Nepal - Telecommunications Project : Credit 0166 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 166 NEP Development Credit Agreement (Telecommunications Project) BETWEEN KINGDOM OF NEPAL AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED NOVEMBER 10, 1969 CONFORMED COPY CREDIT NUMBER 166 NEP Development Credit Agreement (Telecommunications Project) BETWEEN KINGDOM OF NEPAL AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED NOVEMBER 10, 1969 Uprlopi~ment TJrebit Agrerment AGREEMENT, dated November 10, 1969, between KING- DOM OF NEPAL (hereinafter called the Borrower) and INTER- NATIONAL EVELOPMENT AssOCIATION (hereinafter called the Association). ARTICLE I General Conditions; Definitions SECTI,, 1.01. The parties to this Development Credit Agreement accept all the provisions of the General Condi- tions Applicable to Development Credit Agreements of the Association, dated January 31, 1969, with the same force and effect as if they were fully set forth herein (said Gen- eral Conditions Applicable to Development Credit Agree- ments of the Association being hereinafter called the Gen- eral Conditions). SECTION 1.02. Wherever used in this Development Credit Agreement, unless the context otherwise requires, the sev- eral terms defined in the General Conditions have the respective meanings therein set forth, and the following additional terms have the following meanings: (a) "NT1" means the Nepal Telecommunications Board, established under the Development Board Act, 1956, of the Borrower by Notification Volume 19, Special Issue 30 of the Borrower dated October 17, 1969, to succeed to the assets, facilities and operations of the Nepal Department of Telecommunications of the Ministry of Works, Transport and Communications of the Borrower; and (b) "NRs" means rupees in the currency of the Bor- rower. ARTICLE II The Credit SECTION 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in this Development 4 Credit Agreement set forth or referred to, an amount in various currencies equivalent to one million seven hundred thousand dollars ($1,700,000). SECTION 2.02. (a) The Association shall open a Credit Account on its books in the name of the Borrower and shall credit to such Account the imount of the Credit. (b) The amount of the Credit may be withdrawn from the Credit Account as provided in, and subject to the rights of cancellation and suspension set forth in, this Develop- ment Credit Agreement and in accordance with the alloca- tion of the proceeds of the Credit set forth in Schedule 1 to this Agreement, as such allocation shall be modified from time to time pursuant to the provisions of such Schedule or by further agreement between the Borrower and the Association. SECTION 2.03. The Borrower shall be entitled to with- draw from the Credit Account such amounts as shall have been paid (or, if the Association shall so agree, shall be required to meet payments to be made) in respect of the reasonable cost of goods or services required for the Proj- ect and to be financed under this Development Credit Agreement. SECTION 2.04. Except as the Association shall otherwise agree, no withdrawals from the Credit Account shall be made on account of payments in the currency of the Bor- rower, or for goods produced in, or services supplied from, the territories of the Borrower. SECTION 2.05. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. SECTION 2.06. The Borrower shall pay to the Associa- tion a service charge at the rate of three-fourths of one 5 per cent (% of 1) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. SECTION 2.07. Service charges shall be payable semi- annually on March 15 and September 15 in each year. SECTION 2.08. The Borrower shall repay the principal amount of the Credit withdrawn from the Credit Account in semi-annual installments payable on each March 15 and September 15 commencing September 15, 1979 nid ending March 15, 2019, each instal1lment to and including the instal'ment payable on March 15, 1989 to be one-half of one per cent (1/ of 1/) of such principal amount, and each installment thereafter to be one and one-half per cent (1y,/) of such principal amount. ARTICLE III Use of Proceeds of the Credit SECTION 3.01, The Borrower shall apply, or cause to be applied, the proceeds of the Credit in accordance with the provisions of this Development Credit Agreement to ex- penditures on the Project, described in Schedule 2 to this Agreement. SECTION 3.02. Except as the Association shall otherwise agree, (i) the goods and services to be financed out of the proceeds of the Credit shall be procured on the basis of international competitive bidding in accordance with the (Juidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in February 1968, and in accordance with such other procedures supplementary thereto as are set forth in Schedule 3 to this Agreement, and (ii) contracts for the procurement of such goods and services shall be subject to the prior approval of the Asso- ciation, except as otherwise provided in such Schedule 3. SECTIoN 3.03. Until the completion of the Project, the Borrower shall cause all goods and services ffianced out 6 of the proceeds of the Credit to be used exclusively in carrying out the Project, except as the Association may otherwise agree. ARTICLE IV Particular Covenants SECTION 4.01. The Borrower shall carry out, or cause to be carried out, the Project with due diligence and efficiency and in conformity with sound admiiistrative, financial, engineering and public utility practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. SECTION 4.02. (a) Upon request from time to time by the Association, the Borrower shiall promptly furish or cause to be furnished to the Association the plans, specifi- cations and -- ork schedules for the Project and any mate- rial modifications subsequently made therein, in such detail as the Association shall request. (b) The Borrower shall: (i) maintain or cause to be maintained records adequate to identify the goods and services financed out of the proceeds of the Credit, to dis- close the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect in accordance with consistently maintained sound account- ing practices the operations and financial condition of NTB; (ii) enable the Association 's representatives to inspect the Project, the goods financed out of the proceeds of the Credit, NTB's properties and equipment and any relevant records and documents; and (iii) furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the expend- iture of the proceeds of the Credit, the Project, the goods and services financed out of the proceeds of the Credit, and the administration, operations and financial condition of NTB. , 7 SECTION 4.03. (a) The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, each of them shall furnish to the other all such information as it shall rea- sonably request with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and eco- nomic conditions in the territories of the Borrower and the international balance of payments position of the Borrower. (b) The Borrower and the Association shall from time to time, at the request of either party, exchange views through their representatives with regard to matters relat- ing to the purposes of the Credit and the maintenance of the service thereof. The Borrower shall promptly inform the Association of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit or the maintenance of the service thereof. (c) The Borrower shall afford all reasonable opportu- nity for accredited representatives of the Association to visit any part of the territories of the Borrower for pur- poses related to the Credit. SECTION 4.04. The Borrower undertakes to insure or cause to be insured the imported goods financed out of the proceeds of the Credit against marine, transit and other hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. SECTIOx 4.05. (a) The Borrower shall cause the organi- zation and functions of NTB to be implemented and the operations and activities of NTB to be carried out (i) in such manner as to satisfy the criteria specified in Sched- S ule 4 to this Agreement and (ii) under rules mutually satisfactory to the Borrower and the Association. (b) Except as the Association shall otherwise agree, the Borrower shall not amend, suspend or terminate any pro- vision of Notification Volume 19, Special Issue 30 of the Borrower dated October 17, 1969 establishing NTB. (c) Except as the Association shall otherwise agree, the transfer of the assets and the functions required for the efficient operation of NTB, and the valuation of such assets on a basis acceptable to the Association, shall be completed by not later than July 16, 1970. SECTION 4.06. (a) Except as the Association shall other- wise agree, the Borrower shall cause NTB to adopt and put into operation, by not later than July 16, 1970, a com- mercial accounting system acceptable to the Association. Such commercial accounting system shall replace the pres- ent system of maintaining accounts, and any statements required by the Borrower in respect of NTB's revenues and expenditures, including development expenditures, will, after the adoption of such system by NTB, be furnished not more frequently than quarterly. (b) After the adoption of the accounting system referred to in paragraph (a) of this Section, the Borrower shall, commencing with the fiscal year beginning in July 1970, cause the financial statements (balance sheet and related statement of earnings and expenses) of NTB to be audited and certified annually by an independent auditor or udit- ing firm acceptable to the Association and shall promptly after their preparation, and, except as the Association shall otherwise agree, not later than five months after the close of the fiscal year to which they apply, transmit to the Asso- ciation certified copies of such statements and a signed copy of the auditor's or auditing firm's report. SECTION 4.07. Except as the Association shall otherwise agree, the Borrower shall: 9 (a) engage consultants acceptable to the Association on terms and conditions satisfactory to the Association to make recommendations on and assist in the implementation of: (i) the operating organization and the procedures to be adopted by NTB for the efficient conduct of its business in accordance with Section 4.05 (a) of this Agreement; and (ii) the commercial accounting system referred to in Section 4.06(a) of this Agreement; (b) cause NTB to employ for periods satisfactory to the Association experts acceptable to the Association for the positions of Financial Comptroller and Business Man- ager of NTB; (c) secure for NTB the services of sufficient qualified accountants for the implementation of the commercial ac- counting system referred to in Section 4.06 (a) of this .dlkAgreement; (d) make arrangements in consultation with the Asso- ciation for the training of NTB's accounting staff; and (e) formulate and carry out a program satisfactory to the A,sociation for the expansion and improvement of training facilities for telecommunications technicians and new employees. SECTION 4.08. The Borrower shall promptly pay, or cause to be paid, at normal rates applicable to all users, to NTB, on a current basis, all charges incurred after July 13, 1969 (or such other date as may be agreed between the Borrower and the Association) by the Borrower or by any of its departments, agencies or instrumentalities in respect of telecommunications services furnished by NTB. SECTION 4.09. Except as the Association shall otherwise agree, the Borrower shall not make, or permit to be made, prior to the completion of the Project, expenditures (other 10 than expenditures for the Project) for the expansion of NTB's telecommunications facilities exceeding in the aggre- gate the equivalent of $100,000 in any fiscal year. SECTION 4.10. The Borrower shall make available lo NTB the proceeds of the Credit under arra rements satis- factory to the Association. Except as the Association shall otherwise agree, such arrangements shall provide inter alia that NTB shall transfer periodically to the Borrower amounts representing (i) interest on such. proceeds at the rate of 61/ fo per annum and (ii) amortization of such proceeds over a term of approximately 12 years, including a grace period of two years, from the date of this Agree- ment. SECTION 4.11. The Borrower shall cause NTB: (a) to operate NTB's business and conduct its affairs in accordance with sound business, public utility and financial practices under the supervision of qualified and experienced management and to operate, maintain, renew and repair its plants, equipment and property in accordance with sound engineering and public utility practices; (b) to take all action reasonably required to maintain and renew all rights, powers, privileges and franchises necessary or useful in the conduct of NTB's business; (c) to take out and maintain with responsible insurers or make other provision satisfactory to the Association for insurance against such risks and in such amount as shall be consistent with sound practice; and (d) not to sell, lease, transfer, or otherwise dispose of any of its properties or assets which shall be required for the efficient carrying on of its business, without the consent of the Association. SECTION 4.12. (a) Except as the Association shall other- wise agree, the Borrower shall: 11 (i) maintain, or cause to be maintained, at present levels the existing tariffs for telecommunication services until the end of the fiscal year ending in July 1973; (ii) by not later than July 15, 1970, establish and put into effect (A) tariffs for the trunk telephone and telex serv- ices to be provided by facilities included in the Project and (B) the amount of the deposit for telephone in- struinents to be paid by new subscribers at levels not less than those specified in Schedule 5 to this Agreement, and maintain such tariffs at the levels so established until the end of the fiscal year ending July 1973; and (iii) establish and maintain tariffs for the fiscal year beginning in July 1973 and thereafter so as to pro- duce an annual rate of return on the average value of NTB's not fixed assets in operation of 8/ or such higher return as may be agreed from time to time between the Borrower and the Association in order to met NTB's cash requirements for its operations, debt service, appropriate portions of its capital expansion, and distributions from prof- its, if any, to the extent that the other requirements are met. (b) For the purposes of paragraph (a) (iii) of this Sec- tion: (i) The annual rate of return shall be calculated by relating the net operating income of NTB for the fiscal year in question to the average of the net depreciated value of NTB 's fixed assets in operation at the beginning and at the end of the year in question. 12 (ii) "Net operating income" shall mean the difference between (A) all operating revenues accruing from NTB's telecommunications services; and (B) all operating costs of NTB's telecommunica- tions services, including administrative ex- penses, adequate maintenance and provision for depreciation on all depreciable assets in operation, computed in accordance with the straight-line method at an average rate of not less than 5% per annum of the value of such depreciable assets as established under subparagraph (iii) below but excluding inter- est and other charges on debt. (iii) "Net depreciated value of NTB's fixed assets in operation" shall mean the gross value of such assets less accumulated depreciation, adjusted in accordance with methods agreed between the Bor- rower and the Association to reflect changes in cur- rent prices of such assets. SECTION 4.13. (a) Except as the Association shall other- wise agree, the Borrower shall not incur, or permit to be incurred, any debt for the benefit of NTB unless NTB's net revenues for the preceding fiscal year or for any later consecutive twelve-month period, whichever is the greater, shall be at least 1.5 times the maximum debt service require- ment on all debt incurred for the benefit of NTB (including the debt to be incurred) for any succeeding fiscal year (including the fiscal year in which such debt is to be incurred). (b) For the purposes of this Section: (i) The term "debt" shall not include debt payable on demand or maturing not more than ome year after its date. 13 (ii) The term "incur" with reference to any debt in- cludes fhe assumption and guarantee of debt and any renewal, extension or modification of the terms of such debt. Debt shall be deemed to be incurred on the date of execution and delivery of a contract, loan agreement or other instrument providing for such debt or for the refinancing of such debt. (iii) The term "net revenues" means gross revenues from all sources, adjusted to take account of NTB 's tariffs in effect at the time of the incurrence of debt even though they were not in effect during the fiscal year or twelve-month period to which such revenues relate, less all operating, maintenance and overhead expenses, but before provision for depre- ciation and inLerest and other charges on debt. (iv) The term "debt service requirement" means the aggregate amount of amortization (including sink- ing fund payments, if any), interest and other charges on debt. (v) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt or, if such other currency is not so obtainable, at the rate of exchange that will be reasonably deter- mined by the Association. SECTION 4.14. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes, and free from all restrictions, imposed under 1:he laws of the Borrower or laws in effect in its territo.ies. 1 14 SECTION 4.15. The Development Credit Agreement shall be free from any taxes that shall be imposed under the laws of the Borrower or laws in effect in its territories on or in connection with the execution, delivery or registration thereof. ARTICLE V Remedies of the Association SE cTIoN 5.01. If any event specified in Section 7.01 of the General Conditions shall occur and shall continue for the period, if any, therein set forth, then at any subsequent time during the continuance thereof, the Association, at its option, may by notice to the Borrower declare the prin- cipal of the Credit then outstanding to be due and payable immediately together with the service charges thereon and upon any such declaration such principal, together with such charges, shall become due and payable immediately, anything in this Development Credit Agreement to the contrary notwithstanding. ARTICLE VI Effective Date; Termination SECTIOx 6.01. The following events are specified as addi- tional conditions to the effectiveness of this Development Credit Agreement within the meaning of Section 10.01(b) of the General Conditions: (a) The Borrower shall have made arrangements satis- factory to the Association to implement the provisions of Section 4.08 of this Agreement. (b) The Borrower shall have employed, on terms and conditions satisfactory to the Association, the consultants, experts and accountants referred to in Section 4.07(a), (b) and (c) of this Agreement. (c) The Borrower shall have made arrangements satis- factory to the Association to finance the portion of the Project not financed by the Credit. 15 SECTION 6.02. The date of March 1, 1970 is hereby specified for the purposes of Section 10.04 of the General Conditions. SECTION 6.03. The obligations of the Borrower under Sections 4.02, 4.05, 4.06, 4.07, 4.08, 4.10, 4.11, 4.12 and 4.13 of this Agreement shall terminate on the earlier of: (i) the date on which this Development Credit Agree- ment shall terminate or (ii) the date 12 years after the date of this Development Credit Agreement or the date on which the proceeds of the Credit made available to NTB pursuant to Section 4.10 of this Agreement shall have been amortized by transfers to the Borrower, whichever shall be the later. ARTICLE VII Miscellaneous SECTION 7.01. The Closing Date shall be July 31, 1974 or such other date as shall be agreed between the Borrower and the Association. SECTION 7.02. The Secretary to the Ministry of Finance of the Borrower is designated as representative of the Bor- rower for the purposes of Section 9.03 of the General Conditions. SECTION 7.03. The following addresses are specified for the purposes of Section 9.01 of the General Conditions: For the Borrower: Secretary to the Ministry of Finance Singha Durbar Kathmandu, Nepal 16 Por the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Alternative address for cables: Indevas Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and to be delivered in the District of Columbia, United States of America, as of the day and year first above written. KINGDOM OF NEPAL By /s/ KUL SHEKHAR SHARMA Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ J. BURKE KNAPP Vice President 17 SCHEDULE 1 Allocation of Proceeds of Credit Amounts Expressed Category in Dollar Equivalent I. Telephone exchanges, local distribution network, subscribers conniections and apparatus 322,000 11. Long-distance microwave, IHF, VHF and HF systems 907,000 111. Telegraph and telex equipment 50,000 IV. Vehicles, tools and training aids 133,000 V. Consultants 100,000 TI. Unallocated 188,000 Total 1,700,000 Reallocation Upon Change in Cost Estimates 1. If the estimate of the cost of the items included in any of the Categories I to V shall decrease, the amount of the Credit then allocated to, and no longer required for, such Category will be reallocated by the Association to Cate- gory VI. 2. If the estimate of the cost of the items included in any of the Categories I to V shall increase, an amount equal to the portion, if any, of such increase to be financed out of the proceeds of the Credit will be allocated by the Associa- tion, at the request of the Borrower, to such Category from Category VI, subject, however, to the requtirements for contingencies, as determined by the Association, in respect of the cost of the items in the other Categories. 18 SCHEDULE 2 Description of the Project The Project is the Borrower's program for the expansion and modernization of NTB 's telecommunication facilities duriiig the period July 1968-July 1973. The Project includes the following principal items: 1. Expansion of local telephone exchanges to increase the net capacity by approximately 3,600 lines of automatic equipment and 1,000 lines of manual equipment, together with the necessary cables and subscriber equipment to add approximately 6,000 installations. 2. Expansion of domestic long distance communication facilities by installation of long distance telephone trunk lines, super high frequency and ultra high frequency radio trunk systems, a very high frequency radio scatter system and extensions of the high frequency telephonetelegraph network, together with ancillary equipment. 3. Expansion and improvement of international commu- nications facilities by establishment of an international trunk exchange at Kathmandu, installation of land line and carrier routes to India, improvement of high frequency radio-telephone system to New Delhi and installation of an international telex switchboard at Kathiandu, together with ancillary equipment. 4. Installation of telex facilities for approximately 50 subscribers in Kathmandi. 5. Construction of buildings required for the technical installations referred to above, and provision of miscel- laneous equipment such as vehicles and tools. 6. The setting up of NTB's organization to enable it to conduct its affairs on the basis of sound business, financial and public utility practices and the establishment along commercial lines of an effective accounting system for NTB. 19 SCHEDULE 3 Procurement 1. With respect to goods referred to in Section 3.02 of this Agreement and in Categories I, II, III and IV of Sched- ule 1 to this Agreement, identical or similar items to be procured shall be grouped together wherever practical for the purposes of bidding and procurement, and such group- ing of items shall be subject to approval by the Association. 2. With respect to contracts for procurement of goods and services referred to in Section 3.02 of this Agreement estimated to cost in excess of $50,000 equivalent: (a) Invitations to bid, specifications, conditions of con- tract, all other tender documents and the method and places of advertising will be submitted to the Association for its review and approval prior to the issuance of invi- tations to bid. (b) After bids have been received and analyzed, the analysis of the bids, and the proposals for awards, together with the reasons for such proposals, will be submitted to ihe Association for its review and approval prior to the Borrower's making any award of contract or issuing any letter of intent. (c) If the final contract is to differ substantially from the terms and conditions contained in the respective docu- nients approved by the Association under paragraphs (a) and (b) above, the text of the proposed changes will be submitted to the Association for its review and approval prior to the execution of such contract. (d) As soon as a letter of intent has been issued or a contract has been executed, a copy thereof will be sent to the Association. 3. With respect to contracts for procurement of goods and services referred to in Section 3.02 of this Agreement 20 estimated to cocit $50,000 equivalent or Iess, copies of the invitation to bid, a bid analysis and evaluation, the contract or order and any other documents the Association may request Will be sent to the Association promptly after the execution of the respective contract and prior to the sub- missioi to the Association of the first application for witS- drawal of funds from Ilie Credit Account in respect of such con tract. 21 SCHEDULE 4 Criteria Referred to in Section 4.05 (a) of this Agreement 1. The managing board and the chief executive officer of NTB shall have sufficient financial and operational respon- sibility to enable them to manage NTB's activities and operations efficiently and on the basis of sound financial and managenent principles. 2. NTB shall retain and exercise control over the funds generated by its business and otherwise available to it and shall be permitted to utilize such funds in accordance with annual budget appropriations so as to operate its business efficiently and to carry out its development program. After taking into account the cash requirements for the following year, profits may be paid into the Consolidated Fund. 3. NTB shall have a commercial accounting system as its only requlire system of accounting. 4. NTB shall be required to adopt measures to improve the labor performance and productivity standards of its employees. 22 SCHEDULE 5 Tariffs and Subscriber Deposit The minimum levels for the tariffs and subscriber deposit referred to in Section 4.12(a) (ii) of this Agreement are as follows: I. SHFIVHF Trunk Service Revenue for Radial Metering Pulses Revenue 3 minute Price distance pulse period per per minute manual call class km in seconds minute in NRs in NRs I 0-25 30 2 0.4 1.2 II 25-50 15 4 0.8 2.4 III 50-100 7.5 8 1.6 4.8 IV 100-200 5.0 12 2.4 7.2 V 200-400 4.0 15 3.0 9.0 VI 400-800 3.0 20 4.0 12.0 II. Telex Service Rental per annum NRs 4,800.- Local call charge NRs 0.2 III. Subscriber Deposit Deposit of NRs 500 from each new telephone service sub- scriber, repayable upon the subscriber's terminating the service.