Conformed Copy - C2784 - Social Investment Fund Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2784 AM Development Credit Agreement (Social Investment Fund Project) between REPUBLIC OF ARMENIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated November 15, 1995 CREDIT NUMBER 2784 AM Development Credit Agreement AGREEMENT dated November 15, 1995, between REPUBLIC OF ARMENIA (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; and (B) 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 Development Credit Agreements" of the Association, dated January 1, 1985, with the 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 and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "SIF" means Social Investment Fund established pursuant to Decree No. 165 of the Prime Minister, dated September 12, 1995. (b) "SDS" means the State Department of Statistics, Analysis and State Page 2 Register. (c) "Microproject" means a subproject eligible, in accordance with the provisions of the Operational Manual, for financing out of the proceeds of the Credit, and in respect of which SIF has entered into a Framework Agreement. (d) "Sponsored Microproject" means a Microproject to be financed, on a pari passu basis, out of the proceeds of the Credit and the proceeds of private sector contributions. (e) "Microprojects" means any one or more Microproject and Sponsored Microproject, collectively. (f) "Microproject Committee" means a committee established in accordance with the provisions of the Operational Manual for carrying out Microprojects. (g) "Operational Manual" means the manual, satisfactory to the Association, containing eligibility criteria and appraisal, approval and supervision rules and procedures for Microprojects, as well as other administrative rules to be followed by SIF, as the same may be amended from time to time by agreement between the Association and SIF; (h) "Framework Agreement" means an agreement to be entered into between SIF and an Implementing Agency, for purposes of carrying out a Microproject or a Sponsored Microproject on terms and conditions as specified in the Operational Manual, as the same may be amended from time to time. (i) "Project Preparation Advance" means the project preparation advance granted by the Association to the Borrower pursuant to an exchange of letters dated August 24, 1994 and January 12, 1995 between the Borrower and the Association. (j) "Special account" means the account referred to in Section 2.02 (b) of this Agreement. (k) "Implementing Agency" means a local government, non-governmental organization, Microproject Committee or other organization which meets all eligibility criteria under the Operational Manual and is responsible for carrying out a Microproject or a sponsored Microproject under a Framework Agreement with SIF. (l) "Project Account A" means the account referred to in Section 3.01 (b) of this Agreement; (m) "Project Account B" means the account referred to in Section 3.01 (c) of this Agreement; (n) "MIS" means Management Information System, the computerized, internal monitoring system of SIF providing up-to-date data on operations to SIF management. 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 Development Credit Agreement, an amount in various currencies equivalent to eight million one hundred thousand Special Drawing Rights (SDR 8,100,000). 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) The Borrower may, for the purposes of the Project, open and maintain in dollars a special deposit account in a commercial bank on terms and conditions satisfactory to the Association, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. (c) 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 Page 3 outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn balance of the authorized amount of the Project Preparation Advance shall thereupon be canceled. Section 2.03. The Closing Date shall be June 30, 2000 or such 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 canceled; 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 restrictions 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. Section 2.06. Commitment charges and service charges shall be payable semiannually on March 1 and September 1 in each year. Section 2.07. (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 March 1 and September 1 commencing March 1, 2006 and ending September 1, 2030. Each installment to and including the installment payable on September 1, 2015 shall be one and one-fourth per cent (1-1/4%) of such principal amount, and each installment thereafter shall be two and one-half percent (2-1/2%) 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 consideration 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 Association 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 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 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 Agreement, and, to this end, shall carry Page 4 out the Project through SIF with due diligence and efficiency and in conformity with appropriate administrative, financial, environmental and engineering practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon any of its obligations under paragraph (a) of this Section, the Borrower shall: (i) maintain Project Account A in local currency and replenish said Project Account A not later than June 15 and December 15 of each calendar year, so that the amount deposited in said Project Account A at the beginning of each semi-annual period shall not be less than the equivalent of $80,000; and (ii) use said Project Account A for financing the Borrower's contribution to the Project expenditures. (c) The Borrower shall open and maintain Project Account B in a commercial bank into which contributions from the private sector are to be deposited and from which expenditures under each Sponsored Microprojects are to be financed on a pari passu basis with the proceeds of the Credit. (d) 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 in accordance with the Implementation Program set forth in Schedule 4 to this Agreement. Section 3.02. 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 3 to this Agreement. Section 3.03. For the purposes of Section 9.08 of the General Conditions, and without limitation thereto, the Borrower shall: (a) prepare, on the basis of guidelines acceptable to the Association, and furnish to the Association not later than six (6) months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, a plan for the future operation of the Project; and (b) afford the Association a reasonable opportunity to exchange views with the Borrower on said plan. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause SIF to maintain records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project. (b) The Borrower shall cause SIF to: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the Special Account 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, a certified copy of 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, 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 expenditure, the Borrower shall cause SIF to: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; Page 5 (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 or payment out of the Special 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 V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Condition, the following additional event is specified, namely, that the Operating Manual, or any provision thereof, shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of SIF to carry out the Project. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) The MIS, including the accounting system, shall be fully operational on the basis of indicators satisfactory to the Association; (b) SIF shall have selected and appointed a resident technical advisor to the General Manager of SIF with qualifications and under the terms of reference acceptable to the Association; (c) SIF shall have selected and appraised at least twenty-five Microprojects, with a total cost of at least the equivalent of $500,000, in accordance with the rules and procedures specified in the Operational Manual; and (d) the Borrower shall have opened Project Account A in a commercial bank on terms and conditions acceptable to the Association with an initial deposit in local currency equivalent to $80,000. Section 6.02. 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 VII Representatives of the Borrower; Addresses Section 7.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance 1, Government House Republic Square Yerevan 375010 Armenia Page 6 Telex: 243331 LADA SU 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) 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 ARMENIA By /s/ Rouben Shougarian Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Thomas Blinkhorn Acting Regional Vice President Europe and Central Asia 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) Goods, works and services in respect of Microprojects (a) Microprojects (other 3,910,000 90% than Sponsored Microprojects) under Part A of the Project (b) Sponsored 1,350,000 50% Microprojects Page 7 under Part A of the Project (2) Goods under Parts B 340,000 100% of and D of the Project foreign expenditures, 100% of local expenditures (ex-factory cost) and 80% of local expenditures for other items procured locally (3) Technical 740,000 100% assistance and training (4) Incremental operating 810,000 100% costs of SIF and SDS (5) Refunding of 270,000 Amounts due Project pursuant to Preparation Section 2.02 (c) Advance of this Agreement (6) Unallocated 680,000 TOTAL 8,100,000 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; (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; and (c) the term "incremental operating costs" means incremental operating costs of SIF incurred on account of the Project, including: (i) staff salaries and allowances (provided, however, that government officials may be considered SIF staff for this purpose only if relieved of their governmental responsibilities and assigned to SIF on a full time basis); (ii) office maintenance, utilities and telecommunications; and (iii) office equipment and consumable supplies. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. 4. The Association may require withdrawals from the Credit Account to be made on the basis of statements of expenditure for expenditures: (i) for Microprojects and goods under contracts not exceeding $50,000 equivalent; (ii) for services provided by consulting firms under contracts not exceeding $30,000 equivalent; and (iii) for services provided by individual consultants under contracts not exceeding $10,000 equivalent, under such terms and conditions as the Association shall specify by notice to the Borrower. SCHEDULE 2 Description of the Project The objective of the Project is to support the lower income groups among the Armenian population through improvement of basic social services and creation of employment opportunities. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: Microprojects in Rehabilitation of Small-Scale Infrastructure Page 8 Carrying out Microprojects for rehabilitation of local clinics, primary schools, sanitation work and water supply, energy saving repairs, repair of feeder roads, and rehabilitation of degraded village and town environments through cleanup and tree planting, and rehabilitation of other infrastructure in accordance with the provisions of the Operational Manual. Part B: Institutional Support for SIF Strengthening of SIF's operational capacity through: (a) provision of training and technical assistance to SIF staff in the areas of financial planning, management, participatory community development, institutional analysis, contracting and bidding procedures, project supervision and computer training; and (b) provision of equipment and vehicles. Part C: Capacity Building of Small Contractors, Implementing Agencies and Communities (a) Provision of technical assistance and training to small construction firms and other micro-enterprises to increase their technical and managerial capacity. (b) Provision of training to local governments personnel, non-governmental organizations and Microproject Committees in community participation, conducting competitive bidding, preparing contracts, and monitoring work progress. Part D: Support for Monitoring Living Conditions (a) Assistance in improvement of the methods of SDS for conducting sampling and household surveys. (b) Carrying out of two household surveys by SDS. * * * * * The Project is expected to be completed by December 31, 1999. SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: General Goods and works shall be procured in accordance with the provisions of Section I of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in January 1995 (the Guidelines) and the following provisions of this Section, as applicable. Part B: Procurement Procedures 1. National Competitive Bidding Works estimated to cost $150,000 equivalent or less per contract and $5,900,000 equivalent or less in the aggregate may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. 2. Procurement of Small Works Works estimated to cost $30,000 equivalent or less per contract, and not to exceed $600,000 in the aggregate, may be procured under lump sum, fixed price contracts awarded on the basis of quotations obtained from three qualified domestic contractors in response to a written invitation. The invitation shall include a detailed description of the works, including basic specifications, the required completion date, a basic form of agreement acceptable to the Association, and relevant drawings, where applicable. The award shall be made to the contractor who offers the lowest price quotations for the required work, and who has the experience and resources to successfully complete the contract. Page 9 3. International Shopping Goods estimated to cost $300,000 equivalent or less per contract and $500,000 equivalent or less in the aggregate may be procured under contracts awarded on the basis of international shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. 4. National Shopping Goods estimated to cost $30,000 equivalent or less per contract and $300,000 equivalent or less in the aggregate, may be procured under contracts awarded on the basis of national shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. 5. Community Participation Works in remote areas where contractors are not available estimated to cost $30,000 equivalent or less per contract and $100,000 equivalent or less in the aggregate shall be procured in accordance with procedures acceptable to the Association. Part C: Review by the Association of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to prequalify for bidding or to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Association for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods and works shall be undertaken in accordance with such procurement plan as shall have been approved by the Association, and with the provisions of said paragraph 1. 2. Prior Review With respect to each contract for goods and works estimated to cost the equivalent of $50,000 or more, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. Section II. Employment of Consultants 1. Consultants' services shall be procured under contracts awarded in accordance with the provisions 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 (the Consultant Guidelines). For complex, time-based assignments, such contracts shall be based on the standard form of contract for consultants' services issued by the Bank, with such modifications as shall have been agreed by the Association. Where no relevant standard contract documents have been issued by the Bank, other standard forms acceptable to the Association shall be used. 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Association review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts shall not apply to (a) contracts for the employment of consulting firms estimated to cost less than $30,000 equivalent each or (b) contracts for the employment of individuals estimated to cost less than $10,000 equivalent each. However, said exceptions to prior Association review shall not apply to (a) the terms of reference for such contracts, (b) single-source selection of consulting firms, (c) assignments of a critical nature, as reasonably determined by the Association, (d) amendments to contracts for the employment of consulting firms raising the contract value to $30,000 equivalent or above, or (e) amendments to contracts for the employment of individual consultants raising the contract value to $10,000 equivalent or above. SCHEDULE 4 Implementation Program Page 10 1. SIF shall ensure that (a) Microprojects are identified, appraised, approved, implemented and evaluated in accordance with the procedures set forth or referred to in the Operational Manual and the applicable Framework Agreement; and (b) SIF