Tanzania - Smallholder Tea Consolidation Project : Credit 1037 - Development Credit Agreement - Conformed

CREDIT NUMBER 1037 TA Development Credit Agreement (Smallholder Tea Consolidation Project) between UNITED REPUBLIC OF TANZANIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1980 CREDIT NUMBER 1037 TA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated , 1980, between UNITED REPUBLIC OF TANZANIA (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) by Agreement dated August 30, 1979, (hereinafter called the Norad Agreement), the Kingdom of Norway agreed to make a grant (hereinafter called the Norad Grant) to the Borrower for the construction and maintenance of feeder roads, including the roads referred to in Part G.2 of the Project on the terms and conditions therein set forth; (C) part of the Project will be carried out by the Tanzania Tea Authority (hereinafter called TTA) and the Tanzania Rural Development Bank (hereinafter called TRDB) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to TTA 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 hereinafter set forth and in the Project Agreement of even date herewith between the Association and TTA; 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). -2- 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 and TTA 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) "TTA Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and TTA pursuant to Section 3.02 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the TTA Subsidiary Loan Agreement; (c) "First Project" means the Project described in Schedule 2 to the Development Credit Agreement (Smallholder Tea Development Project) dated March 3, 1972, between the Borrower and the Associ- ation; and (d) "Project Grower" means any smallholder tea .grower participating in the tea planting program to be established under the Project. 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 fourteen million dollars ($14,000,000). 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. -3- Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Credit, shall be governed by the provisions of Schedule 3 to this Agree- ment. Section 2.04. The Closing Date shall be December 31, 1985, or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semiannually on March 1 and September 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each March 1 and September 1 commencing September 1, 1990, and ending March 1, 2030, each installment to and including the installment payable on March 1, 2000, 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 2.08. The currency of the United Kingdom of Great Britain and Northern Ireland is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out Part G of the Project through the Administrative Authorities of Iringa, Mbeya, West Lake and Tanga Regions with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. (a) Without any limitation or restriction upon any of its other obligations under the Development Credit -4- Agreement, the Borrower shall: (i) cause TRDB to carry out Part H of the Project in a timely fashion in order to facilitate the implementation of Part C of the Project; (ii) cause TTA to carry out Parts A through F of the Project and to perform in accordance with the provisions of the Project Agreement and the TTA Subsi- diary Loan Agreement, all the obligations therein set forth; (iii) take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable TRDB and TTA, respectively, to perform such obligations; and (iv) 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 allocated to Parts A through E of the Project to TTA under a subsidiary loan agreement to be entered into between the Borrower and TTA under terms and conditions satisfactory to the Associa- tion, which shall include: repayment in 28 years, inclusive of 8 years of grace; interest at a rate of 10% per annum and the Borrower to bear the foreign exchange risk. (c) The Borrower shall exercise its rights under the TTA Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accom- plish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the TTA Subsidiary Loan Agreement or any pro- visions thereof. Section 3.03. In order to assist the Borrower in the carrying out of Part G.1 of the Project, the Borrower shall by not later than December 31, 1980: (a) employ a mechanical engineer and a road construction engineer whose qualifications, experience, and terms and condi- tIons of employment shall be satisfactory to the Borrower and the Association, and whose successors shall be employed in accordance with the provisions of this sub-section; and (b) establish or cause to be established, a road construc- tion unit at Njombe in Iringa Region, with a staff consisting of the engineers referred to in the foregoing sub-section (a) and such local and support staff as shall be required for the purpose. Section 3.04. The Borrower shall furnish or cause to be furnished to the Association for its review and comment, not -5- later than March 31, 1981, and thereafter not later than March 31 of each preceding fiscal year until the completion of the Njombe roads included in Part G.1 of the Project, an annual work program covering the fiscal year commencing on the following July 1. Each such work program shall set out the detailed proposals for the carrying out of such part of the Project in the period to which it relates. Section 3.05. (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 allocated to Part G.1 of the Project against hazards incident to the acquisition, transportation and delivery thereof to the place of use or instal- lation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Association shall otherwise agree, all goods and services financed out of the proceeds of the Credit allocated to Part G.1 of the Project shall be used exclusively for said Part of the Project until its completion. Section 3.06. (a) The Borrower shall furnish to the Associa- tion, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for Part G.1 of the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The Borrower shall: (i) maintain or cause to be main- tained, records and procedures adequate to record and monitor the progress of Part G.1 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 Part G.1 of the Project; (ii) enable the Association's accredited representatives to visit the facilities and construction sites included in Part G.1 of the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) furnish to the Association at regular intervals all such information as the Association shall reasonably request concerning Part G.1 of the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds. -6- (c) Promptly after completion of Part G.1 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 Borrower shall prepare or cause to be prepared and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of Part G.1 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 respective obligations under the Development Credit Agree- ment and the accomplishment of the purposes of the Credit. Section 3.07. The Borrower shall take or cause to be taken all such action as shall be necessary to allocate as and when needed all land as shall be required for the construction (and operation) of the facilities included in the Project. ARTICLE IV Other Covenants Section 4.01. The Borrower shall, before undertaking or permitting the undertaking of additional tea plantings (other than those contemplated under the Project), make or ensure that adequate and appropriate arrangements have been made, for the processing of the additional tea production resulting from such undertakings. Section 4.02. In order to assist TTA in attracting competent and higher level staff and to improve the efficiency of its management, in particular in its branch offices, the Borrower shall take all necessary action so that by December 31, 1980, TTA's status as a parastatal organization shall have been up- graded. Section 4.03. The Borrower shall continue to review the local pool price of tea with a view to making any changes which may be required in such price, to reflect parity with the average world market price of Tanzanian tea adjusted for quality and cost differentials. Section 4.04. (a) The Borrower shall, until the completion of the Project, (i) maintain constant in nominal terms, the green leaf producer price established for the 1979-80 growing season and (ii) continue to cause the Marketing Development Bureau of its -7- Ministry of Agriculture to undertake annually, a detailed cost analysis of TTA's operations. (b) Notwithstanding the provisions of sub-section (a) (i) of this Section 4.04, the Borrower may, after review of the cost analysis of TTA's operations and, after consultation with the Association, increase such green leaf producer price, as long as TTA's projected net operating income is positive. For the purposes of this Section, the term "net operating income" means gross revenue from all sources of operations less all expenses of operations, including, inter alia, administration, interest payments, adequate maintenance and depreciation. Section 4.05. (a) The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with consistently maintained appropriate accounting practices the operations, resources and expenditures, in respect of Part G.1 of the Project, of the departments or agencies of the Borrower, including the Administrative Authorities of Iringa and West Lake Regions, responsible for carrying out Part G.1 of the Project, or any part thereof, including without limitation to the fore- going, separate accounts reflecting all expenditures on account of which withdrawals are requested from the Credit Account under Category (5) of the table in paragraph 1 of Schedule 1 to this Agreement on the basis of certificates of expenditure. (b) The Borrower shall retain or cause to be retained, until one year after the Closing Date, all records (orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Credit Account on the basis of certificates of expenditure and shall enable the Association's accredited representatives to examine such records. (c) The Borrower shall: (i) have the separate accounts referred to in the foregoing paragraph (a) 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 six months after the end of each such year a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Associa- tion shall have reasonably requested including, without limitation to the foregoing, a separate opinion by said auditors in respect -8- of the expenditures and records referred to in paragraph (b) of this Section as to whether the proceeds of the Credit withdrawn from the Credit Account on the basis of certificates of expendi- ture have been used for the purpose for which they were provided; and (iii) furnish to the Association such other information concerning such separate accounts, records and expenditures and the audit thereof as the Association shall from time to time reasonably request. Section 4.06. The Borrower shall cause the roads constructed under the Project to be maintained in accordance with sound engineering and financial practices and shall provide the funds required for the foregoing. ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) TTA shall have failed to perform any of its obligations under the Project Agreement; (b) the Borrower or TTA shall have failed to perform any of its obligations under the TTA Subsidiary Loan Agreement; (c) the organization, powers or responsibilities of TTA shall have been altered so as to affect materially and ad- versely the execution by TTA of its obligations under the Project Agreement or the carrying out by TTA of its obligations under the TTA Subsidiary Loan Agreement; and (d) (i) Subject to subparagraph (ii) of this paragraph the right of the Borrower to withdraw the proceeds of the Norad Grant made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the Norad Agreement. (ii) Subparagraph (i) of this paragraph shall not apply if (A) such suspension, cancellation or termination is not caused by the failure of the Borrower to perform any of its obligations under such agree- ment, and (B) adequate funds for the Project are 9- available to the Borrower from other sources on terms and conditions consistent with the obliga- tions of the Borrower under this Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) any events specified in paragraphs (a) and (b) of Section 5.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been.given by the Association to the Borrower and TTA; and (b) any event specified in paragraph (c) of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. 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 TTA Subsidiary Loan Agreement has been executed on behalf of the Borrower and TTA; and (b) the General Manager of TTA has been appointed. Section 6.02. 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 TTA, and is legally binding upon TTA in accordance with its terms; and (b) that the TTA Subsidiary Agreement has been duly author- ized or ratified by the Borrower and TTA, and is legally binding upon TTA in accordance with its terms. Section 6.03. The date Nt"c4 f I. X is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. - 10 - Section 6.04. The obligations of the Borrower under Sections 4.01, 4.04 (b) and 4.06 of this Agreement and the provisions of Section 5.02 shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date 20 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. The Minister of the Borrower at the time responsible for Finance is designated as representative of the Borrower for the purposes of Section 11.03 of the General Condi- tions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance P.O. Box 9111 Dar es Salaam United Republic of Tanzania Cable address: TREASURY Dar es Salaam For the Association: International Development Association 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) - 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. UNITED REPUBLIC OF.TANZANIA By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Byik Regional Vice President Eastern Africa - 12 - 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 allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil works under (a) Part A (excluding 1,000,000 80% Part A.1) of the Project; and (b) Part A.1 of the 2,000,000 80% Project (2) Driers under Part A.2 400,000 100% of foreign and coal-fired boiler expenditures and under Part A.3 of the 85% of local ex- Project penditures (3) Machinery, equipment, 4,600,000 100% of foreign vehicles and spare- expenditures and parts under Parts A, 85% of local D and G.1 of the expenditures Project (4) Technical assistance 1,000,000 100% of foreign and consultants' services expenditures and 85% of local expenditures (5) Road construction and 500,000 80% maintenance, excluding road equipment, spareparts and technical assistance therefor - 13 - Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (6) Salaries of incremental 800,000 80% of local local staff under Part expenditures E.3 of the Project (7) Fuelwood plantation and 1,000,000 80% of local tea nurseries expenditures (8) Operating costs of vehicles 1,000,000 70% of local referred to in Part D.4 expenditures of the Project Unallocated 1,700,000 TOTAL 14,000,000 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 expEaditures" 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 Credit shall he 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. - 14 - 4. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement except that withdrawals in an aggregate amount not exceeding the equivalent of $1,000,000 may be made in respect of Categories (1)(a) and (3) on account of payments made for such expenditures before that date but after July 1, 1979; and (b) expenditures in respect of Category (2) above, until the Borrower has made arrangements satisfactory to the Association to ensure the allocation of sufficient quantities of coal to the factories at Katumba and Mwakaleli. 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 expendi- tures, and (ii) if such reallocation cannot fully meet the estimated shortfall, 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 proceeds of the Credit and the Association may, without in any way re- stricting 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 financ- ing out of the proceeds of the Credit. - 15 - SCHEDULE 2 Description of the Project The Project is a continuation of part of the Borrower's smallholder tea development program and is designed to: (i) strengthen TTA's capacity to handle the increasing amount of green leaf produced from all smallholder tea plantings, including those established under the First Project; (ii) maximize the production benefits of smallholder tea growers; (iii) improve the financial viability of TTA; and (iv) increase the Borrower's export earnings from the tea industry. It consists of the following parts: Part A: Tea Factories 1. Construction and equipping of a factory at Ukalawa. 2. Completion of the equipping of the factory at Mwakaleli constructed under the First Project. 3. Construction of extensions to, and equipping of, the factory at Katumba. 4. Construction of extensions to the factories at Lupembe, Bukoba and Mponde and provision of equipment and machinery therefor. Part B: Fuelwood Planting Provision of fuelwood for use by factories, through the establishment by TTA of a total of about 1,600 hectares of fuel- wood plantations in Lupembe, Ukalawa, Bukoba and Mponde factory areas. Part C: Tea Planting Establishment of nurseries and the planting of tea by Project Growers on about 200 hectares of land in the environs of Ukalawa factory and an infilling program covering an aggregate of about 450 hectares of land in Rungwe and an aggregate of about 90 hectares each of land in Njombe and Lushoto districts. Part D: Transport 1. Provision of about 28 7-ton lorries and 18 tractors with trailers for use in leaf collection. - 16 - 2. Provision of one four-wheel drive vehicle each for the factories at Mwakaleli and Ukalawa, and one four-wheel drive vehicle each for use by the Resident Engineers to be stationed at Katumba and Lupembe factories. 3. Provision of about 9 cars to TTA for use by its senior and expatriate staff. 4. Financing of the operating costs of the vehicles referred to in sub-parts 1, 2 and 3 above. 5. Provision of spare-parts for use in repairing TTA's vehicles. Part E: Technical Assistance for TTA and Incremental Staff 1. Planning and implementation of work under the Project and strengthening TTA's factory engineering service and management through the provision of about 17 man-years of technical assis- tance. 2. Improvement of TTA's management and accounting systems, organizational structure, standard of tea manufacture and crop husbandry through the provision of about 6 man-months of consul- tants' services. 3. Strengthening of TTA's factory, branch office and head quarters staff, through the employment of about (i) 200 employees for TTA's factories at Mwakaleli and Ukalawa, (ii) 10 employees to be stationed at TTA's branches at Rungwe and Njombe and (iii) 12 employees at TTA's headquarters. Part F: Storage Facilities Reduction of storage costs through the acquisition of 2 warehouses in the Dar es Salaam area. Part G: Road Construction and Maintenance 1. Construction and maintenance of about 19 kilometers of all weather roads in Bukoba and about 53 kilometers in Njombe, such roads to be constructed in accordance with the road design standards set forth in the Annex to this Schedule 2, with the assistance of about 4 man-years of consultants' services and provision of equipment and spareparts. - 17 - 2. Construction and maintenance of about 51 kilometers of all weather roads in Rungwe and about 53 kilometers in Lushoto. Part H: Credit Provision of credit through TRDB to Project Growers for the purchase of planting materials and fertilizer. The Project is expected to be completed by June 30, 1985. - 18 - ANNEX Road Design Standards Width: Minimum 7.50 m between centers of side drains. Cross-Section: Barreled cross-section; center line level minimum 40 cm above invert of side drains. Surfacing: Gravel or crushed stone, 3 m wide, to a minimum thickness of 10 cm. - 19 - SCHEDULE 3 Procurement A. International Competitive Bidding 1. Except as provided in Parts C and E hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower or TTA, as the case may be, shall prepare and forward to the Association as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequal- ification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Association shall reasonably request; the Association will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Borrower or TTA as the case may be, shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international com- petitive bidding. 3. Orders for tea processing machinery and equipment, vehicles and spare parts and road equipment and spare parts shall be bulked together in bidding packages to the maximum extent practicable for the purposes of bidding and procurement. 4. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; and (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids. - 20 - B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in Tanzania may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Tanzania if the bidder shall have established to the satisfaction of TTA and the Association that the manufacturing cost of such goods includes a value added in Tanzania equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest evalu- ated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such - 21 - group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures 1. Contracts for machinery, equipment, vehicles and spare- parts for such items which cannot be bulked in packages of $100,000 equivalent or more, shall be awarded under the Borrower's applicable competitive bidding procedures, provided however that, the aggregate amount of such contracts shall not exceed $300,000. 2. Contracts for civil works shall be procured in accord- ance with the Borrower's applicable competitive bidding proce- dures, provided however that, foreign contractors shall not be excluded from bidding. D. Review of Procurement Decisions by the Association 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equiv- alent of $100,000 or more: (a) Before bids are invited, the Borrower or TTA as the case may be, 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 Assoc- iation shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Bor- rower or TTA 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 shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Association shall reasonably re- quest. - 22 - The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower or TTA as the case may be and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked 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 withdrawal of funds from the Credit Account in respect of such contract. 3. With respect to each contract not governed by the preceding paragraph, the Borrower or TTA 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 with- drawal of funds from the Credit Account in respect of such con- tract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower or TTA as the case may be and state the reasons for such determination. 4. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an exten- sion of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, the Borrower or TTA as the case may be, shall inform the Association of the proposed modif- ication, waiver, extension or change order and the reasons there- for. The Association, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower or TTA, as the case may be, and state the reasons for its determination. E. Procurement Without Contracting The fuelwood plantations to be established pursuant to Part B of the Project, the nursery development program included - 23 - in Part C of the Project and the roads to be constructed and maintained pursuant to Part G(l) of the Project, shall be executed by force account through TTA and the Administrative Authorities of Iringa and West Lake Regions as the case may be, and in accordance with procedures satisfactory to the Association. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of 19ft . FOR SECRETARY