Sri Lanka - Agricultural Development Project : Credit 0595 - Credit Agreement - Conformed

7rS7t... CONFORMED COPY CREDIT NUMBER 595 CE Development Credit Agreement (Agricultural Development Project) BETWEEN REPUBLIC OF SRI LANKA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED DECEMBER 24, 1975 CONFORMED COPY CREOIT NUMBER 595 CE Development Credit Agreement (Agricultural Development Project) BETWEEN REPUBLIC OF SRI LANKA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED DECEMBER 24, 1975 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated December 24, 1975, between REPUBLIC OF SRI LANKA (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). 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 March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agreements of the Association being hereinafter called the General Conditions). 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) "MIPH" means the Borrower's Ministry of Irrigation, Power and Highways; (b) "DME" means the Department of Machinery and Equipment of MIPH; (c) "SLTC" means the Sri Lanka Tractor Corporation, a corporation established and operating under the laws of the Borrower; (d) "TCEO" means the Borrower's Territorial Civil Engineering Organization, a department of MIPH; (e) "DI" means the Department of Irrigation in MIPH; and (f) "UNDP" means the United Nations Development Program. 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 twenty-five million dollars ($25,000,000). 4 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 The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule I to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Association, 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 out of the proceeds of the Credit. Section 2.03. Except as the Association shall otherwise agree, the goods, works and services (other than consultants' services) for the Project to be financed out of the proceeds of the Credit, shall be procured in accordance with the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1978 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. 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 February I and August I in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each February 1 and August I commencing February 1, 1986, and ending August 1, 2025, each installment to and including the installment payable on August 1, 1995 to be one-half of one per cent (1/2 of 19'/) 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. ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out the Project with due diligence and efficiency and in conformity with appropriate agricultural, financial and administrative practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. 5 Section 3.02. (a) In order to coordinate the execution of the Project, the Borrower shall establish and maintain: (i) a Project Coordinating Committee, chaired by the Director of the External Resources Division of the Ministry of Planning and Economic Affairs, and including representatives of the Ministries of Agriculture and Lands, Plantation Industries, and MIPH and the Central Bank of Ceylon, and shall provide such Committee with an adequate full-time staff; and (ii) in consultation with the Project Coordinating Committee and for the purpose of rendering it technical advice and assistance in Project implementation and subsequent monitoring, technical sub-committees in the Ministries of Agriculture and Lands, Plantation Industries and MIPH, not later than thirty days after the Effective Date, or such other date as the Association shall agree. (b) The Borrower shall cause the Project Coordinating Committee to prepare and submit to the Association quarterly reports, adequate in scope and detail, on the progress of the Project and the UNDP inputs and the Borrower's budgetary allocations in respect of the Project. Section 3.03. Except as the Borrower and the Association shall otherwise agree, all agricultural tractors to be procured under Part A(3)(b) of the Project shall be four-wheel units. Section 3.04. In carrying out Parts A(3)(c), A(5)(a), E(2) and F of the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 3.05. In carrying out Part A(3)(b) and Part B of the Project, the Borrower shall ensure that: (a) sufficient credit on appropriate terms is available to farmers, estates and bought-leaf factories for the purchase of new tractors and vehicles imported by the Borrower; and (b) adequate refinancing facilities, as necessary, are made available by the Central Bank of Ceylon to commercial banks providing the credit referred to in sub-clause (a) of this Section. Section 3,06. (a) In carrying out Part A(l)(b) of the Project, the Borrower shall ensure that adequate credit facilities are made available to farm extension workers to purchase motorcycles imported by the Borrower. (b) In carrying out Part A(2) of the Project, the Borrower shall ensure that adequate funds are provided from its own resources for the construction of seed storage facilities on about 42 of the Borrower's seed farms. 6 Section 3.07. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Association shall otherwise agree, all goods and services financed out of the proceeds of the Credit shall be used exclusively for the Project. Section 3.08. (a) The Borrower shall furnish or cause to be furnished to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The Borrower: (i) shall maintain or cause to be maintained 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) shall enable the Association's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) shall furnish or cause to be furnished 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. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained separate records adequate to reflect in accordance with consistently maintained appropriate accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall cause the departments or agencies of the Borrower referred to under paragraph (a) of this Section to: (i) have their accounts and financial statements (balance sheets, statements of income and expenses, as applicable, and related statements), in respect of the Project, for each fiscal year audited, in accordance with sound auditing principles consistently applied, by the 7 Auditor General of Sri Lanka; (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, (A) certified copies of their 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 the concerned departments or agencies and the audit thereof as the Association shall from time to time reasonably request. Section 4.02. (a) The Borrower shall at all times operate, maintain and renew the equipment, machinery and vehicles purchased by the Borrower under the Project in accordance with sound engineering practices and shall provide the funds, facilities and services required therefor. (b) The Borrower shall ensure that the equipment and vehicles imported under the Project and distributed to owners are operated, maintained and renewed in accordance with sound engineering practices and shall make the necessary spare parts and replacements available to the beneficiaries of the Project. Section 4.03. (a) The Borrower shall at all times operate and maintain the irrigation works referred to in Parts A(4) and A(6) of the Project in accordance with sound agricultural and engineering practices and shall provide the funds, facilities and other services required therefor. (b) Without any limitation or restriction on the provisions of paragraph (a) of this Section, the Borrower shall, not later than its fiscal year 1979, increase, in consultation with the Association, its yearly allocation to TCEO to allow proper operations and maintenance of the said irrigation works. Such allocation is estimated at Rs50 in current terms per acre per year. ARTICLE V Effective Date; Termination Section 5.01. The following event is specified as an additional condition to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01(b) of the General Conditions, namely, that the Project Coordinating Committee has been established in accordance with the provisions of Section 3.02(a)(i) of the Credit Agreement. Section 5.02. The date March 24, 1976 is hereby specified for the purposes of Section 12.04 of the General Conditions. 8 Section 5.03. The obligations of the Borrower under Sections 4.01, 4.02 and 4.03 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 VI Representative of the Borrower; Addresses Section 6.01. The Secretary, Ministry of Planning and Economic Affairs of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: The Secretary Ministry of Planning and Economic Affairs Colombo, Sri Lanka Cable address: SECMINPLAN Colombo For the Association: International Development Association 18 18 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed 9 in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF SRI LANKA By /s / Neville Kanakaratne Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / Ernest Stern Regional Vice President South Asia 10 SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of imported items to be financed out of the proceeds of the Credit and the allocation of amounts of the Credit to each Category: Amount of the Credit Allocated (Expressed in Category Dollar Equivalent) (1) Equipment, machinery, vehicles and spare parts (a) for Part A(1) of the 2,300,000 Project (b) for Part A(3)(b) of 2,500,000 the Project (c) for Part A(5) of the 2,900,000 Project (d) for Part B of the 5,000,000 Project (e) for Part C of the 250,000 Project (f) for the other Parts of 11,500,000 the Project (2) Consultants' services 550,000 TOTAL 25.000,000 2. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: 11 (a) expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; (b) expenditures prior to the date of this Agreement; (c) payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; (d) expenditures under Category (1)(a) until a Project Agreement has been signed, pursuant to allowing the Association the opportunity to comment on the terms of reference for the consultants to be provided thereunder, between the Borrower, UNDP and an executing agency whereby UNDP agrees to provide through such executing agency technical assistance and equipment and materials to the Borrower for the purpose of Part A(l) of the Project; (e) expenditures under Category (1)(c) until the Association has been given the opportunity to comment on the assessment of DME's need for spare parts provided for in Part A(5)(b) of the Project. (f) expenditures under Category (I )(d) until the Borrower has employed the consultant required to carry out Part F of the Project in accordance with the provisions of Section 3.04 of this Agreement; and (g) expenditures under Category (1)(e) until: (i) a Project Agreement has been entered into between the Borrower, UNDP and an executing agency whereby UNDP agrees to provide through such executing agency technical assistance and equipment and materials to the Borrower for the purpose of Part C of the Project; and (ii) the event specified in subparagraph 2(f) of this Schedule as a condition of withdrawals in respect of expenditures under Category (1)(d) has occurred. 3. Notwithstanding the allocation of an amount of the Credit set forth in the second column of the table in paragraph I above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance all expenditures in that Category, the Association may, by notice to the Borrower, reallocate to such Category, to the extent required to meet such estimated shortfall, proceeds of the Credit which are then allocated to another Category and which in the opinion of the Association are not needed to meet other expenditures. 4. 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 12 to in this 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. 13 SCHEDULE 2 Description of the Project The Project, which is part of the Borrower's plan to increase foodgrain and sugar production and to support tree crop production, consists of the following Parts: Part A. The increase of foodcrop production through: (1) improvements of the research, training and extension services of Borrower's Department of Agriculture in four of the said Department's research, training and extension centers by the procurement and utilization of (a) spare parts for the repair of farm machinery, equipment and vehicles; and (b) new farm machinery, equipment and vehicles (including motorcycles for extension workers) and by the reconstruction or rehabilitation of farm buildings required for the efficient operation of the said four centers; (2) development of about 42 of the Borrower's seed farms, improved land and water use, procurement and utilization of farm equipment, machinery and vehicles and equipment for plant protection, irrigation and seed processing, and construction of adequate seed storage facilities on the said farms; (3) the increase of available farm power through: (a) the provision by SLTC of spare parts for the rehabilitation of obout 1600 privately owned tractors; (b) the procurement and distribution of agricultural tractors and tractor implements; (c) the utilization of consultants' services to assist the Borrower in: (i) planning of tractor, implement and farm tool production; (ii) planning the importation of tractor spare parts by SLTC; and 14 (iii) by reorganization of tractor repair services. (4) the improvement of operation and maintenance of irrigation networks serving about 950,000 acres by the procurement and utilization by TCEO of transport and construction equipment and of surveying and drafting equipment; (5) (a) the expansion of the irrigation works construction capacity of the Borrower through the utilization of a consultant's services starting not later than six months after the date of this Agreement or such other date as the Association shall agree, to assist the Borrower in: (i) the review and necessary reorganization of DME's repair and maintenance facilities; and (ii) the review and necessary improvement of DME's spare part procurement procedures. (b) the importation of replacement and spare parts for the rehabilitation of about 150 major pieces of equipment pursuant to the technical and economic assessment by DME of its needs for the same; (6) the procurement and utilization of machinery and equipment by DI to complete the irrigation schemes of Muthuaiyankaddu and Wahalkade, totalling about 8,000 acres. Parr B. Improvement of the quality of tree crop production through the procurement and distribution of about 300 tractors, 315 trucks to improve transportation, about 150 motorcycles for on-estate supervision, about 145 motorcyles and 10 vehicles for extension services, and of spare parts to rehabilitate the existing transportation fleet. Part C. A program of tree crop research by the Borrower's Tea Research Institute, Rubber Research Institute and Coconut Research Institute, to be carried out with the assistance of UNDP. Part D. The extension of sugar production by land clearing and irrigation of about 4,600 acres. 15 Part E. Pre-investment studies for: (1) a smallholder development project in the coconut production area; and (2) the development of the Lower Uva -gion including irrigation development on 15,000 acres and development of 15,000 acres for rainfed agriculture. Part F. A study of pricing and subsidy systems affecting the tree crop sub-sector to be carried out by consultants to be employed not later than six months of the date of this Agreement or such other date as the Association shall agree. The Project is expected to be completed by July 1, 1978. 16 SCHEDULE 3 Procurement A. General Procedures 1. Except as provided in Part A(3) hereof, equipment, vehicles and machinery and spare parts shall be procured under contracts to be awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. With respect to the goods referred to in Part A(1) hereof, such item shall be grouped in lots so as to permit such bulk procurement as shall be consistent with sound technical and procurement practices. 3. Spare parts for the presently existing vehicles and tractors and for equipment, to be procured under Parts A(1)(a), A(3)(a), A(5)(b), and B of the Project shall be procured through normal trade channels. B. Review of Procurement Decisions by the Association 1. Review of invitation to bid and of proposed awards and final contracts. With respect to all contracts for goods estimated to cost the equivalent of $100,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, inform the Association of the name of the bidder to which it intends to award the contract and the reasons for the intended award and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the recommendation for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended 17 award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract to be financed out of the proceeds of the Credit and not governed by the preceding paragraph, the Borrower shall furnish to the Association, promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination.