Afghanistan - Livestock Development Project : Credit 0375 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 375 AF Project Agreement (Livestock Development Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND HERAT LIVESTOCK DEVELOPMENT COMPANY AND AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN DATED MAY 2, 1973 CONFORMED COPY CREDIT NUMBER 375 AF Project Agreement (Livestock Development Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND HERAT LIVESTOCK DEVELOPMENT COMPANY AND AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN DATED MAY 2, 1973 PROJECT AGREEMENT AGREEMENT, dated May 2, 1973, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and HERAT LIVESTOCK DEVELOPMENT COMPANY (hereinafter called HLDC), a joint-stock company duly established under the laws of the Borrower and AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN (hereinafter called AGBANK), a joint-stock company duly established under the laws of the Borrower. WHEREAS (A) by the Development Credit Agreement of even date herewith between Kingdom of Afghanistan (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to nine million dollars ($9,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that HLDC and AGBANK agree to undertake such obligations toward the Association as hereinafter set forth; and (B) By an agreement among the Borrower, HLDC and AGBANK, the proceeds of the credit provided for under the Development Credit Agreement will be made available to AGBANK on the terms and conditions therein set forth; (C) By an agreement between HLDC and AGBANK, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available by AGBANK to HLDC on the terms and conditions therein set forth; WHEREAS HLDC and AGBANK, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, have agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. 4 ARTICLE II Particular Covenants of HLDC Section 2.01. HLDC shall carry out Parts A(ii), and B through G of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, agricultural and business practices. Section 2.02. In order to assist HLDC in the carrying out of Parts A(ii), B(i) and (iii), C, and E through G of the Project, HLDC shall employ agricultural and management consultants satisfactory to, and upon terms and conditions satisfactory to, the Association and HLDC. Section 2.03. (a) In carrying out Part B(ii) of the Project, HLDC shall employ a contractor satisfactory to, and upon terms and conditions, satisfactory to the Association and HLDC. (b) In carrying out Part E of the Project, HLDC shall employ contractors satisfactory to, and upon terms and conditions satisfactory to, the Association and HLDC. Section 2.04. Except as the Association shall otherwise agree, the goods and services (other than services of consultants) required for the Project except Parts A, C, E and F thereof and to be financed out of the proceeds of the Credit, shall be procured on the basis of international competition under procedures consistent with the Guidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in April 1972, as revised in October 1972, and in accordance with, and subject to, the provisions set forth in Schedule 1 to this Agreement. Section 2.05. (a) HLDC undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent or made available to it by AGBANK against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by HLDC to replace or repair such goods. (b) Except as the Association may otherwise agree, HLDC shall cause all goods and services financed out of the proceeds of the Credit relent or made available to it by AGBANK to be used exclusively for the Project. 5 Section 2.06. (a) HLDC shall furnish to the Association promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) HLDC: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit relent or made available to it by AGBANK, and to disclose the use thereof in Parts A(ii) and B through G of the Project; (ii) shall, without limitation upon the provisions of Section 4.03 of this Agreement, enable the Association's representatives to examine the said parts of the Project, the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning Parts A(ii) and B through G of the Project, the expenditure of the proceeds of the Credit so relent or made available to it and the goods and services financed out of such proceeds. Section 2.07. HLDC shall duly perform all its obligations under the Subsidiary Loan Agreements. Except as the Association shall otherwise agree, HLDC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreements or any provision thereof. Section 2.08. HLDC shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 2.09. HLDC shall establish and maintain an experimental center to conduct investigations and demonstrations in agricultural and livestock improvement and development and range management practices, on terms and conditions satisfactory to the Borrower and the Association. Section 2.10. HLDC shall establish and maintain a technical services unit, on terms and conditions satisfactory to the Borrower and the Association, to assist farmers under the Project in developing and implementing farm plans. In order to enable TSU to assist said farmers in groundwater development, HLDC shall employ an initial cadre of two geologists, three technicians, and six dewatering mechanics. In carrying out its functions referred to herein, HLDC shall cause TSU, to the extent feasible, to take account of the recommendations of consultants presently studying water resources of the Hari-rod valley. 6 Section 2.11. HLDC shall conduct its business and operations in accordance with appropriate agricultural, administrative and financial policies and practices, and, under the supervision of competent and experienced management. Section 2.12. HLDC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 2.13. HLDC shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of HLDC and the audit thereof as the Association shall from time to time reasonably request. Section 2.14. HLDC shall install and operate a system for monitoring and evaluating economic benefits resulting from the Project. Section 2.15. HLDC shall complete the preparation of specifications included in Part B(i) of the Project not later than December 31, 1973. Section 2.16. HLDC shall issue to the Borrower, from time to time, such number of shares to be subscribed by the Borrower, as shall be required to enable the Borrower to perform its undertaking under Section 3.06(i) of the Credit Agreement. ARTICLE III Particular Covenants of AGBANK Section 3.01. AGBANK shall carry out Part A(i) of the Project with due diligence and efficiency and in conformity with appropriate administrative, agricultural and financial practices. Section 3.02. (a) AGBANK, under an agreement to be entered into between HLDC and AGBANK under terms and conditions which shall have been approved by the Association, shall: 7 (i) relend to HLDC an amount equivalent to $4,000,000 out of the Subsidiary Loan for a term of 15 years, including 5 years of grace, for slaughterhouse construction and at an interest rate of 8% per annum on amounts withdrawn and outstanding from time to time; (ii) make available to HLDC an amount equivalent to $1,700,000 out of the Subsidiary Fund as capital grant; and (iii) make available to HLDC an amount equivalent to $1,700,000 out of the Subsidiary Fund as Government equity by subscribing to HLDC's authorized capital. Such subscriptions shall be made on the date or dates of, and out of, first disbursements by the Association of the proceeds of the Credit in respect of Part B of the Project. (b) Whenever in connection with the foregoing provisions of this Section it shall become necessary to value the proceeds of the Credit in terms of Afghanis, the provisions of Section 3.01(d) of the Development Credit Agreement shall apply. Section 3.03. AGBANK: (i) shall maintain records adequate to record the progress of Part A(i) of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit relent to it by the Borrower, and to disclose the use thereof in Part A(i) of the Project; (ii) shall, without limitation upon the provisions of Section 4.03 of this Agreement, enable the Association's representatives to examine Part A(i) of the Project, the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning Part A(i) of the Project, the expenditure of the proceeds of the Credit so relent to it and the goods and services financed out of such proceeds. Section 3.04. AGBANK shall duly perform all its obligations under the Subsidiary Loan Agreements. Except as the Association shall otherwise agree, AGBANK shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreements or any provision thereof. Section 3.05. AGBANK shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consisLent with appropriate practice. 8 Section 3.06. AGBANK shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices, its operations and financial condition. Section 3.07. AGBANK shall: (i) maintain separate accounts for the Project; (ii) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements and accounts referred to in sub-paragraph (i) of this Section) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of AGBANK and the audit thereof as the Association shall from time to time reasonably request. Section 3.08. The operating policies and procedures of AGBANK in respect of Part A(i) of the Project shall be as set forth in Schedule 2 to this Agreement and as the same may be amended from time to time by agreement among the Borrower, the Association and AGBANK. Section 3.09. AGBANK shall promptly undertake a study of the alternative methods for securing its loans under the Project and shall furnish such a study together with recommendations thereon to the Borrower and the Association for their comments not later than December 31, 1973. Section 3.10. (a) AGBANK shall not establish, acquire or take over any subsidiary except on terms and conditions satisfactory to the Association. (b) AGBANK shall cause each of its subsidiaries if any, and each of the subsidiaries established, acquired or taken over, after the date of the Development Credit Agreement, if any, to observe and perform the obligations of AGBANK hereunder to the extent to which such obligations shall or can be applicable thereto, as though such obligations were binding upon each of such subsidiaries. Section 3.11. AGBANK shall at all times charge interest on all of its loans at rates sufficient to enable it to: (a) cover all operating expenditures and charges including taxes (if any) and interest payments on borrowings; (b) maintain adequate provisions for bad and doubtful debts; and (c) maintain adequate general reserves. 9 ARTICLE IV Particular Covenants of HLDC and AGBANK Section 4.01. The Association, HLDC and AGBANK shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association, HLDC and AGBANK shall from time to time, at the request of either party, exchange views through their representatives with i.vard to the performance of their respective obligations under this Agreement, the performance by HLDC and AGBANK of their respective obligations under the Subsidiary Loan Agreements, the administration, operations and financial condition of HLDC and AGBANK, any change in appointment to the position of HLDC's President, and other matters relating to the purpose of the Credit. Section 4.02. The Association, HLDC and AGBANK shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, or the performance by any of them of its obligations under this Agreement or the performance by HLDC and AGBANK of their respective obligations under the Subsidiary Loan Agreements. Section 4.03. HLDC and AGBANK shall enable the Association's representatives to examine all of their respective sites, properties and equipment and any relevant records and documents. Section 4.04. Except as the Association may otherwise agree, HLDC and AGBANK shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association, HLDC and AGBANK thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or 10 (ii) a date twenty-five years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a)(ii) of this Section, the Association shall promptly notify HLDC and AGBANK of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be. given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. For HLDC: Herat Livestock Development Company Herat Herat Province Afghanistan 11 Cable address: Herat Livestock Development Company Herat Herat Province Afghanistan For AGBANK: Agricultural Development Bank of Afghanistan P.O. Box 414 Kabul, Afghanistan Cable address: AGBANK Kabul Afghanistan Section 6.02. Any action required or permitted to be taken, and any * documents required or permitted to be executed, under this Agreement on behalf of HLDC may be taken or executed by its President or the Vice-President or such other person or persons as either of them shall designate in writing. Section 6.03. HLDC shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of HLDC, take any action or execute any documents required or permitted to be taken or executed by HLDC pursuant to any of the provisions of this Agreement. Section 6.04. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of AGBANK may be taken or executed by its President or the Vice-President or such other person or persons as either of them shall designate in writing. Section 6.05. AGBANK shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of AGBANK, take any action or execute any documents required or permitted to be taken or executed by AGBANK pursuant to any of the provisions of this Agreement. Section 6.06. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 12 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered ir the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ M. P. Benjenk Regional Vice President Europe, Middle East and North Africa HERAT LIVESTOCK DEVELOPMENT COMPANY By /s/ A. Malikyar Authorized Representative AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN By /s/ A. Malikyar Authorized Representative 13 SCHEDULE 1 Procurement A. Contracts Governed by Guidelines 1. Goods and services included in Part B(ii) of the Prcject will be provided under a turnkey contract. 2. With respect to the said turnkey contract, and any contract for goods and services included in Part B(iii) of the Project estimated to cost the equivalent of $20,000 or more: (a) If bidders are required to prequalify, HLDC shall, before qu'lification is invited, inform the Association in detail of the procedure to be followed and shall introduce such modifications in said procedure as the Assocition shall reasonably request. The list of prequalified bidders, together with a statement of their qualifications and of the reasons for the exclusion of any applicant for prequalification, shall be furnished by HLDC to the Association for its comments before the applicants are notified and HLDC shall make such additions to or deletions from the said list as the Association shall reasonably request. (b) Before bids are invited, HLDC shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedure as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (c) After bids have been received and evaluated, HLDC shall, before a final decision on the award is made, inform the Association of the name of the bidder to whom it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the reasons for the intended award. The Association shall, if it determines that the intended award would be inconsistent with the procedures set forth or referred to in Section 2.04 of this Agreement, promptly inform HLDC and the Borrower, and state the reasons for such determination and advise the Borrower and HLDC of any cancellation pursuant to the provisions of paragraph 4(c) of Schedule 1 to the Development Credit Agreement. 14 (d) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked. (e) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract. 3. With respect to any other contract for goods and services included in Part B(iii) of the Project, HLDC shall furnish to the Association, promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract, two conformed copies of such contract, together with the analysis of bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract is not consistent with the procedures set forth or referred to in Section 2.04 of this Agreement, promptly inform the Borrower and HLDC and state the reasons for such determination and advise the Borrower and HLDC of any cancellation pursuant to the provisions of paragraph 4(c) of Schedule I to the Development Credit Agreement. B. Contracts Not Governed by the Guidelines 1. Goods and services provided for under Part A and required for Parts (C), (E) and (F) of the Project shall be procured through normal commercial and trade channels. 15 SCHEDULE 2 Operating Policies and Procedures 1. AGBANK loans under the Project shall be made in accordance with its Policy Statement and Loan Regulations dated October 18, 1970, as the same may be amended from time to time with the prior approval of the Association. 2. Loans to farmers under Part A(i)(I) of the Project are expected to be made for the development and expansion of approximately 1,200 farms with an average area of about 13 ha. each, for purposes set forth in said Part. Loans will be made to farmers contributing at least 20 percent of the cost of the investment plan to be financed. In computing such cost the value of family labor will be taken into account. Loans to farmers under the Project shall not exceed 80% of the estimated cost of each investment plan. Of the amounts lent to said farmers by AGBANK, one-fourth thereof shall be provided by AGBANK from its own resources and the remainder shall be provided out of the proceeds of Credit relent to it by the Borrower pursuant to Section 3.01(c) of the Credit Agreement. 3. Long-term loans (i.e. loans with repayment period of not more than seven years including a grace-period of not more than two years) shall be made at an interest rate of 8% per annum. AGBANK shall supplement its long-term loans by making short-term loans to farmers under the Project from its own resources and by lending to HLDC, as necessary, for its working capital requirements. Such short-term loans shall be made at an interest rate of 10% per annum. 4. Loans shall be supervised by AGBANK in co-operation with HLDC. Such supervision shall include periodic visits to farms to ensure that amounts under the loan are used for the purposes of the loan.