Haiti - Economic And Social Fund Project : Credit 2205 - Credit Agreement - Conformed

CREDIT NUBER2E -HA Development Credit Agreement (Economic and Social Fund Project) between REPUBLIC OF HAITI and INTERNATIONAL DEVELOPHENT ASSOCIATION Dated Ffw"Za ( , 1991 CREDIT NUMBERZ?0 S HA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated 9:;-> k o.1G'. - , 1991, between REPUBLIC OF HAITI (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 intends to obtain from the Inter-American Development Bank (IDB) a loan (the IDB Loan) in an amount equivalent to about ten million four hundred thousand dollars ($10,400,000) to assist in financing the Project on the terms and conditions set forth in an agreement to be entered into between the Borrower and IDB; 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 modifications set forth in Schedule 5 to this Agreement (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 following additional terms have the following meanings: (a) "Gourde" means the unit of the currency of the Borrower; (b) "ESF" means Le Fonds d'Assistance Economigue et Sociale, the Borrower's Economic and Social Fund, a public entity with juridical personality as well as administrative, technical and financial autonomy, established by the Borrower's Decree dated May 28, 1990, published in Le Moniteur of June 3, 1990 (hereinafter -2- the Decree), and operating within the jurisdiction of the Borrower's Ministry of Economy and Finance; (c) "Central Bank" means La Bandue de la Reublique dj'Haiti, the Borrower's Central Bank; (d) "Operational Manual" means the manual put into effect by ESF pursuant to paragraph (b) of Section 7.01 of this Agreement, that sets forth the rules and procedures for ESF operation within the framework of the Decree referred to in paragraph (c) above, including appraisal of Sub-projects (as hereinafter defined), eligi- bility and evaluation criteria for such Sub-projects, procedures and selection for eligibility criteria for, Delegated Entities and, when warranted, mechanisms for cost recovery to ensure sustainability of Sub-project positive effects; (e) "Supervision Contract" means each of the agreements that, pursuant to the provisions of the proviso to paragraph 3 (b) (ii) of Schedule 1 to this Agreement, will be entered into between, inter alia, ESF and a party other than the Executing Entity commit- ting supervision services thereunder; (f) "Fiscal Year" means the fiscal year of the Borrower which currently begins on October 1 in each calendar year; (g) "ESF Contractual Arrangement" means the contractual arrangements to be entered into between the Bjrrower and ESF pursuant to Section 3.01 (c) of this Agreement; (h) "Project Preparation Advance" means the advance granted by the Association to the Borrower pursuant to an exchange of letters dated April 25, 1990 and May 23, 1990 between the Borrower and the Association; (i) "Beneficiary Community" means a community, selected in accordance with the Operational Manual, for the benefit of which an Approved Sub-project will be carried out in the health, education or infrastructure sectors; (j) "Requesting Entity" means any governmental entity, or a non-governmental entity which either intends to execute the Sub- project (as hereinafter defined) by itself or has appointed other non-governmental entity which meets the eligibility criteria set forth in the Operational Manual for the purpose of carrying out the Sub-project the approval of which is being, will be or has been - 3 - requested; "Delegated Entity" means any non-governmental entity which meets the eligibility criteria set forth in the Operational Manual for the carrying out of a given Approved Sub-project (as hereinafter defined), that has been appointed therefor by a Requesting Entity and that has accepted such appointment; and "Executing Entity" means, as applicable, a non-governmental entity that carries or will carry the Approved Sub-project in question by itself, or a Delegated Entity. (k) "Sub-project" means a set of activities related to health and/or nutrition, education, or infrastructure, or to the institutional strengthening of an Executing Entity, selected in accordance with the Operational Manual, and that is to be carried out by an Executing Entity and to be financed out of the proceeds of the Credit; "Free-limit Sub-project" means a Sub-project, as so defined, that is not one of the first thirty Sub-projects (including at least one Sub-project of each of the types of Sub-projects referred to above) which have been approved in accordance with the procedures set forth in the Operational Manual, or a Sub-project, as so defined, the estimated cost of which does not exceed the equivalent of $100,000; and "Approved Sub-project" means a Free- limit Sub-project, as so defined, or a Sub-project that is not a Free-limit Sub-project and has been approved by the Association pursuant to paragraphs 1 and 2 of Schedule 4 to this Agreement; and (1) "Sub-project Agreement" means the agreement or agree- ments to be entered into between ESF and an Executing Entity, in respect of an Approved Sub-project, and, where applicable, a con- tractor other than the Executing Entity who also commits services for the execution of civil works under such Approved Sub-project, as such agreement or agreements may be amended from time to time. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Develop- ment Credit Agreement, an amount in various currencies equivalent to seven million nine hundred thousand Special Drawing Rights (SDR 7,900,000). 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 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) Promptly after the Effective Date, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and pay to itself the amount required to repay the principal amount of the Project Preparation Advance withdrawn and outstanding as of such date and to pay all unpaid charget thereon. The unwithdrawn balance of the authorized amount of the Project Preparation Advance shall thereupon be cancelled. Section 2.03. The Closing Date shall be June 30, 1995 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date or at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next payment date in that year specified in Section 2.06 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restric- tions 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 per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. - 5 - Section 2.06. Commitment and service charges shall be payable semiannually on December 1 and June 1 in each year. Section 2.07. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.08. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semi- annual installments payable on each December 1 and June 1 commencing June 1, 2001 and ending December 1, 2030. Each installment to and including the installment payable on December 1, 2010 shall be one percent (1%) of such principal amount, and each installment there- after shall be two percent (2%) of such principal amount. (b) Whenever: (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years; and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due considera- tion by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Asso- ciation may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at' any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.09. The General Director of ESF, or the person or persons appointed by such General Director, jointly with the person or persons appointed by the representative of the Borrower under -6- Section 8.01 of this Agreement, are designated as representatives of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V 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 Agree- ment, and, to this end, shall carry out the Project through ESF with due diligence and efficiency and in conformity with appropriate financial, administrative and managerial practices, and shall provide, promptly as needed, the f-ids, 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 Association shall otherwise agree, the Borrower shall carry out the Project through ESF in accordance with the Implementation Program set forth in Schedule 4 to this Agreement. (c) For purposes of paragraphs (a) and (b) of this Section, the Borrower shall enter into contractual arrangements, satisfactory to the Association, with ESF (the ESF Contractual Arrangement) providing, inter alia, for: (A) the transfer of the proceeds of the Credit on a grant basis to ESF for purposes of carrying out the Project; and (B) the obligation of ESF to take all such action as shall be required to enable the Borrower to carry out the Project in accordance with the terms and conditions set forth in this Agreement, includ- ing, but not limited to, those set forth in paragraphs (a) and (b) of this Section. (d) The Borrower shall exercise its rights under the ESF Contractual Arrangement in such manner as to protect the interests of the Borrower and the Association, and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not change, assign, amend, abrogate or waive the ESF Contractual Arrangement or any provision thereof. -7- Section 3.02. During execution of the Project and until the completion thereof, the Borrower shall, or shall cause ESF, as the case may be: (a) to keep all of the positions of Department Directors, and ESF General Director, filled with employees possessing experience and qualifications acceptable to the Association, to consult with the Association with respect to replacement of any such key personnel prior to any such replacement, and not to terminate the services of any ESF's General Director without IDA's acquiescence; and (b) to employ any fixed-term staff whose salary is intended to be financed in whole or in part out of the proceeds of the Credit with persons having qualifications and experience, and on terms and conditions of employment, satisfactory to the Association. Section 3.03. Without limitation to or restriction upon its other reporting requirements under the General Conditions and this Agreement, the Borrower shall inform, and shall cause ESF to prompt- ly inform, the Association of any condition which interferes, or threatens to interfere, with the progress of the Project or the Sub- projects, the accomplishment of the purposes of the Credit, or the performance by ESF of its obligations under the ESF Contractual Arrazgement, or the performance by ESF and the applicable Executing Entities of their respective obligations under Sub-project Agree- ments or the performance by the parties to a Supervision Contract. Section 3.04. (a) The Borrower undertakes that, unless the Association shall otherwise agree, Sub-projects will be identified, appraised and carried out in accordance with the terms and condi- tions set forth in the Operational Manual; and (b) the Borrower shall cause ESF: (i) to ensure that the Operational Manual is maintained in effect until the date on which the report referred to in paragraph (c) of Section 9.06 of the General Conditions has been furnished to the Association; and (ii) not to abrogate, waive, or modify the Operational Manual without the Association's concurrence. Section 3.05. (a) Without limitation or restriction to the provisions of Section 9.01 of the General Conditions, the Borrower and the Association agree to undertake, jointly with ESF, not later than December 31, 1992 a review of the progress of the Project, -8- based on performance indicators satisfactory to the Bank and pursuant to the provisions of this Agreement; and (b) the Borrower shall promptly undertake or shall cause ESF to promptly undertake or to cause the corresponding Requesting Entity or Executing Entity, or both, as the case may be, to under- take such modifications in the execution of the Project as shall be necessary, in the Association's opinion, as a result of the review referred to in paragraph (a) above, for the achievements of the objectives of the Project. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall cause ESF to maintain records and accounts adequate to reflect in accordince with sound accounting practices the operations and financial condition of ESF, including separate records and accounts to reflect the operations, resources and expenditures in respect of the different Parts of the Project, including each Approved Sub-project. (b) The Borrower shall, and shall cause ESF to: (i) have the records and accounts, and financial statements (balance sheets, statements of income and expenses and related statements) of ESF referred to in paragraph (a) above, for each Fiscal Year audited, in accordance with appro- priate 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 four months after the en1 of each such Year: (A) certified copies of the financial statements mentioned in (i) above 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 such records, accounts, financial 9- statements and the audit thereof as the Associa- tion 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 expenditure, the Borrower shall, and shall cause ESF to: (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 Association's representatives to examine such records; and (iv) ensure that s-ch 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 Other Covenants Section 5.01. The Borrower shall cause ESF: (a) to take out and maintain with responsible insurers, or to make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice; (b) to carry on its operations and conduct its affairs in accordance with the Decree, the Operational Manual and sound administrative, financial and managerial practices, all under the - 10 - supervision of qualified and experienced management assisted by competent staff in adequate numbers; and (c) at all times to operate and to maintain its offices, machinery, equipment, vehicles, 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 managerial practices. ARTICLE VI Remedies of the Association Section 6.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) the Decree shall have been amended, suspended, abro- gated, repealed or waived so as to affect materially and adversely the ability of ESF to perform any of its obligations under the ESF Contractual Arrangement or any Sub-project Agreement or the obligations of an Executing Entity under one or more Sub-project Agreements; (b) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of ESF; (c) disbursements under the IDB Loan shall have not become permitted by June 30, 1991, or such later date as the Association may agree; provided, however, that the provisions of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that adequate funds for the Project are available to the Borrower from other sources on terms and conditions con- sistent with the obligations of the Borrower under this Agreement; and (d) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of the IDB Loan shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms thereof, or - 11 - (B) the IDB Loan shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satis- faction of the Association that: (A) such sus- pension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agree- ment; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obliga- tions of the Borrower under this Agreement. Section 6.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional events are specified: (a) any event specified in paragraph (a) or (b) or (c) of Section 6.01 of this Agreement shall occur; and (b) any event specified in paragraph (d) (i) (B) of Section 6.01 of this Agreement shall occur, subject to the proviso of paragraph (d) (ii) of that Section. ARTICLE VII Effective Date; Termination Section 7.01. The following events are 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) that the ESF Contractual Arrangement has been entered into between the Borrower and ESF; and (b) that the Operational Manual has been put into effect by ESF in form and substance satisfactory to the Association. Section 7.02. The following is specified as additional matter, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association, namely, that the ESF Contractual Arrangement has been duly authorized or satisfied by, and is legally binding upon ESF and the Borrower in accordance with its terms. - 12 - Section 7.03. The date of V/A^ ) 1> (9 9/ is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VIII Representatives of the Borrower; Addresses Section 8.01. Except as provided in Section 2.09 of this Agreement, the Minister of Economy and Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 8.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministbre de l'Economie et des Finances Palais des Ministbres Port-au-Prince Haiti Cable address: Telex: Minist&re de l'Economie 2030347 et des Finances Port-au-Prince Haiti Facsimile: 231247 - 13 - For the Association: International Development Association 1818 H Street, N.W. Wa'3hington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) Facsimile: 202-676-0861 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. REPUBLIC OF HAITI By uthorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By *.480 6 . S h 3t41 . Regional Vice President Lati America and the Caribbean - 14 - 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 % of Allocated Expenditures (Expressed in to be Category SDR Equivalent) Financed (1) Approved Sub-projects under Part A of the Project: (a) Health care 4,300,000 100% (b) Education 1,600,000 (c) Infrastructure 700,000 (d) Technical 60,500 100% assistance (2) Institutional strengthening of ESF under Part B of the Project: (a) Consultants' 70,000 100% services - 15 - Amount of the Credit % of Allocated Expenditures (Expressed in to be Category SDR Equivalent) Financed (b) Furniture, 100,800 100% equipment and vehicles (c) Salaries and 426,000 100% operating costs (3) Refunding of 530,000 Amount due Project Preparation pursuant to Advance Section 2.02 (c) of this Agreement (4) Unallocated 112,700 TOTAL 7,900,000 2. For the purposes of this Schedule the term "Salaries and operating costs" means salaries for professional (during first year after Effective Date only) and support staff of ESF, and reasonable costs for operation and maintenance of ESF facilities, vehicles and equipment. 3. Notwithstanding the provisions of paragraph 1 above, and except otherwise agreed by the Association, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement; and (b) an Approved Sub-project unless: (i) the Sub-project is in accordance with the terms and conditions set forth in the Opera- tional Manual; and (ii) the respective Sub-project Agreement has been signed; provided, however, that whenever required by the Opera- tional Manual, the Supervision Contract providing for the services of an entity (other than the Requesting Entity or Delegated Entity in question) that shall commit its services to supervise, partially - 16 - or totally, the execution of the Approved Sub-project in question, shall be part of the corresponding Sub-project Agreement. - 17 - SCHEDULE 2 Description of the Project The objectives of the Project are to assist the Borrower in: (i) establishing ESF as a means of responding efficiently and in a decentralized manner to the basic need of the nation's poor through non-governmental organizations, including cooperatives, organized community groups and other grass root organizations; (ii) streng- thening health care, nutrition and education services (primarily in respect of infants and pregnant and lactating women) and providing physical infrastructure addressing the needs of the poorest popula- tion; (iii) providing an effective channel for required donor financing and coordination of scattered domestic efforts; and (iv) strengthening the capabilities of ESF and Delegated Entities for project preparation and implementation. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time te time to achieve such objectives: Part A: Approved Sub-projects Financing and carrying out of Approved Sub-projects within Beneficiary Communities, and of specific projects in the health and nutrition, education and infrastructure sectors financed under the IDB Loan in accordance with the terms and conditions set forth in the agreement providing therefor. Part B: Institutiona1 Development Strengthening the capabilities of ESF by means, inter alia of: 1. acquisition and utilization of vehicles for Project super- vision, micro-computers, office equipment and supplies; and 2. provision of technical assistance services to enable ESF to establish: (i) an information system and data base intended to enhance ESF's ability to design, target, monitor and evaluate Sub- projects; (ii) an accounting system; and (iii) a costing mechanism. - 18 - Part C: Studies Execution of studies under terms of reference satisfactory to the Association on: 1. means and ways for enhancing the targeting of the use of ESF resources; and 2. impact of the Approved Sub-projects on the corresponding Beneficiary Communities. The Project is expected to be completed by December 31, 1994. - 19 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part B 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 "Guide- lines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. To the extent practicable, contracts for micro-computers and vehicles shall be grouped into bid packages estimated to cost the equivalent of $100,000 or more. Part B: Other Procurement Procedures 1. Contracts for works estimated to cost more than the equivalent of $50,000 per contract but less than the equivalent of $2,500,000 may be awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 2. Contracts for works estimated to cost the equivalent of $50,000 or less may be awarded after direct negotiations with contractors, in accordance with procedures acceptable to the Asso- ciation, provided that the contracts so awarded does not exceed: (i) during the same calendar year, in the aggregate per contractor, the equivalent of $200,000; and (ii) in the total aggregate, the equivalent of $6,300,000. 3. Subject to paragraph 4 below only in respect of Approved Sub- projects, goods or groups of goods estimated to cost less than the equivalent of $100,000 may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 4. Goods or groups of goods under Approved Sub-projects estimated to cost the equivalent of $20,000 or less may be procured under contracts awarded after direct negotiations with suppliers, after having received offers from at least three eligible suppliers under the Guidelines in accordance with procedures acceptable to the - 20 - Association, provided that the contracts so awarded do not exceed, in the aggregate, the equivalent of $2,300,000. Part C: 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 goods and works awarded under Part A hereof and to the first two contracts awarded without objection from the Association under Parts B.1 and B.3 hereof, 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 preceding paragraph, 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 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 Guidelies. Section II. Employment of Consultants In order to assist the Borrower in carrying out the Project, the Borrower shall employ and shall cause ESF, and the Executing Entities in respect of the execution of Approved Sub-projects, to 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. - 21 - SCHEDULE 4 Implementation Program 1. No expenditures for goods or services required for a Sub- project (a) estimated to cost the equivalent of more than $100,000 or (b) that is one of the first 30 Sub-projects approved by ESF in accordance with the Operational Manual or (c) that is the first Sub- project in the health and nutrition sector or in the education sector or in the infrast-ucture sector shall be eligible for financing out of the proceeds of the Credit, unless the Sub-project in question shall have been approved by the Association. 2. (a) When presenting a Sub-project to the Association for approval, the Borrower shall furnish, or shall cause ESF to furnish to the Association an application, in form satisfactory to the Association, together with: (i) a description of the Requesting Entity, the Executing Entity (in the cases where the services of a Delegated Entity are being utilized) and the Sub-project Agreement it is intended to be used, and an appraisal of the Sub-project, including a description of the expenditures proposed to be financed out of the proceeds of the Credit; and (ii) such other information as the Association shall reasonably request. (b) Applications and requests made pursuant to the provisions of sub-paragraph (a) of this paragraph shall be presented to the Association on or before April 30, 1994. 3. The Sub-project Agreements shall be made on terms consistent with models satisfactory to the Association, whereby ESF shall obtain, inter alia, rights adequate to protect the interests of the Borrower, the Association and ESF, including the right to: (a) require the Executing Entity, as the case may be, to carry out the Sub-project, and the applicable contractor, if any, to execute the corresponding civil works, all with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (b) require that: (i) the goods and services to be financed out of the proceeds of the Credit shall be procured in accordance with the provisions of Schedule 3 to this Agreement; and (ii) such goods and services shall be used exclusively in the carrying out of the Sub-project; - 22 - (c) inspect, by itself or jointly with representatives of the Association if the Association shall so request, such goods, works, plants and construction included in the Sub-project, the operation thereof, and any relevant records and documents; (d) require that: (i) the Executing Entity or the contrac- tor, as applicable, 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) with- out 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 insurance beneficiary to replace or repair such goods; (e) obtain all such information as the Borrower, the Asso- ciation or ESF shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Executing Entity, and to the benefits to be derived from the Sub- project; and (f) suspend or terminate the right of the Requesting Entity, or Delegated Entity or contractor, as applicable, to the use of the proceeds of the Credit upon failure by the party in question to perform its obligations under its contract with ESF or upon the failure by any party to a Supervision Contract to perform its obligations thereunder. 4. Without limitation or restriction to the provisions of Sec- tions 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Condi- tions and of its obligations under this Agreement, the Borrower shall furnish or shall cause ESF to furnish to the Association, during the execution of the Project, quarterly monitoring reports on the progress of the Project on all areas of ESF operations and on sources and use of ESF funds, starting on a date six months from the Effective Date, in such scope and detail as the Association shall reasonably request. 5. The Borrower shall: (i) prepare or cause ESF to prepare, and furnish to the Association for review and approval every six months, starting on a date six months from the Effective date: (a) a report showing the geographical and sectoral distribution of Approved Sub- projects and (b) a report on procurement performance, including a review of the unit price mechanism for direct contracting; and (ii) - 23 - put into effect the corrective actions thereof, in a manner satis- factory to the Association, if any, to improve targeting of ESF resources, or the procurement performance. 6. The Borrower shall submit or shall cause ESF to submit for review to the Association, in a timely fashion, and by December 15, 1993, respectively, the terms of reference for the carrying out of Part C.1 and Part C.2 of the Project and, by June 30, 1991 and December 31, 1994, shall complete the execution of Part C.1 and Ptrt C.2 of the Project, respectively. 7. The Borrower shall: (i) submit or shall cause ESF to submit to the Association in a timely fashion a proposed costing mechanism to be utilized in connection with col-tracts to be awarded under Section I, Part B.2 of Schedule 3 to ;his Agreement; (ii) review with the Association such proposal upon the latter's request; and (iii) put into effect by not later than April 30, 1991, or such later date as agreed between the Borrower and the Association, the costing mechanism for the aforesaid purposes which shall be acceptable to the Association. The mechanism in question shall be reviewed and, if warranted revised, to ensure at all times that it remains acceptable to the Association. - 24 - SCHEDULE 5 Modifications of the General Conditions For purposes of this Agreement, the provisions of the General Conditions are modified as follows: (1) The last sentence of Section 3.02 is deleted. (2) The provisions of Section 5.04 of the General Conditions shall be deemed applicable also to reallocation of funds from one sub-category of Schedule 1 to the Development Credit Agreement to another sub-category of such Schedule. (3) The words "the Association may, by notice to the Bor- rower, terminate the right of the Borrower to make withdrawals with respect to such amount. Upon the giving of such notice, such amount of the Credit shall be cancelled" set forth at the end of Section 6.03 are deleted and the following is substituted therefor: "or (e) by the date specified in sub-paragraph 2 (b) of Schedule 4 to the Development Credit Agreement, the Association shall, in respect of any portion of the Credit: (i) have received no applications permitted under sub- paragraph (a) of said paragraph; or (ii) have denied any such applications, the Association may, by notice to the Borrower, terminate the right to submit such applications or to make withdrawals from the Credit Account, as the case may be, with respect to such amount or portion of the Credit. Upon the giving of such notice, such amount or portion of the Credit shall be cancelled." INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY