Conformed Copy - C2242 - Henan Agricultural Development Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2242 CHA (Henan Agricultural Development Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and HENAN PROVINCE Dated June 20, 1991 CREDIT NUMBER 2242 CHA PROJECT AGREEMENT AGREEMENT, dated June 20, 1991, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and HENAN PROVINCE (Henan). WHEREAS by the Development Credit Agreement of even date herewith between People's Republic of China (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to eighty-one million four hundred thousand Special Drawing Rights (SDR 81,400,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that Henan agree to undertake its obligations under the Project; and WHEREAS Henan, 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 Page 2 Definitions Section 1.01. Unless the context otherwise requires, 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) Henan declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement and, to this end, shall carry out 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, including passenger vehicles, required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and Henan shall otherwise agree, Henan shall carry out the Project in accordance with the Implementation Program set forth in Schedule 2 to this Agreement. Section 2.02. Without limitation upon the provisions of paragraph (a) of Section 2.01, Henan shall: (a) make available a portion of the proceeds of the Credit to Project Entities through BOFs for purposes of carrying out activities under Parts A.2, B.2, B.6, C.1, C.3 and E of the Project, in accordance with terms and conditions acceptable to the Association, including: (i) ensuring that interest rates charged for such funds made available under Parts A.2, B.2, B.6, C.1 and C.3 of the Project shall be no less than ABC's prevailing interest rates for similar loans for similar purposes, such rates to be reviewed from time to time with the Association in light of the cost of funds to ABC, as well as changes in ABC's interest rates; and (ii) ensuring that interest rates charged for such funds made available under Part E of the Project shall be no less than PCBC's prevailing interest rates for similar loans for similar purposes, such rates to be reviewed from time to time with the Association in light of the cost of funds to PCBC, as well as changes in PCBC's interest rates. (b) cause each BOF to establish and maintain, from counterpart funds and repayments of funds made available pursuant to paragraph (a) of this Section, four separate revolving funds on terms and conditions acceptable to the Association, including charging interest at the rates set forth in paragraph (a) (i) of this Section, to be used for purposes of providing continued financing for: (i) ground water development; (ii) farm inputs; (iii) orchard development; and (iv) livestock development. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.04. Henan 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 respectively to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) in respect of the Project. Section 2.05. (a) Henan shall, at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and other matters relating to the purposes of the Credit. Page 3 (b) Henan shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by Henan of its obligations under this Agreement. ARTICLE III Financial Covenants Section 3.01. (a) Henan shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition in respect of the Project. (b) Henan shall: (i) have the accounts referred to in paragraph (a) above 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 records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, Henan 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 Association has received the audit for the fiscal year in which the last withdrawal from the Credit 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 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. Section 3.02. Henan shall ensure that suitable arrangements acceptable to the Association will be made with ABC and with PCBC or other appropriate financial institutions for purposes of facilitating the provision of funds to Project Entities. ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Page 4 Section 4.02. (a) This Agreement and all obligations of the Association and of Henan 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 accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify Henan of this event. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE V Miscellaneous Provisions Section 5.01. 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 designated 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 197688 (TRT) Washington, D.C. 248423 (RCA) 64145 (WUI) or 82987 (FTCC) For Henan Province: Henan Province 10 Wei Er Road Zhengzhou, Henan Province 450003 People's Republic of China Telex: 46080 HCSPC CN Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Henan, may be taken or executed by the Vice Governor of Henan or such other person or persons as he shall designate in writing, and he shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized Page 5 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/ A. Karaosmanoglu Regional Vice President Asia HENAN PROVINCE By /s/ Zhu Qizhen Authorized Representative SCHEDULE 1 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding and Works 1. Except as provided in Part C hereof, goods, including machinery, equipment, vehicles, agrochemicals and agroindustrial equipment, 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 for equipment or materials shall be grouped into bid packages to permit bulk purchases. 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 China 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. Civil works shall be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 2. Civil works estimated to cost less than $200,000 equivalent per contract may be procured through force account. 3. Groups of items, including small pumps, motors, irrigation equipment, electrical equipment, pipes, farm and livestock tools, seed and feed processing equipment, materials and farm supplies estimated to cost less than $200,000 equivalent per contract, may be procured under contract awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 4. Groups of items, including furnishings, small equipment and office supplies, estimated to cost less than $50,000 equivalent per contract, up to an aggregate amount not to exceed the equivalent of $4,000,000, 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 a accordance with procedures acceptable to the Association. Page 6 5. Fruit tree, seedlings, tree saplings and breeding stock, may be procured by direct purchase from suppliers eligible under the Guidelines in accordance with procedures acceptable to the Association. Part D: 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 and each of the first contracts procured under Parts C.1 and C.3 hereof, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. When 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 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 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. When 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 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 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 Association has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 3.01 (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 Henan in carrying out the Project, Henan shall employ consultants whose qualifications, 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. Unless otherwise agreed to by the Association, Henan shall submit each contract for consultants' services to the Association for its review and approval prior to entering into such contract. SCHEDULE 2 Implementation Program 1. In order to ensure effective coordination in carrying out the Project, Henan shall maintain or cause to be maintained: (a) a project leading group (PLG) at each of the provincial, prefecture or municipal, and county levels with composition and responsibilities acceptable to the Association; and (b) a project management office at: (i) the provincial level; and (ii) each of the prefecture or municipal, and county levels, with functions and responsibilities acceptable to the Association and staffed by competent staff in adequate numbers. 2. Henan shall cause each PMO to assist Henan in complying with the financial reporting requirements of Article III of this Agreement. 3. Henan shall furnish to the Association by December 31 of each year during implementation of the Project, an annual plan of civil works to be carried out under the Project during the next calendar Page 7 year, including a proposed schedule and budgetary and financial arrangements required to carry out such program. 4. Henan shall ensure that: (a) all agrochemicals financed out of the proceeds of the Credit shall have been approved by the Association and shall be used in accordance with guidelines acceptable to the Association; (b) all Project activities comply with environmental standards and practices, including the environmental guidelines and regulations issued by the National Environmental Protection Agency and by the Henan Environmental Protection Bureau (HEPB), acceptable to the Association; (c) HEPB shall have approved the final designs for effluent treatment for each agroindustrial or agroprocessing facility financed under the Project prior to beginning construction of such facility; and (d) each agroindustrial and agroprocessing enterprise shall implement and maintain a system in accordance with the final designs approved by HEPB to treat and monitor all effluents from the agroindustrial or agroprocessing facility financed under the Project. 5. Without limitation to the reporting provisions of Section 9.06 of the General Conditions, Henan shall: (a) furnish to the Association, on January 31 and July 31 of each year during implementation of the Project, a report on the progress of carrying out the Project; (b) by not later than October 31, 1993, carry out a midterm review with the Association of the progress of carrying out the Project; and (c) by not later than December 31, 1993, furnish to the Association a report on the progress of carrying out any recommendations resulting from such midterm review. 6. Henan shall: (a) cause the resale prices charged for imported fertilizers and pesticides financed out of the proceeds of the Credit to be at least equal to the cost of importing such fertilizers and pesticides, including a margin for distribution costs, determined in accordance with a methodology acceptable to the Association; and (b) review the resale prices of imported fertilizers and pesticides with the Association on at least an annual basis, and promptly thereafter make any adjustments as may be required to ensure that at least the resale prices required by paragraph (a) hereof are achieved. 7. (a) By December 31, 1992, Henan shall provide to the Association for its review and comment, a plan to manage water resources; (b) Henan shall ensure that number of new and rehabilitated wells in the Project Area are limited to those financed under the Project until Henan shall have completed an assessment of ground water potential and Henan and the Association have agreed that there is adequate groundwater to support the establishment of additional new wells in the Project Area; (c) by December 31, 1992, Henan shall prepare and provide to the Association revised operation and maintenance plans for the surface irrigation schemes financed under the Project; and (d) by February 28 of each year, Henan shall: (i) provide to the Association for its review a report of water charges for surface irrigation schemes financed under the Project; and (ii) revise such charges periodically in order to achieve by November 1, 1996, levels of water charges sufficient to cover all operating and maintenance costs, such costs to be determined in accordance with a methodology acceptable to the Association. 8. Henan shall cause each new agroprocessing or agroindustrial Project Entity which Page 8 participates in Part E of the Project: (a) to provide to the Association for its review and comment, draft operational guidelines before final adoption thereof; (b) to be managed by competent staff with qualifications and experience acceptable to the Association; and (c) to maintain at all times during Project implementation a debt to equity ratio of no greater than 5 to 1, determined in a manner acceptable to the Association. 9. Henan shall by December 31 of each year during implementation of the Project, furnish to the Association for its review and approval, a program for domestic and overseas training and study tours to be carried out under the Project during the next calendar year. 10. Without limitation to the provisions of Section 2.01 (a) of this Agreement and in order to ensure that adequate counterpart funding is made available in a timely manner, Henan shall: (a) furnish to the Association: (i) by January 31 of each year during Project implementation, a statement of proposed budgetary allocations for the Project at each of the municipal, prefecture and county levels; and (ii) by April 30 of each year during Project implementation, a detailed statement of approved budgetary allocations for the Project; and (b) ensure that PLGs shall take all actions necessary or appropriate to mobilize the provision of such counterpart funding.