Sri Lanka - Smallholder Rubber Rehabilitation Project : Credit 1017 - Credit Agreement - Conformed

CREDIT NUMBER 1017 CE Development Credit Agreement (Smallholder Rubber Rehabilitation Project) between DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1980 CREDIT NUMBER 1017 CE DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated L i4 , 1980, between DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (herein- after called the Association). ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agreements of the Association 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) "Subsidy Act" means the Borrower's Rubber Replanting Subsidy Act, No. 36 of 1953, as amended to the date of this Agreement; (b) "Replanting Fund" means the Rubber Replanting Subsidy Fund established under the Subsidy Act; (c) "Control Act" means the Borrower's Rubber Control Act, No. 11 of 1956, as amended to the date of this Agreement; (d) "Replanting Scheme" means the Borrower's ongoing program to assist rubber growers in the replacement of overaged rubber trees with high yielding rubber cultivars and the introduction of modern methods of rubber cultivation, in accordance with the Control Act; (e) "Project Coordination Unit" means the Project Coordina- tion Unit as headed by the Project Coordinator whose appointment is referred to in the letter of the Secretary, Ministry of Planta- tion Industries dated March 13, 1980; -2- (f) "Project Area" means the Borrower's administrative districts of Kalutara, Ratnapura and Kegalle; (g) "Rupees" and "Rs" means Rupees in the Borrower's cur- rency; and (h) "ha" means hectares of land. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equiva- lent to sixteen million dollars ($16,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Association, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works required for the Project shall be governed by the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1986 or such later date as the Association shall establish. The Asso- ciation shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semiannually on January 1 and July 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each Janu- -3- ary 1 and July 1 commencing July 1, 1990, and ending Janu- ary 1, 2030, each installment to and including the installment payable on January 1, 2000, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out or cause to be carried out the Project with due diligence and efficiency and in conformity with appropriate financial, administrative and agri- cultural practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. In order to assist in carrying out the Project, the Borrower shall employ or cause to be employed, consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 3.03. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit against hazards incident to the acquilition, 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 Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. Section 3.04. (a) The Borrower shall furnish to the Associa- tion, promptly upon their preparation, the plans, specifications, reports, training programs, contract documents and work and procurement schedules for the Project, and any material modifica- tions thereof or additions thereto, in such detail as the Associa- tion shall reasonably request. -4- (b) The Borrower: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) shall enable the Association's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) shall furnish to the Association at regular intervals all such information as the Association shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds. (c) 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 Association, the Borrower shall prepare and furnish to the Association a report, of such scope and in such detail as the Association 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 and the Association of their respective obligations under the Development Credit Agreement and the accomplishment of the purposes of the Credit. Section 3.05. The Borrower shall take or cause to be taken all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for carrying out the Project. Section 3.06. The Borrower shall: (i) by March 31, 1981, cause all Group Processing Centers under Part C of the Project, to be established and organized under appropriate by-laws; and (ii) ensure or take steps necessary to ensure that no new Group Pro- cessing Centers are established in the Project Area until the potential members of any such Group Processing Centers have pledged to collectively supply not less than 100 kg of latex per day of operation. Section 3.07. The Borrower shall establish by January 1, 1981 and thereafter maintain with powers, resources and staff or composition satisfactory to the Association: - 5 - (a) the Advisory Services Department as a separate depart- ment within its Ministry of Plantation Industries; (b) a Rubber Policy and Planning Unit within its Ministry of Plantation Industries, whose responsibility includes the provi- sion of advice to the Rubber Policy Review Committee referred to hereunder, on levels of industry cesses, duties, replanting payments and other matters related to the rubber industry; and (c) a Rubber Policy Review Committee within its Ministry of Plantation Industries. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with consistently maintained sound 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, including, without linitation to the foregoing, separate accounts reflecting all expenditures described in Categories (1), (2) and (3) of the table in paragraph 1 of Schedule 1 to this Agreement with regard to replanting payments and contracts each of 100,000 Rupees or less, on account of which withdrawals are requested from the Credit Account on the basis of certificates of expenditure. (b) The Borrower shall retain, until one year after the Closing Date, all records (orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Credit Account on the basis of certificates of expenditure and shall enable the Associa- tion's accredited representatives to examine such records. Section 4.02. The Borrower shall cause its departments and agencies responsible for carrying out the Project or any part thereof to: (i) establish a separate account for the purposes of the Project; (ii) have their accounts and financial statements (statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors accept- able to the Association; (iii) furnish to the Association as soon as available, but in any case not later than twelve months after -6- the end of each such year, (A) certified copies of their respec- tive financial 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 Association shall have reasonably requested includ- ing, without limitation to the foregoing, a separate opinion by said auditors in respect of the expenditures and records referred to in Section 4.01 (b) of this Agreement as to whether the pro- ceeds of the Credit withdrawn from the Credit Account on the basis of certificates of expenditure have been used for the purpose for which they were provided; and (iv) furnish to the Association such other information concerning the accounts and financial statements and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. The Borrower shall cause its departments and agencies responsible for carrying out the Project or any part thereof, by January 1, 1981, to appoint such accounting staff as may be required to implement the Project. Section 4.04. The Borrower shall: (a) annually review the financial resources of the Replanting Fund required to implement the Project and continue to carry out the Replanting Scheme, and promptly furnish to the Association the results of said review; and (b) provide the Replanting Fund with the resources necessary to finance the implementation of the Project, and continue to carry out the Replanting Scheme at a rate mutually agreed between the Borrower and the Association. ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of The General Conditions, the following additional events are specified pursuant to paragraph (h) thereof, namely, that the Subsidy Act, the Control Act and any other legislation or regulation of the Borrower governing the rubber sector shall have been amended, suspended, abrogated, repealed, waived, or shall cease to be enforced, so as to materially and adversely affect the Replanting Scheme, the Replanting Fund or the Project. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are -7- specified pursuant to paragraph (d) thereof; namely any event specified in Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower. ARTICLE VI Termination Section 6.01. The date oJ& I ,/9O is hereby specified for the purposes of Section 12.04 of the General Condi- tions. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. The Secretary, Ministry of Finance and Planning 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: Ministry of Finance and Planning Colombo Democratic Socialist Republic of Sri Lanka Cable address: Telex: SECMINFIN 1232 Colombo FORAID For the Association: 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) -8- 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. DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA By/S Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By/SIk Regional Vice President South Asia -9- SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Replanting payments 11,200,000 80% of amounts to Smallholders disbursed (2) Civil works 1,150,000 80% (3) Vehicles, equipment 1,100,000 and materials (a) directly imported 100% of for- eign expendi- tures (b) locally manufac- 100% of local tured expenditures (ex-factory) (c) procured locally 80% (4) Consultants' services 250,000 100% and overseas training (5) Unallocated 2,300,000 TOTAL 16,000,000 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 - 10 - goods or services supplied from the territory of any country other than the Borrower; and (b) the term "lodal 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 Association that no proceeds of the 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, 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 out of the proceeds of the Credit decreases or increases, the Association 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 Association. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expen- ditures prior to the date of this Agreement, except that with- drawals, in an aggregate amount not exceeding the equivalent of $200,000 may be made in respect of Categories (2), (3) and (4) on account of payments made for such expenditures before that date but after April 1, 1980. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in para- graph 1 above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Association may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit which are then allocated to another Category and which in the opinion of the Association are not needed to meet other expendi- tures; 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. 6. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with - 11 - the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restrict- ing or limiting any other right, power or remedy of the Associa- tion under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as, in the Associa- tion's reasonable opinion, represents the amount of such expen- ditures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 12 - SCHEDULE 2 Description of the Project The Project is part of the Borrower's program to increase production and improve quality of rubber in the Project Area, and consists of the following: Part A: Replanting Replanting with high yielding rubber on about 27,000 small- holdings replacing about 19,000 ha of overaged rubber. Part B: Institutional Support 1. Strengthening of the Department of Rubber Control and the Advisory Services Department including improvement of their respective capabilities to administer the Replanting Scheme, and advise smallholders on rubber replanting, through staffing, training, provision of equipment and civil works. 2. Support of the Project Coordination Unit. Part C: Processing 1. Improvement of smallholder rubber processing standards through provision of technical and managerial advice to private processors and to Group Processing Centers by the Processing Advisory Division of the Advisory Services Department. 2. A phased program for the establishment of about 50 new Group Processing Centers and rehabilitation of existing Group Processing Centers. Part D: Research Provision of vehicles, equipment and fellowships for the Rubber Research Institute of Sri Lanka. Part E: Evaluation Support of surveys and studies for the evaluation of the impact of the Project on smallholders by the Agrarian Research and Training Institute. - 13 - Part F: Technical Assistance Provision of technical assistance for training, rubber processing, Replanting Scheme administration and Project evalua- tion. The Project is expected to be completed by December 31, 1985. - 14 - SCHEDULE 3 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 interna- tional competitive bidding as described in Part A of the Guide- lines. 2. 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 Association 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 Association shall reasonably request; the Association will arrange for the publica- tion 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. 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 the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; and (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids. 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 - 15 - Sri Lanka 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 Sri Lanka if the bidder shall have established to the satisfaction of the Borrower and the Associa- tion that the manufacturing cost of such goods includes a value added in Sri Lanka equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest eval- uated 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 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 - 16 - 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 may be carried out by contracts awarded under the Borrower's competitive bidding procedures satisfactory to the Association. 2. (a) Contracts for equipment and materials with values estimated not to exceed the equivalent of $100,000 for each contract, may be procured in accordance with the Borrower's competitive bidding procedures satisfactory to the Association, provided that the aggregate expenditure for contracts so pro- cured shall not exceed the equivalent of $800,000. (b) Any item of equipment and materials with a cost not exceeding the equivalent of $5,000 each, may be procured through prudent shopping in accordance with the Borrower's procurement procedures satisfactory to the Association, provided that the aggregate expenditure for items so procured shall not exceed the equivalent of $100,000. 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 equipment, materials and civil works estimated to cost the equivalent of $250,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, - 17 - inform the Association of the name of the bidder to which it intends to award the contract and shall furnish to the Associa- tion, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Association shall reasonably request. The Association 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 Association'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 Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 3. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Association, promptly after its execution and prior to the submission to the Association 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 Association shall reasonably request. The Association 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. 4. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an exten- sion 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 15% of the original price, the Borrower shall inform the Association of the proposed modification, waiver, extension or change order and the reasons -therefor. The Association, 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 DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of 198 1. FOR SECRETARY