Malagasy - Railway Project : Credit 0488 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 488 MAG Development Credit Agreement (Railway Project) BETWEEN MALAGASY REPUBLIC AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JUNE 27, 1974 CONFORMED COPY CREDIT NUMBER 488 MAG Development Credit Agreement (Railway Project) BETWEEN MALAGASY REPUBLIC AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JUNE 27, 1974 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 27, 1974, between MALAGASY REPUBLIC (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 foreign exchange cost of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) Part B of the Project will be carried out by the Borrower and Part A by Rgseau National des Chemins de Fer Malagasy (hereinafter called RNCFM) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to RNCFM part of the proceeds of the Credit as hereinafter provided; and (C) The Association is willing to make the Credit available upon the terms and conditions set forth hereinafter and in a project agreement of even date herewith between the Association and RNCFM; 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 following modifications thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions): (a) Section 5.01 is deleted; (b) Section 6.02(h) is deleted and Section 6.02(i) becomes 6.02(h); (c) the words "the Project Agreement" are added after the words "Development Credit Agreement" in Section 6.06; 4 (d) the words "or the Project Agreement" are added after the words "Development Credit Agreement" in Section 8.02; and (e) the following subparagraph is added to Section 2.01: "13. The term 'Project Agreement' shall have the meaning set forth in the Development Credit Agreement." 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 RNCFM 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 RNCFM pursuant to Section 3.0 1(b) 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) "RNC'M" means Rgseau National des Chemins de Fer Malagasy, an Etablissement Public & Caractere Industriel et Commercial of the Borrower, under the supervision (tutelle) of the Borrower's Ministere de l'4menagement du Territoire and Ministire de l'Economie et des Finances, established pursuant to Decree No. 74-154 of the Borrower, dated May 10, 1974, and including any successor thereto; (d) "Ministry" means the Borrower's Ministre de l'Amenagement du Territoire; (e) "Malagasy Francs" and "FMG" mean the currency of the Borrower; (f) "1973-1975 Investment Plan" means RNCFM's investment plan for the railway's immediate needs during the period 1973-1975, as described in Schedule 3 to this Agreement and as such Schedule may from time to time be amended by agreement between the Borrower, the Association and RNCFM. 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 six million dollars ($6,000,000). 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 made) 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 made 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 required for the Project and to be financed out of the proceeds of the Credit shall be procured pursuant to the provisions set forth or referred to in Section 2.02 of the Project Agreement. Section 2.04. The Closing Date shall be June 30, 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 April 15 and October 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each April 15 and October 15 commencing April 15, 1984 and ending October 15, 2023, each installment to and including the installment payable on October 15, i993 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 (1-1/27) 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. RNCFM's Directeur GdUnral is designated with respect to Part A of the Project 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. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out Part B of the Project and shall cause Part A of the Project to be carried out by RNCFM with due diligence L 6 and efficiency and in conformity with appropriate administrative, financial, engineering and railway practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) The Borrower shall relend five million two hundred thousand dollars ($5,200,000) of the proceeds of the Credit to RNCFM under a Subsidiary Loan Agreement to be entered into between the Borrower and RNCFM under terms and conditions (including, inter alia, an interest rate of seven and one fourth per cent (7-1/4%) per annum and a repayment period of twenty years including a grace period of three and one half years) which shall have been approved by the Association. (c) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause RNCFM to perform in accordance with the provisions of the Project Agreement and the Subsidiary Loan Agreement all the obligations 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 RNCFM to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such perfonnance. (d) 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. In order to assist the Borrower in the carrying out of Part B of the Project, the Borrower shall by a date not later than August 31, 1974 or such later date as shall be agreed to by the Association, employ transportation consultants acceptable to the Association upon terms and conditions (including terms of reference) satisfactory to the Association. Section 3.03. Except as the Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. Section 3.04. (a) The Borrower shall cause to be furnished to the Association, promptly upon their preparation, the plans, specifications and work schedules for the Project and contract documents for goods and services to be financed out of the proceeds of the Credit, and any material modifications or amplifications thereof, in such detail as the Association shall reasonably request. 7 (b) The Borrower shall or shall cause RNCFM to: (i) maintain records adequate to record the progress 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 the Project; (ii) enable the Association's representatives to inspect the Project, the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) 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 3.05. Without limitation or restriction upon the provisions of Section 3.01 of this Agreement, the Borrower shall make arrangements, satisfactory to the Association, promptly to provide RNCFM with funds to complete the execution of Part A of the Project, should at any time RNCFM's resources prove insufficient for this purpose. ARTICLE IV Other Covenants Section 4.0 1. The Borrower shall take all such action as shall be necessary on its part to enable RNCFM to comply with the provisions of Sections 4.03 and 4.04 of the Project Agreement including the setting and adjustment of RNCFM's tariffs. Section 4.02. The Borrower shall, after completion of the tariff costing study made by the consultants referred to in Section 3.05 of the Project Agreement, consult with the Association and RNCFM regarding the decisions that it proposes to take in the light of the consultants' recommendations and the means of their implementation. Section 4.03. The Borrower shall take all such action as shall be necessary on its part to cause RNCFM to comply with the obligations set forth in Section 4.07 of the Project Agreement and shall limit its own railway investments in the manner and to the amounts set forth in such section, taking into account any capital expenditures made by RNCFM pursuant to such section. ARTICLE V Consultation, Information and Inspection Section 5.01. 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: 8 (a) exchange views through their representatives with regard to the performance of their respective obligations under the Development Credit Agreement, the performance by RNCFM of its obligations under the Project Agreement, the administration, operations and financial condition, resources and expenditures of RNCFM and, in respect of the Project, of the departments or agencies of the 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 a 02. (a) The Borrower shall furnish or cause to be f,rnished to the Association all such information as the Association shall reasonably request concerning the administration, operations and financial condition of RNCFM 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 Borrower and the Association 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 maintenance of the service thereof, the performance oy either of them of its obligations under the Development Credit Agreement or the performance by RNCFM of its obligations under the Project Agreement and the Subsidiary Loan Agreement. Section 5.03. 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 VI Taxes and Restrictions Section 6.01. 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 6.02. 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. 9 Section 6.03. The payment of the principal of, and service charges on, the Credit shall be free from all restrictions, regulations, controls anl moratoria of any nature imposed under the laws of the Borrower or laws in effect in its territories. ARTICLE VII Remedies of the Association Section 7.01. If any event specified in Section 7.01 of the General Conditions or in Section 7.03 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 7.02. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) RNCFM shall have failed to perform any covenant, agreement or obligation of RNCFM under the Project Agreement. (b) A default shall have occurred in the performance of any covenant, agreement or obligation on the part of the Borrower or RNCFM under the Subsidiary Loan Agreement. (c) Decree No. 74-154 of May 10, 1974 of the Borrower or any other legislation or regulation of the Borrower governing the establishment, organization, powers and operations of RNCFM, shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of RNCFM 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 RNCFM or for the suspension of its operations. (e) An extraordinary situation shall have arisen which shall make it improbable that RNCFM will be able to perform its obligations unler the Project Agreement or the Subsidiary Loan Agreement. 10 Section 7.03. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified: (a) the event specified in paragraphs (a) and (b) of Section 7.02 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Association to the Borrower and RNCFM. (b) any event specified in paragraphs (c) and (d) of Section 7.02 of this Agreement shall occur. ARTICLE VIII Effective Date; Termination Section 8.01. 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 RNCFM have been duly authorized or ratified by all necessary cornorate and governmental action. (b) The execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and RNCFM, respectively, have been duly authorized or ratified by all necessary corporate and governmental action. (c) RNCFM shall have entered into a contract satisfactory to the Association with the consultants referred to in Section 3.05(a)(i) of the Project Agreement. Section 8.02. 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, RNCFM, and constitutes a valid and binding obligation of RNCFM 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 RNCFM, respectively, and constitutes a valid and binding obligation of the Borrower and RNCFM in accordance with its terms. Section 8.03. The date September 30, 1974 is hereby specified for the purposes of Section 10.04 of the General Conditions. Section 8.04. The obligations of the Borrower under Section 4.01 of this Agreement and the provisions of paragraphs (a) through (e) of Section 7.02 of this Agreement and those of paragraphs (a) and (b) of Section 7.03 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date twenty years after the date of this Agreement, whichever shall be the earlier. ARTICLE IX Representative of the Borrower; Addresses Section 9.01. The Minister of Economy and Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 9.03 of the General Conditions. Section 9.02. The following addresses are specified for the purposes of Section 9.01 of the General Conditions: For the Borrower: Ministre de l'Economie et des Finances Tananarive Malagasy Republic Cable address: MINECOFIN Tananarive For the Association: International Development Asse iation 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. 12 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. MALAGASY REPUBLIC By /s / Bernardin Rajonhanes Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Bernard R. Bell Regional Vice President Eastern Africa 13 SCHEDULE 1 Withdrawal of tiie 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 % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed I. Rolling Stock 2,100,000 100% of foreign expenditures II. Track Material 1,700,000 100% of foreign expenditures 111. Miscellaneous 300,000 100% of foreign Material and expenditures Equipment IV. Consultants' 600,000 100% of foreign Services to expenditures RNCFM V. Consultants' 700,000 100% of foreign Services to expenditures Ministry VI. Unallocated 600,000 TOTAL 6,000,000 2. For the purposes of this Schedule, the term "foreign expenditures" means expenditures for goods produced in, or services supplied from, the territories, and in the currency, of any country other than the Borrower. 3. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) expenditures prior to the date of this Agreement, except that withdrawals may be made in respect of Category IV on account of expenditures 14 incurred after January 1, 1974 in an aggregate amount not exceeding the equivalent of $100,000; and (b) payments 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 I 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 amount of the Credit set forth in the second column of the table in paragraph I above: (a) if the estimate of the expenditures under any Category shall decrease, the amount of the Credit then allocated to such Category and no longer required therefor will be reallocated by the Association by increasing correspondingly the unallocated amount of the Credit; (b) if the estimate of the expenditures under any Category shall increase, the percentage set forth in the third column of the table in paragraph I 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 the unallocated amount of the Credit, subject, however, to the requirements for contingencies, as determined by the Association, in respect of any other expenditures; and (c) if the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in Section 2.02 of the Project Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. 15 SCHEDULE 2 Description of the Project The Project consists of part of RNCFM's 1973-1975 Investment Plan, and the provision of technical assistance to the Ministry on transport planning and coordination. The purposes of the Project are to carry on the physical rehabilitation of RNCFM's equipment, to improve its management, operations and finances, and to improve coordination of the Borrower's policies in the transport sector. The Project includes the following Parts: A. RNCFM Investments 1. Track Renewal Relaying of about 60 km of track on the line between Tananarive and Tamatave and about 10 km of track in the Managareza yard in Tamatave, including installation of points and crossings. 2. Other Works (a) Extension of yards and sidings in Tananarive, Brickaville and Moramanga. (b) Completion of a load adjustment track in Tamatave. (c) Construction of staff quarters and of medical stations in Tamatave, Fianarantsoa, Andasibe and Anivorane. 3. Rolling Stock Acquisition and putting into service of 50 covered freight wagons and of 20 passenger coaches. 4. Track Material Acquisition of about 130 km of 36 kg/m rails, 16,000 steel sleepers and 20,000 m3 of ballast. 5. Miscellaneous Material and Equipment Acquisition and putting into use of one ballast tamping machine, one set of automatic barriers, one crane and road construction and timber handling equipment. 16 6. Technical Assistance and Training Employment of consultants to review, recommend and assist in implementing new management, operation and accounting systems and procedures; to prepare a long-term investment plan and to undertake on-the-job training of key personnel. B. Technical Assistance and Training to Ministry (Transport Planning and Coordination Assistance) Employment of a consulting firm to assist the Ministry to perform the following functions: (1) planning, reviewing and coordinating transport studies, (2) formulating policy regarding transport pricing and coordination; (3) preparing coordinated sectorial investment plans; (4) undertaking specific studies such as the preparation of a plan for the development of secondary or penetration roads and the development of an integrated transport system: (5) on-the-job training of Malagasy nationals in transport planning; and (6) coordinating intersectoral matters with the Borrower's Direction du Plan. 17 SCHEDULE 3 1973-1975 Investment Plan The Investment Plan to be implemented during the period 1973-1975 is estimated to require an expenditure of about FMG3,703 billion, including contingencies. The main components of the Investment Plan and the annual expenditures therefor are: 1973 1974 1975 - FMG million - A. WORKS 1. Realignment Ambila- Brickaville - 544 66 2. Track renewal 15 68 77 3. Extension of yards and sidings 34 46 50 4. Buildings and staff quarters 38 26 67 5. Miscellaneous 13 13 27 100 697 287 B. MATERIALS Track Materials 1. Rails incl. small materials 130 kn - 162 162 2. Steel sleepers incl. fastenings 16,000 Nos. - 26 26 3. Points and crossing 100 Nos. 37 114 - 4. Ballast 20,000 m3 - 10 10 Locomo tives 5. BB, 1200 Hp incl. spare parts 7 Nos. 230 311 - 18 1973 1974 1975 - FMG million - Rolling Stock 6. Flat Cars and Tip Wagons 47 Nos. - 259 - 7. Box Cars 50 Nos. 195 - 8. Passenger Coaches 20 Nos. - - 264 9. Miscellaneous material and equipment 26 138 68 293 1,215 530 C. CONSULTANTS' SER VICES 1. Management, account- ing, operation - 75 100 2. New line Antsirabe - Fianarantsoa 85 9 - 3. Miscellaneous - 5 5 85 89 105 D. TOTAL 478 2,001 922 E. CONTINGENCIES 1. Physical (10% on A 3-5) 9 9 14 2. Price (7% per year) - 141 129 F. GRAND TOTAL 487 2,151 1,065