Conformed Copy - C1854 - Cocoa Rehabilitation Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1854 GH (Cocoa Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and GHANA COCOA BOARD Dated February 18, 1988 PROJECT AGREEMENT AGREEMENT, dated February 18, 1988, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and GHANA COCOA BOARD (COCOBOD). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Republic of Ghana (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to thirty- one million three hundred thousand Special Drawing Rights (SDR 31,300,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that COCOBOD agrees to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and COCOBOD, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to COCOBOD on the terms and conditions set forth in the Subsidiary Loan Agreement; and Page 2 WHEREAS COCOBOD, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, wherever used in this Agreement, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) COCOBOD declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Deve- lopment Credit Agreement and, to this end, shall carry out Parts A through J of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and agricultural practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Parts A through J of the Project. (b) Without any limitation or restriction upon any of its other obligations under this Agreement, COCOBOD shall include in its annual recurrent and capital budget adequate funds to finance its estimated share of expenditures under Parts A through J of the Project. (c) Without any limitation or restriction upon the provi- sions of paragraph (a) of this Section and, except as the Associa- tion and COCOBOD shall otherwise agree, COCOBOD shall carry out Parts A through J of the Project in accordance with the Imple- mentation Program set forth in Schedule 2 to this Agreement. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for Parts A through J of the Project and to be financed out of the proceeds of the Credit shall be governed by the provi- sions of Schedule 1 to this Agreement. Section 2.03. COCOBOD shall carry out 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 insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement and Parts A through J of the Project. Section 2.04. COCOBOD shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, COCOBOD shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provi- sion thereof. Section 2.05. (a) COCOBOD shall, at the request of the Asso- ciation, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) COCOBOD shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Parts A through J of the Project, the accomplishment of the purposes of the Credit, or the performance by COCOBOD of Page 3 its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of COCOBOD Section 3.01. (a) COCOBOD shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, economical, agricultural and engineering practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. (b) COCOBOD shall appoint suitable persons with experience and qualifications acceptable to the Association for the following positions: (i) Executive Directors of CSD and CRIG; (ii) Managing Director of PBC; and (iii) the Directors of Audits, PPMR and Finance and Budget. Section 3.02. COCOBOD shall at all times operate and maintain its plant, machinery, equipment and other property and, from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and agricultural practices. Section 3.03. COCOBOD shall ensure that pesticides are used in accordance with appropriate environmental standards; to that end, COCOBOD shall make arrangements satisfactory to the Asso- ciation for the monitoring of the use of pesticides and status of residues in beans, soils and water supplies in treated areas, as well as the effect on workers and farmers involved in the applica- tion of pesticides. Section 3.04. COCOBOD shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.05. COCOBOD shall no later than August 31, 1988: (i) formulate (on the basis of the cocoa producer price study commissioned by COCOBOD) a cocoa producer pricing study satisfac- tory to the Association; and (ii) furnish to the Association full details of the said policy. ARTICLE IV Financial Covenants Section 4.01. (a) COCOBOD shall maintain records and accounts (on a consolidated basis as well as for its various divisions and subsidiaries) adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) COCOBOD shall: (i) have its records, 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 (iii) furnish to the Association such other information Page 4 concerning said records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of COCOBOD thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date twenty years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accor- dance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify COCOBOD of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have desig- nated by notice to the party giving such notice or making such request. The addresses so specified are: 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) For COCOBOD: Ghana Cocoa Board P.O. Box 933 Accra, Ghana Cable address: Telex: COCOBOD 2210 Leymot GH Accra Page 5 Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of COCOBOD may be taken or executed by the Chief Executive of COCOBOD or such other person or persons as COCOBOD shall designate in writing, and COCOBOD shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. 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. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Edward V.K. Jaycox Regional Vice President Africa GHANA COCOA BOARD By /s/ Eric Otoo Authorized Representative SCHEDULE 1 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding 1. 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). 2. To the extent practicable, contracts shall be grouped in bid packages estimated to cost the equivalent of $100,000 or more each. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in Ghana 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 procedures described in Part A.1 hereof, COCOBOD 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 Page 6 1. Civil works and goods estimated to cost less than the equiva- lent of $100,000 but more than the equivalent of $60,000 per contract may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with proce- dures satisfactory to the Association. 2. Items or groups of items estimated to cost less than the equivalent of $60,000 per contract, up to an aggregate amount not to exceed the equivalent of $5,000,000, may be procured under contracts awarded on the basis 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. 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 $200,000 or more, the procedures set forth in para- graphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of Special Account A, 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 Special Account A in respect of such contract. (b) With respect to each contract not governed by the preceding 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 Special Account A, 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 para- graph 3, shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 3 to the Development Credit 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 on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (a) (ii) of the Develop- ment Credit Agreement. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist COCOBOD in carrying out Parts A through J of the Project, COCOBOD shall employ consultants whose qualifica- tions, experience and terms and conditions of employment shall be satisfactory 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. SCHEDULE 2 Implementation Program Project Coordination and Monitoring 1. The overall responsibility for coordinating all Project acti- vities under Parts A through J of the Project rests with the Chief Executive of COCOBOD. Within this framework, the different Page 7 components shall be implemented by the various units or subsi- diaries of COCOBOD as described below. COCOBOD shall submit to the Association, not later than July 1 of each year, for its approval, its proposed annual budget and annual work programs for the different components in such detail and format as agreed upon by COCOBOD and the Association which shall include reports on the progress achieved in the carrying out of the Project during the preceding year. Following approval of the annual work programs, COCOBOD shall ensure that all Project activities under Parts A through J be carried out in accordance with the approved annual work programs. 2. In addition to these reviews of the annual work programs, COCOBOD and the Association shall exchange, not later than August 1 of each year, views on: (a) COCOBOD's corporate plan; (b) its farm input privatization plan referred to in paragraph 15 below; (c) the internal marketing policy and strategy; and (d) the program of CSSVD incentive payments to farmers. 3. In order to assess the overall progress of the Project activities and to ensure the necessary adjustment of implementation procedures to prevailing conditions and policy, COCOBOD and the Association shall conduct a mid-term review not later than November 1, 1990. Parts A through E of the Project 4. CSD shall be responsible for the implementation of Parts A through E of the Project. 5. In order to enhance its abilities to handle its key respon- sibilities in cocoa development, CSD shall implement a reorganiza- tion plan designed to: (a) improve efficiency; (b) ensure effec- tive supervision; (c) allow a better use of limited staff skills, (d) promote specialization; and (e) reduce costs. As part of such reorganization, CSD shall, not later than January 1, 1990, reduce the number of districts in which it operates to thirty nine. 6. In order to further streamline and strengthen the extension service provided to cocoa farmers, CSD shall: (a) by June 30, 1988, discontinue its involvement in the sale and distribution of farm inputs; and (b) starting, not later than January 1, 1989, implement two pilot operations under which field-level extension services will be provided: (i) to cocoa farmers (A) in one-half of the cocoa growing areas of the Volta Region during the first year of the pilot operations by extension staff of the Borrower's Ministry of Agriculture, and (B) in all the cocoa growing areas of the Volta Region by said extension staff as from the second year of the pilot operations if effective field extension services have been provided by such staff during the first year of the pilot operations; and (ii) to farmers (A) in one-half of the cocoa growing areas of the Brong Ahafo Region by CSD extension staff during the first year of the pilot opera- tions, and (B) in all cocoa growing areas of the Brong Ahafo Region by CSD extension staff as from the second year of the pilot operations. 7. Under Part D of the Project, CSD shall: (a) make available hybrid seed only to farmers who agree to apply improved agroeconomic practices and to prepare seedlings in polybags; and (b) sell seed or seedlings at prices not less than the pre- Page 8 vailing market prices for equivalent dry weight of beans. Part F of the Project 8. CRIG shall be responsible for the implementation of Part F of the Project. 9. In order to strengthen its capacity to provide the necessary scientific and technical support to the cocoa sector, CRIG shall establish, not later than April 1, 1988, a CRIG Management Commit- tee with terms of reference and membership acceptable to the Asso- ciation. Said Committee shall, in particular: (a) take important decisions or set guidelines on research policies and priorities; (b) approve work programs, budgets, funding, staff appointments and terms of service; and (c) ensure proper liaison with other institutions and farmer contacts. 10. Under the Management Committee, CRIG shall establish, not later than June 30, 1988, a Research Policy Sub-Committee designed to advise the Management Committee on research policies and priorities in line with national development goals, with terms of reference and membership acceptable to the Association. 11. CRIG shall undertake periodic external assessments of its research program and provide such information to COCOBOD. The first assessment shall be undertaken not later than March 31, 1988, the second not later than June 30, 1991, and thereafter at least every five years. Part G of the Project 12. The Policy, Planning, Monitoring and Research Department shall be responsible for the monitoring and evaluation activities in COCOBOD. In order to strengthen the overall policy analysis capacity of COCOBOD, monitoring and evaluation units shall be established in the Policy, Planning, Monitoring and Research Department as well as in the Produce Buying Company, Ltd. and CSD. Part H of the Project 13. (a) CSD shall be responsible for carrying out the study under Part H.1 of the Project. (b) PPMR shall be responsible for carrying out the study under Part H.2 of the Project. (c) PPMR shall be responsible for carrying out the review under Part H.3 of the Project. Part I of the Project 14. COCOBOD shall reduce, in accordance with a program acceptable to the Association, the cocoa farm input subsidies in three annual steps and eliminate them by the end of 1989. 15. COCOBOD shall take all steps necessary to ensure the privatization of the farm input system by 1992 in accordance with the following program: (a) Within one year from the Effective Date (first year of Project implementation), private retailing of farm inputs shall be introduced in the Eastern Region. COCOBOD shall continue to make bulk deliveries at regional level or other bulk delivery points. Retailers shall sell the farm inputs to farmers at uniform prices allowing them a negotiated margin of profit. Based on the experience gained, COCOBOD shall then design a national retailing network. (b) In the second year of Project implementation, private retailing of farm inputs shall be introduced in the Central and Volta Regions taking into account the lessons learned in the first Page 9 Project implementation year. COCOBOD shall relinquish bulk delivery in the Eastern, Central and Volta Regions. Retailers shall sell the farm inputs at prices which shall vary from region to region depending on the particular circumstances and shall be, in general, higher than in the first Project implementation year reflecting a reduced subsidy level. (c) In the third year of Project implementation, private retailing of farm inputs shall be introduced in the Ashanti and Brong-Ahafo Regions; bulk delivery by COCOBOD in these Regions shall be relinquished. All inputs to farmers in the Regions so far affected shall be sold at market prices. (d) In the fourth year of Project implementation, bulk delivery and retailing in the Western Region shall be privatized. Farm inputs to farmers shall be sold at market prices in all Regions. (e) Not later than May 31, 1991, COCOBOD shall announce that, starting in 1992, the private sector shall be allowed, in addition to the retailing activities, to import inputs for the cocoa sector as approved by COCOBOD. Part J of the Project 16. Part J of the Project shall be carried out by: (a) the Produce Buying Company, Ltd (PBC) with respect to buying, storing and hauling of cocoa; (b) the Produce Inspection Division with respect to grading and inspection of cocoa; and (c) the Infestation Control Department with respect to infestation control. 17. In order to rationalize and streamline the cocoa buying system, PBC shall, not later than January 1, 1990: (a) review the role and function of each of its buying centers and forecast the annual purchases of cocoa in each buying center taking into account, inter alia, the establishment of new farms, fire damage or cutting out of cocoa trees, conditions of roads and accessibility; (b) close down all buying centers with forecasted annual purchases of less than 25 tons; and (c) convert all buying centers with forecasted annual purchases between 25 and 50 tons into sub-societies which would be visited once a week by a mobile buying unit.