Malawi - Shire Valley Agricultural Consolidation Project : Credit 0823 - Development Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 823 MAI Development Credit Agreement (Shire Valley Agricultural Consolidation Project) between REPUBLIC OF MALAWI and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated July 7, 1978 CREDIT NUMBER 823 MAI DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated July 7, 1978, between REPUBLIC OF MALAWI (hereinafter calle4 the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agreements of the Association 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) "MANR" means the Borrower's Ministry of Agriculture and Natural Resources. (b) "Project Executing Agencies" means with respect to (i) Parts A through E, G and H of the Project described in Schedule 2 to this Agreement, MANR's Shire Valley Agricultural Development Program Management Team (hereinafter called the Management Team), and (ii) Part F of the Project, the Borrower's Ministry of Health. (c) "Project Area" means with respect to (i) the national irrigation study included in Part E of the Project, the whole of Malawi, and (ii) the remaining components of the Project, the administrative districts of Chikwawa and Nsanje in the Lower Shire Valley in the Southern part of Malawi. (d) "main roads", "secondary roads", and "district roads" mean the categories of roads to be improved or constructed under Part G (1) of the Project, according to design standards for such categories which have been established by the Borrower's Ministry of Works and Supplies. -2- ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equiva- lent to ten million seven hundred thousand dollars ($10,700,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit 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 Association, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Credit, shall be governed by the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1982 or such later date as the Association shall establish. The Associa- tion shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annua on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semiannually on April 1 and October 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each April 1 and October 1 commencing October 1, 1988, and ending April 1, 2028, each installment to and including the installment payable on April 1, 1998, to be one-half of one per cent (1/2 of 1Z) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United Kingdom of Great Britain and Northern Ireland is hereby specified for the purposes of Section 4.02 of the General Conditions. -3- ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out the Project, through the Project Executing Agencies, with due diligence and efficiency and in conformity with appropriate administrative, financial and agricultural practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) The Borrower shall continue to maintain the Management Team in such form, and with such powers and responsibilities, as shall be satisfactory to the Association and the Borrower shall assign the Management Team, acting under MANR, overall responsi- bility for administering Parts A through E, G and H of the Project. (c) Without any limitation or restriction upon its obliga- tions under paragraph (a) above, the Borrower shall provide in its annual budgets the following amounts to meet the recurrent costs of the Project Executing Agencies required to provide continuing services to farmers and fishermen to maintain levels of production already attained under previous phases of the Shire Valley Agri- cultural Development Program, namely: (i) not less than (A) MKOO,000 in fiscal year 1978/1979, (B) MK438,000 in fiscal year 1979/1980, (C) MK470,000 in fiscal year 1980/1981, (D) MK496,000 in fiscal year 1981/1982; and (ii) such additional amounts as shall be required to meet the said recurrent costs in any of these years or in subsequent years. Section 3.02. In order to assist the Borrower in carrying out the Project, the Borrower shall employ consultants (including consultants for Part E (1) of the Project) whose qualifications, experience and terms and conditions of employment (including terms of reference) shall be satisfactory to the Association. Section 3.03. The Borrower shall increase the number of qualified Technical Assistants employed on a permanent basis and zssigned to the Management Team to 97 by May 1, 1979, 112 by May 1, 1980, and 132 by May 1, 1981. Section 3.04. All roads to be improved or constructed under the Project shall be improved or constructed in accordance with the standards established by the Borrower's Ministry of Works and Supplies. -4- Section 3.05. The Borrower shall cause: (i) its Ministry of Works and Supplies to maintain adequately all main roads con- structed under the Project; and (ii) either the said Ministry or the District Councils having jurisdiction, if such councils are suitably equipped, to maintain adequately after completion of the Project all secondary and district roads constructed under the Project, all in accordance with appropriate engineering practices; and the Borrower shall provide promptly as needed the funds, facilities and services required for the purpose. Section 3.06. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Association shall otherwise agree, the Borrowez shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. Section 3.07. (a) The Borrower shall furnish to the Associa- tion, 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) The Borrower: (i) shall cause each of the Project Executing Agencies to maintain records and procedures adequate to record and monitor the progress of the Part or Parts of the Project which the said Agency is carrying out (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) shall enable the Associa- tion's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) shall cause each of the Project Executing Agencies to furnish to the Association at regular intervals all such information as the Association shall reasonably request concerning Part or Parts of the Project which the said Agency is carrying out, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of -5- the Credit and the goods and services financed out of such pro- ceeds. (c) Promptly after completion of the Project, but in any event not later than three months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, the Borrower shall prepare and furnish, or cause to be prepared and furnished, to the Association a report, of such scope and in such detail as the Association 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 Association of their respective obligations under the Development Credit Agreement and the accomplishment of the purposes of the Credit. Section 3.08. 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 Association, promptly after such acquisition, evidence satisfac- tory to the Association that such land and rights in respect of land are available for purposes related to the Project. Section 3.09. The Borrower shall adequately maintain, after completion of the Project, all the services established under the Project, and shall provide, promptly as needed, the funds, facili- ties, services and other resources required for this purpose. Section 3.10. The Borrower shall apply policies concerning the recovery of costs incurred under the Project which shall be in conformity with the cost recovery policies applied to agricultural development projects under the Borrower's National Rural Develop- ment Program. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with consis- tently maintained appropriate accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. -6- (b) The Borrower shall cause each of the Project Executing Agencies to: (i) have its accounts and financial statements (balance sheets, if any, 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 Association; (ii) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year, (A) certi- fied 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 rea- sonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial state- ments of the responsible Project Executing Agency and the audit thereof as the Association shall from time to time reasonably request. Section 4.02. The Borrower shall cause each of the Project Executing Agencies to take out and maintain with responsible insurers, or to make other provision satisfactory to the Associa- tion for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 4.03. The Borrower shall prepare and send to the Association no later than March 31, 1979, a program for the recruitment and training for purposes of the Project of suitably qualified Malawi nationals in numbers adequate to assume, by the completion of the Project, responsibilities currently being undertaken by internationally recruited staff and, after consul- tation with the Association, the Borrower shall carry out the program as finally formulated. Section 4.04. The Borrower shall continue to employ on the Management Team qualified staff in the following posts, namely, Project Manager, Senior Agricultural Officer, Senior Research Officer, Senior Veterinary Officer, Hydrogeologist, Evaluation Officer and Financial Controller and any replacement of such staff shall only be made after consultation with the Association. Section 4.05. The Borrower shall, no later than October 31, 1978, appoint: (i) a qualified person as head of MANR's Planning Unit for a period of up to two years from the date of this Agree- ment; and (ii) a Malawian national, who shall have received adequate training during this period, to replace such head. -7- ARTICLE V Effective Date; Termination Section 5.01. The following event is specified as an addi- tional condition to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions, namely, the transfer to the control and administration of the Management Team of about 150 hectares of land at MANR's Makanga Research Station for purposes of the irrigated seed selection and multiplication farm to be established under Part A (3) of the Project. Section 5.02. The date October 10, 1978 is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representatives of the Borrower; Addresses Section 6.01. 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 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance P.O. Box 30049 Capital City Lilongwe 3 Malawi Cable address: FINANCE Lilongwe For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF MALAWI By /s/ D.Y.J. Kalilangwe Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Willi A. Wapenhans Regional Vice President Eastern Africa -9- SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Vehicles and 1,410,000 100% of foreign equipment expenditures if directly imported and 85% if imported end purchased lucally (2) Civil works 1,660,000 85% (3) Salaries and allow- 280,000 100% of foreign ances for interna- expenditures tionally recruited staff (4) Operating costs 4,910,000 85% (vehicles, machinery, personnel and mis- cellaneous) excluding the recurrent costs mentioned in Section 3.01 (c) of this Agreement (5) Consultants 400,000 100% of foreign expenditures (6) Unallocated 2,040,000 TOTAL 10,700,000 - 10 - 2. For the purposes of this Schedule, the term "foreign expendi- tures" 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. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Association that no proceeds of the Credit 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 Credit decreases or increases, the Association 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 Association. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (i) payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $600,000 may be made in respect of Categories (3) and (4) on account of payments made for such expenditures before that date but after March 31, 1978; or (ii) payments made for expendi- tures under Category (5) relating to the feasibility study included in Part E (1) of the Projeit, until (A) the Association has notified the Borrower that it is satisfied that the nation- wide irrigation study included in Part E (1) of the Project has been commenced with terms of reference satisfactory to the Asso- ciation and with the assistance of consultants employed in accor- dance with Section 3.02 of this Agreement; or (iii) payments under Part E (2) of the Project until the Borrower shall have prepared a program satisfactory to the Association to involve villagers in regular maintenance of the areas surrounding the wells and pumps, and has agreed to carry out the said program. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Association may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit which are then allocated to another Category and which in the - 11 -. opinion of the Association are not needed to meet other expendi- tures; 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 Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expendi- tures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as, in the Association's reason- able opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 12 - SCHEDULE 2 Description of the Project The Project forms the third phase of the Borrower's Shire Valley Agricultural Development Program (SVADP) and consists of the carrying out in the Project Area of the following Parts: Part A: Agricultural Services 1. Extension and farmer training programs including a reorganization of the extension system, training of village extension workers and establishment of five additional Extension Planning Area Headquarters with necessary staff housing, training and administrative facilities. 2. (1) Development and provision to the Management Team's extension service of technological information by the Management Team's Project Research Unit. (2) Strengthening of HANR's Planning Unit. 3. Establishment and operation of a 150 hectares irrigated seed selection and multiplication farm at MANR's Makanga Research Station with necessary buildings, vehicles, equipment and administrative facilities. 4. Provision of seasonal and medium term credit to small- holder farmers and fishermen. 5. Continuation of the land husbandry component included in the second phase of the Shire Valley Agricultural Development Program. 6. Construction of an additional livestock market; enlarge- ment of Khaombe holding ground; expansion of the ox training program; completion of the Tsetse study begun in the second phase of SVADP; and provision for vaccination programs against foot and mouth disease and trypasomaisis. Part B: Fisheries Expansion of the Borrower's fisheries development program including construction of infrastructure, extension of credit - 13 - for purchase of canoes, training of fishermen, pollution monitor- ing and construction of four new centralized boat landings and about sixty smoking kilns. Part C: Forestry Reforestation program including the establishment of a Forestry Development Unit in the Management Team's Natural Resources Division and the involvement of the local population in the planting and care of forestry plantations. Part D: Wildlife Support for the existing wildlife conservation activities including boundary demarcation and construction of fences and ditches; increase in overnight tourist accommodations and provi- sion of staff housing, vehicles and necessary facilities. Part E: Hydrology and Water Supply (1) Hydrology program including a study to investigate hydrogeologic conditions, purchase of a trailer mounted rotary drilling machine, establishment of an 8-station sediment sampling network, staff housing and vehicles, a nation-wide study to review existing irrigation schemes in Malawi, their organization, financing and the Borrower's policies relating thereto and a feasibility study for the development of a surface water irrigation project. (2) Water supply program including construction of 40 additional boreholes with hand operated pumps, provi- sion of a specific conductance meter and training of village teams in maintenance of the grounds surrounding bore holes and wells. Part F: Health Continuation and expansion of the existing comprehensive health program including the construction and operation of two new maternity/dispensary sub-centers and four health posts and expansion of the bilharzia control program including purchase of molluscicides and construction of field latrines and village bathing/laundry facilities. -14- Part G: Technical Services and Road Construction (1) Upgrading and expansion of the system of secondary and district roads servicing the main agricultural areas, including the improvement of about 86 km of secondary roads, about 32 km of district roads for crop extraction, and construction of about 21 km of district roads to boat landings; the provision of staff housing, vehicles and other necessary equipment; and maintenance of all roads improved or constructed under this Project. (2) Provision of maintenance service for the repair and upkeep of housing, vehicles and equipment provided for the Project. Part H: Evaluation Unit Expansion of the existing Project Evaluation Unit including development of a common computer program for analysis of annual farm survey data and collation and routine distribution of crop marketing, credit recovery and unit data bank statistics. The Project is expected to be completed by March 31, 1982. - 15 - SCHEDULE 3 Procurement A. International Competitive Bidding 1. Vehicles, machinery and equipment estimated to cost the equivalent of $50,000 or more, 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 international competitive bidding as described in Part A of the Guidelines. 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 Association 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 Association shall reasonably request; the Association will arrange for the publi- cation 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 international competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international 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. 4. Contracts for vehicles, equipment and machinery shall be grouped so as to encourage international competitive bidding. B. Other Procedures 1. Vehicles, machinery and equipment estimated to cost the equivalent of less than $50,000 shall be procured on the basis of - 16 - competitive bidding after local advertising and in accordance with local procurement procedures acceptable to the Association. 2. Civil works may be procured in accordance with the procedures mentioned in (1) above or may be carried out by force account. 3. Boreholes may be constructed by force account. C. Review of Procurement Decisions by the Association 1. Review of prequalification. The Borrower shall, before pre- qualification is invited, inform the Association in detail of the procedure to be followed, and shall introduce such modi- fications in said procedure as the Association shall reasonably request. The list of prequalified bidders, together with a state- ment of their qualifications and of the reasons for the exclusion of any applicant for prequalification shall be furnished by the Borrower to the Association for its comments before the applicants are notified of the Borrower's decision, and the Borrower shall make such additions to, deletions from, or modifications in, the said list as the Association 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 $50,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Association, 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 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, the Bor- rower 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 evalua- tion and comparison of the bids received, and such other informa- tion as the Association shall reasonably request. The Association - 17 - shall, if it determines that the intended award would be inconsis- tent 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 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 the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 3. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Association, promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit 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 Association shall reasonably request. The Association 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. 4. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an exten- sion 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 15% of the original price, the Borrower shall inform the Association of the proposed modification, waiver, extension or change order and the reasons therefor. The Association, 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.