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

CONFORMED COPY CREDIT NUMBER 348 PNG Development Credit Agreement (Smallholder Livestock Credit Project) BETWEEN The Administration of Papua New Guinea AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JANUARY 4, 1973 CONFORMED COPY CREDIT NUMBER 348 PNG Development Credit Agreement (Smallholder Livestock Credit Project) BETWEEN The Administration of Papua New Guinea AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JANUARY 4, 1973 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated January 4, 1973, between THE ADMINISTRATION OF PAPUA NEW GUINEA (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) The Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; and (B) The Project will be carried out partly by the Department of Agriculture, Stock and Fisheries of the Borrower and partly by Papua and New Guinea Development Bank (hereinafter called PNGDB) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to PNGDB part of the proceeds of the Credit as hereinafter provided. WHEREAS the Association has agreed to make the Credit available to the Borrower upon inter alia the terms and conditions set forth hereinafter, in a project agreement of even date herewith between the Association and PNGDB and in a letter of undertaking of even date herewith from the Commonwealth of Australia to the Association. NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated January 31, 1969, with the same force and effect as if they were fully set forth herein, subject, however, to the modifications thereof set forth in Schedule 3 to this Agreement (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions). 4 Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Association and PNGDB of even date herewith, as the same may be amended from time to time and such term includes all schedules to the Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and PNGDB pursuant to Section 3.01(d) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (c) "Ordinance" means the Papua and New Guinea Development Bank Ordinance 1965 (No. 2 of 1966), as amended to the date of this Agreement; (d) "PNGDB" means the Papua and New Guinea Development Bank, a body corporate established and existing under the Ordinance; (e) "DASF" means Department of Agriculture, Stock and Fishenes of the Borrower; (f) "Lending Policy Statement" means the Lending Policy Statement adopted by the Board of PNGDB on November 18, 1971, as amended to the date of this Agreement, and as the same may be amended from time to time after consultation between PNGDB and the Association; (g) "Sub-loan" means a loan made or proposed to be made by PNGDB, out of the proceeds of the part of the Credit made available to it by the Borrower, to a farmer under Part B of the Project; and (h) "A$" means the Australian dollar. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to five million dollars ($5,000,000). 5 Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule I to this Agreement, as such Schedule shall be amended from time to time, for expenditures made (or, if the Association shall so agree, to be mac-) in respect of the reasonable cost of goods and services required for the Project and to be financed under the Development Credit Agreement; provided, however, that, except as the Association shall otherwise agree, no withdrawal shall be rnade on account of expenditures in the territories of any country which is not a member of the Bank (other than Switzerland) or for goods produced in, or services supplied from, such territories. Section 2.03. Except as the Association shall otherwise agree, the goods and services (other than services of consultants) required for Part A of the Project and to be financed out of the proceeds of the Credit shall be procured through normal commercial channels and under procedures acceptable to the Association. Section 2.04. The Closing Date shall be December 31, 1976 or such other date as shall be agreed between the Borrower and the Association. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semi-annually on March I and September 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each March I and September 1 commencing March 1, 1983, and ending September 1, 2022, each installment to and including the installment payable on September 1, 1992 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. 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. Section 2.09. The Treasurer of the Borrower is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. 6 ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out Part A of the Project through DASF with due diligence and efficiency and in conformity with appropriate administrative, agricultural and financial practices. (b) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause PNGDB to perform in accordance with the provisions of the Project Agreement all the obligations therein set forth, shall take and cause to be taken all action necessary or appropriate to enable PNGDB to perform such obligati.ns, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (c) The Borrower shall provide, or cause to be provided to DASF and PNGDB, promptly as needed, any funds, facilities, services and other resources required by DASF and PNGDB to enable them to carry out Part A and Part B of the Project respectively. (d) The Borrower shall make available the equivalent of $4,600,000 from the proceeds of the Credit to PNGDB under a subsidiary loan agreement to be entered into between the Borrower and PNGDB under terms and conditions which shall have been approved by the Association. The Subsidiary Loan Agreement shall provide, inter alia, for (i) the relending of an amount equivalent to $4,000,000 for a term of 15 years, including 5 years of grace, and for payment of interest by PNGDB at the rate of 1-1/4% per annum on amounts withdrawn and outstanding from time to time; and (ii) the provision of capital to PNGDB in an amount equivalent to $600,000. (e) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. The Borrower shall continue to exercise all such care and take all such measures as shall be necessary on its part for controlling the spread of Brucellosis. In the event the Borrower finds active Brucellosis on any farm the Borrower shall consult with the Association on the measures the Borrower proposes to take to continue its eradication program, so that the implementation of Part 7 B of the Project so far as it relates to the development of beef, shall continue in a manner satisfactory to the Borrower and the Association. Section 3.03. In the carrying out of Part A of the Project, the Borrower shall, during disbursement of the Development Credit, strengthen DASF by providing staff, housing and administrative facilities, satisfactory to the Association, and consistent with the provisions of Schedule 4 to this Agreement, as such Schedule may be modified, from time to time, by the agreement of the Borrower and the Association. Section 3.04. The Borrower shall take all steps practicable to ensure that so long as Sub-loans made to farmers for the development of beef are outstanding: (A) such farmers receive for meat marketed by them prices no less favourable than those received by other producers for the same grade of meat; and (B) adequate facilities for transportation and storage of meat or beef, as the case may be, are available, whenever necessary to facilitate movement thereof from areas of surplus to areas of short supply. Section 3.05. The Borrower shall establish and maintain or cause to be established and maintained a system to monitor and evaluate the financial and economic benefits accruing from the Project. Section 3.06. Until the completion of the disbursement of the Credit, the Borrower shall establish and maintain training and research facilities, satisfactory to the Association, and consistent with the provisions of Schedule 5 to this Agreement, as such Schedule may be modified, from time to time, by the agreement of the Borrower and the Association. Section 3.07. The operating policies and procedures for the carrying out of the Project shall be as set forth in Schedule 6 to this Agreement, as the same may be amended by agreement among the Borrower, Association and PNGDB. Section 3.08. As far as practicable, the Borrower shall ensure that any dispute as to rights under clan-land usage agreements is promptly referred to an appropriate tribunal. Section 3.09. (a) The Borrower shall furnish to the Association, promptly upon their preparation, the plans, specifications, contract documents and construction and procurement schedules, for the livestock training centres and buildings included in Parts A(ii) and A(iii) of the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. 8 (b) The Borrower: (i) shall maintain records adequate to record the progress of Part A of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit, and to disclose the use thereof in Part A of the Project; (ii) shall enable the Association's accredited representatives to inspect Part A of the Project, the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds. Section 3.10. During the disbursement of the Credit, the Borrower shall employ a duly qualified and competent person to the position of Project Coordinator, to assist the Assistant Director in Charge of the Animal Industry Division of DASF, consistent with the provisions of Schedule 7 to this Agreement, as such Schedule may be modified, from time to time, by the Agreement of the Borrower and the Association. Section 3.11. The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with consistently maintained sound accounting practices the operations, resources and expenditures, in respect of Part A of the Project, of the departments or agencies of the Borrower responsible for carrying out the said part of the Project. Section 3.12. Except as the Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit for purposes of Part A of the Project to be used exclusively for the Project. ARTICLE IV Consultation, Information and Inspection Section 4.01. The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Borrower and the Association shall from time to time, at the request of either party: (a) exchange views through their representatives with regard to the performance of their respective obligations under the Development Credit Agreement, the performance by PNGDB of its obligations under the Project Agreement, the appointment of the Assistant Director in Charge of the Animal Industry Division of DASF, the administration, operations and financial condition of PNGDB and, in respect of the Project, of the departments or agencies of the 9 Borrower responsible for carrying out any part of the Project, and other matters relating to the purposes of the Credit; and (b) furnish to the other all such information as it shall reasonably request with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and economic conditions in the territories of the Borrower, including its balance of payments, and the external debt of the Borrower, of any of its political subdivisions and of any agency of the Borrower or of any such political subdivision. Section 4.02. (a) The Borrower shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the administration, operations and financial condition of PNGDB and, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out any part of the Project. (b) The Boirower and the Association shall promptly inform each other of any condition which interferes with, or threate.- to interfere with, the accomplishment of the purposes of the Credit, the maintenance of the service thereof, the performance by either of them of its obligations under the Development Credit Agreement or the performance by PNGDB of its obligations under the Project Agreement and the Subsidiary Loan Agreement. Section 4.03. The Borrower shall afford all reasonable opportunity for accredited representatives of the Association to visit any part of the territories of the Borrower for purposes related to the Credit. ARTICLE V Taxes and Restrictions Section 5.01. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes imposed under the laws of the Borrower or laws in effect in its territories. Section 5.02. The Development Credit Agreement and the Project Agreement shall be free from any taxes on or in connection with the execution, delivery or registration thereof, imposed under the laws of the Borrower or laws in effect in its territories. Section 5.03. The payment of the principal of, and service charges on, the Credit shall be free from all restrictions, regulations, controls and moratoria of 10 any nature imposed under the laws of the Borrower or laws in effect in its territories. ARTICLE VI Remedies of the Association Section 6.01. If any event specified in Section 7.01 of the General Conditions or in Section 6.03 of this Agreement shall occur and shall continue for the period, if any, therein set forth, then at any subsequent time during the continuance thereof, the Association, at its option, may by notice to the Borrower declare the principal of the Credit then outstanding to be due and payable immediately together with the service charges thereon and upon any such declaration such principal and service charges shall become due and payable immediately, anything to the contrary in the Development Credit Agreement notwithstanding. Section 6.02. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) PNGDB shall have failed to perform any covenant, agreement or obligation of PNGDB under the Project Agreement. (b) PNGDB shall have become unable to pay any of its debts as they mature. (c) The Ordinance shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of PNGDB to carry out the covenants, agreements and obligations set forth in the Project Agreement. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of PNGDB or for the suspension of its operations. (e) An extraordinary situation shall have arisen which shall make it improbable that PNGDB will be able to perform its obligations under the Project Agreement. Section 6.03. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified: ' 11 (a) the event specified in paragraph (a) of Section 6.02 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 and PNGDB. (b) any event specified in paragraph (b) of Section 6.02 of this Agreement shall occur and shall continue for a period of thirty days after notice thereof shall have been given by the Association to the Borrower and PNGDB; and (c) any event specified in paragraphs (c) or (d) of Section 6.02 of this Agreement shall occur. ARTICLE VII Effective Date; Termination Section 7.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 10.01(b) of the General Conditions: (a) The execution and delivery of the Project Agreement on behalf of PNGDB have been duly authorized or ratified by all necessary corporate and governmental action. (b) The execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and PNGDB, respectively, have been duly authorized or ratified by all necessary corporate and governmental action. Section 7.02. The following are specified as additional matters, within the meaning of Section 10.02(b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) That the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, PNGDB, and constitutes a valid and binding obligation of PNGDB in accordance with its terms. (b) That the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and PNGDB, respectively, and constitutes a valid and binding obligation of the Borrower and PNGDB in accordance with its terms. Section 7.03. The date April 4, 1973 is hereby specified for the purposes of Section 10.04 of the General Conditions. 12 Section 7.04. The obligations of the Borrower under Sections 3.04, 3.05, 3.08, 3.09(b)(iii), 4.01(a) and 4.02(a) of this Agreement and the provisions of Section 6.02 and Section 6.03 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date 15 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VIII Representative of the Borrower; Addresses Section 8.01. The Treasurer of the Borrower is designated as representative of the Borrower for the purposes of Section 9.03 of the General Conditions. Section 8.02. The following addresses are specified for the purposes of Section 9.01 of the General Conditions: For the Borrower: The Treasurer Box 2249 Konedobu Papua New Guinea Cable address: Treasurer Port Moresby 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. 13 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 to be delivered in the District of Columbia, United States of America, as of the day and year first above written. THE ADMINISTRATION OF PAPUA NEW GUINEA By /s / Edmund M.W. Visbord Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s R. J. Goodman Director East Asia and Pacific Department Asia Regional Office 14 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 amounts of the Credit to each Category and the percentage of eligible expenditures so to be financed in each Category: Amount of the Credit Allocated o of (Expressed in Expenditures Category Dollar Equivalent) to be Financed I. Sub-loans for 4,218,000 ) beef develop- ) ment and ) fattening ) II. Sub-loans for 279,000 ) 90% of total ex- pig develop- ) penditures ment and ) fattening ) III. Sub-loans for 103,000 ) poultry devel- opment IV. Technical Services 400,000 100% of total (buildings, vehicles expenditures and equipment) TOTAL 5,000,000 2. For the purposes of this Schedule: (a) The term "total expenditures" means the aggregate of foreign expenditures and of expenditures for goods produced in, or services supplied from, territories of the Borrower; and (b) the term "foreign expenditures" means expenditures for goods produced in, or services supplied from, the territori-s, and in the currency, of any country other than the Borrower; provided, however, that 15 if the currency of the Borrower is also that of another country in the territories of which goods are produced or from the territories of which services are supplied, expenditures in such currency for such goods or services shall be deemed to be "foreign expenditures". 3. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) expenditures prior to May 1, 1972 under Category I and exceeding an amount equivalent to $600,000; and (b) payment for taxes imposed under the laws of the Borrower or laws in effect in its territories on goods or services, or on the importation, manufacture, procurement or supply thereof. To the extent that the amount represented by the percentage set forth in the third column of the table in paragraph 1 above in respect of any Category would exceed the amount payable net of all such taxes, such percentage shall be reduced to ensure that no proceeds of the Credit will be withdrawn on account of payments for such taxes. 4. Notwithstanding the allocation of an amoun, of the proceeds of the Credit set forth in the second column of the table in paragraph I above: (a) if the estimate of the expenditures under Category I, II or III shall decrease, the amount of the Credit then allocated to such Category and no longer required therefor will be reallocated by the Association, at the request of the Borrower, to any other Category (excluding Category IV) by increasing correspondingly the amount allocated thereto, subject, however, to the requirements for contingencies, as determined by the Association, in respect of any other expenditures; (b) if the estimate of the expenditures under Category 1, 11 or III shall increase, the percentage set forth in the third column of the table in paragraph 1 above in respect of such expenditures shall be applied to the amount of such increase, and a corresponding amount will be allocated by the Association, at the request of the Borrower, to such Category from any other Category (except Category IV) as regards which there is a decrease in the estimate of expenditures, subject, however, to the requirements for contingencies, as determined by the Association, in respect of any other expenditures. 16 SCHEDULE 2 Description of the Project The Project is part of the Borrower's program for a smallholder livestock development in Papua New Guinea and includes: Part A:: (i) Provision by the Borrower of agricultural extension and associated support services for the development and over-all supervision of the program, including the appraisal and supervision of smallholder Sub-loans for beef cattle, pigs and poultry. (ii) Provision by the Borrower of: (a) livestock education services for training smallholders and extension staff; (b) the construction, furnishing and equipping of two new livestock training centers; and (c) additional staff at four regional in-service training centers. (iii) The expansion of research staff and the provision of extra research facilities (including buildings), by the Borrower for increasing applied research on beef cattle, pigs and poultry smallholder production problems. Part B: Provision by PNGDB of loans to smallholders for the development of beef cattle, pigs and poultry. 17 SCHEDULE 3 Modifications of General Conditions (A) Paragraph 5 of Section 2.01 is deleted and the following paragraph is substituted therefor: "5. The term 'Borrower' means The Administration of Papua New Guinea." (B) In Section 2.01, the following paragraph is added after paragraph 12: "13. The term 'Project Agreement' has the meaning set forth in Section 1.02 of the Development Credit Agreement." (C) The last tour lines of Section 4.01 shall read as follows: "may be made in respect of expenditures in the currency of the Commonwealth of Australia or of the Borrower such withdrawals shall be made in such currency or currencies as the Association shall from time to time reasonably select." (D) Section 5.01 is deleted. (E) Sub-paragraph (ii) of paragraph (c) of Section 6.02 is deleted and the following paragraph is substituted therefor: "(ii) the Bank shall have suspended in whole or in part the right of the Borrower to make withdrawals under any loan agreement with the Bank guaranteed by the Commonwealth of Australia because of a failure by the Commonwealth of Australia to perform any of its obligations under such agreement. (F) Paragraph (d) of Section 6.02 is deleted and the following paragraph is substituted therefor: "(d) An extraordinary situation shall have arisen which shall make it improbable that the Project can be carried out or that the Borrower will be able to perform its obligations under the Development Credit Agreement or there shall occur any such change in the nature and constitution of the Borrower as shall make it improbable that the Borrower will be able to carry out its obligations under the Development Credit Agreement." 18 (G) The word "Borrower" is deleted in paragraph (e) of Section 6.02 and in the sixth line of Section 7.01(b) and the words "Commonwealth of Australia" are substituted therefor. (H) Section 6.02(h) is deleted and Section 6.02(i) becomes 6.02(h). (I) In Section 6.06, the words ", the Project Agreement" are added after the words "the Development Credit Agreement". (J) In Section 8.02, the words "or the Project Agreement" are added after the words "the Development Credit Agreement". (K) The term "or the Commonwealth of Australia, as the case may be" is added after the word "Borrower" in paragraph (k) of Section 8.03. (L) Paragraph (a) of Section 10.01 is deleted and the following paragraph is substituted therefor: "(a) the execution and delivery of the Development Credit Agreement on behalf of the Borrower have been duly authorized or ratified by all necessary governmental action, including action of the Commonwealth of Australia; and". 19 SCHEDULE 4 DASF Staff, Housing and Equipment for the Project ---------------- Year ----------- 1 2 3 4 Project Coordination Project Coordinator 1 1 1 1 Livestock Officers 1 1 1 1 Typist 1 1 1 1 Clerk 1 1 1 1 Special Livestock Services Regional Livestock Officers 4 4 4 4 Field Supervisors (District 6 6 6 6 Coordinators) Extension Services Rural Development Officers 6 9 11 5 Assistant Rural Development 12 20 25 15 Officers Rural Development Assistants 34 52 62 26 Typist 6 9 11 5 Clerical Assistant 6 9 11 5 New Houses and Furniture 41 23 14 - New Office Stores 6 3 2 - Vehicles New Four-wheel Drive 22 8 5 - New Motor Bikes 6 3 2 - 20 SCHEDULE 5 Training and Research Facilities A. Farmer Training 1. Livestock Farmers' Training Center The Borrower shall construct, equip, and staff a Livestock Farmers' Training Center at Moitaka II (Launakalana) near Port Moresby, with a capacity of 48 places to train farmers or junior DASF staff per course. 2. Existing Livestock Farmers' Training Centers The Borrower shall continue the livestock courses currently given at the centers at Baiyer River (72 places), Erap (48 places), and Urimo (48 places). B. In-Service Training 1. In-Service Livestock Training Center The Borrower shall construct, equip, and staff an In-Service Training Center with 30 places at Lae to train diploma and certificate holders of the staff of DASF. 2. Regional In-Service Training Centers The Borrower shall employ one additional staff member (of Assistant Rural Development Officer or Livestock Assistant grade) for attachment to each of the four regional in-service training centers. C. Research 1. The Borrower shall strengthen Animal Industry Research Stations so that professional and management staff members shall be as set forth below: Number of Professional and Management Category Station Staff Beef cattle Erap 6 Urimo 2 Bena Bena 3 Baiyer River 2 Moitaka 2 21 Number of Professional and Management Category Station Staff Pigs Goroka 4 Poultry Bubia 3 2. Research will be of a strictly applied nature and emphasis will be placed in testing production systems for beef suitable for smallholders in the different major ecological zones. Emphasis in pig and poultry work will be given to nutrition and management aspects for improving production under conditions similar to those of the smallholders. 3. The Borrower shall construct new poultry laboratories and shall provide housing for expanded staff and minor necessary items of equipment at all locations. 22 SCHEDULE 6 Operating Policies and Procedures (a) DASF staff shall assist applicants in preparing farm plans and budgets, shall appraise sub-projects, provide close supervision during development thereof and shall visit farms thereafter regularly until the Sub-loans are repaid; (b) All Sub-loans shall be appraised in terms of incremental returns and particular attention shall be given to the repayment capacity of the borrower; (c) 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.; (d) Farmers shall contribute not less than 20% of each sub-project cost, by way of cash and/or labor; (e) Sub-loans shall be made only to such farmers who are in areas where satisfactory marketing channels (including slaughter facilities) shall exist; (f) 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; (g) 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; (h) Prior to bringing beef ca)tle provided for under the Sub-loan on the farm the farmer shall have installed boundary fencing and yards thereon; 23 (i) Wherever possible, prior to receiving beef cattle provided for under the Sub-loan, the beef cattle farmer or such farmer's herder shall have attended a Farmer's Training Course; (j) As a general rule some legumes shall be established in the first year on each beef farm covered under the Project to provide seed or planting material for extending grass legume pastures in the following years; (k) Sub-loans for beef cattle development shall be made so as to ensure that the farms have not less than 15 breeders except in exceptional cases; (1) Sub-loans for pig development shall be made only to such farmers as are in areas where good yields of sweet potato or other suitable bulk feeds can be obtained and where adequate supplies of such feeds and supplementary feeds are available; (m) In connection with the Sub-loans for pig development: the farmer shall (i) build houses for pigs before bringing them on his farm; (ii) when the pigs come on the farm, have yielding sweet potatoes or other suitable bulk feeds and have a supply of protein supplement sufficient for not less than one month (the Sub-loan will finance the protein requirements until the farmer is able to purchase the same from the sale of his pigs); and (iii) have labor and land sufficient to grow sweet potato or other feeds required by him; (n) Sub-loans for poultry development shall be made only after examination and approval thereof by DASF's poultry husbandry adviser; (o) Sub-loans for poultry development shall be made only to such farmers as are located in areas where adequate supplies of good quality poultry feed are available; and (p) 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. 24 SCHEDULE 7 Project Coordinator 1. The Project Coordinator will require a degree in Veterinary Science or Agricultural Science or equivalent qualifications, with appropriate experience in the implementation of livestock development and a sound knowledge of technical and economic aspects of livestock production and animal health. 2. Within the framework of DASF and PNGDB organizational and administrative procedures, the Project Coordinator's role will include: (i) coordinating, through appropriate channels, the supply of inputs necessary for the implementation of the project, and the marketing of farm products; (ii) planning and supervising the collection of physical and financial performance data relative to the Project; (iii) regular assessment of the progress of the Project consistent with the Borrowers and the Association's reporting procedures; and (iv) assessment of the progress and performance of ancillary industries and operations necessary for the Project.