Conformed Copy - L3099 - Health Development Project - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3099 PH (Health Development Project) between REPUBLIC OF THE PHILIPPINES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated November 9, 1989 LOAN NUMBER 3099 PH LOAN AGREEMENT AGREEMENT, dated November 9, 1989, between REPUBLIC OF THE PHILIPPINES (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). 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 Bank to assist in the financing of the Project; (B) the Borrower has received from the Government of Italy a grant (the Italian Grant) in an amount of Lira 12,520,000,000 to assist in financing the Project on the terms and conditions set forth in the Memorandum of Agreement between the Government of the Republic of Italy and the Government of the Republic of the Philippines concerning assistance to the National Tuberculosis Control Program, dated November 3, 1988 (the Italian Grant Agreement); (C) the Borrower has received from the Government of Japan a Page 2 grant (the Japanese Grant) in an amount of Yen 540,000,000 to assist in financing the Project on the terms and conditions set forth in two agreements, respectively, dated November 29, 1988, and even date herewith (the Japanese Grant Agreements) between the Borrower and the Bank acting as Administrator of the Japanese Grant; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan 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 Loan and Guarantee Agreements" of the Bank, 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 and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "DOH" means the Borrower's Department of Health; and (b) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, various currencies that shall have an aggregate value equivalent to the amount of seventy million one hundred thousand dollars ($70,100,000) being the sum of withdrawals of the proceeds of the Loan with each withdrawal valued by the Bank as of the date of such withdrawal. Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special account in a bank acceptable to the Bank and on terms and conditions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 6 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1996, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one- Page 3 half of one percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.06 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost of the outstanding borrowings of the Bank drawn down after June 30, 1982, expressed as a percentage per annum, as reasonably determined by the Bank. (iii) "Semester" means the first six months or the second six months of a calendar year. Section 2.06. Interest and other charges shall be payable semiannually on March 15 and September 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. 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 through DOH with due diligence and efficiency and in conformity with appropriate health practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Bank shall otherwise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 5 to this Agreement. Section 3.02. Except as the Bank shall otherwise agree, procurement of the goods and services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources 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 records and accounts referred to in paragraph (a) of this Section, including those for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied by independent auditors acceptable to the Bank; Page 4 (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records and accounts and the audit thereof as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made 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, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (k) of the General Conditions, the following additional events are specified: (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of any grant or loan made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor; or (B) any such loan shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Bank that: (A) 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 (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations Page 5 of the Borrower under this Agreement. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional event is specified, namely, that the event specified in paragraph (i) (B) of Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (ii) of that Section. ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that the Borrower shall have complied with the provisions of paragraph 1(a) of Schedule 5 to this Agreement. Section 6.02. 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. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. The Secretary of Finance of the Borrower 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: Secretary of Finance Department of Finance Manila Philippines Cable address: Telex: SECFIN 7550 CBP-PH Manila 40268 CB-CONF For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 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. REPUBLIC OF THE PHILIPPINES By /s/ Vicente R. Jayme Page 6 Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Attila Karaosmanoglu Regional Vice President Asia SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Goods 30,000,000 100% of foreign expenditures, 100% of local expenditures (ex-factory cost), and 80% of local ex- penditures for other items pro- cured locally (2) Consultants' and 25,000,000 100% other services (including salaries of contractual staff) and training (3) Grants for 8,100,000 100% services under Part C (4) Unallocated 7,000,000 ___________ 70,100,000 TOTAL 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; and (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 payments made for expenditures prior to the date of this Agreement. Page 7 SCHEDULE 2 Description of the Project The objectives of the Project are to support the Government's priorities to expand and improve public and primary health care, especially for high risk groups; strengthen the efficiency and effectiveness of DOH; promote collaboration between the Government, local communities and non-governmental organizations in meeting community health needs; and establish improved mechanisms for future policy development. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: Part A: Strengthening DOH Health Impact Programs (1) The expansion and improvement of the effectiveness of DOH's malaria control program, inter alia, through the establishment of a new organizational structure for prevention efforts and improved malaria treatment within the existing health delivery system; (2) strengthening of DOH's national tuberculosis control program through improvements in case-finding, patient treatment and follow-up of cases, as well as improving program supervision, providing the program, for the first time, with an urban focus; (3) assisting the national schistosomiasis program in sharply reducing the prevalence rate of the disease in schistosomiasis- infected areas by the deployment of mobile schistosomiasis teams in each endemic municipality to enable case finding and treatment in surrounding areas; and (4) strengthening DOH programs for, inter alia, (a) the reduction of infant and child illness and death through provision of micronutrient supplements for children and expanded support for the acute respiratory infection program; and (b) the reduction of maternal mortality and fertility through provision of micro- nutrient supplements for pregnant women and expansion of health services. Part B: Strengthening DOH Institutional Capability Strengthening of DOH's institutional capability by: (i) strengthening management information and communication systems at key central and field offices; (ii) developing sound planning and budgeting processes and capabilities at central, regional and provincial levels; (iii) strengthening service delivery capacity at selected DOH field units; (iv) upgrading the DOH central laboratory; (v) providing technical and staff support for project management; (vi) improving and coordinating information, education and communication activities within DOH; (vii) strengthening and coordinating training within DOH; and establishing and supporting evaluation mechanisms for both project and program needs; and (viii) strengthening DOH's capacity to plan and monitor community health development activities. Part C: Partnerships for Community Health Development Assisting in the development of partnerships between Government and non-governmental and other community based- organizations for community health development, through, inter alia, the development of proposals for, and the subsequent implementation of, community health projects by such organizations, as well as the provision of services by such organizations, DOH and local governmental staff in selected provinces. Part D: DOH Policy and Program Development Strengthening of: (i) planning and development of future Page 8 health sector policies and programs including establishment of a national committee and a technical secretariat for such purpose; and (ii) the carrying out of related studies. * * * The Project is expected to be completed by June 30, 1996. SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (Expressed in dollars)* March 15, 1995 1,285,000 September 15, 1995 1,335,000 March 15, 1996 1,385,000 September 15, 1996 1,440,000 March 15, 1997 1,495,000 September 15, 1997 1,555,000 March 15, 1998 1,610,000 September 15, 1998 1,675,000 March 15, 1999 1,740,000 September 15, 1999 1,805,000 March 15, 2000 1,875,000 September 15, 2000 1,945,000 March 15, 2001 2,020,000 September 15, 2001 2,095,000 March 15, 2002 2,175,000 September 15, 2002 2,260,000 March 15, 2003 2,345,000 September 15, 2003 2,435,000 March 15, 2004 2,530,000 September 15, 2004 2,625,000 March 15, 2005 2,725,000 September 15, 2005 2,830,000 March 15, 2006 2,940,000 September 15, 2006 3,050,000 March 15, 2007 3,170,000 September 15, 2007 3,290,000 March 15, 2008 3,415,000 September 15, 2008 3,545,000 March 15, 2009 3,680,000 September 15, 2009 3,825,000 _______________________ * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. Premiums on Prepayment Pursuant to Section 3.04 (b) of the General Conditions, the premium payable on the principal amount of any maturity of the Loan to be prepaid shall be the percentage specified for the applicable time of prepayment below: Time of Prepayment Premium The interest rate (ex- pressed as a percentage per annum) applicable to the Loan on the day of prepayment multiplied by: Not more than three years 0.15 before maturity More than three years but 0.30 not more than six years Page 9 before maturity More than six years but 0.55 not more than 11 years before maturity More than 11 years but not 0.80 more than 16 years before maturity More than 16 years but not 0.90 more than 18 years before maturity More than 18 years before 1.00 maturity SCHEDULE 4 Procurement and Consultants' Services Section I. Procurement of Goods Part A: International Competitive Bidding Except as provided in Part C hereof, goods 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 procedures described in Part A hereof, goods manufactured in the Philippines 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: Other Procurement Procedures 1. Contracts for the purchase of the pesticide DDT up to an aggregate amount not to exceed $1,200,000 may be awarded through limited international bidding procedures on the basis of evaluation and comparison of bids invited from all manufacturers, and an adequate number of dealers to ensure competitive prices, each eligible under the Guidelines, and in accordance with the procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof). 2. Subject to the prior approval of the Bank and in accordance with procedures satisfactory to the Bank, proprietary drugs or pesticides up to an aggregate not to exceed $6,200,000 may be procured under contracts negotiated directly with the manufacturer of such drugs or pesticides. 3. Items or groups of items estimated to cost less than the equivalent of $200,000 per contract but more than the equivalent of $25,000 per contract up to an aggregate amount not to exceed the equivalent of $8,500,000 may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Bank. 4. Items or groups of items estimated to cost less than the equivalent of $25,000 per contract up to an aggregate amount not to exceed the equivalent of $1,500,000 may be procured 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 Bank. Part D: Review by the Bank of Procurement Decisions Page 10 1. (a) With respect to each contract estimated to cost the equivalent of $200,000 or more as well as each contract referred to in paragraphs 1 and 2 of Part C hereof, 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, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank prior to the making of the first payment out of the Special Account 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 the Special Account, said 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 Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 6 to this Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Bank has authorized withdrawals from the Loan Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (c)(ii) of this Agreement. 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 satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank 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 5 Implementation Program 1. (a) The Borrower shall take necessary steps to establish and adequately staff a Project Coordinating Unit in DOH, appoint a Project Coordinator with qualifications and terms of reference agreed with the Bank, and designate officials responsible for Project implementation in each implementing DOH division. (b) The Borrower shall, during the Project implementation period, maintain the Project Coordination Unit referred to in subparagraph (a) of this paragraph with appropriate powers, staff and resources. 2. The Borrower shall establish a community health development fund by January 1, 1990, in accordance with procedures and operating guidelines agreed with the Bank. 3. The Borrower shall issue regulations, agreed with the Bank and endorsed by such departments and agencies of the Borrower as shall be appropriate, setting out conditions for distribution of funds for the Project, including the approval and distribution of grants under Part C of the Project. 4. The Borrower shall enter into agreements with selected non- governmental and other community-level organizations, selected in accordance with criteria and procedures satisfactory to the Bank, for the provision of services by such organizations in carrying out Part C of the Project. Page 11 5. DOH shall, by March 1, 1990, issue a directive agreed with the Bank to designated provinces requiring such provinces to develop a provincial health plan to be submitted to DOH by October 30, 1990. 6. The Borrower shall, by January 1, 1990, establish and adequately staff, and thereafter maintain, a Committee for Community Health Policy with terms of reference agreed with the Bank. 7. The Borrower shall, by March 1, 1990, establish, and thereafter maintain, a National Council for Health Policy Development with terms of reference agreed with the Bank. 8. The Borrower shall review with the Bank, not later than October of each year of Project implementation, the health programs and activities supported by the Project. SCHEDULE 6 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1), (2) and (3) 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 Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $4,000,000 to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank 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 shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other Page 12 evidence to have been made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account: (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Loan allocated to the eligible Categories for the Project, less the amount of any outstanding special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories for the Project shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank 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 Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. Page 13