Ceylon - Mahaweli Ganga Development Project : Credit 0174 - Credit Agreement - 2 - Conformed

Reprinted February 1972 CONFORMED COPY CREDIT NUMBER 174 CE Development Credit Agreement (Mahaweli Ganga Development Project) BETWEEN GOVERNMENT OF CEYLON AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JANUARY 30, 1970 AS AMENDED APRIL 20, 1971 CONFORMED COPY CREDIT NUMBER 174 CE Development Credit Agreement (Mahaweli Ganga Development Project) BETWEEN GOVERNMENT OF CEYLON AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JANUARY 30, 1970 11rrlpment Trebit Agrermenut AGREEMENT, dated January 30, 1970, between the Gov- ERNMENT OF CEYLON (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association).") WHEREAS the Borrower has requested the Association to assist in the financing of the cost of the project described in Schedule 1 to this Agreement; WHEREAS the Borrower has also requested the Interna- tional Bank for Reconstruction and Development (herein.- after called the Bank) to provide additional financing for such project and, by a loan agreement of even date herewith between the Borrower and the Bank, the Bank agrees to provide such financing in an aggregate principal amount equivalent to fourteen million five hundred thousand dol- * lars ($14,500,000); and WHEREAS the Borrower and the Association intend, to the extent practicable, that the proceeds of the credit provided for in this Agreement be disbursed on account of expendi- tures under such project before disbursements of the pro- ceeds of the loan provided for in such loan agreement are made; Now THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions SECTION 1.01. The parties to the Development Credit Agreement accept all the provisions of the Geperal 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- (1) As amended by a letter from the Bank and the Association to the Government of Ceylon dated March 23, 1971 and confirmed by the Government on April 20, 1971. 4 eral Conditions Applicable to Development Credit Agree- ments of the Association being hereinafter called the Gen- eral Conditions). SECTION 1.02. Wherever used in the Development Credit Agreement, unless the context otherwise requires, the sev- eral terms defined in the General Conditions have the re- spective meaningp therein set forth and the following ad- ditional terms have the following meanings: (a) "Loan Agreement" means the loan agreement of even date herewith between the Borrower and the Bank, and such term includes the General Conditions Applicable to Loan and Guarantee Agreements of the Bank dated January 31, 1969 as made applicable thereto, all agreements supplemental to such agree- ment and all schedules thereto, as such agreement, supplemental agreements and schedules may be amended from time to time; (b) "Board" means the Mahaweli Development Board, a body corporate established pursuant to the legisla- tion referred to in Section 7.01 (a) of the Loan Agreement, as such legislation may be amended from time to time after agreement with the Association, and includes any successor thereto; and (c) "Project Area" means the areas west of the Maha- weli Ganga and located to the east and to the west of Habarane, near the center of the Island of Ceylon and comprising a total of about 126,500 acres, which areas shall be further defined on a map to be agreed upon between the Borrower and the Association. ARTICLE II The Credit SECTION 2.01. The Association agrees to lend to the Bor- rower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in 5 various currencies equivalent to fourteen million five hun- dred thousand dollars ($14,500,000). 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 amount 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, the Develop- ment Credit Agreement and in accordance with the alloca- tion of the proceeds of the Credit and of the Loan set forth in Schedule 2 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, the Association and the Bank. SECTION 2.03. The Borrower shall be entitled to with- draw from the Credit Account in respect of the reasonable cost of goods or services required for the Project and to be financed under the Development Credit Agreement: (i) such amounts as shall have been paid (or, if the Association shall so agree, as shall be required to meet payments to be made) for goods or services included in Categories III and IV of the allocation of the proceeds of the Credit and of the Loan re- ferred to in Section 2.02 of this Agreement; (ii) the equivalent of fifty per cent (50%o) or such other percentage as may be agreed between the Borrower and the Association of such amounts as shall have been paid (or, if the Association shall so agree, of such amounts as shall be required to meet payments to be made) for goods or services included in Cate- gory I of the allocation of the proceeds of the Credit and of the Loan referred to in Section 2.02 of this Agreement, which percentage represents the estimated foreign exchange component of the cost of such goods or services; and 6 (iii) the equivalent of thirty-seven per cent (37%) of such amounts as shall have been paid (or, if the Association shall so agree, of such amounts as shall be required to meet payments to be made) for goods or services included in Category II of the alloca- tion of the proceeds of the Credit and of the Loan referred to in Section 2.02 of this Agreement, which percentage represents the foreign exchange compo- nent of the cost of such goods or services estimated at the date of the Development Credit Agreement; provided, however, that if there shall be an increase in the estimate of such payments for goods or services included in any of the Categories I and II, the Association may by notice to the Borrower adjust the stated percentage appli- cable to such Category as required in order that with- drawals of the amount of the Credit then allocated to such Category and not withdrawn may continue pro rata with the payments remaining to be made for goods or services included in such Category. SECTION 2.04. (a) No withdrawals from the Credit Ac- count shall be made on account of payments under Cate- gory IV of the allocation of the proceeds of the Credit and of the Loan referred to in Section 2.02 of this Agree- ment for goods produced in, or services supplied from, the territories of the Borrower, or on account of payments under Categories IHl and IV of such allocation of the pro- ceeds of the Credit and of the Loan for taxes imposed by the Borrower or any of its political subdivisions on, or in connection with the importation or supply of, goods or services included in such Categories. (b) It is hereby agreed, pursuant to Section 5.01 of the General Conditions, that withdrawals from the Credit Ac- count may be made on account of payments under Cate- gory IV of the allocation of the proceeds of the Credit and of the Loan referred to in Section 2.02 3f this Agree- 7 ment and made prior to the date of the Development Credit Agreement but after August 1, 1969. SECTION 2.05. The currency of the United Kingdom of Great Britain and Northern Ireland 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 per cent (3/4 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 February 1 and August 1 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 February 1 and August 1 commencing February 1, 1980 and ending August 1, 2019 each installment to and including the installment payable on August 1, 1989 to be one-half of one per cent ( of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (11/2%) of such principal amount. ARTICLE III Use of Proceeds of the Credit SECTION 3.01. The Borrower shall apply the proceeds of the Credit in accordance with the provisions of the Devel- opment Credit Agreement to expenditures on the Project, described in Schedule 1 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 8 Guidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in August 1969, and in accordance with such other procedures supplementary thereto as are set forth in Schedule 3 to this Agreement or as shall be agreed between the Borrower and the Asso- ciation, and (ii) contracts for the procurement of such goods and services shall be subject to the prior approval of the Association, except as otherwise stipulated in such Schedule. SECTION 3.03. Except as the Association may otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively in carrying out the Project. ARTICLE IV Particular Covenants SECTION 4.01. The Borrower shall cause the Board to carry out the Project with due diligence and efficiency and in conformity with sound administrative, agricultural, finan- cial, and engineering practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. SECTION 4.02. (a) Without limitation or restriction upon the provisions of Section 4.01 of this Agreement, the Bor- rower shall take all steps required to ensure adequate coordination between the Board and the Ministries of Agri- culture and Food, and of Land, Irrigation and Power of the Borrower. (b) The Borrower shall cause the Board at all times to manage its affairs and carry on its operations, all in accord- ance with sound agricultural, engineering and financial prac- tices, and with the assistance of adequate qualified and experienced staff. 9 (c) The Borrower shall cause the Board to appoint and at all times maintain: (i) a general manager, (ii) a deputy general manager qualified as an irrigation engineer, and (iii) another deputy general manager qualified as an agriculturalist, all competent and experienced. (d) The Borrower shall at all times operate and main- tain, or cause to be operated and maintained, the plants, structures, machinery, equipment and other property re- quired for the Project, and shall make, or cause to be made, all necessary repairs and renewals thereof, in accordance with sound engineering and economic practices. (e) The Borrower shall cause the financial accounts of the Board to be audited annually by competent and expe- rienced auditors acceptable to the Association and shall, promptly after heir preparation and not later than four months after the close of the fiscal year to which they apply, cause to be transmitted to the Association certified copies of all revelant statements and a signed copy of the auditors' report. SECTION 4.03. To assist in carrying out the Project, the Borrower shall employ, or shall cause the Board to employ, competent and experienced consultants acceptable to the Association, to an extent, and upon terms and conditions (including terms of reference), which shall have been ap- proved by the Association. SECTION 4.04. Upon completion of Part A (I) of the Project, the Borrower shall transfer or cause to be trans- ferred to the Ceylon Electricity Board established pursuant 10 to the Ceylon Electricity Board Act, No. 17 of 1969, the hydro-electric plant and all related power assets included in the Project, on terms and conditions mutually acceptable to the Borrower, the Association and the Ceylon Electricity Board. SECTION 4.05. The Borrower shall take all steps required to establish, and thereafter maintain, adequate standards of maintenance of the tanks and canal systems included in, or necessary to, the Project, and shall provide the staff, equipment and funds necessary to strengthen the existing field maintenance organization. SECTION 4.06. The Borrower shall undertake, or cause to be undertaken, in accordance with terms of reference acceptable to the Association, a study of the need for short, medium and long-term agricultural credit for farmers lo- cated in the Project Area, such study to be completed not later than June 30, 1973, and, upon such completion, the Borrower shall make available, or cause to be made avail- able, to such farmers such credit facilities as shall have been agreed to by the Borrower after consultation with the Association, in the light of the report submitted to the Borrower upon the completion of such study. SECTION 4.07. To ensure the coordination of intensified extension services in the Project Area, the Borrower shall establish not later than June 30, 1972 special project units in such area, similar in organization, authority and respon- sibilities to the Elahera Special Project, each such special project unit being directed by a resident manager who shall coordinate and direct the activities of the resident staff of all extension agencies operating in such area. SECTION 4.08. The Borrower shall provide to the Maha Illuppalama Agricultural Station the staff, equipment and financial resources required to enable it to meet the re- 11 search needs of the Project Area, and, in particular, to expand the irrigation facilities of such station in order to intensify research work on crop rotations. SECTION 4.09. Until completion of the Project, the Bor- rower shall ensure that sufficient irrigation water shall be released from the Kantalai tank to the sugar estate located in the Project Area, at intervals and in quantities which shall be determined by such sugar estate, in order to pro- vide adequate irrigation of 200 acres of sugarcane through- out the year for research and demonstration purposes. SECTION 4.10. The Borrower shall carry out, or cause to be carried out, for a period of ten years, the monitoring of the effect of additional water supplies on soil conditions and crop production in the Project Area. SECTION 4.11. The Borrower, in the light of the results of the study referred to in Part B (III) of the Project, shall before completion of the Project take appropriate steps after consultation with the Association to ensure the recovery (a) of the operation and maintenance costs of the roject as they are incurred and (b) over a reasonable period of years, of the construction cost of the Project, having due regard to the incentives and capacity to pay of farmers. SECTION 4.12. (a) The Borrower shall furnish or cause to be furnished to the Association, promptly upon their preparation, the reports, studies, plans, specifications, work and procurement schedules for, or in connection with, the Project, and any material modifications subsequently made therein, in such detail as the Association shall reasonably request. (b) The Borrower shall: (i) at all times maintain or cause to be maintained records adequate to identify the 12 goods and services financed out of the proceeds of the Credit, to disclose 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 accounting practices the operations and financial condition of the Board and of any institution or agency of the Borrower responsible for the carrying out of the Project or any part thereof; and (ii) enable the Associa- tion's representatives to inspect the Project, the goods financed out of the proceeds of the Credit, all other plants, sites, works, properties, machinery, equipment and opera- tions of the Borrower relevant to the Project and any relevant records and documents. (c) The Borrower shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the expenditures of the proceeds of the Credit, the goods and services financed out of such proceeds, the Project, and the administration, operations and financial condition with respect to the Proj- ect of the Borrower, the Board and any institution or agency of the Borrower responsible for the carrying out of the Project or any part thereof. SECTION 4.13. (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 reason- ably request with regard to the general status of the Credit. On the part of the Borrower, such information shall in- clude information with respect to financial and economic conditions in the territories of the Borrower and the inter- national 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 re- lating to the purposes of the Credit and the maintenance of the service thereof. 13 (c) 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, the maintenance of the service thereof, or the per- formance by the Borrower of its obligations under the Development Credit Agreement. (d) 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 4.14. (a) The Borrower shall cause to be taken out and maintained with responsible insurers, or shall make other provisions satisfactory to the Association for, insur- ance of the hydro-electric plant and related power assets included in the Project against such risks and in such amounts as shall be consistent with sound practices. (b) Without limiting the generality of the foregoing, the Borrower undertakes to have the imported goods to be financed out of the proceeds of the Credit insured against marine, transit and other hazards incident to 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 or convertible by the Borrower to replace or repair such goods. SECTION 4.15. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes imposed under the laws of the Borrower or laws in effect in its territories, and free from all restric- tions imposed under any such laws. SECTION 4.16. The Development Credit Agreement shall be free from any taxes that shall av 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. 14 ARTICLE V Remedies of the Association SECTION 5.01. If any event specified in Section 7.01 of the General Conditions or in Section 5.02 of this Agreement shall occur and shall continue for the period, if any, therein set forth, then, at any subsequent time during the continu- ance thereof, the Association, at its option, may by notice to the Borrower declare the principal of the Credit then outstanding to be due and payable immediately together with the service charges thereon and upon any such declara- tion such principal, together with such charges, shall be- come due and payable immediately, anything in the Devel- opment Credit Agreement to the contrary notwithstanding. SECTION 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified: (a) the legislation of the Borrower referred to in Sec- tion 7.01 (a) of the Loan Agreement and any other legislation or regulation of the Borrower governing the establishment, organization and powers of the Board, shall have been amended, suspended, abro- gated, repealed, waived, or shall cease to be en- forced, so as to materially affect the operations of the Board or the Project, and such event shall con- tinue for a period of sixty days; and (b) any action shall have been taken to materially modify the organization structure of the Board referred to in Section 7.01 (d) of the Loan Agreement and such event shall continue for a period of sixty days. ARTICLE VI Effective Date; Termination SECTION 6.01. The following event is specified as an ad- ditional condition to the effectiveness of the Development 15 Credit Agreement within the meaning of Section 10.01 (b) of the General Conditions, namely, that all the conditions precedent to the effectiveness of the Loan Agreement other than the effectiveness of the Development Credit Agreement shall have been fulfilled. SECTION 6.02. The date May 8, 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, 4.11 and 5.02 of this Agreement shall terminate on the date on which the Development Credit Agreement shall terminate or on a date thirty years after the date of the Development Credit Agreement, which- ever shall be the earlier. ARTICLE VII Miscellaneous SECTION 7.01. The Closing Date shall be June 30, 1976 or such other date as shall be agreed between the Borrower and the Association. SECTION 7.02. The Permanent Secr,-tary of the Ministry of Planning and Economic Affairs of the Borrower is desig- nated as representative of the Borrower for the purpose 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: Ministry of Planning and Economic Affairs Central Bank Building, 8th Floor Colombo 1, Ceylon Cable address: Seeminplan Colombo 16 For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Indevas Washington, D.C. IN WITNESS WHEREOF the parties hereto, acting through their representatives thereunto duly authorized, have caused the Development Credit Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. GOVERNMENT OF CEYLON By /s/ OLIVER WEERASINGHE Authorized Representative INTERNATIONAL DEVELOPMENT AssoCIATION By /s/ MOHAMED SHOAIB Vice President 17 SCHEDULE 1 Description of the Project The Project includes Stage 1 of the first scheme of the Mahaweli Ganga Development Program and consists of the following parts: A. I. The construction of the Polgolla complex consisting of a low diversion dam on the Mahaweli Ganga at Polgolla, a diversion tunnel (about 5 miles long) and a 40 MW hydro-electric plant. II. The construction of the Bowatenna complex consist- ing of a high diversion dam on the Amban Ganga at Bowatenna, a tunnel and a canal (each about 5 miles long) to feed the Kalawewa and Kandalama tanks. III. The construction of training works and channel im- provements on the Dhun Oya and the Sudu Ganga. IV. The remodelling uf the existing Elahera weir and of the 38-mile long Elahera-Minneri-Kantalai canal to carry 1,500 cubic feet per second. V. The redesigning and reconstruction of the irrigation system, the construction of drainage systems, land leveling and subsoiling, on 4,000 acres planted to sugarcane in the Project Area. VI. The provision of machinery, equipment, vehicles and materials for Parts A (I) through A (V) hereof (other than machinery, equipment, vehicles and mate- rials included in the civil works contracts for such Parts A (I) through A (V)), for the operation and maintenance of the civil works included in such Parts A (I) through A (V), and for extension serv- ices in the Project Area. B. I. Studies to determine the optimum capacity of the tunnels referred to in Parts A (I) and A (II) hereof, 18 to be completed before the construction of such tun- nels is initiated. II. Engineering of the civil works included in Part A hereof, including the conducting of model tests and the preparation of construction drawings, and the administration and supervision of the construction of such works. III. A comprehensive study to determine an appropriate schedule of water charges in the Project Area, having due regard to farmers' incentives and capacity to pay, such study to be completed within three years of the date of the Development Credit Agreement. C. Investigations of the area west of Habarane for the development in Stage II of the first scheme of the Mahaweli Ganga Development Program, of about 113,000 acres, such investigations to include aerial surveys, land classification, planning for irrigation and drainage works, determining land clearance and development costs, cropping patterns, water require- ments, the development of cost estimates for, and the preparation of a feasibility report on, such de- velopment, the determination of optimum farm size and a study of the respective merits of settling farm- ers on their land and of settling them in villages away from their land, such investigations to be com- pleted not later than on June 30, 1972. The Project is expected to be completed by June 30, 1975. 19 SCHEDULE 2 Allocation of the Proceeds of the Credit and of the Loan Maximum Amounts Expressed Category in Dollar Equivalent I. Civil works under Parts A (I) and A (II) of the Project 12,500,000 II. Civil works under Parts A (III) through A (V) of the Project 1,750,000 III. Machinery, equipment, vehicles and materials under Part A (VI) of the Project 4,750,000 IV. Engineering and consulting services under Parts B and C of the Project 3,000,000 V. Interest and other charges on the Loan accrued on or before January 31, 1975 3,000,000 VI. Unallocated 4,000,000 TOTAL 29,000,000 Allocation of the Proceeds of the Credit 1. The amount of the Credit shall be withdrawn from the Credit Account as provided under Article II of the Development Credit Agreement, and shall be applied to expenditures under any of the Categories I through IV, until the total of such withdrawals, and of commitments, if any, in respect of such expenditures, shall have reached the equivalent of $14,500,000. Allocation of the Proceeds of the Loan 2. The amount of the Loan shall be withdrawn from the Loan Account as provided under Article II of the Loan Agreement, and shall be applied to expenditures under any of the Categories I through V incurred, in the case 20 of Categories I through IV, after the amount of the Credit shall have been exhausted, except that withdrawals from the Loan Account may be made prior to such exhaustion in respect of commitments referred to in Section 2.04 (c) of the Loan Agreement. Reallocation upon Change in Cost Estimates 3. If the estimate of the expenditures under any of the Categories I through V shall decrease, the amount then allocated to, and no longer required for, such Category will be reallocated to Category VI by the Association and by the Bank, or by the Bank, as the case may be. 4. If the estimate of the expenditures under any of the Categories I through V shall increase, an amount equal, in the case of any of the Categories III through V, to to the portion, if any, of such increase to be financed out of the proceeds of the Credit and of the Loan, in the case of Category I, an amount equal to 50% of such increase or such other percentage as may be agreed pursuant to Section 2.03 (ii) of the Development Credit Agreement, and, in the case of Category II, an amount equal to 37%0 of such increase, will be allocated at the request of the Borrower, by the Association and the Bank, or by the Bank, as the case may be, to such Category from Cate- gory VI, subject, however, to the requirements for con- tingencies, as determined by the Association and the Bank, in respect of expenditures under any of the other Categories. 21 SCHEDULE 3 Procurement 1. With respect to goods and services in Categories I and III of the allocation of the proceeds of the Credit and of the Loan referred to in Section 2.02 of this Agreement and of the Loan Agreement, items to be procured shall be grouped together whenever applicable in amounts sufficient to attract international competitive bidding. Whenever the estimated cost of such items or groups of items exceeds the equivalent of $10,000, they shall be procured on the basis of international competitive bidding pursuant to Sections 3.02 of this Agreement and of the Loan Agreement. 2. With respect to goods and services in Category II of such allocation of the proceeds of the Credit and of the Loan, the Borrower shall cause the civil works included in such Category (a) to be carried out by the Mahaweli Devel- opment Board on force account, (b) to be contracted out to its Ministry of Land, Irrigation and Power or to its Min- istry of Agriculture and Food, or (c) to be carried out by local contractors on the basis of local competitive bidding and pursuant to the provisions set forth in paragraphs 3 and 4 hereof, provided, however, that the aggregate cost of such contracts shall in no event exceed the equivalent of $2,500,000. 3. With respect to all contracts or letters of intent for civil works involving expenditures expected to exceed the equivalent of $100,000 and included (a) in Category I of such allocation of the proceeds of the Credit and of the Loan, and (b) in Category II thereof and referred to in paragraph 2 (c) hereof, as well as with respect to all con- tracts or letters of intent for the purchase of machinery, equipment, vehicles and materials included in Category III of such allocation of the proceeds of the Credit and of the Loan and involving expenditures expected to exceed the 22 equivalent of $50,000, the following procedures shall be followed: (a) Invitations to bi, specifications, the proposed terms and conditions of contracts, and all other bidding documents, together with a description of the adver- tising procedures to be followed, will be submitted to the Association and to the Bank for review and approval, which approval shall be obtained prior to the issuance of invitations to bid. (b) After bids have been received and analyzed, the analyses of bids and the recommendations thereon of the Borrower and of the consultants, as well as the Borrower's proposals for awards, will be fur- nished to the Association and to the Bank for review and approval, which approval shall be obtained prior to making any award of contract or issuing any letter of intent. (c) For the purpose of awarding contracts for the pur- chase of machinery, equipment, vehicles or materials included in Category III of such allocation of the proceeds of the Credit and of the Loan, bids will be compared on the following basis: (i) the bids submitted by foreign manufacturers will first be compared on the basis of a bid price which shall consist of the c.i.f. (Colombo) landed price plus the actual rate of customs duties and similar taxes paid or to be paid and the local agents' commissions, if any; the low- est such bid shall be deemed to be the lowest for- eign bid; if no bids are submitted by Ceylonese manufacturers, the lowest foreign bid will be considered the lowest evaluated bid if other terms and conditions are satisfactory; (ii) the bids submitted by Ceylonese manufacturers will be compared on the basis of the ex-factory 23 price, and the lowest such bid shall be deemed to be the lowest Ceylonese bid; if no bids are submitted by foreign manufacturers, the lowest Ceylonese bid will be considered the lowest eval- uated bid if other terms and conditions are satisfactory; (iii) if foreign manufacturers and Ceylonese manu- facturers have submitted bids, the lowest for- eign bid shall be compared with the lowest Ceylonese bid on the basis of a price for the lowest foreign bid consisting of the c.i.f. (Co- lombo) landed price plus 157 of such price or the rate of customs duties and similar taxes which applies to non-exempt purchasers in the territories of the Borrower, whichever is the lower, plus the local agents' commissions, if any, and on the basis of the ex-factory price of the lowest Ceylonese bid; if the price of the lowest Ceylonese bid is equal to or lower than the price of the lowest foreign bid, and other terms and conditions are satisfactory, then the lowest Ceylonese bid will be considered the lowest evaluated bid. (d) If the final contract or letter of intent is to differ substantially from the terms and conditions contained in the respective documents approved by the Asso- ciation and by the Bank under paragraphs (a) and (b) above, the text of the proposed changes will be submitted to the Association and to the Bank for review and approval prior to the execution of such contract or issuance of such letter of intent. (e) Two conformed copies of any letter of intent issued and of any contract executed under this paragraph 2 shall be sent to the Association and to the Bank promptly upon their issuance or execution. 24 4. With respect to all contracts or letters of intent for civil works involving expenditures expected to cost the equiva- lent of $100,000 or less and included (a) in Cat,-gory I of such allocation of the proceeds of the Credit and of the Loan, and (b) in Category II thereof and referred to in paragraph 2 (c) hereof, as well as with respect to all con- tracts or letters of intent for the purchase of machinery, equipment, vehicles or materials included in Category III of such allocation of the proceeds of the Credit and of the Loan and involving expenditures expected to cost more than the equivalent of $10,000 but less than the equivalent of $50,000, copies of the invitations to bid, bid analyses and evaluations, as well as any other bid documents or rele- vant information requested by the Association or by the Bank, and two conformed copies of any such contract or letter of intent, shall be sent to the Association and to the Bank promptly after the execution of any such contract or issuance of any such letter of intent and prior to the sub- mission to the Association or to the Bank of the first appli- cation for withdrawal of funds from the Credit Account or from the Loan Account in respect of any such contract or letter of intent. 5. With respect to the procurement of equipment and vehi- cles in Category III of such allocation of the proceeds of the Credit and of the Loan, bidding documents shall require the supplier to provide adequate after-sales services. 6. With respect to items or groups of items in Category III of such allocation of the proceeds of the Credit and of the Loan the value of which does not exceed the equivalent of $10,000, international competitive bidding may be dispensed with, provided that the Borrower shall send to the Associa- tion and to the Bank for their approval details of the pro- posed procurement procedure as well as periodic lists of items so purchased indicating the price of such goods and the suppliers thereof.