Conformed Copy - C2307 - Guangdong Agricultural Development Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2307-0 CHA (Guangdong Agricultural Development Project) between PEOPLE'S REPUBLIC OF CHINA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated December 16, 1991 CREDIT NUMBER 2307-0 CHA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated December 16, 1991, between PEOPLE'S REPUBLIC OF CHINA (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 Project will be carried out by Guangdong Province (Guangdong) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to Guangdong the proceeds of the Credit as provided in this Agreement; 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 and in the Project Agreement of even date herewith between the Association and Guangdong; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Page 2 General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development 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) "ABC" means the Agricultural Bank of China, a specialized banking institution established and operating under the laws of the Borrower; (b) "Project Agreement" means the agreement between the Association and Guangdong, 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; (c) "Project Beneficiaries" means the individuals or groups of individuals engaged in farming and fishing under the Project; (d) "Project Enterprises" means the agroindustrial enterprises engaged in undertaking investments and activities under the Project; (e) "Project Municipalities" means the municipalities of Guangzhou, Huizhou, Jiangmen, Maoming, Meizhou, Qingyuan, Shantou, Shanwei, Shenzhen, Yangjiang, Zhanjiang, Zhaoqing and Zhuhai and such other municipalities as may be agreed between the Borrower and the Association; (f) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; and (g) "Sub-loan" means a loan made to one of the Project Enterprises or Project Beneficiaries out of the proceeds of the Credit made available to it to finance an investment project under Part E.1 of the Project. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to one hundred twenty-one million seven hundred thousand Special Drawing Rights (SDR 121,700,000). 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): (i) in respect of the reasonable cost of goods, works and services required for Parts A, B, C, D, E.2, E.3 and F of the Project and to be financed out of the proceeds of the Credit; and (ii) on account of withdrawals made by one of the Project Beneficiaries or Project Enterprises under a Sub-loan to meet the reasonable cost of goods, works and services required for the investment project in respect of which the withdrawal from the Credit Account is requested. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special deposit account in dollars in a bank and on terms and conditions satisfactory to the Association, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 3 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1998 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Page 3 Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of June 30 immediately preceding the accrual date or at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next payment date in that year specified in Section 2.06 of this Agreement. (c) 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 percent (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 May 1 and November 1 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semiannual installments payable on each May 1 and November 1 commencing May 1, 2002 and ending November 1, 2026. Each installment to and including the installment payable on November 1, 2011 shall be one and one-fourth percent (1-1/4%) of such principal amount, and each installment thereafter shall be two and one-half percent (2-1/2%) of such principal amount. (b) Whenever (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years, and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due consideration by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. 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 Page 4 Project as set forth in Schedule 2 to this Agreement, and, to this end, without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, shall cause Guangdong to perform in accordance with the provisions of the Project Agreement all the obligations of Guangdong therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable Guangdong to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall make available the proceeds of the Credit to Guangdong on terms and conditions satisfactory to the Association. 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 1 to the Project Agreement. Section 3.03. The Borrower and the Association hereby agree that the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) shall be carried out by Guangdong pursuant to Section 2.04 of the Project Agreement. ARTICLE IV Financial Covenants Section 4.01. The Borrower shall: (a) maintain, or cause to be maintained, in accordance with sound accounting practices, records and account reflecting expenditures for which payments are made out of the Special Account; (b) have the records and accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (c) furnish to the Association 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 Association shall have reasonably requested, including 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; and (d) furnish to the Association such other information concerning said records and accounts and the audit thereof as the Association shall from time to time reasonably request. ARTICLE V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) Guangdong shall have failed to perform any of its obligations under the Project Agreement; and (b) as a result of events which have occurred after the date of the Development Credit Agreement, an extraordinary situation shall have arisen which shall make it improbable that Guangdong will be able to perform its obligations under the Project Agreement. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional event is specified, namely that any event specified in paragraph Page 5 (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 Association to the Borrower. ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an additional condition to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions, namely, that the Borrower's State Council shall have approved the Development Credit Agreement. Section 6.02. The following is specified as an additional matter, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association namely, that the Project Agreement has been duly authorized or ratified by Guangdong, and is legally binding upon Guangdong in accordance with its terms. Section 6.03. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. Except as provided in Section 2.09 of this Agreement, 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 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance Sanlihe Beijing 100820 People's Republic of China Cable address: Telex: FINANMIN 22486 MFPRC CN Beijing For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) 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. PEOPLE'S REPUBLIC OF CHINA Page 6 By /s/ Zhao Xixin Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Gautam S. Kaji Regional Vice President East Asia and Pacific 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) Goods, including 84,670,000 100% of foreign vehicles other expenditures, than passenger 100% of local vehicles, for expenditures Parts A, B, C and (ex-factory D of the Project cost) and 75% of local expen- ditures for other items procured locally (2) Works: (a) for office con- 4,500,000 struction and on-farm orchards under Part C of the Project 90% (b) for all other 19,960,000 works under Parts A, B, C and D of the 50% Project (3) Consultants' ser- 1,330,000 100% vices, research, overseas training and study tours under Part F of the Project (4) Part E of the Project: (a) Works 1,960,000 65% (b) Consultants' 380,000 100% services, research, studies Page 7 and training (c) Sub-loans under 8,900,000 100% Part E.1 of the Project __________ TOTAL 121,700,000 =========== 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 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not to exceed SDR 9,600,000, may be made in respect of Categories (1) and (2) on account of payments made for expenditures before that date but after January 31, 1991; and (b) expenditures in respect of Category (4), unless the Association shall have approved a plan meeting the requirements of paragraph E.1 (a) of Schedule 2 to the Project Agreement. SCHEDULE 2 Description of the Project The objectives of the Project are to assist the Borrower and Guangdong in: (i) increasing fish production in the 100 to 250 meter depth of the Northern Continental Shelf of the South China Sea, relieving pressure on near-coastal resources; (ii) developing land unsuitable for agriculture, coastal mud flats and shallow water areas for aquaculture; (iii) increasing fruit production on sloping land; (iv) bringing new land in the Pearl River delta into agricultural production; (v) providing modern agroindustrial facilities for handling and processing; and (vi) alleviating poverty in limestone mountain areas, all in the Project Municipalities. 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: Marine Fisheries 1. Increasing fish production, through provision and initial operation of fishing vessels, including steel trawlers, refrigerated steel trawlers and wooden purse seiners. 2. Improving on-shore support facilities, through: (a) construction of a wharf; (b) construction, rehabilitation, equipping and initial operation of cold storage facilities and ice plants; and (c) provision of vehicles and construction of fisheries-related buildings for local aquatic bureaus. Part B: Aquaculture 1. Increasing production of fish and aquatic products, through construction and initial operation of brackish water fish ponds, marine culture cages, freshwater cages, freshwater ponds and oyster and shrimp farms. 2. Improving aquaculture support facilities, through: (a) construction, expansion and initial operation of new and existing shrimp hatcheries and fish and shrimp feed mills; (b) construction of aquaculture-related buildings for local aquatic bureaus; and (c) provision of vehicles, production equipment and laboratory equipment. Page 8 Part C: Agriculture 1. Fruit Production Expanding litchi, longan and pomelo fruit production by: (a) improving existing orchards and establishing new orchards; (b) provision of related agricultural inputs, (c) construction of related storage and irrigation facilities; and (d) strengthening the fruit development companies in each of the relevant Project Municipalities, through construction of additional offices, research and training facilities and fruit warehouses, and provision of vehicles and equipment. 2. Sugar Cane and Vegetable Production Expanding sugar cane and vegetable production, through: (a) reclamation of tidal lands and improvement of existing reclaimed land, establishment of farm settlements, including provision of housing and electricity and drinking water supply systems; (b) provision of related agricultural inputs for initial operation; and (c) construction of buildings and provision of office equipment, boats and vehicles for local land reclamation agencies. Part D: Agroindustries Construction and expansion of agroindustrial plants and facilities in the following product and processing lines: frozen fruit and vegetables, yogurt drink, fruit juice, spirulina natural medicine, feed additives, foodstuff processing, fish canning, rosin processing and perfumery, candied fruit, and longan drying. Part E: Limestone Mountain Poverty Alleviation Expanding agricultural and agroindustrial production to increase incomes in the impoverished rural counties of Qingyuan Municipality, through: 1. Financing of Sub-loans for production of crops, livestock and fisheries and for agroprocessing. 2. Construction of rural infrastructure, including drinking water supply facilities and market access and feeder roads. 3. Improving planning and research and strengthening research and extension, including provision of consultants' services. Part F: Institutional Development Supporting Project implementation activities and Project-related research, including provision of local and overseas training, study tours and consultants' services. * * * The Project is expected to be completed by December 31, 1997. SCHEDULE 3 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means the Categories 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 Page 9 (c) the term "Authorized Allocation" means an amount equivalent to $7,600,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. 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 shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Association requests for deposits into the Special Account at such intervals as the Association shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid 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 said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Credit allocated to the eligible Categories, less 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 equal the equivalent of twice the amount of the Authorized Allocation. 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 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 an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or Page 10 (B) deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Association shall otherwise agree, no further deposit by the Association into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (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. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.