Turkey - Fifth Livestock Development Project : Loan 1862 - Loan Agreement - Conformed

LOAN NUMBER / 44TU Loan Agreement (Fifth Livestock Development Project) between REPUBLIC OF TURKEY and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated , 1980 LOAN NUMBER IN2-TU LOAN AGREEMENT AGREEMENT, dated sm-. 4 , 1980, between REPUBLIC OF TURKEY (hereinafter called the Borrower or Turkey) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) by an agreement of even date herewith between the Bank and the Turkiye Cumhuriyeti Ziraat Bankasi (hereinafter referred to as TCZB), certain obligations in respect of the carrying out of Part A of the Project have been undertaken by TCZB; (C) the Borrower is willing to make part of the proceeds of the Loan available to TCZB, Et ve Balik Kurumu (hereinafter referred to as EBK) and Turkiye Yapagi ve Tiftik A.S. (hereinafter referred to as TYT) for the carrying out of Parts A, E and F of the Project, respectivel-, as hereinafter set forth; and (D) the Bank is willing to make the Loan available upon the terms and conditions set forth hereinafter and in a project agreement of even date herewith between the Bank and TCZB; 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 Loan and Guarantee 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 and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: - 2 - (a) "Project Agreement" means the agreement of even date herewith between the Bank and TCZB, as such agreement may be amended from time to time, and such term includes the Schedules to the Project Agreement. (b) "Subsidiary Loan Agreements" means the agreements to be entered into between the Borrower and TCZB, EBK and TYT pur- suant to Section 3.02 (a) (i), (ii), and (iii), of this Agreement, respectively, as the same may be amended from time to time, and such term includes all agreements supplemental to, and all sched- ules to, such agreements. (c) "Subsidiary Loans" means the loans made by the Borrower to TCZB, EBK and TYT under the Subsidiary Loan Agreements. (d) "MFAL" means the Borrower's ministry responsible for food, agriculture and livestock. (e) "GDVS" means the General Directorate of Veterinary Services of MEAL. (f) "GDANB" means the General Directorate of MFAL respon- sible for Artificial Insemination, Natural Services and Breed Improvement. (g) "LDP" means the General Directorate for Livestock Development Projects of MFAL. (h) "EDLD" means the Encouragement and Development Loan Division of TCZB. (i) "Project area" means the area referred to in the pre- amble of Schedule 2 hereto. (j) "Project Manager" means the person employed as head of the division of LDP referred to in Sections 3.01 (b) (ii) and 3.05 (a) of this Agreement. (k) "Sub-loan" means a loan made by TCZB in accordance w-ith the procedures and the lending and operating policies provided for in the Schedule to the Project Agreement and util- izing inter alia funds provided to TCZB under the Subsidiary Loan Agreement. (1) "Sub-loan Contract" means the contract for any Sub-loan. - 3 - (m) "Farm Development Plan" means a specific development plan of an investor qualifying for a Sub-loan under Part A.1 of the Project for investment in forage production, farm buildings, livestock, farm machinery and equipment, tractors and other related items, or any combination thereof. (n) "Financing Plan" means a specific development plan for an investor qualifying for a Sub-loan under Part A.2 of the Project for investment in buildings, machinery and equipment, vehicles, inventories of starter chicks, vaccines, bulk and concentrate feeds and other reiated items, or any combination thereof. (o) "Beneficiary" means the recipient of a Sub-loan. (p) "Liras" and the letters "TL" mean the currency of the Borrower. (q) "Special Operational Fund" means the fund established pursuant to the provisions of the Subsidiary Loan Agreement of May 18, 1971 between the Borrower and TCZB entered into pursuant to the Development Credit Agreement of February 22, 1971 between the Borrower and the Association. (r) "Small farmer" means a farmer as defined in Article 3 of the Borrower's Law No. 3202, as amended, whose net annual pre- development family income, will not exceed the minimum wage in the Republic of Turkey (TL64,800, as of April 30, 1979) as re-vised from time to time. (s) "Farmer Association" means an association of at least 20 poultry farmers under the Project; (t) "Agricultural Credit Guidelines" means the administra- tive directive of TCZB set forth in the Annex to Circular No. 4770 dated September 24, 1979, as such directive may be amended, and the "Rules and Regulations of TCZB on Agricultural Credits", promulgated in the Official Gazette, No. 16674, dated June 22, 1979. (u) "CTSS" means the "Center for Technical Support Services" referred to in Section 3.06 of this Agreement. (v) "State Economic Enterprise" means an enterprise estab- lished pursuant to Law No. 440 of the Borrower dated March 21, 1964 as amended from time to time. -4- 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 referred to, an amount in various currencies equivalent to fifty-one million dollars ($51,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan 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 Bank, for expendi- tures made (or, if the Bank 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 Loan. Section 2.03. Except as the Bank shall otherwise agree, contracts for the purchase of goods required for the Project and to be financed out of the proceeds of the Loan or of any Sub-loan, shall be procured in accordance with the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1987 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 pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) 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 twenty-five hundredths per cent (8.25%) 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 semiannually on February 15 and August 15 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 3 to this Agreement. Section 2.09. The Borrower hereby designates the General Director of TCZB for the purposes of taking any action required or permitted to be taken in respect of Part A of the Project under -5- the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out Parts B, C and D of the Project and cause TCZB, EBK and TYT to carry out Parts A, E and F of the Project, respectively, with due diligence and efficiency and in conformity with appropriate administrative, financial, economic and agricultural practices and in accordance with the provisions set forth in Schedule 2 hereto, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the pur- pose. In particular the Borrower shall provide, or cause to be provided, all vehicles required to carry out Part B of the Pro- ject, under terms and conditions satisfactory to the Bank. (b) For the purpose of carrying out the Project the Borrower shall, except as the Bank may otherwise agree: (i) cause the General Director of LDP to coordinate all Parts of the Project; and (ii) employ or continue to employ on a full-time basis, a Project Manager for Part A of the Project duly qualified and experienced. Section 3.02. (a) The Borrower shall relend (i) $30,900,000 equivalent of the proceeds of the Loan withdrawn on account of expenditures under Part A of the Project to TCZB under a Subsid- iary Loan Agreement to be entered into between the Borrower and TCZB, under terms and conditions satisfactory to the Bank; (ii) $2,600,000 equivalent of the proceeds of the Loan withdrawn on account of expenditures under Part E of the Project to EBK under a Subsidiary Loan Agreement to be entered into between the Borrower and EBK, under terms and conditions satisfactory to the Bank; and (iii) $2,900,000 equivalent of the proceeds of the Loan withdrawn on account of expenditures under Part F of the Project to TYT under a Subsidiary Loan Agreement to be entered into between the Borrower and TYT, under terms and conditions satis- factory to the Bank. -6- (b) The Borrower shall exercise its rights and fulfill its obligations under the Subsidiary Loan Agreements in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive said Subsidiary Loan Agreements or any provision thereof. (c) Without any limitation or restriction upon any of its other obligqtions under the Loan Agreement, the Borrower shall: (i) cause TCZB, EBK and TYT to perform in accordance with the provisions of the Subsidiary Loan Agree- ments, and the Project Agreement in case of TCZB, and all the obligations therein set forth; and (ii) take and cause all its agencies and departments to take all action which shall be necessary or appro- priate on their part to enable TCZB, EBK and TYT to perform all such obligations (including those related to terms and conditions applicable to Small farmer lending) and shall not take or permit io be taken any action which would prevent or interfere with such performance. Section 3.03. (a) Until completion of the Project, the Borrower shall as and when needed: (i) provide not less than $45,500,000 equivalent out of resources other than the proceeds of this Loan for carrying out the Project; (ii) cause TCZB to provide not less than $22,600,000 equivalent out of resources other than the proceeds of this Loan under Part A of the Project; and (b) Except as the Borrower and the Bank shall otherwise agree, the Borrower shall maintain in LDP the Special Operational Fund to be utilized for the purpose of supplementing the funds otherwise available for the Project. Such Fund shall be credited with the amounts made available by TCZB to LDP in accordance with Section 4.02 of the Project Agreement. Expenditures out of such Fund shall be authorized only by the General Director of LDP, or any other person duly designated by him for such purpose. - 7 - Section 3.04. For purposes of carrying out Part A of the Project: (a) The Borrower shall, through LDP, enter into the arrange- ments referred to in Section 2.01 (d) of the Project Agreement. (b) The lending and operating policies and procedures shall be as set forth in the Schedule to the Project Agreement, as the same may be amended from time to time by Agreement between the Borrower, the Bank and TCZB. (c) The Borrower shall, through GDVS, provide veterinary assistance required for carrying out Part A of the Project under arrangements satisfactory to the Bank. Section 3.05. For purposes of carrying out Part A.1 of the Project the Borrower shall: (a) Establish within LDP's headquarters and, thereafter, maintain a separate division responsible for matters with respect to livestock production enterprises which are Beneficiaries .under the Project, with adequate authority and with qualified and experienced staff in sufficient numbers including a division manager and with adequate facilities; (b) (i) employ for the division referred to in paragraph (a) above not less than 15 veterinarians, 15 agronomists, 16 middle-level animal health tech- nicians and 17 middle-level agriculturalists, all with suitable qualifications and experience; (ii) continue to employ not less than 30 professionals and 33 middle-level technicians for carrying out the Project; and (iii) through LDP employ by March 31, 1981 an inter- nationally recruited technical specialist to assist in carrying out Part B.3 of the Project whose qualifications and experience and terms and con- ditions of employment shall be satisfactory to the Bank. Section 3.06. For purposes of carrying out Part A.2 of the Project, the Borrower shall through LDP: - 8 - (a) establish CTSS for technical assistance to farmers or groups of farmers with respect to poultry development, with sufficient authority and responsibilities and qualified and experienced staff in sufficient numbers, and adequate facilities in order inter alia to promote poultry development among village farmers, train and assist such farmers in preparing Financing Plans for Sub-loan applications and carrying out of Sub-projects; (b) employ by March 31, 1981 until completion of the Project not less than 2 full-time and, as and when needed, part-time internationally-recruited consultants to establish and operate CTSS, and prepare and carry out a training program with rripect to Part A.2 of the Project, whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Section 3.07. For purposes of carrying out Part C of the Project, the Borrower shall through GDVS: (a) conduct surveys on the basis of examination of milk samples from a statistically selected, stratified sample of milking herds of a few thousand cows and requiring not more than 1 year for implementation, a field survey of herds infected with Brucellosis and base-line survey of :he incidence of Theileriosis; (b) prepare and furnish to the Bank not later than Decem- ber 31, 1983, a detailed plan for recovering to the extent permitted by the Borrower's applicable laws, the cost to the Borrower in cArrying out its Mastitis control program, and exchange views with the Bank on such plan; and (c) employ specialists to assist with the implementation of Part C of Schedule 2 to this Agreement, whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Bank. Section 3.08. For the purposes of carrying out Part D of the Project, the Borrower shall through GDANB: (a) prepare and furnish to the Bank not later than Decem- ber 31, 1982, a plan for national livestock improvement, exchange views with the Bank on such plan, and promptly thereafter imple- ment such plan; (b) employ a specialist in animal breeding whose qualifi- cations, experience and terms and conditions shall be satisfactory to the Bank, to assist in preparing the plan referred to in paragraph (a) of this Section; and (c) (i) prepare and furnish to the Bank for its review not later than December 31, 1981, a study for the Borrower to levy suitable charges for its artificial insemination services; (ii) promptly thereafter take all necessary steps to introduce such charges; and (iii) recover through such charges the operating cost of the Borrower (excluding salaries) for the breeding program in any province under Part D of the Project not later than 3 years after introduction in such province of said program (taking into account the ability of farmers to pay). Section 3.09. The Borrower shall cause EBK to employ inter- nationally recruited consultants, whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, to assist in the design and supervision of the facili- ties under Parts E (i), (ii) and (iii) and carrying out the training program under Part E (v) of the Project. Section 3.10. For purposes of carrying out Part F of the Project the Borrower shall cause TYT to: (a) employ, not later than March 31, 1981, internationally- recruited consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, to assist in the design, tpecification and selection of machinery, and initial operation of the facilities under Part F.1 and the carrying out of the training program under Part F.2 of the Project; and (b) retain, as and when needed, an expert or experts to assist in the export marketing of mohair tops produced under the Project, whose qualifications, experience and terms of reference shall be satisfactory to the Bank. Section 3.11. (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 Loan against hazards - 10 - incident to the acquisition, transportation and delivery thereof to the place of use or installation. (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. (c) The Borrower shall issue, as and when needed, any import and other licenses including any foreign exchange authori- zation required for the importation of goods or the supply of services to be financed out of the proceeds of the Loan or for the replacement or repair of such goods. (d) The Borrower shall ensure that the entry into the Borrower's territory of the imported livestock required for the Project is handled expeditiously at border stations. Section 3.12. (a) The Borrower shall, with respect to the Project, furnish or cause to be furnished to the Bank, promptly upon their preparation, the plans, programs and reports of LDP and TCZB, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall, with the assistance of TCZB, GDVS, GDANB, EBK and TYT, maintain records adequate to record the progress of the Project (including its cost and the benefits to be derived from it) and to identify the goods and services financed out of the proceeds of the Loan, and to disclose the use thereof in the Project; (ii) shall enable the Bank's accredited repre- sentatives to visit the facilities and construction sites included in the Project and to see the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall, with the assistance of TCZB, GDVS, GDANB, EBK and TYT furnish to the Bank all such information as the Bank shall reason- ably request concerning the Project, its cost and, where appro- priate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Without limiting the generality of the provisions in paragraph (b) above and in order to monitor and/or evaluate the progress of the whole Project, the effects of the whole Project and the expenditures therefor, the Borrower shall (A) through the General Director of LDP: (i) maintain detailed records, as required for monitoring purposes, on the implementation of not - 11 - less than 20% of the Farm Development Plans with respect to livestock development and all Financing Plans with respect to poultry davelopment; (ii) prepare each semester, with the assis- tance of TCZB, GDVS, GDNAB, EBK and TYT, progress and evaluation reports on all Parts of the Project; and (iii) furnish such reports to the Bank through LDP, within two months after the end of each semester; and (B) (i) through GDVS, maintain detailed records, as required for purposes of monitoring and evaluating the progress and effectiveness of the programs included in Part C of the Project, on the implementation of the Mastititis control program with respect to not less than 20% of the herds included in said program and adequate records with respect to the Brucellosis and Theileriosis control programs; and (ii) through GDANB, main- tain records on a representative sample of inseminated cattle and their progeny with retpect to insemination and pregnancy coeffi- cients and milk production. (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall, through the General Director of LDP and with the assistance of TCZB, GDVS, GDANB, EBK and TYT, prepare and furnish to the Bank a completion repori, of such scope and in such detail- as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower, the Bank, TCZB, GDVS, GDANB, EBK and TYT of their respective obligations under the Loan, Project and Subsidiary Loan Agreements and the accomplishment of the purposes of the Loan. ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the - 12 - Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its-political or adminis- trative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase 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. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative subdivision thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including assets held by the T.C. Merkez Bankasi or any other institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 4.02. The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with consis- tently maintained appropriate accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. Section 4.03. Without limitation upon its obligations con- tained in Section 4.02 above, the Borrower shall: (a) cause LDP, GDVS, GDANB, EBK and TYT to establish and maintain separate accounts on its :ecords to be used exclusively for those Parts of the Project for which they are responsible and the Special Operational Fund to be maintained by the General Director of LP and to register in such accounts all its receipts and payments f,r or in connection with such Parts of the Project, in accordance with appropriate accounting principles consistently applied; and - 13 - (b) cause LDP, GDVS, GDANB, EBK and TYT to: (i) have the accounts referred to in (a) hereof and related statements for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors accept- able to the Bank; (ii) furnish to the Bank, in the English lan- guage, as soon as available, but in any case not later than March 31 of every year until completion of the Project with respect to accounts of the Special Operational Fund and in all other cases seven months after the end of the fiscal year of LDP, EBK and TYT, (A) certified copies of such related statements for such year as so audited and (B) the 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 such accounts and related statements of such agency and the audit thereof as the Bank shall from time to time reasonably request. ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) TCZB shall have failed to perform any of its obligations under the Project Agreement. (b) TCZB, EBK or TYT shall have failed to perform any of their obligations under the Subsidiary Loan Agreements. (c) An extraordinary situation shall have arisen which shall make it improbable that TCZB will be able to perform any of its obligations under the Project Agreement. (d) An extraordinary situation shall have arisen which shall make it improbable that TCZB, EBK or TYT will be able to perform any of their obligations under the Subsidiary Loan Agreements. (e) Any legal provision governing or applicable to the organization or operations of TCZB shall have been amended, suspended or abrogated so as to threaten the ability of TCZB to carry out any of its obligations under the Project Agreement or the efficiency of its operations. - 14 - (f) The Agricultural Credit Guidelines shall have been amended, suspended or abrogated so as to threaten the ability of TCZB to carry out any of its obligations under the Project Agree- ment or the efficiency of its operations. (g) TCZB shall be unable to pay its debts as they mature or any action or proceeding shall have been taken by TCZB or by others whereby any of the property of TCZB shall or may be distri- buted among its creditors. (h) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of TCZB, EBK or TYT or for the suspension of operations of TCZB, EBK or TYT. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following.additional events are specified pursuant to paragraph (h) thereof, namely, any of the events specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower or any event specified in paragraphs (c), (d), (e), (f), (g) and (h) of said Section shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) The execution and delivery of the Project Agreement on behalf of TCZB have been duly authorized or ratified by all necessary administrative and governmental action. (b) The execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and TCZB has been duly authorized or ratified by all necessary administrative and governmental action. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: - 15 - (a) That the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, TCZB, and is legally binding upon TCZB in accordance with its terms. (b) That the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and TCZB and is legally binding upon the Borrower and TCZB in accordance with its terms. Section 6.03. The date Oc64t' e , 199o, is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. 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 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Maliye Bakanligi Hazine Genel Mudurlugu ve Milletlerarasi Iktisadi Isbirligi Teskilati Genel Sekreterligi Ankara, Turkey Cable address: Telex: MALIYE 821-42285 (MLYE-TR) or Hazine 821-42689 (ANK-TR) Ankara For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America - 16 - Cable address: Telex: INTBAFRAD 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 TURKEY Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Regional Vice President Europe, Middle East and North Africa - 17 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category- Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Livestock and 12,310,000 100% of foreign Semen expenditures (2) Machinery, 18,980,000 100% of foreign equipment expenditures and and vehicles 100% of local expenditures ex-factory (3) Civil works: (a) Under Part B.2(c) 225,000 15% (b) Under Part F 120,000 15% (4) Inputs for livestock and poultry product- tion: (a) Under Part A.1 725,000 20% of amounts disbursed by TCZB (b) Under Part A.2 3,370,000 20% of amounts disbursed by TCZB (5) Consultants' 4,235,000 100% Services (6) Training 1,035,000 100% of foreign expenditures (7) Unallocated 10,000,000 51,000,000 - 18 - 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; 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. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Bank that no proceeds of the Loan 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, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed oit of the proceeds of the Loan decreases or increases, the Bank 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 Bank. 4. Notwithstanding the provisions of paragraph 1 above no withdrawals shall be made in respect of payments made for expendi- tures prior to the date of this Agreement. 5. Notwithstanding the provisions of paragraph 1 above no withdrawals shall be made: (a) with respect to expenditures under Part A of the Pro- ject, unless LDP and TCZB shall have executed the protocol re- ferred to in Section 2.01 (d) of the Project Agreement in a manner satisfactory to the Bank. (b) with respect to expenditures under Part A.1 of the Project, unless LDP shall have employed since April 15, 1980 not less than 6 additional veterinarians and 5 additional agronomists in eastern Turkey; and (c) with respect to expenditures for the equipping of about 15 teams for the carrying out of disease control programs for Theileriosis under Part C of the Project, unless tha Bank has received satisfactory evidence that the production of attenuated Theileriosis vaccine at the Veterinary Control and Research - 19 - Institute at Pendik shall have reached at least 50,000 doses per year. (d) with respect to expenditures under Parts E and F of the Project, unless the Bank has received satisfactory evidence that the Subsidiary Loan Agreements on behalf of the Borrower, EBK and TYT, referred to in Section 3.02 (a)(ii) and (iii) have been duly authorized or ratified by all necessary administrative and govern- mental action. 6. Each request for withdrawal from the Loan Account in respect of payments for expenditures in respect of Part A shall be accom- panied by a certificate issued by TCZB by which TCZB certifies that the disbursement on account of which the withdrawal is requested has been made for an Investment Project; the certificate shall be in such form as shall have been agreed between the Bank, the Borrower and TCZB. 7. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Cate- gory, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 8. If the Bank 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 Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 20 - SCHEDULE 2 Description of the Project The Project covers the whole of 32 provinces and selected sites in 3 others, as specified in the Annex to this Sechedule; it being understood that the list of provinces and sites in said Annex may be changed from time to time by agreement between the Borrower and the Bank. The Project is part of a program of the Borrower for live- stock development in the Project area (i) to upgrade animal quality, increase the production of feedstuffs, livestock and livestock products (including milk and poultry meat), (ii) en- courage related on-farm development, mainly through the provision of investment credit to livestock producers (including Small farmers) for on-farm improvements and of technical services, technical studies and training, and (iii) establish facilities for the production of poultry inputs and broiler, meat and mohair processing. The Project consists of the following parts: Part A: Lending Program 1. The provision through TCZB of Sub-loans to an estimated 2,900 farmers for the financing of Farm Development Plans in the Project area, prepared and implemented with the assistance referred to in Part B.1 hereof, such plans to include: (a) with respect to dairy farm development, about 600 5-cow units, 400 12 cow-units, 100 20-cow units, and 50 30 cow- units; (b) with respect to the breeding of improved dairy cattle, about 600 10-cow units; (c) with respect to the breeding of improved Merino sheep about 300 50-ewe units; and (d) wil-h respect to the breeding of improved Angora goats, about 250 100-doe units. 2. The provision through TCZB of sub-loans to an estimated 600 poultry farmers and 23 Farmer Associations for Financing Plans - 21 - in the Project area, prepared and implemented with the assistance referred to in Part B.1 hereof, such plans to include about 600 village broiler house units, 12 regional processing centers, 9 parent and 1 grandparent stock farms, and 1 premix feed plant. Part B: Technical Services 1. Provision, through A.1 and 2 hereof, of LDP and with the assistance of GDVS with respect to Part A.1 and 2 hereof, of technical services to farmers and Farmer Associations benefiting from Part A hereof, such technical services to be provided in cooperation with TCZB and to include, inter alia, (i) the promo- tion of the Project among farmers; (ii) the initial selection of farmers and Farmer Associations applying for Sub-loans; (iii) the preparation and approval of Farm Development and Financing Plans; (iv) the procurement of goods and services required to carry out such plans; (v) the supervision of such plans; and (vi) the maintenance of records -for the Project. 2. (a) Training: (i) for farmers benefiting under Part A.1 hereof in animal husbandry, and land and credit management; (ii) for village poultry farmers and supervisory staff and workers in facilities to be provided under Part A.2 hereof; and (iii) on-the- job and abroad, for LDP and TCZB staff engaged in carrying out Parts A.1 and 2 hereof and staff of CTSS including its field teams; (b) rehabilitation of the poultry training center for Part A.2 of the Project; and (c) constructing about 9 houses for field staff of LDP carrying out Parts B.1 and 2 (a) of the Project. 3. Carrying out of studies by LDP on land use practices for forage crop and cereal intercropping production, and dissemi- nation to farmers of technical information with respect to animal production and land use practices. Part C: Disease Control Program The Equipping of about 8 laboratories and establishing and equipping of about 65 survey and control teams of GDVS and the conducting of surveys by such teams on the incidence of Mastitis in cattle, Brucellosis in cattle, sheep and goats and Theileriosis in cattle, and the carrying out of disease control programs for these diseases over a 4-5 year period. Part D: Breeding Program The expansion by GDANB of its artificial (AI) and natural breeding program, through (i) expansion and reequipping of semen - 22 - production centers at Senlikkoy and Bornova; (ii) construction and equipping of a new AI laboratory at Uzunyayla; (iii) the increas- ing of GDANB's mobile AI field teams to about 300 teams and equipping of such teams over a six-year period; (iv) the carrying out of an AI program to increase the number of cows inseminated in the Project area to about 800,000 per year, through inter alia distributi.on to the field reams of about 80,000 doses of imported frozen semen from proven purebred sires to augment locally pro- duced semen, and importation of about 3 proven purebred cattle sires; (v) provision of about 2,000 young purebred heifers for distribution to about 7 breeding stations, and about 200 Haflinger breeding horses to be distributed to about 5 breeding stations; (vi) the preparation of a plan for national livestock improvement inter alia integrating activities of breeding stations and esta- blishing a herd recording scheme to register purebred and top- crossed offspring and monitor their performance; and (vii) the carrying out of a training program in recording and organization techniques with respect to artificial and natural breeding for GDANB staff implementing the Project. Part E: Meat Processing 1. (i) Construction by EBK of an extension to its slaugh- terhouse at Kars, (ii) installation of meat-cutting equipment at EBK's slaughterhouses at Kars and Sakarya with capacities of about 5 and 10 metric tons per day, respectively, and (iii) installation of intestine processing equipment at about 12 EBK slaughterhouses in the eastern part of Turkey, each with a capacity of about 300 sets of casings per hour. 2. The provision and operation of about 12 refrigerated rail wagons for use on shipments between Kars and destinations in the western part of Turkey. 3. Training of EBK plant workers in on-the-rail deboning and mechanical processing of intestines. Part F: Mohair Processing 1. Constructing and equipping by TYT of a mohair processing plant at Sincanli (Afyon Province) with capacity to process about 1,000 metric tons per year greasy mohair on a three-shift basis to combed tops suitable for export. 2. Training of TYT staff in operating the plant. The Project is expected to be completed by December 31, 1986. - 23 - ANNEX TO SCHEDULE 2 Tfie Project will be implemented in the following provinces or parts thereof: 1. Part A.1: Afyon, Amasya, Ankara, Burdur, Eskisehir, Isparta, Kayseri, Konya, Kutahya, Mugla, Nevsehir, Nigde, Siirt, Sivas, Tokat, Tunceli and Usak. 2. (a) Part A.2: the regions of Ankara (composed of parts of the provinces of Ankara, Eskisehir and Konya) and Diyarbakir (composed of parts of the provinces of Diyarbakir, Elazig and Urfa) and the provinces of Erzurum, Icel and Kayseri. (b) Part A.2: grandparent stock farm: a location to be selected by the Borrower. 3. Part C: Adana, Amasya, Ankara, Cankiri, Corum, Eskisehir, Hatay, Icel, Kayseri, Kirsehir, Konya, Nevsehir, Nigde, Sivas, Tokat and Yozgat. 4. Part D: Adana, Amasya, Ankara, Aydin, Bursa, Cankiri, Corum, Eskisehir, Icel, Istanbul, Izmir, Kayseri, Kirklareli, Konya, Kutahya, Manisa, Nigde, Sivas, Tokat and Yozgat. - 24 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 15 and August 15 beginning February 15, 1985 through February 15, 1997 1,960,000 On August 15, 1997 2,000,000 * To the extent that any portion et the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. - 25 - Premiums on Prepayment The following percentages are specified as the premiums payable 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 1.45% More than three years but not more than six years before maturity 2.90% More than six years but not more than eleven years before maturity 5.351 More than eleven years but not more than fifteen years before maturity 7.30% More than fifteen years before maturity 8.25% - 26 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods shall be procured under contracts awarded in accordance 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 inter- national competitive bidding as described in Part A of the Guide- lines. 2. For goods to be procured on the basis of international competitive bidding, and in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank 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 documents relating thereto, a general procure- ment notice, in such form and detail and containing such infor- mation as the Bank shall reasonably request; the Bank 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. 3. (i) Orders for individual Sub-borrowers will be grouped by local LDP staff and, then, sent to the Project Manager who will organize bulk procurement. (ii) Invitations to bid will require bidders to guaran- tee adequate servicing and spare parts for vehicles, tractors, machinery and equipment in the main centers of the Project area. 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 - 27 - 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. 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 Turkey 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 comparison 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 Turkey if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Turkey equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Turkey. (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 domesLically, to determine the lowes; 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 c.i.f. bid price of the imported - 28 - 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 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. On-farm construction materials, tools and farm and poultry processing inputs may be purchased through normal commer- cial channels; provided, however, that goods so procured shall not exceed $12,000,000 equivalent in the aggregate. 2. Civil works under Parts B.2 and F of the Project, and laboratory buildings and renovation under Parts C and D of the Project may be procured through the Borrower's usual procedures. 3. Laboratory, office and field equipment and materials and visual aids needed for Parts C and D, and machinery and equipment required for Part F of the Project, may be procured through international shopping on the basis of not less than three price quotations based on invitations from at least two different member countries of the Bank and Switzerland. 4. Frozen semen to be imported for Part D of the Project may be procured through international shopping on the basis of not less than three price quotations based on invitations from at least two different member countries of the Bank and Switzerland. Frozen semen so procured will be from purebred bulls: (a) registered in the national herd book of the country of origin; (b) out of dams which have a certified average milk produc- tion record of at least 5,000 kg per year; (c) progeny tested and proven, viz. whose progeny have a positive rating (above average) in the milk production testing program of the country bf origin. - 29 - 5. Purchases of livestock required for Part D of the Project will be handled by GDANB in a manner satisfactory to the Bank: (a) on the basis of: (i) not less than three price quotations from at least two different member countries of the Bank and Switzerland; and (ii) the individual selection to be undertaken in the supplier country by at least two professional staff members of GDANB and one professional staff member of GDVS. (b) the Borrower will take all necessary action to expedite livestock purchases and veterinary clearances and to assure prompt and adequate deliveries of such livestock to purchasers thereof; (c) (i) cattle imported for the Project will be: (A) predominantly of Friesian and Brown Swiss breeds; (B) in good general health; (C) free of tuberculosis, brucellosis, leptospi- rosis, trichomoniasis and vibriosis; and (D) vaccinated against foot and mouth disease (Types A and C) and brucellosis. (ii) Imported heifers for the Project will be: (A) two-year pregnant or yearling (6 to 15 months animals); (B) purebred animals, i.e., registered in the national pedigree herd book of the country of origin; (C) out of dams with a certified lifetime average milk production record of at least 4,000 kg/year; - 30 - (D) in the case of pregnant heifers, be certified incalf to registered sires (or sons of regis- tered sires) of the same breed whose progeny have a positive rating (above average) in the milk production testing program of the country of origin. (iii) Imported bulls for the Project will be: (A) registered in the national pedigree herd book of the country of origin; (B) out of dams which have a certified average milk production record of at least 5,000 kg/year; (C) progeny tested and proven, viz., whose progeny have a positive rating (above average) in the milk production testing program of the country of origin; (D) aged 12-24 months; and (E) sired by proven sires whose progeny have a positive rating (above average) in the milk production testing program of the country of origin. 6. Horses to be imported will be: (a) registered as of Haflinger breed in the national herd book of the country of origin; and (b) certified to be sound and free of disease by the veterinary authorities of the country of origin. 7. Purchases by farmers of livestock required to carry out Farm Development Plans and to be financed out of the proceeds of the Sub-loans will be handled by LDP's Project Manager in a manner satisfactory to the Bank: (a) on the basis of: (i) individual orders collected from such farmers by local LDP technicians and, then sent to the - 31 - Project Manager through the regional or provincial managers of LDP; (ii) not less than three price quotations based on invitations from at least two different member countries of the Bank and Switzerland; and (iii) the individual selection to be undertaken in the supplier country by two professional staff members of LDP and by one professional staff member of GDVS. (b) Contracts with suppliers for the purchase of livestock will contain provisions regarding the reception and delivery of live,stock satisfactory to the Project Manager and will provide that title to such livestock will pass to the farmer only upon delivery at his farm. (c) The Borrower will take all necessary action to expedite livestock purchases and veterinary clearances and to assure prompt and adequate deliveries of such livestock to purchasers thereof. (d) Cat,le, heifers and bulls imported for the Project shall reet the requirements set forth in paragraph 5 (c) (i), (ii) and (iii) hereof. D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts included in Parts A and C.3 through 7 of this Schedule: (a) Before bids are invited, the Borrower shall furnish to the Bank, 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 procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. - 32 - (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report (by the General Director of LDP for contracts included in Part A of this Schedule and the Project Manager for contracts included in Part C.3 through 7 (b) of this Schedule) on the evaluation and comparison of the bids received, together with the recommendations for award of LDP or the Project Manager, as the case may be, and such other information as the Bank shall reasonably request. The Bank 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 Bank'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 Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such con- tract, together with the analysis of the respective bids, recom- mendations for award and such other information as the Bank shall reasonably request. The Bank 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 more than 30% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, 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. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this 64 -day of 198 1. FOR SECRETARY