Sri Lanka - Agricultural Research Project : Credit 1776 - Credit Agreement - Conformed

CREDIT NUMBER 1776 CE Development Credit Agreement (Agricultural Research Project) between DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1987 CREDIT NUMBER 1776 CE DEVELOPME CREDIT AGREEMENT AGREEMENT, .4..drF?47( 1987, between DEMOCRATIC SOCIALIST REPUBL OF SRI LANKA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). 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 Association to assist in the financing of the Project; (B) the Borrower intends to obtain from the Federal Republic of Germany, acting through its Agency for Technical Cooperation (hereinafter called the GTZ) a grant (the GTZ Grant) in an amount of $800,000 equivalent to assist in financing the Project on the terms and conditions set forth in an agreement (hereinafter called the GTZ Agreement) to be entered into between the Borrower and GTZ; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Develop- ment Credit Agreements" of the Association, 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) "CARP" means the Council of Agricultural Research Policy to be established under the Project; -2- (b) "MADR" means the Ministry of Agricultural Development and Research of the Borrower; (c) "DOA" means the Department of Agriculture within MADR; (d) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; and (e) "Fiscal Year" means the Borrower's fiscal year commencing January 1 and ending December 31. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Bor- rower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to fifteen million four hundred thousand Special Drawing Rights (SDR 15,400,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, for expenditures made (or, if the Association shall so agree, to be made) in respect of the rea- sonable 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 Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special account in its Central Bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1996 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge at the rate of one-half of one per cent (1/2 of 1%) per annum on the principal amount of the Credit not with- drawn from time to time. The comm-itment charge shall accrue from - 3 - a date sixty days after the date of the Development Credit Agree- ment to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or shall be cancelled. (b) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on June 1 and December 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each June I and December 1 commencing June 1, 1997, and ending December 1, 2036. Each installment to and including the installment payable on December 1, 2006 shall be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter shall be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. 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 the Project with due diligence and efficiency and in conformity with appropriate agricultural, administrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. -4- (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and the Borrower may otherwise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Sched- ule 4 to this Agreement. (c) Without any limitation to the generality of paragraph (a) above, the Borrower shall ensure that adequate funds will be allocated for the operation and maintenance of Project facilities. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. ARTICLE IV Financial 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. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association, as soon as available, but in any case not later than nine months after the end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and -5- (iii) furnish to the Association such other information concerning the said records, accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until one year after the Association has received the audit report for the fiscal year in which the last disbursement from the Credit Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association'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 pro- cedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE V Remedies of the Association Section 5.01. (a) Pursuant to Section 6.02 (h) of the General Conditions, the following additional event is specified, namely, that, subject to paragraph (b) of this Section the right of the Borrower to withdraw the proceeds of the GTZ Grant made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor. -6 - (b) Paragraph (a) of this Section shall not apply if the Borrower establishes to the satisfaction of the Association that: (i) such suspension, cancellation or termination is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (ii) adequate funds for the Project are available to the Borrower from other sources on terms and condi- tions consistent with the obligations of the Borrower under this Agreement. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) all conditions precedent to the effectiveness of the GTZ Agreement (other than, if applicable, the effectiveness of this Agreement) have been fulfilled; (b) the Borrower has established CARP and appointed its members, the Executive Secretary, two senior scientists and support staff; and (c) the Borrower has established and adequately staffed the Project Management Unit and has employed, under terms and conditions satisfactory to the Association, a firm of architects/ engineers to assist said Unit. Section 6.02. The date 90 days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Secretary, Ministry of Finance and Planning of the Borrower, is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. -7- Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance and Planning Democratic Socialist Republic of Sri Lanka Coloml,o, Sri Lanka Cable address: Telex: SECMINFIN 21409 Colombo FINMIN For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) -8- 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, DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President South Asia -9- SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Civil works 3,700,000 65% (2) Equipment and 3,000,000 100% of foreign vehicles expenditures, 100% of local expenditures (ex-factory cost) and 75% of local ex- penditures for other items pro- cured locally (3) Training and 3,600,000 100% fellowships (4) Contract research 2,800,000 60% (5) Staff salaries 1,100,000 Amounts specified and operating in the Annex to costs this Schedule (6) Unallocated 1,200,000 TOTAL 15,400,000 - 10 - 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 1 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 SDR 150,000, may be made in respect of Categories 3 and 5 on account of payments made for expenditures before that date but after June 1, 1986. - 11 - ANNEX TO SCHEDULE 1 1. Disbursements in respect of salaries, allowances and other operating costs under the Project of incremental staff of the Headquarters Research Planning Cell of DOA, CARP Administration, and Project Management Unit shall be made as follows: % of Expenditures to be Financed until all Disbursements under Category 5 reach the Aggregate Amount opposite to Aggregate Amount in each Percentage SDRs 90% 700,000 60% 1,000,000 40% 1,100,000 2. Disbursements shall be made on the basis of statements of expenditures certified by the head of the Project Management Unit or his designate. - 12 - SCHEDULE 2 Description of the Project The objectives of the Project are to promote the integration of agricultural research efforts in Sri Lanka, to develop a cost effective agricultural research system and to increase farmers' incomes through the development of better varieties, and improvements in husbandry practices and farming systems. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A Establishment under MADR of a Council of Agricultural Research Policy (CARP) responsible for making recommendations concerning agricultural research strategies, policies, priorities and funding. Part B Strengthening of research stations and library facilities through the carrying out of civil works and the provision of vehicles, machinery, and equipment therefor. Part C Improvement of the technical capacity of researchers through the provision of training, fellowships and technical assistance. Part D Introduction of a contract research program to finance research activities. Part E Establishment of a Headquarters Research Planning Cell within DOA. Part F Introduction of research planning and evaluation procedures. - 13 - Part G Improvement of research-extension linkages. The Project is expected to be completed by June 30, 1996. - 14 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A. International Competitive Bidding 1. Except as provided in Part C hereof, scientific equipment, farm machinery and vehicles 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). Part B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A hereof, goods manufactured in Sri Lanka 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. Civil works shall be procured under contracts awarded on the basis of competitive bidding advertised locally under procedures satisfactory to the Association. 2. Contracts for spares and miscellaneous items which to the extent practicable cannot be grouped in bid packages estimated to cost the equivalent of $30,000 or more, may be let follow- ing local competitive bidding procedures satisfactory to the Association, provided that any such items estimated to cost less than the equivalent of $10,000, up to an aggregate amount of $100,000 equivalent, may be procured through prudent shopping on the basis of at least three price quotations from different sources. 3. Books and publications may be procured through direct purchase from sole suppliers. - 15 - Part D. Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract for civil works estimated to cost the equivalent of $100,000 or more and each contract for goods estimated to cost the equivalent of $50,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 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 Association pursuant to said paragraph 2 (d) shall be furnished to the Association 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 pre- ceding paragraph, the procedures set forth in paragraphs 3 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 together with the other information required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 5 to this Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Associa- tion has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agree- ment. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants In order to assist the Borrower in carrying out the Project, the Borrower shall employ consultants whose qualifications and experience shall be satisfactory to the Association. - 16 - SCHEDULE 4 Implementation Program 1. The Borrower shall establish, not later than June 30, 1987, and thereafter maintain throughout the execution of the Project, a Project Coordination Committee within MADR with membership and terms of reference satisfactory to the Association. 2. The Borrower shall establish and fully staff the Head- quarters Research Planning Cell of DOA by June 30, 1987. 3. The Borrower shall ensure that by December 31, 1987 all land and rights in respect of land have been made available for the construction of CARP'S administrative building in Colombo. 4. The Borrower shall prepare and furnish to the Association by March 31, 1988, for comments by the Association, a Status Review Report for each of the Borrower's seven agroecological regions. 5. The Borrower shall: (i) carry out during fiscal year 1987 high priority research programs and maintain in said fiscal year the same level of agricultural research expenditures (in real terms) as in fiscal year 1986; (ii) prepare and furnish to the Association the agricultural research programs of the different research institutions for the fiscal years 1988 and 1989; and (iii) carry out its annual research program planning and review exercise in accordance with procedures agreed with the Association. 6. The Borrower shall prepare and furnish to the Association, by December 31, 1987, for comments by the Association, a preli- minary manpower development plan, and shall take into account the Association's comments in the formulation of such plan. 7. The Borrower shall prepare and furnish to the Association, for its approval, by December 31, 1988, the National Agricultural Research Plan and shall from time to time review and update such Plan. 8. The Borrower shall ensure that Diagnostic Teams of 2-3 scientists will be formed at all research institutions by May 31, 1987. - 17 - 9. The Borrower shall, not later than June 30, 1988, carry out a review of the existing extension system with a view of improv- ing such system and developing research extension linkages. The Borrower shall afford the Association a reasonable opportunity to comment on the results and recommendations of such review. 10. The Borrower shall prepare and furnish to the Association by December 31 of each year of the Project period, for comments by the Association, a consolidated annual Research Report for the previous year. 11. The Borrower shall carry out, in consultation with the Association, interim reviews of all research activities under the Project, one in January 1989 and the other in January 1991. 12. The Borrower shall ensure that, after the completion of the Project, incremental research and support staff are retained and that an adequate level of expenditures for research activities is maintained. - 18 - SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (5) 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 the Project and to be financed out of the proceeds of the Credit 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 SDR 420,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Association 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 Association 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 Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit 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 for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit 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. 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 Association, prior to or at the time of such request, such documents and other evidence as the Association shall reasonably request, showing that such payment was made for eligible expen- ditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals should be made directly by the Borrower from the Credit Account in accordance with the provisions of paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Credit allo- cated to the eligible Categories, minus the amount of any outstanding special commitment entered into by the Association 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 Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice have been or will be utilized in making payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account (i) was made for any - 20 - 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 Association deposit into the Special Account (or, if the Association shall so request, refund to the Association for crediting to the Credit Account), an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit by the Association into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Association 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 Association, refund to the Association such outstanding amount for crediting to the Credit Account. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY