Turkey - Ceyhan Aslantas Multipurpose Project : Credit 0360 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 360 TU Development Credit Agreement (Ceyhan Aslantas Multipurpose Project) BETWEEN REPUBLIC OF TURKEY AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED MARCH 22, 1973 CONFORMED COPY CREDIT NUMBER 360 TU Development Credit Agreement (Ceyhan Aslantas Multipurpose Project) BETWEEN REPUBLIC OF TURKEY AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED MARCH 22, 1973 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated March 22, 1973, between REPUBLIC OF TURKEY (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) The Borrower has requested the Association to assist in the financing of the Project described in Schedul 2 to this Agreement by extending the Credit as hereinafter provided; (B) The Borrower has also requested the Bank to provide additional assistance towards the financing of the Project and by an agreement of even date herewith between the Borrower and the Bank (hereinafter called the Loan Agreement) the Bank is agreeing to provide such assistance in an aggregate principal amount equivalent to forty-four million dollars ($44,000,000) (hereinafter called the Loan); (C) The Borrower and the Association intend, to the extent practicable, that the proceeds of the Credit provided for in this Agreement be disbursed on account of expenditures on the Project before disbursements of the proceeds of the Loan provided for in the Loan Agreement are made; WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated January 31, 1969, with the same force and effect as if they were fully set forth herein, subject, however, to the deletion of Sections 5.01 and 6.02(h) thereof and to the renumbering of Section 6.02(i) into 6.02(h) thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions). 4 Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Loan Agreement" means the agreement of even date herewith between the Borrower and the Bank for the purpose of the Project, as such agreement may be amended from time to time; and such term includes the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated January 31, 1969, as made applicable to such agreement, all agreements supplemental to the Loan Agreement and all schedules to the Loan Agreement; (b) "DSI" means Deviet Su Isleri (State Hydraulic Works), an agency of the Borrower under the Ministry of Energy and Natural Resources of the Borrower, and includes any successor to such agency; (c) "Topraksu" means an agency of the Borrower under the responsibility of the Ministry of Village Affairs, and includes any successor to such agency; (d) "Extension Service" means an agency of the Borrower under the responsibility of the Ministry of Agriculture of the Borrower, and includes any successor to such agency; (e) "TCZB" means the Agricultural Bank of the Turkish Republic, or any successor thereto; (f) "TEK" means the Turkish Electricity Authority, or any successor thereto; (g) "Executing Agencies" means the agencies and legal entities defined in sub-sections (b), (c), (d), (e) and (f) of this Section; (h) "Project Area" means that area of about 108,000 gross hectares on both banks of the Ceyhan River, within the Province of Adana and adjacent to and east of the Seyhan Irrigation Project, which is to be developed as an irrigation area; and (i) "Reservoir Area" means that portion of the Ceyhan River valley which is to be flooded, up to an elevation of 160 meters above mean sea level, for use as a reservoir. 5 ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to thirty million dollars ($30,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule I to this Agreement, as such Schedule shall be amended from time to time, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed under the Development Credit Agreement; provided, however, that, except as the Association shall otherwise agree, no withdrawal shall be made on account of expenditures in the territories of any country which is not a member of the Bank (other than Switzerland) or for goods produced in, or services upplied from, such territories. Section 2.03. Except as the Association shall otherwise agree, the goods and services (other than services of consultants) required for the Project 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 3 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1981 or such other date as shall be agreed between the Borrower and the Association. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semi-annually on May 15 and November 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each May 15 and November 15 commencing May 15, 1983, and ending November 15, 2022, each installment to and including the installment payable on November 15, 1992 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. 6 Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out the Project through the Executing Agencies with due diligence and efficiency and in conformity with appropriate engineering, agricultural, administrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. (a) In order to assist DSI in the preparation of bid documents, specifications, revision of final designs and approval of working drawings prepared by the contractors during construction, preparation of withdrawal applications, the review of the evaluation of bids, preparation of contract documents, and supervision of the construction of the dam and power plant specified in Parts A and B of the Project, the Borrower shall cause DSI to employ a firm of engineering consultants acceptable to the Bank and the Association upon terms and conditions satisfactory to the Bank and the Association. (b) In order to assist Topraksu and the Extension Service in carrying out the Project, the Borrower shall cause Topraksu and the Extension Service to employ engineering and agricultural consultants acceptable to the Bank and the Association upon terms and conditions satisfactory to the Bank and the Association by April 1, 1974, in the case of Topraksu and by March 1, 1975, in the case of the Extension Service or such other date or dates as shall be agreed with the Bank and the Association. Section 3.03. In order to assist DSI in resolving any special problems which arise in connection with the carrying out of Parts A and B of the Project, the Borrower shall cause DSI to retain an independent group of four specialists acceptable to the Bank and the Association upon terms and conditions satisfactory to the Bank and the Association by August 1, 1974, or such other date as shall be agreed with the Bank and the Association. Section 3.04. Except as the Bank and the Association shall otherwise agree, in carrying out the Project, the Borrower shall cause to be employed contractors acceptable to the Bank and the Association upon terms and conditions satisfactory to the Bank and the Association. 7 Section 3.05. (a) The Borrower shall cause the Executing Agencies to insure, or make adequate provision for the insurance of, the goods to be financed out of the proceeds of the Loan and the Credit 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 the Executing Agencies to replace or repair such goods. (b) Except as the Bank and the Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan and the Credit to be used exclusively for the Project until its completion. Section 3.06. The Borrower shall cause TEK to construct, at its own expense and by June 30, 1980, or such other date as shall be agreed with the Bank and the Association, a transmission line connecting the switchyard specified in Part B of the Project with the main electricity grid. Section 3.07. For the purpose of coordinating the works undertaken by the Executing Agencies in carrying out the Project, the Borrower shall establish within six months of the date on which the Loan Agreement and the Development Credit Agreement become effective and maintain in existence until the date of the completion of the Project, a Project Coordinating Committee mutually acceptable to the Borrower, the Bank and the Association. Section 3.08. For the purpose of assisting the Executing Agencies in carrying out the Project, the Borrower shall by March 1, 1974. or such other date as shall be agreed with the Bank and the Association and thereafter by the same date in each following year until the date of the completion of the Project, cause each of the Executing Agencies to prepare an annual training program of on-the-job and overseas training for staff engaged in works related to the carrying out of the Project, that is satisfactory to the Borrower, the Bank and the Association. Section 3.09. (a) The Borrower shall cause the Executing Agencies to furnish to the Bank and the Association, promptly upon their preparation, the plans, specifications, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank and the Association shall reasonably request. (b) The Borrower shall cause the Executing Agencies: (i) to 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 Loan and the Credit, and to disclose the use thereof in the Project, (ii) to enable the 8 Bank's and the Association's accredited representatives to visit the Project Area and see the goods financed out of the proceeds of the Loan and the Credit and any relevant records and documents; and (iii) to furnish to the Bank and the Association all such information as the Bank and the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the Credit and the goods and services financed out of such proceeds. Section 3.10. The Borrower shall take or cause to be taken all such action as shall be necessary to acquire by June 30, 1975, or such other date as shall be agreed with the Bank and the Association, all land and rights in respect of land as shall be required for the Reservoir Area and, as and when needed, all such other land and rights in respect of land as shall be required for the construction and operation of the facilities included in the Project and shall furnish to the Bank and the Association, promptly after any such acquisition, evidence satisfactory to the Bank and the Association that such land and rights in respect of land are available. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall cause DSI, Topraksu and the Extension Service to maintain separate accounts adequate to reflect in accordance with consistently maintained appropriate accounting practices their operations and financial condition in respect of the Project. (b) The Borrower shall cause DSI, Topraksu and the Extension Service to: (i) have such accounts and their financial statements, namely their balance sheets, statements of income and expenses and related statements for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank and the Association; (ii) furnish to the Bank and 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 in English of their provisional financial statements for such year as so audited and (B) the report of such audit by said auditors, in English of such scope and in such detail as the Bank and the Association shall have reasonably requested; and (iii) furnish to the Bank and the Association such other information concerning their provisional accounts and financial statements and the audit thereof as the Bank and the Association shall from time to time reasonably request. Section 4.02. The Borrower shall (i) cause DSI, under arrangements satisfactory to the Bank and the Association, to inspect the Aslantas Dam and w 9 its appurtenant structures and the Ceyhan River flood protection dykes from time to time, to determine whether there are any deficiencies or potential deficiencies in the condition of such structures or in the quality and adequacy of their maintenance or operation which may endanger their safety and furnish a report in English every five years to the Bank and the Association, of such scope and in such detail as the Bank and the Association shall have reasonably requested, the first such report to be furnished by not later than December 31, 1985, or such other date as shall have been agreed with the Bank and the Association and (ii) take any remedial action that is required to correct such deficiencies or potential deficiencies. Section 4.03. Except as the Bank and the Association shall otherwise agree, the Borrower shall ensure that the flow of water in the Ceyhan River is not depleted, as a result of other development works, below the minimum that is required for the Project. Section 4.04. The Borrower shall cause the Executing Agencies to have such powers, ficilities and resources as are necessary for the diligent and efficient carrying out and operation of the Project. Any import, exchange or other licenses required by successful bidders for civil works and equipment contracts under international * competitive bidding, for the importation of goods or the supply of services for the Project shall be issued by the Borrower without delay. Section 4.05. The Borrower shall cause a revision of the existing feasibility study to be carried out and completed by December 31, 1977, or such other date as shall be agreed with the Bank and the Association, on the best methods for the introduction of irrigation in the Dortyol and Yumurtalik plains on the Mediterranean coast adjoining the Project Area. Section 4.06. For the purpose of providing the Project Area with an integrated extension service, the Borrower shall establish within three months of the date on which the Loan Agreement and the Development Credit Agreement become effective, or such other date as shall be agreed with the Bank and the Association, and maintain in existence for at least ten years after the date of the completion of the Project, a project extension service for the Project Area under the direction of a qualified and experienced full-time manager. Section 4.07. The Borrower shall at all times provide, or cause TCZB to provide, appropriate short and medium-term credit facilities in adequate amounts to farmers in the Project Area. Section 4.08. The Borrower shall make arrangements satisfactory to the Bank and the Association, for the setting of charges levied on farmers in the Project 10 Area at levels which will provide revenues at least sufficient to cover all on-farm development as well as operating and maintenance costs and, in addition, provide for the recovery, on reasonable terms and conditions, of the remaining moneys invested in the Project together with reasonable interest thereon, taking into account the relationship of the investment recovery rate to farmers' incentives and capacity to pay. Such charges will be subject to periodic reviews at intervals not exceeding five years. Section 4.09. The Borrower shall cause the works and facilities included in the Project to be operated and maintained, and to be renewed from time to time as necessary, in accordance with appropriate agricultural, engineering, economic and financial policies and practices and shall take such action as shall be reasonably required to ensure the economic use of the water made available by such works for agricultural development. ARTICLE V Consultation and Information Section 5.01. The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Borrower and the Association shall from time to time, at the request of either party: (a) exchange views through their representatives with regard to the performance of their respective obligations under the Development Credit Agreement, the administration, operations, resources and expenditures in respect of the Project, of the Executing Agencies and of any other departments or agencies of the Borrower responsible for carrying out any part of the Project, and other matters relating to the purposes of the Credit; and (b) furnish to the other all such information as it shall reasonably request with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and economic conditions in the territories of the Borrower, including its balance of payments, and the external debt of the Borrower, of any of its political subdivisions and of any agency of the Borrower or of any such political subdivision. Section 5.02. (a) The Borrower shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the administration, operations resources and expenditures. in respect 11 of the Project, of the Executing Agencies and of any other departments or agencies of the Borrower responsible for carrying out any part of the Project. (b) The Borrower and the Association shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the maintenance of the service thereof or the performance by either of them of its obligations under the Development Credit Agreement. Section 5.03. The Borrower shall afford all reasonable opportunity for accredited representatives of the Association to visit any part of the territories of the Borrower for purposes related to the Credit. ARTICLE VI Taxes and Restrictions Section 6.01. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes imposed under the laws of the Borrower or laws in effect in its territories. Section 6.02. The Development Credit Agreement shall be free from any taxes on or in connection with the execution, delivery or registration thereof, imposed under the laws of the Borrower or laws in effect in its territories. Section 6.03. The payment of the principal of, and service charges on, the Credit shall be free from all restrictions, regulations, controls and moratoria of any nature imposed under the laws of the Borrower or laws in effect in its territories. ARTICLE VII Remedies of the Association Section 7.01. If any event specified in Section 7.01 of the General Conditions shall occur and shall continue for the period, if any, therein set forth, then at any subsequent time during the continuance thereof, the Association, at its option, may by notice to the Borrower declare the principal of the Credit then outstanding to be due and payable immediately together with the service charges thereon, and upon any such declaration such princinal and service charges shall become due and payable immediately, anything to the contrary in the Development Credit Agreement notwithstanding. 12 ARTICLE VIII Effective Date; Termination Section 8.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 10.01(b) of the General Conditions: (a) The execution and delivery of the Loan Agreement on behalf of the Borrower shall have been duly authorized or ratified by all necessary administrative and governmental action; and (b) DSI has appointed the consultants specified in Section 3.02(a) of the Development Credit Agreement. Section 8.02. The following is specified as an additional matter, within the meaning of Section 10.02(b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association, namely, that the Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and constitutes a valid and binding obligation of the Borrower in accordance with its terms. Section 8.03. The date June 22, 1973 is hereby specified for the purposes of Section 10.04 of the General Conditions. Section 8.04. The obligations of the Borrower under Sections 4.01 and 4.06 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date 25 years after the date of this Agreement, whichever shall be the earlier. ARTICLE IX Representative of the Borrower; Addresses Section 9.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 9.03 of the General Conditions. Section 9.02. The following addresses are specified for the purposes of Section 9.01 of the General Conditions: 13 For the Borrower: Maliye Bakanligi Hazine Genel Mudurlugu ve Milletlerarasi Iktisadi Isbirligi Teskilati Genel Sekreterligi Ankara, Turkey Cable address: MALIYE Hazine, Ankara 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. 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 to be delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF TURKEY By /s/ Muammer Akinci Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Munir P. Benjenk Regional Vice President Europe, Middle East and North Africa 14 - SCHEDULE I Withdrawal of the Proceeds of the Credit and of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan and the Credit, the allocation of amounts of such proceeds to each Category and the percentage of eligible expenditures so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed I. Civil Works: Dam and Power 20,900,000 35% of total Plant expenditures II. Civil Works: Irrigation, Drainage 18,800,000 31% of total and Flood Protection expenditures Dikes IIL1 On-Farm Development, 3,600,000 15% of total Buildings and Other expenditures Facilities IV. Imported Equipment 22,100"000 100% of foreign and Livestock expenditures or in the case of imported equip- ment procured from local dealers' stock, 70% of total expenditures V. Consultants and 2,100,000 100% of foreign Training expenditures VI. Unallocated 6,500,000 TOTAL 74,000,000 15 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures for goods produced in, or services supplied from, the territories, and in the currency, of any country other than the Borrower; (b) the term "local expenditures" means expenditures for goods produced in, or services supplied from, the territories of the Borrower; and (c) the term "total expenditures" means the aggregate of foreign and local expenditures. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) expenditures prior to the date of this Agreement; and (b) payments for taxes imposed under the laws of the Borrower or laws in effect in its territories on goods or services, or on the importation, manufacture, procurement or supply thereof. To the extent that the amount represented by the percentage set forth in the third column of the table in paragraph I above in respect of any Category would exceed the amount payable net of all such taxes, such percentage shall be reduced to ensure that no proceeds of the Credit or of the Loan will be withdrawn on account of payments for such taxes. In addition, except as the Borrower, the Bank and the Association shall otherwise agree, and until all amounts of the Credit shall have been withdrawn or committed, no withdrawals shall be made from the Loan Account except under commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions referred to in Section 1.01 of the Loan Agreement. 4. Notwithstanding the allocation of an amount of the proceeds of the Credit and of the Loan set forth in the second column of the table in paragraph 1 above: (a) if the estimate of the expenditures under any Category shall decrease, the amount of the proceeds of the Loan and of the Credit then allocated to such Category and no longer required therefor will be reallocated by the Bank and the Association at the request of the Borrower or, after full withdrawal of all amounts of the Credit, by the Bank, by increasing correspondingly the unallocated amount of the proceeds of the Credit and of the Loan; (b) if the estimate of the expenditures under any Category shall increase, the percentage set forth in the third column of the table in paragraph I above 16 in respect of such expenditures shall be applied to the amount of such increase, and a corresponding amount will be allocated by the Bank and the Association or, after full withdrawal of all amounts of the Credit, by the Bank, at the request of the Borrower, to such Category from the unallocated amount of the proceeds of the Loan and of the Credit, subject, however, to the requirements for contingencies, as determined by the Bank and the Association or, after full withdrawal of all amounts of the Credit, by the Bank, in respect of any other expenditures; and (c) if the Bank and the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in Section 2.03 of this Agreement and of the Loan Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit or, after full withdrawal of all amounts of the Credit, of the proceeds of the Loan and the Bank and the Association may, without in any way restricting or limiting any other right, power or remedy of the Bank and the Association under the Loan Agreement and the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit and of the Loan as in the Bank's and the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit or after full withdrawal of all amounts of the Credit, of the proceeds of the Loan. 5. Notwithstanding the percentages set forth in the third column of the table set out in paragraph 1 above, if the estimate of expenditures under Category I, II or III, shall increase and no proceeds of the Loan and of the Credit are available for reallocation to such Category, the Bank and the Association or, after full withdrawal of all amounts of the Credit, the Bank, may, by notice to the Borrower, adjust the percentage then applicable to such expenditures in order that further withdrawals tinder any such Category may continue until all expenditures thereunder shall have been made. 17 SCHEDULE 2 Description of the Project The Project consists of: Part A Aslantas Darn The construction of an earthfill dam on the Ceyhan River, to be called the Aslantas Dam, with a storage capacity of 1,190 million cubic meters serving irrigation flood control and power generation. Part B Power Facilities An above ground power plant with three 46 MW units, switchyard and appurtenances. Part C Irrigation, Flood Protection and Drainage The construction of irrigation conveyance canals on both banks of the Ceyhan River with distribution systems served by gravity on about 99,000 hectares and with pumps on about 9,000 hectares, drainage systems and about 60 kilometers of flood protection dikes giving a river channel capacity of 1,600 cubic meters per second. Part D On-Farm Development On-farm development would include land leveling and land planning about 97,000 hectares, the construction of about 1,455 kilometers of surface drains, tile drains on about 6,000 hectares, soil reclamation on about 2,000 hectares and about 485 kilometers of feeder roads. Part E Buildings and Other Facilities These include the construction of three Operation and Maintenance centers for DSI with ancillary staff housing, office and storage accommodations; one center with staff houses and other facilities for Topraksu; three Extension Service centers with 20 sub-centers with staff houses, offices, stores; and livestock demonstration sheds. 18 Part F Equipment, Machinery and Livestock Procurement of equipment, machinery and vehicles for the irrigation system, on-farm development and extension services, together with miscellaneous demonstration and laboratory equipment and livestock. Part G Consultants and Training A group of specialists would be retained and a consulting firm would be employed for the Aslantas Dam and power plant. In addition other consultants would be employed to assist Topraksu and the Extension Service. Provision will be made for training project staff. The Project is expected to be completed by December 31, 1981. 19 SCHEDULE 3 Procurement 1. With respect to any contract for the construction of the dam and the civil works for the power plant specified in Parts A and B of the Project, bidders shall be prequalified by a prequalification board to be constituted by DSI in accordance with existing legislation using criteria satisfactory to the Borrower, the Bank and the Association. Before qualification is invited DSi will inform the Bank and the Association in detail of the procedure to be followed and shall take into consideration any comments on the said procedure which the Bank and the Association shall reasonably make. The list of prequalified bidders, together with a statement of their qualifications, a detailed report by the consultants referred to in Section 3.02(a) of this Agreement on the evaluation of applicants and of the reasons for the exclusion of any such applicant for prequalification, shall be furnished by DSI to the Bank and the Association for their comments before the applicants are notified and DSI shall make such additions to or deletions from the said list as the Bank and the Association shall reasonably request. 2. With respect to all contracts for the Project except for Part G thereof estimated to cost the equivalent of $100,000 or more in the case of contracts for civil works and $25,000 or more in the case of contracts for equipment, materials and supplies. (a) Contracts for the irrigation works, dikes and drainage systems specified in Part C of the Project shall be grouped for each invitation to bid so as to have a total estimated value of not less than $7,000,000. Bidders will be 'vited to tender for the total or for any of the identified separable parts of such group. (b) Before bids are invited, the Borrower shall cause the Bank and the Association to be given, for their 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 cause such modifications in the said documents or procedures to be made as the Bank and the Association shall reasonably request. Any further modification to the bidding documents shall require the Bank's and the Association's concurrence before it is issued to the prospective bidders. (c) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, cause the Bank and the Association to be informed of the name of the bidder to whom it is intended to award the contract and shall cause the Bank and the Association to be given in sufficient time for 0 20 their review, a detailed report on the evaluation and comparison of the bids received, together with the reasons for the intended award. The Bank and the Association shall, if they determine that the intended award would be inconsistent with the procedures set forth or referred to in Section 2.03 of this Agreement, promptly inform the Borrower and state the reasons for such determination. (d) The terms and conditions of the contract shall not, without the Bank's and 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 Bank and the Association promptly after its execution and prior to the submission to the Bank or the Association of the first application for withdrawal of funds from the Loan Account or the Credit Account in respect of any such contract. 3. Notwithstanding the procedures set forth as referred to in Section 2.03 of this Agreement, any contract for civil works for not more than the equivalent of $100,000 and any contract for the procurement of imported equipment, materials and supplies required for the Project which is not estimated to cost the equivalent of $25,000 or more, is hereby exempted from procurement on the basis of international competition provided that the aggregate of all such contracts shall not exceed the equivalent of $500,000. Two conformed copies of each such contract shall be furnished to the Bank and the Association promptly after its execution. 4. With respect to all contracts for goods and services for the Project which are not to be financed out of the proceeds of the Loan or the Credit and estimated to cost the equivalent of at least $100,000 for civil works contracts and $25,000 per unit for equipment, materials and supplies: (i) the Borrower shall cause the Bank and the Association to be given draft specifications in respect of such goods and services, for their comments, prior to the issue of invitations to bid and any such comments will be taken into consideration before bidding documents are issued to prospective bidders and (ii) two conforned copies of each contract shall be furnished to the Bank and the Association promptly after it execution. 5. With respect to any other contract, the Borrower shall cause the Bank and the Association to be given, promptly after its execution and prior to the submission to the Bank or the Association of the first application for withdrawal of funds from the Loan Account or 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 Bank and the Association shall reasonably request. The Bank and the Association shall, if they 21 determine that the award of the contract is not consistent with the procedures set forth or referred to in Section 2.03 of this Agreement, promptly inform the Borrower and state the reasons for such determination. 6. For the purpose of evaluation and comparison of bids, customs duties and other import taxes on imported goods, and sales and similar taxes on locally produced goods, shall be excluded, except to the extent hereinafter provided, and bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for locally produced goods. The cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be taken into account in the evaluation of bids in accordance with paragraph 4.7 of the Guidelines for Procurement. 7. For purposes of the provisions hereinafter set forth, the following terms shall have the following meanings: (a) Preferred Domestic Bid means a bid offering goods manufactured in Turkey if the bidder shall have established to the satisfaction of the Borrower, the Bank and the Association that the manufacturing cost of such goods includes a value added in Turkey of not less than 20% of the ex-factory bid price. (b) Non-.preferred Domestic Bid means any other bid offeri-g goods manufactured in Turkey. (c) Foreign Bid means any bid other than those specified in (a) or (b) above. 8. For equipment included in Category IV of the Allocation of Loan Proceeds set out in paragraph I of Schedule 1 to this Agreement, a margin of preference may be granted by the Borrower to Preferred Domestic Bids. Such preference shall be granted by adding to each Foreign Bid, for the purpose only of comparison with Preferred Domestic Bids, an amount (hereinafter called "Domestic Preference Margin") equal to the smaller of (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the goods offered in the bid, or (ii) 15% of the c.i.f. bid price of such goods. 9. If Preferred Domestic Bids are received, the comparison among all evaluated bids for each contract shall be made in the stages and with the preferences indicated below: 22 Stage Bids to be Compared Preference I All Preferred Domestic Bids None and Non-preferred Domestic Bids. II (a) Lowest evaluated bid under Add Domestic Stage I, if Preferred Preference Domestic Bid, with all Margin to Foreign Bids; Foreign Bids 0o (b) Lowest evaluated bid under None Stage I, if Non-preferred Domestic Bid, with all Foreign Bids. III If lowest evaluated bid under None Stage II is not the lowest evaluated bid under Stage 1. all Foreign Bids. 10. The bidding documents shall clearly indicate any preference which will be granted to Preferred Domestic Bids, the information required to establish the eligibility of a bid for such preference and the methods and stages that will be followed in the evaluation and comparison of bids to give effect to such preference.