China - Third Railway Project : Credit 1680 - Credit Agreement - Conformed

WHMlAL DOCUMENTS CREDIT WHBER 1680 CHA Development Credit Agreement (Third Railway Project) between PEOPLE'S REPUBLIC OF CHINA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated O He 1986 CREDIT NUMBER 1680 CHA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated 0 c l / , 1986, between PEOPLE'S REPUBLIC OF CHINA (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; (B) the Borrower has also requested the International Bank for Reconstruction and Development (the Bank) to provide addi- tional assistance towards the financing of the Project and by an agreement of even date herewith between the Borrower and the Bank (the Loan Agreement), the Bank is agreeing to provide such assistance in an aggregate principal amount equivalent to one hundred sixty million dollars ($160,000,000) (the Loan); (C) the Borrower and the Association intend, to the extent practicable, that the proceeds of the Credit provided for in this Agreement be disbursed on account of expenditures in respect of the Project before disbursements of the proceeds of the Loan provided for in the Loan Agreement are made; 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 respec- tive meanings therein set forth and the following additional terms have the following meanings: - 2 - (a) "Loan Agreement" means the agreement of even date here- with between the Borrower and the Bank for the Project, as such agreement may be amended from time to time; and such term in- cludes the "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985 (as modified), as applied to such agreement, and all schedules and agreements supplemental to the Loan Agreement; (b) "Special Account" means the account referred to in Sec- tion 2.02 (b) of this Agreement; I (c) "MR" means the Borrower's Ministry of Railways or any successor thereto; (d) "XRSF" means Xi'an Railway Signalling Factory, one of the signalling factories under MR; and (e) "Project Sub-units" means the administrations and sub-administrations of MR, including KRSF, which are carrying out the Project. 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 sixty-three million Special Drawing Rights (SDR 63,000,000). 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 a bank and on terms and conditions satisfactory to the Association. Deposits - 3 - 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, 1993 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 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 January 15 and July 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each Janu- ary 15 and July 15 commencing July 15, 1996, and ending Janu- ary 15, 2036. Each installment to and including the installment payable on January 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 objective of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project through MR with due diligence and efficiency and in conformity with appropriate railway, engineering, financial and administrative 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, 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. Section 3.03. The Borrower shall carry out the training under the Project in accordance with a program agreed with the Association. Section 3.04. For the purposes of Part E of the Project, the Borrower shall carry out the subsequent parts of the study of railway traffic costing begun under Railway Project (Loan No. 2394-CHA) between People's Republic of China and International Bank for Reconstruction and Development, dated April 13, 1984, in accordance with terms of reference and arrangements acceptable to the Association. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall cause MR to maintain records and accounts adequate to reflect, in accordance with sound accounting practices, the operations and financial condi- tions of each of the Project Sub-units. (b) The Borrower shall cause MR to: (i) have the accounts and financial statements (balance sheets, statements of income and of sources and application of funds) of the Project - 5 - Sub-units 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 six months after the end of each such year: (A) certified copies of such 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 Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of the Project Sub-units and 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 are requested from the Credit Account on the basis of statements of expenditure, the Borrower shall cause MR to: (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; (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 con- tains, 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 have been used for the purpose for which they were provided. - 6 - ARTICLE V Other Covenants Section 5.01. The Borrower shall cause MR, as to each of the Project Sub-units to carry on its operations and conduct its affairs in accordance with sound administrative, financial, railway and engineering practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 5.02. Without limitations to the provisions of Sections 9.03 and 9.07 of the General Conditions, the Borrower shall cause MR, as to each of the Project Sub-units: (a) to take out and maintain with responsible insurers, or to make other provision satisfactory to the Association for insurance against such risks and in such amounts as shall be consistent with appropriate practice; and (b) at all times to operate and to maintain its plants, machinery, equipment and other property, and from time to time, promptly as needed, to make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and railway practices. ARTICLE VI Effective Date; Termination Section 6.01. The following events specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the Borrower's State Council has approved this Agreement; and (b) all conditions precedent to the effectiveness of the Loan Agreement have been fulfilled, except the effectiveness of this Agreement. 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. - 7 - ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of Finance 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 Sanlihe Beijing People's Republic of China Cable address: Telex: FINANMIN 22486 MFPRC CN Beijing 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) -8- 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. PEOPLE'S REPUBLIC OF CHINA By W Authorized Representative INTFRNATIONAL DEVELOPMENT ASSOCIATION By 4 Regional Vice President East Asia and Pacific - 9 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit and of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit and of the Loan, the allocation of the amounts of such proceeds to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Amount of the Loan Allocated Credit Allocated (Expressed in % of (Expressed in Dollar Expenditures Category SDR Equivalent) Equivalent) to be Financed (1) Equipment, materials and related training and con- sultants' services: (a) equipment 58,570,000 153,220,000 100% of foreign and materials expenditures, and 100% of local expendi- tures (ex- factory cost) (b) related 740,000 100% training and consul- tants' services (2) Training and 1,020,000 100% consultants' services other than (1) (b) above (3) Unallocated 2,670,000 6,780,000 TOTAL 63,000,000 160,000,000 - 10 - 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. - 11 - SCHEDULE 2 Description of the Project The objective of the Project is to assist the Borrt,wer in increasing the capacity and improving the operations and -ffi- ciency of its railways, including MR's technical and management capabilities. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from -ime to time to achieve such objective. Part A: Upgrading and electrification of the 456 km single track line between Chongqing in Sichuan Province and Guiyang in Guizhou Province. Part B: Upgrading and electrification of the 704 km single track line between Yingtan in Jiangxi Province and Xiamen in Fujian Province. Part C: Assisting XRSF in increasing the quantity and improving the quality of its current production. Part D: Introducing mechanized track maintenance on lines with heavy traffic density on a pilot project basis. Part E: Carrying out of subsequent phases of the study of railway traffic costing commenced by the Borrower in 1984. The Project is expected to be completed by December 31, 1992. - 12 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods Part A. International Competitive Bidding Except as provided in Part C hereof, goods and works 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 China 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 Contracts for equipment estimated to cost the equivalent of less than $150,000 per contract, up to an aggregate amount not exceeding $4,000,000 equivalent, may be procured on the basis of a comparison of quotations received from at least three suppliers eligible under the Guidelines in accordance with procedures acceptable to the Association. 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 more than $500,000, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply; provided, however, that where payments for such contract are to be made out of the proceeds of the Special Account, the two conformed copies of the contract required to be furnished to the Association, pursuant to paragraph 2 (d) of Appendix 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 contract. - 13 - (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; provided, however, that where payments for such contract are to be made out of the proceeds of the Special Account, the two conformed copies of the contract required to be furnished to the Association, pursuant to paragraph 3 of Appendix 1 to the Guidelines, together with the other information specified therein, shall be furnished as part of the evidence to be furnished pursuant to paragraph 5 of Schedule 4 (the Special Account Schedule) to this Agreement. (c) The provisions of the preceding paragraphs (a) and (b) shall not apply to contracts on account of which the Association 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 Agreement. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants 1. 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. 2. Such consultants shall be selected in accordance with prin- ciples 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. - 14 - SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) and (2) as 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 or the Loan 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 of SDR 900,000 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 and the Bank shall otherwise agree, payments out of the Special Account shall be made exclu- sively for eligible expenditures in accordance with the provi- sions of this Schedule. 3. After the Association has received evidence satisfactory to the Association that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent with- drawals 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 or the Bank requests for replenishment of the Special Account at such intervals as the Association or the Bank shall specify. On the basis of such requests, the Association or the Bank shall withdraw from the Credit Account or the Loan Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the - 15 - amount of payments made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account or by the Bank from the Loan 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 or the Bank, prior to or at the time of such request, such documents and other evidence as the Association or the Bank shall reasonably request, showing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association or the Bank when either of the following situations first arises: (i) the Association or the Bank 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 from the Loan Account in accordance with the provisions of Section 2.02 of the Loan Agreement; or (ii) the total unwithdrawn amount of the Credit and the Loan allocated to the eligible Categories, minus the amount of any outstanding special commitment entered into by the Association or the Bank pursuant to Section 5.02 of the respective 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 and the Loan Account of the remaining unwithdrawn amount of the Credit and the Loan allocated to the eligible Categories shall follow such procedures as the Association and the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association or the Bank shall have been satisfied that all such amounts remaining on - 16 - 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 or the Bank 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 or the Bank, deposit into the Special Account (or, if the Association or tho Bank shall so request, refund to the Association or the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit by the Association or the Bank into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Association or the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expendi- tures, the Borrower shall, promptly upon notice from the Associa- tion or the Bank, refund to the Association or the Bank such outstanding amount for crediting to the Credit Account or Loan Account. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Bank for Reconstruction and Development. FOR SECRETARY