Argentina - Forestry Development Project : Loan 3948 - Loan Agreement - Conformed

L4 LOAN NUMBER 3948-AR Loan Agreement (Forestry Development Project) between ARGENTINE REPUBLIC and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated Lr C ( , 199o Loan Number 3948-AR LOAN AGREEMENT AGREEMENT, dated JU l ( , 199* between ARGENTINE REPUBLIC (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS 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; WHEREAS the Borrower is committed to undertaking sustainable management and conservation-oriented forestry and, in furtherance of this commitment, is preparing a Native Forests and Protected Areas Project for the financing of which it intends to request assistance from the Bank; 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 modifications set forth below (the General Conditioas) constitute an integral part of this Agreement: (a) The last sentence of Section 3.02 is deleted. (b) The second sentence of Section 5.01 is modified to read: "Except as the Bank and the Borrower shall otherwise agree, no withdrawals shall be made: (a) on account of expenditures in the territories of any country which is not a member of the Bank or for goods produced in, or services supplied from, such territories; or (b) for the purposes of any payment to persons or entities, or for any import of goods, if such payment or import, to the knowledge of the Bank, is prohibited by a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations." -2- (c) In Section 6.02, subparagraph (k) is relettered as subparagraph (1) and a new subparagraph (k) is added to read: "(k) An extraordinary situation shall have arisen under which any further withdrawals under the Loan would be inconsistent with the provisions of Article III, Section 3 of the Bank's Articles of 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) "Annual Operating Plan" means any of the annual operating plans (planes operativos anuales) referred to in Section 3.04 (b) of this Agreement and which plan has been approved by the Bank; (b) "Arg$" means the currency of the Borrower; (c) "Charter" means the Borrower's decree-law No. 21.680 of December 4, 1956 creating INTA (as hereinafter defined), as amended; (d) "Collaboration Agreement" means an agreement, satisfactory to the Bank, to be entered into between the Borrower, through the Secretaria (as hereinafter defined), and a Selected Institution providing foir the assistance of the latter in the implementation of Parts C.2, C.3 and C.4 of the Project in a Selected Area; (d) "Fiscal Year" means the Boirower's fiscal year commencing on January 1 and ending on December 31; (e) "INTA" means Instituto Nacional de Tecnologia Agropecuaria the Borrower's National Institute for Agricultural Research; (f) "INASE" means Instituto Nacional de Semillas, the Borrower's National Seed Institute; (g) "Monitoring Indicators" means the indicators of performance and impact of the Project as such indicators are set forth in the letter from the Borrower to the Bank of even date herewith; (h) "Project Implementation Unit" means the administrative unit referred to in Section 3.06 (c) of this Agreement; -3- (i) "Selected Area" means any of the following areas: Sierra Central, in the Province of Misiones; Yungas\Transici6n Parcue Chagueflo, in the Province of Salta; Chaco H6medo, in the Province of Chaco; Departamento Minas, in the Province of Neuquen; and the Chaco Seco, in the Province of Salta and any other area, in addition or substitution therefor, selected between the Borrower and the Bank, for purposes of the implementation of Part C of the Project; (j) "Selected Institution" means a public or private entity, acceptable to the Borrower and the Bank, which is willing to participate in the implementation of Parts C.2, C.3 and C.4 of the Project; (k) "Small Farmer" means an individual farm family which has: (A) legal title to the land it farms; (B) family income of less than two minimum rural salaries (as determined from time to time by the Borrower's Ministry of Labor and Social Security); (C) total assets, excluding land, of less than Arg$20,000; and (D) potential and motivation, in the opinion of the Selected Institution, to increase family income while also contributing to protecting adjoining native for.sts; (1) "Secretaria" means the Borrowe-'s Secretaria de AgrTicultura, Ganaderia y Pesca, Secretariat of Agriculture, Livestock and Fisheries; and (m) "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 sixteen million dollars ($16,000,000), 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 may, for the purposes of the Project, open and maintain in dollars a special deposit account in a commercial bank on terms and conditions satisfactory to the Bank, 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 5 to this Agreement. Section 2.03. The Closing Date shall be June 30, 2004 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 per cent (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 for each Interest Period equal to the Cost of Qualified Borrowings determined in respect of the preceding Semester, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rate applicable during 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 determined in respect of such Semester. (c) For the purposes of this Section: (i) "Interest Period" means a six-month period ending on the date immediately preceding each date specified in Section 2.06 of this Agreement, beginning with the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost, as reasonably determined by the Bank and expressed as a percentage per annum,. of the outstanding borrowings of the Bank drawn down after June 30, 1982, excluding such borrowings or portions thereof as the Bank has allocated to fund: (A) the Bank's investments; and (B) loans which may be made by the Bank after July 1, 1989 bearing interest rates determined otherwise than as provided in paragraph (a) of this Section. -5- (iii) "Semester" means the first six months or the second six months of a calendar year. (d) On such date as the Bank may specify by no less than six months' notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to read as follows: "(a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Quarter equal to the Cost of Qualified Borrowings determined in respect of the preceding Quarter, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rates applicable during such Interest Period." "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Quarter." "(c) (iii) 'Quarter' means a three-month period commencing on January 1, April 1, July 1 or October 1 in 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 the Secretaria with due diligence and efficiency and in conformity with appropriate administrative, financial, agricultural, forestry and environmental practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. -6- (b) Without limitation upon the provisions of paragraph (a) of this Section, the Borrower, through the Secretaria, shall carry out Parts B.3, B.5 and C.1 of the Project with the assistance of INTA and carry out Part B.4 of the Project with the assistance of INASE, all on terms acceptable to the Bank. 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. Section 3.03. Without limitation upon the provisions of Article IX of the General Conditions, the Borrower, through the Secretaria. shall: (a) prepare and furnish to the Bank not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, a plan, of such scope and in such detail as the Bank shall reasonably request, for the future operation of the Project; (b) afford the Bank a reasonable opportunity to exchange views with the Borrower on said plan; and (c) thereafter, carry out said plan with due diligence and efficiency and in accordance with appropriate practices, taking into account the Bank's comments thereon. Section 3.04. Without limitation to the provisions of Section 9.07 (a) (iii) and (c) of the General Conditions, the Borrower shall furnish to the Bank: (a) not later than January 31 and July 31 of each year of Project execution, a progress report on the Project, of such scope and detail as the Bank may reasonably request, including, inter alia: (i) a section detailing progress in implementation of the Project based on, among other factors, the Monitoring Indicators; and (ii) specific and justified proposals for adjustm-ents in Project implementation based on the then current results; and (b) not later than June 30 of each year of Project execution, for its review and approval, a proposed Annual Operating Plan providing for the activities, implementation schedule, physical targets and a proposed budget in respect of the Project during the upcoming year. Section 3.05. Without limitation to the provisions of Section 9.01 (a) (i) of the General Conditions, the Borrower shall: -7- (a) Not later than November 1998, hold, jointly with the Bank, a comprehensive mid-term review of the execution of the Project, such review to be based on the reports referred to in Section 3.04 (a) of this Agreement and to focus, inter alia, on the following items: (i) progress in the reform process of the policy, legal and regulatory framework in connection with the plantations and timber processing industries; (ii) Parts B.6 and C of the Project; (iii) evaluation of the progress in execution and in the achievement of the objectives of the Project based on, among other factors, the Monitoring Indicators; and (iv) any changes in Project implementation that may be necessary. (b) If as a result of the above mid-term review, progress in the execution of the Project or in the achievement of the objectives of the Project is not satisfactory to the Bank, the Borrower shall promptly take or cause to be taken all such action, satisfactory to the Bank, as shall be needed to achieve such objectives or to carry out efficiently the Project. Section 3.06. The Borrower shall: (a) maintain in the Secretaria an appropriate organizational structure, functions and staff for the efficient implementation and supervision of the Project; (b) promptly inform the Bank of any change in the organizational structure or functions of the Secretaria that may affect the execution of the Project; and (c) without limitation or restriction to paragraph (a) above, establish, and thereafter maintain during the execution of the Project, an administrative unit within the Secretaria with organizational structure, functions and staff acceptable to the Bank for the provision of administrative and technical services for the Project. Section 3.07. The Borrower, through the Secretaria, shall: (a) require that beneficiaries of government grants for forest plantation establishments utilize seedlings, when available, which are certified by INASE in accordance with the methodology developed under Part B.4 of the Project; (b) collect and input the statistics under Part B. 1 (b) of the Project in accordance with the least cost option of inputting into the Secretaria's database raw statistics collected by other agencies, when available, and having the Secretaria collect only the raw data required by its mandate and not already collected by some other agency; (c) ensure that a Small Farmer shall not receive during the execution of the Project more than $1,000 equivalent under the grant program to be carried out under Part C.4 of the Project; and (d) enter into a Collaboration Agreement for each Selected Area prior to the commencement of activities to be financed under the Loan for Part C of the Project in such Selected Area. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and separate accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project. (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; (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 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 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 -9. 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 Effective Date; Termination Section 5.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the Project Implementation Unit has been established and has been staffed with a project coordinator, a technical manager, a procurement specialist and an accountant, all with experience and qualifications acceptable to the Bank; and (b) the Borrower, through the Secretaria, and INTA have made arrangements satisfactory to the Bank for the provision of assistance by INTA to the Secretaria for the execution of Parts B.3, B.5 and C.1 of the Project. Section 5.02. The date Spr c- Lf , 199(is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of Economy and Public Works and Services of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: - 10 - For the Borrower: Ministerio de Economia y Obras y Servicios Piblicos, Hip6lito Yrigoyen 250, 5to. piso 13210 Buenos Aires Argentina Cable address: Telex: MINISTERIO ECONOMICA 121950 AR 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 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) - 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. REPUBLIC OF ARGENTINA By /61 Ai+onio (Cul)ler-n~o Zocccx-h Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By / 0 6jbi d T7ka AA Regional Vice President Latin America and the Caribbean - 12 - 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 Dollar to be Category Equivalent) Financed (1) Part A of the Project (a) Vehicles, equipment, 318,000 57% training, workshops (b) Consultants' services 1,846,000 100% (2) Part B. 1 of the Project (a) Vehicles, equipment, remote images, workshops 510,000 57% (b) Consultants' services 1,970,00-0 100% (3) Parts B.2, B.3, B.4 and B.5 of the Project (a) Vehicles, equipment, training, research 2,612,000 57% activities (b) Consultants' services 3,608,000 100% (4) Part B.6 of the Project (a) Workshop 34,000 57% (b) Consultants' services 690,000 100% - 13 - Amount of the Loan Allocated % of (Expressed in Expenditures Dollar to be Category Equivalent) Financed (5) Parts C.1, C.2 and C.3 of the Project (a) Vehicles, equipment, training, research 889,000 57% activities (b) Consultants' services 2,058,000 100% (6) Unallocated 1,465,000 TOTAL 16,000,000 - 14 - 2. For the purposes of this Schedule: (a) "consultants' services" means expenditures for consultant fees excluding expenditures for domestic travel and subsistence; (b) the term "remote images" means computer-compatible tapes of satellite images or aerial photography; (c) the term "training" means study tours, training in a recognized educational institution, and short courses, and all of which have received the prior approval of the Bank, and excludes consultants services; and (d) the term "workshop" means any workshop under the Project which has received the prior approval of the Bank with respect to objectives, sponsorship, agenda, cost, location and list of participants. 3. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. 4. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for expenditures under: (a) contracts for goods not exceeding $100,000 equivalent; (b) contracts for consultants' services not exceeding $50,000 equivalent, in the case of consulting firms, and $30,000 equivalent in the case of individuals; and (c) training, workshops and research activities; all under such terms and conditions as the Bank shall specify by notice to the Borrower. - 15 - SCHEDULE 2 Description of the Project The objectives of the Project are to assist the Borrower in: (a) contributing to the efficient and sustainable growth of forest plantations and timber processing industries; (b) alleviating rural poverty; and (c) developing a strategy and consensus to deal with desertification and soil erosion problems in the Patagonia region. 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: Institutional Strengthening A program to strengthen the institutional capacity in the areas of forest plantations and timber processing industries through: (a) the analysis and reform of the policy, legal and regulatory frameworks at the national and provincial levels; (b) a review of the interinstitutional relationships network, the design of improved organizational structures and management procedures and the training of high and mid-level management in improved management procedures; (c) a study of the constraints imposed by public sector personnel policies in the area of forest plantations and timber processing industries and proposals to improve such policies; (d) training of national and provincial staff in technical fields related to forest plantations and timber processing industries; and (e) the establishment and operation of the Project Implementation Unit. PART B: Research and Information Generation and Dissemination. 1. (a) Carrying out of a plantation forest inventory and the development and adequate updating of a database on forest plantations; (b) collection, input and storage of such other statistics necessary for Secretaria to fulfill its mandate in the commercial forestry sector; and (c) strengthening the capacity of Secretaria to analyze data and disseminate information from the database. 2. (a) Studies to identify export markets for sawnwood in which Argentine mills may be competitive; (b) development of a grading system for sawnwood appropriate to the export markets identified in the above studies; and (c) a training program on grading systems for national and provincial public staff and private operators of timber processing industries. - 16 - 3. A tree selection and breeding program for conifers and broadleaf species including studies on available genetic material of pines and eucalypti in Argentina and training for local specialists in cloning, espalier system and other breeding technologies. 4. A seedling improvement and marketing program including the design and operation of a program for certifying seed and nursery stock, the design and implementation of a seedling and seed demand survey, technical assistance to nursery owners to identify sources and to procure improved seed, and technical assistance to nursery operators on improved nursery techniques. 5. A program of: (a) research activities on plantation management, including research training for selected INTA staff involved in plantation establishment and management; (b) extension training by INTA of a core group of subject matter specialists in: (i) improved forest plantation management systems; (ii) awareness of and sensitivity to the environmental issues raised by forest plantations; (iii) laws and regulations applicable to forest plantation establishment and management; (iv) best environmental practices related to forest plantation establishment and management; and (c) prepgration and dissemination of guidelines on forest plantation establishment and management and best environmental practices applicable to forest plantation establishment and management. 6. (a) A study to analyze the desertification process in the Patagonia region and to propose options to address such desertification; and (b) a workshop to disseminate and discuss the findings of the above study. PART C: Small Farmer Improvement. I. A program of applied research for purposes of developing conservation-oriented technologies and sustainable productive systems to be utilized by Small Farmers in Selected Areas. 2. A program to: (a) provide extension services to Small Farmers for improved farming systems; (b) promote the establishment of farmers' organizations; (c) provide technical assistance for land-use planning; and (d) test alternatives to diversify agricultural production of Small Farmers. 3. A program to raise public awareness of environmental issues including school and community tree planting, production and utilization of environmental education videos and training of primary school teachers. 4. A program of grants for Small Farmers to finance production-oriented activities with environmental benefits. - 17 - The Project is expected to be completed by December 31, 2003. - 18 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each March 15 and September 15 beginning March 15, 2001 through September 15, 2010 800,000 * 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. - 19 - 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 (expressed as a percentage per annum) applicable to the Loan on the day of prepayment multiplied by: Not more than three years 0.20 before maturity More than three years but 0.40 not more than six years before maturity More than six years but 0.73 not more than 11 years before maturity More than 11 years but not 0.87 more than 13 years before maturity More than 13 years before 1.00 maturity - 20 - SCHEDULE 4 Procurement and Consultants' Services Section I. Procurement of Goods Part A: General Goods shall be procured in accordance with the provisions of Section I of the 'Guidelines for Procurement under IBRD Loans and IDA Credits' published by the Bank in January 1995 (the Guidelines) and the following provisions of this Section as applicable. Part B: Procurement Procedures 1. Limited International Bidding Vehicles and nursery equipment which the Bank agrees can only be purchased from a limited number of suppliers, regardless of the cost thereof, may be procured under contracts awarded in accordance with the provisions of paragraph 3.2 of the Guidelines. All such vehicles and nursery equipment shall be grouped in packages estimated to cost not less than $100,000 equivalent. 2. International Shopping Goods estimated to cost less than $100,000 equivalent per contract and $500,000 equivalent or less in the aggregate, may be procured under contracts awarded on the basis of international shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. Such procurements shall take place using standard documents approved by the Bank. 3. National Shopping Goods estimated to cost $50,000 equivalent or less per contract and $1,200,000 equivalent or less in the aggregate, may be procured under contracts awarded on the basis of national shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. Such procurements shall take place using standard documents approved by the Bank. - 21 - 4. Direct Contracting Contracts for satellite images estimated to cost $600,000 or less in the aggregate may be procured in accordance with the provisions of paragraph 3.7 of the Guidelines. Part C: Review by the Bank of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to prequalify for bidding or to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph I of Appendix 1 to the Guidelines. Procurement of all goods and works shall be undertaken in accordance with such procurement plan as shall have been approved by the Bank, and with the provisions of said paragraph 1. 2. Prior Review With respect to each contract for goods procured under the procedures referred to in Parts B. 1 and B.4 of this Schedule, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix I to the Guidelines shall apply. Section II. Employment of Consultants 1. Consultants' services shall be procured under contracts awarded in accordance with the provisions 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 (the Consultant Guidelines). For complex, time-based assignments, such contracts shall be based on the standard form of contract for consultants' services issued by the Bank, with such modifications thereto as shall have been agreed by the Bank. Where no relevant standard contract documents have been issued by the Bank, other standard forms acceptable to the Bank shall be used. 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Bank review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts, shall not apply to: (a) contracts for the employment of consulting firms estimated to cost less - 22 - than $ 50,000 equivalent each; or (b) contracts for the employment of individual consultants estimated to cost less than $30,000 equivalent each. However, said exceptions to prior Bank review shall not apply to: (a) the terms of reference for such contracts; (b) single-source selection of consulting firms; (c) assignments of a critical nature, as reasonably determined by the Bank; (d) amendments to contracts for the employment of consulting firms raising the contract value to $50,000 equivalent or above; or (e) amendments to contracts for the employment of individual consultants raising the contract value to $30,000 equivalent or above. All consultant firms and individual consultants shall be employed using model letters of invitation approved by the Bank and a standard form of contract issued by the Bank. - 23 - SCHEDULE 5 Special Account I. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (5) set forth in the table in paragraph I of Schedule I 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 I to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $650,000 to be withdrawn from the Loan Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless the Bank shall otherwise agree, the Authorized Allocation shall be limited to an amount equivalent to $300,000 until the aggregate amount of withdrawals from the Loan Account plus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions shall be equal to or exceed the equivalent of $3,000,000. 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 in 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 - 24 - 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 evidence to have been paid 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) if the Borrower shall have failed to furnish to the Bank, within the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit reports required to be furnished to the Bank pursuant to said Section in respect of the audit of the records and accounts for the Special Account; (c) if, at any time, the Bank shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Loan Account pursuant to the provisions of Section 6.02 of the General Conditions; or (d) once the total unwithdrawn amount of the Loan allocated to the eligible Categories, 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 shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made - 25 - 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. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Bank for Reconstruction and Development. FOR SECRETARY