Madagascar - Second Railway Project : Credit 0903 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 903 MAG Development Credit Agreement (Second Railway Project) between DEMOCRATIC REPUBLIC OF MADAGASCAR and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated June 25, 1979 ft CREDIT NUMBER 903 MAG DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 25, 1979, between DEMOCRATIC REPUBLIC OF MADAGASCAR (hereinafter called the Borrower) and INTER- NATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Associa- tion). WHEREAS (A) the Borrower has re uested 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 intends to contract from the French Caisse Centrale de Coop6ration Economique a loan in an amount of 89,000,000 French francs, to assist in financing the Project on the terms and conditions set forth in an Agreement to be entered into between the Borrower and such agency; (C) the Project will be carried out by the Borrower's National Railways, the Reseau National des Chemins de Fer Malagasy (hereinafter called the Railways) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the Railways the proceeds of the Credit as herein- after provided; and 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 set forth hereinafter and in the Project Agreement of even date herewith between the Association and the Railways; 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 V -2- 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 and in the Preamble to this Agreement have the respective meaning's therein set forth and the following additional terms have the following meanings: (a) "Railways" means Reseau National des Chemins de Fer Malagasy, an Etablissement Public A Caractere Industriel et Commercial of the Borrower, under the supervision (tutelle) of the Borrower's Ministry responsible for Transport and established pursuant to Decree No. 74-154 of the Borrower, dated May 10, 1974, and including any successor thereto; (b) "Project Agreement" means the agreement between the Association and the Railways of even date herewith, as the same may be amended from timue to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; and (c) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and the Railways pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement. 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 thirteen million dollars ($13,000,000). 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 Associ- ation, 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. r7lI -3- 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 set forth or referred to in Schedule 1 to the Project Agreement. Section 2.04. The Closing Date shall be June 30, 1984 or such later date as the Association shall establish. The Association 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 15 and November 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each May 15 and November 15 commencing May 15, 1989, and ending November 15, 2028, each installment to and including the installment payable on November 15, 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. A Section 2.09. The Railways is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause the Railways to perform in accordance with the provisions of the Project Agreement and the Subsidiary Loan Agreement all the obligations therein set forth, shall take and cause to be taken all action, including I - - the provision of funds, facilities, services and other resources, necessary or appropriate to enable the Railways to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the proceeds of the Credit to the Railways under a Subsidiary Loan Agreement to be entered into between the Borrower and the Railways under terms and conditions which shall have been approved by the Association including interest at eight per cent (8%) per annum and a term of 20 years including 5 years of grace. (c) The Borrower shall exercise its rights under the Subsid- iary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. Upon completion of the study included in Part G of the Project, the Borrower and the Association shall exchange views on the implementation of the recommendations resulting therefrom with a view to ensuring through appropriate measures, including the provision of funds to the Railways, that it will be compensated for the costs of any services found to be uneconomi- cal. ARTICLE IV Other Covenants Section 4.01. The Borrower shall take all such action as shall be necessary on its part, including but not limited to the setting and adjustment of tariffs, to enable the Railways to comply with the provisions of Sections 4.04, 4.05, 4.06 and 4.07 of the Project Agreement. Section 4.02. The Borrower shall exchange views with the Association on any proposal for a material change in the Statuts or organization of the Railways. Section 4.03. The Borrower shall exchange views with rhe Association from time to time on the development of the proposed new container handling facility at Antananarivo. Section 4.04. The Borrower shall promptly reimburse to the Railways all amounts foregone on account of concessionary passenger fares established by the Borrower. ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) The Railways shall have failed to perform any covenant, agreement or obligation of the Railways under the Project Agree- ment. (b) A.default shall have occurred in the performance of any covenant, agreement or obligation on the part of the Borrower or the Railways under the Subsidiary Loan Agreement. (c) Decree No. 74-154 of May 10, 1974 of the Borrower or any other legislation or regulation of the Borrower governing the establishment, organization, powers and operations of the Rail- ways, shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of the Railways to carry out the covenants, agreements and obligations set forth in the Project Agreement. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of the Railways or for the suspension of its operations. (e) An extraordinary situation shall have arisen which shall make it improbable that the Railways will be able to perform its obligations under the Project Agreement or the Subsidiary Loan Agreement. (f) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower or the Railways to withdraw the proceeds of any grant or loan made to the Borrower or the Railways for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agree- ment providing therefor, or (B) any such loan shall have become due and payable prior to the agreed maturity thereof. -6- (ii) Subparagraph (i) of this paragraph shall not apply if: (A) such suspension,, cancellation, termination or prematuring is not caused by the failure of the Borrower or the Railways to perform any of their obligations under such agreemeht, and (B) adequate funds for the Project are available to the Borrower or the Railways from other sources on terms and conditions consistent with the obli- gations of the Borrower under this Agreement and of the Railways under the Project Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) any event specified in paragraphs (a) or (b) of Section 5.01 of this Agreement shall occur and shall continue for a period of 30 days after notice thereof shall have been given by the Association to the Borrower and the Railways; and (b) the event specified in paragraphs (d) or (f) (i) (B) of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. 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 Subsidiary Loan Agreement has been executed on behalf of the Borrower and the RaiLways; and (b) the Association has been notified by the Caisse Centrale de Coop6ration Economique that all conditions precedent to initial disbursement of its loan for the Project, except for the effectiveness of this Agreement, have been fulfilled. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to .be furnished to the Association: -7- (a) that the Project Agreement has been duly authorized or ratified by the Railways, and is legally binding upon the Railways in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly author- ized or ratified by the Borrower and the Railways and is legally binding upon the Borrower and the Railways in accordance with its terms. Section 6.03. The date September 25, 1979, is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. Section 6.04. The obligations of the Borrower under Article IV of this Agreement and the provisions of Section 5.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date 21 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. Except as provided in Section 2.09 of this Agreement, the Minister of the Borrower responsible 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 purpose of Section 11.01 of the General Conditions: For the Borrower: Ministere aupres de la Presidence de la R6publique Charge des Finances et du Plan Antananarivo Madagascar Cable address: Telex: MINFINPLAN 22339 Antananarivo IN1 -8- 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) 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. DEMOCRATIC REPUBLIC OF MADAGASCAR By Is/ Norbert Rakotomalala Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Willi A. Wapenhans Regional Vice President Eastern Africa J, 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) Imported track- 10,850,000 100% of foreign maintenance expenditures or, equipment and if purchased in track materials; Madagascar, 75% aerial ropeway of local expen- ditures (2) Consultants' and 400,000 100% of foreign experts' services; expenditures training (3) Unallocated 1,750,000 TOTAL 13,000,000 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 or for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Association that no proceeds of the Credit shall be disbursed on account of payments for taxes levied - 10 - 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 payments made for expendi- tures prior to the date of this Agreement. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in para- graph 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 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 opinion of the Association are not needed to meet other expenditures. 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 expenditures 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 reredy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as, in the Associ- ation's reasonable opinion, represents the amount of such expendi- tures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 11 - SCHEDULE 2 Description of the Project The Project comprises the Investment Plan of the Railways for the period 1979-1983, designed to renew and modernize its instal- lations and equipment, improve its operations and strengthen its organization and management. The Project includes the following: Part A: Renewal of about 160 km of worn-out track on the Antananarivo - Cfte Est Line and the. Moramanga line; improvement of about 124 km; renewal of points and crossings and procurement of track-maintenance equipment; Part B: procurement of seven line locomotives, one railcar, ten coaches and about seventy-five wagons; Part C: improvement of telecommunications; Part D: improvement of workshops and replacement of workshop equip- ment; Part E: * realignment of about 14 km of track between Ambila and Brickaville; Part F: review and implementation of a unified financial and cost- accounting system; carrying out of the Railways' Transport Plan; training of acck. nting personnel; and Part G: carrying out a study of the long-term viability of the Antsirabe-Antananarivo and the Manakara-Fianarantsoa railway lines. The Project is expected to be completed by December 31, 1983.