Malawi - Third Education Project : Credit 0910 - Credit Agreement - 2 - Conformed

CONFORMED COPY SPECIAL ACTION CREDIT NUMBER 12 MAI Special Action Credit Agreement (Third Education Project) between REPUBLIC OF MALAWI and INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the SPECIAL ACTION ACCOUNT established with funds contributed by the MEMBER STATES of the EUROPEAN ECONOMIC COMMUNITY Dated June 19, 1979 SPECIAL ACTION CREDIT NUMBER 12 MAI SPECIAL ACTION CREDIT AGREEMENT AGREEMENT, dated June 19, 1979, between REPUBLIC OF MALAWI (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the Special Action Account established with funds contributed by the MEMBER STATES of the EUROPEAN ECONOMIC COMMU- NITY. WHEREAS (A) by the Agreement, dated May 2, 1978, between the International Development Association (hereinafter called IDA) and the European Economic Community and its Member States there has been established by IDA a Special Action Account constituted by the funds which shall be contributed by the Member States of the European Economic Community and administered by IDA, acting as Administrator of such Special Action Account, for the purpose of, and in accordance with, the provisions of said Agreement; (B) the Borrower has requested the Administrator for assistance from the resources of the Special Action Account in the financing of a project described in Schedule 2 to this Agreement and the Administrator has determined that such assistance would be in accordance with the provisions of the Agreement of May 2, 1978 referred to above; (C) the Borrower has also requested IDA to provide addi- tional assistance towards the financing of the Project and by an agreement of even date herewith between the Borrower and IDA (hereinafter called the Development Credit Agreement), IDA is agreeing to provide such assistance in an aggregate principal amount equivalent to fourteen million five hundred thousand dollars ($14,500,000) (hereinafter called the IDA Credit); WHEREAS the Administrator has agreed, on the basis inter alia of the foregoing, to extend the Special Action Credit to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: 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 International Development Association, -2- dated March 15, 1974, with the same force and effect as if they were fully set forth herein, subject, however, to the following modifications thereof (said General Conditions Applicable to Development Credit Agreements of the International Development Association, as so modified, being hereinafter called the General Conditions): (a) the term "Association", wherever used in the General Conditions, means the International Development Association acting as the Administrator of the Special Action Account referred to in the Preamble to this Special Action Credit Agreement; (b) the terms "Development Credit Agreement" and "Credit", wherever used in the General Conditions are amended to read "Special Action Credit Agreement" and "Special Action Credit", respectively; (c) Sections 4.01, 4.02, 4.03, 4.04 and the second sentence of Section 5.01 are deleted; and (d) in Sections 6.02 and 7.01, the term "Association" shall also include the International Development Association acting in its own capacity. Section 1.02. Wherever used in this Agreement,) unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Member States" means the Member States of the European Economic Community, i.e. Belgium, Denmark, The Federal Republic of Germany, France, Ireland, Italy, Luxembourg, The Netherlands and The United Kingdom; (b) "Administrator" means the International Development Association acting as Administrator of the Special Action Account referred to in the Preamble to this Special Action Credit Agree- ment; and (c) "Development Credit Agreement" means the agreement of even date herewith between the Borrower and IDA for the purpose of the Project, as such agreement may be amended from time to time; and such term includes the General Conditions Applicable to Development Credit Agreements of IDA, dated March 15, 1974, as -3- made applicable to such agreement, all agreements supplemental to the Development Credit Agreement and all schedules to the Develop- ment Credit Agreement. ARTICLE II The Special Action Credit Section 2.01. The Administrator agrees to lend to the Bor- rower on the terms and conditions in the Special Action Credit Agreement set forth or referred to, the following currency amounts: nine million one hundred thirteen thousand Belgian francs (BF9,113,000); one million one hundred thirty-four thousand Danish kroner (DK1,134,000); four million three hundred eighty thousand Deutsche marks (DM4,380,000); four million six hundred thirty-one thousand French francs (FF4,631,000); ten thousand one hundred Irish pounds (IrE10,l100); five hundred thirty-seven million three hundred forty-eight thousand Italian lire (ItL537,348,000); two hundred eighty- seven thousand Luxembourg francs (LF287,000); one million two hundred eleven thousand Netherlands guilders (Dfl 1,211,000); and one million one hundred sixteen thousand seven Pounds sterling (1,116,700). hundred Section 2.02. '(a) The proceeds of the Special Action Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Administrator, for expenditures made (or, if the Administrator shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Special Action Credit. (b) Withdrawals shall be made only on account of expendi- tures (i) in the currency of the Borrower, or (ii) for goods produced in, or services supplied from, (A) any of the Member States and (B) any developing country which is a member of the International Development Association and could be the recipient of a special action credit, as determined by the Administrator. (c) Withdrawals from the Credit Account shall be made in the respective currencies in which the expenditures to be financed out of the proceeds of the Special Action Credit have been paid or are payable or, at the option of the Administrator, in such currency or currencies as the Administrator shall from time to time select. Section 2.03. Except as the Administrator shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Special Action Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1982, or such later date as the Administrator shall establish. The Administrator shall promptly notify the Borrower of such later date. Section 2.05. (a) The Borrower shall pay to the Administrator a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum, on each of the various currency amounts with- drawn from the Credit Account and outstanding from time to time. The amounts of service charge in various currencies so found, and additional service charges (if any) payable pursuant to Section 3.02 of the General Conditions, shall be payable in the currency of the United Kingdom of Great Britain and Northern Ireland, or in another currency selected by the Administrator in accordance with the provisions of paragraph (b) of this Section, after their conversion into such currency on the basis of exchange rates determined in accordance with the provisions of Section 4.05 of the General Conditions. (b) If the Administrator shall at any time determine that the currency so specified or selected is not freely convertible or freely exchangeable by the International Development Association for currencies of other members of the International Development -5- Association for the purposes of its operations, service charges shall be payable in such other currency as the Administrator may select for such purposes and shall notify in writing to the Borrower, whereupon, commencing thirty days after the date of such notice, service charges shall be payable in such other currency. Section 2.06. Service charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.07. (a) The Borrower shall repay the principal amount of the Special Action Credit in semiannual installments payable on each May 1 and November 1 commencing November 1, 1989 and ending May 1, 2029, each installment to and including the installment payable on May 1, 1999, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment there- after to be one and one-half per cent (1-1/2%) of such principal amount. (b) Each of the installments payable pursuant to paragraph (a) of this Section shall be the aggregate of such amounts in the various currencies withdrawn from the Credit Account as shall be found by multiplying the total amount in each currency so with- drawn by the applicable installment percentage as specified in paragraph (a) of this Section, unless the Administrator shall otherwise specify by notice to the Borrower prior to each pay- ment date for the purpose of avoiding the payment of fractional currency amounts. (c) If withdrawal shall have been made in a currency which the Administrator, shall have purchased with one or more other currencies for the purpose of such withdrawal, the portion of the Special Action Credit so withdrawn shall, for the purpose of paragraph (b) of this Section, be deemed to have been withdrawn in the currency or currencies used by the Administrator for such purchase in the amounts of such currency or currencies so used. (d) The Administrator will, at the request of the Borrower and on such terms and conditions as the Administrator shall determine, use its best efforts to purchase any currency needed by the Borrower for payment of principal required under this Agreement upon payment by the Borrower of sufficient funds therefor in a currency or currencies to be specified by the Administrator from time to time. In purchasing the currencies required the Administrator shall be acting as agent of the Borrower and the Borrower shall be deemed to have made any payment -6- required under this Agreement only when and to the extent that the Administrator has received such payment in the currency or currencies required. ARTICLE III Execution of the Project Section 3.01. The Borrower shall duly perform all its obliga- tions set forth in the Development Credit Agreement as if they were fully set forth herein. Section 3.02. (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 Special Action Credit against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Administrator shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Special Action Credit to be used exclusively for the Project. ARTICLE IV Remedies of the Administrator Section 4.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) the right of the Borrower to withdraw the proceeds of the IDA Credit made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the Development Credit Agreement; or (b) the IDA Credit shall have become due and payable prior to the agreed maturity thereof. The preceding paragraphs (a) and (b) shall not apply if: (i) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its -7- obligations under such agreement; and (ii) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 4.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (d) thereof; namely, that the event speci- fied in paragraph (b) of Section 4.01 of this Agreement shall occur. ARTICLE V Effective Date; Termination Section 5.01. The following event is specified as an addi- tional condition to the effectiveness of the Special Action Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions, namely, that all conditions precedent to the effectiveness of the Development Credit Agreement, except for the effectiveness of this Agreement, have been fulfilled. Section 5.02. The date September 19, 1979 is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister 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 to the Treasury Ministry of Finance P.O. Box 30049 Capital City Lilongwe 3, Malawi -8- Cable address: FINANCE Lilongwe For the Administrator: Administrator of the Special Action Account (International Development Association) 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF MALAWI By /s/ Jake T. X. Muwamba Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the SPECIAL ACTION ACCOUNT established with funds contributed by the MEMBER STATES of the EUROPEAN ECONOMIC COMMUNITY By Is/ Hans A. Adler Acting Regional Vice President Eastern Africa -9- SCHEDULE 1 Withdrawals of the Proceeds of the Special Action Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Special Action Credit, the allocation of the amounts of the Special Action Credit to each Category and the percentage for items so to be financed in each Category: Amount of the Special Action Credit % of Allocated (Expressed Expenditures Category in Dollar Equivalents) to be Financed (1) Textbooks under 2,800,000 90% Part A (2) of the Project (2) Civil works 2,100,000 87% under Parts A (3) and B (1) and (2) of the Project (3) Equipment under Parts 1,000,000 100% of foreign A (3) and B (1) and expenditures and (2) and vehicles 90% of local under Part C (2) of expenditures the Project (4) Furniture under 200,000 90% Parts A (3) and B (1) and (2) of the Project (5) Unallocated 1,400,000 TOTAL 7,500,000 2. The total dollar amount shown in the foregoing table shall be adjusted from time to time as required to reflect the aggregate - 10 - dollar equivalent of the unwithdrawn currency amounts in the Credit Account; the unallocated dollar amount shall be adjusted accordingly. 3. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of, and for goods produced in or services supplied from, (i) any of the Member States and (ii) any developing country, other than the Borrower, which is a member of the Inter- national Development Association and could be the recipient of a Special Action Credit, as determined by the Administrator; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 4. The disbursement percentages have been calculated in com- pliance with the policy of the Administrator that no proceeds of the Special Action Credit shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procure- ment or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Special Action Credit decreases or increases, the Administrator may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Administrator. 5. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. 6. Notwithstanding the allocation of an amount of the Special Action Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Administrator has reasonably estimated that the amount of the Special Action Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Administrator may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Special Action Credit which are then allocated to another Category and which in the opinion of the Administrator are not needed to meet other expenditures; and (ii) - 11 - if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expen- ditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 7. If the Administrator shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Special Action Credit Agreement, no expenditures for such item shall be financed out of the proceeds of the Special Action Credit and the Admin- istrator may, without in any way restricting or limiting any other right, power or remedy of the Administrator under the Special Action Credit Agreement, by notice to the Borrower, cancel such currency amounts of the Special Action Credit as, in the Adminis- trator's reasonable opinion, represent the currency amounts which would otherwise have been eligible for withdrawal out of the proceeds of the Special Action Credit in respect of such expendi- tures. - 12 - SCHEDULE 2 Description of the Project The Project consists of the following: Part A: Primary Education (1) The construction, furnishing and equipping of about 1,000 classrooms and about 500 staff housing units. (2) The provision of about 2.2 million textbooks to primary school students. (3) The construction, furnishing and equipping of facilities at Mzuzu Teacher Training College so as to increase its total enrollment capacity to about 540 students. Part B: Secondary Education (1) The construction, furnishing and equipping of about 30 satellite Centers for MCC, including about 30 staff housing units. (2) Improving the facilities at MCC headquarters through expanding and upgrading its recording studio facilities, providing it with recording and printing equipment and upgrading its electrical system. (3) The upgrading of about five secondary schools; includ- ing, inter alia, the provision of boarding facilities for about 280 students. (4) The construction, furniFhing and equipping of facilities for the teaching of commercial and business subjects to about 120 students at the three technical schools in Blantyre, Mzuzu and Lilongwe. (5) The construction, furnishing and equipping of facilities sufficient to increase the enrollment capacity of the Chancellor College by about 225 teacher training students. (6) The construction and furnishing of about 6 staff houses, and the furnishing and equipping of boarding facilities - 13 - for about 60 students at the Colby College of Agricul- ture. Part C: Education Services (1) The establishment of the Institute of Education through the expansion and improvement of the facilities of the teacher in-service center at Domasi so as to accom- modate about 150 students and 30 staff. (2) The provision of about 50 vehicles. Part D: Studies Unless otherwise agreed between the Borrower and the Administrator, the following studies will be carried out: (1) A tracer study of graduates of general secondary schools, teacher training programs at the Chancel- lor College and commercial training programs at the technical schools. (2) A school mapping study. (3) Studies to assist in the preparation of a national education plan and future education projects. (4) A study of the costs, durability and financing of primary school textbooks. (5) Monitoring and evaluation of the Project and of the project financed under the Development Credit Agreement concluded between the Borrower and the Administrator on November 24, 1975. The Project is expected to be completed by December 31, 1983. - 14 - SCHEDULE 3 Procurement A. International Competitive Bidding 1. Subject to the eligibility restrictions set forth in Section 2.02 (b) of this Agreement and except as provided in Part C hereof, goods shall be procured under contracts awarded in accor- r.ance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. Items of goods shall be grouped so as to permit such bulk procurement as shall be consistent with appropriate technical standards and procurement practices. 3. For goods to be procured on the basis of international competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Administrator as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Administrator shall reasonably request; the Administrator will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods remain to be procured on the basis of international competitive bidding. 4. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) 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 domestically manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically supplied goods, shall be excluded; and (iii) 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 included. - 15 - B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in Malawi may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comnparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Malawi if the bidder shall have established to the satisfaction of the Borrower and the Administrator that the manufacturing cost of such goods includes a value added in Malawi equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Malawi. (3) Group C: bids offering any other goods. 3. All evaluated bids in each group shall.be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, *the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such - 16 - group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures 1. Civil works, to be financed out of the proceeds of the Special Action Credit, may be carried out under procedures of the Borrower satisfactory to the Administrator or under competitive bidding advertised locally pursuant to procedures satisfactory to the Administrator. Contracts for the carrying out of such works shall be grouped so as to permit such bulk procurement as shall be consistent with appropriate technical standards and procurement practices. 2. The primary school textbooks, referred to in Category (1) of the table shown in Schedule 1 to this Agreement, shall be purchased from the Malawi Book Service Corporation or other suppliers pursuant to such procedures and under such terms as shall be satisfactory to the Administrator. 3. Without limitation upon the provisions of paragraph 2 above, contracts for the purchase of goods estimated to cost less than the equivalent of $50,000 per contract may be awarded in accor- dance with the Borrower's applicable procedures satisfactory to the Administrator. D. Review of Procurement Decisions by the Association 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all. contracts for civil works estimated to cost the equivalent of $250,000 or more, and for all contracts for the procurement of goods estimated each to cost the equivalent of $50,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Administrator, for its comments, the text of the invita- tions 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 - 17 - said documents or procedures as the Administrator shall reasonably request. Any further modification to the bidding documents shall require the Administrator's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Administrator of the name of the bidder to which it intends to award the contract and shall furnish to the Administrator, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Administrator shall reasonably request. The Administrator shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Administrator's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Administrator promptly after its execution and prior to the submission to the Administrator of the first application for withdrawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Administrator, promptly after its execution and prior to the submission to the Administrator of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Administrator shall reasonably request. The Administrator shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by - 18 - more than 15% of the original price, the Borrower shall inform the Administrator of the proposed modification, waiver, extension or change order and the reasons therefor. The Administrator, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination.