Turkey - Second Structural Adjustment Loan : Loan 1987 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1987 TU Loan Agreement (Second Structural Adjustment Loan) between REPUBLIC OF TURKEY and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated May 15, 1981 LOAN NUMBER 1987 TU LOAN AGREEMENT AGREEMENT, dated May 15, 1981 between REPUBLIC OF TURKEY (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Bank has received a letter dated Febru- ary 20, 1981 from the Borrower describing a program of actions, objectives and policies designed to achieve a structural adjust- ment of the Borrower's economy, declaring the Borrower's commit- ment to the execution of that program, and requesting assistance from the Bank in the financing of urgent imports to be made during the execution of such program; and (B) the Bank has decided in support of such program to provide assistanze to the Borrower by making the loan as herein- after provided; 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 Loan and Guarantee Agreements of the Bank, dated October 27, 1980, with the same force and effect as if they were fully set forth herein, subject, however, to the following modification thereof (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank, as so modified, being hereinafter called the General Conditions), namely, that Section 2.01 No. 11 shall read: "The term Project means the activities that may be financed out of the proceeds of the Loan pursuant to the provisions of Schedule 1 to this Agreement." 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) "Lt" and "Lira" mean the currency of the Borrower; -2- (b) "Project Account" means the account established in T.C. Merkez Bankasi pursuant to Section 3.01 of this Agreement; (c) "T.C. Merkez Bankasi" means TUrkiye Cumhuriyet Merkez Bankasi, the Central Bank of the Republic of Turkey established and operating pursuant to Law No. 1211 promulgated in the Official Gazette of the Republic of Turkey No. 13409 of January 26, 1970 as amended; (d) "SEE" means a State Economic Enterprise, or a corpora- tion, enterprise or entity, 50% or more of whose capital is owned or controlled by the Borrower or any of its administrative sub- divisions, agencies or instrumentalities; and (e) "Private Sector Firm" means a firm, corporation, part- nership or any other manufacturing entity 50% or more of whose capital is owned or controlled by persons or entities other than the Borrower, its administrative subdivisions, agencies or instru- mentalities, including SEEs. 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 three hundred million dollars ($300,000,000). 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 respect of the reasonable cost of the imported goods included in such Schedule. Section 2.03. Except as the Bank shall otherwise agree, the procurement of the goods to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be November 30, 1982 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. -3- 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 three-fifths per cent (9-3/5%) per annum on the prin- cipal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semiannually on January 15 and July 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 2 to this Agreement. Section 2.09. (a) T.C. Merkez Bankasi 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. (b) Without limitation or restriction to the f regoing, the Borrower shall entrust T.C. Merkez Bankasi with respo sibilitk for the coordination and collection of relevant documentation, and the preparation of withdrawal applications, under the Loan, which withdrawal applications shall to the extent practicable be con- solidated so as to provide for withdrawal of at least $25,000 equivalent. Each such withdrawal application shall be submitted to the Bank with a statement of the cumulative amount claimed for withdrawal from the Loan Account on account of expenditures made or to be made by Private Sector Firms under such application and all earlier applications submitted to the Bank. ARTICLE III Particular Covenants Section 3.01. The Borrower shall open an account (the Project Account) with T.C. Merke;z Bankasi and shall deposit in said account in accordance with its usual financial procedures, upon each withdrawal from the Loan Account, the equivalent in Liras of the currency or currencies withdrawn from the Loan Account (such equivalent to be determined as of the respective date of such withdrawals). The amounts so deposited in the Project Account shall be used exclusively to finance expenditures included in the Borrower's development programs. Section 3.02. The Borrower shall: (a) promptly upon receipt of appropriate applications from potential importers: (i) determine their eligibility under the Loan; and (ii) issue, or cause to be issued to eligible importers such import licenses as shall be required for the importation of goods to be financed out of the proceeds of the Loan; (b) make available, or cause to be made available, to the licensed importers promptly as needed, such amounts of foreign exchange as shall be required to import goods to be financed out of the proceeds of the Loan; and (c) take all such action as shall be necessary to facilitate the timely importation of goods to be financed out of the proceeds of the Loan. Section 3.03. The Borrower undertakes that adequate provision will be made 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 to replace or repair such goods. Section 3.04. The Borrower and the Bank shall from tima to time, at the request of either party, exchange views on the progress achieved in carrying out the program referred to in paragraph (A) of the Preamble to this Agreement and the measures specified in Schedule 4 to this Agreement. Section 3.05. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any -5- external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing 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. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative subdivision thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including assets held by T.C. Merkez Bankasi or any other institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 3.06. The Borrower shall ensure that records shall be kept to register all expenditures financed out of the proceeds of the Loan in accordance with sound accounting practices con- sistently applied. Section 3.07. Upon the award of any contract for goods to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. ARTICLE IV Additional Event of Suspension Section 4.01. For the purposes of Section 6.02 of the General Conditions, tiie following additional event is specified pursuant -6- to paragraph (k) thereof, namely, that an event has occurred which shall make it improbable that the program or a significant part of the program referred to in the Preamble to this Agreement will be carried out. ARTICLE V Termination Section 5.01. The date August 17, 1981, is hereby specified 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: Maliye Bakanligi Hazine Genel Mudurlugu ve Milletlerarasi Iktisadi Isbirligi Teskilati Genel Sekreterligi Ankara, Turkey Cable address: MALIYE Hazine Ankara For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America -7- 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 District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF TURKEY By /s/ Tevfik Altinok Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Roger Chaufournier Regional Vice President Europe, Middle East and North Africa -8- SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of imported commod- ity groups to be financed out of the proceeds of the Loan and the allocation of the amounts of the Loan to each Category: Amount of the Loan Allocated (Expressed in Category Dollar Equivalent) (1) Agriculture 200,000,000 Materials for produc- tion of fertilizers except petroleum and petroleum products (2) Industry 100,000,000 Raw materials and intermediate goods except petroleum and petroleum products TOTAL 300,000,000 2. Notwithstanding the provisions of paragraph 1 above: (a) No withdrawals shall be made in respect of: (i) expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; (ii) payments made prior to the date of this Agreement, except that withdrawals in an aggregate amount not exceeding the equivalent of $30,000,000 may be made on account of payments made for such expenditures before that date but after April 1, 1981; -9- (iii) 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; and (iv) expenditures for goods procured under invoicps for less than $5,000 equivalent. (b) No withdrawal shall be made and no commitment shall be entered into to pay amounts to the Borrower or others in respect of expenditures to be financed under this Agreement after the aggregate amount of the Loan withdrawn from the Loan Account and the amount of commitments entered into by the Bank upon the Borrower's request in respect of expenditures to be financed under the Loan would exceed the equivalent of $200,000,000,, unless the Bank shall be satisfied, after an exchange of views referred to in Section 3.04 of this Agreement with the progress achieved by the Borrower in the carrying out of the measures described in Schedule 4 to this Agreement. 3. Notwithstanding the allocation of an amount of the Loan set forth in paragraph 1 of this Schedule, if the Bank has rea- sonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the expenditures in that Category, the Bank may, by notice to the Borrower, reallocate to the respective Category, to the extent required to meet such 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. 4. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expen- ditures 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 ouch expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 10 - SCHEDULE 2 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each January 15 and July 15 Beginning January 15, 1986 Through January 15, 1998 11,540,000 On July 15, 1998 11,500,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.04), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. - 11 - 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 1.70% More than three years but not more than six years before maturity 3.40% More than six years but not more than eleven years before maturity 6.20% More than eleven years but not more than fifteen years before maturity 8.50% More than fifteen years before maturity 9.60% - 12 - SCHEDULE 3 Procurement 1. Except as provided in paragraph 3 thereof, goods to be imported under a single contract estimated to cost $10,000,000 equivalent or more, shall be procured through limited interna- tional tendering on the basis of at least three responsive quota- tions from suppliers from the member countries of the Bank and Switzerland or from Taiwan. 2. Contracts for the purchase of goods estimated to cost less than the equivalent of $10,000,000 shall be awarded through normal trade channels on the basis of the procurement procedures of the purchaser of such goods. 3. Contracts for commonly traded commodities may be awarded on the basis of price quotations available from organized inter- national commodity markets. 4. With respect to each contract costing $250,000 equivalent or more, the Borrower shall furnish to the Bank, 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 contract; in raspect of contracts referred to in paragraph 1 of this Schedule, the Bank shall, in addition, be furnished with, a description of the advertising and tendering procedures followed, an appropraite analysi- of the respective bids and recommendations 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 this Schedule, promptly inform the Borrower and state the reasons for such determination. - 13 - SCHEDULE 4 Review with respect to Schedule 1, paragraph 2 (b) The Borrower and the Bank shall review: 1. The adequacy of policies and legislative and administrative measures for export promotion, import liberalization and domestic resource mobilization, in particular with respect to tax reforms: (a) progress in enacting a law providing for a value added tax to be introduced during the Borrower's fiscal year 1982; and (b) progress in establishing adequate procedures for tax collection, especially with respect to personal and corporate income and agricultural sales tax. 2. The adequacy of progress in reforms of State Economic Enter- prises, in particular (a) by September 30, 1981, (i) carrying out the reforms decided in principle by the Council of Ministers in February 1981, and (ii) decision of the Council of Ministers of legal changes permitting greater delegation of authority within SEEs and multi-year contracts for their managers; and (b) carrying out the decree No. 8/2022, dated November 29, 1980, with respect to the number of authorized positions and new hiring. Progress will be reviewed inter alia by examining the implementation in selected SEEs of the measures referred to under (a) (i) and (b) hereof. 3. The adequacy of energy policies, in particular pricing of petroleum products at levels comparable to international market prices.