Conformed Copy - C2423 - Financial Sector Technical Assistance Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2423-CHA (Financial Sector Technical Assistance Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and PEOPLE'S BANK OF CHINA Dated December 30, 1992 CREDIT NUMBER 2423-CHA PROJECT AGREEMENT AGREEMENT, dated December 30, 1992, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and PEOPLE'S BANK OF CHINA (PBC). WHEREAS 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 forty-two million one hundred thousand Special Drawing Rights (SDR 42,100,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that PBC agree to undertake such obligations toward the Association as are set forth in this Agreement; WHEREAS PBC, 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) PBC 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 with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Part A of the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and PBC shall otherwise agree, PBC shall carry out Part A of the Project in accordance with the Implementation Program set forth in Schedule 2 to this Agreement. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods and consultants' services required for Part A of 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 2.03. PBC 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, respectively) in respect of the Project Agreement and Part A of the Project. Section 2.04. (a) PBC 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 other matters relating to the purposes of the Credit. (b) PBC 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 PBC of its obligations under this Agreement. ARTICLE III Management and Operations of PBC Section 3.01. PBC shall carry on its operations and conduct its affairs in accordance with sound administrative and financial practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. ARTICLE IV Financial and Other Covenants Section 4.01. (a) PBC shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations, resources and expenditures in respect of Part A of the Project. (b) PBC 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; Page 3 (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 as well as the audit thereof, as the Association shall from time to time reasonably request. Section 4.02. PBC shall, jointly with the Borrower and the Association, review annually the progress made in financial sector reform, in accordance with Section 4.03 of the Development Credit Agreement. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of PBC 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 20 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 PBC of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. 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 PBC: Page 4 People's Bank of China No. 32 Cheng Fang Street Xi Cheng District, Beijing 100800 People's Republic of China Cable address: Telex: RENMINBANK 22612 PBCHO CN Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of PBC may be taken or executed by Governor or Deputy Governor or such other person or persons as Governor or Deputy Governor shall designate in writing, and PBC shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. 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/ Shahid Javed Burki Acting Regional Vice President East Asia and Pacific PEOPLE'S BANK OF CHINA By /s/ Zhu Qizhen Authorized Representative SCHEDULE 1 Procurement and Consultants' Services Section I: Procurement of Goods 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 1992 (the Guidelines). 2. To the extent practicable, contracts 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 Page 5 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 estimated to cost the equivalent of $200,000 or less per contract, up to an aggregate amount equivalent to $1,600,000, may be procured with the prior agreement of the Association on the basis of the procurement plan referred to in paragraph 6 of Schedule 2 to this Agreement, under contracts awarded on the basis of: (a) competitive bidding, advertised locally; or (b) comparison of price quotations obtained from at least three suppliers from at least three different countries eligible under the Guidelines; or (c) comparison of price quotations obtained from at least three suppliers eligible under the Guidelines; all in accordance with procedures acceptable to the Association. 2. Contracts for proprietary items may be awarded after direct negotiations with suppliers, in accordance with procedures acceptable to the Association. Part D: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract to be awarded in accordance with the procedures described in Part A.1 hereof, 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 PBC 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 PBC 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 PBC 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 5 to the Development Credit Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals from the Credit Account are to be made 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 PBC in carrying out Part A of the Project, PBC 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 1. In implementing Part A of the Project, PBC shall comply with the following requirements: (a) all training shall be carried out in accordance with a training program agreed with the Association; and (b) all studies shall be carried out in accordance with terms of reference Page 6 and timing agreed with the Association, and the study results shall be reviewed with the Association promptly upon completion of the study. 2. PBC shall complete asset reviews of the four specialized banks under Part A.1 of the Project by June 30, 1998, using asset classification criteria agreed with the Association. Such asset reviews shall include off-balance sheet items and cover no less than 70 percent by value of each bank's total loan portfolio. 3. PBC shall furnish to the Association for comment an implementation plan for the introduction of prudential regulations developed under Part A.1 of the Project, within four months of the completion of the related consultants' services. 4. Under Part A.3 of the Project, PBC shall, promptly upon completion, furnish to the Association for comment a proposed implementation plan for the introduction of revised accounting standards and practices for the financial sector, taking into account MOF's strategy for the implementation of general accounting standards and practices referred to in paragraph 2 (c) of Schedule 4 to the Development Credit Agreement. 5. For the purposes of effective project implementation, PBC shall maintain the following, all with functions and responsibilities agreed with the Association: (a) its Leading Group, with representation from concerned departments of PBC, to guide and facilitate project management; (b) its Project Office, under the leadership of the Leading Group, with competent staff in adequate numbers; and (c) staffing arrangements to provide adequate numbers of counterpart staff with appropriate qualifications to work with the consultants employed for the purposes of Part A of the Project. 6. PBC shall furnish to the Association, a procurement plan (specifying packaging and procurement procedures) to be agreed with the Association prior to any purchases of goods under Part A of the Project.