Philippines - Second Provincial Cities Water Supply : Credit 0920 - Credit Agreement - 1 - Conformed

a -- CONFORMED COPY CREDIT NUMBER 920 PÉ Development Credit Agreement (Second Provincial Citles Water Supply Project) between REPUBLIC OF THE PRILIPPINES and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated June 27, 1979 ~# i CREDIT NUMBER 920 PH DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 27, 1979, between REPUBLIC OF THE PHILIPPINES (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 Borrower has also requested the Bank to provide additional assistance toward the financing of the Project and by an agreement of even date herewith between the Borrower and the Bank (hereinafter called the Loan Agreement), the Bank is agreeing to provide such assistance in an aggregate principal amount equivalent to sixteen million dollars ($16,000,000); (C) the Borrower and the Association intend, to the extent practicable, that the proceeds of the Credit provided for in this Agreement be disbursed on account of expenditures of the Project before disbursements of the proceeds of the Loan provided for in the Loan Agreement are made; (D) Parts A and B of the Project will be carried out by the Local Water Utilities Administration (hereinafter called LWUA) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to LWUA part of 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 set forth hereinafter, in the Loan Agreement of even date herewith between the Borrower and the Bank and in the Project Agreement of even date hererith between the Association, the Bank and LWUA; 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 ...... . gl I 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 and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Association, the Bank and LWUA 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; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and L WUA for the purpose of relending any, proceeds of the Credit and the Loan, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (c) "Loan Agreement" means. the agreement of even date herewith between the Borrower and the Bank for the purpose of the Project, as such agreement may be amended from time to time, and such term includes the General Conditions Applicable to Loan and,, 'Guarantee Agreements of the Bank, dated March 15, 1974, as made applicable to such agreement, all agreements supplemental to the Loan Agreement and all schedules to the Loan Agreement; (d) "Water District" means a water district established pursuant to the provision of Title II of the Borrower's Presiden- tial Decree No. 198, as amended; (e) "Sub-project" means a water supply project to be car- ried out in a Water District under the Project; and (f) "Peso" means the currency unit of the Borrower. 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 -3- set forth or referred to, an amount in various currencies equiva- lent to twenty-two million dollars ($22,000,000). Section 2.02. The amount of the Credit may be withdrawn from t,he 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 Associ- ation, 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, procurement of the goods and civil works to be financed out of the proceeds of the Credit, shall be governed by the provisionsl set forth or referred to in Section 2.03 of the Project Agreement. Section 2.04. The Closing Date shall be December 31, 1985 ,or such later date as the' Association shall establish. The Asso- ciation 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 semiannually 'on February 15 and August 15 in each year. Section 2.07. The Borrower shall repay the principal amount I\\of the Credit in semiannual installments payable on each Febru- av 15 and August 15 commencing August 15, 1989, and ending February 15, 2029, each installment to and including the install- ment payable on February 15 , 1999t, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment there- after 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. (a) Without any limitation or restriction upon any of its other obligations under the Development Credit _40- Agreement, the Borrower shall cause LWU 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 actions, 1;including the provision of funds, facilities, services and ot4er resources, necessary or appropriate to enable LWUA 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 in pesos the proceeds of the Credit required to carry -out Parts A and B of the Project to, LWUA under a subsidiary loan agreement to be entered into between the Borrower and LWUA 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 provis_on thereof. Section 3.02. The Borrower shall carry out Parts C and D of the Project with due diligence and efficiency and in con- formity with appropriate administrative, financial, engineering and public utility practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.03. (a) In order to assist the Borrower in the design and construction of the rural water supply and sanitation components under Parts C and D of the Project, the Borrower shall employ, as may be determined by the Borrower, the Associ- ation and the Bank, engineering and management consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association and the Bank. (b) The,eligibility, preparation, review and appraisal design of each rural water supply and sanitation project under Parts C and D of the Project shall be in accordance with criteria acceptable to the Association and the Bank. Section 3.04. The Borrower shall, with respect to each Sub-project to be undertaken by the Water Districts (except for the Iloilo Water District and such other Water Districts which N 4. : TA AOR -5- are unable to generate at least 10% of the total cost of each Sub-project from their own resources) under the Project, contrib- ute an amount equivalent to 20% of the total cost of each Sub- project as equity of the Water District in which such Sub-project is being carried out. Section 3.05. The Borrower shall take necessary measures to increase LWUA's naid in capital to meet LWIA's annual require- ments estimated at-0I8 million equivalent each year for the next 6 yeas. Section 3.06. (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, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. Section 3.07. (a) The Borrower shall furnish to the Associa- tion, promptly upon their preparation, the plans, specifications, reports, contract documents and, construction and procurement schedules for Parts C and D of 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 main- tained records and procedures adequate to record and monitor the progress of Parts C and D of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) shall enable the Associa- tion'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 reicords and documents; and (iii) shall furnish to the Association atl regular intervals all such information as the Association sfiall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expen- diture of the proceeds of ,the Credit and the goods and services /financed out of such proceeds. N-1' . . . . . ... . .k . ... -6- (c) Promptly after completion of Parts C and D of the Project, but .in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, the dorrower shall prepare and furnish to the Association a report, or such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of Parts C and D of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Association of their respec- tive obligations under the Development Credit Agreement and the accomplishment of the purposes of the Credit. 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) LWUA shall have failed to perform any covenant, agree- ment or obligation of LWUA under the Project Agreement or the Subsidiary Loan Agreement; (b) an extraordinary situation shall have arisen which shall make it improbable that LWUA will be able to perform its obli- gations under the Project Agreement; (c) Presidential Decree No. 198 of the ,Borrower, as amended to the date of this Agreement shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of LWUA to carry out the covenants, agreements and obligations set forth in the Project Agreement; and (d) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of LWUA or for the prolonged suspension of the operations of LWUA. Sectionz4.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) the event specified in paragraph (a) of Section 4.01 of this Agreement shall occur and shall continue for a period of 60 6"-. . . . .-T)~C~' if~~~J --.--- - -7- days after notice thereof shall have been given by the Association to the Borrower and LWUA; and (b) the events specified in paragraphs (c) or (d) of Section 4.01 of this Agreement shall oeur. 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: (a) the Subsidiary Loan Agreement has been executed on behalf of the Borrower and LWUA; (b) LWUA has caused Baguio, Lipa, Lupata, Cabanatuan, Tarlac and La Union Water Districts to take such action satis- factory to the Association as shall be necessary to increase their water tariffs; and (c) all conditions precedent to the effectiveness of the Loan Agreement have been fulfilled. 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 LWUA, and is legally binding upon LWUA in accor- dance with its terms; and (b) that the Subsidiary Loan Agreement has been duly autho- rized or ratified by the Borrower and LWUA and is legally binding upon the Borrower and LWUA in accordance with its terms. Section 5.03. The date September 28, 1979, is hereby specified for the purposes of Section 12.04 of the General Condi- tions. Section 5.04. The provisions of paragraphs (a) and (b) of Section 4.02 of this Agreement shall cease and determine on the e .- ..... v -8- date on 4hich the Development Credit Agreement shall terminate or on a date 20 years af ter the date of this Agreement, whichever shall be the earlier . 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 Conditions. Section 6.02. The following addresses are specified for the purpose of Section 11.01 of the General Conditions: For the'Borrowern Minister of Finance Ministry of Finance Manila Philippines Cable address: MINFIN Manila For the Association: International Development Association 1818 11 Street, N.W. Washington, D.C. 20433 United States of America Cabie address: INDEVAS Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this 3,. ....................... . 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. REPUBLIC OF THE PHILIPPINES By /s/ Eduardo Z. Romualdez Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ S. Shahid Husain Regional Vice President East Asia and Pacific (9( -W W 1M T 4'a 10 SCHEDULE i WItdraval,of the Proceeds of the Credit and of the Loan 1. The table below sets forth the Categories of items to be financed out of the, proceeds of the Credit and of the Loan, the allocation of amouäts of such proceeds to each Category and the percentage of expenditures foi items so to be financed in each Category: Amount of the Credit and of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil works 27,550,000 100% of foreign expenditures and 65% of local expenditures (2) Equipment and materials: (a) under Part C of the Project 1,500,000 (b) other: 300,000 (i) directly 100% of foreign imported expenditures (ii) locally manu- 100% of local factured' expenditures (ex-factory) (iii) procured lo- 65% cally (3) Consultants' services 4,000,000 100% -711 - Amount of the Credit and of the Loan Allocated % of (Expressed in Expendlrures Category Dollar Equivalent) to be Financed (4) Overseas training 650,000 100% (5) Unallocated 4,000,000 TOTAL 38,000,000 V 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 Bank and the Association that no proceeds of the Loan 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 Loan or the Credit decreases or increases, the Bank or 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 Bank and the Association. 4. (a) Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for: (i) expenditures prior to the date of this Agreement; and (ii) expenditures under Category (2) (a) of the table set forth in paragraph 1 above until the Borrower has established an" organi- zation for rural water supply in a form satisfactory to the Association and the Bank. ,fly9 -12,- (b) In addition, except as the Borrower, the Bank and the Associatio' shall otherwise agree, and until all amounts of the Credit shall have been withdrawn -or committed, no withdrawals shall be made from the Loan Account except under commitments entered into,,by the Bank pursuant to Section 3.02 of the General Conditions referred to in Section 1.01 of the Loan Agreement. 5. Notwithstanding the allocation of an amount of the Loan or of the,Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank or the Association has, reason- ably estimated that the amount of the Loan or of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank or 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 Loan or of the Credit, as the case may be, which are then allocated to another Category and which in the opinion of the Bank or the Association are not needed to meet other expenditures, ,And (ii) if such -reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further with- drawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Association or the Bank shall have reasonably deter- mined that the procurement, of any item in any Category is incon- sistent with the procedures set forth or referred to in this Agreement, no expenditures' for such item shall be financed out of the proceeds of the Loan or of the Credit and the Bank or the Association may, without in any way restricting or limiting any other right, power or remedy of the Bank or of the Association under the Loan Agreement or the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Loan or of the Credit as, in the Bank's or 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 Loan or of the Credit. INI - 13 - SCHEDULE 2 Description of the Project The Project is designed to provide improved water supplies through rehabilitation and constrietion of water supply facilities in the provincial cities and rural communities, and consists of the following: Part A: (i) Source development, mostly springs and wells, rehabili- tation and construction of transmission and distribution systems, installation of new service connections, public faucets, metering, leak detection and repair and im- provement of existing facilities in about 50 small Water Districts primarily with populations varying between 10,000 and 30,000, and the city of Iloilo; and (ii) Utilization of technical assistance for project prepar- ation, detailed design and supervision of construction. Part B: (i) Utilization of technical assistance for reconnaissance surveys for about 150 communities and detailed design for water supply and sanitation projects for Water Districts; and (ii) Training of staff for LWUA and Water Districts including provision of vehicles and equipment for Water Districts. Part C: Construction of wells, development of springs pumping stations, pipelines, public faucets and house connections for about 1,000 rural communities. Part D: Completion of a pilot sanitation study for about eight rural communities. The Project is expected to be completed by June 30, 1985.