Benin - Public Enterprise Sector Rehabilitation Project : Credit 1748 - Credit Agreement - Conformed

OFFICIAL DOCUMENTS CREDIT NUMBER 1748 BEN Development Credit Agreement (Public Enterprise Sector Rehabilitation Project) between PEOPLE'S REPUBLIC OF BENIN and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated 9, 1987 CREDIT NUMBER 1748 BEN DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated 9' , 1987, between PEOPLE'S REPUBLIC OF BEIN (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (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 Borrower has obtained from the Government of the Swiss Confederation (Switzerland) a non-reimbursable contribution in an amount of fifteen million Swiss Francs (SwF 15,000,000) (the Swiss Contribution) to assist in financing the Project on the terms and conditions set forth in an agreement (the Swiss Contribution Agreement) dated February 10, 1986 between the Borrower and Switzerland; 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; 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 modifications set forth below (the General Conditions) constitute an integral part of this Agreement: (a) the last sentence of Section 3.02 is deleted; (b) the words "and the Swiss Contribution" are added after the words "out of the proceeds of the Credit" in Sections 9.03, 9.04 and 9.06 (a) (iii); (c) the words "and Switzerland" are added after the words "Except as the Association" in Section 9.04; and (d) the words "the Association's representatives" are sub- stituted by the words "the representatives of the Association and Switzerland" in Section 9.06 (a) (ii). -2- Section 1.02. 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) "Special Account A" and "Special Account B" mean the Special Account A and the Special Account B referred to in Section 2.02 (d) of this Agreement; (b) "Project Preparation Advances" means collectively the project preparation advance granted by the Association to the Borrower pursuant to an exchange of letters dated June 11, 1984 and November 6, 1984 between the Borrower and the Association. the project preparation advance granted by the Association to the Borrower pursuant to an exchange of letters dated March 25, 1985 and August 21, 1985 between the Borrower and the Association and the project preparation advance granted by the Association to the Borrower pursuant to an exchange of letters dated October 17, 1986 and December 2, 1986 between the Borrower and the Associa- tion; (c) "PMU" means the Project Management Unit established by the Borrower's Decree No. 85-271 dated July 12, 1985 and referred to in Section 3.01 (b) of this Agreement; (d) "CFA Franc" and the letters "CFAF" mean the Franc de la Communaut6 Financibre Africaine, the common currency of the Borrower and the other members of the West African Monetary Union; (e) "Rehabilitation Financing" means financing made or proposed to be made by the Borrower out of the proceeds of the Credit or the Swiss Contribution to a Beneficiary Enterprise for a Rehabilitation Program; (f) "Beneficiary Enterprise" means a public and parapublic sector enterprise, established and operating in the Borrower's territory, which is to carry out a Rehabilitation Program under Part C of the Project; (g) "Rehabilitation Program" means a specific rehabilita- tion program including a specific emergency program, utilizing the proceeds of a Rehabilitation Financing, to be carried out by a Beneficiary Enterprise with the Borrower's assistance under Part C of the Project; - 3 - (h) "Action Program" means the action program to be carried out by the Borrower under Part A of the Project, as outlined in Schedule 4 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Association; (i) "Swiss Contribution Account" means the account opened by Switzerland in the books of Swiss National Bank in the name of the Borrower to which the amount of the Swiss Contribution is credited; and (j) "Subsidiary Account" means the account to be opeaed by the PMU in its name in a primary bank in Cotonou and to be replenished from time to time out of the proceeds of the Special Account A or the Special Account B. 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 cur- rencies equivalent to twelve million eight hundred thousand Special Drawing Rights (SDR 12,800,000). Section 2.02. (a) The amount of the Credit and of the Swiss Contribution may be withdrawn from the Credit Account and the Swiss Contribution 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, the Associa- tion and Switzerland, for amounts paid (or, if the Association shall so agree, for amounts to be paid) by the Borrower: (i) on account of withdrawals made by a Beneficiary Enterprise under a Rehabilitation Financing to meet the reasonable cost of goods and services required for a Rehabilitation Program in respect of which the withdrawal from the Credit Account or the Swiss Contri- bution Account is requested; and (ii) in respect of the reason- able cost of goods and services required for Parts B, D and E of the Project and to be financed out of the proceeds of the Credit or the Swiss Contribution. (b) Without limitation to the provisions of paragraph (a) above, the amount of the Swiss Contribution shall be used for expenditures related to Parts B, C and D of the Project in connection with specific public or parapublic sector enterprises as shall be agreed from time to time between the Borrower, the Association and Switzerland. (c) Except as the Association and Switzerland shall other- wise agree, the allocation and withdrawal of the Swiss Contribu- tion shall be governed, mutatis mutandis, by the General Condi- tions. (d) The Borrower shall, for the purposes of the Project, open and maintain in CFAF a Special Account A and a Special Account B in the Cotonou branch of Central Bank for West African Countries on terms and conditions satisfactory to the Associa- tion. Deposits into, and payments out of, the Special Account A and the Special Account B shall be made in accordance with the provisions of Schedule 5 and Schedule 6 to this Agreement, respectively. (e) Promptly after the Effective Date, the Association shall, on behalf of the Borrower, withdraw from Lhe Credit Account and pay to itself the amount required to repay the prin- cipal amount of the Project Preparation Advances withdrawn and outstanding as of such date and to pay all unpaid charges there- on. The unwithdrawn balance of the authorized amount of the Project Preparation Advances shall thereupon be cancelled. Section 2.03. (a) When presenting a Rehabilitation Financing to the Association for approval, the Borrower shall furnish to the Association an application, in a form satisfactory to the Association, together with: (i) a description of the Beneficiary Enterprise and an appraisal of the Rehabilitation Program, including a description of the expenditures proposed to be financed out of the proceeds of the Credit or the Swiss Contri- bution; (ii) the proposed terms and conditions of the Rehabili- tation Financing; and (iii) such other information as the Association shall reasonably request. (b) Except as the Borrower and the Association shall other- wise agree, applications made pursuant to the provisions of para- graph (a) of this Section shall be presented to the Association on or before June 30, 1992. Section 2.04. The Closing Date shall he June 30, 1995 or such later date as the Association shall establish. The Asso- ciation shall promptly notify the Borrower of such later date. - 5 - Section 2.05. (a) The Borrower shall pay to the Association a commitment charge at the rate of one-half of one per cent (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 Associatioa 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 2.06. 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 2.07. Commitment charges and service charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.08. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each May 1 and November 1 commencing May 1, 1997, and ending November 1, 2036. Each installment to and including the installment payable on November 1, 2006 shall be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter shall be one and one-half per cent (1-1/2%) of such principal amount. Section 2.09. The currency of the Republic of France 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, shall carry out the Project with due diligence and efficiency and in conformity with appropriate - 6 - administrative, financial, planning and managerial practices, and shall provide, promptly a3 needed, tae funds, facilities, services and other resources required for the Project. (b) The Borrower shall maintain its PMU with responsibili- ties for overall coordination and management of the Project and with qualified and experienced staff, including inter alios a Project coordinator at its 'head, assisted by specialized consultants, one of them acting as senior adviser, and the following Beninese staff: an engineer/economist, a financial analyst, a lawyer, an accountant and a disbursement officer. Section 3.02. (a) The Borrower undertakes that, unless the Association shall otherwise agree, any Rehabilitation Financing will be made on terms whereby the Borrower shall obtain, by written contract with the Beneficiary Enterprise or by other appropriate legal means, rights adequate to protect the interests of the Borrower, the Association and Switzerland including, inter alia, in respect of a Rehabilitation Financing, the right to: (i) require the Beneficiary Enterprise to carry out the Rehabilitation Program with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (ii) require that: (A) procurement of the goods and services to be financed out of the proceeds of the Credit and the Swiss Contribution shall be gov- erned by the provisions of Schedule 3 to this Agreement; and (B) such goods and services shall be used exclusively in the carrying out of the Rehabilitation Program; (iii) inspect, by itself or jointly with representa- tives of the Association and Switzerland, if the Association and Switzerland shall so request, such goods and the sites, works, plants and construc- tion included in the Rehabilitation Program, the execution thereof, and any relevant records and documents; (iv) require that: (A) the Beneficiary Enterprise shall take out and maintain with responsible insurers such insurance, against such risks and in such -7 - amounts, as shall be consistent with sound busi- ness practice; and (B) without any limitation upon the foregoing, such insurance shall cover hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Credit and the Swiss Contribution to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the Beneficiary Enterprise to replace or repair such goods; (v) obtain all such information as the Borrower or the Association or Switzerland shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Beneficiary Enterprise and to the benefits to be derived from the Rehabilitation Program; and (vi) suspend or terminate the right of the Beneficiary Enterprise to the use of the proceeds of the Credit or the Swiss Contribution upon failure by such Beneficiary Enterprise to perform its obliga- tions under its contract with the Borrower. (b) The Borrower shall exercise its rights in relation to each Rehabilitation Program in such manner as to: (i) protect the interests of the Borrower, the Association and Switzerland; (ii) comply with its obligations under this Agreement; and (iii) achieve the purposes of the Project. Section 3.03. Except as the Association and Switzerland shall otherwise agree, procurement of the goods, works and con- sultants' services required for the Project and to be financed out of the proceeds of the Credit and the Swiss Contribution shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.04. The Borrower shall: (a) beginning March 31, 1987 or such other date as the Association may agree, and thereafter at six-months' intervals, in consultation with the Association, evaluate the progress made with the reforms of the Borrower's public and parapublic enter- prise sector, the Action Program and the Rehabilitation Programs under execution as well as those under preparation; and - 8 - (b) on the basis of said evaluation, promptly thereafter, take all necessary measures satisfactory to the Association. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained separate records and accounts adequate to reflect in accordance with sound accounting practices the operations, resorces and expenditures in respect of the Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have the accounts referred to in paragraph (a) of this Section, including the Special Account A, the Special Account B and the Subsidiary Account, 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 Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said accounts and the audit thereof and said records as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals are requested from the Credit Account and the Swiss Contribution Account on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; - 9 - (ii) retain, until at least one year after the Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account and the Swiss Contribution Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such separate accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report thereof contains, in respect of such separate accounts, a separate opinion by the said auditors as to whether the proceeds of the Credit and the Swiss Contribution withdrawn in respect of such expenditures have been used for the purpose for which they were provided. Section 4.02. (a) The Borrower shall cause each of the Beneficiary Enterprises to maintain records anc accounts adequate to reflect in accordance with sound account:ng practices its operations and financial condition. (b) The Borrower shall cause each of the Beneficiary Enterprises to: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by 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 copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and - 10 - (iii) furnish to the Association such other iriformation concerning its accounts, financial statements and the audit thereof and said records as the Associa- tion shall from time to time reasonably request. ARTICLE V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified, namely that: (a) Subject to paragraph (b) of this Section: (i) the right of the Borrower to withdraw the proceeds of the Swiss Contribution or of any grant o loan made to the Borrower for the financing of the Project shali have been suspended, cancelled or terminated, in whole or in part, putc'.ant to the terms of the agreement providing therefor, or (ii) any such loan shall have become due and payable prior to the agreed maturity thereof. (b) Paragraph (a) of this Section shall not apply if the Borrower establishes to the satisfaction of the Association that: (i) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (ii) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 5.02. For the purposes of Section 7.01 (d) of the General Conditions, the following additional event is specified, namely that the event specified in paragraph (a) (ii) of Sec- tion 5.01 of this Agreement shall occur, subject to the proviso of paragraph (b) of that Section. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit - 11 - Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the Borrower shall have furnished to the Association a preliminary list, satisfactory to the Association, of enterprises which could be rehabilitated under Part C of the Project; (b) the Borrower shall have furnished to the Association its recommendations for main measures, as identified in the diagnosis studies under Part B of the .roject, to be undertaken by the Borrower and by four enterprises at least selected amongst those specified in the list referred to in paragraph (a) above, together with an estimated time-schedule therefor, all acceptable to the Association; and (c) all conditions precedent to the effectiveness of the Swiss Contribution Agreement (other than, if applicable, the effectiveness of this Agreement) have been fulfilled. Section 6.02. The date 90 days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.03. The obligations of the Borrower under Arti- cle IV of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on the date 15 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of the Borrower responsible for finance is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Minister of Finance and Economy P.O. Box 302 Cotonou People's Republic of Benin - 12 - Cable address: Telex: MINIFINANCES MIFIN 5009 or Cotonou 5289 or MININDART 5252 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 WHFkEOF, the parties hereto, acting through their duly authorized rF,presentatives, 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 BENIN By /4/ Aut7rized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /4J A ~ Regional 1 ce President Western Africa - 13 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit and the Swiss Contribution 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit and the Swiss Contri- bution, the allocation of the amounts of such proceeds to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Swiss Amount of Contribu- the Credit tion Allo- Allocated cated (Ex- % of (Expressed pressed in Expendi- in SDR Swiss Francs tures to be Category Equivalent) Equivalent) Financed (1) Goods and 7,310,000 12,000,000 100% services for Rehabi- litation Programs including emergency programs (2) Operating costs of PMU (a) operat- 530,000 100% ing costs other than salary allowances (b) salary 80,000 100% of local allowances expenditures up to SDR 30,000, 80% of loczl expenditures up to SDR 60,000 and 40% of local expenditures thereafter - 14 - Amount of the Swiss Amount of Contribu- the Credit tion Allo- Allo-ated cated (Ex- % of (Expressed pressed in Expendi- in SDR Swiss Francs tures to be Category Equivalent) Equivalent) Financed (3) Consultants' 1,020,000 2,000,000 100% services (4) Expenditures 1,700,000 1,000,000 100% under Part D of the Project (5) Refunding of 1,290,000 Amount due Project Pre- pursuant to paration Section 2.02 (e) Advances of this Agree- ment (6) Unallocated 870,000 TOTAL 12,800,000 15,000,000 2. For the purposes of this Schedule: (a) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; provided, however, that if the currency of the Borrower is also that of another country from the territory of which goods or services are supplied, expenditures in such currency for such goods or services shall be deemed to be "foreign expenditures"; and (b) the term "operating costs other than salary allowances" set forth in Category (2) (a) means costs for supplies, equip- ment, vehicles, maintenance, documentation, missions and travel, and rent. - 15 - 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made: (a) in respect of payments made for expenditures prior to the date of this Agreement except that withdrawals from the Swiss Contribution, in an aggregate amount not exceeding the equivalent of SwF 2,350,000, may be made in respect of Categories (1), (3) and (4) on account of payments made for expenditures before that date but after the date of the Swiss Contribution Agreement; (b) in respect of a Rehabilitation Financing for an emer- gency program unless said emergency program and its financing have been approved by the Association (and Switzerland for a Rehabilitation Financing out of the proceeds of the Swiss Contri- bution) and remedial measures under said emergency program shall have been taken in a manner satisfactory to the Association (and Switzerland where concerned); (c) in respect of a Rehabilitation Financing for a Rehabil- itation Program unless said Rehabilitation Program and its financing have been approved by the Association (and Switzerland for a Rehabilitation Financing out of the proceeds of the Swiss Contribution) and key remedial measures under any such Rehabili- tation Program shall have been taken in a manner satisfactory to the Association (and Switzerland where concerned); and (d) in respect of a Rehabilitation Financing for an emer- gency program or a Rehabilitation Program of a manufacturing enterprise unless all price controls on products locally manu- factured by said enterprise have been removed. - 16 - SCHEDULE 2 Description of the Project The objectives of the Project are to assist the Borrower in the rehabilitation of its public and parapublic enterprise sector through: (a) the execution of sector reforms, as expressed in the Borrower's letter of October 22, 1985 and telex of November 10, 1986; and (b) the design and implementation of specific rehabilitation programs for economically viable public and parapublic enterprises. 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: Carrying out of an Action Program, as outlined in Schedule 4 to this Agreement, for putting into effect reforms at the sector level and at the public and parapublic enterprise level. Part B: Carrying out of diagnosis studies to assess the techni- cal, economic and financial viability of public and parapublic sector enterprises and to prepare Rehabi- litation Programs or liquidation plans for said enter- prises. Part C: Carrying out of Rehabilitation Programs, including, if required, emergency programs in a first phase. Part D: Carrying out of a program concerning requirements for training and redeployment of staff within the framework of liquidation plans referred to in Parts A and B of the Project and under Rehabilitation Programs. Part E: PMU operation. The Project is expected to be completed by December 31, 1994. - 17 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A. International Competitive Biddir Except as provided in Part D hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). Part B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in Benin may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C. Preference for Domestic Contractors In the procurement of works in accordance with the proce- dures described in Part A hereof, the Borrower may grant a margin of preference to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part D. Other Procurement Procedures 1. Goods estimated to cost more than $50,000 equivalent but less than $350,000 equivalent per contract (exclusive of goods referred to in paragraph 3 hereunder) and works estimated to cost less than $1,000,000 equivalent per contract may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 2. Goods estimated to cost $50,000 equivalent or less per con- tract, up to an aggregate not to exceed the equivalent of $2,500,000 (exclusive of goods referred to in paragraph 3 hereunder), may be procured under contracts awarded on the basis - 18 - of comparison of price quotations solicited from a list of at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Association. 3. Retail goods for Part C of the Project, up to an aggregate not to exceed the equivalent of $1,500,000, shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and, in the case of services, of their quality and the competence of the parties rendering them. Part E. Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $100,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account A or the Special Account B, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account A or the Special Account B in respect of such contract. (b) With respect to each contract not governed by the pre- ceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account A or the Special Account B, such procedures shall be modified to ensure that the two conformed copies of the contract, together with the other information required to be furnished to the Association pursuant to said paragraph 3, shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 5 and Schedule 6 (the Special Account Schedule) to this Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Associa- tion has authorized withdrawals from the Credit Account and the Swiss Contribution Account on the basis of statements of expen- diture. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agreement. - 19 - 2, The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants In order to assist the Borrower in carrying out the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. - 20 - SCHEDULE 4 Action Program For the purposes of the rehabilitation of its public and parapublic enterprise sector, the Borrower will carry out an Action Program consisting of measures outlined as follows: 1. Liquidation of Uneconomically Viable Enterprises (a) On the basis of liquidation plans and in accordance with a time-schedule acceptable to the Association, the Borrower will take all necessary steps to realize the assets and close the accounts of Ceramigue Industrielle du Benin (CIB), Industrie Beninoise des Textiles (IBETEX) and Societe des Transports Routiers du B&nin (TRANSBENIN). (b) For those enterprises for which a liquidation plan will have been prepared under the diagnosis studies included in Part B of the Project, the Borrower will take all necessary steps to liquidate said enterprises in accordance with the liquidation plans. 2. Privatization Beginning March 31, 1987 and thereafter at least once each year, the Borrower will exchange views on progress achieved and measures to be taken for privatization in the following sectors of activities: freight forwarding, imports and distribution, construction, hotels, data processing and textiles. 3. Investments in the Public Enterprise Sector (a) Before undertaking any new investment in the public and parapublic enterprise sector, the Borrower will ensure that a full technical, economic and financial appraisal has determined that such investment will be viable and the impact thereof on public finances is sustainablie (b) The Borrower will prepare an annual investment program for its public and parapublic enterprise sector in accordance with criteria and subject to an aggregate expenditure level acceptable to the Association, and will exchange views with the Association: (i) from time to time on any proposed new investment in said sector; and (ii) not later than December 1 of each year, - 21 - on the contents of said annual investment program. Until the completion of the Project, in carrying out said annual investment program, the Borrower will not exceed the expenditure level deemed acceptable by the Association for said program. 4. Institutional Framework (a) The Borrower will review in consultation with the Asso- ciation the legislative and regulatory framework of its public and parapublic enterprise sector with the objective of improving the efficiency of the operations of enterprises in which the Bor- rower has a participation, through: (i) a clear definition and separation of responsibilities to be attributed to bodies and individuals involved in the supervision and management of enter- prises; (ii) a sufficient degree of management and financial autonomy and decision-making power to be given to enterprises; and (iii) an increased accountability to be borne by enter- prises. In accordance with an action plan satisfactory to the Association, the Borrower will take all measures required to accomplish said objective, including but not limited to a revi- sion of the regulations concerning the allocation of enterp-ises' earnings. (b) The Borrower will develop a management information system for public and parapublic enterprises under terms of reference acceptable to the Association and, beginning January 1988, apply said system. 5. Incentives The Borrower will design an incentive and bonus scheme based on performance criteria at the managerial level and at the employee level. Rehabilitation Programs will define the performance criteria applicable at the managerial level. The Borrower will ensure that enterprises will define performance criteria applicable at the employee level and implement a bonus scheme for employees beginning with the year 1988. 6. Enterprise Liquidity and Indebtedness The Borrower will carry out a study on the indebtedness of its public and parapublic enterprise sector under terms of reference acceptable to the Association. Upon completion of said study, the Borrower will exchange views with the Association on - 22 - the recommendations included therein and, on the basis of said recommendations, will promptly take measures satisfactory to the Association. 7. Pricing The Borrower will ensure that prices applicable to the public and parapublic enterprise sector, rely on market forces and, for public utilities, reflect long-term marginal costs. - 23 - SCHEDULE 5 Special Account A 1. For the purposes of this Schedule: (a) the term "Category" means a category of items to be financed out of the proceeds of the Credit as set forth in the table in paragraph I 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 Categories (1), (2), (3) and (4) in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount of CFAF 180,000,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, payments out of the Special Account A shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to the Association that the Special Account A has been duly opened, withdrawals of the Authorized Allocation and subsequent withdra- wals to replenish the Special Account A 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 A such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the Special Account A 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 A such amounts as shall be required to replenish the Special Account A with amounts not exceeding the - 24 - amount of payments made out of the Special Account A for eligible expenditures. Each such deposit shall be withdrawn by the Asso- ciation from the Credit Account under the respective Categories (1), (2), (3) and (4), 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 A 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 documents and other evidence as the Association shall reasonably request, showing that such payment was made for eligible expen- ditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account A shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals should 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) when the total unwithdrawn amount of the Credit allocated to Categories (1), (2), (3) and (4) for the Project, minus the amount of any outstanding qualified agreement to reimburse made by the Asso- ciation and of any outstanding special commitment entered into by the Association pursuant to Sec- tion 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 Cate- gories (1), (2), (3) and (4) for the Project shall follow such procedures as the Association shall specify by notice to the Borrower. 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 A as - 25 - of the date of such notice have been or will be utilized in mak- ing payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account A: (i) was made for any expenditure or in any amount not eligible pursuant to para- graph 2 of this Schedule; or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association, deposit into the Special Account A (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. No further deposit by the Association into the Special Account A 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 A 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. - 26 - SCHEDULE 6 Special Account B 1. For the purposes of this Schedule: (a) the term "Category" means a category of items to be financed out of the proceeds of the Swiss Contribution 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 Swiss Contribution allocated from time to time to Categories (1), (3) and (4) in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount of CFAF 150,000,000 to be withdrawn from the Swiss Contribution Account and deposited in the Special Account B pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, payments out of the Special Account B shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to the Association that the Special Account B has been duly opened, withdrawals of the Authorized Allocation and subsequent withdra- wals to replenish the Special Account B 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 Swiss Contribution Account and deposit in the Special Account B such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the Special Account B at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Swiss Contribution Account and deposit into the Special Account B such amounts as shall be - 27 - required to replenish the Special Account B with amounts not ex- ceeding the amount of payments made out of the Special Account B for eligible expenditures. Each such deposit shall be withdrawn by the Association from the Swiss Contribution Account under the respective Categories (1), (3) and (4), 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 B 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 documents and other evidence as the Association shall reasonably request, showing that such payment was made for eligible expen- ditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account B shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals should be made directly by the Borrower from the Swiss Contribution Account in accordance with the provisions of paragraph (a) of Section 2.02 of this Agreement; or (ii) when the total unwithdrawn amount of the Swiss Contribution allocated to Categories (1), (3) and (4) for the Project, minus the amount of any outstanding qualified agreement to reimburse made by the Association and of any oucstanding special commitment entered into by the Association pur- suant 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 Swiss Contribution Account of the remaining unwithdrawn amount of the Swiss Contri- bution allocated to Categories (1), (3) and (4) for the Project shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made - 28 - only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account B 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 B: (i) was made for any expenditure or in any amount not eligible pursuant to para- graph 2 of this Schedule; or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association, deposit into the Special Account B (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. No further deposit by the Association into the Special Account B 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 B 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 Swiss Contribution Account. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Bank for Reconstruction and Development and the International Development Association. FOR SECRETARY