Sri Lanka - Second Vocational Training Project : Credit 1698 - Credit Agreement - Conformed

CREDIT NUMBER 1698 CE Development Credit Agreement (Second Vocational Training Project) between DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated / 1986 CREDIT NUMBER 1698 CE DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated 4- -L, 7/ , 1986, between DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS (A) 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 (B) the Borrower intends to obtain from the United Nations Development Programme (hereinafter called UNDP) a grant in an amount equivalent to $1,000,000 (the UNDP Grant) to assist in financing part 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 and in the Preamble to this Agreement have the respective meanings therein set forth and the term "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. 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 cur- rencies equivalent to thirteen million Special Drawing Rights (SDR 13,000,000). - 2 - 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 (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement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 5 to this Agreement. Section 2.03. The Closing Date shall be June 30, 1995 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 requec.., (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 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 March 1 and September 1 in each year. -3- Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each March 1 and September 1, commencing September 1, 1996, and ending March 1, 2036. Each installment to and including the installment payable on March 1, 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. (a) 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 through its Ministry of Local Government, Housing and Construction, with due diligence and efficiency and in conformity with appropriate financial, economic and administrative practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Sched- ule 4 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Associa- tion. Section 3.02. 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 3 to this Agreement. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in accordance -4- 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 all experditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the 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; (iii) enable the Association's representatives to examine such records; and -5- (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 Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional event is specified: (a) Subject to paragraph (b) below the right of the Bor- rower to withdraw the proceeds of the UNDP Grant made to the Borrower for the financing of the Project shall have been sus- pended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor; or (b) The provisions of paragraph (a) above shall not apply if the Borrower establishes to the satisfaction of the Associa- tion that: (A) such suspension, cancellation or termination is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the ollowing additional event is specified, namely, that the event !cified in paragraph (a) of Section 5.01 of this Agreement shall ,ccur, subject to the proviso of paragraph (b) of that Section. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit - 6 - Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) that the technical assistance agreement between the Borrower and UNDP for the UNDP Grant has been signod; and (b) that the consultants to be financed from the proceeds of the Credit have been appointed. Section 6.02. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. 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 7.02. 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 or Colombo 21409 FINMIN CE For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America -7- 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 k Authorized 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 1,700,000 90% (including related pro- fessional fees) (2) Equipment, 2,700,000 100% of foreign furniture, expenditures, books and 100% of local vehicles expenditures (ex-factory cost) and 80% of local ex- penditures for other items pro- cured locally (3) Consultants' 2,800,000 100% services and training (4) Incremental 5,100,000 80% in FY 87, staff salaries, FY 88, FY 89; honoraria, con- 70% in FY 90; sumable mate- 60% in FY 91; rials, trainee 50% in FY 92; tool kits and 40% in FY 93; operation and 20% in FY 94 maintenance costs (5) Unallocated 700,000 TOTAL 13,000,000 - 9 - 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 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 I above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of SDR 250,000, may be made in respect of Category (1) on account of payments made for expenditures before that date but after September 1, 1985. - 10 - SCHEDULE 2 Description of the Project The objective of the Project is to establish an institu- tional framework to promote construction industry development through sustained training at semi-skilled, skilled :nd manage- rial levels, and improvement in the efficiency and the produc- tivity of the sector. 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 A: The establishment, staffing and operation of the Institute for Construction Industry Training and Development. Part B: The carrying out of a program of training of about 50,000 new and 22,000 existing semi-skilled and skilled workers in the construction industry. Part C: The carrying out of a program of training of about 5,000 managers and supervisors of all grades in the public and private sector of construction industry. Part D: The carrying out of a program of about 500 training instructors in skills trade, operators and mechanics, and management and supervisory staff. Part E: The construction, furnishing and equipping of facili- ties to assist in the implementation of Parts A and B of the Project, in the following locations: Colombo, Ampara, Anuradhapura, Homagama, Badulla, Kandy, Kurunegala, Matara, Ratmalana, Balapitiya, Mattakkliya, Maradana, Galle, Peliyagoda and Galkulama. Part F: The provision of technical assistance to carry out training programs under the Project. The Project is expected to be completed by December 31, 1994. - 11 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part C hereof, goods shall be procured under con--acts 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). 2. To the extent possible, contracts for equipment and vehicles shall be grouped in large packages for bulk procurement. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A 1 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. Contracts for civil works may be let on the basis of competitive bidding advertised locally in accordance with procedures satisfactory to the Association. 2. Books may be purchased directly from distributors. 3. Consumable materials and trainee tool kits may be purchased 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 for civil works estimated to cost the equivalent of $250,000 or more, and each contract or purchase order for equipment, vehicles, consumable materials and - 12 - trainee tool kits estimated to cost the equivalent of $100,000 or more, the procedures set forth in paragraphs 2 and 4 of Appen- dix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such proce- dures 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 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 Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 5 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 1 to the Guidelines. Section II. Employment of Consultants In order to assist the Borrower in carrying out the Project, the Borrower 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 Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. - 13 - SCHEDULE 4 Implementation Program Except as the Association may otherwise agree in implement- ing the Project, the Borrower shall: 1. (a) for the purpose of complying with paragraph (b) below, carry out a study, under terms of reference satisfac- tory to the Association, on the financing of vocational training in the construction industry, and by Septem- ber 30, 1987, review the findings of said study with the Association; (b) ensure that the following costs of training shall be financed from sources other than the general budget revenues of the Borrower: (i) by December 31, 1989, the cost of stipends and tool kits, and (ii) by Decem- ber 31, 1994, in addition to said costs of stipends and tool kits, about 50% of the cost of consumable mate- rials or such other percentage of such cost as the Association may otherwise agree on the basis of the findings of the study referred to in paragraph (a) above; 2. for the purpose of carrying out activities under the Project, appoint all additional staff in ICTAD and CHPB at appro- priate levels in accordance with a schedule agreed with the Association; 3. ensure that, by June 30, 1990, all functions of instructor training are transferred from ICTAD to NTTTC; 4. ensure that, by January 31, 1989, all activities relating to the registration of contractors and the promotion of the private sector in the construction industry are transferred from ICTAD to ACCSL; 5. ensure that, by January 1, 1990, all upper-level management training courses shall be financed by the trainees or their employers; 6. conduct four training needs assessments in accordance with a schedule agreed with the Association; and review the findings -14 - with the Association prior to implementation of recommendations arising from such findings; 7. conduct four tracer studies in accordance with a schedule agreed with the Association, and review with the Association the findings made under said studies; 8. in January 1991, undertake with the Association a mid-term review and evaluation of the activities under the Project, and shall make adjustments, if necessary, based on implementation experience up to the date of said review. ACRONYMS: ICTAD - Institute for Construction Industry Training and Development. MOLGHC - Ministry of Local Government, Housing and Con- struction. CHPB - Center for Housing, Planning and Building. NTTTC - National Technical Teacher Training College. ACCSL - Association of Construction Contractors of Sri Lanka. - 15 - SCHEDULE 5 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 amount 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 of 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 accor- dance with the provisions of paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Credit allo- cated 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 eligible Categories shall follow such procedures as the Associa- tion 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 expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account (i) was made for any - 17 - 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 f hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY