Conformed Copy - C2307 - Guangdong Agricultural Development Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2307-0 CHA (Guangdong Agricultural Development Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and GUANGDONG PROVINCE Dated December 16, 1991 CREDIT NUMBER 2307-0 CHA PROJECT AGREEMENT AGREEMENT, dated December 16, 1991, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and GUANGDONG PROVINCE (Guangdong). WHEREAS (A) by the Development Credit Agreement of even date herewith between People's Republic of China (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to one hundred twenty-one million seven hundred thousand Special Drawing Rights (SDR 121,700,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that Guangdong agree to undertake such obligations toward the Association as are set forth in this Agreement; and WHEREAS Guangdong, 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 Page 2 Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) Guangdong 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 the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering, agricultural and fisheries practices, and shall provide, or cause to be provided, 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 Association and Guangdong shall otherwise agree, Guangdong shall carry out the Project in accordance with the Implementation Program set forth in Schedule 2 to this Agreement. Section 2.02. (a) Without limitation upon the provisions of paragraph (a) of Section 2.01, Guangdong shall make available a portion of the proceeds of the Credit to Project Beneficiaries and Project Enterprises (other than project management offices) carrying out activities under Parts A, B, C and D of the Project, through the finance bureau of each of the Project Municipalities, in accordance with terms and conditions acceptable to the Association, including interest at a rate no less than ABC's prevailing interest rates for similar loans for similar purposes. (b) To that end, Guangdong shall make arrangements satisfactory to the Association for the relending of such proceeds to Project Beneficiaries and Project Enterprises on such terms and conditions by ABC, whereby: (i) the credit risk shall be borne by each of the Project Municipalities; and (ii) ABC shall be paid a management fee on the funds disbursed and repaid. (c) Guangdong shall cause the finance bureau of each of the Project Municipalities to establish and maintain, from its own funds and repayments of funds made available pursuant to paragraph (a) of this Section, separate revolving funds for repayment of funds used for fishing vessels under Part A.1 of the Project, sugar cane production under Part C.2 of the Project and agroindustries under Parts A.2 (a), B.2 and D of the Project, on terms and conditions acceptable to the Association, including interest to be charged at rates at least equivalent to the rates set forth in paragraph (a) (i) above. Section 2.03. 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 1 to this Agreement. Section 2.04. Guangdong 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 respectively to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) in respect of the Project Agreement. Section 2.05. (a) Guangdong shall, at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and other matters relating to the purposes of the Credit. (b) Guangdong shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by Guangdong of its obligations under this Agreement. ARTICLE III Page 3 Financial Covenants Section 3.01. (a) Guangdong 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 Guangdong responsible for carrying out the Project or any part thereof. (b) Guangdong 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 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, 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 and accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditures, Guangdong shall: (i) maintain or cause to be maintained, in accordance with sound accounting practices, records and accounts reflecting such expenditures; (ii) retain until at least one year after the Association 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 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 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 Guangdong thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date twenty years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify Guangdong of this event. Page 4 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 address 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 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) For Guangdong: Guangdong Province Province Government Building Dongfeng Zhong Road, Guangzhou 510031 People's Republic of China Cable Address: Foreign Economic Office Agriculture Department of Guangdong Province 0181 Guangzhou Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Guangdong, or by Guangdong on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by Vice Governor or such other person or persons as Vice Governor shall designate in writing, and Guangdong 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 Page 5 By /s/ Gautam S. Kaji Regional Vice President East Asia and Pacific GUANGDONG PROVINCE By /s/ Zhao Xixin Authorized Representative SCHEDULE 1 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 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). 2. To the extent practicable, contracts for machinery and equipment shall be grouped into bid packages estimated to cost the equivalent of $200,000 or more. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 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 1. Items or groups of items for computing equipment may be procured under contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids obtained from at least three qualified suppliers eligible under the Guidelines and in accordance with procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof). 2. Equipment and supplies for Parts A.2 (b) and D of the Project and for offices under Part C of the Project, estimated to cost the equivalent of $200,000 or less per contract, and works (except for infrastructure works under Parts C and E.2 of the Project) may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 3. Infrastructure works under Part C and E.2 of the Project may be carried out by force account. 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 $200,000 or more, the procedures set forth in 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 Page 6 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 3 to the Development Credit Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which the Association 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 Guangdong in carrying out the Project, Guangdong shall 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. SCHEDULE 2 Implementation Program Part A: Marine Fisheries 1. In order to develop its fisheries management: (a) Guangdong shall cause an annual survey of its fisheries resources to be carried out, using hydroacoustic gear, and shall utilize the survey results in preparing a fisheries resource assessment by December 31, 1992 and in updating such resource assessment annually thereafter. Guangdong shall furnish such resource assessments to the Association by December 31 in each year for review and comment. (b) On the basis of such annual surveys and resource assessments and its log book program, Guangdong shall prepare and furnish to the Association by June 30, 1993 for review and comment, a fisheries management plan including a measurable definition of overfishing, and thereafter shall implement such plan, taking into account the Association's comments on it. 2. (a) Procurement of 46 vessels under Part A.1 of the Project may be carried out under Part A.1 of Section I of Schedule 1 to this Agreement before the first resource assessment is furnished to the Association under paragraph A.1 (a) above. Thereafter, procurement of additional vessels under Part A.1 of the Project shall require prior approval of the Association on the basis of such resource assessments and the financial viability of such vessels already in operation. (b) Guangdong shall prepare a vessel maintenance and service schedule for each type of vessel under Part A.1 of the Project and furnish such schedules to the Association promptly after the delivery of such vessels. 3. Under arrangements satisfactory to the Association, Guangdong shall retire from service approximately 600 aged fishing vessels over the five year period beginning in 1992, and through its aquatic bureau, place crews from such retired fishing vessels in other forms of employment. Page 7 4. Guangdong shall make arrangements satisfactory to the Association for the transfer of the ownership of each vessel provided under Part A.1 of the Project to the respective Project Beneficiaries, upon full repayment of the cost of the vessel. Part B: Aquaculture Guangdong shall maintain existing sea dikes at Haifeng, Lufeng and Chenghai in accordance with appropriate engineering standards. Part C: Agriculture Guangdong shall ensure that: (a) all pesticides under Part C of the Project shall have been approved by the Association; and (b) the storage, handling, distribution and use of such pesticides shall be consistent with guidelines satisfactory to the Association. Part D: Agroindustries 1. Guangdong shall ensure that operational guidelines, acceptable to the Association, are applied to all newly-established and, to the extent possible, existing, Project Enterprises under Part D of the Project, including that all Project Enterprises shall maintain at all times a debt:equity ratio of no greater than 5 to 1, such ratio to be determined in a manner acceptable to the Association. 2. Guangdong shall: (a) cause the final designs for effluent treatment for each agroindustrial or agroprocessing plant under Part D of the Project to be approved by the relevant municipal environmental protection bureau prior to beginning construction of such plant; (b) ensure that such bureau maintains a system to monitor all effluents from such plants; and (c) ensure that all effluents from such plants are treated adequately before disposal. 3. Guangdong shall ensure that the second stage expansion of the Guangzhou Frozen Fruit and Vegetable Plant shall be carried out under Part D of the Project only if the Association shall have received and found acceptable a feasibility study for such expansion, showing: (a) profitable operation and full capacity utilization of the first phase; and (b) export potential for additional production. Part E: Limestone Mountain Poverty Alleviation 1. Guangdong shall cause Qingyuan Municipality to prepare and furnish to the Association: (a) by June 30, 1992, for its review and approval, a detailed program for the implementation of Part E of the Project; (b) by December 1 of each year during implementation of the Project, for its review and approval, an annual plan for the activities to be carried out under Part E of the Project during the next calendar year. 2. (a) Sub-loans under Part E.1 of the Project shall be made on terms and conditions and in accordance with guidelines, all acceptable to the Association, which shall include, inter alia: (i) Sub-loans shall finance investment projects at the municipal level and below which support agricultural and agroindustrial development; (ii) Sub-loans shall finance up to 65% of investment project cost; the contribution by Project Beneficiaries and Project Enterprises shall be at least 20% of investment project cost; and the Page 8 remainder shall be provided by Qingyuan Municipality, participating counties in Qingyuan Municipality, or the financial intermediary referred to in paragraph (b) below; and (iii) terms and conditions of Sub-loans would be specified in contracts, including interest at a rate no less than ABC's prevailing interest rates for similar loans for similar purposes. (b) Sub-loans would be appraised and approved by a financial intermediary acceptable to the Association in accordance with such guidelines. Part F: Institutional Development Training, study tours and research under Part F of the Project shall be carried out in accordance with a program agreed with the Association. Part G: Overall Project Implementation 1. In order to ensure effective coordination of the Project, Guangdong shall maintain or cause to be maintained: (a) a project leading group at each of the provincial, municipal, and county levels with composition and responsibilities acceptable to the Association; and (b) a project management office at the provincial level and a project office under the provincial bureaus of aquatic products and agriculture, and at each of the municipal and county levels, with functions and responsibilities acceptable to the Association and staffed by competent staff in adequate numbers. 2. Guangdong shall cause the provincial project management office to prepare and furnish to the Association, by December 15 of each year, a detailed work plan and a report on the work schedule and financing arrangements for the works planned for the next calendar year. 3. Guangdong shall implement its environmental action plan for the Project, as agreed with the Association. 4. Guangdong shall ensure that all Project activities shall conform to environmental standards and guidelines, including the environmental regulations and guidelines issued by the National Environmental Protection Agency and the Guangdong Environmental Protection Bureau, which shall be acceptable to the Association. 5. Guangdong shall, under arrangements satisfactory to the Association: (a) monitor settlement of sea dikes constructed under the Project and raise them as soon as settlement has occurred; and (b) cause the technical quality of construction of such sea dikes and the monitoring procedures to be examined and evaluated periodically in accordance with sound engineering practice, by independent experts acceptable to the Association.