Conformed Copy - C2159 CN - Hebei Agricultural Development Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2159 CHA (Hebei Agricultural Development Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and HEBEI PROVINCE Dated July 2, 1990 CREDIT NUMBER 2159 CHA PROJECT AGREEMENT AGREEMENT, dated July 2, 1990, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and HEBEI PROVINCE (Hebei). WHEREAS by the Development Credit Agreement of even date herewith between People's Republic of China (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to one hundred sixteen million one hundred thousand Special Drawing Rights (SDR 116,100,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that Hebei agree to undertake its obligations under the Project; and WHEREAS Hebei, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Page 2 Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) Hebei declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and agricultural practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and Hebei shall otherwise agree, Hebei shall carry out the Project in accordance with the Implementation Program set forth in Schedule 2 to this Agreement. (c) Without limitation upon the provisions of paragraph (a) of this Section, Hebei shall, for purposes of cost recovery: (i) make available a portion of the proceeds of the Credit, through Local PMOs, to Project Entities for purposes of carrying out Project activities, under terms and conditions acceptable to the Association; and (ii) ensure that interest rates charged for such funds shall be no less than ABC's prevailing interest rates for similar loans for similar purposes, such rates to be reviewed from time to time with the Association in light of the cost of funds to, as well as changes in ABC's interest rates. Section 2.02. 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 1 to this Agreement. Section 2.03. Hebei shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating respectively to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) in respect of the Project. Section 2.04. In order to ensure effective coordination in carrying out the Project, Hebei shall maintain the Provincial PMO with staff, functions and responsibilities acceptable to the Association. Section 2.05. (a) Hebei shall, at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and other matters relating to the purposes of the Credit. (b) Hebei shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by Hebei of its obligations under this Agreement. ARTICLE III Financial Covenants Section 3.01. (a) Hebei shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition in respect of the Project. (b) Hebei shall, through the Provincial PMO: (i) have the accounts referred to in paragraph (a) above, including Page 3 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 six 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 (iii) furnish to the Association such other information concerning said records, accounts and financial statements as well as 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, Hebei 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 at least one year after the Association has received the audit for the fiscal year in which the last withdrawal 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 procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section 3.02. Hebei shall ensure that suitable arrangements acceptable to the Association will be made with ABC or other appropriate financial institutions for purposes of providing necessary funding to Project Entities. ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 4.02. (a) This Agreement and all obligations of the Association and of Hebei thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date fifteen years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify Hebei of this event. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. Page 4 ARTICLE V Miscellaneous Provisions Section 5.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 197688 (TRT) Washington, D.C. 248423 (RCA) 64145 (WUI) or 82987 (FTCC) For Hebei Province: The People's Government of Hebei Province 10, Wei Ming Street Shijiazhuang Hebei Province People's Republic of China Telex: 26240 PBLSJ CN Section 5.02. Any action required or permited to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Hebei, may be taken or executed by the Vice Governor of Hebei or such other person or persons as he shall designate in writing, and he shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 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. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Shahid Javed Burki Acting Regional Vice President Asia Page 5 HEBEI PROVINCE By /s/ Zhu Qizhen Authorized Representative SCHEDULE 1 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, including 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). 2. To the extent practicable, contracts for equipment or materials shall be grouped into bid packages to permit bulk purchases. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in China 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. Specialized equipment, including research, water monitoring and seed processing equipment, up to an aggregate amount not to exceed $7,000,000 equivalent, may be procured under contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids invited from a list of at least three qualified suppliers eligible under the Guidelines and in accordance with the procedures set forth in Sections I and II of the Guidelines (excluding paragraph 2.8, 2.9, 2.55 and 2.56 thereof). 2. Machinery, equipment and materials estimated to cost less than $200,000 equivalent per contract, up to an aggregate amount not to exceed $53,500,000 equivalent, and works under the Project may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 3. Works, up to an aggregate amount not to exceed $12,100,000 equivalent, may be procured through force account or other local procedures acceptable to the Association. 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 estimated to cost the equivalent of $200,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. When 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 preceding paragraph, Page 6 the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. When 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 3 to the Development Credit Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Association has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 3.01 (c) (ii) of this Agreement. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist Hebei in carrying out the Project, Hebei shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association 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 2 Implementation Program 1. Hebei shall cause Local PMOs to be established and maintained at the prefectural and county levels, with staff, functions and responsibilities acceptable to the Association. 2. Hebei shall cause each Local PMO when appropriate for purposes of facilitating Project activities: (a) to establish and maintain four separate revolving accounts under terms and conditions satisfactory to the Association, from counterpart funds and repayments of amounts borrowed by Project Entities, for purposes of financing: (i) wells and water-saving pipes; (ii) farm inputs; (iii) farm machinery; and (iv) livestock activities; and (b) assist Hebei in complying with the financial reporting requirements of Article III of this Agreement. 3. Hebei shall ensure that: (a) all agrochemicals financed out of the proceeds of the Credit shall have been approved by the Association; (b) all Project activities comply with the Environmental Guidelines issued by Hebei's Provincial Environmental Protection Bureau and with environmental standards and practices acceptable to the Association; (c) all overseas training and study financed out of the proceeds of the Credit, shall have been approved by the Association; (d) no new irrigation wells, other than those financed under the Project, will be drilled in the Project Area until the final assessment of ground water resources in Hebei under Part A.3 of the Project has been provided to the Association; (e) the results of research carried out under Part A.4 of the Project are provided to and discussed with, the Association as such results become available; (f) it shall have designed, by December 31, 1990, a system to monitor and Page 7 treat all effluents from agroprocessing facilities financed under the Project and that thereafter such system shall be maintained; and (g) that the final designs for treatment plants financed under the Project shall have been approved by the Hebei Environmental Bureau. 4. Hebei shall cause each new agroindustrial Project Entity engaged in production of urea or monoammonium phosphate fertilizer, particle board or fluting paper: (a) to provide to the Association draft operational guidelines before final adoption thereof; (b) to be managed by staff competent with expertise acceptable to the Association; and (c) to maintain a debt to equity ratio of no greater than 5 to 1, determined in a manner acceptable to the Association. 5. Hebei shall furnish to the Association, by December 31 of each year during implementation of the Project, a program of civil works to be carried out during the next calendar year, for the expansion and rehabilitation of existing irrigation systems in the Project Area and drilling of new wells in the Heilonggang area, including the budgeting and financial arrangements required to carry out such program. 6. Hebei shall, by December 31, 1991, submit to the Association for its review and comment: (a) revised operation and maintenance guidelines for pumping stations included in the Project; and (b) a report of surface water charges for surface irrigation systems included in the Project. 7. Without limitation to the reporting provisions of Section 9.06 of the General Conditions, Hebei shall: (a) furnish to the Association, on June 30 and December 31 of each year during implementation of the Project, a report on the progress of carrying out the Project; and (b) by not later than June 30, 1993, carry out a mid-term review with the Association of the progress of carrying out the Project, including the water resources development plan under Part A.3 of the Project. 8. (a) Hebei shall cause the resale prices charged for imported fertilizers and pesticides financed out of the proceeds of the Credit to be at least equal to the cost of importing such fertilizers and pesticides, including a margin for distribution costs, determined in accordance with a methodology acceptable to the Association. (b) Hebei shall review the resale prices of imported fertilizers and pesticides with the Association on at least an annual basis, and promptly thereafter make any adjustments as may be required to ensure that at least the resale prices required by paragraph (a) hereof are achieved.