Malawi - Phase II Shire Valley Agricultural Development Project : Credit 0363 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 363 MAI Development Credit Agreement (Phase II Shire Valley Agricultural Development Project) BETWEEN REPUBLIC OF MALAWI AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED MARCH 28, 1973 CONFORMED COPY CREDIT NUMBER 363 MAI Development Credit Agreement (Phase II Shire Valley Agricultural Development Project) BETWEEN REPUBLIC OF MALAWI AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED MARCH 28, 1973 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated March 28, 1973, between REPUBLIC OF MALAWI (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions 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, subject, however, to the deletion of Sections 5.01 and 6.02(h) thereof and to the renumbering of Section 6.02(i) into 6.02(h) thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "ADMARC" means the Agricultural Development and Marketing Corporation of the Borrower, a statutory body established under the Agricultural Development and Marketing Corporation Act (Cap. 67:03 of the Laws of Malawi), or any successor thereto. (b) "Project Area" means the area as defined in General Notice No. 198 of the Malawi Government Gazette of March 2, 1973. (c) "Project Manager" means the person to be employed by the Borrower as project manager pursuant to Section 3.02(b) of this Agreement. (d) "ADS" means the Agricultural Development Services Unit established by the World Bank and the headquarters of which are located in Nairobi (Kenya). 4 (e) "Land registration" means the acquisition of title to land by farmers and livestock owners pursuant to procedures set forth in Cap. 59:01 of the Laws of Malawi, which came into operation on May 9, 1967, as the same may be amended from time to time. (f) "Subsidiary Agreement" means the agreement to be entered into between the Borrower and ADMARC pursuant to Section 3.07 of this Agreement. (g) "Guidelines for Procurement" means the Guidelines for Procurement under World Bank Loans and IDA Credits published by the Bank in April 1971, as revised in October 1972. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in this Agreement set forth or referred to, an amount in various currencies equivalent to ten million five hundred thousand dollars ($10,500,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule shall be amended from time to time, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed under this Agreement; provided, however, that, except as the Association shall otherwise agree, no withdrawal shall be made on account of expenditures in the territories of any country which is not a member of the Bank (other than Switzerland) or for goods produced in, or services supplied from, such territories. Section 2.03. Except as the Association shall otherwise agree, the goods and services (other than services of consultants) required for the Project and to be financed out of the proceeds of the Credit, shall be procured on the basis of international competition under procedures consistent with the Guidelines for Procurement, and in accordance with, and subject to, the provisions set forth in Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1978 or such other late as shall be agreed between the Borrower and the Association. 5 Section 2.05. The Borrower shall pay to the Association 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 2.06. Service charges shall be payable semi-annually on June 1 and December 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each June I and December 1 commencing June 1, 1983, and ending December 1, 2022, each installment to and including the installment payable on December 1, 1992 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. 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. ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out the Project with due diligence and efficiency and in conformity with appropriate economic, financial, administrative, agricultural and engineering practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. Except as the Association shall otherwise agree, the Borrower shall: (a) (i) establish and maintain, until completion of the Project, a liaison committee to coordinate the activities of the ministries, agencies and instrumentalities of the Borrower concerned with implementation of the Project, and (ii) appoint as members of said committee the Permanent Secretary of the Borrower's Ministry of Agriculture and Natural Resources, or his designated representative, who shall act as chairman thereof; the Project Manager, who shall act as secretary thereof; and one designated senior official from each of the ministries, agencies and instrumentalities of the Borrower referred to in sub-paragraph (a)(i) of this Section; 6 (b) employ a qualified and experienced person, acceptable to the Borrower and the Association, to serve as project manager (who shall be directly responsible to the Permanent Secretary of the Borrower's Ministry of Agriculture and Natural Resources); and (c) cause the Project Manager to be provided with such adequate and competent staff as may be necessary to carry out the Project. Section 3.03. The Borrower shall employ consultants acceptable to the Borrower and the Association upon terms and conditions satisfactory to the Borrower and the Association to assist the Borrower in carrying out Part A(iv) of the Project and to carry out Part D(ii) of the Project. Section 3.04. The Borrower shall continue to employ a qualified and experienced research officer who shall be responsible for the carrying out of Part G(iv), (v) and (vi) of the Project. Section 3.05. In carrying out construction works for the Project, other than those specified in sub-paragraphs B(b) and B(c) of Schedule 3 to this Agreement, the Borrower shall employ contractors acceptable to the Borrower and the Association upon terms and conditions satisfactory to the Borrower and the Association. Section 3.06. Except as the Borrower and the Association shall otherwise agree, the Borrower shall, in providing credit as required under Part A(ii) of the Project, follow, or cause to be followed, the operating policies and procedures set forth in Schedule 4 to this Agreement. Section 3.07. The Borrower shall cause ADMARC or any successor thereto to provide such resources as may be required to carry out Part A(ii) and (vi) of the Project in accordance with a subsidiary agreement between the Borrower and ADMARC, the terms and conditions of which shall be satisfactory to the Association. Section 3.08. The Borrower shall cause the ministry responsible for health to provide such staff, equipment and drugs as shall be necessary for carrying out Part E of the Project. Section 3.09. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance * 7 any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. Section 3.10. (a) The Borrower shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and construction, work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The Borrower: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and rervices financed out of the proceeds of the Credit, and to disclose the use thereof in the Project; (ii) shall enable the Association's accredited representatives to examine the Project, the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with consistently maintained appropriate accounting practices the operations, resources and expenditures, in respect of the Project, of the departments, agencies or instrumentalities of the Borrower reponsible for carrying out the Project or any part thereof. (b) Without limiting or restricting paragraph (a) of this Section, the Borrower shall: (i) cause the accounts and financial statements (balance sheets, statements of income and expenses and related statements) in respect of the Project for each fiscal year of the Borrower to be audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of such financial statements for such year as so audited and (B) the report of 8 such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning such accounts and financial statements and the audit thereof as the Association shall from time to time reasonably request. Section 4.02. The Borrower shall cause the buildings, roads and equipment included in the Project to be adequately maintained and repaired, and to that end, shall make available, or cause to be made available, promptly as needed, all funds and other resources as shall be required for that purpose. ARTICLE V Consultation, Information and Inspection Section 5.01. The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Borrower and the Association shall from time to time, at the request of either party: (a) exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration and operations, in respect of the Project, of the departments, agencies or instrumentalities of the Borrower responsible for carrying out any part of the Project, and other matters relating to the purposes of the Credit; and (b) furnish to the other all such information as it shall reasonably 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 economic conditions in the territories of the Borrower, including its balance of payments, and the external debt of the Borrower, of any of its political subdivisions and of any agency of the Borrower or of any such political subdivision. Section 5.02. (a) The Borrower shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the administration and operations, in respect of the Project, of the departments, agencies or instrumentalities of the Borrower responsible for carrying out any part of the Project. (b) The Borrower and the Association shall promptly inform each other 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 performance by either of them of its obligations under this Agreement. 9 Section 5.03. The Borrower shall afford all reasonable opportunity for accredited representatives of the Association to visit any part of the territories of the Borrower for purposes related to the Credit. ARTICLE VI Taxes and Restrictions Section 6.01. 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. Section 6.02. This Agreement shall be free from any taxes on or in connection with the execution, delivery or registration thereof, imposed under the laws of the Borrower or laws in effect in its territories. Section 6.03. The payment of the principal of, and service charges on, the Credit shall be free from all restrictions, regulations, controls and moratoria of any nature imposed under the laws of the Borrower oi. in effect in its territories. ARTICLE VII Remedies of the Association Section 7.01. If any event specified in Section 7.01 of the General Conditions or in Section 7.03 of this Agreement 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 declale the principal of the Credit then outstanding to be due and payable immediately together with the service charges thereon, and upon any such declaration such principal and service charges shall become due and payable immediately, anything to the contrary in this Agreement notwithstanding. Section 7.02. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified, namely, that the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of ADMARC or for the suspension of its operations in such manner as would materially and adversely affect the carrying out of the Project. Section 7.03. For the purposes of Section 7.01 of the General Conditions the following additional event is specified, namely, that the event specified in Section 7.02 of this Agreement shall occur. 10 ARTICLE VIII Effective Date; Termination Section 8.01. The following event is specified as an additional condition to the effectiveness of the Development Credit Agreement within the meaning of Section 10.0 1(b) of the General Conditions, namely that the execution and delivery of the Subsidiary Agreement on behalf of the Borrower and ADMARC, respectively, has been duly authorized or ratified by all necessary corporate and governmental action. Section 8.02. The following is specified as an additional matter, within the meaning of Section 10.02(b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association, namely, that the Subsidiary Agreement has been duly authorized or ratified by, and executed and delivered on behalf of the Borrower and ADMARC respectively, and constitutes a valid and binding obligation of each of the parties thereto. Section 8.03. The date April 27, 1973, is hereby specified for the purposes of Section 10.04 of the General Conditions. Section 8.04. The obligations of the Borrower under Article IV of this Agreement shall cease and determine on the date on which this Agreement shall terminate or on a date 15 years after the date of this Agreement, whichever shall be the earlier. ARTICLE IX Representative of the Borrower; Addresses Section 9.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 9.03 of the General Conditions. Section 9.02. The following addresses are specified for the purposes of Section 9.01 of the General Conditions: For the Borrower: The Secretary to the Treasury Ministry of Finance P.O. Box 53 Zomba, Malawi * 11 Cable address: FINANCE Zomba 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 iepresentatives 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. REPUBLIC OF MALAWI By /s/ C.M. Mkona Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Bernard R. Bell Regional Vice President Eastern Africa 12 SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of amounts of the Credit to each Category and the percentage of eligible expenditures so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed I. Seasonal credit 300,000 33% of total (including fertilizers, expenditures insecticides and seeds) 1I. Medium term credit (in- 600,000 ) 100% of foreign cluding sprayers, carts, ) expenditures or fishing boats, fishing ) 85% of total nets and ox drawn equip- ) expenditures ment) ) (representing ) the estimated III. Vehicles, machinery 900,000 ) foreign ex- and equipment ) penditure ) component) IV. Construction of: (a) Housing, buildings 2,100,000 85% of total and water supplies expenditures (b) Roads (including 1,200,000 100% of foreign road construction expenditures or equipment) 85% of total expenditures (representing the estimated foreign expenditure component) V. Consultants' Services 500,000 100% of foreign expenditures VI. Project Personnel (a) ADS personnel 100,000 100% of foreign expenditures 13 Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (b) Other personnel 2,000,000 85% of total expenditures VII. *Administration 1,300,000 85% of total maintenance expenditures VIII. Unallocated 1,500,000 TOTAL 10,500,000 * Such category includes cost of administration and maintenance required, inter alia, for crop and livestock development, research, fisheries, roads, buildings, rural water supply and health services. 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures for goods produced in, or services supplied from, the territories, and in the currency, of any country other than the Borrower; and (b) the term "total expenditures" means the aggregate of foreign and of expenditures for goods produced in, or services supplied from, the territories of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) expenditures prior to the date of this Agreement; and (b) payments for taxes imposed directly under the laws of the Borrower or laws in effect in its territories on goods or services, or on the importation, manufacture, procurement or supply thereof. To the extent that the amount represented by the percentage set forth in the third column of the table in paragraph 14 1 above in respect of any Category would exceed the amount payable net of all such taxes, such percentage shall be reduced to ensure that no proceeds of the Credit will be withdrawn on account of payments for such taxes. 4. Notwithstanding the allocation of an amount of the Credit set forth in the second column of the table in paragraph I above: (a) if the estimate of the expenditures under any Category shall decrease, the amount of the Credit then allocated to such Category and no longer required therefor will be reallocated by the Association by increasing correspondingly the unallocated amount of the Credit; (b) if the estimate of the expenditures under any Category shall increase, the percentage set forth in the third column of the table in paragraph I above in respect of such expenditures shall be applied to the amount of such increase, and a corresponding amount will be allocated by the Association, at the request of the Borrower, to such Category from the unallocated amount of the Credit, subject, however, to the requirements for contingencies, as determined by the Association, in respect of any other expenditures; and (c) if the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in Section 2.03 of this Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under this Agreement, by notice to the Borrower, cancel such amount of the Credit as in the Association's reasonable opinion, represents the anfount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. 5. Notwithstanding the percentages set forth in the third column of the table in paragraph I above, if the estimate of total expenditures under Categories IV(a), VI(b) and VII shall increase and no proceeds of the Credit are available for reallocation to such Category, the Association may, by notice to the Borrower, adjust the percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 15 SCHEDULE 2 Description of the Project The Project is the second phase of a program directed at increasing agricultural, livestock and fish production in the Project Area over a five-year period, and consists of the following Parts: Part A: A program involving about 16,000 farmers designed to increase the production of about 49,000 acres of cotton, about 52,000 acres of maize, about 19,000 acres of sorghum, about 7,000 acres of rice, about 4,000 acres of groundnuts and about 200 acres of cocoa by: (i) providing extension services, including the construction of offices, stores and training facilities at six extension area headquarters, the expansion of existing extension offices, training facilities, workshops, stores and staff housing and the supply of vehicles and training equipment; (ii) extending seasonal and medium-term credit to farmers; (iii) drilling and equipping 140 boreholes; (iv) improving about 80 miles of main and secondary roads, and adapting the railway bridge at Bangula to carry road vehicles; (v) constructing about 100 miles of feeder roads; and (vi) constructing 17 new markets and renovating three existing markets. Part B: The operation of two grazing schemes in selected areas on available grazing land and the construction of fire lines, tracks, dipping tanks, weirs and aams, and the establishment of three ox training centers. Part C: A program designed to increase the productivity of about 1,000 fishermen by: (i) providing extension services and facilities; (ii) constructing smoke-drying kilns; 16 (iii) constructing about 20 miles of all-weather roads; and (iv) training of boat builders. Part D: Carrying out of: (i) engineering studies in the Elephant and Ndinde Marshes to determine the feasibility of intensive low-cost fish farming; and (ii) final engineering for the improvement of the Chikwawa-Bangula Road. Part E: A program to improve health services in the Project Area by: (i) construction of new or conversion of existing buildings to provide four Primary Health Centers, 11 Sub-Centers and 16 Health Posts and medical service departments at Chikwawa District Hospital; and (ii) provision of personnel, drugs and equipment for the operation of the basic health services included in the Project. Part F: Maintenance and control of Game Parks for wildlife preservation, in particular at Lengwe by: (i) provision of staff houses and vehicles; and (ii) construction of access roads. Part G: A program to improve agricultural research at Makanga, Kasinthula and Ngabu and fisheries research at Chiromo by: (i) the appointment of a qualified and experienced senior research officer to coordinate local research programs; (ii) construction of staff housing and offices; (iii) construction and equipping of two laboratories; (iv) rainfed crop trials at Ngabu; (v) irrigation trials at Kasinthula; and (vi) the carrying out of a seed bulking program at Makanga. 17 Part H: Services of consultants for Parts A(iv) and D(ii) of the Project. Part I: A program designed to assist in preparation of land registration for farmers and livestock owners under Parts A and B of the Project, respectively. The Project is expected to be completed by March 31, 1978. 18 SCHEDULE 3 Procurement A. Contracts Governed by Guidelines for Procurement 1. With respect to any contract for road construction works, machinery, equipment, vehicles and fertilizers estimated to cost the equivalent of $25,000 or more: (a) If bidders are required to prequalify, the Borrower shall, before qualification is invited, inform the Association in detail of the procedure to be followed and shall introduce such modifications in said procedure as the Association shall reasonably request. The list of prequalified bidders, together with a statement of their qualifications and of the reasons for the exclusion of any applicant for prequalification, shall be furnished by the Borrower to the Association for its comments before the applicants are notified and the Borrower shall make such additions to or deletions from the said list as the Association shall reasonably request. (b) Before bids are invited, the Borrower shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedure as the Association shall reasonably request. The items to be purchased will be grouped so as to permit such bulk procurement as shall be consistent with sound technical and procurement practices. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (c) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, inform the Association of the name of the bidder to whom it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the reasons for the intended award. The Association shall promptly inform the Borrower if it has any objection to the intended award on the ground that the award would be inconsistent with the procedures set forth or referred to in Section 2.03 of this Agreement, and shall state the reasons for any objections which it may have. (d) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked. 19 (e) If any contract shall be awarded over the Association's reasonable objection, or if its terms and conditions shall, without the Association's concurrence, materially differ from those on which bids were asked, no expenditure thereunder shall be financed out of the proceeds of the Credit. (f) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract. 2. With respect to any other contract for road construction works, the Borrower shall furnish to the Association, promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract, two conformed copies of such contract, together with the analysis of bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall promptly inform the Borrower if it finds that the award of the contract is not consistent with the procedures set forth or referred to in Section 2.03 of this Agreement and, in such event, no expenditure for such contract shall be financed out of the proceeds of the Credit. B. Contracts or Works not Governed by Guidelines for Procurement Notwithstanding the provisions included in the paragraphs of this Schedule or referred to in Section 2.03 of this Agreement the following contracts or works will be awarded or carried out as follows: (a) Any contract to supply machinery, equipment, vehicles or fertilizers which is, on an annual basis, less than $25,000 equivalent, will be awarded under the Borrower's usual procurement procedures. (b) Boreholes will be drilled and equipped by the Borrower under force account. (c) Staff housing, workshops, offices and other building construction works will be awarded on the basis of competitive bids from local firms. (d) The earth works and the gravelling required for the road construction works included in Part A(iv) and (v) of the Project will be carried out by the Borrower under force account. 20 C. Supplemental Rules on Bid Evaluation and Comparison for goods included in Category III of the table set out in paragraph I of Schedule 1 to this Agreement 1. For the purpose of evaluation and comparison of bids, customs duties and other import taxes on imported goods, and sales and similar taxes on locally produced goods, shall be excluded, except to the extent hereinafter provided, and bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for locally produced goods. The cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be taken into account in the evaluation of bids in accordance with paragraph 4.7 of the Guidelines for Procurement. 2. For purposes of the provisions hereinafter set forth, the following terms shall have the following meanings: (a) "Preferred Domestic Bid" means a bid offering goods manufactured in Malawi if the bidder shall have established to the satisfaction of the Borrower and the Association that the manufacturing cost of such goods includes a value added in Malawi of not less than 20% of the ex-factory bid price. (b) "Non-preferred Domestic Bid" means any other bid offering goods manufactured in Malawi. (c) "Foreign Bid" means any bid other than those specified in (a) or (b) above. 3. A margin of preference may be granted by the Borrower to Preferred Domestic Bids. Such preference shall be granted by adding to each Foreign Bid, for the purpose only of comparison with Preferred Domestic Bids, an amount (hereinafter called "Domestic Preference Margin") equal to the smaller of (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the goods offered in the bid, or (ii) 15% of the c.i.f. bid price of such goods. 4. If Preferred Domestic Bids are received, the comparison among all evaluated bids for each contract shall be made in the stages and with the preferences indicated below: 21 Stage Bids to be Compared Preference I. All Preferred Domestic Bids and Non-preferred None Domestic Bids. II. (a) Lowest evaluated bid under Stage I, if Add Domestic Preferred Domestic Bid, with all Foreign Preference Bids; Margin to Foreign Bids or (b) Lowest evaluated bid under Stage 1, if None Non-preferred Domestic Bid, with all Foreign Bids. III. If lowest evaluated bid under Stage 11 is not None the lowest evaluated bid under Stage I, all Foreign Bids. only. 5. The bidding documents shall clearly indicate any preference which will be granted to Preferred Domestic Bids, the information required to establish the * eligibility of a bid for such preference and the methods and stages that will be followed in the evaluation and comparison of bids to give effect to such preference. 22 SCHEDULE 4 Operating Policies and Procedures for the Provision of Credits unde; Part A(ii) of the Project Two revolving funds for credit will be established under control of the Project Manager, one for seasonal credit and the other for medium-term credit. 1. Seasonal Credits Seasonal credit will be provided in kind for farmers' seasonal inputs such as fertilizers, insecticides and seed at a price equal to their cost (including all handling, transportation and other direct charges) plus a 10% service charge. Seasonal credits will be secured by the beneficiary farmer's crop. If a seasonal credit is not fully repaid on time, a further 10% charge on the amount outstanding will be levied and the over-all total will be secured by the following crop. All repayments will be allocated to the revolving seasonal credit fund. 2. Medium-term Credits Medium-term credit will be provided to farmers and fishermen for such items as work oxen, ploughs and accessories, cotton sprayers, and fishing boats and fishing nets at a price equal to their cost (including all handling, transportation and other direct charges). Such credit will carry interest at the rate of 10% per annum. Repayments will be in annual installments over a period of up to 3 years, depending upon the items financed by the credit. Medium-term credits will be secured by the items financed with the proceeds thereof and the beneficiary's crop or catch. All repayments will be allocated to the revolving medium-term credit fund. 3. Repayment Procedure All beneficiaries under the above credits will register at the closest ADMARC market or beach credit office, to which they will obligate themselves to sell their produce or catch in order to repay their respective credits. Credit repayments will be collected at the appropriate ADMARC market or beach credit office by the Project credit staff. Beneficiaries will repay 50% of their receipts or 100% of their remaining debt, whichever is less, after delivery of their crops or catch to the stipulated market or beach credit office. Records of each individual account will be maintained at each ADMARC market or beach credit office. 23 4. Administration of the Credits Funds The revolving seasonal credit fund and the revolving medium-term credit fund will be established and administered by the Project Manager, who will maintain credit records, authorize credit sales and supervise debt collections. The Project Manager's extension staff will provide technical supervision. Adequate records of all agricultural credit transactions will be maintained.