Somalia - Port Modernization Project : Credit 1723 - Project Agreement - Conformed

OFFICIAL DOC 1EUM NTS, CREDIT NUMBER 1723 SO Proje2t Agreement (Port Modernization Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and SOMALI PORTS AUTHORITY Dated , 1984 CREDIT NUMBER 1723 SO PROJECT AGREEMENT AGREEMENT, dated 6LfQ Y " , 198%~, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and SOMALI PORTS AUTHORITY (SPA). WHEREAS (A) by the Development Credit Agreement of even date herewith between SOMALI DEMOCRATIC REPUBLIC (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to nineteen million nine hundred thousand Special Drawing Rights (SDR 19,900,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that SPA 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 SPA, the proceeds of the Credit provided for under the Development Credit Agreement will be made available to SPA on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS SPA, 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, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. SPA 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 with -2- appropriate administrative, financial, engineering and environ- mental practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 2.02. 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 Schedule 1 to this Agreement. Section 2.03. SPA shall carry out the obligations set forth in Sections 9.03 through 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respec- tively) in respect of the Project Agreement. Section 2.04. SPA shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, SPA 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 provision thereof. Section 2.05. SPA shall carry out the Project in such a manner as to achieve the performance targets set forth in, and substantially in accordance with the provisions of, Schedule 2 to this Agreement. Section 2.06. (a) SPA shall, at the request of the Associa- tion, exchange views with the Association with regard to the progress 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) SPA shall promptly inform the Association of any condi- tion which interferes or threatens to interfere with the progress of the Pro'ject, the accomplishment of the purposes of the Credit, or the performance by SPA of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of SPA Section 3.01. SPA shall carry on its operations and conduct its affairs in accordance with sound administrative, financial -3- and engineering practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. SPA 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 and financial practices. Section 3.03. SPA shall take out and maintain with responsi- ble insurers, or make other provision satisfactory to the Asso- ciation for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. (a) SPA shall establish and thereafter main- tain a Training Fund which shall be used to finance its training activities. (b) By April 1 of each fiscal year, SPA shall deposit into the Training Fund a proportion of SPA's gross annual revenues of the previous fiscal year. The proportion to be deposited shall not be less than the equivalent of: (i) 0.5% in 1987; (ii) 1% in 1988; and (iii) 1.5% in 1989 and in each fiscal year thereafter. Section 3.05. SPA shall: (a) not later than July 1, 1987, submit to the Association for review and comments its proposals for standardizing gang composition of conventional cargo; and (b) thereafter implement such proposals taking into account the Association's comments and the availability of equipment to be procured under the Project. Section 3.06. SPA shall submit to the Association Quarterly Progress Reports containing, inter alia, information on construc- tion of each item of civil works, acquisition of cargo handling, office, training and workshop equipment, refurbishing of existing equipment, technical assistance, training program, detailed project expenditures and any other information the Association may require to monitor project implementation. Section 3.07. In order to assist SPA in carrying out Part C.1 of the Project, SPA shall employ operational experts in key positions. The employment of such experts shall be in accordance with Schedule 1 to this Agreement. 4 ARTICLE IV Financial Covenants Section 4.01. (a) SPA shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) SPA shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) and the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than nine months after the end of fiscal years 1987 and 1988 and no later than seven months after the end of each fiscal year after 1989: (A) certified copies of its 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 Associa- tion shall have reasonably requested; 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, SPA 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 f7im the Credit -5- Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such separate accounts are inclnded 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 proceeds of the Credit withdrawn in respect of such expenditures were used for the purposes for which they were provided. Section 4.02. (a) Except as the Association shall otherwise agree, SPA shall: (i) at the beginning of each fiscal year, undertake in consultation with the Association, a revaluation of its fixed assets in operation on the basis of replacement cost; and (ii) take all such measures (including but not limited to adjustments of the structure or levels of its tariffs) as shall be required to generate revenues sufficient to yield an annual rate of return of not less than five percent (5%) of the average current net value of its fixed assets in operation from fiscal year 1989. (b) For the purposes of this Section: (i) The annual return shall be calculated by dividing SPA's net operating income for the fiscal year in question by one-half of the sum of the current net value of SPA's fixed assets in operation at the beginning and at the end of that fiscal year. (ii) The term "net operating income" means total operating revenues less total operating expenses, (iii) The term "total operating revenues" means revenues from all sources related to operations. -6- (iv) The term "total operating expenses" means all expenses related to operations, including admin- istration, adequate maintenance, taxes and pay- ments in lieu of taxes, and provision for depre- ciation acceptable to the Association, but exclud- ing interest and other charges on debt. (v) The average current gross value of SPA's fixed assets in operation shall be calculated as one- half of the sum of the gross value of SPA's fixed assets in operation at the beginning and at the end of the fiscal year, as valued from time to time in accordance with sound and consistently maintained methods of valuation satisfactory to the Association. (vi) The term "current net value of SPA's fixed assets in operation" means the gross value of SPA's fixed assets in operation less the amount of accumu- lated depreciation, as valued from time to time in accordance with sound and consistently maintained methods of valuation satisfacto-ry to the Associa- tion. Section 4.03. SPA shall, on the basis of a plan of action approved pursuant to Section 6.01 (d) of the Development Credit Agreement, open and thereafter maintain until the completion of the Project, a special account in a commercial bank outside Somalia and shall deposit therein an amount in dollars sufficient to meet SPA's annual needs for spare parts and equipment. There- after SPA shall, at intervals to be agreed between SPA and the Borrower, deposit into the account such amounts as shall be required for spare parts and equipment for the following year. Section 4.04. SPA shall: (a) not later than March 31, 1987, submit to the Association for approval a plan of action for implementing by December 31, 1988, structural tariff increases of such a magnitude as to achieve the 5% rate of return pursuant to Section 4.02 of this Agreement; and (b) implement such plan of action after obtaining the Association's approval. Section 4.05. SPA shall, with effect from its 1989 fiscal year, carry out a semiannual review of its tariff structure and levels and shall adjust such tariffs whenever necessary to achieve the rate of return pursuant to Section 4.02 of this AgreemOnt. -7- Section 4.06. (a) Except as the Association shall otherwise agree, SPA shall not incur any debt, unless the net revenues of SPA for the fiscal year immediately preceding the date of such incurrence or for a later twelve-month period ending prior to the date of such incurrence, whichever is the greater, shall be at least four times the estimated maximum debt service requirements of SPA for any succeeding fiz al year on all debt of SPA, including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of SPA maturing by its terms more than one year after the date on which it is originally incurred. (ii) Debt shall be deemed to be incurred: (A) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment on the date of such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into. (iii) The term "net revenues" means the difference between: (A) the sum of revenues from all sources related to operations adjusted to take account of SPA's tariffs in effect at the time of the incurrence of debt even though they were not in effect during the twelve-month period to which such revenues relate and net non-operating income; and (B) the sum of all expenses related to operations including administration, adequate main- tenance, taxes and payments in lieu of _axes, but excluding provision for depreciation, other non-cash operating charges and interest and other charges on debt. (iv) The term "net non-operating income" means the difference between: (A) revenues from all sources other than those related to operations; and -8- (B) expenses, including taxes and payments in lieu of taxes, incurred in the generation of revenues in (A) above. (v) The term "debt service requirements" means the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. (vi) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable flr the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Association. Section 4.07. From the date hereof until the completion of the Project, SPA shall not undertake any new capital investment in the ports of Mogadishu, Berbera and Kismayo, beyond those included in the Project estimated to cost in the aggregate in any given fiscal year more than the equivalent of five hundred thousand dollars ($500,000), without the prior concurrence of the Association; such concurrence shall not be unreasonably withheld. 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 SPA 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. -9- (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 SPA 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 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 SPA: Somali Ports Authority P.O. Box 935 Mogadishu Telex: 61150 SOMSHIP - 10 - 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 SPA, may be taken or executed by the General Manager of SPA or such other person or persons as the General Manager of SPA shall designate in writing, and SPA 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 collectively but one instrument, 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 Regional Vice President Eastern and Southern Africa SOMALI PORTS AUTHORITY Authorized Representative - 11 - SCHEDULE I Procurement Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part C hereof, goods and civil works 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 May 1985 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. (a) Bidders for the works included in the Project shall be prequalified as described in paragraph 2.10 of the Guidelines. (b) Contracts for equipment and civil works shall be grouped together to the maximum extent practicable for the pur- poses of inviting bids, and such grouping of items shall be subject to the approval of the Association. Part B: Preference for Domestic Contractors In the procurement of works in accordance with the proce- dures described in Part A.1 hereof, SPA may grant a margin of preference of 7-1/2% to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part C: Other Procurement Procedures The refurbishing of old equipment and docking of tugs may 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 three qualified suppliers/ contractors 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). Part D: Review by the Association of Procurement Decisions 1. Review of prequalification: With respect to the prequalification of bidders as provided in Part A.2 (a) hereof, the procedures set forth in paragraph 1 of Appendix 1 to the Guidelines shall apply. - 12 - 2. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to all contracts, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contracts are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contracts required to be furnished to the Association pursuant to paragraph 2 (d) of Annex 1 to the Guidelines shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contracts. (b) With respect to each contract not governed by the pre- ceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix I 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 Association as part of the evidence to be furnished pursuant to paragraph 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 basis of statements of expenditure. Such contracts shall be re- tained in accordance with Section 4.01 (c) (ii) of this Agree- ment. 3. The figure of 15% is hereby specified for purposes of para- graph. 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants In order to assist SPA in carrying out the Project, SPA shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory 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 Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank ii August 1981. - 13 - SCHEDULE 2 Performance Targets 1. Labor Productivity (tons per gang hour):1/ Mogadishu/Berbera Kismayo Current*/Target Current*/Target General Cargo 6 10 5.3 8 Bagged Cargo 11 16 9 13 Bananas 11 16 9 13 Container (TEU) 6.5/3.3** 10 3.3 6.5 Ro-Ro (unit loads) 6.5/3.3** 12 - 6.5 The performance shall be 80% of the agreed targets 1 year after delivery of cargo-handling equipment provided under the Project, 90% after 2 years and 100% after 3 years. 2. Cargo Handling Equipment Availability: 75%. 3. Average Annual Ship Waiting Time: 2 days, 2 years after delivery of cargo-handling equipment provided for under the project; 1 day, 3 years after such procurement. Based on current average performance level. Berbera. 1/ To determine productivity per berth per day, each berth will be assumed to work an average of 16 hours (two shifts); vessels loading/discharging bananas, general and bagged cargo work an average of 2.5 gangs per shift and container and Ro-Ro vessels are assumed to average 2 working points per shift. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY