Conformed Copy - C1988 - Municipal Development and Earthquake Emergency Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1988 NEP (Municipal Development and Earthquake Emergency Housing Reconstruction Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and TOWN DEVELOPMENT FUND BOARD Dated April 7, 1989 PROJECT AGREEMENT AGREEMENT, dated April 7, 1989 between the INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and the TOWN DEVELOPMENT FUND BOARD (the Board). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Kingdom of Nepal (the Borrower) and the Association, the Association has agreed to lend to the Borrower an amount in various currencies equivalent to thirty million nine hundred thousand Special Drawing Rights (SDR 30,900,000) on the terms and conditions set forth in the Development Credit Agreement, but only on condition that the Board agree to undertake such obligations toward the Association as are set forth in this Agreement; and (B) by a subsidiary loan agreement to be entered into between the Borrower and the Board, part of the proceeds of the Credit provided for under the Development Credit Agreement will be made available to the Board on terms and conditions set forth in said Subsidiary Loan Agreement; and Page 2 WHEREAS the Board, 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; Management and Operations of the Board Section 2.01. The Board 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 Part A of the Project and conduct its operations and affairs, in accordance with sound financial, administrative, economic, technical, social and environmental standards and practices, with qualified and experienced management and staff, and in accordance with its General Policy Statement and Rules and Regulations. Section 2.02. (a) The Board undertakes that, unless the Association shall otherwise agree, Loans will be made in accordance with the procedures and on the terms and conditions set forth or referred to in Schedule 1 to this Agreement. (b) The Board shall exercise its rights in relation to each Investment Project in such manner as to: (i) protect the interests of the Association and the Board; (ii) comply with its obligations under this Agreement and the Subsidiary Loan Agreement; and (iii) achieve the purposes of the Project. Section 2.03. Except as the Association shall otherwise agree, procurement of consultants' services for the carrying out of Parts A (iii) and A (iv) of the Project shall be governed by the provisions of Section II (b) of Schedule 2 to this Agreement. Section 2.04. The Board shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) in respect of Part A of the Project. Section 2.05. The Board shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, the Board shall not take or concur in any action which would have the effect of assigning, amending, abrogating or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.06. (a) The Board shall, at the request of the Association, exchange views with the Association with regard to the progress of Part A 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) The Board shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part A of the Project, the accomplishment of the purposes of the Credit, or the performance by the Board of its obligations under this Agreement and under the Subsidiary Loan Agreement. Page 3 Section 2.07. On March 1 of each year, commencing on March 1, 1990 and thereafter, the Board shall prepare and furnish to the Borrower and the Association for their review and comments, its proposed Annual Plan, and Budget and Operating Expenses for the forthcoming fiscal year, and, thereafter, taking into account the Borrower's and the Association's comments, if any, approve and implement such Annual Plan, and Budget and Operating Expenses. Article III Financial Covenants Section 3.01. (a) The Board shall maintain records and accounts adequate to monitor and record the progress of Part A of the Project (including its cost and the benefits to be derived from it) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of the Board. (b) The Board shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) 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 twelve months after the end of each such year: (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 Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records, accounts and financial statements as well as the audit thereof as the Association shall from time to time reasonably request, including without limitation on the foregoing unaudited Project accounts and financial statements for each fiscal year, certified as to their accuracy and authenticity by an independent auditor acceptable to the Association, as soon as available, but not later than six months after the end of each such year. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Board shall: (i) maintain, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until one year after the Association has received the audit report for the fiscal year in which the last disbursement 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 records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted Page 4 during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE IV Effective Date; Termination Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 4.02. (a) This Agreement and all obligations of the Association and of the Board thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate; or (ii) a date 25 years after the date of this Agreement. (b) If the Development Credit Agreement terminates before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify the Board of this event. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE V Miscellaneous Provisions Section 5.01. 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 addresses 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 the Board: Secretary, Ministry of Housing and Physical Planning His Majesty's Government Singhadurbar Kathmandu, Nepal Cable address Telex: ARTHA 2249-NEP Kathmandu, Nepal Page 5 Section 5.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of the Board or by the Board on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by its Executive Director, or by such other person or persons as the Board shall designate in writing, and the Board shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. 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 By /s/ Attila Karaosmanoglu Regional Vice President Asia TOWN DEVELOPMENT FUND BOARD By /s/ Mohan Man Sainju Authorized Representative SCHEDULE 1 Terms and Conditions of Loans 1. The Board shall make Loans exclusively to Town Panchayats eligible under, and to finance Investment Projects that meet the criteria set forth, in the General Policy Statement and Rules and Regulations. Except as the Borrower, the Association and the Board may otherwise agree, Loans for financing social infrastructure projects shall include an interest rate not to exceed 8 percent per annum and a maximum repayment period of 18 years, including a grace period of 3 years, and Loans for financing revenue generating projects shall include an interest rate not to exceed 12% per annum and a maximum repayment period of 12 years, including a grace period of 2 years. 2. No expenditures for goods, works or services required for an Investment Project shall be eligible for financing out of the proceeds of the Credit unless: (a) the Investment Project shall have been approved by the Association and such expenditures shall have been made not earlier than ninety days prior to the date on which the Association shall have received the application and information required under paragraph 3 (a) of this Schedule in respect of such Investment Project; or (b) the Investment Project shall be financed by a free-limit Loan for which the Association has authorized withdrawals from the Credit Account and such expenditures shall have been made not earlier than ninety days prior to the date on which the Association shall have received the request and information required under paragraph 3 (b) of this Schedule in respect of such Page 6 free-limit Loan and Investment Project. For the purposes of the Development Credit Agreement and this Agreement, a free-limit Loan shall be a Loan for an Investment Project, which Investment Project shall not exceed the sum of $150,000 equivalent; provided, however, that the foregoing amount is subject to change from time to time as determined by the Association in consultation with the Borrower and the Board. 3. (a) When presenting an Investment Project (other than an Investment Project financed by a free-limit Loan) to the Association for approval, the Board shall furnish to the Association an application, in a form satisfactory to the Association, together with (i) a description of the Town Panchayat and an appraisal of the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Credit; (ii) the proposed terms and conditions of the Loan, including the schedule of amortization of the Loan; and (iii) such other information as the Association shall reasonably request. (b) Each request by the Board for authorization to make withdrawals from the Credit Account in respect of an Investment Project financed by a free-limit Loan shall contain: (i) a summary description of the Town Panchayat and the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Credit, and (ii) the terms and conditions of the Loan, including the schedule of amortization therefor. (c) Applications and requests made pursuant to the provi- sions of sub-paragraphs (a) and (b) of this paragraph shall be presented to the Association on or before December 31, 1994. 4. Loans shall be made on terms whereby the Board shall obtain, by written contract with the Town Panchayat or by other legal means, rights adequate to protect the interests of the Association and the Board, including the right to: (a) require the Town Panchayat to carry out and operate the Investment Project with due diligence and efficiency and in accordance with sound technical, financial, economic, managerial, social and environmental standards and to maintain adequate records and accounts; (b) require that: (i) the goods, works and services to be financed shall be procured in accordance with the provisions of Schedule 2 to this Agreement; and (ii) such goods, works and services shall be used exclusively in the carrying out of the Investment Project; (c) inspect, by itself or jointly with representatives of the Association, if the Association shall so request, such goods, works, services, plants and construction included in the Investment Project, the operation thereof, and any relevant records and documents; (d) require that: (i) the Town Panchayat shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice; and (ii) without any limitation upon the foregoing, such insurance shall cover hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Credit to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the Town Panchayat to replace or repair such goods; (e) obtain all such information as the Association or the Board shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Town Panchayat and to the benefits to be derived from the Investment Project; and Page 7 (f) suspend or terminate the right of the Town Panchayat to the use of the proceeds of the Credit upon failure by such Town Panchayat to perform its obligations under its contract with the Board. SCHEDULE 2 Procurement Section I. Procurement of Goods and Works Part A: International Competitive Bidding Except as provided in Part D 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 procedures described in Part A hereof, goods manufactured in Nepal 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: Preference for Domestic Contractors In the procurement of works in accordance with the procedures described in Part A hereof, the Borrower may grant a margin of preference 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 D: Other Procurement Procedures 1. Contracts for civil works estimated to cost $200,000 equivalent or less shall be awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 2. Goods estimated to cost $200,000 equivalent or less shall be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satis- factory to the Association; provided, however, that automotive equipment and machinery 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 eligible under the Guidelines and in accordance with the procedures set forth in Section I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof). Part E: 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 $200,000 or more, and for each contract for goods estimated to cost the equivalent of $50,000 or more, the procedures set forth in paragraph 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. Page 8 (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraph 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 the Development Credit Agreement. (c) The provisions of the preceding subparagraphs (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 (a) (ii) of the Development Credit Agreement. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants (a) In order to assist the Town Panchayats in carrying out Investment Projects, the Town Panchayats shall, as and when needed, 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 in August 1981. (b) In order to assist the Board in carrying out Parts A (iii) and A (iv) of the Project, the Board shall employ consul- tants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association.