Afghanistan - Third Agricultural Credit Project : Credit 0721 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 721 AF Project Agreement (Third Agricultural Credit Project) among INTERNATIONAL DEVELOPMENT ASSOCIATION and INTERNATIONAL DEVELOPMENT ASSOCIATION as Administrator on behalf of THE GOVERNMENT OF CANADA and AGRICULTURAL DEVELOPMENT EANK OF AFGHANISTAN Dated June 20, 1977 PROJECT AGREEMENT AGREFNENT, dated June 20, 1977, between INTERNATIONAL DEVEL- OPMENT ASSOCIATION (hereinafter called the Association) and the AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN, existing as a legal entity under the laws of the Borrower (hereinafter called AGBANK). WHEREAS by the Development Credit Agreement of even date herewith between the Republic 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 twelve million dollars ($12,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that AGBANK agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by the Development Credit Agreement of even date herewith between the Republic of Afghanistan and the Association acting on behalf of the Government of Canada, the Association has agreed to make available to the Borrower the amount of five million Canadian dollars (C$5,000,000), on the terms and conditions set forth in such Development Credit Agreement (hereinafter called the Canadian Credit Agreement), but only on condition that AGBANK agree to undertake such obligations toward the Association as hereinafter set forth; -2- WHEREAS by a subsidiary agreement to be entered into between the Borrower and AGBANK, a part of the proceeds of the credit provided for under the Development Credit Agreement and a part of the proceeds of the Canadian Credit provided for under the Canadian Credit Agreement will be made available to AGBANK on the terms and conditions therein set forth; and WHEREAS AGBANK, in consideration of the Association's entering into the Development Credit Agreement and the Canadian Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: - 3 - 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, provided that unless the context shall otherwise require, the term "Association" shall mean both "the International Development Association and the International Development Association acting on behalf of the Canadian Government," and the term "Canadian Credit" shall mean "the development credit provided for in the Canadian Credit Agreement". -4- ARTICLE II Execution of the Project Section 2.01. AGBANK shall carry out Parts A, B, C and D 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 financial practices. Section 2.02. Except as the Association shall otherwise agree, contracts for the purchase of goods to be financed out of the proceeds of the Credit and the Canadian Credit shall be procured in accordance with the provisions in Schedule 1 to this Agreement. Section 2.03. (a) AGBANK undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit and the Canadian Credit relent or made available to it by the Borrower 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 AGBANK to replace or repair such goods. (b) Except as the Association may otherwise agree, AGBANK shall cause all goods and services financed out of the proceeds of the Credit and the Canadian Credit relent or made available to it by the Borrower to be used exclusively for the Project. - 5 - Section 2.04. (a) AGBANK 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) AGBANK: (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 and the Canadian Credit relent or made available to it by the Borrower, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Association's representatives to visit the facilities and construction sites included in the Project and to examine 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 the Project, the expenditure of the proceeds of the Credit and the Canadian Credit so relent or made available to it and the goods and services financed out of such proceeds. (c) AGBANK shall enable the Association's representatives to examine all plants, sites, works, buildings, property and equipment of AGBANK and any relevant records and documents. -6- Section 2.05. AGBANK shall duly perform all its obligations under the Subsidiary Agreement. Except as the Borrower and 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 Agreement or any provision thereof. Section 2.06. (a) AGBANK shall, at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Agreement, and other matters relating to the purposes of ?he Credit and the Canadian Credit. (b) AGBANK shall promptly inform the Association of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Credit and the Canadian Credit, or the performance by AGBANK of its obligations under this Agreement and under the Subsidiary Agreement. -7- ARTICLE III Management and Operations of AGBANK Section 3.01. AGBANK shall at all times manage its affairs and conduct its business in an efficient manner under capable management and with competent staff and in accordance with appropriate administrative, financial and agricultural credit practices. Section 3.02. AGBANK shall employ, until August 31, 1980, or such other date as shall be agreed to between the Borrower, the Association and AGBANK, a consulting firm providing: (A) two experts specializing in management and banking and credit operations, with qualifications and experience and on terms and conditions satisfactory to the Borrower and the Association, for the purpose of carrying out Part D (a) of the Project; such employment to be made in such manner that there is no gap in the appointments to the positions currently filled by consultants; and (B) one financial expert and short-term consultants, with qualifications and experience and on terms and conditions satisfactory to the Borrower and the Association, for the purpose of carrying out Part D (b) of the Project. Section 3.03. Except as the Borrower and the Association shall otherwise agree, AGBANK shall, not later than March 31, -8- 1978, prepare a plan, satisfactory to the Borrower and the Association, to monitor and evaluate the effect of AGBANK's sub-loans, under the Project, on crop yields and farm incomes. Without prejudice to the generality of the foregoing, such plan shall specify the dates for the commencement and completion of such monitoring and evaluation. AGBANK shall furnish quarterly progress reports until the said completion date. Section 3.04. AGBANK shall furnish to the Association for its review, promptly after its completion, the appraisal report: (i) of each of the first three sub-loans, under Part A (a) of the Project, to farmer groups or cooperatives, and, under Part A (b) of the Project, for drilling deep wells; (ii) of each of the first two sub-loans under Part C of the Project; and (iii) of any sub-loan for marketing and processing, under Part C of the Project, exceeding Af 5 million and Af 15 million, respectively. Section 3.05. The operating policies of AGBANK in respect of Parts A, B and C of the Project shall be as set forth in Schedule 2 to this Agreement, as the same may be amended from time to time by agreement between the Borrower, the Association and AGBANK, and, AGBANK's appraisal procedures of sub-loans included in said Parts shall be satisfactory to the Borrower and the Association. Section 3.06. AGBANK shall take out and maintain with responsible insurers, or make other provisions satisfactory -9- to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.07. (a) AGBANK shall not establish, acquire or take over any subsidiary except on terms and conditions satisfactory to the Borrower and 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 this Agreement, if any, to observe and perform, as appropriate, the obligations of AGBANK under this Agreement to the extent to which such obligations shall be applicable to such subsidiary, as though such obligations were binding upon each of such subsidiaries. Section 3.08. AGBANK shall implement the Organization Program in accordance with the schedule se- forth therein, and shall complete such implementation not later than September 30, 1978, or such other date as shall be agreed to between the Association and AGBANK. Section 3.09. (a) AGBANK shall at all times operate and maintain its equipment and property and promptly make all necessary repairs and renewals thereof, in accordance with appropriate engineering and agricultural practices. (b) Except in the normal course of its business, AGBANK shall not, without the agreement of the Borrower and the - 10 - Association, sell, lease, transfer or otherwise dispose of any of its property or assets which shall be required for the efficient operation of its business and undertaking. - 11 - ARTICLE IV Financial Covenants Section 4.01. AGBANK shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. AGBANK shall: (i) have its and AMSCO's accounts and financial statements (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 Borrower and 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 AMSCO and the audit thereof as the Association shall from time to time reasonably request. - 12 - 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 and the Canadian Credit Agreement become effective. Section 5.02. (a) This Agreement and all obligations of the Association and of AGBANK thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement and the Canadian Credit Agreement shall terminate in accordance with its terms; or (ii) a date 20 years after the date of this Agreement. (b) If the Development Credit Agreement and the Canadian Credit Agreement terminate in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Associa- tion shall promptly notify 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 or the Canadian Credit Agreement. - 13 - 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 the 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 here- inafter 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: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) - 14 - 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 AGBANK may be taken or executed by the President or the Vice President of AGBANK or such other person or persons as the President or the Vice President shall designate in writing. Section 6.03. 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 6.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. Section 6.05. In accordance with the Agreement, dated April 22, 1977, between the Government of Canada and the - 15 - International Development Association, the rights and obligations of the Association acting on behalf of the Government of Canada under this Agreement may be transferred to the Government of Canada, or one of its agencies designated by it. AGBANK accepts and agrees that, upon notice by the Association to AGBANK to that effect, the Government of Canada (or the agency designated by it) shall ipso facto, from the date specified in such notice, be substituted in all rights and obligations of the Association acting on behalf of the Government of Canada under this Agreement as if the Government of Canada or such agency had been an original party to this Agreement, without any further action or formality required on the part of any party, and from such date the Intern- ational Development Association shall cease to have any rights or obligations as a party acting on behalf of the Government of Canada under this Agreement. - 16 - 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. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Munir P. Benjenk Regional Vice President Europe, Middle East and North Africa AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN By /s/ S. Saljooque Authorized Representative - 17 - SCHEDULE 1 Procurement A. General Procurement of machinery, equipment and supplies shall be the responsibility of AGBANK, and AGBANK will require AMSCO to make administrative arrangements therefor. AGBANK and AMSCO shall. ensure satisfactory after-sales service for the said machinery, equipment and supplies either by AMSCO or through the suppliers. B. International Competitive Bidding Except as provided in Part C hereof, contracts for the purchase of goods shall be procured in accordance with procedures consistent with those set forth in 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. C. Other Procurement Procedures 1. Vehicles and equipment for AGBANK and small farm equipment and implements shall be procured after inviting quotations from at least three suppliers. 2. Items required for on-farm development and for land settle- ment program of AGBANK and for purposes of sub-loans under Category 3 of Schedule 1 to the Development Credit Agreement may be procured through normal trade channels. - 18 - 3. Contracts for goods included in Category (1) (other than small farm equipment and implements) and for mobile workshops included in Category (5) of the said Schedule, estimated to cost the equivalent of less than $150,000 shall be procured after inviting quotations from at least three suppliers. D. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods except those to be procured in accordance with local procedures: (i) 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 domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to AGBANK or AMSCO, as the case may be, of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in Afghanistan may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for - 19 - such preference and the following methods and stages that will be followed in che evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Afghanistan if the bidder shall have established to the satisfaction of the Borrower and the Association that the manufacturing cost of such goods includes a value added in Afghanistan equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Afghanistan. (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. 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. - 20 - (d) If, as a result of the comparison under paragraph (c) 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 c.i.f. 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 such gruup 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 (c) is the lowest evaluated bid shall be selected. E. Review of Procurement Decisions by the Association 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for goods included in Category (1) (other than small farm equipment and implements) and Category (5) (mobile workshops only) estimated to cost the equivalent of $150,000 or more: (a) Before bids are invited, AGBANK or AMSCO, as the case may be, shall furnish to the Association, for its comments, the - 21 - 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 procedures 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. (b) After bids have been received and evaluated, AGBANK or AMSCO, as the case may be, shall, before a final decision on the award is made, inform the Association of the name of the bidder to which 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, and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower, AGBANK and AMSCO and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to - 22 - the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract to be financed out of the proceeds of the Credit and the Canadian Credit and not governed by the preceding paragraph, AGBANK or AMSCO, as the case may be, shall furnish to the Association, promptly after its execution and prior to the submission to the Association of the first applica- tion for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the con- tract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower, AGBANK and AMSCO, and state the reasons for such determination. AGBANK shall keep all relevant documents in respect of such contracts for review by the Associa- tion's representatives. - 23 - SCHEDULE 2 Operating Policies of AGBANK 1. General AGBANK sub-loans under the Project shall be made in accordance with its Charter and the Policy Statement and Loan Regulations dated October 18, 1970, as the same may be amended from time to time with the prior agreement of the Association. 2. Security Requirements: (a) AGBANK will continue to take security for its sub-loans for on-farm development under Part A of the Project in accordance with the said Policy Statement and Loan Regulations. (b) AGBANK will make its best efforts to modify, in consultation with the Association, its security requirements, to make its sub-loans available to a larger number of farmers with small holdings. 3. Conditions Precedent to Making Loans: (a) AGBANK will prepare and adopt lending terms (including security arrangements), satisfactory to the Borrower and the Association, relating to Part B of the Project prior to making any sub-loan thereunder. (b) AGBANK will prepare and adopt lending terms, satisfactory to the Association, relating to short-term (12 - 24 - months) sub-loans under Part C of the Project prior to making any sub-loan thereunder. 4. Terms and Conditions of Sub-loans: (a) The minimum interest rate and contribution of farmers and the maximum permissible grace period and the period of repay- ment for AGBANK sub-loans are set forth below: Category of Interest Sub-borrowers' Repayment Grace Sub-loans Rate Contribution Period Period %Investment Cost Years (A) Tractors, attachments 8 20 6 1 and water pumps (B) On-farm development, small machinery and equipment 8 20 12 4 (C) Fertilizer and other inputs 10 0 1 0 (D) Land settlement 8 0 12 5 (farm investments and inputs) (E) Marketing and process ing sub-loans (short- 10 0 1 0 term) to cooperatives (F) Marketing and process- 10 50 1 0 ing sub-loans (short-term) to firms (b) It is understood that AGBANK may allow rebate to coopera- tives not exceeding one percentage point of the applicable interest rates. - 25 - (c) AGBANK sub-loans under Categories (A) and (B) and Category (F) above shall not, on an average, exceed 80% and 50%, respectively, of the estimated cost of each investment plan. 5. Loan Recovery AGBANK shall take all such measures as shall be necessary on its part to reduce the reimbursements, by the Borrower of AGBANK's losses, pursuant to Section 3.07 of the Development Credit Agreement. To this end, AGBANK will, in collaboration with appropriate authorities of the Borrower, strengthen its loan recovery procedures.