Conformed Copy - C3754 - Mineral Resources Goverance Project - Supplemental Letter

Supplemental Letter No. 2 REPUBLIC OF MADAGASCAR June 17, 2003 International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Re: Credit No. 3754 MAG (Mineral Resources Governance Project) Performance Indicators Development Credit Agreement, Schedule 4 Gentlemen: We are pleased to refer to Schedule 4 to the above-mentioned Development Credit Agreement and, more particularly, to paragraphs 3 (a) and 4 (a) thereof, and to confirm, on behalf of the Republic of Madagascar (the Borrower), that the performance indicators agreed upon between the Borrower and the Association for the purposes of the Project are as shown in the attachment to this letter. It is our understanding that, in making the above Credit, the Association may rely on the statements herein set forth or referred to. Very truly yours, REPUBLIC OF MADAGASCAR By: /s/ Radavidson Andriamparany Benjamin Authorized Representative  ATTACHMENT Republic of Madagascar – Mineral Resources Governance Project Main Project Performance Indicators Objectives Indicator Initial Situation at Control Source Situation the end of the (2002) project (2008) a) National development objectives  Natural Increase in National, sector resources declared statistics, governance production of 20 40 questionnaires, improvement precious stones DGEM. by legally established artisanal miners (in millions of $US)  Sustained Increased per 100 base 30% increase Regional growth of the capita revenues indicator, in per capita statistics, mining sector among the according to revenues. household and reduction population in the social and questionnaires of poverty artisanal economic in the artisanal mining areas. data from the mining areas, 2000 Cornell consultant University reports. study. b) Project Development Objectives  Improvement Creation of the No 4 BAM DGEM reports, of transparency local mining established established project in the precious administration bureaus and fully supervision stones bureaus. operational governance (BAM) (production and commercializat ion) Creation of the No exchange A gemstones DGEM reports, gemstones exists exchange project  Republic of Madagascar – Mineral Resources Governance Project Main Project Performance Indicators Objectives Indicator Initial Situation at Control Source Situation the end of the (2002) project (2008) exchange established supervision and reports, operational to stakeholder fully meet user questionnaires demand. Creation of the No one-stop- One-stop-shop DGEM reports, one-stop-shop shop in established project for stones existence and fully supervision exports operational, reports, meeting stakeholder stakeholder questionnaires requirements  Institutional Increased Ministry of reforms for the collection of Finance reports, decentralized mining 10% recovery 80% recovery national budget, management royalties DGEM reports, of mineral through project resources put decentralized supervision in place recovery reports. mechanisms Number of No plans A minimum of Project progress community 10 community reports, project plans plans supervision established, established reports. integrating mineral resources management and partially financed by sector revenues. Increase in Provincial and provincial and community communal budgets, project fiscal revenues, No revenues > 3 million progress resulting from dollars reports, project  Republic of Madagascar – Mineral Resources Governance Project Main Project Performance Indicators Objectives Indicator Initial Situation at Control Source Situation the end of the (2002) project (2008) decentralized supervision management of reports. mineral resources. (in US$)  Investment Increased value National and promotion and of annual sector export added value in exports of gold 21 million 50 million statistics, the mining and precious dollars dollars project sector stones. supervision. (US$) Increased National and volume of cut 0.1 million >1 million sector export stones exports dollars dollars statistics, ($US) project supervision. Increased value DGEM sector of annual 10 million 85 million statistics, mining sector dollars dollars project investment supervision report, final project report