Korea - Highway Sector Project : Loan 2392 - Loan Agreement - Conformed

OFFICIALLONNME 3OI-,K DOCUMENTS LOAN NUMBERC3Ys2/ KO Loan Agreement (Highway Sector Project) between REPUBLIC OF KOREA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated , 1984 LOAN NUMBER c2 9J K0 LOAN AGREEMENT AGREEMENT, dated / Z , 1984, between REPUBLIC OF KOREA (hereinafter called the Borrower) and INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS the Bank has received a letter dated February 20, 1984, from the Borrower, describing a program of action, objectives and policies designed to increase efficiency in the Borrower's highway sector (hereinafter called the Action Plan) and declaring the Borrower's commitment to the execution of that plan; WHEREAS the Borrower has requested the Bank to assist in the financing of measures to be undertaken pursuant to, or in furtherance of, the Action Plan and the Borrower's 1982-1986 Highway Investment Plan through the Project described in Schedule 2 to this Agreement, by making the Loan as hereinafter provided; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to make the Loan 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 Loan and Guarantee Agreements of the Bank, dated October 27, 1980, with the same force and effect as if they were fully set forth herein, subject, however, to the following modification thereof (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank, as so modified, being hereinafter called the General Conditions): the words "and Sub-projects" are added after the words "the Project" in Section 5.03, thereof. Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following addi- tional terms have the following meanings: -2- (a) "Sub-project" means any project included under Part A (i) of the Project and to be financed out of the proceeds of the Loan pursuant to the provisions of Sections 3.01 (b), 3.01 (c), and 3.01 (d) of this Agreement; (b) "1982-1986 Highway Investment Plan" means the highwz investment plan included in the Borrower's Fifth Five-Year Economic and Social Development Plan, as such highway investment plan may be amended from time to time; (c) "1OF" means the Ministry of Finance of the Borrower; (d) "EPB" means the Economic Planning Board of the Borrower; (e) "MOC" means the Ministry of Construction of the Borrower; (f) "MCI" means the Ministry of Commerce and Industry of the Borrower; (g) "MOER" means the Ministry of Energy Resources of the Borrower; (h) "MOHA" means the Ministry of Home Affairs of the Borrower; (i) "MOT" means the Ministry of Transport of the Borrower; (j) "Bank of Korea" means the Central Bank of the Republic of Korea, established and operating pursuant to the Borrower's Law No. 138, as amended to the date of this Agreement; (k) "KNR" means the Korean National Railroad Administra- tion, -a central administrative organ under the jurisdiction of the Borrower's Ministry of Traftsportation, established and operating pursuant to the Government Organization Law, dated December 14, 1963, (Law 1506) as amended to the date of this Agreement, and Presidential Decree No. 5977, dated February 9, 1972, as amended to the date of this Agreement; (1) "Provincial and County Roads Project" means the project described in Schedule 2 to the Loan Agreement dated December 30, 1982 entered into between the Borrower and the Bank; and (m) "Won" or "W" means the currency of the Borrower. - 3 - ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agree- ment, an amount in various currencies equivalent to two hundred thirty million dollars ($230,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1988, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. (a) The Borrower shall pay to the Bank a fee equivalent to five hundred seventy three thousand five hundred sixty-six dollars ($573,566). (b) On or promptly after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount of the said fee in such currency or currencies as the Bank shall determine. Section 2.06. The Borrower shall pay to the Bank a commit- ment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.07. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one half percent per annum above the Cost of Qualified Borrowings for -4- the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.08 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost" of Qualified Borrowings means the cost, expressed as a percentage per annum, as reasonably determined by the Bank, provided that the amount of $8,520.5 million referred to in (iii) (B) hereunder shall be reckoned at a cost of 10.93% per annum. (iii) "Qualified Borrowings" means (A) outstanding borrowings of the Bank drawn down after June 30, 1982; and (B) until July 1, 1985, the amount of $8,520.5 million (representing borrowings of the Bank between July 1, 1981 and June 30, 1982) less any part thereof repaid earlier than July 1, 1985. (iv) "Semester" means the first six months or the second six months of a calendar year. Section 2.08. Interest and other charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.09. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this -5- Agreement, and, to this end, without any limitation or restric- tion upon any of its other obligations under the Loan Agreement, the Borrower shall carry out Part A (i) of the Project through MOC and MOHA; Part A (ii) of the Project through MOHA, MOT and other Borrower's related agencies, as required; Part A (iii) of the Project through MOC; Parts B (i) and B (ii) of the Project through MOT; Part B (iii) of the Project through MOC; Part B (iv) of the Project through MOC and KNR; Part B (v) of the Project through MCI, MOER, MOT, and other Borrower's related agencies as required; Part B (vi) of the Project through MOC and MOHA; Part C (i) of the Project through MOC, MCI, MOER and MOT; Part C (ii) of the Project through MOC and MOHA; and Part C (iii) of the Project through MOC, all with due diligence and efficiency and in conformity with appropriate administrative, financial, economic and engineering practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Without limitation to the provisions of paragraph (a) of this Section, the Borrower shall present to the Bank, for its approval, each Sub-project together with the following documenta- tion, which documentation shall be prepared in accordance with road engineering, financial and economic practices satisfactory to the Bank: (i) detailed engineering, including cost estimates in foreign and local currencies, contract drawings, and specifications and tender documents; (ii) a final feasibility study; (iii) an implementation schedule and estimated disburse- ment schedule; and (iv) such other information as the Bank shall reason- ably request. (c) Except as the Bank shall otherwise agree, each Sub-pro- ject shall: (i) be evaluated and selected following a methodology satisfactory to the Bank; (ii) be carried out in accordance with the detailed engineering, contract drawings, specifications and tender documents, and implementation schedule - 6 - approved for each Sub-project pursuant to the provisions of paragraph (b) of this Section; and (iii) have an economic rate of return of at least twelve per cent (12%) calculated in accordance with a method satisfactory to the Bank. (d) Without in any way restricting or limiting any other right, power or remedy of the Bank under this Agreement, the Bank may postpone consideration of any Sub-project submitted for its approval if the Borrower shall not, in the opinion of the Bank, have made satisfactory progress in carrying out the Action Plan or if the Borrower is in default in performing any obligation under the Loan Agreement. Section 3.02. In order to assist the Borrower in the carry- ing out of the Project the Borrower shall employ, or shall cause its departments and agencies responsible for the carrying out of the Project or any Part thereof to employ, consultants and experts whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, such consultants to be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Section 3.03. The Borrower shall: (a) furnish to the Bank, for its review and comments, the findings and recommendations of the studies under Parts B (i), B (ii) and B (iii) of the Project, not later than April 30, 1985, November 30, 1985 and January 31, 1985, respectively; and (b) exchange views with the Bank on the findings and recom- mendations of the studies under Parts B (i), B (ii) and B (iii) of the Project, not later than July 30, 1985, February 28, 1986, and April 30, 1985, respectively, and, thereafter, implement such recommendations agreeable to the Borrower and the Bank in a manner and pursuant to timetables satisfactory to the Borrower and the Bank. (c) for those recommendations for which no agreement has been reached pursuant to paragraph (b) of this Section, advise the Bank with respect to the actions to be undertaken for their future implementation. - 7 - Section 3.04. Without limitation to the provisions of Section 3.01 of this Agreement and pursuant to the Action Plan, the Borrower has entrusted EPB with the overall responsibility of implementing the Action Plan, and, to that end, the Borrower shall take all action as shall be necessary to enable EPB to carry out such responsibility. Section 3.05. The Borrower and the Bank shall from time to time, at the request of either party, exchange views on the progress achieved in carrying out the Action Plan; the first such exchange of views, shall take place no later than November 30, 1984, or such later date as the Borrower and the Bank may otherwise agree. Section 3.06. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indem- nity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) The Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the purposes od' the Project. Section 3.07. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower shall: (i) maintain records and procedures adequate to record and monitor the progress of the Project (in- cluding its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) enable the Bank's representatives to visit the facilities and construc- tion sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) furnish to the Bank at regular intervals all such information as the Bank shall reasonably request con- cerning the Project, its cost and, where appropriate, the bene- fits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. - 8 - (c) Upon the award by the Borrower of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Without limitation to the provisions of paragraph (b)(iii) of this Section, the Borrower shall, through EPB, commencing June 30, 1984, and thereafter on a quarterly basis, furnish to the Bank, for its review and comments, reports of such scope and in such detail as the Bank shall reasonably request on the progress achieved in the carrying out of the Action Plan. (e) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Bank of their respective obligations under the Loan Agreement, and the accomplishment of the purposes of the Loan. Section 3.08. The Borrower shall: (a) take or cause to be taken all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for carrying out the Project; and (b) furnish to the Bank, promptly after such acquisition, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to the Project. Section 3.09. The Borrower shall, not later than June 30, 1984, or such other date as the Bank may agree, and taking into account the results and recommendations of the study undertaken under Part E (i) of the Provincial and County Roads Project, take all action as shall be necessary to ensure the adequate imple- mentation of the road safety program under Part A (ii) of the Project, which implementation shall commence not later than February 28, 1985. Section 3.10. The Borrower shall, in a manner and pursuant to a timetable satisfactory to the Bank, implement the plan -9- provided for in Section 3.07 (a) of the Loan Agreement dated December 30, 1982, entered into between the Borrower and the Bank for purposes of the Provincial and County Roads Project, which plan shall be satisfactory to the Bank. Section 3.11. The provisions of Section 3.10 of this Agreement supercede the provisions of Section 3.07 (b) of the Loan Agreement dated December 30, 1982, entered into between the Borrower and the Bank for purposes of the Provincial and County Roads Project. Section 3.12. The Borrower shall, prior to the commencement of construction for the widening of the 91 Km section Jeonju- Gwangju Expressway, furnish to the Bank for its review and com- ments, the results and recommendations of the feasibility study carried out by the Borrower's Korean Highway Corporation. ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. - 10 - (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property or as security .or the payment of debt incurred for the purpose of financing the purchase of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative sub- division thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and foreign exchange assets held by the Bank of Korea or any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 4.02. (a) The Borrower shall maintain or cause to be maintained separate records and accounts adequate to reflect in accordance with consistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall, or shall cause to: (i) have the accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said separate accounts, records and expenditures and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. The Borrower shall: (a) cause all of its national, provincial and county roads to be adequately maintained, and cause all necessary repairs thereof to be made, all in accordance with appropriate engineering practices, and, to this end, without any limitation, or restriction upon any of its other obligations under this Agreement, the Borrower shall provide, promptly as needed, the - 11 - funds, facilities, services and other resources required for the purpose. (b) cause all equipment for road maintenance and workshops of MOHA and MOC to be adequately maintained and cause all neces- sary repairs and renewals thereof to be made, all in accordance with appropriate engineering and management practices; (c) cause the buildings to be constructed under the Pro- ject, as well as the vehicles to be purchased under the Project, to be adequately maintained and cause all necessary repairs and renewals thereof to be made, all in accordance with appropriate engineering and management practices. Section 4.04. Without limitation to the provisions of Sec- tions 3.01 (a), 3.01 (b (iii) and 4.03 (a) of this Agreement, the Borrower shall, with respect to MOC, by July 30 of each year, .,commencing on July 30, 1984 and thereafter, and with respect to MOHA, by November 15 of each year, commencing on November 15, 1984, and, thereafter, furnish to the Bank, for its review and comments, the proposed amounts to be made available to MOC and MOHA during the next following Fiscal Year, for purposes of adequately maintaining the Borrower's national, provincial and county roads, as the case may be, and, thereafter, taking into account the Bank's comments, if any, the Borrower shall take such actions as may be required to ensure that such amounts shall be available to MOC and MOHA for such purposes during such Fiscal Year. Provided, however, that for purposes of this Section, the term "Fiscal Year" means the Borrower's Fiscal Year. Section 4.05. The Borrower shall take, or cause to be taken, the necessary measures, acceptable to the Bank, to ensure that the dimensions and axle-loads of vehicles using its national, provincial and county roads shall not exceed limits consistent with the design standard of such roads. ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified pursuant to paragraph (k) thereof, namely, that an event has occurred which shall make it improbable that the Action Plan or a significant part thereof will be carried out. - 12 - ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) that the Borrower has employed, pursuant to the provi- sions of Section 3.02 of this Agreement, the consultants required for carrying out Parts B (i) and B (iii) of the Project; and (b) that the Borrower has, in a manner satisfactory to the Bank, commenced the implementation of the plan referred to in Section 3.10 of this Agreement. Section 6.02. The date o a'l , 1984 is hereby specified for the purposes of Section 12.04 of the General Condi- tions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Minister of Finance Ministry of Finance Republic of Korea Seoul, Korea Cable address: Telex: MOF K 23243 Seoul - 13 - For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF KOREA By /5 C Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By (5'/ A Regional Vice President East Asia and Pacific - 14 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil Works: (a) under Part A 190,000,000 50% of the Pro- ject (b) supervision 3,300,000 100% under Part C (iii) of the Project (2) Equipment for road 7,800,000 100% of foreign maintenance and expenditures road safety and 100% of local expenditures (ex-factory) (3) Consultants' 4,300,000 100% services, tech- nical assis- tance and train- ing for Parts B (iv), B (vi), C (i) and C (iii) of the Project (4) Fee 573,566 Amount due under Section 2.05 of this Agreement (5) Unallocated 24,026,434 100% TOTAL 230,000,000 - 15 - 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; 3. The disbursement percentages have been calculated in com- pliance with the policy of the Bank that the proceeds of the Loan shall not be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; on this basis, if the a,mount of any such taxes levied on or in respect of items in any Category decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the dis- bursement percentage then applicable to such Category as required to be concistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) expenditures made prior to the date of this Agreement; and (b) payments made for expenditures under Category 1 for a Sub-project, unless such Sub-project has been approved by the Bank. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Cate- gory, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disburse- ment percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the - 16 - procedures set forth or referred to in this Agreement, no ex- penditure for such item shall be financed out of the proceeds of the Loan, and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cay,cel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been elig- ible for financing out of the proceeds of the Loan. - 17 - SCHEDULE 2 Description of the Project The objective of the Project is to assist the Borrower in increasing the economic efficiency of its highway sector by implementing the measures outlined in the Action Plan. The Project consists of the following Parts: Part A: (i) Improvement (including paving) of particular national, provincial and county roads, or portions thereof. (ii) Implementation of a program to improve road safety. (iii) Implementation of a program aimed at improving the Borrower's maintenance management of its national paved road network, including the acquisition, utilization and maintenance of maintenance equipment and facilities. Part B: (i) A study of the economic impact of regulations in the trucking industry. (ii) A study of road and intermodal freight terminals. (iii) A study of road user charges. (iv) Feasibility and engineering studies on multi-modal projects to be implemented in the Seoul-Busan Corridor and in the Gyonggi Regional Transport Area. (v) Studies on energy conservation on the Borrower's transport sector. (vi) Feasibility and engineering studies for the future development of the Borrower's road network. Part C: Provision of technical assistance and training for: (i) implementing the Action Plan; - 18 - (ii) the construction-supervision of the Sub-projects; and (iii) implementing the program under Part A (iii) of the Project. The Project is expected to be completed by December 31, 1987. - 19 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each May 1 and November 1 beginning November 1, 1987 through November 1, 1998 9,585,000 On May 1, 1999 9,545,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal; see General Conditions, Section 3.04. - 20 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.04 (b) of the General Conditions: Time of Prepayment Premium The interest rate (ex- pressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of prepayment multiplied by: Not more than three years 0.20 before maturity More than three years but 0.40 not more than six years before maturity More than six years but 0.73 not more than 11 years before maturity More than 11 years but not 0.87 more than 13 years before maturity More than 13 years before 1.00 maturity - 21 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publica- tion of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international com- petitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids; and (iii) the cost of inland freight and other expenditures incidental to the delivery of the goods to the place of their use or installation shall be included. - 22 - B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in Korea may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information requir2d to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Korea if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Korea equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in - 23 - such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from Group C, which as a result of the comparison under paragraph 3 is the lowest evaluated bid, shall be selected. C. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for goods and civil works: (a) Before bids are invited, the Borrower shall furnish to the Bank, 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 docu- ments or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification was invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after - 24 - its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 20% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this day of I11 01A 98 . FOR SECRETARY