Conformed Copy - L2841 - National Urban Development Project - Loan Agreement

Page 1 LOAN NUMBER 2841 JO Loan Agreement (National Urban Development Project) between HASHEMITE KINGDOM OF JORDAN and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated July 13, 1987 LOAN NUMBER 2841 JO LOAN AGREEMENT AGREEMENT, dated July 13, 1987, between HASHEMITE KINGDOM OF JORDAN (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; (B) Part A of the Project will be carried out by the Borrower through the Urban Development Department of its Ministry of Municipal and Rural Affairs and the Environment (UDD); (C) Part B of the Project will be carried out by the Housing Bank (HB) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to HB part of the proceeds of the Loan as provided in this Agreement; (D) Part C of the Project will be carried out by the Cities and Villages Development Bank (CVDB) pursuant to a management and credit agreement to be entered into between the Borrower and CVDB as provided in this Agreement; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith between the Bank and HB; NOW THEREFORE the parties hereto hereby agree as follows: Page 2 ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. 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) "Project Agreement" means the agreement between the Bank and HB of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (b) "Subsidiary Financing Agreement" means the agreement to-be entered into between the Borrower and HB 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 Financing Agreement; (c) "CVDB Management and Credit Agreement" means the agreement to be entered into between the Borrower and CVDB pursuant to Section 3.01 (c) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the CVDB Agreement; (d) "UDD Operational Policy Statement" means the statement of operational policy approved by the Board of Directors of UDD on March 23, 1987, as amended to the date of this Agreement, and as the same may be amended from time to time; (e) HB Policy Statement" means the statement of investment and lending policy approved by the Board of Directors of HB on April 28, 1987, as amended to the date of this Agreement, and as the same may be amended from time to time; (f) "CVDB Policy Statement" means the statement of investment and lending policy approved by the Board of Directors of CVDB on May 9, 1985, as amended to the date of this Agreement, and as the same may be amended from time to time; (g) "LIHRF Operational Guidelines" means the Operational Guidelines for the Borrower's Low Income Housing Revolving Fund approved by the Borrower's Council of Ministers on January 30, 1985; and (h) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount in various currencies equivalent to twenty six million four hundred thousand dollars ($26,400,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule I to this Agreement for: (i) expenditures made (or, if the Bank-'-shall so agree, to be made) in respect of the reasonable cost of goods and services required for Parts A, and B (4) (a) of the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan; and (ii) amounts paid (or, if the Bank shall so agree, to be paid) by HB pursuant to loans made by HB under Part B (1) of the Project and in respect of which the withdrawal from the Loan Account is requested. (b) The Borrower shall, for the purposes of the Project, open and Page 3 maintain in dollars a special account in a bank, acceptable to the Bank, on terms and conditions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 6 to this Agreement. Section 2.03. The Closing Date shall be June 30, 1993, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. 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 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one-half of one percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.06 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost of the outstanding borrowings of the Bank drawn down after June 30, 1982, expressed as a percentage per annum, as reasonably determined by the Bank. (iii) "Semester" means the first six months or the second six months of a calendar year. Section 2.06. Interest and other charges shall be payable semiannually on February 15 and August 15 in each year. Section 2.07. 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 declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out Part A of the Project through UDD with due diligence and efficiency and in conformity with appropriate administrative, economic, financial, engineering and urban development practices and in accordance with UDD Operational Policy Statement, and shall provide, prompt- ly as needed, the funds, facilities, services, staff and other resources required for the purpose. (b) For the purposes of carrying out Part B of the Project, the Borrower shall make available to HB: (i) the equivalent in the currency of the Borrower (deter- mined as of the respective dates of withdrawal from the Loan Account or payment out of the Special Account) of the proceeds of the Loan allocated from time to time to Category 2 of the table set forth in paragraph 1 of Schedule I to this Agreement and withdrawn or paid out on account of amounts paid or to be paid by HB pursuant to loans made by HB under Part B (1) of the Project, or of the cost of goods financed or to be financed by HB under Part B (4) (a) of the Project; and (ii) an additional amount in the currency of the Borrower Page 4 equivalent to ten million one hundred thousand dollars ($10,100,000) out of the proceeds of the sale of plots and core houses pursuant to the provisions of Part E of Schedule 5 to this Agreement to be utilized by HB in providing loans to households under Part B (2) of the Project, under a subsidiary financing agreement to be entered into between the Borrower and HB on terms and conditions which shall have been approved by the Bank and which shall include, without limitation, terms pursuant to which HB shall undertake to: (A) pay interest on the principal amounts so made available pursuant to subparagraphs (i) and (ii) of this paragraph and withdrawn and outstanding from time to time at a fixed rate of 7.92%; (B) repay the principal amount so made available pursuant to subparagraph (i) of this paragraph over a period of 17 years, inclusive of a grace period of four years; and (C) repay the principal amount so made available pursuant to subparagraph (ii) of this paragraph over a period of 18 years, inclusive of a grace period of four years. (c) For the purpose of carrying out Part C of the Project, the Borrower shall enter into a management and credit agreement, satisfactory to the Bank, with CVDB providing for: (i) the establishment and operation by CVDB of the credit facility under Part C (1) of the Project in accordance with CVDB's applicable policies and procedures pursuant to CVDB Policy Statement; (ii) the carrying out by CVDB of Part C (2) of the Project with due diligence and efficiency and in conformity with appropriate practices and in accordance with the applicable provisions of Schedule 5 to this Agreement; (iii) the channeling through CVDB of the funds, including the proceeds of the Loan, required by UDD for the provision of the facilities for the social services under Part A (3) of the Project; and (iv) the payment by the Borrower to CVDB of all costs incurred by CVDB in the carrying out of its activities under Part C (2) of the Project. Section 3.02. Without limitation upon the provisions of Section 3.01 of this Agreement and except as the Borrower and the Bank shall otherwise agree, the Borrower shall carry out or cause to be carried out, the Project in accordance with the LIHRF Operational Guidelines and the Implementation Program set forth in Schedule 5 to this Agreement. Section 3.03. The Borrower shall: (a) without limitation or restriction upon any of its other obligations under the Loan Agreement, cause HB to perform in accordance with the provisions of the Project Agreement and the Subsidiary Financing Agreement, and CVDB to perform in accordance with the provisions of the CVDB Management and Credit Agreement, all the obligations of HB and CVDB therein set forth, take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable HB and CVDB to perform such obligations, and not take or permit to be taken any action which would interfere with such performance; and (b) exercise its rights under the Subsidiary Financing Agreement and the CVDB Management and Credit 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, not assign, amend, abrogate or waive any such Agreement or any provision thereof. Section 3.04. Except as the Bank shall otherwise agree, procurement of the goods, works and consultants' services required for Parts A and B (4) (a) 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 3.05. The Bank and the Borrower hereby agree that the obligations set forth in Sections 9.04, 9.05, 9.06 and 9.07 of the General Conditions (relating to insurance, use of goods and services, plans and schedules and records and reports, respectively) in respect of Part B of the Project shall be carried out by HB pursuant to Section 2.03 of the Project Agreement. Page 5 ARTICLE IV Financial and Other Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof, including, without limitation, separate records and accounts of UDD. (b) The Borrower shall, through UDD: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the Special Account f or each fiscal year audited, in accordance with appropriate auditing principles consistently 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, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records and accounts and the audit thereof as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall, through UDD: (i) maintain, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section 4.02. The Borrower shall at all times: (i) cause the facilities provided under Part A (3) of the Project to be operated and maintained and from time to time, promptly as needed, all--necessary repairs and renewals thereof to be made, all in accordance with sound engineering and financial practices; and (ii) ensure the timely and adequate provision of funds, facilities and other resources required for the purpose. ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (k) of the General Conditions, the following additional events are specified: (a) HB shall have failed to perform any of its obligations under the Project Agreement. Page 6 (b) As a result of events which have occurred after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that HB will be able to perform its obligations under the Project Agreement. (c) UDD Operational Policy Statement, or law No. 4 of 1974 of the Borrower pertaining to the establishment of HB, or HB Policy Statement, or CVDB Policy Statement shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of UDD to carry out, on behalf of the Borrower, Part A of the Project, or of HB to perform any of its obligations under the Project Agreement, or of CVDB to carry out Part C of the Project or to perform any of its obligations under the CVDB Management and Credit Agreement. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of HB or CVDB or for the suspension of HB's and CVDB's operations. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified: (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower; and (b) the events specified in paragraphs (c) and (d) of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the Subsidiary Financing Agreement has been executed on behalf of the Borrower and HB; (b) the CVDB Management and Credit Agreement has been exe- cuted on behalf of the Borrower and CVDB; and (c) the Borrower has appointed to UDD duly qualified and experienced manpower development officer and public relations officer; (d) HB has (i) appointed to its Low-Cost Housing Department duly qualified and experienced financial analyst and engineer, and (ii) employed, in accordance with the provisions of Section 2.02 (b) of the Project Agreement, a project appraisal and contract coordinator to assist said Department in carrying out its functions. Section 6.02. The following are specified as additional matters, 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: (a) that the Project Agreement has been duly authorized or ratified by HB, and is legally binding upon HB in accordance with its terms; (b) that the Subsidiary Financing Agreement has been duly authorized or ratified by the Borrower and HB and is legally binding upon the Borrower and HB in accordance with its terms; and (c) that the CVDB Management and Credit Agreement has been authorized or ratified by the Borrower and CVDB and is legally binding upon the Borrower and CVDB in accordance with its terms. Section 6.03. The date one hundred and twenty (120) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Page 7 Representative of the Borrower; Addresses Section 7.01. The Minister of Planning of the Borrower 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 purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Planning P.O. Box 555 Amman, Jordan Cable address: Telex: MINISTRY OF PLANNING 21319 JO Amman 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 duly authorized representatives, 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. HASHEMITE KINGDOM OF JORDAN By/s/ M. Kamal Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By/s/ A. J. Stoutjesdijk Acting Regional Vice President Europe, Middle East and North Africa 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: Page 8 Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) For Part A of the Project (a) Works 17,300,000 45% (b) Goods 3,490,000 100% of foreign expenditures, 100% of local expenditures (ex- factory cost) and 70% of local expenditures for other items pro- cured locally (c) Engineering 500,000 100% design and construction supervision services (2) For Part B of the Project (a) loans under 3,900,000 45% of amounts subpart (1) paid by HB thereof (b) goods under 10,000 70% of local subpart (4) (a) expenditures thereof (3) Unallocated 1,200,000 TOTAL 26,400,000 =========== 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of 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. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $500,000, may be made in respect of Category (1) on account of payments made for expenditures before that date but after January 31, 1987. SCHEDULE 2 Description of the Project The objectives of the Project are to assist the Borrower in implementing its strategy to improve the shelter provision of low-income households through the promotion of suitable shelter development within its urban centers and the strengthening of institutional capabilities to facilitate such development. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time Page 9 to time to achieve such objectives: Part A: (1) Upgrading of existing high density, low-income settlement sites, including the provision of additional infill residential and commercial plots and core houses and workshops. (2) Development of new low-income settlement sites, including the provision of residential and commercial plots and core houses on about 40% of the residential plots and workshops. (3) The provision, for the settlements to be so upgraded and developed, of suitable open spaces, road accesses, internal roads and footpaths, water and sewerage facilities, including water and sewerage connections to individual houses and plots, and social services, including community centers, schools, vocational and women training centers, health clinics and emergency centers. (4) The acquisition of land for the purposes of such upgrading and development and of providing secure tenure to residents. (5) Strengthening of UDD's capacity in designing and executing urban development projects, including the provision of staff training. Part B: (1) The provision and operation by HB of a credit facility to provide loans to households for the purchase of building materials and the construction and expansion of houses within the settlements to be upgraded and developed under Part A of the Project. (2) The provision and operation by HB of a credit facility to provide loans to households for the purchase of plots, core houses and workshops to be prepared and constructed under Part A (1) and (2) of the Project. (3) The provision and operation by HB of a credit facility to provide loans to UDD on behalf of the Borrower for the acquisition of land, other than that required for the social services facilities, the preparation of residential and commercial plots and the construction of on-site infrastructure and core houses under Part A of the Project. (4) The carrying out by HB of a program to (a) strengthen its capacity in appraising the technical, financial and economic feasibility of projects to develop residential and commercial plots and to construct low-income housing, including the provision of staff training and computer equipment; and (b) appraise the technical, financial and economic feasibility of upgrading and development activities to be carried out by UDD under Part A of the Project. Part C: (1) The provision and operation by CVDB of a credit facility to provide loans to UDD on behalf of the Borrower for the acquisition of land required for the social services facilities and for the construction of such facilities under Part A (3) of the Project. (2) The carrying out by CVDB of a program to evaluate the suitability of the facilities for the social services to be provided under Part A (3) of the Project and to channel to UDD the Borrowers funds required for the provision of such facilities. The Project is expected to be completed by June 30, 1992. SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 15 and August 15 Page 10 beginning February 15, 1992 through February 15, 2004 1,015,000 On August 15, 2004 1,025,000 ___________________________ * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. Premiums on Prepayment The following premiums are specified for the purposes of Section 3.04 (b) of the General Conditions: Time of Prepayment Premium The interest rate (ex-pressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of prepayment multiplied by: Not more than three years 0.18 before maturity More than three years but 0.35 not more than six years before maturity More than six years but 0.65 not more than 11 years before maturity More than 11 years but not 0.88 more than 15 years before maturity More than 15 years before 1.00 maturity SCHEDULE 4 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part C hereof , goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. To the extent practicable, contracts: (a) for works shall be grouped in bid packages estimated to cost the equivalent of $2,000,000 or more each; and (b) for goods shall be grouped in bid packages estimated to cost the equivalent of $150,000 or more each. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in Hashemite Kingdom of Page 11 Jordan may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Other Procurement Procedures 1. Works which the Bank agrees cannot be grouped pursuant to Part A.2 (a) hereof, may be procured under contracts awarded on the basis of competitive bidding, advertised locally in accordance with procedures satisfactory to the Bank. 2. Goods (a) which the Bank agrees cannot be grouped pursuant to Part A.2 (b) hereof, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Bank, and (b) which are estimated to cost less than the equivalent of $50,000 per contract, may be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Bank; provided, however, that the aggregate amount of all contracts to be procured pursuant to this Part C.2 shall not exceed the equivalent of $800,000. Part D: Review by the Bank of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract for (a) works estimated to cost the equivalent of $2,000,000 or more; and (b) goods estimated to cost the equivalent of $150,000 or more, the procedures set f orth in paragraphs 2 and 4 of Appendix I to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, said procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 6 to this Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Bank has authorized withdrawals from the Loan Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agreement. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix I to the Guidelines. Section II. Employment of Consultants Consultants' services shall be procured under contracts awarded to consultants: (A) whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank; and (B) who shall be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by The World Bank as Executing Agency" published by the Bank in August 1981. SCHEDULE 5 Implementation Program The provisions of this Schedule shall apply for the purposes of Section 3.02 of this Agreement. Page 12 A. Selection of Sites UDD shall select the sites for development and upgrading under Part A of the Project on the basis of the following criteria: 1. The urban centers within which sites are proposed to be upgraded and developed have been designated by the Borrower as priority areas for urban development pursuant to its housing strategy. 2. The sites to be upgraded have been determined to suffer basic deficiencies in the provision of infrastructure and social services and are not designated under an existing program of such upgrading. 3. The sites to be developed have been determined to be (a) suitably located to avail their residents of existing employment opportunities, and (b) amenable to such development in view of their particular topographical, soil and drainage conditions, the availability of suitable off-site infrastructure facilities and the assurance that the required land for such development would be readily available at a reasonable cost. 4. The local authorities of the localities within which such sites are, or are to be, located have indicated their approval in principle of such upgrading and development. 5. The concerned authorities, agencies and companies responsible for the provision of infrastructure facilities, public utilities and social services within such localities have indicated their readiness to ensure the proper operation and maintenance of such facilities, utilities and services within such sites. B. Feasibility of Upgrading and Development The following will be undertaken upon completion of the selection of sites pursuant to Part A of this Schedule. 1. UDD shall carry out, on the basis of guidelines satisfactory to the Bank, a feasibility study for each such site, including the preparation of preliminary designs therefor. 2. Concurrently with the preparation of the preliminary designs as indicated above, UDD shall initiate the process of (i) obtaining formal approval of the local authorities to the proposed upgrading and development, and the formal undertakings by the authorities, agencies and companies concerned with the provision of infrastructure facilities, public utilities and social services to ensure the proper operation and maintenance of such facilities, utilities and services, and '(ii) acquiring the land and rights in respect of land required for the upgrading and development of the selected sites. 3. As part of establishing the feasibility of the upgrading and development to be undertaken, UDD shall carry out a registration survey of each selected site, pursuant to which UDD will establish and maintain suitable contacts with existing and prospective residents of such sites in order to identify their concerns and provide solutions therefor, and to initiate a scheme for the marketing of the residential and commercial plots and core houses to be offered for sale on such sites. 4. Concurrently with the above, UDD shall investigate and establish, on the basis of guidelines acceptable to UDD and HB, the commitment of the present and prospective residents of the sites to the upgrading and development of these sites and the ability of said residents to pay for such upgrading and development. 5. After completion of above process in respect of each selected site, UDD shall prepare and furnish to HB a detailed proposal Page 13 for the upgrading or development of such site and the activities to be undertaken thereunder. C. Assessment of Upgrading and Development The following shall be undertaken upon receipt by UDD of HB's approval of the proposal for upgrading and development referred to in Part B.5 of this Schedule. 1. UDD shall prepare detailed designs for each site to be upgraded or developed and technical, financial and economic assessment thereof. Such designs and assessments will be furnished to HB for HB's approval, together with: (a) details of the costs of such upgrading and development; (b) analysis of the ability of the present and prospective residents of such sites to pay for such upgrading and development; (c) a copy of the agreement between UDD and the local authorities providing for said authorities' approval of, and commitment to, such upgrading and development; (d) evidence of the undertakings by, and the capability of, the authorities, agencies and companies concerned with the provision of infrastructure facilities, public utilities and social services to operate and maintain properly the facilities provided under Part A (3) of the Project upon the completion of site upgrading and development by UDD; (e) description of the marketing plan for the sale of plots and core houses and evidence of commitment by the present and prospective residents of the sites to be upgraded to purchase the same in the form of purchase agreements, down payments against such purchases or other evidence acceptable to HB; and (f) any other information requested by HB in this context. 2. UDD shall, concurrently with the above, prepare, in accordance with guidelines acceptable to UDD and CVDB, and furnish to CVDB for its approval, detailed designs for the social services facilities and centers to be provided in each site to be developed and upgraded, together with the details of the equipment, vehicles and furniture therefor. D. Approval of Upgrading and Development 1. The designs, assessments and other data to be prepared by UDD and furnished to HB under Part C.1 of this Schedule shall be analyzed by HB, in accordance with criteria satisfactory to the Bank. On the basis of such analysis, HB shall approve only such upgrading and development activities which: (a) are technically and financially feasible; (b) are estimated to have an economic rate of return of at least 9%; (c) are marketable and the prospective residents are able to pay for; and (d) in respect of which all approvals and commitments of the concerned authorities, agencies or companies have been secured. HB shall furnish to the to the Bank for its approval a report, in form and substance satisfactory to the Bank, in respect of the upgrading and development activities which are so approved by HB, together with the supporting documentation and any other information reasonably requested by the Bank. 2. The designs for the social facilities, together with the details of the equipment, vehicles and furniture therefor, to be prepared by UDD and furnished to CVDB under Part C.2 of this Schedule shall be reviewed by CVDB to determine the suitability thereof, on the basis of criteria satisfactory to the Bank, for the site to be upgraded or developed. CVDB shall furnish to the Bank for its approval the results of such review, together with the supporting documentation and any other information reasonably requested by the Bank. 3. Only such upgrading and development activities which the Bank shall have approved, on the basis of the information to be provided pursuant to paragraphs 1 and 2 of this Part, shall be eligible for financing out of the proceeds of the Loan. Page 14 E. Allocation and Sale of Plots and Core Houses Except as the Borrower and the Bank may otherwise agree, inter alia, on the basis of market conditions, the plots and core houses to.be prepared and constructed under Part A (1) and (2) of the Project shall be allocated and sold on the basis of the guidelines set forth hereinafter. 1. UDD shall ensure that: (a) about 60% of such 2 plots shall have sizes averaging between 110 and 160m each and shall be sold only in accordance with the provisions of paragraph 3 of this Part; (b) about 35% of such, plots shall have sizes averaging between 160 and 300m each and shall be sold at market prices to house-holds for the construction of houses and to private developers for the construction of houses and apartment buildings for subsequent rental or resale to households; and (c) about 5% of such plots shall have suitable sizes for the construction of commercial units and workshops and shall be sold at market prices to individuals or businesses for commercial operations. 2. All prof its to be generated through the sale of plots referred to in subparagraphs (b) and (c) of paragraph 1 above shall be utilized to reduce the prices of the plots referred to in subparagraph (a) of said paragraph I and of the core houses constructed thereon; provided, however, that the prices thereof shall not be set at levels below that which will be sufficient to cover (a) the costs associated with the acquisition of land therefor and any on-plot construction, including the connection thereof to water and sewerage facilities, and (b) the pro-rata share of the costs of (i) cadastral surveys and site preparation, (ii) design, management and supervision activities relating to site upgrading and development, (iii) on-site infrastructure, including water supply and sewerage, street lighting, electricity and telephone, roads under 10m width and 50% of the cost of roads of 10m width or more, and (iv) interest and other charges paid during the period of the preparation and construction of the site. 3. The plots referred to in subparagraph (a) of paragraph I above and the core houses constructed thereon shall be allocated, in approximate proportion to the number of, and sold only to, households the income of which is determined, in accordance with a methodology satisfactory to the Bank, to fall between 10% and 40% of the national income distribution, provided that the plots and core houses to be so sold shall be affordable to such households. For the purposes hereof, a plot or core house shall be considered affordable by a household when, after deduction of a down payment of 10% of the sale price thereof, the amount required to service the mortgage loan and the estimated amount of utility charges shall represent, on a monthly average basis not more than (a) one-fifth of the estimated monthly income of such household in respect of plots and core houses within the sites to be upgraded under Part A (1) of the Project, and (b) one-third of the estimated monthly income of such household in respect of plots and core houses within the sites to be developed under Part A (2) of the Project. F. Coordination, Monitoring and Supervision 1. UDD shall apply policies and procedures, satisfactory to the Bank, for ensuring the proper planning, design, coordination, monitoring and supervision of Part A of the Project. For these purposes, UDD shall maintain a team of qualified staff to undertake, in accordance with suitable action plans satisfactory to the Bank, such activities in coordination with and the participation of HB and CVDB, if so requested by HB and CVDB, and to report, on a quarterly basis, to HB and CVDB on the carrying out of the upgrading and development activities under Part A of the Project. 2. UDD shall maintain a team of qualified staff to be responsible Page 15 for the marketing of the plots and core houses, to advise households on construction and extension of houses and to supervise such construction and extension, to promote the development of community organization and to assist HB in processing applications for loans under Part B (1) and B (2) of the Project. 3. (a) Upon completion of the upgrading and development of each site, UDD shall ensure that the facilities provided under Part A (3) of the Project are transferred to the concerned authorities, agencies and companies for operation and maintenance; and (b) within one year of the completion of the upgrading and development of each such site, UDD will prepare and furnish to the Bank a report, in form and substance satisfactory to the Bank, on the execution thereof, its costs and the benefits derived and to be derived therefrom, the performance of UDD, HB and CVDB of their respective activities and the accomplishments of the purposes of the Loan. H. Consultants' Services In order to assist UDD in carrying out the tasks referred to in this Schedule, the Borrower shall employ consultants with qualifications and experience and under terms of reference satisfactory to the Bank. SCHEDULE 6 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) and (2) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for Part A of the Project and payments in respect of withdrawals under loans made by HB under Part B (1) of the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $3,000,000 to be withdrawn from the Loan Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Bank shall otherwise agree, payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Bank requests for replenishment of the Special Account at such intervals as the Bank shall specify. On the basis of such requests, the Bank shall withdraw from the Loan Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account f or eligible expenditures. All such deposits shall -be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been Justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. Page 16 4. For each payment made by the Borrower 'out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Bank, prior to or at the time of such request, such documents and other evidence as the Bank shall reasonably request, showing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Bank when either of the following situations first arises: (i) the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Loan allocated to the eligible Categories minus the amount of any outstanding special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. b) Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Bank, deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit b@-the Bank into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount for crediting to the Loan Account.