Papua New Guinea - Smallholder Livestock Credit Project : Credit 0348 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 348 PNG Project Agreement (Smallholder Livestock Credit Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND PAPUA AND NEW GUINEA DEVELOPMENT BANK DATED JANUARY 4, 1973 CONFORMED COPY CREDIT NUMBER 348 PNG Project Agreement (Smalfliolder Livestock Credit Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND PAPUA AND NEW GUINEA DEVELOPMENT BANK DATED JANUARY 4, 1973 PROJECT AGREEMENT AGREEMENT, dated January 4, 1973, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and PAPUA AND NEW GUINEA DEVELOPMENT BANK (hereinafter called PNGDB). WHEREAS by the Development Credit Agreement of even date herewith between the Administration of Papua New Guinea (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to five million dollars ($5,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that PNGDB agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into by the Borrower and PNGDB, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to PNGDB on the terms and conditions therein set forth; and WHEREAS PNGDB, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, 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. PNGDB shall carry out Part B of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency 4 and in conformity with appropriate administrative, agricultural, and financial practices. Section 2.02. In order to assist PNGDB in the carrying out of Part B of the Project, PNGDB shall employ agricultural consultants acceptable to the Association upon terms and conditions satisfactory to the Association. Section 2.03. Except as the Association shall otherwise agree, the goods and services (other than services of consultants) required for Part B of the Project and to be financed out of the part of the proceeds of the Credit made available to PNGDB by the Borrower, shall be procured through normal commercial channels and under procedures acceptable to the Association. Section 2.04. Except as the Association may otherwise agree, PNGDB shall cause all goods and services financed out of the part of the proceeds of the Credit made available to it by the Borrower to be used exclusively for Part B of the Project. Section 2.05. PNGDB: (i) shall maintain records adequate to record the progress of Part B of the Project (including the cost thereof) and to identify the goods and services financed out of the part of the proceeds of the Credit made available to it by the Borrower, and to disclose the use thereof in Part B of the Project; (ii) shall, without limitation upon the provisions of Section 5.03 of this Agreement, enable the Association's representatives to inspect Part B of the Project, the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning Part B of the Project, the report of the consultants referred to in Section 2.02 of this Agreement on the progress of Part B of the Project, the expenditure of the part of the proceeds of the Credit made available to it by the Borrower and the goods and services financed out of such proceeds. Section 2.06. PNGDB shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, PNGDB shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. ARTICLE III Management and Operations of PNGDB Section 3.01. PNGDB shall take out and maintain with responsible insurers or make other provisions satisfactory to the Association for insurance against such risks and in such amounts as shall be consistent with appropriate practice. 5 Section 3.02. PNGDB shall not amend the Lending Policy Statement without prior consultation with the Association. Section 3.03. The operating policies and procedure for the carrying out of Part B of the Project shall be as set forth in Schedule 1 to this Agreement, as the same may be amended from time to time by agreement among the Borrower, the Association and PNGDB. ARTICLE IV Financial Covenants Section 4.01. PNGDB shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. PNGDB shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) 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 four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) 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 the accounts and financial statements of PNGDB and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. Except as the Borrower, Association and PNGDB shall otherwise agree, PNGDB shall at all times manage its financial affairs in such manner as shall enable it from its operating income: (i) to cover all its operating expenditures and charges; including taxes, if any, and interest payments on borrowings; (ii) to make adequate provision for bad or doubtful loans; and (iii) to accumulate adequate general reserves. 6 ARTICLE V Consultation, Information and Inspection Section 5.01. The Association and PNGDB shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and PNGDB shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of PNGDB and other matters relating to the purpose of the Credit. Section 5.02. The Association and PNGDB shall promptly inform each other of any condition which interferes with, or threatens to interfere with, The accomplishment of the purposes of the Credit, the performance by either of them of its obligations under this Agreement and the performance by PNGDB of its obligations under the Subsidiary Loan Agreement. Section 5.03. PNGDB shall enable the Association's representatives to inspect all properties and equipment of PNGDB and any relevant records and documents. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 6.02. (a) This Agreement and all obligations of the Association and of PNGDB 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) a 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 PNGDB of this event and, upon the giving of such notice, this Agreement and all obligations of the parties thereunder shall forthwith terminate. 7 Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. 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: INDEVAS Washington, D.C. For PNGDB: Papua and New Guinea Development Bank P. 0. Box 500 Port Moresby Papua New Guinea Cable address: DEVELOPMENT Port Moresby 8 Section 7.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of PNGDB may be taken or executed by its Managing Director or such other person or persons as the said Managing Director shall designate in writing. Section 7.03. PNGDB shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of PNGDB, take any action or execute any documents required or permitted to be taken or executed by PNGDB pursuant to any of the provisions of this Agreement. Section 7.04. 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 representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / R. J. Goodman Director East Asia and Pacific Department Asia Regional Office PAPUA AND NEW GUINEA DEVELOPMENT BANK By /s/ Edmund M.W. Visbord Authorized Representative 9 SCHEDULE 1 Operating Policies and Procedures 1. PNGDB shall ensure that: (a) All Sub-loans shall be appraised in terms of incremental returns and particular attention shall be given to the repayment capacity of the borrower; (b) All Sub-loans up to A$3,000 shall bear a minimum interest rate of 7-1/4% p.a., and all Sub-loans in excess of A$3,000 shall bear a minimum interest rate of 7-3/4% p.a.; (c) Farmers shall contribute not less than 20% of each sub-project cost, by way of cash and/or labor; (d) The following maximum grace and total periods shall apply for Sub-loans: Grace Period Total Period Lending Categories Years Years Beef 4 12 Pigs 2 5 Poultry: Layers 2 5 Broilers 1 4 Shorter grace periods may be prescribed if consistent with borrower's ability to repay; (e) Sub-loans for beef cattle development involving clan-land shall only be made where the applicant has obtained a written clan-land usage agreement giving him permission to use the land during the term of the Sub-loan and for an adequate period thereafter; and (f Initially the number of Sub-loans for development of poultry shall be limited to twenty, and further lending for poultry development shall only be carried out after the results achieved from such initial development have been evaluated. 2. At the time of approving or disbursing, as the case may be, the Sub-loans, PNGDB shall satisfy itself that the policies and procedures set forth in paragraphs (e), (h) through (o) of Schedule 6 to the Development Credit Agreement have been followed.