Conformed Copy - C2411 - Sichuan Agricultural Development Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2411-0-CHA (Sichuan Agricultural Development Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and SICHUAN PROVINCE Dated July 22, 1992 CREDIT NUMBER 2411-0-CHA PROJECT AGREEMENT AGREEMENT, dated July 22, 1992, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and SICHUAN PROVINCE (Sichuan). 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 seven million seven hundred thousand Special Drawing Rights (SDR 107,700,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that Sichuan agree to undertake such obligations toward the Association as are set forth in this Agreement; WHEREAS Sichuan, 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 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) Sichuan 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 Sichuan shall otherwise agree, Sichuan shall carry out the Project in accordance with the Implementation Program set forth in Schedule 2 to this Agreement. 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. Sichuan 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 to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement. Section 2.04. (a) Sichuan 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) Sichuan 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 Sichuan of its obligations under this Agreement. ARTICLE III Financial Covenants Section 3.01. (a) Sichuan 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 Sichuan responsible for carrying out the Project or any part thereof. (b) Sichuan shall: (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. (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 Page 3 records and accounts and the audit thereof as the Association shall from time to time reasonably request. 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 Sichuan 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 Sichuan 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: 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 Sichuan: Sichuan Provincial Water Conservancy and Hydropower Bureau No. 69 Wenwu Road Chengdu 610017 Sichuan Province People's Republic of China Cable address: Telex: 7557 60163 SCPEC CN Chengdu Page 4 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 Sichuan may be taken or executed by Governor or Vice Governor or such other person or persons as Governor or Vice Governor shall designate in writing, and Sichuan 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/ Gautam S. Kaji Regional Vice President East Asia and Pacific SICHUAN 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 D 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 for goods and works 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: Preference for Domestic Contractors In the procurement of works in accordance with the procedures described in Part A.1 hereof, the Borrower may grant a margin of preference to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part D: Other Procurement Procedures Page 5 1. Pesticides, computers, and office equipment estimated to cost the equivalent of $200,000 or less per contract, up to an aggregate amount equivalent to $4,500,000, may be procured under contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids obtained from 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. Small agricultural machinery and tools, pumps, utility and training equipment and spare parts estimated to cost the equivalent of $200,000, or less per contract, up to an aggregate amount equivalent to $7,000,000, and cement and phosphate fertilizer 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 of equipment, instruments, other miscellaneous goods, planting materials and breeding stocks, estimated to cost the equivalent of $50,000 or less per contract, up to an aggregate amount equivalent to $17,400,000, 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. Works estimated to cost $10,000,000 or less per contract: (a) may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association, up to an aggregate amount equivalent to $82,800,000; and (b) for construction of lateral and sub-lateral canals, rural roads, afforestation and other on-farm works, may be carried out by force account up to an aggregate amount equivalent to $52,200,000. Part E: 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 for works estimated to cost the equivalent of $2,000,000 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 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, 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 withdrawals from the Credit Account are to be made 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 Sichuan in carrying out the Project, Sichuan 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 Page 6 Implementation Program Part A: Irrigation Schemes under Part A.1 of the Project In expanding the Shengzhong, Wudu and Yangjiaba irrigation systems under Part A.1 of the Project, Sichuan shall undertake the following: 1. Sichuan shall prepare and furnish to the Association for approval by August 1, 1993, a plan of operation and maintenance for each of these irrigation systems. 2. Sichuan shall ensure that water charges are collected for these completed irrigation systems at a level sufficient to cover full annual operation and maintenance costs, with the rates to be revised periodically as necessary to reach such level. 3. (a) Sichuan shall cause the dams and reservoirs included in the Shengzhong and Yangjiaba irrigation systems to be maintained and inspected periodically in accordance with sound engineering practice, under arrangements satisfactory to the Association. (b) Sichuan shall ensure that the resettlement of persons affected by the construction of the dam connected with the Yangjiaba irrigation system shall be carried out in accordance with a resettlement plan agreed with the Association. Part B: Agricultural Inputs 1. (a) Sichuan shall cause the fertilizers and pesticides provided under Part A.2 (d) of the Project to be sold to farmers at prices which cover the costs of procurement, transportation and distribution. (b) Sichuan shall ensure that grain quotas shall not be increased in any of the counties under the Project. 2. Sichuan shall ensure that: (a) all pesticides under Part A.2 of the Project shall have been approved by the Association; and (b) the storage, handling, distribution and use of such pesticides shall be consistent with guidelines satisfactory to the Association. Part C: Soil Conservation and Income Generation 1. Sichuan shall ensure that all plantations under Part B.2 of the Project shall conform to environmental guidelines satisfactory to the Association. 2. Sichuan shall establish a comprehensive grassland monitoring system in Qianjiang prefecture, satisfactory to the Association, by June 30, 1993. Part D: Agro-processing 1. Sichuan shall: (a) ensure that the final designs for effluent treatment for each agro-processing plant under Part D of the Project have been approved by the relevant prefectural environmental protection bureau prior to beginning construction of such plant; and (b) ensure that each enterprise shall monitor and treat effluents from such plants adequately before disposal, under the supervision of such bureau. 2. Sichuan shall ensure that prior to approval of financing for the pulp and paper mills and rabbit hair processing plant under Part D of the Project, each enterprise shall implement an enterprise reform plan satisfactory to the Association, which will enable the enterprise to be managed as a company independently from the local Page 7 supervisory bureau, under an enterprise manager selected by an enterprise board of directors. 3. In connection with the expansion of pulp and paper mills under Part D of the Project, Sichuan shall ensure that the Gaugu, Yushan and Mianyang paper mills shall be closed in accordance with timing and procedures acceptable to the Association. Part E: Project Management 1. (a) Sichuan shall ensure that all Project activities shall conform to environmental standards and guidelines, including the environmental regulations and guidelines issued by the National Environmental Protection Agency and its Provincial Environmental Protection Bureau, which shall be satisfactory to the Association. (b) To that end, Sichuan shall implement its environmental management plan for the Project as agreed with the Association. 2. Sichuan shall maintain or cause to be maintained: (a) a project leading group at each of the provincial, prefectural and county levels included in the Project, with composition and responsibilities acceptable to the Association; and (b) a project management office at the provincial level with functions and responsibilities acceptable to the Association, staffed by competent staff in adequate numbers. 3. Sichuan shall, by December 15 of each year, prepare and furnish to the Association for review a detailed work plan and report of the schedule and financing arrangements, including a statement of proposed counterpart funding, for Project implementation for the following year. 4. (a) Sichuan shall ensure that all training, including study tours, and research under the Project shall be carried out in accordance with training and research programs agreed with the Association. To that end, Sichuan shall cause the PMO by November 1 in each year, to prepare and furnish to the Association for approval the proposed training, study tours and research to be carried out in the next year. (b) Sichuan shall ensure that under such training programs, at least 50% of the farmers trained and 20% of the technicians trained are women. Part F: Financial Management 1. (a) Sichuan shall ensure that the proceeds of the Credit shall be made available to farmers and enterprises under the Project by ABC or PCBC in the form of loans bearing interest at rates no less than the prevailing rate charged by ABC for similar loans for similar purposes. (b) Sichuan shall make arrangements satisfactory to the Association for ABC and PCBC to make such loans as financial agents only, taking no credit risk, prior to the making of any such loans by ABC or PCBC, respectively. 2. Sichuan shall establish and operate three revolving funds in accordance with procedures satisfactory to the Association: (a) a revolving fund for agricultural inputs, financed from the proceeds of purchases of fertilizer and pesticides under Part A.2 (d) of the Project; (b) a revolving fund for soil conservation, financed from the repayments of loans made for activities under Part B of the Project; and (c) a revolving fund for poverty alleviation in Qianjiang prefecture, financed from the repayments of loans made for activities in Qianjiang prefecture under Part C of the Project. Page 8