Afghanistan - Second Agricultural Credit Project : Credit 0539 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 539 AF Project Agreement (Second Agricultural Credit Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN AND AFGHAN FERTILIZER COMPANY DATED APRIL 25, 1975 PROJECT AGREEMENT AGREEMENT, dated April 25, 1975, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and THE AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN, a joint-stock company organized under the laws of the Borrower (hereinafter called the AGBANK) and THE AFGHAN FERTILIZER COMPANY, a joint-stock company organized under the laws of the Borrower, (hereinafter called the AFC). WHEREAS by the Development Credit Agreement of even date herewith between the Republic of Afghanistan (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to thirteen million dollars ($13,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that AGBANK and AFC agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by an agreement to be entered into between the Borrower and AGBANK, the proceeds of the credit provided for under the Development Credit Agreement will be made available to AGBANK on the terms and conditions therein set forth; WHEREAS by an agreement to be entered into between AGBANK and AFC, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to AFC on the terms and conditions therein set forth; and WHEREAS AGBANK and AFC, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, have 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. 4 ARTICLE II AGBANK's Obligations as to the Execution -f the Project Section 2.01. AGBANK shall carry out Parts I and II of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, agricultural and financial practices. Section 2.02. (a) AGBANK shall make available to AFC as AGBANK's subscription to AFC's authorized capital the part of the proceeds of the Credit received by AGBANK from the Borrower pursuant to Section 3.01(d) of the Development Credit Agreement under an agreement on terms and conditions satisfactory to the Borrower and the Association. (b) AGBANK shall make available to AFC as AGBANK's subscription to AFC's authorized capital an amount equal to Afghanis 43,100,000 received by AGBANK from the Borrower pursuant to Section 3.01(e) of the Development Credit Agreement under the Second Subsidiary Agreement on terms and conditions satisfactory to the Borrower and the Association. (c) Whenever in connection with the foregoing provisions of this Section it shall become necessary to value the proceeds of the Credit in terms of Afghanis, the provisions of Section 3.01(f) of the Development Credit Agreement shall apply. Section 2.03. AGBANK undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent or made available to it by the Borrower 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 AGBANK to replace or repair such goods. Section 2.04. (a) AGBANK shall furnish to the Association promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) AGBANK: (i) shall 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 relent or made available to it by the 5 Borrower, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of Section 4.03 of this Agreement, enable the Association's representatives to visit the facilities and construction sites included in the Project, and to examine 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 the Project, the expenditure of the proceeds of the Credit so relent or made available to it and the goods and services financed out of such proceeds. Section 2.05. AGBANK shall duly perform all its obligations under the Subsidiary Agreements. Except as the Association shall otherwise agree, AGBANK shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Agreements or any provision thereof. Section 2.06. AGBANK shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 2.07. AGBANK 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 AGBANK and the audit thereof as the Association shall from time to time reasonably request. Section 2.08. AGBANK shall, not later than one month from the Effective Date, establish, and thereafter maintain, a groundwater technical unit and shall staff the said unit with (i) not less than one groundwater pump engineer and (ii) about six staff members to appraise applications for sub-loans for water pumps. Section 2.09. AGBANK shall monitor the progress of, and evaluate the results achieved under, the Project and shall furnish a report thereon to the Association not later than two months after the end of each quarter. Section 2.10. The operating policies and procedures of AGBANK in respect of Part I of the Project shall be as set forth in Schedule 2 to thi! Agreement and as the same may be amended from time to time by agreement among the Borrower, the Association and AGBANK. 6 Section 2.11. AGBANK shall not establish, acquire or take over any subsidiary except on terms and conditions satisfactory to the Borrower and the Association. Section 2.12. AGBANK shall at all times charge interest on all of its loans at rates sufficient to enable it to: (a) cover all operating expenditures and charges including taxes (if any) and interest payments on borrowings; (b) maintain adequate provisions for bad and doubtful debts; and (c) maintain adequate general reserves. ARTICLE III Obligations of AFC as to the Execution of the Project Section 3.01. (a) AFC shall carry out Part III of the Project with due diligence and efficiency and in conformity with appropriate administrative, agricultural, financial and engineering practices. (b) In order to assist AFC in the preparation of specifications and detailed designs of facilities included in Part III of the Project and the supervision of the construction thereof, AFC shall employ an architect whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 3.02. AFC undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the part of the proceeds of the Credit made available to it by AGBANK pursuant to Section 2.02(a) of this Agreement against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemhity shall be payable in a currency freely usable by AFC to replace or repair such goods. Section 3.03. (a) AFC shall furnish to the Association promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for Part III of the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) AFC: (i) shall maintain records adequate to record the progress of Part III 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 AGBANK pursuant to Section 2.02(a) of this Agreement, and to disclose 7 the use thereof in the Project; (ii) shall, without limitation upon the provisions of Section 4.03 of this Agreement, enable the Association's representatives to visit the facilities and construction sites included in Part III of the Project, and to examine 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 III of the Project, the expenditure of the proceeds of the Credit so made available to it and the goods and services financed out of such proceeds. Section 3.04. AFC shall duly perform all its obligations under the Second Subsidiary Agreement. Except as the Association shall otherwise agree, AFC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Second Subsidiary Agreement or any provision thereof. Section 3.05. AFC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 3.06. AFC 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 AFC and the audit thereof as the Association shall from time to time reasonably request. Section 3.07. (a) AFC shall purchase (i) within six months from the date of this Agreement, for the construction of six warehouses and (ii) within twelve months from the date of this Agreement, for the construction of eighteen warehouses, all such land and acquire rights in respect of land as shall be required therefor. AFC shall promptly inform the Borrower if AFC is of the opinion, that the land required for any warehouse is not available. (b) AFC shall promptly after each purchase of land pursuant to Section 3.07(a) of this Agreement or provision of land by the Borrower pursuant to Section 3.05 of the Development Credit Agreement, furnish evidence satisfactory to the Association of such purchase or provision. 8 ARTICLE IV Obligations of AGBANK and AFC Section 4.01. AGBANK and AFC 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. Section 4.02. (a) The Association, AGBANK and AFC shall from time to time, at the request of either party, exchange views through their representatives with regard to the progress of the Project, the performance of their respective obligations under this Agreement, the performance by AGBANK and AFC of their respective obligations under the Subsidiary Agreements and other matters relating to the purposes of the Credit. (b) AGBANK and AFC shall promptly inform the Association of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by AGBANK and AFC of their respective obligations under this Agreement and under the Subsidiary Agreements. Section 4.03. AGBANK and AFC shall enable the Association's representatives to examine all of their respective sites, properties, equipment, records and documents relevant to the Project. Section 4.04. Except as the Association may otherwise agree, AGBANK and AFC shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. Section 4.05. 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 1 to this Agreement. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. 9 Section 5.02. (a) This Agreement and all obligations of the Association, AGBANK and AFC 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 twenty 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 AGBANK and AFC of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. 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 bu 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. 10 For AGBANK: Agricultural Development Bank of Afghanistan P.O. Box 414 Kabul, Afghanistan Cable address: AGBANK Kabul Afghanistan For AFC: Afghan Fertilizer Company P.O. Box 3206 Kabul, Afghanistan Cable address: AFERTCO Kabul Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of AGBANK may be taken or executed by the President or Vice-President of AGBANK or such other person or persons as the said President or Vice-President shall designate in writing. Section 6.03. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of AFC may be taken or executed by the President or Vice-President of AFC or such other person or persons as the said President or Vice-President shall designate in writing. Section 6.04. AGBANK and AFC 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 AGBANK and AFC, take any action or execute any documents required or permitted to be taken or executed by AGBANK and AFC pursuant to any of the provisions of this Agreement. Section 6.05. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 11 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / M. P. Benjenk Regional Vice President Europe, Middle East and North Africa AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN By /s/ A. Malikyar Authorized Representative AFGHAN FERTILIZER COMPANY By /s/ A. Malikyar Authorized Representative 12 SCHEDULE 1 Procurement A. General Procedures 1. Except as provided in Part A.3 hereof, contracts shall be let under procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in April 1972, as revised in October 1972 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. (I) With respect to the procurement of tractors, spares and attachments: (a) AGBANK would procure over a three-year period about 450 tractors (including spare parts equal to 10%, or such other percentage as may be agreed between the Association and AGBANK) and such attachments as may be determined by AGBANK. (b) Except as the Association and the AGBANK shall otherwise agree: bidders will be required to state the after-sales services that will be provided and the steps taken or intended to be taken for the provision of such services; such after-sales services will include, among others, the maintenance of stocks of spare parts equivalent to about 10% of the c.i.f. value of the tractors; and bids not offering satisfactory assurances as to said after-sales services will be rejected. (c) The time interval referred to in Section 4.1 of the Guidelines between the invitation to bid and bid opening shall be equal to at least 45 days. (II) In the event AFC shall decide to give the margin of preference set forth in paragraph B. 1 hereof to domestic contractors, all bidders for civil works included in Category 4 of the table set forth in Schedule 1 to the Development Credit Agreement will be prequalified. 3. (a) Vehicles, sprayers and equipment for AGBANK's supporting services as well as pump sets shall be procured by AGBANK through negotiated contracts after inviting quotations from at least three suppliers; (b) In the event the Borrower decides not to give the margin of preference set forth in paragraph B.1 hereof to domestic contractors, AFC shall procure the civil works included in Category 4 of the table set forth in Schedule 1 to the Development Credit Agreement, after advertising locally and in accordance with 13 competitive procedures satisfactory to the Association. To this end AFC shall furnish to the Association, prior to tendering, detailed procedures that AFC intends to apply; (c) Farmers receiving sub-loans shall procure oxen, animal drawn implements, other locally made farm equipment and farm imputs, under Categories 2 and 3 of the table set forth in Schedule I to the Development Credit Agreement, through normal trade channels. B. Evaluation and Comparison of Bids for Civil Works; Preferences for Domestic Contractors 1. With respect to any contract for civil works included under Category 4 of the table set forth in Schedule 1 to the Development Credit Agreement, the AFC may grant a margin of preference of 7-1/2% to domestic contractors, in accordance with, and subject to, the following provisions: (a) Contractors shall be required to prequalify as provided in Part A of this Schedule and applicants for qualification applying also for such preference shall be asked to provide, as part of the information for qualification, such information, including details of ownership, as shall be required to determine whether, according to the classification established by the Borrower and accepted by the Association, a particular firm or group of firms qualifies for a domestic preference. The bidding documents shall clearly indicate the preference and the method that will be followed in. the evaluation and comparison of bids to give effect to such preference. (b) After bids have been received and reviewed, responsive bids will be classified into the following groups: (i) bids offered by domestic contractors eligible for preference; and (ii) bids offered by other contractors. For the purpose of evaluation and comparison of bids an amount equal to 7-1/2% of the bid amount shall be added to bids received under group (ii) above. C. Review of Procurement Decisions by Association 1. Review of prequalification. AFC, before qualification is invited, shall inform the Association in detail of the procedure to be followed and shall introduce such modifications in said procedure as the Association shall reasonably request. The 14 list of prequalified bidders, together with a statement of their qualifications and, where applicable, of their eligibility for domestic preference under Part B. 1 above and of the bases for the exclusion of bidders from the list of prequalified bidders shall be furnished by the AFC to the Association for its comments before the applicants are notified, and the AFC shall make such additions to, deletions from, or modifications in, the said list as the Association shall reasonably request. 2. Review of invitation to bid and of proposed awards and final contracts: With respect to (i) contracts for civil works (if the Borrower decides to give the margin of preference set forth in paragraph B. 1 hereof) and (ii) all contracts for the purchase of tractors, spare parts and attachments: (a) Bids for civil works shall be advertised in at least one newspaper of general circulation in Afghanistan, and Bank member countries and Switzerland shall be notified in the manner set forth in paragraph 2.1 of the said Guidelines. Before bids for civil works, tractors, spare parts and attachments 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) Promptly after the bids have been received, the Association shall be informed of the names of the bidders and the respective amounts of the bids. (c) After bids have been received and evaluated, the AGBANK or AFC, as the case may be, 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 (in case of civil works, by the architect referred to in Section 3.01(b) of this Agreement), on the evaluation and comparison of the bids received, (in case of civil works, together with the recommendation for award of the said architect) and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and AGBANK or AFC, as the case may be, and state the reasons for such determination. (d) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked or prequalification invited. 15 (e) 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. 3. With respect to each contract to be financed out of the proceeds of the Credit and not governed by the preceding paragraph, the AGBANK or AFC, as the case may be, 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. The Association shall, if it determines that the award of the contract was not consistent with this Schedule, promptly inform the Borrower and AGBANK or AFC, as the case may be, and state the reasons for such determination. 16 SCHEDULE 2 Operational Policies and Procedures A. Medium- and Long-term Sub-Loans I. AGBANK's Executive Board shall empower appropriate AGBANK branches to approve sub-loans up to a maximum of Afghanis 500,000 for such sub-loans. II. AGBANK shall develop a system, satisfactory to the Association, for the supervision of sub-loans through field inspectors, credit supervisors and the Groundwater Technical Unit and for the provision of technical assistance to sub-borrowers. B. Short-term Sub-Loans I. Short-term sub-loans will normally be made for fertilizer, seeds and pesticides. II. AGBANK shall make arrangements with public and private processing and/or marketing institutions such as AFC, co-operatives and companies engaged in cultivation of cotton and sugar for purposes of distribution of farm inputs and collection of repayments of sub-loans. C. On-lending Terms and Conditions The minimum interest rate and sub-borrowers' contributions and the maximum permissible grace period and period of repayment for the sub-loans are set forth below: 17 Interest Grace Period of Sub-borrowers' Sub-loans per annum period repayment contributions -------Years-------- For tractors 8% 1 6 20% For pumpsets 8% 1 6 20% sprayers and other imple- ments For oxen 8% 1 6 20% For polyculteurs 8% Nil 3 Nil For on-farm 8% 4 12 20% development (Short-term) 10% Nil I Nil for fertilizer, seed and pesti- cides