Tanzania - Morogoro Industrial Complex Project : Loan 1386 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1386 TA LOAN AGREEMENT (Morogoro Industrial Complex Project) between UNITED REPUBLIC OF TANZANIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated April 6, 1977 LOAN NUMBER 1386 TA LOAN AGREEMENT AGREEMENT, dated April 6, 1977, between UNITED REPUBLIC OF TANZANIA (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) the Borrower has requested the European Economic Commun- ity to assist in the financing of the canvas mill included in the Morogoro Industrial Complex by making available to the Borrower the equivalent of $18,000,000 in the form of a loan and a grant (both hereinafter called the EEC Financing); (C) the Project will be carried out by the Borrower's National Development Corporation (hereinafter called NDC) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to NDC the proceeds of the Loan as hereinafter provided and of the EEC Financing; (D) the Borrower has also requested the Bank to provide ad- ditional assistance towards the financing of the Project under the Interest Subsidy Fund for the Third Window established by Resolu- tion No. 75-11.1 of the Executive Directors of the Bank and by an agreement of even date herewith between the Borrower and the Bank (hereinafter called the Intermediate Term Loan Agreement) the Bank is agreeing to provide such assistance in an aggregate principal - 2 - amount equivalent to eleven million five hundred thousand dollars ($11,500,000) (hereinafter called the Intermediate Term Loan); (E) the Borrower and the Bank intend that the proceeds of this Loan and of the Intermediate Term Loan be disbursed pro rata on the basis of 1:1 ratio; 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: -3- APTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guar- antee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the Gen- eral Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the term "Project Com- panies" means the companies referred to in Slection 3.02 (a) and (b) of this Agreement, ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or re- ferred to, an amount in various currencies equivalent to eleven million five hundred thousand dollars ($11,500,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Sched- ule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for ex- penditures 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 and to be financed out of the proceeds of the Loan and in respect of interest and other charges on the Loan. (b) On each of the semi-annual interest payment dates speci- fied in Section 2.07 of this Agreement, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amounts required to pay, on such date, interest and other charges on the Loan accrued and payable on the date set forth, and up to the amount allocated, in Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement be- tween the Borrower and the Bank. Section 2.03. Except as the Bank shall otherwise agree, contracts for the purchase of goods or for civil works to be fi- nanced out of the proceeds of the Loan and the Intermediate Term - 5 - Loan shall be procured in accordance with the provisions of Sched- ule 4 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1982 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment 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 2.06. The Borrower shall pay interest at the rate of eight and one-half per cent (8-1/2%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semi-annually on February 1 and August 1 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. -6- ARTICLE III Execution of the Project Section 3.01. The Borrower shall cause NDC and the Project Companies to carry out the Project and operate the facilities in- cluded therein with due diligence and efficiency and in conformity with sound industrial, engineering, administrative and financial practices, and shall provide, promptly as needed, the funds, fa- cilities, services and other resources required for the purpose. Section 3.02. Except as the Bank may otherwise agree, the Borrower shall cause NDC: (a) (i) to set up, by December 1, 1978, a company exclusively in charge of the industrial estate included in Part A of the Project; and (ii) to employ, by December 1, 1978, a person, after consulting with the Bank on his qualifications, ex- perience and terms and conditions of employment, to manage the said estate; (b) to set up, by December 1, 1978, two companies, each ex- clusively in charge of the leather goods factory and the shoe factory, respectively, included in the Project; and (c) (i) to employ a person, after consulting with the Bank on his qualifications, experience and terms and conditions of employment, to serve as Project Manager during the period of Project execution; and (ii) to provide such person with adequate staff, facili- ties, and professional services. Section 3.03. (a) The Borrower shall relend the proceeds of the Loan and the Intermediate Term Loan to NDC under a subidialy loan agreement to be entered into between the Borrower and NDC, on terms and conditions satisfactory to the Bank, which shadl include the following: repayment in 15 years, including four and onm-hal f years of grace; interest to accrue on outstanding amounts at the rate of 10% per annum but to be paid only after the first three years; NDC to bear the foreign exchange risk. (b) Except as the Bank may otherwise agree, the Borrower shall cause NDC to utilize the proceeds of the Loan and the Intermediate Term Loan so relent to it by the Borrower, as follows: (i) relending the equivalent of $5,500,000 to, and making an equity contribution for the equivalent of $1,000,000 in, the Project Company in charge of carrying out Part A of the Project for that purpose; (ii) relending the equivalent of $15,400,000 to, and making an equity contribution for the equivalent of $500,000 in, the Project Company in charge of carrying out Part B of the Project, for that pur- pose; and - 8 - (iii) relending the equivalent of $600,000 to the Project Company in charge of carrying out Part C of the Project, for that purpose; said relending to be on the same terms and conditions as those set forth or referred to in paragraph (a) hereof, the Project Companies to bear the foreign exchange risk. (c) The Borrower shall exercise its rights, and shall cause NDC to exercise NDC's rights, under the agreements hereinabove referred to, in such manner as to protect the interests of the Bor- rower, the Bank and NDC, and to accomplish the purposes of the Loan and the Intermediate Term Loan and except as the Borrower and the Bank shall otherwise agree, the Borrower shall not, and shall cause NDC not to, assign, amend, abrogate, waive or fail to enforce any provision of said agreements. (d) Whenever there shall be reasonable cause to believe that the funds available to NDC or the Project Companies will be inade- quate to meet the estimated expenditures required for the carrying out of the Project, the Borrower shall provide or cause such com- pany or companies to be provided, on terms and conditions satisfac- tory to the Bank, with such funds as are needed to meet such expen- ditures. Section 3.04. (a) The Borrower shall employ, or cause to be employed, during not less than six years, a firm, whose qualifica- tions and experience on shoe factory design, construction and op- eration, and whose terms and conditions of employment, shall be satisfactory to the Bank, to assist in the design, construction, -9- equipment installation, procurement of construction and equipment contracts, training of personnel, start-up and management of oper- ations of the shoe factory included in Part B of the Project. (b) The Borrower shall employ, or cause to be employed, a firm whose qualifications and experience on shoe marketing and whose terms and conditions of employment shall be satisfactory to the Bank, to assist in marketing the output of the shoe factory included in Part B of the Project. (c) The Borrower shall afford the Bank a reasonable opportu- nity to exchange views with the Borrower, NDC, and the corresponding Project Company, before the termination of the contracts referred to in the preceding paragraphs, regarding the desirability of ter- minating or extending them. Section 3.05. The Borrower shall cause: (i) the construction of the third and the fourth standard factory buildings in the in- dustrial estate included in the Project to start only when demand will justify the corresponding investment; and (ii) the Bank to be consulted before the construction of each such third and fourth building is started. Section 3.06. The Borrower shall use its best efforts to ob- tain adequate financing to construct the Mindu Dam and a pipeline to supply water from that dam to the industrial complex included in the Project, and shall construct said dam and pipeline so as to ensure that there will be adequate supply of water by the time each of the facilities included in the Project is completed. - 10 - Section 3.07. The Borrower shall carry out, or cause to be carried out, dur'ng the engineering design phase of the industrial estate included in the Project, but in any event not later than December 1, 1977, a study to determine if an evaporation/oxidation pond constitutes an adequate method of liquid waste disposal for the industrial corplex included in the Project, in the light of modern ecological considerations, and, for this purpose, the Bor- rower sha. employ, or cause to be employed, sanitary and industrial waste dioposa e ts w-Fhcse qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Section 3.0. (a) The Borrower undertakes to insure, make ade.uate i n f'or the insurance of, or cause to be insured, the mte T'e financed out of the proceeds of the Loan and the Intermediate Term Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of usp or installation, and for such insurance any indemnity shall be payable in a cirrency freely usable by the Borrower to replace or repair such goods. (b) Eep s *he Bank shal. otherwise agree, the Borrower shall cns- al.l rs and services financed out of the proceeds of the Toan and .he Intermediate Term Loan to be used exclusively for the Proi, .C Sectaon (a) The Borrower shall furnish or cause to be furnishd 1to the Bank, promptly upon their preparation, the plans, specificatio . rports, contract documents and construction and - 11 - procurement schedules for the Project, and any material modifica- tions thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall maintain or cause to be maintained records adequate to reflect the progress and cost of the Project and to identify the goods and services financed out of the pro- ceeds of the Loan and the Intermediate Term Loan, and to disclose the use thereof in the Project; (ii) shall enable the Bank's ac- credited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and the Intermediate Term Loan and any relevant records and documents; and (iii) shall furnish or cause to be furnished to the Bank all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the Intermediate Term Loan and the goods and services financed out of such proceeds. - 12 - 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, specific 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 for- eign exchange heli '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 foreign exchange, such lien shall, unless the Bank shall otherwice agree, ipso facto and at no cost to the Bank, equally and ratally secure the principal of, and interest and other charges on, the Loan and the Intermediate Term Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect. (b) The foregoing undertaking shall not apply -Lo: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; (ii) any lien arising in the ordinary course of banking transac- tions and securing a debt maturing not more than one year after its date; and (iii) any charges on the General Fund of the East African Community (hereinafter called the Community) securing a debt of the Community where the amount of the debt service on such debt in any financing year together with other debt service on - 13 - other debt of the Community payable from such General Fund in such financial year does not exceed 2% of the average of customs duties and excise duties collected by the East African Customs and Excise Department in the three financial years preceding such incurrence. For the purposes of this paragraph, "debt service" shall include payments of the principal of, and interest and other charges on, debt; and any reference to incurring of debt shall include the assumption and guarantee of debt and any renewal, extension or modification of the terms of the debt or of the assumption or guar- antee thereof. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative subdi- vision thereof and of any entity owned or controlled by, or oper- ating for the account or benefit of, the Borrower or any such sub- division, including gold and other foreign exchange assets held by any institution performing the functions of a central bank or ex- change stabilization fund, or similar functions, for the Borrower. Section 4.02. The Borrower shall cause NDC and the Project Companies: (a) to maintain records adequate to reflect in accordance with consistently maintained sound accounting practices its res- pective operations and financial condition; and (b) to: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with ap- propriate auditing principles consistently applied, by the Tanzania - 14 - Audit Corporation; '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 copies of its financial statements for such year as so audited and (B) the report of such audit by said Corporation, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning its accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. The Borrower shall cause the Project Companies to take out and maintain with responsible insurers, or to make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appro- priate practice. Section 4.04. Except as the Borrower and the Bank may other- wise agree, the Borrower shall, through NDC or otherwise, cause each of the Project Companies: (a) to maintain at all times a debt/equity ratio not greater than 60:40; (b) to maintain a ratio of current assets to current liabil- ities of not less than 1.5:1, and, particularly, not to incur any debt or pay any dividend (other than dividends payable in shares in such companies' capital) or other cash distribution or make any distribution on its capital stock, or purchase, redeem or other- wise acquire any shares of its capital stock, if such action would reduce such ratio below said limit; and - 15 - (c) (i) to open and maintain on its books a special reserve account; (ii) to transfer to such special account, at the end of each fiscal year, out of its net operating income after taxes for that year, if any, such funds as shall be required to maintain in such account an amount equal to its debt service requirements dur- ing the following two years; and (iii) to maintain the funds cor- responding to the amounts maintained in such account in cash or in assets readily convertible into cash. For purposes of this Section: (i) "debt" means any debt incurred by the Project Com- pany and maturing more than one year after the date on which it is originally incurred; (ii) debt shall be deemed to be incurred (1) under a loan contract, on the date it is drawn down but only to the extent that it is outstanding, and (2) under a guarantee agreement, on the date such agreement is entered into but only to the extent that the guaranteed debt is outstanding; (iii) "debt service requirements" means the aggregate amount of amortization (including sinking fund pay- ments, if any) of, and interest and other charges on, debt payable in the pertinent period of time: (iv) "equity" means the sum of the Project Company's un- impaired paid-in share capital, surplus and reserves not allocated to specific liabilities; - 16 - (v) "current assets" includes cash, accounts receivable due within twelve months, less an appropriate re- serve for bad debts, prepaid expenses, and inven- tories and all other assets, excluding spare parts, which could, in the ordinary course of business, be converted into cash within twelve months; (vi) "current liabilities" includes accounts payable within twelve months, customer advances, income taxes, dividends, bonuses and all other liabilities due and payable, or which could be called for pay- ment, within twelve months; and (vii) whenever it shall be necessary to value in ter's of the currency of the Borrower obligations denominated in another currency, such valuation shall be made using the rate of exchange provided by the Bank of Tanzania. - 17 - ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) the right of the Borrower to withdraw the proceeds of the financing referred to in Section 3.06 hereof shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor, or (b) any such financing, to the extent that it has been ob- tained as a loan, shall have become due and payable prior to the agreed maturity thereof. (c) subparagraphs (a) and (b) of this Section shall not apply if the Borrower establishes to the satisfaction of the Bank that: (i) such suspension, cancellation, termination or prematuring is not caused by Uhe failure of the Borrower to perform any of its obligations under such agreement; and (ii) adequate funds are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following events are specified pursuant to para- graph (h) thereof: - 18 - (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower; and (b) the event specified in paragraph (b) of Section 5.01 of this Agreement shall occur. - 19 - ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an addi- tional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely that the subsidiary loan agreement referred to in Section 3.03 (a) of this Agreement has been executed and delivered on behalf of the Borrower and NDC. Section 6.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinLon or opinions to be furnished to the Bank, naidely, that the agreement referred to in Section 6.01 hereof has been duly authorized or ratified by, and executed and delivered on behalf of the Borrower and NDC and is legally binding upon the Borrower and NDC in accordance with its terms. Section 6.03. The date July 6, 1977, is hereby specified for the purposes of Section 12.04 of tie C'aeral Uonditions. - 20 - ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of the Borrower at the time res- ponsible for Finance 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: Ministry of Finance and Planning P. 0. Box 9111 Dar es Salaam United Republic of Tanzania Cable address: TREASURY Dar es Salaam 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 440o98 (ITT) Washington, D.C. 248423 (RCA) or 64145 (wUI) - 21 - 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. UNITED REPUBLIC OF TANZANIA By Is/ Paul Bomani Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Is! W.A. Wapenhans Regional Vice President Eastern Africa - 22 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan and the Intermediate Term Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan and of the Intermediate Term Loan, the allocation of the amounts of the Loan and of the Intermediate Term Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan and of the Intermediate Term Loan Allocated % of (Expressed in Dollar Expenditures Category Equivalent) to be Financed (1) Equipment and 9,700,000 100% of foreign materials expenditures and 85% of local ex- penditures (2) Civil works 5,300,000 50% of total expenditures (3) Consulting services 3,000,000 100% of foreign expenditures (4) Training 400,000 100% of foreign expenditures (5) Interest and other 3,100,000 Amounts due charges on the Loan accrued on or before December 31, 1980 (6) Unallocated 1,500,000 TOTAL 23,000,000 - 23 - 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods and services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Bank that no proceeds of the Loan or the Intermediate Term Loan shall be disbursed on account of pay- ments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the pro- ceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank- 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of: (i) payments made for expendi- tures prior to the date of this Agreement, except that withdrawls, in an aggregate amount not exceeding the equivalent of $130,000, may be made in respect of Category (3) on account of paymeiAts made for such expenditures before that date but after January 1, 19T7; and (ii) unless the Bank shall so agree, civil works doe.linrpnt, -214 - until the Borrower shall have obtained the financing referred to in Section 3.06 of this Agreement and, if such financing is in the form of a loan or a grant from sources outside Tanzania, all con- ditions for the initial disbursement thereof, if any, (except for the effectiveness of this Agreement) shall have been fulfilled. 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 Category, 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) regarding Category (2) only, if such real- location cannot fully meet the estimated shortfall, reduce the dis- bursement percentage then bpplicable 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 procedures set forth or referred to in this Agreement, no expen- ditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or lim- iting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 25 - SCHEDULE 2 Description of the Project The Project, located about 4 kilometers north of Morogoro, consists of: Part A: Development of about 65 hectares into an Industrial Estate. This includes construction of roads, surface drainage canals, and utilities (power, water, sewage disposal, telecommunications) and other facilities for small- and medium-scale industries, and about 35 houses 2 with an aggregate area of about 5,250 m . It includes also the construction of four standard factory build- ings of approximately 1,440 m2 each. Part B: Construction and equipment of a Shoe Factory with capa- city to produce about 4 million pairs of leather and canvas shoes per annum. Part C: Construction and equipment of a Leather Goods Factory with capacity to utilize about 183,000 m2 of finished leather per annum to fabricate handbags, suitcases, garments, wallets and other items. It is expected that most of the output of the Shoe Factory and of the Leather Goods Factory will be exported. It is expected that the Project will be completed by July 1, 1982. - 26 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 1 and August 1 Beginning February 1, 1982 through August 1, 1996 370,000 On February 1, 1997 4oo,000 To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equiva- lents determined as for purposes of withdrawal. - 27 - Premiums on Prepayment The following percentages are specified as the premiums pay- able on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.25% More than three years but not more than six years before maturity 2.55% More than six years but not more than eleven years before maturity 4*65% More than eleven years but not more than sixteen years before maturity 6.80% More than sixteen years but not more than eighteen years before maturity 7.65% More than eighteen years before maturity 8.50% - 28 - SCHEDULE 4 Procurement A. International Competitive Bidding Except as provided in Part B hereof, contracts for the pur- chase of goods or for civil works shall be procured in accordance with procedures consistent with those set forth in Part A of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guide- lines), on thp basis of international competitive bidding. B. Other Procurement Procedures Contracts for goods estimated to cost less than the equiva- lent of $100,000 shall be awarded after obtaining a reasonable number of quotations from qualified and experienced suppliers. Contracts for ci _1 works estimated to cost less than the equivalent of $100,000 shall be awarded in accordance with the Borrower's ordinary procedures. C. Evaluation and Comparison of Bids for Goods 1. For the purpose of evaluation and comparison of bids for the supply of goods under paragraph A hereof: (i) bidders shall be re- quired to state in their bid the c.i.f. (port of entry) price for imported goods; (ii) customs duties and other import taxes on im- ported goods, and sales and similar taxes on domestically supplied - 29 - goods, shall be excluded; and (iii) the cost to the Borrower of in- land 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 Tanzania may be granted a margin of preference in accordance with, and subject to, the following pro- visions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the infor- mation required to establish the eligibility of a bid for such preference and the following methods and stages that will be fol- lowed in the 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 Tan- zania 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 Tanzania equal to at least 20% of the ex- factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Tanzania. (3) Group C: bids offering any other goods. - 30 - (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 simiiar taxes on goods to be supplied domestically, to determine the lowest evalu- ated 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. (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 com- parison 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 group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxcs 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. D. Evaluation and Comparison of Bids for Civil Works; Preference for Domestic Contractors With respect to any contract for civil works to be procured in accordance with the procedures described in Part A of this Schedule, the Borrower may grant a margin of preference of 7-1/2% - 31 - to domestic contractors, in accordance with, and subject to, the following provisions: (a) Contractors shall be required to prequalify as provided in Part A of this Schedule and applicants for qualification apply- ing also for such preference shall be asked to provide, as part of the data for qualification, such information, including details of ownership, as shall be required to determine whether, according to the classification established by the Borrower and accepted by the Bank, a particular firm or group of firms qualifies for a domestic preference. The bidding documents shall clearly indicate the pre- ference and the method that will be followed in the evaluation and comparison of bids to give effect to such preference. (b) After bids have been received and reviewed by the Bor- rower, responsive bids will be classified into the following groups: (i) bids offered by domestic contractors eligible for preference; and (ii) bids offered by other contractors. For the purpose of evaluation and comparison of bids an amount equal to 7-1/2% of the bid amount shall be added to bids received under group (ii) above. E. Review of Procurement Decisions by the Bank 1. Review of prequalification. The Borrower shall, before quali- fication is invited, inform the Bank in detail of the procedure to - 32 - be followed, and shall introduce such modifications in said pro- cedure as the Bank shall reasonably request. The list of prequalified bidders, together with a statement of their qualif,cations and, where applicable, of their eligibility for domestic preference un- der Part D above and of the reasons for the exclusion of any ap- plicant for prequalification and for such eligibility shall be furnished by the Borrower to the Bank for its comments before the applicants are notified of the Borrower's decision, and the Bor- rower shall make such additions to, deletions from, or modifications in, the said list as the Bank shall reasonably request. 2. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equiva- lent of $100,000 or more: (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 Drocedures 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 Bor- rower 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 - 33 - its review, a detailed report, by the consultants referred to in Section 3.04 (a) of this Agreement, where applicable, on the eval- uation and comparison of the bids received, together with the recommendations for award of the said consultants 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, with- out the Bank'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 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. 3. With respect to each contract to be financed out of the pro- ceeds of the Loan or the Intermediate Term Loan and not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after 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 Guide- lines or this Schedule, promptly inform the Borrower and state the reasons for such determination.