Philippines - National Extension Project : Loan 1626 - Loan Agreement - Conformed

CONFORNED COPY LOAN NUMBER 1626 PH Loan Agreement (National Extension Project) between REPUBLIC OF THE PHILIPPINES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated December 21, 1978 LOAN NUMBER 1626 PH LOAN AGREEMENT AGREEMENT, dated December 21, 1978, between REPUBLIC OF THE PHILIPPINES (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). ARTICLE 1 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 March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Lopa 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 General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "MOA" means the Borrower's Ministry of Agriculture; (b) "Presidential Decree" means the Presidential Decree No. 1579 of the Borrower; and (c) "Letter of Instruction" means the Letter of Instruction No. 599 of the Borrower. 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 referred to, an amount in various currencies equivalent to thirty- five million dollars ($35,000,000). 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 The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between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 -2- 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 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 to be financed out of the proceeds of the Loan, shall be governed by the provisions of Schedule 4 to this Agreement. To assist the Borrower for this purpose, the Borrower may employ such consultant services as may be necessary. Section 2.04. The Closing Date shall be June 30, 1983 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 seven and thirty-five hundredths per cent (7.35%) 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 semiannually on June 1 and December 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. ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out Part E.1 of the Project through its Ministry of the Budget, Part E.2 through its National Food and Agricultural Council and the remainder of the Project through MOA, with due diligence and efficiency and in conformity with appropriate administrative, agricultural, nutri- tional, financial, training and extension practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. -3- Section 3.02. In order to assist the Borrower in carry- ing out the Project, the Borrower shall employ or cause to be employed, consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, including: (a) consultants, to be appointed by December 31, 1979, to assist in carrying out Part E.1 of the Project; and (b) consultants, to be appointed by December 31, 1979, to assist in carrying out Part E.2 of the Project. Section 3.03. (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 indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. Section 3.04. (a) The Borrower shall furnish to the Bank, 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 Bank shall reasonably request. (b) The Borrower: (i) shall 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) shall enable the Bank's accredited representatives to visit the facili- ties and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any rele- vant records and documents; and (iii) shall furnish to the Bank at regular intervals all such information as the Bank shall reason- ably request concerning the Project, its cost and, where appro- priate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. -4- (c) 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 reason- ably 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 respec- tive obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. Section 3.05. The Borrower shall 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 shall 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 3.06. The Borrower shall cause MOA to implement a reorganization of the MOA including the appointment by January 31, 1980 of MOA's twelve Regional Directors and at least two Assistant Regional Directors for each of the Regional Directors, in accor- dance with the Presidential Decree. Section 3.07. The Borrower shall ensure that in carrying out Part D of the Project, the required incremental extension staff are appointed in accordance with the implementation time- table set forth in the Annex to Schedule 2 to this Agreement. Section 3.08. The Borrower shall, in regard to Part E.1 of the Project, cause its Ministry of the Budget: (a) to draw up, in consultation with the Bank, by July 31, 1979, the terms of reference of the study to be carried out; (b) to evaluate, in consultation with the Bank, by March 31, 1981, the findings of the said study; and (c) to implement, by January 31, 1982, the plan of action agreed with the Bank. Section 3.09. (a) The Borrower shall cause its National Food and Agricultural Council to draw up, in consultation with the Bank, the terms of reference for the study outlined in Part E.2 of the Project by July 31, 1979. -5- (b) Except as the Bank shall otherwise agree, the Borrower shall cause MOA by July 31 of each year commencing on July 31, 1980, to furnish to the Bank for the Bank's review a report on the activities and achievements of the extension services, during the preceding year. Section 3.10. The Borrower shall ensure that motorcycles which are financed under the Project are of suitable engine capacity and design, and shall cause such motorcycles to be made available to extension workers under terms and procedures satis- factory to the Bank. For this purpose, the Borrower shall, by July 31, 1979, cause arrangements to be made satisfactory to the Bank. Section 3.11. (a) The Borrower shall cause Part C of the Project to be carried out in accordance with a program and pro- cedures satisfactory to the Bank. (b) In order to enable extension staff to implement Part C of the Project, the Borrower shall cause MOA to establish ade- quate transportation allowances for extension staff by January 31, 1980. ARTICLE IV Other Covenants Section 4.01. (a) It is the mutual intention of the Borrower and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on governmental assetse (b) To that end the Borrower: (i) represents that at the date of this Agreement no lien exists on any governmental assets as security for any external debt except as otherwise disclosed in writing by the Borrower to the Bank; and (ii) undertakes that, except as the Bank shall otherwise agree, if any such lien shall be created, it will ipso facto equally and ratably, and at no cost to the Bank, secure the payment of the principal of, and interest and other charges on, the Loan, and in the creation of any such lien express provision will be made to that effect. The Borrower shall promptly inform the Bank of the creation of any such lien. - 6 - (c) The foregoing representation and undertaking shall not apply to: (1) any lien created on property, at the time of purchase thereof, solely as security for payment of the pur- chase price 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. (d) As used in this Section, the term "governmental assets" means assets of the Borrower or of any agency of the Borrower including the Central Bank of the Philippines or any institution performing the functions of a central bank for the Borrower. (e) The Borrower further undertakes that, within the limits of the laws in force in its territories, it will make the fore- going undertaking effective with respect to liens on the assets of its political subdivisions and their agencies, and to the extent that the Borrower is unable within the limits of the laws in force in its territories to make this undertaking effective, the Borrower will give to the Bank an equivalent lien satisfactory to the Bank. Section 4,."* (a) The Borrower shall cause MOA to maintain separate accounts and records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations in respect of the Project. (b) The Borrower shall cause MOA to: (i) have such accounts 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 copies of its accounts 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 Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts of MOA and the audit thereof as the Bank shall from time to time reasonably request. 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 the Presidential Decree or -7- the Letter of Instruction shall have been amended, suspended, abrogated, repealed or waived in such a way as materially and adversely affects the ability of the Borrower to carry out the covenants, agreements and obligations set forth in this Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof, namely, that any events specified in Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The date March 27, 1979, is hereby specified for the purposes of Section 12.04 of the General Conditions. 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 Manila, Philippines Cable address: Telex: MINFIN 7550 CBP-PH Manila 0268 CB-CONF For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America -8- 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 THE PHILIPPINES By /s/ Arturo R. Tanco, Jr. Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ S. Shahid Husain Regional Vice President East Asia and Pacific -9- 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 2,000,000 50% (2) Equipment and 25,000,000 materials: (a) directly 100% of foreign imported expenditures (b) locally 100% of local manufactured expenditures (ex-factory) (c) goods procured 65% locally (3) Credits for motor- 4,000,000 100% of amounts cycles under Part disbursed B.3 (a) of the Project (4) Consultants' ser- 2,000,000 100% vices, training and study tours (5) Unallocated 2,000,000 TOTAL 35,000,000 - 10 - 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 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 no proceeds of the Loan shall 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; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds 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 payments made for expenditures prior to the date of this Agreement. 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 disbursement 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 procedures set forth or referred to in this Agreement, no expen- ditures for such item shall be financed out of the proceeds - 11 - 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, 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. - 12 - SCHEDULE 2 Description of the Project The Project is part of the Borrower's program to strengthen extension services, and consists of the following Parts: A. Organizational Program Implementation of an improved organizational structure for MOA including the establishment of a unified system of extension services and closer coordination between extension and research. B. Buildings, Vehicles and Equipment 1. Construction of at least 500 rural extension centers and renovation of the existing facilities for extension services. 2. Provision of communications equipment for MOA. 3. Provision of equipment and materials for extension services, including: (a) vehicles for transporting staff and materials; (b) office, printing and photographic equipment and supplies; and (c) audio and visual aids and other demonstration and training equipment and materials. C. Extension Methodology Introduction and implementation of a sound extension methodology, with particular emphasis on close super- vision, regular training of extension workers and regu- lar visits. D. Staffing and Training Program Implementation of a staffing and training program in accordance with the Annex to Schedule 2. - 13 - E. Studies 1. Review of extension services provided by the Borrower 's agencies including job functions and compensation of extension staff in order to develop a unified system of extension services and a system of equitable compensation for extension staff. 2. Development of more effective monitoring and evaluation procedures to determine (i) individual performance of extension workers and (ii) effec- tiveness of extension services provided. The Project is expected to be completed by December 31, 1982. - 14 - ANNEX TO SCHEDULE 2 Implementation time-table for incremental extension staff and new extension positions under Part D of the Project. Designation FY*1979 FY1980 FY1981 FY1982 Total Rural Youth Development Officer 150 150 200 500 Subject Matter Specialist - 80 100 100 280 Farm Management Technician 100 200 300 400 1,000 Home Management Technician - 300 300 400 1,000 Livestock exten- sion Officer 150 150 200 500 * FY means the Borrower's Fiscal Year - 15 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each June 1 and December 1 beginning June 1, 1984 through June 1, 1998 1,165,000 On December 1, 1998 1,215,000 * 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. - 16 - 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 3.05 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.10% More than three years but not more than six years before maturity 2.20% More than six years but not more than eleven years before maturity 4.05% More than eleven years but not more than sixteen years before maturity 5.90% More than sixteen years but not more than eighteen years before maturity 6.60% More than eighteen years before maturity 7.35% - 17 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods shall be procured under contracts awarded 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 inter- national competitive bidding as described in Part A of the Guide- lines. 2. For goods to be procured on the basis of international 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 publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods remain to be procured on the basis of inter- national 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 competitive bidding, (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 the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in the Republic of the Philippines may be granted a margin of preference in accordance with, and subject to, the following provisions: - 18 - 1. 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 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 the Republic of the Philippines 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 the Republic of the Philippines equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in the Republic of the Philippines. (3) Group C: bids offering any other goods. 3. 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 3upplied domestically, to determine the lowest eval- uated 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. 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 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 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. - 19 - C. Other Procurement Procedures 1. Specialized items and items to be purchased in small quanti- ties estimated to cost not more than the equivalent of $50,000 each and in the aggregate the equivalent of $2,000,000 or less, may be procured after local advertising in accordance with the Borrower's competitive bidding procedures satisfactory to the Bank. 2. Motorcycles may be procured on the basis of local competitive bidding in accordance with procedures satisfactory to the Bank. 3. Notwithstanding the provisions of Parts A, C.1 and C.2 of this Schedule, equipment and materials with unit prices not exceeding the equivalent of $10,000 each may be purchased on the basis of prudent shopping after solicitation of at least three quotations, provided that the aggregate expenditure of items so purchased shall not exceed the equivalent of $500,000. 4. Civil works shall be carried out either by contracts awarded under the Borrower's procurement procedures satisfactory to the Bank, or by force account under supervision of the Borrower. D. 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 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 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 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 its review, a detailed report on the evaluation and comparison - 20 - 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 invited. (d) Two conformed copies of the contract shall be fur- nished 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. 2. With respect to each contract 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 con- tract, together with the analysis of the respective bids, recom- mendations 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 ,ny 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 10% 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.