Zambia - Third Highway Project : Credit 0798 - Development Credit Agreement - Conformed

 CONFORMED COPY CREDIT NUMBER 798 ZA Development Credit Agreement (Third Highway Project) between REPUBLIC OF ZAMBIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated June 27, 1978  CREDIT NUMBER 798 ZA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 27, 1978, between REPUBLIC OF ZAMBIA (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) the Borrower has requested the Association to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) the Borrower has also requested the Bank to provide additional assistance towards the financing of the foreign exchange cost of the Project and by an agreement of even date herewith between the Borrower and the Bank (hereinafter called the Loan Agreement) the Bank is agreeing to provide such assistance in an aggregate principal amount equivalent to eleven million two hundred and fifty thousand dollars ($11,250,000) (hereinafter called the Loan); and (C) the Borrower and the Association intend, to the extent practicable, that the proceeds of the Credit provided for in this Agreement be disbursed on account of expenditures on the Project before disbursements of the proceeds of the Loan provided for in the Loan Agreement are made; WHEREAS the Association has agreed, on the basis inter alia of- the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to 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 Agree- ments of the Association being hereinafter called the General Conditions).  -2- Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Loan Agreement" means the agreement of even date herewith between the Borrower and the Bank for the purpose of the Project, as such agreement may be amended from time to time; and such term includes the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, as made applicable to such agreement and the schedule to the Loan Agreement; (b) "Minister" means the Minister of the Borrower respon- sible for finance, or, if the President of the Borrower assumes such functions, the President; (c) "Local Authority" means, with respect to the Borrower, a city council, a municipal council, a rural council, or any other governmental authority of the Borrower (other than its central government) which has power to raise revenues by taxation and to charge such revenues or any of its assets as security for external debt; (d) "Primary and Secondary Road Network" means the road system of the Borrower administered by the Roads Department of the Ministry of Public Works of the Borrower; (e) "Tertiary Road Network" means the road system of the Borrower administered by the Rural Councils under the Ministry of Local Government and Housing of the Borrower; (f) "Routine Maintenance" means the road maintenance acti- vities of the Borrower which are carried out on a yearly basis including, inter alia, the following: cleaning and repair of lateral areas, surface and deep drains, ditches, culverts, bridges, guard rails, parapets and road signs; spot repairing and/or grading of earth and gravel roads and shoulders; and patching of paved roads; and (g) the symbol "K" and the term "kwacha" mean the unit of the currency of the Borrower.  -3- ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Bor- rower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various cur- rencies equivalent to eleven million two hundred and fifty thousand dollars ($11,250,000). 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, the Bank and the Association, for expenditures made (or, if the Associ- ation 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 to be financed out of the pro- ceeds of the Credit, shall be governed by the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1983 or such later date as the Association shall establish. The Asso- ciation 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 annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each May 1 and November 1 commencing November 1, 1988, and ending May 1, 2028, each installment to and including the installment payable on May 1, 1998, to be one-half of one per cent (1/2 of 1%) 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 States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out the Project, substantially in accordance with an implementation schedule agreed between the Borrower and the Association, with due diligence and efficiency and in conformity with appropriate engineering, admin- istrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) For the carrying out of Part A (2) (vi) of the Project, the Borrower shall: (i) by December 31, 1978, prepare a plan of action satisfactory to the Association, such plan to include, inter alia: (1) specific targets for the improvement of the effi- ciency of the Mechanical Services Branch of the Borrower and (2) maintaining such Branch for providing services related exclusively to non-military vehicles, equipment and plant of the Borrower; and (ii) carry out such plan within nine months from the date of its preparation. (c) For the carrying out of the training component included in Part C of the Project, the Borrower shall prepare training programs satisfactory to the Association. Section 3.02. (a) The Borrower shall employ such experienced and competent staff as shall be required to carry out the Project efficiently. (b) Notwithstanding the provisions of paragraph (a) above, the Borrower shall, by September 30, 1978, employ in the Roads Department of the Ministry of Public Works of the Borrower the following additional staff with appropriate qualifications and experience for filling existing vacancies: (i) three senior executive engineers; and (ii) one chief materials officer.  -5- Section 3.03. (a) The Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association to: (i) assist the Borrower in the carrying out of Part A (2) (vi) of the Project; (ii) assist the Borrower in the preparation of the bidding documents and the evaluation of bids for the procurement of goods included in Part A (2) (i) and (ii) of the Project; and (iii) carry out the studies included in Part D of the Project. (b) For the carrying out of Part C of the Project, the Borrower shall employ, by September 30, 1978, the following experts whose qualifications, experience and terms and condi- tions of employment shall be satisfactory to the Association: (i) in the Roads Department of the Ministry of Public Works of the Borrower, three road maintenance engineers, one transport economist and two training experts; (ii) in the Mechanical Services Branch of the Borrower, twenty mechanical superintendents (or such other number as shall be agreed by the Association) and two training experts; and (iii) in the Ministry of Local Government and Housing of the Borrower, one rural road maintenance engineer. (c) The Borrower shall take all reasonable action as shall be required for making available adequate living accommodation to the experts referred to in paragraph (b) above. Section 3.04. (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 Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project.  -6- Section 3.05. (a) The Borrower shall furnish to the Associa- tion, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The Borrower: (i) shall maintain records and proce- dures adequate to record and monitor the progress of the Project (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 Association's accredited representatives to visit the facilities, workshops 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 furnish to the Association at regular intervals all such information as the Association shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Credit, the goods and services financed out of such proceeds and the operation and administration of the road system of the Borrower. (c) The Borrower shall: (i) prepare quarterly progress reports on the carrying out of the Project; and (ii) furnish to the Association such reports promptly after their comple- tion. (d) 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 Association, the Borrower shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Bor- rower and the Association of their respective obligations under this Agreement and the accomplishment of the purposes of the Credit. Section 3.06. The Borrower shall make available or cause to be made available as and when needed all such land and rights in respect of land as shall be required for carrying out the Project.  -7- ARTICLE IV Other Covenants Section 4.01. The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with con- sistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. Section 4.02. The Borrower shall collect and record in accordance with appropriate statistical methods and procedures such technical, economic and financial information as shall be reasonably required for proper planning of maintenance, improve- ments and extensions of its road system. Section 4.03. The Borrower shall process in an expeditious manner all documentation, including import licenses and authori- zations to remit foreign exchange, as may be required to enable the timely carrying out of the Project. Section 4.04. The Borrower shall: (i) cause all roads of the Borrower to be adequately maintained and cause all necessary repairs thereof to be made, all in accordance with appropriate engineering practices; (ii) cause all road maintenance equipment and related facilities in the workshops of the Borrower to be adequately maintained and cause all necessary repairs thereof to be made, all in accordance with appropriate engineering practices; and (iii) without limitation or restriction upon the provisions of paragraph (a) of Section 3.01 of this Agreement, promptly provide the funds required for the foregoing, such funds estimated to be in the fiscal years 1979, 1980, 1981 and 1982: (1) the equivalent of $12,000,000, $19,500,000, $21,000,000 and $18,500,000, respec- tively, for the Roads Department of the Ministry of Public Works of the Borrower; and (2) the equivalent of $1,700,000, $2,700,000, $3,800,000 and $4,000,000, respectively, for the Mechanical Services Branch of the Borrower; the Borrower and the Association shall review annually the adequacy of the maintenance funds allocated by the Borrower to the Roads Department of its Ministry of Public Works and its Mechanical Services Branch for the fiscal year subsequent to such review.  -8- Section 4.05. The Borrower shall take all such action as shall be necessary to ensure that the dimensions, axle-loads and weight limits of the vehicles using the roads of the Borrower shall not exceed the limits prescribed by the laws and regulations of the Borrower. Section 4.06. The Borrower undertakes to carry out the training of the road maintenance staff of the Rural Councils under its Ministry of Local Government and Housing in the train- ing school of the Roads Department of its Ministry of Public Works. Section 4.07. By September 30, 1978, the Borrower shall (i) prepare a program, satisfactory to the Association, for the career development of local staff in the Roads Department of its Ministry of Public Works; and (ii) carry out such program thereafter. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the conditions precedent to the effectiveness of the Loan Agreement, other than the additional condition set forth in Section 5.01 thereof, have been fulfilled; and (b) the consultants referred to in Section 3.03 (a) (i) of this Agreement have been employed. Section 5.02. The date September 28, 1978, is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. Section 5.03. The obligations of the Borrower under Article IV of this Agreement shall cease and terminate on the date on  -9- which this Agreement shall terminate or on a date twenty years after the date of this Agreement, whichever shall be the earlier. ARTICLE VI Representative of the Borrouer; Addresses Section 6.01. The Minister 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 R.W. 62 Ridgeway, Lusaka, Zambia Cable address: Telex: FINANCE ZA 42221 Ridgeway Lusaka For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI)  - 10 - 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 Paris, French Republic, as of the day and year first above written. REPUBLIC OF ZAMBIA By /s/ J.M. Mwanakatwe Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ W.A. Wapenhans Regional Vice President Eastern Africa  - 11 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit and of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit and of the Loan, the allocation of the amounts of such proceeds to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit and of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Road maintenance and 12,100,000 workshop equipment, tools, training aids and spare parts (Part A (2) of the Project) (a) Directly im- 100% of foreign ported expenditures (b) Imported and 70% procured lo- cally (2) Equipment, materials 500,000 50% and other items for the pilot rural road maintenance program (Part B of the Pinject) (3) Consultants' and 5,000,000 80% Experts' services (4) Unallocated 4,900,000 TOTAL 22,500,000  - 12 - 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 Bank and the Association that no proceeds of the Loan or 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 Loan or the Credit decreases or increases, the Bank or 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 Bank and the Association. 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, except that withdrawals, in an aggregate amount not exceeding the equivalent of $180,000 may be made in respect of Category 3 on account of payments made for expenditures for consultants' services before that date but after January 1, 1978. 5. Except as the Borrower, the Bank and the Association shall otherwise agree, no withdrawals shall be made from the Loan Account until all amounts of the Credit shall have been withdrawn or committed, except under commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions referred to in Section 1.01 of the Loan Agreement. 6. Notwithstanding the allocation of an amount of the Loan or of the Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank or the Association has reason- ably estimated that the amount of the Loan or of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank or 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 Loan or of the Credit, as the case may be, which are then allocated to another Category and which in the opinion of the Bank or the Association are not needed to meet other expenditures, and (ii) if such reallocation cannot fully  - 13 - meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further with- drawals under such Category may continue until all expenditures thereunder shall have been made. 7. If the Bank or the Association shall have reasonably deter- mined that the procurement of any item in any Category is incon- sistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan or of the Credit and the Bank or the Association may, without in any way restricting or limiting any other right, power or remedy of the Bank or of the Association under the Loan Agreement or the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Loan or of the Credit as, in the Bank's or the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan or of the Credit.  -14- SCHEDULE 2 Description of the Project The Project consists of: Part A: Road Maintenance Program (1) Carrying out, with respect to the Primary and Secondary Road Network, of the following: (i) Routine Maintenance; (ii) Resealing of about 2,000 kilometers of bitumen- surf aced roads, the list of roads included in the program to be determined by agreement between the Borrower, the Bank and the Association; and (iii) Regravelling of about 750 kilometers of gravel roads, the list of roads included in the program to be determined by agreement between the Borrower, the Bank and the Association. (2) Strengthening of the road maintenance organization and operations of the Borrower, regarding the Primary and Secondary Road Network, including inter alia: (i) Acquisition and utilization of about 382 units of equipment for road maintenance and about 9 mobile workshops, and spare parts related thereto; (ii) Acquisition and utilization of workshop equipment and tools for the workshop facilities of the Borrower; (iii) Rehabilitation and utilization of about 61 units of equipment for road maintenance and acquisition of spare parts therefor; (iv) Acquisition and utilization of spare parts for existing road maintenance equipment; (v) Acquisition and utilization of training aids for the workshop facilities of the Borrower; and  - 15 - (vi) Improvement of the efficiency of the Borrower's organization responsible for vehicle and plant procurement, management and maintenance operations. Part B: Pilot Rural Road Maintenance Program Carrying out of a pilot maintenance program for rural roads, satisfactory to the Bank and the Association, for enabling the Borrower to evaluate and improve the efficiency of its maintenance organization and operations regarding the Tertiary Road Network. Part C: Technical Assistance and Training Te%chnical assistance to improve the Borrower's road mainten- ance planning and oprrations, and to assist the Borrower in the carrying out and the evaluation of the Project, and in the train- ing of its staff participating in the carrying out of the Project. Part D: Studies 1. Carrying out of a feasibility study regarding the upgrading to bituminous standard of the existing road between the towns of Mansa - Kawambwa and Nchelenge, or such other road or roads as may be agreed between the Borrower, the Bank and the Association, and, if such upgrading is considered justified by the Borrower, the Bank and the Association, the carrying out of a detailed engineer- ing study for the pertinent project; and 2. Carrying out of a study for the execution of Part A (2) (vi) of the Project. The Project is expected to be completed by December 31, 1982.  16 - SCHEDULE 3 Procurement A. International Competitive Bidding 1. Except as provided in Part B hereof, contracts for the purchase of goods shall be procured in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods to be procured in accordance with paragraph 1 above, the Borrower shall prepare and forward to the Bank or 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 documents relating thereto, a general procurement notice, in such form a-ad detail and containing such information as the Bank or the Association shall reasonably request; the Bank or the Association 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 in accordance with paragraph 1 above. 3. Suppliers of equipment to be procured in accordance with paragraph 1 above shall be required to provide in Zambia services for the training of mechanics and plant operators and to maintain in Zambia an adequate service organization, including a reasonable inventory of spare parts. 4. For bidding purposes, contracts for goods to be procured in accordance with paragraph 1 above shall be grouped in such manner as shall be agreed between the Borrower, the Bank and the Associa- tion prior to issuing the invitation to bid. B. Other Procurement Procedures 1. Contracts for the purchase under Part A (2) of the Project of spare parts for rehabilitating and maintaining existing road maintenance equipment and of training aids shall be procured after  - 17 - calling competitive quotations from established suppliers within Zambia and abroad, in accordance with local procedures satisfac- tory to the Bank and the Association. 2. Contracts for the purchase of equipment, materials and other items for the pilot rural road maintenance program under Part B of the Project shall be procured in accordance with local procedures satisfactory to the Bank and the Association. C. General Procedures Contracts for the purchase of goods under Part A (2) of the Project will be entered into only after the Borrower has employed the experts referred to in paragraph (b) (i) and (ii) of Section 3.03 of this Agreement. D. Evaluation and Comparison of Bids for Goods 1. For the purpose of evaluation and comparison of bids for the supply of goods except those to be procured in accordance with local procedures: (i) bidders shall be required to state in their bid the c.i.f. (point of entry to Zambia) price for imported goods; (ii) customs duties and other import taxes on imported 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. E. Review of Procurement Decisions by the Bank and the Association 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts referred to in paragraph 1 of Part A of this Schedule estimated to cost the equivalent of $50,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Bank or the Association, for comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising proce- dures to be followed for the bidding, and shall make such modifi- cations in the said documents or procedures as the Bank or the Association shall reasonably request. Any further modification to  - 18 - the bidding documents shall require the concurrence of the Bank or the Association 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 or the Association of the name of the bidder to which it intends to award the contract and shall furnish to the Bank or the Association, in sufficient time for review, a detailed report, by the consultants referred to in paragraph (a) (ii) of Section 3.03 of this Agreement, on the evaluation and comparison of the bids received, together with the recommendations for award of the said consultants and such other information as the Bank or the Association shall reasonably request. The Bank or the Association shall, if they determine that the intended award would be incon- sistent 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 concurrence of the Bank or the Association, mate- rially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Bank or the Association promptly after its execution and prior to the delivery to the Bank or the Association, as the case may be, of the first application for withdrawal of funds from, respectively, the Loan Account or the Credit Account in respect of such contract. 3. With respect to each contract to be financed out of the proceeds of the Loan or of the Credit and not governed by the preceding paragraph, the Borrower shall furnish to the Bank or the Association, promptly after its execution and prior to the delivery to the Bank or the Association, as the case may be, of the first application for withdrawal of funds from, respec- tively, the Loan Account or 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 Bank or the Association shall reasonably request. The Bank or the Association shall, if they determine 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.