Philippines - Third Livestock And Fisheries Credit Project : Loan 1894 - Loan Agreement - Conformed

OFFICIAL~ LOAN NUMBER 1894 PH Loan Agreement (Third Livestock and Fisheries Credit Project) between REPUBLIC OF THE PHILIPPINES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated , 1980 LOAN NUMBER 1894 PH LOAN AGREEMENT AGREEMENT, dated , 1980, between REPUBLIC OF THE PHILIPPINES I (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (herein- after called the Bank). ARTICLE 1 General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to 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 have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "DBP" means Development Bank of the Philippines, an agency of the Borrower as established under the Borrower's Act No. 85 dated June 14, 1958, as amended; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and DBP pursuant to Section 3.02 of this Agreement; (c) "Sub-loan" means a loan made or proposed to be made by DBP under Part A of the Project, to a beneficiary for an Investment Project, and to be financed in part out of the proceeds of the Loan; (d) "Beneficiary" means any beneficiary to which DBP pro- poses to make or has made a Sub-loan for livestock or fisheries; (e) "Investment Project" means a specific investment pro- ject, as approved by DBP pursuant to this Loan Agreement and the Subsidiary Loan Agreement, to be carried out by a Beneficiary and to be financed by means of a Sub-loan; -2- (f) "BAI" means the Bureau of Animal Industry of the Borrower; (g) "BFAR" means the Bureau of Fisheries and Aquatic Resources of the Borrower; (h) "FIDC" means the Fisheries Industry Development Council of the Borrower; and (i) "Peso" means the currency unit of the Borrower. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to forty-five million dollars ($45,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule I 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 respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods required for Part B of the Project and to be financed out of the proceeds of the Loan, shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1984 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 eight and one-quarter per cent (8.25%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. -3- Section 2.07. Interest and other charges shall be payable semiannually on February 15 and August 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. (a) The Borrower shall carry out the Project through DBP, BAI, BFAR and FIDC with due diligence and efficiency and in conformity with appropriate administrative, financial, agricultural and technical practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Without limitation to the provisions of paragraph (a) above, the Borrower shall relend an amount equivalent to $15,000,000 to DBP from the proceeds of the Yen Bond (Series Number 1) Issue of March, 1978, on terms and conditions satis- factory to the Bank. Section 3.02. (a) The Borrower shall relend to DBP the proceeds of the Loan allocated under Category (1) of Schedule 1 to this Agreement and an amount equivalent to $1,300,000 (one million three hundred thousand dollars) out of the proceeds of the Loan allocated under Categories (2) and (4) of said Schedule, under a Subsidiary Loan Agreement to be entered into between the Borrower and DBP, under terms and conditions which shall have been approved by the Bank, including those set forth in Schedule 5 to this Agreement. (b) The Borrower shall exercise its rights under the Subsi- diary Loan Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. (c) The Borrower shall take and shall cause all its agencies to take all action which shall be necessary on their part to enable DBP to perform all of its obligations under the Subsidiary Loan Agreement and shall not take or permit to be taken any action which might interfere with such performance. 4- Section 3.03. The Borrower shall cause DBP: (a) to make Sub-loans on terms and conditions satisfactory to the Bank, which shall include inter alia the Lending Policies and Procedures set forth in paragraph B of Schedule 5 of this Agreement, as such paragraph may be amended from time to time in consultation among the Bank, the Borrower and DBP. DBP is hereby designated as representative of the Borrower for these purposes, and to exercise its rights under the agreements providing for Sub-loans so as to achieve the purposes of Part A of the Project and enable the Borrower to comply with its obligations under this Agreement; (b) to establish and maintain, based on a management infor- mation system satisfactory to the Bank, a, separate account to be used exclusively for Part A of the Project, and an audit system; and (c) to record in such account all receipts and payments for or in connection with Part A of the Project, in accordance with sound accounting principles consistently applied, including the following: (i) amounts received from and payments made to the Borrower under the Subsidiary Loan Agreement; and (ii) amounts paid and received on account of Sub-loans. Section 3.04. (a) In order to assist the Borrower in carrying out Part B of the Project, the Borrower shall employ or cause to be employed, consultants and specialists whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Bank. (b) Consultants for DBP's management information system and training program shall be appointed not later than December 31, 1980. Section 3.05. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. -5- (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. Section 3.06. (a) The Borrower shall furnish or cause to be furnished to the Bank, promptly upon their preparation, the plans, specifications, reports, training programs, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall maintain or cause to be main- tained records and procedures 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 Loan, and to disclose their use in the Project; (ii) shall enable the Bank'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 Loan and any relevant records and documents; and (iii) shall furnish or cause to be furnished to the Bank at regular intervals all such information as the Bank shall reasonably request con- cerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reason- ably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Bank of their respec- tive obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. Section 3.07. 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. Section 3.08. The Borrower shall cause DBP to furnish to the Bank for its comments by December 31, 1980, proposals for coop- erative arrangements between DBP and BAI, and DBP and BFAR. -6- Section 3.09. The Borrower shall cause DBP to furnish to the Bank for comments, its annual livestock and fisheries sub- sectors lending program covering the balance of calendar year 1980 and, subsequently, V each January, for the ensuing twelve month period, prepared in consultation and agreement with the Borrower's National Economic and Development Authority, Minstry of Agricul- ture, Ministry of Natural Resources and the Presidential Committee on Agricultural Credit. Section 3.10. The Borrower shall cause DBP to implement by December 31, 1980 plans satisfactory to the Bank, to restruc- ture its departments and staff involved in the livestock and fisheries sub-sectors. Section 3.11. The Borrower shall cause DBP to establish by June 30, 1981 within its departments responsible for branches and agencies, a reporting system satisfactory to the Bank, to reflect the findings and decisions with regard to livestock and fisheries reached at the regional and provincial development councils. Section 3.12. The Borrower shall cause DBP to furnish to the Bank by December 31, 1980, a plan satisfactory to the Bank to implement Part B.3 (c) of the Project. Section 3.13. The Borrower shall cause DBP to appoint, as and when needed, suitably qualified additional staff required to implement the Project. 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 t iat 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 payment of principal of, and interest and other charges on, the Loan and in creation of any such lien -7- 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 purchase 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 Bqrrower or of any agency of the Borrower including the Central Bank of the Philippines or any institution performing the functions of a central bank for the Borrower. (e) The Borrower further undertakes that, within the limits of the laws in force in its territories, it will make the fore- going undertaking effective with respect to liens on the assets of its political subdivisions and their agencies, and to the extent that the Borrower is unable within the limits of the laws in force in its territories to make this undertaking effective, the Bor- rower will give to the Bank an equivalent lien satisfactory to the Bank. Section 4.02. (a) The Borrower shall cause DBP, BAI, BFAR and FIDC to maintain separate records adequate to reflect in accordance with consistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of said Institutions, including, without limitation to the foregoing, separate accounts reflecting all expenditures described in Category (1) of the table in paragraph 1 of Schedule 1 to this Agreement, on account of which withdrawals are requested from the Loan Account on the basis of certificates of expenditure. (b) The Borrower shall retain, until one year after the Closing Date, all records (orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account on the basis of certificates of expenditure and shall enable the Bank's accredited representatives to examine such records. (c) The Borrower shall cause DBP to: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently -8- applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, (A) 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 Bank shall have reasonably requested including, without limitation to the foregoing, a separate opinion by said auditors in respect of the expenditures and records referred to in Section 4.02 (b) of this Agreement as to whether the proceeds of the Loan withdrawn from the Loan Account on the basis of certificates of expenditure have been used for the purpose for which they were provided; and (iii) furnish to the Bank such other information concerning the accounts, financial statements and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. The Borrower shall cause DBP to furnish to the Bank by December 31, 1980, the results of the plan for the reduction of arrears in the livestock and fisheries sub-sectors, and a progam for future action based on such plan. ARTICLE V Effective Date; Termination Section 5.01. The following event is specified as an addi- tional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely that the execution of the Subsidiary Loan Agreement on behalf of the Borrower and DBP, respectively, has been duly authorized or ratified by all necessary corporate and governmental action. Section 5.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank, namely, that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and DBP, respectively, and is legally binding upon the Borrower and DBP in accordance with its terms. Section 5.03. The date Iv,L)- /Y?O, is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. -9- 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: Telex: MINFIN 7550 CBP-PH Manila 0268 CB-CONF For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the - 10 - District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF THE PHILIPPINES By O 64 A4-c Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ByIX .JA Regional Vice President East Asia and Pacific - 11 - 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) Sub-loans under 40,000,000 37% Part A of the Project (2) Equipment, vehicles 850,000 and materials under Part B of the Project: (a) directly 100% of for- imported eign expendi- tures (b) locally 100% of local manufactured expenditures (ex-factory) (c) locally 50% procured (3) Cattle under Part B of the Project: (a) Breeding stock 150,000 100% of for- eign expendi- tures (b) Cattle for dis- 1,500,000 50% persal program - 12 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (4) Consultants' services 1,500,000 100% under Part B of the Project (5) Unallocated 1,000,000 TOTAL 45,000,000 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 and for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made: (a) in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggre- gate amount not exceeding the equivalent of $100,000 may be made - 13 - in respect of Category (4) on account of payments made with respect to Part B.3 (c) of this Project before that date but after December 31, 1979; (b) on account of expenditures incurred for the financing of Part B of the Project until the Bank has been furnished with a detailed physical plan, equipment list, implementation schedule and budget satisfactory to the Bank with regard to that part of the Project. (c) Under Category (1) until the Bank has received DBP's lending program referred to in Section 3.09 of this Agreement for the balance of calendar year 1980. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in para- graph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insuf- ficient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures; and (ii) if such reallo- cation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the 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 and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 14 - SCHEDULE 2 Description of the Project The Project is part of the Borrower's continuing program to increase livestock and fishery production, and consists of the following: Part A: DBP Provision of agricultural credit for: 1. commercial production of small livestock; 2. development of (a) cattle breeding on pasture land, and (b) young stock transferred to villages for fattening and breeding; 3. rehabilitation, expansion and construction of inland fishponds; 4. construction and equipping of fishing -vessels; and 5. other livestock and fisheries Investment Projects. Part B: 1. BAI (a) support for cattle dispersal program; (b) breed stock upgrading; (c) support for small livestock nutrition research; (d) pasture and legume seed propagation and dispersal; (e) support for cattle markets; and (f) livestock planning and other studies. 2. FIDC and BFAR (a) adaptation and extension of fishing gear technology and other studies; and - 15 - (b) review of marine regulations. 3. DBP (a) promotion of provincial feed mills; (b) development of management information system and staff training program; (c) support for monitoring and evaluation of agricul- tural projects; and (d) studies related to the livestock and fisheries sub-sectors. The Project is expected to be completed by December 31, 1983. - 16 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 15 and August 15 beginning February 15, 1986 through August 15, 2000 1,500,000 * 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 equivalents determined as for purposes of withdrawal. - 17 - 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 1.25% More than three years but not more than six years before maturity 2.50% More than six years but not more than eleven years before maturity 4.55% More than eleven years but not more than sixteen years before maturity 6.60% More than sixteen years but not more than eighteen years before maturity 7.40% More than eighteen years before maturity 8.25% - 18 - SCHEDULE 4 Procurement under Part B of the Project A. International Competitive Bidding 1. Except as provided in Part C hereof, goods shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of inter- national competitive bidding as described in Part A of the Guide- lines. 2. For goods to be procured on the basis of international competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods remain to be procured on the basis of inter- national competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; and (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in the Republic of the Philippines may be granted a margin of pre- ference in accordance with, and subject to, the following provi- sions: - 19 - 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in the Republic of the Philippines if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in the Republic of the Philippines equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest eva- luated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. - 20 - C. Other Procurement Procedures 1. Equipment, materials and cattle for the dispersal program under Part B of the Project may be procured in accordance with the Borrower's procurement procedures satisfactory to the Bank. 2. Pasture and legume seeds may be procured through prudent international shopping after solicitation of quotations in accord- ance with the Borrower's procurement procedures satisfactory to the Bank. 3. Cattle for breeding stock, as selected by BAI, may be pro- cured on the basis of competitive bidding after bids have been invited from at least three countries free of foot-and-mouth disease, to be selected in agreement with the Bank. D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equiva- lent of $300,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. - 21 - (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such con- tract, together with the analysis of the respective bids, recom- mendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 3. Before agreeing to 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 Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. - 22 - SCHEDULE 5 Lending Policies and Procedures A. Subsidiary Loan Agreement: Repayment : 20 years, including 5 years of grace Rate of Interest : 8.25 % per annum on outstanding amounts Exchange Risk : the Borrower shall bear it B. Lending Program under Part A of the Project 1. Annual Lending Program. The Annual Lending Program shall be prepared by DBP for every calendar year in accordance with Section 3.09 of this Agreement. The Annual Lending Program will establish, based on criteria satisfactory to the Bank, the type and size of investment projects to be financed by DBP. 2. Sub-loan Terms and Conditions Sub-loans would be made for Investment Projects (which would include incremental working capital) of prospective Beneficiaries on the basis of a competent appraisal and on terms and conditions satisfactory to the Bank, which shall include, for Sub-loans secured by land, annual interest rates of not less than 12% up to Peso 150,000, not less than 14% up to Peso 3,000,000 and not less than 16% above Peso 3,000,000, and for Sub-loans not secured by land, the annual interest rates are increased by 2%, respectively. No Sub-loan would be approved unless the Investment Project is shown to have an internal financial rate of return of at least three percentage points above the rate of interest payable by the Beneficiary to DBP. 3. DBP Administrative Pro.edures DBP will introduce a system for the recording of Sub-loans, utilizing procedures and forms satisfactory to the Bank. 4. Sub-project Reportina. Except as otherwise agreed between the Bank and DBP, once every six months at the end of June and Decem- ber, DBP will prepare a report satisfactory to the Bank, based on the documentation prepared in accordance with the system referred to in the preceding paragraph, identifying progress of the Project in terms of the Annual Lending Program. - 23 - 5. Quality Control and Training. Once every six months DBP will prepare a report satisfactory to the Bank, which will summarize quality control activities to the end of June or December as the case may be, reviewing the ranges of typical Sub-loans and indicating their internal rates of return, listing activities connected with branch visits and principal findings, with indications of training needs identified and training under- taken, and plans for future activities. 6. Sub-loan Agreements. Sub-loans will be made pursuant to written agreements that will conform substantially to the form of Loan Agreement agreed upon by the Bank and the DBP, and, except as the Bank shall otherwise agree, DBP shall not amend any substan- tial provision thereof. 7. Procurement. (a) International Competitive bidding as des- cribed in Part A of the Guidelines referred to in Schedule 4 to the Agreement is required for fishing vessels constructed from material other than wood and any single item of equipment esti- mated to cost more than $300,000. (b) The Borrower's procurement procedures satisfactory to the Bank, will be used for procurement of other items. 8. Livestock Sub-loans. Sub-loans for cattle under Part A.2 (b) of the Project, will be limited to villages selected by BAI. 9. Fisheries Sub-loans. For the development of fishpond estates, DBP will establish evaluation and approval criteria, and proce- dures and guidelines, all satisfactory to the Bank. 10. General. The relending rates of interest, policies and procedures set forth in paragraph B of this Schedule will be periodically reviewed by the Bank and DBP for the purpose of revision, if necessary. 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 4tzday of 5 -f, 198 D. FOR SECRETARY