Sri Lanka - Road Passenger Transport Project : Credit 0994 - Development Credit Agreement - Conformed

OFFICIAL CREDIT NUMBER 994 CE I)OCUMENTS Development Credit Agreement (Road Passenger Transport Project) between DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated gpiL /d , 1980 CREDIT NUMBER 994 CE DEVELOPMENT CREDIT AGREEMENT AGREEMENT, uated fipkik 1b , 1980, between DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association.) WHEREAS (A) the Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) by an agreement of even date herewith between the Association and the Sri Lanka Central Transport Board (hereinafter called SLCTB), SLCTB has agreed to undertake certain obligations in respect of the Project; (C) by letter addressed by the Association to the Borrower on February 23, 1979, the Association granted an advance to the Borrower totalling $165,000 for the preparation of the Project; (D) pursuant to the terms of said advance the amount thereof is to be refunded to the Association out of the proceeds of the Credit provided for in this Agreement; and WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth and in the Project Agreement of even date herewith between the Association and SLCTB; 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 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). -2- 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) "Project Agreement" means the agreement between the Association and the Sri Lanka Central Transport Board of even date herewith, as the same may be amended from time to time by agree- ment between the Borrower, the Association and SLCTB, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and the Sri Lanka Central Transport Board pursuant to Section 3.02 (a) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (c) "Law" means the Transport Board Law Number 10 of 1978 of the Borrower; (d) "SLCTB" means the Sri Lanka Central Transport Board established under the Law; (e) "RTB" means a Regional Transport Board established under the Law; (f) "industrial activities" means the procurement and inventory management of goods and services, the operation of facilities for the assembly of new vehicles, the manufacture and reconditioning of spare-parts, units and sub-units, and the complete overhaul of buses; and (g) "Rupees" and "Rs" mean rupees in the Borrower's cur- rency. 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 fifty-three million dollars ($53,000,000). -3- Section 2.02. (a) 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 Asso- ciation, 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. (b) Promptly after the Effective Date, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and pay to itself the amount required to repay the principal amount of the advance referred to in paragraph (C) of the Preamble to this Agreement withdrawn and outstanding as of such date and to pay any unpaid charges thereon. Any unwithdrawn balance of the authorized amount of such advance shall automatically be cancelled on the same date. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Credit, shall be governed by thd provisions set forth or referred to in Section 2.03 of the Project Agreement. Section 2.04. The Closing Date shall be June 30, 1983 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 January 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. -4- 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. (a) The Borrower shall carry out Part D of the Project, and shall cause the remainder of the Project to be carried out by SLCTB, all with due diligence and efficiency and in conformity with appropriate administrative, financial and engi- neering practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause SLCTB to perform in accordance with the provisions of the Project Agreement and the Subsidiary Loan Agreement all the obligations therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable SLCTB to perform such obligations. Section 3.02 (a) In order to assist in carrying out Parts A, B, C and E of the Project, the Borrower shall make available an amount equivalent to fifty-two million eight hundred thousand dollars ($52,800,000) of the proceeds of the Credit to SLCTB under a subsidiary loan agreement to be entered into between the Bor- rower and SLCTB under terms and conditions which shall have been approved by the Association, including those set forth in Schedule 3 to this Agreement. (b) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.03. With regard to Part D of the Project (a) the Borrower undertakes to insure, or make adequate provision for the -5- insurance of, the imported goods to be financed out of the pro- ceeds of the Credit against hazards incident to the acquisition, transportation and delivery thereof to the place of use or instal- lation, 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, contract documents and work and procurement schedules for Part D of the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The Borrower: (i) shall maintain records and procedures adequate to record and monitor the progress of Part D of thq 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 Part D of the Project; (ii) shall enable the Association's accredited represen- tatives to visit the 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 Part D of 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 Part D 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 pur- poses of the Credit. -6- Section 3.05. 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 Part D of the Project, of the departments or agencies of the Borrower responsible for carrying out Part D of the Project or any part thereof. Section 3.06. 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 and shall furnish to the Association, promptly after such acquisition, evidence satis- factory to the Association that such land and rights in respect of land are available for purposes related to the Project. Section 3.07. The Borrower shall, by December 31, 1980, furnish to the Association a statement of policy on the partici- pation of the private sector in the transportation of passengers, together with a timetable for the implementation of any necessary measures. Section 3.08. In order to eliminate operating losses of the RTBs by the Borrower's fiscal year 1983, the Borrower agrees to take or cause to be taken all necessary measures to progres- sively reduce those operating losses in the intervening years, so that revenues for each RTB in said fiscal year 1983 shall be sufficient to meet the cost of RTB operations, administration, maintenance, taxes, interest and depreciation. For the purposes of this Section, "revenues" means the receipts from passengers and other traffic, and from the disposal of assets. Section 3.09. In order to rationalize the RTB fare structure, the Borrower shall, commencing January 1, 1981, arrange that each RTB adjust the fare charges in accordance with guidelines issued by SLCTB. Section 3.10. The Borrower shall cause SLCTB and the RTBs, not to make, or to commit to, during the period ending Decem- ber 31, 1982, any capital expenditures, outside those provided in the Project, exceeding in any financial year the aggregate sum of Rs50,000,000, except as the Association shall otherwise agree. -7- Section 3.11. (a) 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 Part D of the Project, of the departments or agencies of the Borrower responsible for carrying out Part D of the Project or any part thereof, including, without limitation to the foregoing, separate accounts reflect*ng all expenditures for Part D of the Project 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 Association's accredited representatives to examine such records. (c) The Borrower shall: (i) establish a separate account for the purposes of Part D of the Project; (ii) have such accounts foV 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 six months after the end of each such year, (A) certified copies of the said accounts 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, including, without limitation to the foregoing, a separate opinion by said auditors in respect of the expenditures and records referred to in Section 3.11 (b) of this Agreement as to whether the proceeds of the Credit withdrawn from the Credit Account on the basis of certifi- cates of expenditure have been used for the purpose for which they were provided; and (iv) furnish to the Association such other information concerning such accounts and the audit thereof as the Association shall from time to time reasonably request. ARTICLE IV Remedies of the Association 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: -8- (a) SLCTB shall have failed to perform any covenant, agree- ment or obligation of SLCTB under the Project Agreement; (b) an extraordinary situation shall have arisen which shall make it improbable that SLCTB will be able to perform its obliga- tions under the Project Agreement; (c) the Law shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of SLCTB or the RTBs to carry out the Project; (d) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of SLCTB or any RTB or for the suspension of its operations; and (e) (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of any grant or loan 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 agreement providing therefor; or (B) any such loan shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) 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 events are specified pursuant to paragraph (d) thereof: -9- (a) any event specified in paragraph (a) of Section 4.01 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; and (b) any event specified in paragraphs (c), (d) and (e) (i) (B) of Section 4.01 of this Agreement shall occur. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the execution and delivery of the Project Agreement on behalf of SLCTB have been duly authorized or ratified by all necessary corporate and governmental action; (b) the Subsidiary Loan Agreement has been executed or behalf of the Borrower and SLCTB; (c) the form and substance of agreements between the Bor- rower, SLCTB and the RTBs satisfactory to the Association for the implementation of the Project and the provision of funds therefor, have been furnished to the Association; (d) arrangements, satisfactory to the Association, are in force for the management of the industrial activities of SLCTB; znd (e) consultants whose qualifications, experience and terms and conditions of employment are satisfactory to the Association, have been appointed to provide technical assistance in accounting, procurement and industrial engineering. Section 5.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the Project Agreement has been duly authorized or ratified by SLCTB, and is legally binding upon SLCTB in accordance with its terms; and - 10 - (b) that the Subsidiary Loan Agreement has been duly autho- rized or ratified by the Borrower and SLCTB and is legally binding upon the Borrower and SLCTB in accordance with its terms. Section 5.03. The date I is hereby specified for the purposes of Section 12.04 of the General Condi- tions. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. 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 6.02. The following addresses are specified for the purpose of Section 11.01 of the Ge"eral 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) - 11 - 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 Ikj~. Ra.ro'Wdor&:f#e. Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By S Icht A Vi-e / #1st Regional Vice President South Asia - 12 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of 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) Equipment, machinery 50,000,000 tools, bus chassis, materials and spare parts: (a) directly 100% of foreign imported expenditures (b) locally manufactured 100% of local expenditures (ex-factory) (c) locally 60% of local procured expenditures (2) Technical Assistance 1,950,000 100% (a) consultants' services (b) training (3) Civil works for Part 150,000 90% of local D of the Project expenditures (4) Refunding of advance 165,000 100% of prin- for preparation of cipal amount Project outstanding at Effective Date (5) Unallocated 735,000 TOTAL 53,000,000 - 13 - 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. Any unpaid charges refundable pursuant to Section 2.02 (b) of this Agreement shall be taken from Category (4) hereinabove. 4. 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 Credi% 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. 5. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for ex- penditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $1,400,000 may be made in respect of Category (1) on account of payments made for such expenditures before that date but after February 1, 1980, 6. Netwithstanding 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 - 14 - 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. 7. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in 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 restric- ting 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 Asso- ciation's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for finan- cing out of the proceeds of the Credit. - 15 - SCHEDULE 2 Description of the Project The Project is part of the Borrower's program to improve road transportation of passengers, and consists of the following: Part A: Bus Unit Exchange and Overhaul Facilities Improvement of facilities at the Central and Provincial Workshops: (1) to increase the output and to enhance the quality of reconditioned units, sub-units and spare parts of buses; and (2) to overhaul buses. Part B: New Buses Provision of chassis, materials and parts for about 2,100 new buses, and the assembly thereof. Part C: Bus Maintenance and Operations Improvements in the maintenance and operation of the RTB bus fleet, including: (1) Construction and equipping of about 20 new bus depots. (2) Provision of equipment for existing depots. (3) Provision of equipment for bus operations. Part D: Traffic Engineering Measures Engineering measures to improve the flow of buses. Part E: Technical Assistance and Training Strengthening of SLCTB capabilities in production engineer- ing, procurement, accounting, and management; and strengthening of RTB capabilities in accounting, traffic operations and management. The Project is expected to be completed by December 31, 1982. - 16 - SCHEDULE 3 Principal Terms and Conditions of the Subsidiary Loan Agreement between the Borrower and SLCTB I. Parts A and E of the Project Amount $8,200,000 equivalent Repayment period : 15 years Grace period : 3 years Interest rate 12.5% per annum Foreign exchange risk to be borne by the Borrower To be repaid by : SLCTB II. Parts B and C of the Project Amount : $44,600,000 equivalent Repayment period : 15 years Grace period : 3 years Interest rate : 12.5% per annum Foreign exchange risk to be borne by the Borrower To be repaid by : RTB through SLCTB (dis- charging debt of SLCTB at end of Project) (a) SLCTB to transfer to each RTB equipment and facilities under the Project in accordance with provisions of Section 2.04 of the Project Agreement. (b) Financing of the equipment and facilities provided to each RTB under the Project is to be by way of loans from the Borrower to each RTB under the above terms. - 17 - (c) SLCTB to act as an agent of the Borrower in respect of arrangements between the Borrower and each RTB under which funds are provided to the RTB to pay SLCTB for the equipment and facilities provided. SLCTB will maintain on behalf of the Borrower records of the lending and will debit the loan account of each RTB for the cost of goods and services received by it under the Project with interest thereon. SLCTB to collect payments of principal and interest from each RTB and to pay such sums over to the Borrower. 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 1 day of 19SE EA FOR SECRETARY