Conformed Copy - C2294 - Tarim Basin Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2294 CHA (Tarim Basin Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and XINJIANG UYGUR AUTONOMOUS REGION Dated October 28, 1991 CREDIT NUMBER 2294 CHA PROJECT AGREEMENT AGREEMENT, dated October 28, 1991, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and XINJIANG UYGUR AUTONOMOUS REGION (Xinjiang). 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 ninety-three million eight hundred thousand Special Drawing Rights (SDR 93,800,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that Xinjiang agree to undertake such obligations toward the Association as are set forth in this Agreement; WHEREAS Xinjiang, 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 Definitions Page 2 Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit 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) Xinjiang 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, including passenger vehicles, required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and Xinjiang shall otherwise agree, Xinjiang shall carry out the Project in accordance with the Implementation Program set forth in Schedule 2 to this Agreement. Section 2.02. Xinjiang shall: (i) make available a portion of the proceeds of the Credit through PMOs to Project Entities for purposes of carrying out Parts B, C.3, C.4, C.5, D.2 and D.3 of the Project under terms and conditions satisfactory to the Association; and (ii) ensure that interest rates charged for such funds shall be not 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 ABC and changes in ABC's interest rates. Section 2.03. 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 2.04. Xinjiang 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 Agreement. Section 2.05. (a) Xinjiang 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) Xinjiang 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 Xinjiang of its obligations under this Agreement. ARTICLE III Financial Covenants Section 3.01. (a) Xinjiang 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 Xinjiang responsible for carrying out the Project or any part thereof. (b) Xinjiang shall, through the Regional PMO: (i) 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. Page 3 (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, 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 and 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, Xinjiang 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. 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 Xinjiang 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 20 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 Xinjiang 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. 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: Page 4 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) For Xinjiang: Xinjiang Uygur Autonomous Region Finance Bureau 16 Mingde Road Urumqi, 830002, Xinjiang Uygur Autonomous Region People's Republic of China Cable address: Telex: 6299 79070 PMOCN Urumqi Xinjiang Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Xinjiang, or by Xinjiang on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by its Governor or Vice Governor or such other person or persons as the Governor or Vice Governor shall designate in writing, and Xinjiang 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/ A. Karaosmanoglu Regional Vice President Asia XINJIANG UYGUR AUTONOMOUS REGION By /s/ Zhu Qizhen Authorized Representative Page 5 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 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 goods shall be grouped into bid packages estimated to cost the equivalent of $200,000 or more. 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. Improved livestock breeds, 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 procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof. 2. Civil works, and items or groups of items for building materials (excluding steel, timber and plastic sheeting), small farm machinery and seed processing equipment estimated to cost less than the equivalent of $200,000 per contract, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 3. Items or groups of items for laboratory equipment and instruments, agricultural machinery and implements and improved livestock breeds estimated to cost the equivalent of $50,000 or less per contract, up to an aggregate amount equivalent to $3,000,000, may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Association. 4. Earthworks for land development and small canals, and on-farm works may be carried out by force account. 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 goods estimated to cost the equivalent of $200,000 or more, and with respect to each contract for civil works or earthworks estimated to cost the equivalent of $1,000,000 or more to be procured pursuant to Part C.2 above, 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, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. When payments for such Page 6 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 subparagraph (b) shall not apply to contracts on account of which the Association has authorized withdrawals on the basis of statements of expenditure. 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 Xinjiang in carrying out of the Project, Xinjiang 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. In order to ensure effective coordination in carrying out the Project, Xinjiang shall maintain or cause to be maintained: (a) a regional project management office with functions and responsibilities acceptable to the Association and staffed by competent staff in adequate numbers, including an executive project director from the Xinjiang Regional Water Conservancy Bureau; and (b) (i) a project management office (PMO) at each of the prefecture and county levels; and (ii) a bureau project executing unit in each agricultural, animal husbandry and water conservancy bureau, at each of the regional, prefecture and county levels, with functions and responsibilities acceptable to the Association and staffed by competent staff in adequate numbers. 2. Xinjiang shall cause each PMO to assist Xinjiang in complying with the financial reporting requirements of Article III of this Agreement. 3. Xinjiang shall take all measures, necessary or appropriate, to ensure that adequate supplies of diammonium phosphate (DAP) and other fertilizers are made available to farmers in the Project Area, and to this end, shall provide by December 15 of each year during Project implementation, to the Association for its review and comment, a report of the availability of budgetary funds allocated to the purchase of DAP, the amounts of DAP and other fertilizers made available in the preceding year and to be made available in the next coming year to farmers in the Project Area. For purposes of this paragraph "adequate supplies" of DAP and other fertilizers means about 150 kilograms (kg) of fertilizer per ha of grain crops and about 225 kg of fertilizer per ha of cotton. 4. In allocating leases of wasteland reclaimed as productive land under the Project, Xinjiang shall ensure that priority is given to low-income farmers, landless farmers and farmers with small land holdings with the objective of increasing farm size, and to this end, shall provide by March 15, 1992, to the Association for its review and comment, a plan for the allocation of such reclaimed land. 5. Xinjiang shall cause each Prefecture within the Project Area: (a) by March 15, 1992, to hold a workshop and to develop agricultural extension guidelines, and by March 15, 1993, to develop technical manuals, all satisfactory to the Association; and Page 7 (b) thereafter, utilize such guidelines and manuals in training local extension personnel. 6. Xinjiang shall: (a) by February 15, 1992, appoint an independent panel of technical experts for purposes of providing technical advise on implementation of the Project; (b) cause such panel to review and provide to the Regional PMO a report of the progress of implementing the Project on an annual basis; and (c) without limitation to the reporting provisions of Section 9.06 of the General Conditions, promptly provide such report to the Association. 7. Xinjiang shall: (a) by June 15 of each year during Project implementation beginning June 15, 1993, provide to the Association for its review and comment, a report of its annual survey and analysis of the prices charged during the preceding twelve-month period for grain sold at: (i) fixed and negotiated prices to state-owned entities; and (ii) market-based prices; and (b) cause the production of grain incremental to the previous year's production and financed under the Project to be sold at: (a) negotiated prices to state-owned entities; or (b) market-based prices. 8. Xinjiang shall: (a) by March 15 of each year during Project implementation beginning March 15, 1993, provide to the Association for its review and comment and to Xinjiang's Price Bureau, its annual survey of cotton prices charged and production incentives given during the preceding twelve-month period, as well as its recommendation to adjust cotton prices and give production incentives during the next twelve-month period in order to encourage farmers to produce cotton; and (b) by December 31, 1993, provide to the Association for its review and comment, a plan for allocation of quotas for additional cotton production in order to permit farmers to generate sufficient income (from combined cotton and other cash-crop production) to permit ecologically sound crop rotation, including planting of green manure (clover). 9. (a) Except as the Association shall otherwise agree, Xinjiang shall cause the Yehe Power Company (YHPC) to produce for each of its fiscal years: (i) after its fiscal year ending on December 31, 1995, funds from internal sources equivalent to not less than 15% of the annual average of YHPC's capital expenditures incurred, or expected to be incurred, for that year and the four next following fiscal years; and (ii) beginning on January 1, 2000, funds from internal sources equivalent to not less than 20% of the annual average of such capital expenditures incurred or expected to be incurred for that year and each year thereafter. (b) Before June 30 in each of its fiscal years, Xinjiang shall cause YHPC to review, on the basis of forecasts prepared by YHPC and satisfactory to the Association, whether it would meet the requirements set forth in paragraph (a) in respect of such year and the next following fiscal year and shall furnish to the Association a copy of such review upon its completion. (c) If any such review shows that YHPC would not meet the requirements set forth in paragraph (a) for YHPC's fiscal years covered by such review, Xinjiang shall promptly cause YHPC to take all necessary measures (including, without limitation, adjustments of the structure or levels of YHPC's rates) in order to meet such requirements. (d) For purposes of this paragraph, "funds from internal sources" and "capital expenditures" shall be determined in accordance with a methodology acceptable to the Association. 10. Xinjiang shall: Page 8 (a) by December 31, 1999, ensure that water charges are collected for irrigation schemes in Yerqiang and Weigan at levels sufficient to cover full annual operation and maintenance costs and a portion of capital costs for such irrigation schemes, such cost to be determined in accordance with a methodology acceptable to the Association; (b) by December 31, 1993, furnish to the Association for its review and comment, a plan: (i) detailing the operating and maintenance costs of such irrigation schemes; and (ii) setting forth a scheme to collect water charges sufficient to meet the requirements set forth in subparagraph (a) hereof; and (c) thereafter, review with the Association on an annual basis, the progress of carrying out the plan referred to in subparagraph (b) hereof and if any such review shows that Xinjiang would not meet the requirements of such plan, Xinjiang shall promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of its water rates) in order to meet such requirements. 11. Xinjiang shall ensure that charges for services provided by Animal Husbandry Bureaus at the county and township levels are collected for livestock services (veterinary, grassland and artificial insemination services) at rates sufficient to cover full annual operation and maintenance costs and a portion of capital costs of such services, such costs to be determined in accordance with a methodology acceptable to the Association.