Philippines - Second Fisheries Project : Loan 1270 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1270 PH LOAN AGREEMENT (Second Fisheries Project) between REPUBLIC OF THE PHILIPPINES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated July 2, 1976 S LOAN AGREEMENT AGREEMENT, dated July 2, 1976, between REPUBLIC OF THE PHILIP- PINES (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). -2- ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guar- antee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank 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) "DBP" means the Development Bank of the Philippines, an agency of the Borrower; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and DBP pursuant to Section 3.02 of this Agreement; (c) "sub-loan" means a loan made or proposed to be made by DBP, in carrying out the Project described in Schedule 1 hereto, to a beneficiary for an Investment Project, excluding any loan for working capital, and to be financed in part out of the proceeds of the Loan; 4, -3- (d) "beneficiary" means an individual, a private corporation or partnership to which DBP proposes to make or has made a sub-loan; (e) "Investment Project" means a specific investment proj- ect, as approved by DBP pursuant to this Loan Agreement and the Subsidiary Loan Agreement, to be carried out by a beneficiary and to be financed in part by means of a sub-loan; (f) "cost of Investment Project" means the cost thereof ex- cluding the cost of land and the working capital requirement; and (g) "peso" means the currency of the Borrower. 24- ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or re- ferred to, an amount in various currencies equivalent to twelve million dollars ($12,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account for 61% and 71% of the amounts disbursed under sub-loans under Parts A and B of the Project, respectively, in respect of reasonable expenditures made by the beneficiaries, af- ter the date of this Agreement, for the carrying out of the In- vestment Projects; provided, however, that unless the Bank shall otherwise agree, withdrawals on account of Part A of the Project shall not exceed the equivalent of $7,300,000. Section 2.03. Except as the Bank shall otherwise agree, the goods and civil works to be financed out of the proceeds of the Loan, shall be purchased and carried out, respectively, in accordance with the provisions of paragraph C of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1981 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall per to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) -5- per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. The Borrower shall pay interest at the rate of eight and one-half per cent (8-1/2%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semi-annually on April 1 and October 1 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 2 to this Agreement. -8- Section 3.04. Except as the Bank shall otherwise agree, if any beneficiary cannot otherwise obtain sufficient working capital required for the Investment Project, the Borrower shall cause DBP out of DBP's own resources to make a working capital loan to the beneficiary on terms and conditions not less favorable than those of DBP's lending operations for working capital under similar con- ditions. Section 3.05. The Borrower shall cause the goods to be imported by the beneficiaries and to be financed out of the proceeds of the Loan to be insured against hazards incident to their ac.,iisition, transportation and delivery to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the beneficiaries to replace or repair such goods. Section 3.06. (a) The Borrower shall cause the facilities in- cluded in the Project to be constructed in accordance with design standards satisfactory to the Bank. (b) The Borrower shall cause DBP to cause the beneficiaries of sub-loans for ice plants and slipway: (i) estimated to cost more than $100,000 equivalent, to employ consultants whose qualifica- tions, experience, and terms and conditions shall be satisfactory to the Bank, to prepare its design and specifications, and tender documents for such facilities, and (ii) estimated to cost $100,000 equivalent or less, to submit its design and specifications, and tender documents for such facilities, as shall be acceptable to DBP and the Bank. (c) If, and to the extent that the Bank shall request, the Borrower shall cause the plans, specifications, reports, contract documents and construction and procurement schedules for the Proj- ect, and any material modifications thereof or additions thereto, to be furnished to the Bank in such detail as the Bank shall rea- sonably request, promptly upon their preparation. Section 3.07. The Borrower shall cause DBP: (i) to maintain records adequate to reflect the progress and cost of the Project and to identify the goods and services financed out of the pro- ceeds of the Loan, and to disclose their use in the Project; (ii) to enable the Bank's accredited representatives to visit the fa- cilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) to furnish to the Bank all such information as the Bank shall reasonably request concerning the Project, the account referred to in Section 3.03 (b) hereof, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. Section 3.08. The Borrower shall cause DBP: (a) to obtain from the beneficiaries annual reports with re- spect to Bank financed projects showing quantities and values of production, itemized production costs, and indices of productivity so as to enable the preparation and updating of financial and eco- nomic analysis of sub-projects; and S -10 1 (b) to furnish to the Bank, annually, a report summarizing the information referred to in paragraph (a) hereof, and a summary report on all its loans for fisheries showing, among other things, and separately for the Project, repayment collections, arrears position and the ages of any overdues. 4,- 11- ARTICLE IV Other Covenants Section 4.01. (a) It is the mutual intention of the Borrower and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on governmental assets. (b) To that end the Borrower: (i) represents that at the date of this Agreement no lien exists on any governmental assets as security for any external debt except as otherwise disclosed in writing by the Borrower to the Bank; and (ii) undertakes that, except as the Bank shall otherwise agree, if any such lien shall be created, it will ipso facto equally and ratably, and at no cost to the Bank, secure the payment of the principal of, and in- terest and other charges on, the Loan and in the creation of any such lien express provision will be made to that effect. The Bor- rower shall promptly inform the Bank of the creation of any such lien. (c) The foregoing representation and undertaking shall not apply to: (i) any lien created on property, at the time of pur- chase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. As used in this Section, the term "governmental assets" means assets of the Borrower or of any agency of the Borrower including the Central Bank of the Philippines or any institution performing the functions of a central bank for the Borrower. -12- (a) The Borrower further undertakes that, within the limits f the laws in force in its territories, it will make the fore- ;oing undertaking effective with respect to liens on the assets f its political subdivisions and their agencies, and to the ex- ent that the Borrower is unable within the limits of the laws in orce in its territories to make this undertaking effective, the 'orrower will give to the Bank an equivalent lien satisfactory to ,he Bank. Section 4.02. (a) The Borrower shall cause DBP to maintain .ecords adequate to reflect in accordance with consistently main- ;ained sound accounting practices the operations and financial !ondition of DBP. (b) The Borrower shall cause DBP to: (i) have its accounts and financial statements (balance sheets, statements of income ind expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to she Bank as soon as available, but in any case not later than three months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) Vhe report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of DBP and the audit thereof as the Bank shall from time to time reasonably request. - 13 - Section 4.03. The Borrower shall cause DBP to cause the bene- ficiaries to operate and maintain the facilities included in their Investment Projects in accordance with sound fishing, engineering and financial practices. Section 4.04. The Borrower shall cause DBP: (i) to use its best efforts to reduce substantially the amount of principal and interest in arrears on all the outstanding loans made by DBP to the fisheries sector; (ii) to undertake and complete a portfolio review program of such loans and prepare a detailed plan of action for discussion with the Bank not later than June 30, 1977; (iii) to implement such plan of action according to a timetable to be agreed with the Bank; and (iv) to include such information on its arrears as shall be agreed with the Bank in DBP's quarterly re- ports to the Bank. -14-e ARTICLE V Effective Date; Termination Section 5.01. The following event is specified as an addi-, tional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that the execution and delivery of the Subsidiary Loan Agreement on behalf of the parties thereto have been duly authorized or ratified by all necessary governmental and corporate action. Section 5.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be fur- nished to the Bank, namely, that the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and DBP, and is legally binding upon them in accordance with its terms. Section 5.03. The date October 4, 1976, is hereby specified for the purposes of Section 12.04 of the General Conditions. -,15 - ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Secretary of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Secretary of Finance Department of Finance Manila, Philippines Cable address: SECFINANCE Manila For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. - 16 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF THE PHILIPPINES By /s/ Mario Belisario Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Bernard R. Bell Regional Vice President East Asia and Pacific - 17 - SCHEDULE 1 Description of the Project The Project consists of a lending program for the inland and ma:-ine fisheries sector: Pa.t A: Inland Sector Provision of credit to finance: (a) construction of new fishponds for fish farming; and (b) expansion and rehabilitation of existing fishponds. Part B: Marine Sector Provision of credit to finance: (a) construction of fully equipped fishing vessels; (b) conversion of second-hand vessels into fish carrier boats; (c) construction of ice plants with cold storage, to be used to support the fishing industry; 기 4P -19 SCHEDULE 2 Amortization Schedule Payment of Principal Date P!a ent Due (expressed in dollars)* October 1, 1981 26o,ooo April 1. 1982 2759000 October 1, 1982 2859000 April 1, 1983 2959000 October 1. 1983 3109000 April 1, 1984 3209000 October 1. 1984 3359000 April 1. 1985 3509,000 October 1. 1985 3659000 April 1, 1986 3809000 October 1. 1986 3959000 April 1, 1987 4152000 October 1. 1987 430tOOO April 1. 1988 4509000 October 1. 1988 4709000 April 1. 1989 49o.ooo October 1. 1989 5109000 April 1. 1990 5309000 October 1. 1990 5559000 April 1, 1991 5759000 October 1, 1991 6oo.ooo April 1. 1992 6252000 October 1. 1992 6559000 April 1. 1993 68o,ooo October 1. 1993 7109000 April 1. 1994 735,000 To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equiva- lents determined as for purposes of withdrawal. - 20 - Premiums on Prepayment The following percentages are specified as the premiums pay- able on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1-1/4% More than three years but not more than six years before maturity 2-1/2% More than six years but not more than eleven years before maturity 4-1/2% More than eleven years but not more than fourteen years before maturity 6-3/4% More than fourteen years but not more than sixteen years before maturity 7-1/2% More than sixteen years before maturity 8-1/2% -21- SCHEDULE 3 Operating Policies and Procedures A. Subsidiary Loan Agreement Repayment: 18 years, including 5 years of grace. Rate of interest: 8-1/2% per annum on outstanding amounts. Exchange risk: the Borrower shall bear it. B. Lending Program 1. Sub-loan Applications 1.1 DBP shall maintain during the execution of the Project a Fisheries Group divided into the Inland Fisheries D.vision and Marine Fisheries Division, each divisicn having a Project Appraisal and a Project Supervision Section. Each Section shall include, among others, one inland and one marine senior fisheries specialist, and the Project Ap- praisal Section will also include an experienced financial analyst. 1.2 Sub-loan applications shall be filed with DBP's branch nearest to the location proposed for the - 22 - Investment Project, or with DBP's headquarters, and shall be evaluated by the Fisheries Group from a technical, financial and economic viewpoint. The evaluation will emphasize the management capa- bility and experience of the applicant. 1.3 No Investment Project shall be approved without the prior Bank consent if by itself or together with any outstanding amount of any (i) other sub- loan or (ii) loan made by DBP and financed out of the proceeds of the loan made by the Bank to the Borrower pursuant to the Loan Agreement (Fisheries Credit Project) between them dated May 21, 1973, or (iii) loan for working capital e , to the same beneficiary, it shall exceed the equivalent of $600,000. To enable the Bank to appraise such In- vestment Project, DBP's feasibility study demon- strating the technical, managerial, financial and economic viability of the Investment Project shall be furnished to the Bank. 2. Amount, Terms and Conditions of Sub-loans 2.1 Sub-loans under Part A of the Project shall be in an amount not exceeding 90% of the cost of the Investment Project, and sub-loans under Part B shall be in an amount not exceeding 80% of such cost, in order to ensure that beneficiaries are required to contribute the remainder of such cost. - 23 - 2.2 DBP shall, in making sub-loans, utilize substan- tially the form of sub-loan agreement agreed upon with the Bank. The sub-loan agreement shall pro- vide, among other things, for the following: (a) An interest rate of twelve per cent (12%) a year on the amount withdrawn and outstanding on sub-loans secured by land, and of fourteen per cent (114%) on all sub-loans not secured by land; penal interest at the rate of two per cent (2%) per month, on any amount in arrears of 90 days or more, provided that from June 30, 1977 on such rate shall be three per cent (3%) per month; (b) a term of up to 14 years, including a grace period covering the construction and start up period, but not exceeding three years; (c) that the beneficiary shall not bear any for- eign exchange risk; (d) that the goods and civil works financed by the sub-loans shall be purchased and carried out, respectively, in accordance with the pro- visions of paragraph C of this Schedule; (e) that the proceeds of the sub-loans be used ex- clusively in the carrying out of the Invest- ment Project; S - 24- (f) that authorized representatives of DBP, the Borrower and the Bank shall have the right to inspect the facilities included in the Invest- ment Poject, the operations thereof and any relevant records and documents, and that the beneficiary shall provide DBP such information thereon as DBP shall reasonably request; (g) that beneficiaries of sub-loans exceeding three million pesos shall pay to DBP a fee, not to exceed 2% per annum on the principal amount of the sub-loan outstanding from time to time, to defray DBP's cost of appraising and supervising the sub-loan; (h) that the beneficiary shall maintain records adequate to reflect in accordance with con- sistently maintained sound accounting prac- tices the onerations and financial condition of its Investment Project, and that, if DBP shall so request, they shall cause indepen- dent auditors acceptable to DBP, or DBP's representatives, to audit such accounts, and (i) that the beneficiary shall provide to DBP, from time to time, such information as DBP shall reasonably request to enable DBP to assess the benefits produced by the sub-loan. -25- C. Procurement 1. Ice Plants and Slipway (a) Contracts for the purchase of goods or for civil works required for the ice plants and slipway estimated to cost the eqivalent of $200,000 or more shall be procured in accordance with procedures consistent with those set forth in Part A of the "Guide- lines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guide- lines), on the basis of international competitive bidding, provided that civil works and the purchase and installation of equipment therefor may be let as one contract, at the option of the bene- ficiary. (b) Review of invitations to bid and of proposed awards and final contracts: (i) Before bids are invited, the Borrower shall cause the Bank to be furnished, for its com- ments, 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 cause such modi- fications to be made in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's s - 26 - concurrence before it is issued to the pro- spective bidders. (ii) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, cause the Bank to be informed of the name of the bidder to which it is intended to award the contract and shall cause the Bank to be furnished, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Bank shall reasonably request. (c) (i) Contracts estimated to cost $100,000 equivalent or more but less than $200,000 equivalent may be carried out under contracts awarded on the basis of competitive bidding advertised locally and in accordance with procedures acceptable to the Bank and (ii) contracts estimated to cost less than $100,000 equivalent may be carried out under contracts let through normal commercial channels, with due regard to economy and efficiency. (d) With respect to each contract to be financed out of the proceeds of the Loan and not governed by the preceding paragraph, the Borrower shall cause the Bank to be furnished, promptly after its execution, with the analysis of the respective bids, recom- mendations for award and such other information as the Bank shall reasonably request. - 27 - (e) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked. 2. Equipment; Advertising Therefor (a) The Borrower shall cause DBP to ask the beneficiaries to state their preferences regarding the make of the equipment to be financed, and to establish, with the assistance of its marine spe- cialist staff the standards for service and spare parts inventories to be required from suppliers. (b) The Borrower shall cause DBP to advertise internationally the procurement of such equipment so that suppliers not yet estab- lished or represented in the Philippines have an opportunity to . do so, to build in the Philippines an adequate stock of spare parts, and to make arrangements to provide adequate after-sale services. The advertisements shall indicate the types of equipment and the quantities estimated to be procured. (c) Not less than 2 months after such advertising shall have been made, suppliers established or represented in the Philippines which in the opinion of DBP are qualified with regard to after-sale service facilities and spare parts inventories shall be invited to submit quotations for each type of equipment to be procured, quot- ing prices for varying quantities of equipment. (d) The Borrower shall cause DBP to assist and supervise the beneficiaries in awarding the contracts on the basis of the quota- tions received and the preferences indicated by the beneficiaries. S -28 - 3. Hulls and Second-Hand Vessels; Purchase through Normal Commercial Channels Hulls and second-hand vessels shall be purchased through nor- mal commercial channels, under the supervision of DBP who will en- sure that their cost is reasonable and that the hulls conform to the design criteria established for the Project by its naval ar- chitect. 4. Fishponds The beneficiaries shall, subject to DBP's prior approval, make arrangements for the carrying out of civil works for fishponds by contract or otherwise. 5. Evidence Prior to delivering to the Bank the first application for withdrawal of funds from the Loan Account in respect of any con- tract, and promptly after its execution, the Borrower shall cause the Bank to be furnished two conformed copies of such contract. The Bank shall, if it determines that the award of the contract was not consistent with the provisions of this Schedule, promptly inform DBP and state the reasons for such determination.