Uganda - Second Telecommunications Rehabilitation Project : Credit 1991 - Credit Agreement - Conformed

CREDIT NUMBER 1991 UG Development Credit Agreement (Second Telecommunications Rehabilitation Project) between THE REPUBLIC OF UGANDA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1989 CREDIT NUMBER 1991 UG DEVELOPMENT CREDIT AGREEMENT AGRFEMENT, dated I c -- .2e , 1989, between THE REPUBLIC OF UGANDA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS: (A) the Borrower, being satisfied of the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) the Project will be carried out by Uganda Posts and Telecommunications Corporation (UPTC) with the Borrower's assistante and, as part of such assistance, the Borrower will make available to UPTC the proceeds of the Credit as provided in this Agreement; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith between the Association and UPTC; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Develop- ment Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions), constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth, and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Association and UPTC of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; and - 2 - (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and UPTC pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (c) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (d) "Investment Program" means UPTC's program of investments for the period 1988 through 1993, approved by the Borrower's Ministry of Planning and Economic Development, and includes: (i) the Project described in Schedule 2 to this Agreement; (ii) extension of the microwave routes to the borders of Tanzania and Rwanda, and reconstruction of some VHF/UHF transmission links; (iii) extension of the telephone switching capacity in Entebbe and Jinja; (iv) extension of telex switching capacity; and (v) expansion of international telecommunications and introduction of international subscriber dialing; (e) "Policy Statement" means the Statement of Policy, adopted by UPTC's Board of Directors on October 27, 1988, which is intended to guide UPTC's operations and future development; and (f) "Project Preparation Advance" means the project prepara- tion advance granted by the Association to the Borrower pursuant to an exchange of letters, dated March 12, 1987; May 6, 1987; September 14, 1988; October 27, 1988; and December 19, 1988, between the Borrower and the Association. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to thirty-eight million three hundred thousand Special Drawing Rights (SDR 38,300,000). -3- Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Association shall so agree, to be made) in respect of the reason- able cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars, through the Bank of Uganda, a special account in a commercial bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 3 to this Agreement. (c) Promptly after the Effective Date, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and pay to itself the amount required to repay the principal amount of the Project Preparation Advance withdrawn and outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn balance of the authorized amount of the Project Preparation Advance shall thereupon be cancelled. Section 2.03. The Closing Date shall be December 31, 1993, or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from a date sixty (60) days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date or at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied as of the next payment date in that year specified in Section 2.06 of this Agreement, except that the rate set as of June 30, 1988, shall be applied as of July 1, 1988. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on January 15 and July 15 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semiannual installments payable on each January 15 and July 15 commencing July 15, 1999, and ending January 15, 2029. Each installment to and including the installment payable on January 15, 2009, shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. (b) Whenever: (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985-dollars for five (5) consecutive years; and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association, and after their due consideration of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit -5- shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest, at an annual rate agreed with the Association, on the principal amount of the Credit withdrawn and outstanding from c:A,- to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, shall cause UPTC to perform, in accordance with the provisions of the Project Agreement, all the obligations of UPTC therein set forth, shall take and cause to be taken all action, including the maintenance of appropriate tariffs for telecom- munications services rendered by UPTC, and the provision of funds, lacilities, services and other resources, necessary or appropriate to enable UPTC to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall: (i) make available to UPTC the equivalent of six million six hundred thouand dollars ($6,600,CC_ of the proceeds of the Credit as an equity con- tribution to UPTC's capital; and (ii) relend the equivalent of forty-five million seven hundred thousand dollars ($45,700,000) of the proceeds of the Credit to UPTC, under a subsidiary loan agreement to be entered into between the Borrower and UPTC, under terms and conditions which shall have been approved by the Association, and which shall include repayment of the principal amount of the loan portion in fifteen (15) years, including a grace period of four (4) years, interest on such principal amount at the rate of eight percent (8%) per annum. UPTC shall bear the foreign exchange risk. (c) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association, and to accomplish the purposes of the Credit and, except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project, and to be financed out of the proceeds of the Credit, shall be governed by the provisions of Schedule 1 to the Project Agreement. Section 3.03. The Borrower and the Association hereby agree that the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) shall be carried out by UPTC pursuant to Section 2.03 of the Project Agreement. Section 3.04. The Borrower shall take all measures necessary to ensure that: (a) the Borrower's ministries and parastatal bodies shall pay, in full, all arrears for telecommunications services by June 30, 1990; and (b) thereafter, all charges incurred by its ministries and parastatal bodies are paid to UPTC within thirty (30) days of the billing date. Section 3.05. The Borrower shall take such steps as shall be tecessary to establish the required tariff level and adopt tariff structures for UPTC's telecommunications services to enable UPTC -7- to attain the rate of return and the cash flow level referred to in Sections 4.03 and 4.04 of the Project Agreement. Section 3.06. The Borrower shall take such steps as are necessary, including timely approval of recommendations made by UPTC, to enable UPTC to maintain its staff compensation package at a level which is competitive with the private and public enterprises sectors. ARTICLE IV Financial Covenants Section 4.01. (a) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditures, the Borrower shall: (i) maintain or cause to be maintained in accordance with sound accounting practices, records and accounts reflecting such expenditures; (ii) ensure that all records (contracts, orders, invoices, bills, receipts and other documents) as evidence of such expenditures are retained 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 was made; and (iii) enable the Association's representatives to examine such records. (b) The Borrower shall: (i) have the records and accounts referred to in subparagraph (a) (i) of this Section and those for the Special 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 (6) 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 Association shall have reasonably requested, including a separate opinion by said auditors as to -8- 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; and (iii) furnish to the Association such other information concerning said records and accounts, and the audit thereof, as the Association 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: (a) UPTC shall have failed to perform any of its obligations under the Project Agreement. (b) As a result of events which have occurred after the date of this Agreement, an extraordinary situation shall have arisen which shall make it improbable that UPTC will be able to perform its obligations under the Project Agreement- (c) The UPTC Act shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of UPTC to perform any of its obligations under the Project Agreement. (d) The Borrower, or any other authority having juris- diction, shall have taken any action for the dissolution or disestablishment of UPTC or for the suspension of its operations. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional events are specified: (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty (60)days after notice thereof shall have been given by the Association to the Borrower; and (b) the events specified in paragraphs (c) and (d) of Section 5.01 of this Agreement shall occur. -9- ARTICLE VI Effective Date; Termination Section 6.01. The following events axe specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions. (a) the Subsidiary Loan Agreement has been executed on behalf of the Borrower and UPTC; (b) UPTC has awarded the turn-key contract for the network rehabilitation under Part A.1 of the Project; (c) UPTC has submitted to the Association an institutional development program, pursuant to paragraph 2 of Schedule 2, to the Project Agreement; and (d) UPTC has: (i) employed a suitable accounting firm, pursuant to paragraph 6 of Schedule 2 to the Project Agreement; and (ii) engaged a financial and expenditure accountant, and a management accountant for UPTC's finance and accounting department. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the Project Agreement has been duly authorized or ratified by UPTC and is legally binding upon UPTC in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and UPTC and is legally binding upon the Borrower and UPTC in accordance with its terms. Section 6.03. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. - 10 - Section 6.04. The obligations of the Borrower under Sections 3.04, 3.05 and 3.06 of this Agreement and the provisions of paragraphs (a) and (b) of Section 5.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on the date fifteen (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 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: Ministry of Finance P.O. Box 8147 Kampala Uganda Cable address: Telex: FINSEC 61170 Kampala For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) - 11 - IN WITNESS WHEREOF, the parties hereto, acting through their 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. THE REPUBLIC OF UGANDA By / 5/ /A - Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By / / ece~L4; Z -0 Regional Vice President / Africa - 12 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Rehabilitation 23,700,000 100% of foreign of local cable expenditures networks under Part A.1 of the Project (2) Vehicles, tools, 8,280,000 100% of foreign telecommunications expenditures and equipment, spare 80% of local parts and supplies expenditures (3) Consultants' 5,200,000 100% of foreign services and expenditures training (4) Refunding of 1,120,000 Amount due pur- Project Prepara- suant to Section tion Advance 2.02 (c) of this Agreement TOTAL 38,300,000 - 13 - 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 with- drawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. - 14- SCHEDULE 2 Description of the Project The objectives of the Project are to assist the Borrower to: (i) rehabilitate UPTC's economically critical facilities to increase the utilization of existing exchange capacity and partly meet demand; and (ii) improve UPTC's operating and financial performance through a program of institutional development. 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: Telecommunications Rehabilitation: 1. Rehabilitation of the local cable networks in Kampala, Entebbe and Jinja through replacement and expansion of primary and secondary telephone cables and associated equipment, including transmission systems for the Kampala inter-exchange junction network. 2. Acquisition of telephone instruments, PBX, teleprinters, facsimile and data equipment for the rehabilitation of subscriber facilities. 3. Acquisition of 100 subscriber units of rural radio call equipment, operation consoles and a transmitter to rehabilitate the existing radio call network. 4. Acquisition of cables and associated equipment for the local networks rehabilitation in provincial towns. 5. Installation of a computerized subscribers' record system and acquisition of microcomputers. 6. Acquisition of vehicles and tools. 7. Engineering consultants' services for the design and super- vision of the rehabilitation of local cable networks under Part A.1 of the Project. Part B: Institutional Development Telecommunications sector institution building through: - 15 - 1. technical assistance for strengthening corporate planning, financial management, training and manpower development; 2. consultants' services to assist UPTC in implementing its institutional development strategy; 3. fellowships and twinning arrangements with a suitable tele- communications agency; and 4. acquisition of laboratory equipment and training aids. Part C: Spare Parts and Materials Acquisition of spare parts and materials for UPTC's maintenance and operations. The Project is expected to be completed by June 30, 1993. - 16 - SCHEDULE 3 Special Account 1. For the purposes of this Schedule: (a) the term "Eligible Categories" means Categories (1) through (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 Credit allocated from time to time to the Eligible Categories in accor- dance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $2,000,000 to be withdrawn from the Credit 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 Association has received satisfactory evidence 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 Association 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 Association shall, on behalf of the Borrower, with- draw from the Credit 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 Association requests for deposits into the Special Account at such intervals as the Association shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required, pursuant to paragraph 4 of this Schedule, for the payment or - 17 - payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Acccant such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been made out of the Special Account for Eligible Expenditures. All such deposits shall be withdrawn by the Association from the Credit 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 Association shall reasonably request, furnish to the Association 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 Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit 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 Credit allocated to the Eligible Categories, less the amount of any out- standing special commitment entered into by the Association pur- suant 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 Credit Account of the remaining unwithdrawn amount of the Credit allocated to the Eligible Categories 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 as of the date of such notice will be utilized in making payments for Eligible Expenditures. - 18 - 6. (a) If the Association 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; an (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Association shall otherwise agree, no further deposit by the Association 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 Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for Eligible Expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to para- graphs 6 (a), 6 (b) and 6 (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancella- tion in accordance with the relevant provisions of this Agreement, including the General Conditions. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY