Indonesia - Rural Credit Project : Credit 0826 - Development Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 827 IND Development Credit Agreement (Rural Credit Project) between REPUBLIC OF INDONESIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated June 23, 1978 CREDIT NUMBER 827 IND DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 23, 1978, between REPUBLIC OF INDONESIA (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association.) WHEREAS (A) the Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) the Project will be carried out by Bank Rakyat Indonesia with the Borrower's assistance and, as part of such assistance, the Eorrower will make available to Bank Rakyat Indonesia the proceeds of the Credit as hereinafter provided; and WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth and in the Project Agreement of even date herewith between the Association and Bank Rakyat Indonesia; 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 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) "BRI" means Bank Rakyat Indonesia; -2- (b) "Project Agreement" means the agreement between the Association and BRI of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; (c) "Subsidiary Loan Agreement" means the agreement to be entered into be,tween the Borrower and BRI pursuant to Section 3.01 (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; (d) "Project Area" means the provinces of East Java, Central Java, West Java, South Sulawesi, South Sumatra and Lampung, the Special Region of Yogyakarta and such other provinces and special regions as shall be agreed from time to time between the Borrower and the Association; (e) "BI" means Bank Indonesia; (f) "KIK" means Kredit Investasi Kecil, BI's program of credit to small-scale enterprises for fixed asset financing; (g) "KMKP" means Kredit Modal Kerja Permanen, BI's pro- gram of credit to small-scale enterprises for permanent working capital; (h) "ASKRINDO" means P. T. Assuransi Kredit Indonesia, a State enterprise established and operating under the laws of the Borrower; (i) "Sub-loan" means a loan or credit made or to be made by BRI out of the proceeds of the Credit relent to BRI by the Borrower; (j) "Sub-borrower" means a person or enterprise which has obtained a Sub-loan; (k) "Sub-project" means a project financed or to be financed out of the proceeds of a Sub-loan; 1) "PMUs" means the Project Management Units, established by the Borrower to provide extension and other supporting services in the Project Area; and -3- (m) "Rules and Regulations" means the following circulars or decrees issued by BI: (i) No. SE 6/37/UPK dated December 4, 1973, re: Investment Credit for small entrepreneurs/small investment credit; (ii) No. SE 6/43/UPK dated December 20, 1973, re: Liquidity credit for investment credit to small entrepreneurs/small investment credit; (iii) No. SE 6/47/UPK dated February 13, 1974, re: Insurance premium payable for credit insurance with PT ASKRINDO under KIK/KMKP; (iv) No. SE 7/30/UPK dated September 20, 1974, re: General regulation on drawing liquidity credit from BI for Small Investment Credit and Permanent Working Capital Credit; (v) No. SE 7/47/UPK dated January 16, 1975, re: Eligi- bility for using liquidity credit under Small Investment Credit (KIK) and Permanent Working Capital Credit (KMKP) for small entrepreneurs; (vi) No. SE 7/51/UPK dated March 31, 1975, re: Criteria for determining who is a small indigenous (pribumi) entrepreneur under KIK/KMKP; (vii) No. SE 8/5/UPK dated April 14, 1975, re: Maximum time allowed to disburse KIK and KMKP loans that use BI liquidity credits; (viii) No. SE 8/35/UPK dated March 15, 1976, re: Col- lateral for Small Investment Credit (KIK) and Permanent Working Capital Credit (KMKP) to develop small indigenous entrepreneurs; (ix) No. SE 9/12/UPK dated February 4, 1977, re: Selec- tive increase in the individual loan ceiling under KIK/KMKP; (x) No. SE 10/15/UPK dated November 24, 1977, re: Procurement and disbursement procedures for KIK and KMKP; -4- (xi) No. 10/107/UPK dated December 30, 1977, re: Inter- est rates of investment credit and permanent working capital for small enterprise; (xii) No. SE 10/22/UPK dated February 22, 1978, re: Penalty on overdue loan principal and interest and on unauthorized use of KIK and KMKP; and (xiii) any circular or decree of BI which has the effect of amending, waiving or abrogating any of the circulars set forth or referred to in such para- graphs (i) through (xii) of this paragraph (m). 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 equiva- lent to thirty million dollars ($30,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Associa- tion, 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. The Closing Date shall be March 31, 1985 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. 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 2.05. Service charges shall be payable semiannually on March 1 and September 1 in each year. -5- Section 2.06. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each March 1 and September 1 commencing September 1, 1988, and ending March 1, 2028, each installment to and including the installment payable on March 1, 1998, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.07. 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.(a) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause BRI 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 BRI to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the proceeds of the Credit to BRI, under a Subsidiary Loan Agreement to be entered into between BI, acting on behalf of the Borrower, and BRI under terms and conditions which shall have been approved by the Association. (c) 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, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. The Borrower shall strengthen the PMUs and the extension services of the Directorates General of Estate Crops, Animal Husbandry and Fisheries in its Ministry of Agriculture located in the Project Area to provide adequate extension and other supporting services to farmers benefiting from the Project. -6- ARTICLE IV Remedies of the Association Section 4.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) BRI shall have failed to perform any of its obligations under the Project Agreement; (b) an extraordinary situation shall have arisen which shall make it improbable that BRI will be able to perform its obligations under the Project Agreement; (c) BRI or the Borrower, or any other authority having jurisdiction, shall have taken any action for the dissolution or disestablishment of BRI or for the suspension of its opera- tions; (d) a default shall have occurred in the performance by the Borrower or by BRI of any of its obligations under the Subsidiary Loan Agreement; and (e) BI shall have amended, waived, abrogated or repealed any of the Rules and Regulations or any provision thereof and, in the opinion of the Association, such amendment, waiver, abrogation or repeal materially and adversely affect the carrying out of the Project or the performance by BRI of its obligations under the Project Agreement. Section 4.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) any event specified in paragraphs (a) and (d) of Sec- tion 4.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower and BRI; and (b) the event specified in paragraph (c) of Section 4.01 of this Agreement shall occur. -7- ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions, namely, that: (a) the execution of the Project Agreement on behalf of BRI has been duly authorized or ratified by all necessary corporate and governmental action; and (b) the execution of the Subsidiary Loan Agreement on behalf of the Borrower and BRI, respectively, has been duly authorized or ratified by all necessary corporate and governmental action. Section 5.02. The following are specified as additional matters, within the meaning of Section 12.02 (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 BRI, and is legally binding upon BRI in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and BRI and is legally binding upon the Borrower and BRI in accordance with its terms. Section 5.03. The date September 26, 1978 is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Cenditions. Section 6.02. The following addresses are specified for the purpose of Section 11.01 of the General Conditions: -8- For the Borrower: c/o Director General of Monetary Affairs Ministry of Finance Jalan Lapangan Banteng Timur 4 Jakarta Indonesia Cable address: Telex: MINISTRY FINANCE DITJMON JKT Jakarta 46415 For the Association: International Development Assbciation 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) 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. REPUBLIC OF INDONESIA By /s/ Danudirdjo Ashari Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ S. Shahid Husain Regional Vice President East Asia and Pacific -9- SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocatio! of the amounts of the Credit to each Category and the percertage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures CatgqSX Dollar Equivalent) to be Financed (1) Sub-loans made 26,000,000 68% of amounts by BRI disbursed by BI to BRI (2) Consultants' and 2,300,000 100% specialists services (3) Training under Part 200,000 100% of foreign B (iii) of the expenditures or Project 50% of local expenditures (4) Unallocated 1,500,000 30,000,000 TOTAL 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Association that no proceeds of the - 10 - Credit shall be disbursed on account of 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; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Credit decreases or increases, the Association may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Association. 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $300,000 may be made in respect of Category (2) on account of payments made for such expenditures before that date but after May 1, 1977. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in para- graph 1 above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Association may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the 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, and (ii) if such reallocation cannot fully meet the estimated short- fall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. 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 this Agreement, no expenditures for such item shall be financed out of the pro- ceeds 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. - 11 - SCHEDULE 2 Description of the Project The Project is designed to expand and improve the supply of long-term credit to smallholders and consists of the following Parts: A. Credit The provision of about 40,000 long-term loans to smallholders in the Project Area for financially and economically sound Sub- projects in agriculture, livestock, fisheries and related sub- sectors which require term finance of more than five years. The said loans shall be provided in accordance with the Rules and Regulations and the Annex to this Schedule. B. Technical Assistance and Training for BRI (i) The strengthening of BRI's term lending capability through the utilization of the following technical assistance: (a) a program development economist; (b) a training specialist; (c) three development banking specialists including one senior specialist; and (d) three agriculturalists, namely one perennial crops specialist, one livestock specialist and one fisheries specialist. (ii) The completion of design and testing, and the implemen- tation of a unified chart of accounts and the related management information system and the review of the operations of BRI's Jakarta Special Branch and Inter- branch Clearing Office; and (iii) Such training programs for BRI staff as may be agreed between the Association and BRI. - 12 - C. A study of the Project's socio-economic impact. The Project is expected to be completed by September 30, 1984. - 13 - ANNEX TO SCHEDULE 2 1. Purposes of Sub-loans (a) Sub-lans will finance Sub-projects in the following categories: (i) pepper (ii) coffee (iii) cattle breeding (iv) brackish-water fishponds (v) fresh-water fishponds (vi) fishing boat motorization (vii) ice plants (b) Other categories in the agricultural sector may be added to the above list by agreement between the Association, BI and BRI, on the basis of appraisals of such categories furnished to the Association by BRIL (c) In additioa to Sub-loans in the categories set forth or referred to in paragraphs (a) and (b) above, Sub-loans may be made for Sub-projects in other categories provided, however, that: (i) the branch of BRI which proposes to make such sub- loans shall have made Sub-loans under paragraphs (a) and (b) above in the previous 12-month period; and (ii) such Sub-loans do not exceed in the aggregate 20% of the aggregate of the amounts approved by such branch under the Project. (d) Sub-loans shall be used fo- the financing of investment expenditures and working capital, ii _Luding the purchase of land, provided that the proceeds of the Credit shall not be used to finance the cost of land. - 14 - 2. Eligibility of Sub-borrowers The Rules and Regulations provide that enterprises or indi- viduals whose net worth does not exceed Rp20 million, whose net amount of assets are no more than RplO million and whose total outstanding liabilities to banks (including any proposed Sub-loan) do not exceed RplO million, shall be eligible to receive Sub- loans. Exceptions to this rule shall be made under the Project where justified, on a category-by-category basis for specific types of Sub-projects. 3. Amount The Rules and Regulations specify that the amount of the Sub-loan shall not exceed normally Rp5 million for any single Sub-project. An exception will be made if the Sub-project to be financed falls under a category covered by a specific lending program which prescribes a Sub-loan ceiling higher than the Rp5 million limit. 4. Maturity and Grace Period of Sub-loans Under the Project, maturities shall be more than five years but shall not exceed fifteen years, including an appropriate grace period. Interest may be capitalized during the grace period.