Sri Lanka - Municipal Management Project : Credit 1697 - Credit Agreement - Conformed

OFFICIAL DOCUMENTSj CREDIT NUMBER 1697 CE Development Credit Agreement (Municipal Management Project) between DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1986 CREDIT NUMBER 1697 CE DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated , 1986, between DEMOCRATIC SOCIALIST R2U3LI F SR LANKA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; 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 set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Develop- ment Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. 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) "MLGHC" means the Ministry of Local Government, Housing and Construction of the Borrower; (b) "ULAs" means the Urban Local Authorities of the Borrower; (c) "UPU" means the Urban Program Unit within MLGHC; and (d) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. -2- ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Bor- rower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to eleven million three hundred thousand Special Drawing Rights (SDR 11,300,000). 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 (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement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 Association, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special account in its Central Bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section 2.03. The Closing Date shall be June 30, 1994 or such later date as the Association shall establish The Associa- tion shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge at the rate of one-half of one percent (1/2 of 1%) per annum on the principal amount of the Credit not with- drawn from time to time. The commitment charge shall accrue from a date sixty days after the date of the Development Credit Agree- ment to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or shall be cancelled. (b) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to -3- time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on May 15 and November 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each May 15 and November 15 commencing November 15, 1996, and ending May 15, 2036. Each installment to and including the installment payable on May 15, 2006 shall be one-half of one percent (1/2 of 1%) of such principal amount, and each installment thereafter shall be one and one-half percent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods and works required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. (a) For the purpose of carrying out the Project, the Borrower shall employ consultants whose selection, qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall -4 be selected in accordance with the 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 in August 1981. (b) The Borrower shall cooperate fully with such consul- tants in the performance of their services for the Project and make available to them all information relevant to the Project. (c) The Borrower shall cause such consultants promptly to furnish to the Association copies of the documents prepared by them for the Project, including reports and drafts thereof, plans, designs, specifications, work schedules and estimates of costs, in such detail as the Association shall reasonably request. Section 3.04. The Borrower shall maintain and operate the UPU with staffing, functions and responsibilities satisfactory to the Association. The Borrower shall cause the UPU to prepare semiannual reports on the overall progress of the Project and furnish them to the Association, for comments by the Association, within 30 days following the end of each reporting semester. Section 3.05. The Borrower shall carry out the Project in accordance with an Operational Action Plan satisfactory to the Association. To that effect, the Borrower shall: (i) prepare annual work programs; (ii) furnish such programs to the Associa- tion for comments; (iii) carry out such programs taking into account the Association,'s comments thereon; and (iv) keep the Association informed of the progress of their implementation. Section 3.06. The Borrower shall: (a) maintain and monitor the system of grants to ULAs based on performance criteria; and (b) without limitation to the generality of paragraph (a) above: (i) by June 30 of each year of Project execution, commenc- ing in 1988, carry out, in consultation with the Association an annual review of the performance based system of grants to UCAs; and (ii) promptly after each annual review introduce such changes thereto as shall be agreed with the Association. -5- ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have the accounts referred to in paragraph (a) of this Section including 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 each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the said accounts and the audit thereof and said records as the Association shall from time to time reasonably request. (c) For ell expenditures with respect to which withdrawals from the Credi\ iccount were made on the basis of statements of expenditure, th,- Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, until at least one year after the completion of the audit 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; -6- (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 proceeds of the Credit withdrawn in respect of such expenditures were used for the purposes for which they were provided. ARTICLE V Termination Section 5.01. The date sixty (60) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. 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 purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance and Planning Democratic Socialist Republic of Sri Lanka Colombo, Sri Lanka Cable address: Telex: SECMINFIN 21232 FORAID CE Colombo 21409 FINMIN CE -7- 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) 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. DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA By 4/ Authoried Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President South Asia -8- 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 SDR Equivalent) to be Financed (1) Civil works 440,000 20% (2) Equipment and 2,300,000 100% of foreign vehicles expenditures, 100% of local expenditures (ex-factory cost) and 70% of local ex- penditures for other items pro- cured locally (3) Consultants' 6,200,000 100% of foreign services and expenditures studies (4) Overseas 610,000 100% fellowchips and training (5) Unallocated 1,750,000 TOTAL 11,300,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for -9- goods or services supplied from the territory of any country other than that of the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. - 10 - SCHEDULE 2 Description of the Project The objectives of the Project are to strengthen t-ie MLGHC's organization in sector development and to improve the managerial, financial and service delivery performance of ULAs. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part 1: Urban Management and Policy (a) Urban Program Unit: Provision of technical assist- ance and carrying out studies for strengthening management of the UPU, and further developing its capacity in policy formulation, investment pro- gramming, monitoring performance of ULAs and preparation of a follow-up municipal program. (b) General Management: Provision of technical assistance for strengthening the administrative organization, information systems and procedures of ULAs, their manpower planning and development, and improving their management capacity. (c) Organization and Management of the Colombo Municipal Council: Carrying out a study for the improvement of the organizational structure, staffing, financial and technical management of the Colombo Municipal Council, and assisting in the implementation of reforms. (d) Ministerial Organization: Provision of technical assistance and carrying out studies for reviewing the structure of the MLGHC and its key agencies, developing a strategy for organizing a more efficient structure, and assisting in the implementation of reforms. Part 2: Financial Management and Resource Mobilization (a) Capital and Recurrent Transfer: Provision of technical assistance for rationalizing the grants - 11 - system, further developing and monitoring the newly introduced incentive system for allocation of funds on the basis of performance, and carrying out a feasibility study to develop a municipal loan fund for ULA development. (b) Financial Management: Provision of technical assistance and carrying out studies for stream- lining, improving and updating the municipal financial reporting system including a computeri- zation study of the Colombo Municipal Council. (c) Resource Mobilization: Provision of technical assistance and carrying out studies for improved organization and management of local resource mobilization in ULAs. Part 3: Service Delivery (a) Infrastructure: Provision of technical assistance, vehicles and equipment, and carrying out pilot civil works for demonstrating more cost-effective approaches to the planning and design, construc- tion and rehabilitation, operation and maintenance of infrastructure facilities in selected ULAs, and preparation of standards, guidelines and proce- dural manuals for implementing similar improve- ments in all ULAs. (b) Municipal Services: Provision of technical assist- ance, vehicles and equipment and carrying out pilot construction works for demonstrating more cost-effective approaches to providing, operating and maintaining municipal services and required facilities in selected ULAs, preparation of standards, guidelines and procedural manuals for implementing similar improvements in ULAs, and a first phase of priority improvements in solid waste management for the Colombo Municipal Council. (c) Carrying out studies for: (i) defining ULAs' role in shelter programs and developing a 5-year shelter program for ULAs; (ii) municipal drainage systems and the development of guidelines for the - 12 - preparation of local drainage plans; and (iii) traffic management for the Colombo Municipal Council and guidelines for traffic management, including management of public transport systems in larger ULAs. Part 4: Mapping Provision of technical assistance and training, aerial photography, equipment, materials and vehicles for the production of urban base maps, including links to the plot registration system, in a phased program for ULAs. Part 5: Human Resource Development (a) Provision of technical assistance, equipment and books for the establishment of a Local Government Training Unit within the UPU and for implementing a 5-year training program for ULAs in the man- agerial, financial and technical areas. (b) Provision of training fellowships and overseas training and study tours. (c) Carrying out a study to formulate a long-term human resource development strategy for ULAs. The Project is expected to be completed by December 31, 1993. - 13 - SCHEDULE 3 Procurement Part A: International Competitive Bidding Except as provided in Part C hereof, goods shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A hereof, goods manufactured in Sri Lanka may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Other Procurement Procedures 1. Civil works shall be procured under contracts awarded on the basis of competitive bidding advertised locally under procedures satisfactory to the Association, provided, however, that mapping and minor civil works for maintenance and rehabilitation of municipal services and infrastructures may be carried out through force account. 2. Contracts for goods, which to the extent practicable cannot be grouped in bid packages estimated to cost the equivalent of $50,000 or more, may be let following local competitive bidding procedures satisfactory to the Association; provided, however, that goods estimated to cost less than the equivalent of $10,000 up to an aggregate amount of $200,000 equivalent, may be procured through prudent shopping on the basis of at least three price quotations from different sources. Part D: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $50,000 or more, the procedures set forth in - 14 - paragraphs 2 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 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 not governed by the pre- ceding 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 Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to this 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 retained in accordance with Section 4.01 (c) (ii) of this Agree- ment. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix I to the Guidelines. - 15 - SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (4) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures 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 allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an ailount equivalent to SDR 700,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, payments out or the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible - 16 - expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, prior to or at the time of such request, such documents and other evidence as the Association shall reasonably request, showing that such payment was made for eligible expen- ditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals should be made directly by the Borrower from the Credit Account in accordance with the provisions of paragraph (a) of Section 2.02 of this Agreement; or (iI) the total unwithdrawn amount of the Credit allocated to the eligible Categories minus the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eli- gible Categories shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice have been or will be utilized in making payments for eligible expendi- tures. - 17 - 6. (a) If the Association shall have determined at any time that any payment out of the Special Account: (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association deposit into the Special Account (or, if the Association shall so request, refund to the Association for crediting to the Credit Account) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit by the Association into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount for crediting to the Credit Account. 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