Conformed Copy - C2599 - Second Roads and Coastal Shipping Project - Supplemental Letter 3

Page 1 April 15, 1994 His Excellency Governor of Banco de Mocambique P.O. Box 423 Maputo Republic of Mozambique Re: Credit No. 2599 MOZ (Second Roads and Coastal Shipping Project) Preference for Domestic Contractors Excellency: We refer to the Development Credit Agreement of even date herewith between International Development Association (the Association), and the Republic of Mozambique and to the provisions in Part B of Schedule 3 thereof for the grant of a 7.5% margin of preference to eligible domestic contractors bidding for construction contracts to be financed out of the proceeds of the above Credit. We wish to confirm that, in order to be accepted by the Association, the criteria for classification of domestic contractors eligible for such preference must include at least the following: (a) domestic bidders shall be eligible provided that they: (i) are registered in Mozambique; (ii) have majority ownership by nationals of Mozambique; and (iii) have not subcontracted more than 50% of the contract works measured in terms of value to foreign contractors. (b) joint ventures between domestic and foreign firms shall be eligible for the margin of preference provided that: (i) the domestic partner or partners individually satisfy the criteria for eligibility set forth above; (ii) the domestic partner or partners would not be qualified for the contract works in question on technical or financial grounds without the foreign participation; and (iii) the domestic partner or partners will, under the arrangements proposed, carry out at least 50% of the contract works measured in terms of value. For the purpose of this paragraph, the term "foreign firm" means a firm that does not qualify as a domestic bidder pursuant to sub-paragraphs (a) (i) and (a) (ii) of this paragraph. In any contract awarded to a bidder who received preference as a domestic contractor in accordance with the foregoing, appropriate provisions will be included limiting the right of the contractor to subcontract any portion of the works in excess of the percentage indicated under sub-paragraphs (a) (iii) and (b) (iii) of the preceding paragraph. Please confirm your agreement with the foregoing by signing the enclosed copy of this letter and returning it to us. Sincerely yours, Page 2 INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Stephen M. Denning Acting Regional Vice President Africa CONFIRMED: REPUBLIC OF MOZAMBIQUE By /s/ Hipolito Zozimo Patricio Authorized Representative