Philippines - Structural Adjustment Loan : Loan 1903 - Loan Agreement - Conformed

OFFICIAL DOCUMENTS LOAN NUMBER 1903 PH Loan Agreement (Structural Adjustment Loan) between REPUBLIC OF THE PHILIPPINES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated ( 1980 LOAN NUMBER 1903 PH LOAN AGREEMENT AGREEMENT, dated v2 24 , 1980, between REPUBLIC OF THE PHILIPPINES (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower is undertaking a comprehensive balance of payments stabilization program for 1980/81; (B) one of the objectives of the Borrower's 1978/82 Develop- ment Plan is to accelerate and reorient its industrial develop- ment; (C) the Borrower intends, inter alia, to implement a program of industrial development measures summarized in-the letter dated August 12, 1980, addressed to the Bank by the Borrower's Minister of Finance; (D) the Borrower has requested the Bank's assistance in achieving the aforementioned objectives by providing part of the foreign exchange required to finance imports and technical assist- ance as specified in Schedule 1 to this Agreement; (E) by a letter agreement dated January 7, 1980, the Bank granted to the Borrower a loan (hereinafter called the Project Preparation Advance) in various currencies equivalent to fifty thousand dollars ($50,000) to assist in the preparation of a proposed industrial development program by the Borrower; (F) the Bank has, pursuant to its terms, requested that the Project Preparation Advance be refunded out of the proceeds of the Loan provided for herein and the Borrower and the Bank agree with such request; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- 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 June 30, 1980, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the 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) "Central Bank" means the Central Bank of the Republic of the Philippines; (b) "Project Account" means the account to be established by the Borrower pursuant to the provisions of Section 3.02 of this Agreement; (c) "Project Preparation Advance" means the advance of up to $50,000 made available by the Bank to the Borrower for the preparation of a proposed industrial development program on terms and conditions set forth or referred to in the Bank's letter dated January 7, 1980. 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 two hundred million dollars ($200,000,000). 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 expenditures made (or, if the Bank shall so agree, to be made) in -3- respect of the reasonable cost of imported goods and services provided for in such schedule. Section 2.03. Except as the Bank shall otherwise agree, public sector imports of goods costing more than $5,000,000 equivalent per contract to be financed out of the proceeds of the Loan shall be procured under contracts awarded in accordance with procedures consistent with those sat forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (the Guidelines), on the basis of inter- national competitive bidding as described in Part A of the Guide- lines. Before requesting a withdrawal of proceeds of the Loan on account of any such contract, the Borrower shall cause the Bank to be furnished with a report, in form and substance satisfactory to the Bank, certifying that such contracts have been let following the Guidelines. Section 2.04. The Closing Date shall be June 30, 1985 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 nine and one-fourth per cent (9-1/4%) 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 &pril 15 and October 15 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 the Project described in Schedule 2 to this Agreement with due diligence and efficiency and in conformity with appropriate financial and -4- administrative practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. The Borrower shall open the Project Account with the Central Bank and shall, upon each withdrawal from the Loan Account, deposit in said Account in accordance with its usual financial procedures the equivalent in Pesos of the currency or currencies withdrawn from the Loan Account (such equivalent to be determined as of the respective date of such withdrawal). The amounts so deposited in the Project Account shall be used exclus- ively to finance economic development expenditures. Section 3.03. In order to assist the Borrower in formulation and carrying out of industrial development programs under Part B (2) of the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment, in the event contracts for such services cost $100,000 equivalent or more, shall be satisfactory to the Bank. Section 3.04 (a) The Borrower shall: (i) maintain records and procedures adequate to record and monitor the progress of the Project and to identify the goods and services financed out of the proceeds of the Loan; (ii) enable the Bank's accredited represen- tatives to examine any relevant records and documents; and (iii) furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (b) Promptly after completion of Part B (1) of the Project, 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 reasonably request, on the execution of the Project, 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. (a) The Borrower and the Bank shall, from time to time, at the request of either party, exchange views on the progress achieved in carrying out the industrial development program referred to in Recital (C) of this Agreement. -5- (b) The Borrower shall, by January 1, 1981 or such other date as the Borrower and the Bank may further agree, furnish to the Bank a report, containing such information as the Bank shall reasonably request, prior to and for the purpose of such an exchange of views. 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 assets. (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. (c) The foregoing representation and undertaking shall not apply to: (i) any lien created on property, at the time of pur- chase thereof, solely as security for payment of the purchase 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 f ore- 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 Bor- rower will give to the Bank an equivalent lien satisfactory to the Bank. -6- ARTICLE V Termination Section 5.01. The date , is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representative 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: Minister of Finance Ministry of Finance Manila Philippines Cable address: MINFIN Manila For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. -7- 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 Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President East Asia and Pacific -8- 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) Imports of 195,000,000 100% of for- goods as listed eign expendi- in the Annex tures to this Schedule (2) Consultants' 4,950,000 100% services, training and fellowships (3) Refunding of 50,000 Project Preparation Loan TOTAL 200,000,000 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. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) subject to the provisions of paragraph 6 of this Schedule, payments made for expenditures prior to the date of this Agreement; -9- (b) expenditures for goods to be supplied under a contract which another national or international financing institution or any other agency shall have financed or agreed to finance; (c) payments for taxes levied by, or in the territory of, the Borrower on goods, or on the importation, manufacture, pro- curement or supply thereof; (d) expenditures for goods procured under invoices for less than $5,000 equivalent; and (e) any expenditures under Category (1) in, excess of $100,000,000, prior to January 31, 1981 and until the Bank is satisfied with respect to the progress achieved by the Borrower in the carrying out of its tariff Ireform and liberalization of commodity import procedures. 4. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Borrower and the Bank have reasonably determined that the amount of the Loan then allocated to any Category needs to be adjusted, the Bank may, by notice to the Borrower reallocate to such Category, proceeds of the Loan which are then allocated to another Category. 5. If the Bank 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 Loan. 6. The Bank shall, on the Effective Date, withdraw from the Loan Account and pay to itself, on behalf of the Borrower, under Category (3), the amount required to repay the principal amount withdrawn and outstanding, together with interest and other charges thereon, of Project Preparation Advance. Any amount remaining undisbursed in the Project Preparation Advance shall be cancelled on the same date. - 10 - ANNEX TO SCHEDULE 1 The items that may be financed out of the proceeds of the Loan shall be those imported items included in SITC* Divisions 2, 5, 6, 7, 8 and 9, as specified below: A. Items included in SITC Divisions. 2, 5, 6, and 7, respec- tively, may be financed out of the proceeds of the Loan except, however, for the following items which may not be financed out of the proceeds of the Loan: Description of Items SITC Code Crude Materials and Inedible Division 2: materials, except fuels 271 Fertilizers, crude 292.7 Cut flowers and foliage SITC Code Division 5: Chemicals 533.52 Artists, students, and sign- board painters' colors, modifying tints, amusement colors and the like, in tab- lets, tubes, jars, bottles, pans or colors in sets or in similar forms or packaging (including such colors or outfits, with or without brushes, palettes, or other accessories) 553 Perfumery and cosmetics, den- tifrices and other toilet preparations (except soaps); aqueous distillates and aqueous solutions of essential oils * As defined in Standard International Trade Classification, Revision 2 (New York: United Nations, 1975). - 11 - Description of Items SITC Code Division 5: Chemicals 554.1 Soaps; organic surface-active products and preparation for use of soap, in the form of bars, cakes or molded pieces or shapes, whether or not combined with soap SITC Code Manufactured Goods Classified Division 6: by Material 641.97 Wallpaper and lincrusta; window transparencies of paper 642.2 Writing blocks, envelopes, letter cards, plain postcards, correspondence cards; boxes, pouches, wallets and writing compendiums of paper or paper- board, containing only an assortment of paper stationery 642.41 Cigarette paper, cut to size, whether or not in the form of booklets or tubes 642.43 Toilet paper, cut to size, in rolls or in sheets 658.3 Travelling rugs and blankets (other than electric), not knitted or crocheted 658.4 Bed linen, table linen, toilet linen, and kitchen linen, cur- tains and other furnishing articles of textile materials, not knotted or crocheted 658.9 Other made-up articles of tex- tile material, not elsewhere specified - 12 - Description of Items SITC Code Manufactured Goods Classified Division 6: by Material 659 Floor coverings, etc. 665.2 Glassware (other than articles falling in heading 665.82) of a kind commonly used for table, kitchen, toilet or office pur- poses, for indoor decoration or for similar uses 665.82 Glass beads, imitation pearls, imitation precious stones and semi-precious stones, frag- ments and clippings, and similar fancy or decorative glass smallwares, and articles of glassware made therefrom; glass cubes and small glass plates, whether or not on a backing, for mosaics and similar decorative purposes; artificial eyes of glass (in- cluding those for toys but excluding those for wear by humans); ornaments and other fancy articles of lamp-worked glass, glass grains (ballo- tini) 666 Pottery 667 Pearls, precious and semi- precious stones, unworked or worked 696 Cutlery 697 Household equipment of base metal, not elsewhere speci- fied - 13 - Description of Item SITC Code Machinery and Transport Division 7: Equipment 713.1 Internal combustion piston engines for aircraft, and parts thereof, not elsewhere speci- fied 761 Television receivers (includ- ing receivers incorporating radio-broadcast receivers, or sound recorders or repro- ducers) 762 Radio-broadcast receivers (including receivers incor- porating sound recorders or reproducers) 763 Gramophones (phonographs), dictating machines and other sound recorders and reproducers (including record players and tape decks, with or without sound heads); television image and sound recorders and repro- ducers, magnetic 764.2 Microphones (and stands there- for); loudspeakers; audio- frequency electric amplifiers 775 Household type, electrical and non-electrical equipment, not elsewhere specified 781 Passenger motor cars (other than public service type vehicles), including vehicles designed for the transport of both passengers and goods - 14 - Description of Item SITC Code Machinery and Transport Division 7: Equipment 785.1 Motorcycles, autocycles and cycles fitted with an auxiliary motor, with or without side- cars; sidecars of all kinds 785.2 Cycles not motorized 786.11 Trailers and semi-trailers of the caravan type for housing or camping 792 Aircraft and associated equip- ment, and parts thereof, not elsewhere specified 793.1 Warships of all kinds 793.21 Yachts and other vessels for pleasure or sports B. With respect to items included in SITC Division 8 and 9, only the following items may be financed out of the proceeds of the Loan: SITC Code Division 8: Miscellaneous Manufactured Articles 871 Optical instruments and apparatus 872 Medical instruments and appliances, not elsewhere specified 873 Meters and counters, not elsewhere specified - 15 - Description of Item SITC Code Division 8: Miscellaneous Manufactured Articles 874 Measuring, checking, analyzing and controlling instruments and apparatus, not elsewhere specified; parts and accessories, not else- where specified of the instruments and apparatus of groups 873 and 874 884 Optical goods, not elsewhere speci- fied 885.2 Clocks, clock movements and parts 899.6 Orthopedic appliances, surgical belts, trusses and the like; splints and other fracture appli- ances; artificial limbs, eyes, teeth and other artificial parts of the body; hearing aids and other appliances which are worn or carried, or implanted in the body, to compensate for a defect or disability SITC Code Commodities and Transactions Division 9: Not Classified According to Kind 931 Materials and accessories imported on consignment basis for the manufacture of electrical and electronic machinery, and for embroidery or manufacture of apparel - 16 - SCHEDULE 2 Description of the Project The objectives of the Project are improvement in export incentives and promotion measures, in commodity import procedures and tariff structure, in investment incentives and their admini- stration and in the design and implementation of major industrial projects and measures for restructuring selected industries. The Project consists of: (A) The implementation of a program of industrial development measures being undertaken by the Borrower as summarized in the letter referred to in Recital (C) of the Preamble of this Agreement, which measures include the liberalization of commodity import procedures, tariff reform, an appropriate exchange rate policy, strengthening of fiscal incentives for exporters, and administrative actions to promote and facilitate exports; and (B) The associated importation of goods and services as follows: (1) Import of industrial raw materials, intermediate goods, capital goods, spare parts, and other goods. (2) Utilization of technical services for the formulation and implementation of industrial policies and programs. - 17 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each April 15 and October 15 beginning April 15, 1986 through April 15, 2000 6,665,000 On October 15, 2000 6,715,000 * 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. - 18 - 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 1.40% More than three years but not more than six years before maturity 2.75% More than six years but not more than eleven years before maturity 5.00% More than eleven years but not more than sixteen years before maturity 7.40% More than sixteen years but not more than eighteen years before maturity 8.30% More than eighteen years before maturity 9.25% INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this &2&*.L-day of , 198 0. FOR SECRETARY