Conformed Copy - C2539 - Rural Health Workers Development Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2539 CHA (Rural Health Workers Development Project) between PEOPLE'S REPUBLIC OF CHINA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated August 25, 1993 CREDIT NUMBER 2539 CHA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated August 25, 1993, between PEOPLE'S REPUBLIC OF CHINA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS: (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) Parts A, B, C and D of the Project will be carried out by the Provinces of Anhui, Fujian, Guizhou, Hebei, Henan and Shanxi (the Project Provinces) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the Project Provinces a portion of 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 the Project Provinces; Page 2 NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development 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) "Performance Plan" means the plan to achieve specific outcomes to improve rural health during implementation of the Project by each Project Province, including criteria for monitoring and reporting on progress made in carrying out the Project; (b) "MOPH" means the Ministry of Public Health of the Borrower; (c) "Project Agreement" means the agreement between the Association and the Provinces of Anhui, Fujian, Guizhou, Hebei, Henan and Shanxi of the Borrower, 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; (d) "PIOs" means the Project Implementation Offices established by each Project Province within such Project Province's Bureau of Public Health; "PIO" means any one of such PIOs; (e) "Practice Bases" means the classrooms and accommodations for faculty and students to be established adjacent to or integrated with county and central township hospitals; (f) "Project Provinces" means the Provinces of Anhui, Fujian, Guizhou, Hebei, Henan and Shanxi; "Project Province" means any one of the Project Provinces; and (g) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. 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 seventy-nine million three hundred thousand Special Drawing Rights (SDR 79,300,000). 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 reasonable 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 a special deposit account on terms and conditions satisfactory to the Association, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 3 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1999 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Page 3 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 the date sixty 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 from the next payment date in that year specified in Section 2.06 of this Agreement. (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 April 15 and October 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 semi-annual installments payable on each April 15 and October 15 commencing October 15, 2003, and ending April 15, 2028. Each installment to and including the installment payable on April 15, 2013 shall be one and one-fourth percent (1-1/4%) of such principal amount, and each installment thereafter shall be two and one-half percent (2-1/2%) 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 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 due consideration by them 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 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 time 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 Page 4 Project as set forth in Schedule 2 to this Agreement, and, to this end: (i) shall carry out Part E of the Project with due diligence and efficiency and in conformity with appropriate administrative, health, education and financial practices and shall provide, promptly as needed, the funds, facilities, services and other resources required for such Parts of the Project; and (ii) without limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause the Project Provinces to perform all of their respective obligations set forth in the Project Agreement, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable the Project Provinces 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 relend a portion of the proceeds of the Credit to each Project Province under separate agreements to be entered into between the Borrower and each Project Province, under terms and conditions which shall have been approved by the Association, including the following: (i) repayment over a period not exceeding 15 years, including 6 years of grace; (ii) interest to be paid by each Project Province at the rate of 1.5% per annum on all outstanding amounts withdrawn for foreign expenditures, and at the rate of 3% per annum on all outstanding amounts withdrawn for local expenditures; and (iii) all foreign exchange risks to be paid by each Project Province for the portion of the proceeds of the Credit such Project Province received in foreign exchange. (c) The Borrower shall ensure that the proceeds of the Credit made available by the Project Provinces to prefectures, counties, townships and villages for purposes of carrying out Parts A, B, C and D of the Project, shall be made available on terms and conditions set forth in Schedule 3 to the Project Agreement. 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) in respect of Parts A, B, C and D of the Project shall be carried out by the Project Provinces pursuant to Section 2.03 of the Project Agreement. Section 3.04. The Borrower shall employ, until the completion of the Project, two full-time project managers under Part E of the Project, one within the Department of Education (DOE) and one within the Department of Medical Administration (DOMA) of MOPH, who shall be responsible for coordinating project activities and supporting the dissemination and replication of the benefits of, and lessons learned from, the implementation of the Project. Section 3.05. The Borrower shall conduct, by not later than November 30, 1996, a midterm review of the progress of carrying out the Project with each of the Project Provinces. Section 3.06. (a) The Borrower shall establish by June 30, 1994, and thereafter maintain, an Equipment Selection Committee ("ESC") within MOPH, with composition and terms of reference acceptable to the Association. Page 5 (b) The Borrower shall cause ESC to review all proposals for teaching equipment to be financed out of the proceeds of the Credit and shall select such equipment for financing under the Project in accordance with criteria and procedures acceptable to the Association. 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 expenditures in respect of Part E 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 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 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 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, 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 Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account or payment out of the Special 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. (d) The Borrower shall consolidate and provide to the Association, the audit of the records and accounts with respect to Parts A, B, C, and D of the Project provided by the Project Provinces to the Borrower on behalf of the Association. ARTICLE V Remedies of the Association Page 6 Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) any Project Province shall have failed to perform any of its obligations under the Project Agreement; and (b) as a result of events which have occurred after the date of the Development Credit Agreement, an extraordinary situation shall have arisen which shall make it improbable that a Project Province will be able to perform its obligations under the Project Agreement. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional event is specified, namely that the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower. ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an additional condition to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions, namely, that the Borrower's State Council shall have approved this Agreement. Section 6.02. The following is specified as an additional matter, 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 namely, that the Project Agreement has been duly authorized or ratified by each Project Province, and is legally binding upon each Project Province 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. 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: Minister of Finance Sanlihe Beijing 100820 People's Republic of China Cable address: Telex: FINANMIN 22486 MFPRC CN Beijing For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: Page 7 INDEVAS 248423 (RCA), Washington, D.C. 82987 (FTCC), 64145 (WUI) or 197688 (TRT) 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. PEOPLE'S REPUBLIC OF CHINA By /s/ Li Daoyu Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Gautam S. Kaji Regional Vice President East Asia and Pacific 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) Goods 18,100,000 100% of foreign expenditures, 100% of local expendi- tures (ex-factory cost) and 75% of local expenditures for other items procured locally (2) Civil works 7,300,000 25% (3) Consultants' 11,800,000 100% services, studies and overseas training (4) Local 42,100,000 70% of local training expenditures __________ TOTAL 79,300,000 2. For the purposes of this Schedule: Page 8 (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, except that withdrawals, in an aggregate amount not to exceed SDR 7,200,000 may be made in respect of Categories 3 and 4 on account of payments made for expenditures before that date but after October 31, 1992. SCHEDULE 2 Description of the Project The objectives of the Project are: (a) to strengthen health worker planning capability of the Project Provinces and at the national level; (b) to improve the training of and to retrain medical teachers, rural health workers and managers; (c) to strengthen the management and clinical supervision of rural health workers; (d) to improve inter-institutional coordination among health worker training institutions; and (e) to upgrade the physical conditions of training institutions at the prefecture and county levels and of health service delivery institutions at the township and village levels in the Project Provinces. 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: Health Worker Planning 1. Developing provincial health personnel planning capacity by establishing and staffing health worker planning units at the provincial, prefecture and county levels and by coordinating planning activities common to all Project Provinces. 2. Training personnel planning staff by carrying out: (i) provincial and inter-provincial training workshops in health worker planning; and (ii) overseas training and local academic training of key planning personnel. 3. Improving the planning data base by standardizing and upgrading data collection. 4. Carrying out health worker planning by: (i) analyzing provincial health system needs and health sector staffing; (ii) updating and improving staff productivity standards and the accuracy of provincial health care demand estimates and supply projections; (iii) conducting studies and surveys in support of health worker planning; and (iv) preparing and implementing a provincial health sector staffing plan. 5. Establishing a qualitative basis for health worker planning by carrying out a job analysis study and by writing job descriptions responsive to local community health care needs. 6. Monitoring and evaluating the carrying out of health worker planning by carrying out annual conferences to exchange information and best practices in health worker planning, and by reporting and distributing the results of such conferences within the Project Provinces. Part B: Health Worker Training 1. Establishing: (i) provincial training networks linking and coordinating health worker training institutions at the provincial, prefecture and county levels; and (ii) provincial training plans which will: (a) assess existing strengths and weaknesses of training institutions; (b) establish clinical practice training sites; Page 9 (c) establish a system of differentiated levels of training to obtain cost savings while improving quality; and (d) establish province-wide teacher development and evaluation capabilities. 2. Training teachers and administrators of health training schools by: (a) enhancing teacher skills in instructional design and educational goal measurements through short-term workshops; (b) carrying out national and international study tours; and (c) conducting research on methods to improve teacher performance, develop materials, evaluate teaching methods and student performance, and in-service training for teachers. 3. Improving health worker skills by: (i) analyzing training needs; (ii) updating and improving teaching curricula and teaching methods; (iii) providing in-service and pre-service training targeted to meet specific health needs; and (iv) establishing performance standards. 4. Upgrading the physical infrastructure of provincial training centers, secondary medical schools and county health schools, constructing Practice Bases and providing equipment and educational materials for such schools and Practice Bases. Part C: Managing Rural Health Services 1. Developing health service management and supervision systems. 2. Providing on-the-job training to achieve consistent quality in providing primary health care at the village and township levels. 3. Providing technical assistance, equipment and materials and training to develop a financing, compensation and incentive systems at the township and village levels. 4. Rehabilitating central township hospitals and health centers and provision of equipment to improve central township hospitals, township health centers and village health stations. Part D: Provincial Project Management Training Developing provincial project management skills by providing local and overseas training of PIO staff and local training of staff managing Project activities at the prefecture and county levels. Part E: Central Management Strengthening the institutional capacity of MOPH, specifically its Department of Education (DOE) and the Department of Medical Administration (DOMA), by providing training, equipment, materials and supplies, and technical assistance. * * * The Project is expected to be completed by June 30, 1999. SCHEDULE 3 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means the Categories 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 works, goods and services required for the Project and to be Page 10 financed out of the proceeds of the Credit 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 $6,000,000 (six million dollars) 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 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 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, withdraw 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 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 Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid 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 outstanding special commitment entered into by the Association 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 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. Page 11 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; or (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 paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.