China - Second Rural Credit Project : Credit 1642 - Credit Agreement - Conformed

OFFICIAL CREDIT NUMBER 1642 CHA DOCUMENTS Development Credit Agreement (Second Rural Credit Project) between PEOPLE'S REPUBLIC OF CHINA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated 3 , 1986 CREDIT RMBER 1642 CHA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated 3 , 1986, between PEOPLE'S REPUBLIC OF CHINA (the orrower) and INTERNATIONAL DEVELOPMENT 'SSOCIATION (the Association). WHEREAS: (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) the Project will be carried out by Agricultural Bank of China (ABC) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to ABC proceeds of the Credit as provided in this Agreement; 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 in this Agreement and in the Project Agreement of even date herewith between the Association and ABC; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Develop- ment Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. 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) "ABC" means the Agricultural Bank of China, a special- izfd banking institution established and operating under the laws of the Borrower, including, inter alia, the 1979 State Council Circular and the 1983 State Council Decision; (b) "1979 State Council Circular" means the Circular of the Borrower's State Council on the Restoration of the Agricultural -2- Bank of China, dated February 23, 1979 (State Council Document No. (1979) 56); (c) "1983 State Council Decision" means the Decision of the Borrower's State Council on the Exclusive Exercise of central Bank Functions by the People's Bank of China, dated September 17, 1983 (State Council Document No. (1983) 146); (d) "ABC-Fujian" and "ABC-Hunan" mean the branches of ABC established and operating in Fujian Province and Hunan Province, respectively; (e) "Project Agreement" means the agreement between the Association and ABC of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (f) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and ABC pursuant to Sec- tion 3.01 (b) of this Agreement, as the same may be amended from time to time, such term includes all schedules to the Subsidiary Loan Agreement and "Subsidiary Loan" means the subsidiary loan provided for in the Subsidiary Loan Agreement; (g) "Sub-loan" means a loan made or proposed to be made by ABC out of the proceeds of the Credit and out of its own funds to a Sub-borrower for an Investment Project and "Free-limit Sub- loan" means a Sub-loan, as so defined, which qualifies as a Free-limit Sub-loan pursuant to the provisions of Section 2.02 (b) of this Agreement; (h) "Sub-borrower" means an individual farmer, farm house- hold, joint household, collective enterprise, joint state- collective enterprise or state enterprise to which ABC proposes to make or has made a Sub-loan; (i) "Investment Project" means a specific development project to be carried out by one or several Sub-borrowers uti- lizing the proceeds of a Sub-loan or Sub-loans; (j) "Renminbi" means the currency of the Borrower; (k) "Foreign currency" means any currency other than the currency of the Borrower; -3- (1) "Project Management Committees" means the World Bank Loan Project Management Committee established by the People's Government of Fujian Province, pursuant to its General Document No. (1985) 168, dated March 28, 1985, and the Leading Group for the Utilization of World Bank Loans, established by the People's Government of Hunan Province, pursuant to its Document No. (1984) 82, dated December 26, 1984, respectively; and (m) "Special Account" means the account referred to in Section 2.02 (c) of this Agreement. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Bor- rower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various curren- cies equivalent to eighty-four million Special Drawing Rights (SDR 84,000,000). Section 2.02. (a) 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 frc;h time to time by agreement between the Borrower and the Asso- ciation, for amounts paid (or, if the Association shall so agree, amounts to be paid) by ABC: (i) on account of withdrawals made by a Sub-borrower under a Sub-loan to meet the reasonable cost of goods and services required for the Investment Project in respect of which the withdrawal is requested; and (ii) in respect of the reasonable cost of goods and services required for Part B of the Project and to be financed out of the proceeds of the Credit. (b) A free-limit Sub-loan shall be a Sub-loan to a Sub- borrower for an Investment Project in an amount to be financed out of the proceeds of the Credit and out of ABC's own funds which shall not exceed the sum of $500,000 equivalent, when added to the amounts of any other Sub-loans made or proposed to be made to the same Sub-borrower for the same Investment Project and not repaid, the foregoing amounts being subject to change from time to time as determined by the Association. -4- (c) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special account in a bank and on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 3 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1991 or -uch later date as the Association shall establish. The Ass,o- ciation shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge at the rate of one-half of one percent (1/2 of 1%) per annum on the principal amount of the Credit not with- drawn from time to time. The commitment charge shall accrue from a date sixty days after the date of the Development Credit Agree- ment to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or shall be cancelled. (b) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this, Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semi-annually on May 15 and November 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each May 15 and November 15, commencing May 15, 1996, and ending November 15, 2035. Each installment to and including the installment payable on November 15, 2005 shall be one-half of one percent (1/2 of 1%) of such principal amount, and each installment thereafter shall be one and one-half percent (1-1/2%) of such principal amount. -5- 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) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, without any limitation or restric- tion upon any of its other obligations iaider the Development Credit Agreement, shall: (i) cause ABC to perform in accordance with the provisions of the Project Agreement all the obligations of ABC therein set forth; (ii) take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable ABC to perform such obligations; and (iii) not take or permit to be taken any action which would prevent or interfere with such per- formance. (b) The Borrower shall relend the proceeds of the Credit to ABC under a subsidiary loan agreement to be entered into between the Borrower and ABC, under terms and conditions which shall have been approved by the Association, which shall include: (i) repay- ment of principal by ABC in the currency used within 20 years, including 5 years of grace, such principal amount to be the amount of Renminbi used and the SDR equivalent of the foreign curl.-ncy used; (ii) interest to be paid by ABC at the rate of three percent (3%) per annum; and (iii) commitment charges to be paid by ABC at the rate of one-half of one percent (0.5%) per annum. (b) The Borrower shall exercise its rights under the Sub- sidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the pur- poses of the Credit, and except as the Association shall other- wise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement to affect the provisions of paragraph (b) above. Section 3.02. The Borrower shall take steps necessary to enable ABC to achieve a difference of at least two percent between: - 6 - (a) the weighted average of the interest rates referred to in paragraph C.2 of the Schedule to the Project Agreement; and (b) the weighted average of the cost of funds available to ABC for the purposes of the Project from all sources, including ABC's own funds and the Subsidiary Loan, both such weighted averages to be calculated in a manner acceptable to the Association. Section 3.03. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of the Schedule to the Project Agreement. Section 3.04. The Borrower and the Association hereby agree that the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to in- surance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) shall be carried out by ABC pursuant to Section 2.04 of the Project Agreement. Section 3.05. The Borrower shall cause the Provinces of Fujian and Hunan to maintain the Project Management Committees with composition and functions acceptable to the Association, to assist ABC in carrying out the Project with coordination and assistance from the relevant departments and agencies of the Borrower. Section 3.06. From time to time, at the request of any one of them, the Borrower, the Association and ABC shall exchange views on the interest rates to be charged by ABC in its lending operations in light of ABC's cost of funds and profitability, as well as inflation and other interest rates in China. ARTICLE IV Remedies of the Association Section 4.01. Ptvsuant to Section 6.02 (h) of the General Conditions, the fol41;owing additional events are specified: (a) ABC shall have failed to perform any of its obligations under the Project Agreement. - 7 - (b) As a result of events which have occurred after the date of the Development Credit Agreement, an extraordinary situa- tion shall have arisen which shall make it improbable that ABC will be able to perform its obligations under the Project Agree- ment. (c) The laws of the Borrower applicable to ABC, including the 1979 State Council Circular and the 1983 State Council Deci- sion shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of ABC to perform any of its obligations under the Project Agree- ment. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of ABC or for the suspensionx of its operations. Section 4.02. For the purposes of Section 7.01 (d) of the General Conditions, the following additional events are speci- fied: (a) the event specified in paragraph (a) of Section 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 (b) the events specified in paragraphs (c) and (d) of Section 4.01 of this Agreement shall occur. 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 ABC; and (b) the Borrower's State Council has approved the Develop- ment Credit Agreement and the Project Agreement. Section 5.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General -8- Conditions, to be included in the opinion or opinions to be fur- nished to the Association: (a) that the Project Agreement has been duly authorized or ratified by ABC, and is legally binding upon ABC in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly autho- rized or ratified by the Borrower and ABC and is legally binding upon the Borrower and ABC in accordance with its terms. Section 5.03. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 5.04. The obligations of the Borrower under Section 3.06 of this Agreement and the provisions of Section 4.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on the date 20 years after 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 purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance Sanlihe Beijing People's Republic of China Cable address: Telex: FINANMIN 22486 MFPRC CN Beijing -9- 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) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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. PEOPLE'S REPUBLIC OF CHINA By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President East Asia and Pacific - 10 - SCHEDULE I Withdraval of the Proceeds of the Credit 1. The table below sets forth the Categories of items Lo 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 SDR Equivalent) to be Financed (1) Sub-loans under Part A of the Project 75,000,000 50% (2) Overseas fellow- ships and consultants' services 500,000 100% (3) Goods for Part B of the Project 2,800,000 100% of foreign expenditures, 100% of local expenditures (ex-factory cost) and 75% of local expenditures for other items procured locally (4) Unallocated 5,700,000 TOTAL 84,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of apy country other than that of the Borrower for goods or services sipplied from the territory of any country other than that of the Borrower; and - 11 - (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement; or (b) in respect of a Sub-loan unless: (i) the Sub-loan has been approved by the Association; or (ii) the Sub-loan is a free-limit Sub-loan for which the Association has authorized withdrawals from the Credit Account. -12- SCHEDULE 2 Description of the Project The objectives of the Project are to assist the Borrower in increasing agricultural and rural production and incomes through the diversification and modernization of agricultural production and processing, by supporting the medium- and long-term lending programs of ABC-Fujian and ABC-Hunan, and by assisting in the institutional development of ABC. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: Investment Program A program of Sub-loans by ABC-Fujian and ABC-Hunan to Sub- borrowers for Investment Projects in: (1) freshwater and marine aquaculture development; (2) orchard development; (3) construction and equipping of agroindustrial facilities for processing, storage and transportation of, inter alia, fruit, poultry and fish; and (4) livestock development, including expansion of poultry, cattle and pig breeding. Part B: Institutional Development Improving ABC's operational capability in such areas as project preparation, appraisal, and implementation, finance and management, including a program of staff training in China and abroad, through provision of overseas fellowships, consultants' services, and equipment. The Project is expected to be completed by June 30, 1991. - 13 - SCHEDULE 3 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1), (2) and (3) as set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures 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 allocated from time to time to the eligible Categories in accor- dance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equi- valent to SDR 5,600,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclu- sively for eligible expenditures in accordance with the provi- sions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amou ts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible - 14 - expenditures. All such deposits shall be withdrawn by the Asso- ciation from the Credit Account under the respective eligible Categories and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, prior to or at the time of such request, such and other evidence as the Association shall reasonably request, showing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals can be made directly by the Borrower from the Credit Account in accordance with the provisions of paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Credit allo- cated to the eligible Categories, minus the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eli- gible Categories shall follow such procedures as the Association shall specify by notice to the Borrower. Except as the Associa- tion shall otherwise agree, such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice have been or will be utilized in making payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account: (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 - 15 - of this Schedule; or (ii) was not justified by the evidence fur- nished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless otherwise agreed by the Association, no further deposit by the Association into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Association shall have determined at any' time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount for crediting to the Credit Account. 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 ofl 4 , 198k. FOR SECRETARY