Conformed Copy - L3261 - Second Communal Irrigation Development Project - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3261 PH (Second Communal Irrigation Development Project) between REPUBLIC OF THE PHILIPPINES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated November 8, 1990 LOAN NUMBER 3261 PH LOAN AGREEMENT AGREEMENT, dated November 8, 1990, between REPUBLIC OF THE PHILIPPINES (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). 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 Bank to assist in the financing of the Project; WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan 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 Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the Page 2 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) "NIA" means the National Irrigation Administration, an agency established by the Republic Act No. 3601 of the Borrower, as amended to the date of this Agreement; and (b) "Irrigator Association" means an association of farmers in a communal irrigation system, registered in accordance with the Presidential Decrees Nos. 681 and 1595 of the Borrower, as amended to the date of this Agreement. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, various currencies that shall have an aggregate value equivalent to the amount of forty-six million two hundred thousand dollars ($46,200,000), being the sum of withdrawals of the proceeds of the Loan, with each withdrawal valued by the Bank as of the date of such withdrawal. Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank shall so agree, to be made) in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 Loan. Section 2.03. The Closing Date shall be December 31, 1996 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Interest Period equal to the Cost of Qualified Borrowings determined in respect of the preceding Semester, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rate applicable during such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Semester. (c) For the purposes of this Section: (i) "Interest Period" means a six-month period ending on the date immediately preceding each date specified in Section 2.06 of this Agreement, beginning with the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost, as reasonably determined by the Bank and expressed as a percentage per annum, of the outstanding borrowings of the Bank drawn down after June 30, 1982, excluding such borrowings Page 3 or portions thereof as the Bank has allocated to fund: (A) the Bank's investments; and (B) loans which may be made by the Bank after July 1, 1989 bearing interest rates determined otherwise than as provided in paragraph (a) of this Section. (iii) "Semester" means the first six months or the second six months of a calendar year. (d) On such date as the Bank may specify by no less than six months' notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to read as follows: "(a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Quarter equal to the Cost of Qualified Borrowings determined in respect of the preceding Quarter, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rates applicable during such Interest Period." "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Quarter." "(c) (iii) `Quarter' means a three-month period commencing on January 1, April 1, July 1 or October 1 in a calendar year." Section 2.06. Interest and other charges shall be payable semiannually on February 1 and August 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objective of the Project as set forth in Schedule 2 to this Agree- ment, and, to this end, shall carry out the Project through NIA with due diligence and efficiency and in conformity with appropriate financial, administrative, engineering and agricultural 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 and except as the Borrower and the Bank shall other- wise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 5 to this Agreement. Section 3.02. Except as the Bank shall otherwise agree, pro- curement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. 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 Page 4 any part thereof. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than nine months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information con- cerning said records and accounts and the audit thereof as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan 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, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank'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 expendi-ture submitted during such fiscal year, together with the procedures and internal controls in-volved in their preparation, can be relied upon to support the related withdrawals. ARTICLE V Termination Section 5.01. 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 VI Representative of the Borrower; Addresses Section 6.01. The Secretary of Finance 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: Page 5 Secretary of Finance Department of Finance Manila Republic of the Philippines Cable address: Telex: SECFIN 40268 CB-CONF Manila For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) 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 city of Manila, Republic of the Philippines, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Attila Karaosmanoglu Regional Vice President Asia REPUBLIC OF THE PHILIPPINES By /s/ Romeo L. Bernardo Authorized Representative SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil and 33,000,000 70% agricultural works (2) Goods and 7,000,000 100% of foreign equipment expenditures, 100% reconditioning of local expendi- tures (ex-factory cost) and 80% of local expenditures for other items procured locally Page 6 (3) Technical assis- 4,000,000 75% tance (Irrigator association development, training, consultants' services and monitoring and evaluation) (4) Unallocated 2,200,000 __________ TOTAL 46,200,000 ========== 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 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 expendi- tures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not to exceed $1,000,000, may be made on account of payments made for expenditures before that date but after July 1, 1990. SCHEDULE 2 Description of the Project The objective of the Project is to assist in the implementa- tion of the Borrower's communal irrigation development efforts. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objective: Part A: Construction of new and the rehabilitation and improve- ment of existing communal irrigation systems. Part B: Development of communal Irrigator Associations. Part C: Strengthening of NIA's communal irrigation development capability. Part D: Agricultural support services. * * * The Project is expected to be completed by December 31, 1995. SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* February 1, 1996 845,000.00 August 1, 1996 875,000.00 February 1, 1997 910,000.00 August 1, 1997 945,000.00 February 1, 1998 980,000.00 Page 7 August 1, 1998 1,020,000.00 February 1, 1999 1,060,000.00 August 1, 1999 1,100,000.00 February 1, 2000 1,140,000.00 August 1, 2000 1,185,000.00 February 1, 2001 1,230,000.00 August 1, 2001 1,280,000.00 February 1, 2002 1,330,000.00 August 1, 2002 1,380,000.00 February 1, 2003 1,435,000.00 August 1, 2003 1,490,000.00 February 1, 2004 1,545,000.00 August 1, 2004 1,605,000.00 February 1, 2005 1,665,000.00 August 1, 2005 1,730,000.00 February 1, 2006 1,800,000.00 August 1, 2006 1,870,000.00 February 1, 2007 1,940,000.00 August 1, 2007 2,015,000.00 February 1, 2008 2,095,000.00 August 1, 2008 2,175,000.00 February 1, 2009 2,255,000.00 August 1, 2009 2,345,000.00 February 1, 2010 2,435,000.00 August 1, 2010 2,520,000.00 _____________________________ * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. Premiums on Prepayment Pursuant to Section 3.04 (b) of the General Conditions, the premium payable on the principal amount of any maturity of the Loan to be prepaid shall be the percentage specified for the applicable time of prepayment below: Time of Prepayment Premium The interest rate (ex- pressed as a percentage per annum) applicable to the Loan on the day of prepayment multiplied by: Not more than three years 0.15 before maturity More than three years but 0.30 not more than six years before maturity More than six years but 0.55 not more than 11 years before maturity More than 11 years but not 0.80 more than 16 years before maturity More than 16 years but not 0.90 more than 18 years before maturity More than 18 years before 1.00 maturity SCHEDULE 4 Page 8 Procurement and Consultants' Services Section I. Procurement of Goods and Works 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 procedures described in Part A hereof, goods manufactured in the Philippines may be granted a margin of preference in accordance with, and sub- ject to, the provisions of paragraphs 2.55 and 2.56 of the Guide- lines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Other Procurement Procedures 1. Items or groups of items for goods estimated to cost the equivalent of $100,000 or less per contract, up to an aggregate amount equivalent to $3,000,000, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Bank. 2. Items or groups of items estimated to cost less than the equivalent of $20,000 per contract, up to an aggregate amount not to exceed the equivalent of $1,000,000, may be procured under con- tracts awarded on the basis of comparison of price quotations solicited from a list of at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Bank. 3. Subject to provisions of Part C.4 hereunder, civil works may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satis- factory to the Bank. 4. Civil works may be carried out by NIA under force account, provided that the aggregate cost of civil works carried out under force account shall not, without prior consent of the Bank, exceed 80% of the total cost of civil works. Part D: Review by the Bank 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 $300,000 or more and each contract for goods estimated to cost the equivalent of $200,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. (b) With respect to each contract not governed by the pre- ceding Subparagraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which the Bank has authorized withdrawals on the basis of statements of expenditure. 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 Bank. Such consultants shall be selected in accord- ance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Page 9 Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. SCHEDULE 5 Implementation Program The Borrower shall cause NIA to: 1. In the selection of communal irrigation systems to be financed under the Project, ensure that: (a) irrigation systems which have been constructed or rehabilitated during the preceding five years shall be excluded except those damaged by natural calamities; and (b) systems with more than 20% of land still eligible for redis- tribution shall be included only after emancipation patents have been issued. 2. Apply agreed nationwide selection criteria and design standards for all communal irrigation systems. 3. Initiate a pilot project to test the use of Farmer Irrigator Organizers in the development of Irrigation Associations in a manner satisfactory to the Bank. 4. (a) By January 1, 1991, employ consultants to review and recommend improvements in the financial accounting and management of communal irrigation systems; and (b) by July 1, 1992, commence the implementation of the results of the said study. 5. Prior to finalization of construction-level designs, furnish to the Bank for its review and comments full evaluation reports for irrigation systems estimated to cost more than the equivalent of $350,000 each and summary reports for irrigation systems estimated to cost up to $350,000.