China - Second Rural Credit Project : Credit 1642 - Project Agreement - Conformed

OFFICIAL CREDIT NUMBER 1642 CHA DOCUMENTS Project Agreement (Second Rural Credit Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and AGRICULTURAL BANK OF CHINA Dated ,1986 CREDIT NUMBER 1642 CHA PROJECT AGREEMENT AGREEMENT, dated 3, 1986, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and AGRICULTURAL BANK OF CHINA (ABC). WHEREAS (A) by the Development Credit Agreement of even date herewith between People's Republic of China (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to eighty-four million Special Drawing Rights (SDR 84,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that ABC agrees to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and ABC, the proceeds of the credit provided for under the Development Credit Agreement will be made available to ABC on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS ABC, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective mean- ings therein set forth. TIRTICLE II Execution of the Project Section 2.01. (a) ABC declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity -2- with appropriate administrative, financial, engineering and agri- cultural practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paTagraph (a) of this Section, ABC shall carry out the Project in accordance with the Implementation Arrangements set forth in Part A of the Schedule to this Agreement, as such Schedule may be amended from time to time by agreement between the Association and ABC. Section 2.02. (a) ABC shall approve and present Sub-loans to the Association for approval, or in the case of free-limit Sub- loans, for authorization to withdraw from the Credit Account, in accordance with the provisions of Part B of the Schedule to this Agreement. (b) ABC undertakes that, unless the Association shall otherwise agree, each Sub-loan shall be made on terms whereby ABC sball obtain, by written contract with the Sub-borrower or other appropriate legal means, rights adequate to protect the interests of the Association and of ABC, including the terms and conditions and rights set forth in Part C of the Schedule to this Agreement. (c) ABC shall exercise its rights in relation to each Investment Project in such manner as to: (i) protect the interests of the Association and of ABC; (ii) comply with its obligations under this Agreement and the Subsidiary Loan Agree- ment; and (iii) achieve the purposes of the Project. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Part D of the Schedule to this Agreement. Section 2.04. ABC shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement. Section 2.05. ABC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, ABC shall not take or concur in any action - 3 - which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement to affect the provisions of Section 3.01 (b) of the Development Credit Agreement. Section 2.06. (a) ABC shall, at the request of the Associa- tion, exchange views with the Association with regard to the pro- gress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) ABC shall promptly inform the Association of any condi- tion wh .h interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by ABC of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of ABC Section 3.01. ABC 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. From time to time, at the request of any one of them, the Borrower, the Association and ABC shall exchange views on the interest rates to be charged by ABC in its lending operations in light of ABC's cost of funds and profitability, as well as inflation and other interest rates in China. Section 3.03. ABC shall inform the Association of any changes in the laws referred to in Sectio7a 4.01 (c) of the Development Credit Agreement which relate to the ability of ABC to carry out the Project. ARTICLE IV Financial Covenants Section 4.01. (a) ABC shall maintain, or cause to be main- tained, records and accounts adequate to reflect in accordance with sound accounting practices: (i) the operations, resources and expenditures in respect of the Project; and (ii) the opera- tions and financial condition of ABC-Fujian and ABC-Hunan. -4- (b) ABC shall: (i) cause to be audited in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Associa- tion, for each fiscal year: (A) the Project accounts referred to in sub-paragraph (a) (i) of this Section; (B) the ac.'unts and financial statements of ABC-Fujian and ABC-Hunan (balance sheets, statements of income and expenses and related statements); and (C) the Special Account; (ii) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year, certified copies of: (A) said financial statements of ABC-Fujian and ABC-Hunan for such year as so audited; (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (C) the consoli- dated financial statements (balance sheet and statement of income and expenses) of ABC for such year; and (iii) furnish to the Association such other information concerning said accounts and financial statements as well as the audit thereof and said records, as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, ABC shall: (i) maintain, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Associa- tion has received the audit report for the fiscal year in which the last withdrawal from the Credit Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; -5- (iii) enable the Association's representatives to examine such records; and (iv) ensure that such separate accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report thereof contains, in respect of such separate accounts, a separate opinion by said auditors as to whether the pro- ceeds of the Credit withdrawn in respect of such expenditures were used for the purposes for which they were provided. 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 ABC 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) the date 20 years after the date of this Agree- ment. (b) If the Development Credit Agreement terminates in accQrdance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify ABC of this event. 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. ARTICLE 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 - 6 - the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been dily 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 ABC: Agricultural Bank of China 25 Fuxing Road Beijing People's Republic of China Cable address: Telex: 1053 22017 ABC CN Beijing 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 ABC may be taken or executed by its President or such other person or persons as ABC's President shall designate in writing, and ABC shall furaish to the Associa- tion 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 collectively but one instrument. 7- IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 By By / -Regional Vice President East Asia and Pacific AGRICULTURAL BANK OF CHINA By Authorized Representative -8- SCHEDULE Project Implementation Part A: Project Implementation Arrangements Except as the Association and ABC may otherwise agree: 1. ABC shall cause ABC-Fujian and ABC-Hunan each to maintain a Project Office, with staffing acceptable to Association and ABC, to supervise and monitor the implementation of the Project in the respective Province, and to assist the county-level Project Units, under the guidance of the Project Management Committees. 2. ABC shall cause each of the county offices of ABC-Fuijan and ABC-Hunan in which Investment Projects are proposed to establish and thereafter maintain a Project Unit to supervise and monitor all aspects of implementation of each sLch Investment Project. 3. ABC shall carry out the staff training under Part B of the Project under a training program agreed between the Association and ABC. 4. ABC shall furnish to the Association semi-annually the pro- gress reports referred to in Section 9.06 (a) (iii) of the General Conditions within 60 days of the end of each six-month period. Part B: Appraisal of Investment Projects and Approval of Sub-loans 1. Investment Projects shall be appraised by ABC in accordance with the procedures and criteria set out in its project appraisal manual (August 1984). In addition, as part of this appraisal ABC shall ensure that: (a) planting materials, soils and topography included in Investment Projects under Part A (2) of the Project shall be acceptable to the Fujian and Hunan Academies of Agricultural Sciences, respectively; (b) agro-processing plants included in Investment Projects under Part A (3) of the Project shall be designed in accordance with sound environmental practices as specified in the Environ- mental Guidelines issued from time to time by the Bank; and -9- (c) Sub-loans for fish and shrimp ponds under Part A (1) of the Project shall be made only after the design and layout of ponds, including water supply canals and disposal drains, have been approved by the Fisheries Bureaus of Fujian Province and Hunan Province, respectively. 2. When presenting a Sub-loan (other than a free-limit Sub- loan) to the Association for approval, ABC shall furnish to the Association, an application, in form satisfactory to the Associa- tion, together with: (a) a description of the Sub-borrower and an appraisal of the Investment Project; (b) the proposed terms and conditions of the Sub-loan, including the schedule of amortization therefor; and (c) such other information as the Association shall reason- ably request. ABC shall approve such a Sub-loan only after the Association has notified ABC of its approval. 3. Each request by ABC for authorization to make withdrawals from the Credit Account in respect of a free-limit Sub-loan shall contain: (a) a summary description of the Sub-borrower and the Investment Project; and (b) the terms and conditions of such free-limit Sub-loan. Part C: Terms and Conditions of Sub-loans 1. Sub-borrowers shall contribute not less than thirty percent (30%) of the total cost of Investment Projects. 2. Except as the Association shall otherwise agree, Sub- borrowers shall pay interest from time to time on the principal amount of Sub-loans withdrawn and outstanding, at ABC's prevail- ing interest rate for similar loans for similar purposes. 3. Amortization periods for Sub-loans shall be determined by ABC based on the estimated cash-flow of the Investment Project financed, and shall provide for an appropriate period of grace. - 10 - 4. The Sub-loan contracts referred to in Section 2.02 (b) of this Agreement shall provide, inter alia, for the right of ABC to: (a) require the Sub-borrower to carry out, and, where appropriate, operate the Investment Project with due diligence and efficiency and in accordance with sound technical, financial and agricultural standards, and to maintain adequate records; (b) require that the goods and services to be financed out of the proceeds of the Sub-loan: (i) be procured in accordance with Part D of this Schedule; and (ii) be used exclusively in the carrying out of the Investment Project; (c) inspect, by itself or jointly with representatives of the Association, if the Association shall so request, such goods and the sites, works, plants and construction included in the Investment Project, the operation thereof, and any relevant records and documents; (d) require that the Sub-borrower, if appropriate, take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice; (e) obtain all such information as the Association or ABC shall reasonably request relating to the foregoing, to the admin- istration, operations and financial condition of the Sub-borrower (where the Sub-borrower is not an individual) and to the benefits to be derived from the Investment Project; and (f) suspend or terminate the right of the Sub-borrower to the use of the proceeds of the Sub-loan upon failure by such Sub-borrower to perform its obligations under its contract with ABC. Part D: Procurement Procedures 1. Goods, works and services required for Investment Projects under Parts A (1), (2) and (4) of the Project and to be financed out of the proceeds of the Credit shall be procured according to local procedures acceptable to the Association. 2. Goods for Parts A (3) and B of the Project shall be procured as follows: - 11 - (a) items or groups of items estimated to cost the equiva- lent of $50,000 or less per contract may be procured under con- tracts awarded on the basis of comparison of price quotations solicited from at least three qualified suppliers eligible under the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines), in accordance with procedures acceptable to the Association; and (b) items or groups of items estimated to cost the equiva- lent of more than $50,000 shall be procured under contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids invited from a list of at least four qualified suppliers, from at least three different countries, eligible under the Guidelines and in accordance with the procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof). 3. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract for Parts A (3) and B of the Project estimated to cost the equivalent of $500,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where p&yments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract for Part B of the Project not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Associa- tion as part of the evidence to be furnished pursuant to para- graph 4 of Schedule 3 to the Development Credit Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Associa- tion has authorized withdrawals from the Credit Account on the - 12 - basis of statements of expenditure. Such contracts shall be re- tained in accordance with Section 4.01 (c) (ii) of this Agree- ment. (d) The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. 4. In order to assist ABC in carrying out Part B of the Project, ABC shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Con- sultants by World Bank Borrowers and by the World Bank as Execut- ing Agency" published by the Bank in August 1981. 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 3 day of , 198 . FOR SECRETARY