Afghanistan - Second Livestock Development Project : Credit 0649 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 649 AF PROJECT AGREEMENT (Second Livestock Development Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and HERAT LIVESTOCK DEVELOPMENT COMPANY and AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN Dated June 28, 1976 PROJECT AGREEMENT AGREEMENT, dated June 28, 1976, between INTERNATIONAL DEVEL- OPMENT ASSOCIATION (hereinafter called the Association) and HERAT LIVESTOCK DEVELOPMENT COMPANY (hereinafter called HLDC), a joint- stock comnany duly established under the laws of the Borrower and AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN (hereinafter called AgBank), a joint-stock company duly established under the laws of the Borrower. WHEREAS (A) The DeveloDment 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 fifteen million dollars ($15,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that HLDC and AgBank agree to undertake such obligations toward the Association as hereinafter set forth; (B) By a First Subsidiary Loan Agreement to be entered into between the Borrower, HLDC and AgBank, part of the proceeds of the credit provided "or under the Development Credit Agreement will be made available to AgBank on the terms and conditions therein set forth; (C) By a Second Subsidiary Loan Agreement to be entered in- to between HLDC and AgBank, part of the nroceeds of the credit provided for under the Development Credit Agreement will be made available to HLDC on the terms and conditions therein set forth; and -2- WHEREAS HLDC and ARBank, 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: -3- ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Particular Covenants of HLDC Section 2.01. HLDC shall carry out Parts A, C, E and G of the Project and assist AgBank in carrying out Part B of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, agricultural, business and engineering practices. Section 2.02. In order to assist HLDC in carrying out Parts A, C and U of the Project and in assisting AgBank in carrying out Part B of the Project, HLDC shall employ experts whose qualifica- tions, experience and terms and conditions of employment shall be satisfactory to the Borrower and the Association. Section 2.03. Except as the Association shall otherwise agree, the goods and works for the Project to be financed out .of the pro- ceeds of the Credit, shall be procured in accordance with the provisions of Schedule 1 to this Agreement. Section 2.04. (a) HLDC 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 AgBank 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 HLDC to replace or repair such goods. -5- (b) Except as the Association may otherwise agree, HLDC shall cause all goods and services financed out of the proceeds of the Credit relent or made available to it by AgBank to be used exclu- sively for the Project. Section 2.05. (a) HLDC shall furnish to the Association, promptly upon their preparation, the Project plan, 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) HLDC: (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 AgBank, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the pro- visions of paragraph (c) of this Section, enable the Association's representatives to visit the facilities and construction sites in- cluded in the Project, and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) shall fur- nish 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, works and services financed out of such proceeds. (c) HLDC shall enable the Association's representatives to ex- amine all plants, installations, sites, works, buildings, property and equipment of HLDC and any relevant records and documents related to the Project. -6- Section 2.06. HLDC shall duly perform all its obligations under the Subsidiary Loan Agreements. Except as the Association shall otherwise agree, HLDC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreements or any provision thereof. Section 2.07. (a) HLDC shall, at the request of the Associa- tion, exchange views with the Association with regard to the pro- gress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreements, and other mat- ters relating to the purposes of the Credit. (b) The Borrower, the Association and HLDC shall promptly inform each other 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 HLDC of its obligations under this Agreement and under the Subsidiary Loan Agreements. Section 2.08. HLDC shall: (a) establish and maintain, on terms and conditions satis- factory to the Borrower and the Association, a system for monitoring the progress of the Project and evaluating the economic benefits re- sulting therefrom; and (b) make available to the Borrower and the Association, as and when reasonably needed, such information as is compiled in accordance with paragraph (a) of this Section. I Section 2.09. HLDC shall establish and maintain, on terms and conditions satisfactory to the Borrower and the Association: (a) about fourteen SICs, each with about six outstations to provide, inter alia, for essential field services to sheep producers in the Project Area; (b) two ADCCs, each with six subcenters, to provide, inter alia, essential veterinary health services to livestock producers in the Project Area; and (c) two ERIC Field Stations to obtain, within the operational area of ERIC, more detailed information on sheep flocks and to con- duct investigations and demonstrations for improving range manage- ment practices, pasture species introduction and range observations. Section 2.10. HLDC shall establish and maintain in Herat, on terms and conditions satisfactory to the Borrower and the Associa- tion, a Heavy Equipment and Water Supply Division as provided under Part C of the Project to undertake the construction of wells and farm access roads. Section 2.11. HLDC shall nominate and select its candidates for overseas training under Part E (3) of the Project in accordance with arrangements satisfactory to the Borrower and the Association. Section 2.12. (a) HLDC shall at all times manage its affairs and conduct its business in an efficient manner under capable management and with competent staff and in accordance with appro- priate agricultural, administrative and financial practices. -8- (b) HLDC shall at all times operate, maintain and repair its facilities, equipment and other property in accordance with appro- priate practices. Section 2.13. HLDC 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 2.14. HLDC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 2.15. HLDC 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 in- dependent auditors acceptable to the Borrower and 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 rea- sonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of HLDC and the audit thereof as the Association shall from time to time reasonably request. -9- ARTICLE III Particular Covenants of AgBank Section 3.01. AgBank shall carry out, with the assistance of HLDC, Part B of the Project described in Schedule 2 to the Devel- opment Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and agricul- tural credit practices. Section 3.02. AgBank shall (i) on-lend to HLDC such amounts as may be allocated to Category (2) of paragraph 1 of Schedule 1 to the Development Credit Agreement, out of the Subsidiary Loan for purposes of Part C of the Project; and (ii) make available to HLDC such amounts as may be allocated to Categories (1) and (6) of para- graph 1 of Schedule 1 to the Development Credit Agreement, out of the Subsidiary Fund for purposes of Parts A, E, and G of the Proj- ect, under a Second Subsidiary Loan Agreement to be entered into between HLDC and AgBank under terms and conditions which shall have been approved by the Borrower and the Association, including, inter alia, those set forth or referred to in Schedule 2 to this Agreement, as such schedule may be amended from time to time by agreement among the Borrower, the Association and AgBank. Section 3.03. (a) AgBank: (i) shall maintain records adequate to record the progress of Part B of the Project (including the cost thereof) and to identify the goods, works and services financed out of the proceeds of the Credit relent to it by the Borrower, and to disclose the use thereof in Part B of the Project; (ii) shall, with- out limitation upon the provisions of paragraph (b) of this Section, - 10 ] enable the Association's representatives to visit the facilities and construction sites and to examine the goods financed under Part B of the Project and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning Part B of the Proj- ect, the expenditure of the proceeds of the Credit so relent to it and the goods, works and services financed out of such proceeds. (b) AgBank shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of AgBank and any relevant records and documents re- lated to Part B of the Project. Section 3.04. AgBank shall duly perform all its obligations under the Subsidiary Loan Agreements. Except as the Association shall otherwise agree, AgBank shall not take or concur in any ac- tion which would have the effect of amending, abrogating, assign- ing or waiving the Subsidiary Loan Agreements or any provision thereof. Section 3.05. (a) AgBank shall, at the request of the Associa- tion, exchange views with the Association with regard to the pro- gress of Part B of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreements, and other matters relating to the purposes of the Credit. (b) The Borrower, the Association and AgBank shall promptly inform each other of any condition which interferes or threatens to interfere with, the progress of Part B of the Project, the accomplish- ment of the purposes of the Credit, or the performance by AgBank of - 11 - its obligations under this Agreement and under the Subsidiary Loan Agreements. Section 3.06. AgBank shall at all times manage its affairs and conduct its business in an efficient manner under capable management and with competent staff and in accordance with appro- priate administrative, financial and agricultural credit practices. Section 3.07. (a) AgBank shall not establish, acquire or take over any subsidiary except on terms and conditions satisfactory to the Borrower and the Association. (b) AgBank shall cause each of its subsidiaries, if any, and each of the subsidiaries established, acquired or taken over, after the date of this Agreement, if any, to observe and perform, as appro- priate, the obligations of AgBank under this Agreement to the extent to which such obligations shall be applicable to such subsidiary, as though such obligations were binding upon each of such subsidiaries. Section 3.08. AgBank shall take out and maintain with respon- sible insurers, or make other provisions satisfactory to the Asso- ciation for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.09. AgBank shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 3.10. AgBank shall: (i) maintain separate accounts for the Project; (ii) have its accounts and financial statements - 12 - (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Borrower and the Association; (iii) 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 (iv) furnish to the Association such other information concern- ing the accounts and financial statements of AgBank and the audit thereof as the Association shall from time to time reasonably request. - 13 - ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 4.02. (a) This Agreement and all obligations of the Association, HLDC and AgBank 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; Dr (ii) a date twenty-five years after the date of this Agreement. (b) If the Development Credit Agreement terminates in ac- cordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify HLDC and AgBank of this event. Section 4.03. All the provisions of this Agreement shall con- tinue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. - 14 -I ARTICLE V Miscellaneous Provisions Section 5.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have des- ignated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. For HLDC: Herat Livestock Development Company P.O. Box 7 Herat Herat Province Afghanistan - 15 - Cable address: HLDC Herat Afghanistan For AgBank: Agricultural Development Bank of Aghanistan P. 0. Box 414 Kabul, Afghanistan Cable address: AGBANK Kabul Afghanistan Section 5.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of HLDC may be taken or executed by its Presi- dent or such other person or persons as its President shall desig- nate in writing. Section 5.03. HLDC 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 HLDC, take any ac- tion or execute any documents required or permitted to be taken or executed by HLDC pursuant to any of the provisions of this Agreement. Section 5.04. 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 its Pre- sident or such other person or persons as its President shall des- ignate in writing. - 16 - Section 5.05. AgBank shall furnish to the Association suffi- cient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of AgBank, take any action or execute any documents required or permitted to be taken or executed by AgBank pursuant to any of the provisions of this Agreement. Section 5.06. This Agreement may be executed in several coun- terparts, each of which shall be an original, and all collectively but one instrument. - 17 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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/ Willi A. Wapenhans Regional Vice President Europe, Middle East and North Africa HERAT LIVESTOCK DEVELOPMENT COMPANY By /s/ M. E. Abdullah Malikyar Authorized Representative AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN By /s/ M. E. Abdullah Malikyar Authorized Representative - 18 - SCHEDULE 1 Procurement A. International Competitive Bidding 1. Except as provided in Part A.3 hereof, the goods and works shall be procured under contracts to be awarded in accordance with procedures consistent with those set forth in Part A of the "Guide- lines for Procurement under World Bank Loans and IDA Credits" pub- lished by the Bank in August 1975 (hereinafter called the Guide- lines), on the basis of international competitive bidding. 2. Contracts for heavy equipment, machinery and vehicles shall be bulked to the extent possible so as to encourage international competition. 3. Notwithstanding the provisions set forth in Part A.1 above: (a) Contracts for veterinary laboratory equipment, medica- ments and vaccines, to the extent that the vaccine laboratory of the Ministry of Agriculture of the Borrower is unable to supply the vaccine requirements as and when needed, shall be awarded (i) on the basis of competitive bidding advertised locally in accor- dance with local procedures satisfactory to the Borrower and the Association, or (ii) on the basis of international shopping after solicitation of at least three quotations from suppliers; (b) Contracts for pumpsets shall be awarded in accordance with local procedures satisfactory to the Borrower and the Association; - 19 - (c) Procurement of livestock shall be in accordance with local procedures satisfactory to the Borrower and the Association; and (d) Construction of civil works shall be carried out by force account or under negotiated contracts under arrangements satisfactory to the Borrower and the Association. 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 heavy equipment, machinery and vehicles estimated to cost the equivalent of $50,000 or more: (a) Before bids are invited, HLDC shall furnish to the As- sociation, 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 docu- ments 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 prospec- tive bidders. (b) After bids have been received and evaluated, HLDC shall, before a final decision on the award is made, inform the Associa- tion of the name of the bidder to which it intends to award the contract and shall furnish to the Association, in sufficient time -20- for its review, a detailed report on the evaluation and comparison of the bids received, 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 HLDC and state the reasons for such determination. (c) The terms and conditions of the contract shall not, with- out the Association's concurrence, materially differ from those on which bids were asked or prequalification invited. (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 with- drawal of funds from the Credit Account in respect of such con- tract. 2. With respect to each contract to be financed out of the pro- ceeds of the Credit and not governed by the preceding paragraph, HLDC shall furnish to the Association, promptly after its execu- tion 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 con- tract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and HLDC and state the reasons for such determination. - 21 - SCHEDULE 2 Operating Policies and Procedures of AgBank 1. AgBank loans under the Project shall be made in accordance with its Policy Statement and Loan Regulations dated October 18, 1970, as the same may be amended from time to time with the prior agreement of the Association. 2. AgBank loans for on-farm development under Part B of the Project shall be made in accordance with the modified loan secu- rity requirements agreed to between the High Council of HLDC and the High Council of AgBank which are set forth in sub-paragraphs (a) through (f) below: (a) applicants who can provide immovable property as security; (b) applicants who can provide promissory notes, in line with AgBank's "Security Requirements for Loans", for up to Afghani 300,000 (excluding interest); (c) applicants who cultivate land of their ancestors for which they do not hold title deeds. Such applicants are to be granted loans of up to Afghani 200,000 (excluding interest), pro- vided their neighbors do not have claims on the land and the vil- lage elder certifies to this effect; (d) applicants intending to apply jointly. For this purpose, at least three applicants from the sane village, with at least one of them with property registered to his name, should jointly and severally apply; - 22 - Ce) applicants who possess hereditary lands without title deeds provided that all heirs declare their consent to providing such lands as security; and (f) individual members of Registered Co-operatives who apply through the co-operative society. 3. (a) AgBank shall on-lend such amounts as may be allocated to Category (3) of paragraph 1 of Schedule 1 of the Development Credit Agreement, out of the Subsidiary Loan for purposes of on-farm de- velopment as provided under Part B of the Project, for a term not exceeding 7 years, including a grace period of up to 2 years, and at an interest rate of 8% per annum. (b) AgBank loans for on-farm development shall not, on an average, exceed 80% of the estimated cost of each investment plan. (c) AgBank shall supplement its lending program for on-farm development by providing from its own resources an amount equal to Af 44 million ($800,000 equivalent) which AgBank shall on-lend for a term not exceeding 7 years, including a grace period of up to 2 years, and an interest rate of 8% per annum on amounts with- drawn and outstanding from time to time. (d) AgBank shall supplement its long-term loans for on-farm development by making from its own resources short-term loans as needed for purposes of on-farm development under the Project. Such short-term loans shall be made at an interest rate of 10% per annum. - 23 - (e) AgBank loans for purposes of on-farm development under the Project shall be supervised by AgBank in co-operation with IfL,DC. Such supervision shall include periodic investigations to ensure that amounts under such loans are used for the purposes of on-farm development as provided in Part B of the Project. 4. AgBank shall on-lend to HLDC the amounts indicated in Section 3.02 (i) of this Agreement for a term of 15 years, including 5 years of grace, and an interest rate of 8% per annum on amounts withdrawn and outstanding from time to time. 5. AgBank shall make available to HLDC the amounts indicated in Section 3.02 (ii) of this Agreement and in Section 3.02 (a) of the Development Credit Agreement as capital grant. AgBank shall not charge any interest or service charge on such amounts.