Madagascar - Cotton Development Project : Credit 1433 - Project Agreement - Conformed

OFFICIAL DOCUMENTS CREDIT NUMBER 1433 AG Project Agreement (Cotton Development Project) among INTERNATIONAL DEVELOPMENT ASSOCIATION and INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the SPECIAL FUND established with funds contributed by certain members of the INTERNATIONAL DEVELOPMENT ASSOCIATION and HASY MALAGASY Dated , 1984 CREDIT NUMBER 1433 MAG HASYMA PROJECT AGREEM4ENT AGREEMENT, dated (,<u/ 6 , 1984, between INTERNATIONAL DEVELOPMENT ASSOCIATION, acting on its own behalf and as ADMINISTRATOR of the Special Fund established with funds contributed by certain members of the International Development Association (hereinafter called the Association) and HASY MALAGASY (hereinafter called HASYMA). WHEREAS (A) by the Development Credit Agreement of even date herewith between Democratic Republic of Madagascar (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to seven million five hundred thousand Special Drawing Rights (SDR 7,500,000), on the terms and condi- tions set forth in the Development Credit Agreement, but only on condition that HASYMA agree to undertake such obligations toward the Association as are hereinafter set forth; WHEREAS (B) by the Special Fund Credit Agreement of even date herewith between the Borrower and the Association, acting as Administrator of the Special Fund, established by Resolution No. IDA 82-6, adopted on October 26, 1982, by the Executive Directors of the Association, the Association, acting as Administrator, has agreed to make available to the Borrower an amount in various currencies, equivalent to nine million four 'hundred thousand Special Drawing Rights (SDR 9,400,000) on the terms and condi- tions set forth in the Special Fund Credit Agreement; WHEREAS (C) by a subsidiary loan agreement to be entered into between the Borrower and HASYMA, part of the proceeds of the credit provided for under the Development Credit Agreement and part of the proceeds of the Special Fund Credit provided for under the Special Fund Credit Agreement will be made available to RASYMA on the terms and conditions therein set forth; and WHEREAS HASYMA, in consideration of the Association's entering into the Development Credit Agreement and the Special Fund Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: - 2 - ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth and the term FOFIFA means the Centre National de Recherche Appliquee pour le Developpement Rural. ARTICLE II Execution of the Project Section 2.01. (a) HASYMA shall carry out Parts A through I of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and agricultural practices. (b) By June 30, 1984, HASYMA shall, for the purposes of carrying out Part E of the Project, submit to the Association for comment a proposal for the program to be executed by FOFIFA. (c) By September 30, 1984, HASYMA shall finalize the program referred to in paragraph (b) of this Section; such program to reflect the Association's comment. (d) By June 30, 1984 HASYMA shall, for the purposes of carrying out Part H of the Project, submit to the Association for comment a proposal for the monitoring and evaluation program. (e) By September 30, 1984 HASYMA shall finalize the program referred to in paragraph (d) of this Section; such program to reflect the Association's comment. Section 2.02. In order to assist HASYMA in carrying out Parts C, E and F of the Project, HASYMA shall employ two agricul- tural managers, a ginnery specialist, a financial management specialist, and an agriculturalist whose qualifications, experi- ence and terms and conditions of employment shall be satisfactory to the Association, such consultants to be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World - 3 - Bank Borrowers and by the World Bank as Executing Agency" pub- lished by the Bank in August 1981. Section 2.03. Except as the Association shall othewise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Credit and the Special Fund Credit shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.04. (a) HASYMA undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit and the Special Fund Credit made available to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by HASYMA to replace or repair such goods. (b) HASYMA shall cause all goods and services financed out of the proceeds of the Credit and the Special Fund Credit made available to it by the Borrower to be used exclusively for the purposes of the Project. Section 2.05. (a) HASYMA shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for Parts A through I of the Project, and any material nodifi- cations thereof or additions thereto, in such detail as the Association shall reasonably request. (b) HASYMA shall: (i) maintain records and procedures adequate to record and monitor the progress of Parts A through I of the Project (including their cost and the benefits to be derived from them), to identify the goods and services financed out of the proceeds of the Credit and the Special Fund Credit, and to disclose their use in the Project; (ii) enable the Association's 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 the Special Fund Credit and any relevant records and documents; and (iii) furnish to the Association at six months intervals all such information as the Association shall reasonably request concern- ing Parts A through I of the Project, their cost and, where appropriate, the benefits to be derived from them, the expendi- tures of such proceeds and the goods and services financed out of such proceeds. (c) Upon the award by HASYMA of any contract for goods, works or services to be financed out of the proceeds of the Credit and the Special Fund Credit, the Association may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) HASYMA shall fully cooperate with the Borrower in the preparation of the report to be prepared by the Borrower pursuant to Section 3.06 of the Development Credit Agreement and Section 3.06 of the Special Fund Credit Agreement. (e) HASYMA shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of HASYMA and any relevant records and documents. Section 2.06. HASYMA shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, HASYMA shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provi- sion thereof. Section 2.07. By June 30, 1984, HASYMA shall appoint a training coordinator to assist the General Manager of HASYMA in the implementation of the training program included in Part G of the Project. Section 2.08. (a) By April 30 in each year during execution of the Project, RASYMA shall prepare and furnish to the Association for comment the proposed annual work program of HASYMA containing the information required in Schedule 2 to this Agreement and such other information as the Association shall reasonably request; the Association to comment within two months after receipt of the proposed annual work program. (b) By December 15 in each year during execution of the Project, HASYMA shall furnish to the Association an annual work program satisfactory to the Association for the next following year. Section 2.09. (a) HASYMA shall, at the request of the Association, exchange views with the Association with regard to the progress of Parts A through I of the Project, the performance of its obligations under this Agreement and the Subsidiary Loan - 5 - Agreement, other matters relating to the purposes of the Cradit and the Special Fund Credit and its capital and operating budgets. (b) HASYMA shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Parts A through I of the Project, the accomplishment of the purposes of the Credit and the Special Fund Credit,-or the performance by HASYMA of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.10. HASYMA shall, during execution of the Project, sell all farm inputs to cotton farmers in the Project Area for a price covering the full cost to HASYMA regarding such inputs, including costs related to internal transport, storage and storage losses, and operating costs of HASYMA incurred regarding such inputs. Section 2.11. HASYMA shall deposit all funds received from the sale of agricultural inputs financed out of the proceeds of the Credit and the Special Fund Credit under Part D of the Project into a separate account in a commercial bank acceptable to the Association; the proceeds of such account shall be used by HASYMA for the financing of rehabilitation and maintenance of cotton tracks or for such other purposes as the Borrower and the Association may agree. Section 2.12. HASYMA shall deposit all funds received from the sale of equipment and vehicles financed out of the proceeds of the Credit and the Special Fund Credit into a special reserved fund in the BANKIN'NY TANTSAHA MPAMOKATRA (BTM); such funds to be used. in accordance with the provisions of the agreement referred to in Section 5.01 (e) of the Development Credit Agreement. ARTICLE III Management and Operations of HASYMA Section 3.01. HASYMA shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and agricultural practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. HASYMA shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and technical practices. - 6 Section 3.03. HASYMA shall take out and maintain with responsible insurers, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. HASYMA shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition, including, without limitation to the foregoing, separate accounts reflecting all expenditures on account of which withdrawals are requested from the Credit Account and the Special Fund Credit Account on the basis of statements of expenditure. Section 4.02. HASYMA shall: (a) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (b) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year, (i) certified copies of its financial statements for such year as so audited, and (ii) 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, separate opinions by said auditors in respect of the expenditures and records referred to in Section 4.01 of this Agreement, as to whether the proceeds of the Credit and the Special Fund Credit made available to it and withdrawn from the Credit Account and the Special Fund Credit Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and (c) furnish to the Association such other information con- cerning said accounts, financial statements, records and expendi- tures, as well as the audit thereof, as the Association shall from time to time reasonably request. Section 4.03. Except as the Association shall otherwise agree, HASYMA shall not, during execution of the Project, declare -7- or pay any dividend or make any other distribution with respect to its share capital, unless, after such dividend has been paid or other distribution has been made, the aggregate principal amount of debt of HASYMA then outstanding would not exceed 2.33 times the equity of HASYMA. Any such distribution shall not exceed 25% of the net income of HASYMA in any given year. (a) The term "debt" means any indebtedness of HASYMA matur- ing by its terms more than one year after the date on which it is originally incurred. (b) The term "equity of HASYMA" means the sum of the paid- in share capital, retained earnings, reserves of HASYMA and capital grants made by the Borrower to HASYMA, excluding any sums received and deposited by HASYMA under Section 2.11 of this Agreement. (c) the term "net income" means gross revenues from all sources related to HASYMA's operations less all expenses of HASYMA related thereto, including administration, adequate maintenance and taxes or any payments in lieu of taxes, provision for depreciation on a basis satisfactory to the Association, and payments of interest and other charges on debt. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of HASYMk thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date 15 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify HASYMA of this event. -8- Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion or suspension under the General Conditions. A2TICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: 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) For HASYMA: Hasy Malagasy Botte Postale 692 Antananarivo Cable address: Telex: HASYMA 22224 MG Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of HASYMA may be taken or executed by the -9- Director General or such other person or persons as the Director General shall designate in writing, and HASYMA shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. 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. INTERNATIONAL DEVELOPMENT ASSOCIATION acting on its own behalf and as ADMINISTRATOR of the Special Fund established with funds contributed by certain members of the International Development Association By Regional Vice President Eastern Africa HASY MALAGASY By Authorized Representative - 10 - SCHEDULE I Procurement A. International Competitive Bidding 1. Subject to the eligibility restrictions set forth in Section 2.02 (b) of the Special Fund Credit Agreement and except as pro- vided in Part C hereof, goods shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. The above-mentioned eligibility restrictions shall be stated in the tender or prequalification documents for the pro- curement of such goods. 2. For goods to be procured on the basis of international com- petitive bidding, in addition to the requirements of para- graph 1.2 of the Guidelines, HASYMA 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 relating thereto, 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 publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods in question. HASYMA 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 com- petitive bidding: (i) bidders shal- 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; (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; and (iii) the cost of inland freight and other expenditures incidental to the delivery of the goods to the place of their use or installation shall be included. - 11 - B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in Madagascar 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 Madagascar if the bidder shall have established to the satisfaction of HASYMA and the Association that the manufacturing cost of such goods includes a value added in Madagascar 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 -7!q further comparison only, an amount equal to: (i) the aimcur,. customs duties and other import taxes which a non-exe7.pt impure: would have to pay for the importation of the goob offrered. - 12 - 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. Contracts for equipment, vehicles and fertilizers estimated to cost less than $100,000 equivalent but more than $20,000 equivalent may be procured on the basis of local competitive bidding procedures satisfactory to the Association. 2. Contracts for equipment and vehicles estimated to cost less than $20,000 equivalent and ferries may be procured by local shopping. 3. Contracts for civil works shall be procured on the basis of local competitive bidding procedures satisfactory to the Association. 4. In the cases where there is only one manufacturer of a pesticide, pesticides may be procured directly from it. 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 goods and civil works estiyMated to cost the equivalent of $100,000 or more: (a) Before bids are invited, HASYMA 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 docu- ments 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 prospec- tive bidders. (b) After bids have been received and evaluated, HASYMA shall, before a final decision on the award is made, inform the - 13 - Association of the name of the bidder to which it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evalua- tion and comparison of the bids received, and such other informa- tion as the Association shall reasonably request. The Association shall, if it determines that the intended award would be incon- sistent with the Guidelines or this Schedule, promptly inform HASYMA 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 was 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 with- drawal of funds from the Credit Account or the Special Fund Credit Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph (except for contracts on account of which withdrawals are allowed from the Loan Account on the basis of statements of expenditures), HASYMA shall furnish to the Association, promptly after its execution and prior to the submission to the Associa- tion of the first application for withdrawal of funds from the Credit Account or the Special Fund 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 HASYMA 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 20% of the original price, HUSYMA 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 pro- visions of this Agreement, shall promptly inform HASYMA and state the reasons for its determination. - 14 - SCHEDULE 2 Annual Work Program Each annual work program shall set forth all activities to be carried out by RASYMA under the Project during that year: Each annual work program shall include: (i) the proposed capital expenditures (e.g. on civil works, vehicle and equipment) for Parts A through I of the Project; and, for Part A.1 of the Project, a list of farmers proposed as beneficiaries, a list of equipment that each such farmer has agreed to purchase, and confirmation from each such farmer of the proposed pro- duction program over at least the expected life of the equipment; (ii) the proposed expenditures on salaries, materials, fuel, repairs and maintenance; (iii) proposals for purchase of inputs; (iv) detailed financial projections for the year under con- sideration and an estimate of the financing require- ments from each source, including a projection of the net funds required, if any, from the Borrower's invest- ment budget, a forecast of the foreign exchange alloca- tion required and a list of expenditures eligible for reimbursement out of the proceeds of the Credit or the Special Fund Credit and proposed allocation of funds by categories; (v) detailed proposals for seed cotton and fiber prices for the year under consideration; (vi) a list of technical assistance personnel whose salaries would be financed out of the proceeds of the Credit or the Special Fund Credit, proposed terms of reference for new staff or any changes in terms of reference; (vii) a list of proposed short-term consultancies; (viii) a detailed and costed training program; - 15 - (ix) procurement proposals for items to be financed out of the proceeds of the Credit or the Special Fund Credit; (x) detailed proposals for the road component and proposed disbursements from the account referred to in Section 2.11 of this Agreement; (xi) the proposed monitoring and evaluation work program; (xii) list of new areas to be cultivated and confirmation that such areas have been made available to farmers. 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 FOR SECRETARY