Conformed Copy - TF020738 - Third Montreal Protocol Ozone Depleting Substances Phaseout Project - OTF Grant Agreement

Page 1 May 27, 1999 Mr. Jun Liqun Vice Minister of Finance Ministry of Finance Beijing People's Republic of China Re: CHINA: Advance for Preparation of the Third Montreal Protocol Ozone Depleting Substances Phaseout Project OTF-Project Preparation Advance IX - OTF-PPA No. TF022452 Dear Sir: I am writing on behalf of the International Bank for Reconstruction and Development, acting as Trustee of the Ozone Projects Trust Fund (the Trustee), to indicate the Trustee's agreement to grant to the People's Republic of China (the Recipient) an Advance in an amount not exceeding one hundred forty thousand dollars (US$140,000) (the Advance). The purpose of the Advance is to finance certain expenditures for the following activities: (a) carrying out of a survey an the pharmaceutical aerosol sector to be used as the basis for the formulation of a sector strategy; conduct of a workshop on the formulation of such strategy; conduct of a technology workshop on the CFC phaseout in the pharmaceutical aerosol sector; (b) preparation of a mobile air conditioning project (MAC project); preparation of a technical assistance project to promote technical inspection and monitoring, revise standards and codes, and collect information; workshop on policies and conversion technologies; preparation of implementation manual for the MAC project; (c) preparation of three commercial refrigeration projects; (d) conduct of a workshop on CFC phaseout in the PU foam sector; preparation of twenty five individual projects to collect data and assess the adaptability of available conversion technologies; preparation of foam sector approach; and (e) preparation of a workshop on safety The Recipient has requested the financial assistance of the Ozone Projects Trust Fund for this purpose. The Advance is granted for the purpose described, and on the terms and conditions set forth in Attachments 1-111 hereto. The Advance would be managed on behalf of the Recipient by its State Environmental Protection Agency (SEPA) in its role as head of the Leading Group for Ozone Layer Protection in China. The recipient represents, by confirming its agreement hereunder, that the Recipient is authorized to contract and withdraw the Advance for the said purposes and on the said terms and conditions. The grant of the Advance does not constitute or imply any commitment on the part of the Trustee, the International Bank for Reconstruction and Development in its own capacity or the International Development Association, to assist in financing the project for the preparation of which the Advance is granted. The Government of the People's Republic of China hereby acknowledges that the Advance is not subject to any taxes. Please confirm your agreement with the foregoing, on behalf of the People's Republic of China, by countersigning, dating the two original copies of this Letter of Agreement and returning to us one original, as countersigned. This Letter of Agreement will become effective as of the date of countersignature. Sincerely yours, Page 2 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Acting as Trustee of the Ozone Projects Trust Fund By /s/ Yukon Huang Country Director, China East Asia and Pacific Region AGREED: PEOPLE'S REPUBLIC OF CHINA By /s/ Authorized Representative Dated: June 3, 1999 Attachments. ATTACHMENT I Purposes, Terms and Conditions of Advance 1. The objective of the Advance is to finance activities (the Activities) required to complete the preparation of Ozone Depleting Substance (ODS) phaseout projects and phaseout strategies, The activities are as follows: Based on a work program agreed between the Recipient's State Environmental Protection Agency (SEPA) and the Trustee, assistance will be provided to SEPA for: (a) carrying out of a survey on the pharmaceutical aerosol sector to be used as the basis for the formulation of a sector strategy; conduct of a workshop on the formulation of such strategy; conduct of a technology workshop on the CFC phaseout in the pharmaceutical aerosol sector; (b) preparation of a mobile air conditioning project (MAC project); preparation of a technical assistance project to promote technical inspection and monitoring, revise standards and codes, and collect information; workshop on policies and conversion technologies; preparation of implementation manual for the MAC project; (c) preparation of three commercial refrigeration projects; (d) conduct of a workshop on CFC phaseout in the PU foam sector; preparation of twenty five individual projects to collect data and assess the adaptability of available conversion technologies; preparation of foam sector approach; and (e) preparation of a workshop on safety 2. Expenditures to be financed with the Advance are: Amount of the Grant % of Category Allocated Expenditures to (expressed in US be Financed Dollars) (1) Consultants' services 95,700 100% (2) Workshops 44,300 100% TOTAL 140,000 Notwithstanding the above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of countersignature of this Letter Agreement, Page 3 except for expenditures incurred after January 1, 1997 in an amount not exceeding $65,000. 3. The Recipient shall carry out the Activities through SEPA with due diligence and efficiency and in conformance with appropriate administrative. environmental and financial practices; (,promptly provide the funds, facilities, services, and other resources required for the purpose; furnish to the Trustee all information on the Activities and the use of the proceeds of the Advance as the Trustee shall reasonably request; and from time to time exchange views with the trustee's representatives on the progress and results of such activities. 4. TO assist SEPA in carrying out the Activities, SEPA shall employ consultants whose qualifications, experience and terms and conditions of employment are satisfactory to the Trustee. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Trustee and on the basis of the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers and by the World Bank" published by the Trustee in January 1997 and revised in September 1997 and January 1999. No substitution of such consultant or modification of the terms and conditions of their employment shall be made except with the prior approval of the Trustee. 5. The Trustee may require withdrawals from the Advance to be made on the basis of statements of expenditure for expenditures under: (a) contracts for the employment of consulting firms costing less than the equivalent of USS100,000; (b) contracts for the employment of individual consultants costing less than the equivalent of USS50,000; and (c) workshops, all under such terms and conditions as the Trustee shall specify by notice to the Recipient. 6. Withdrawal, use, and refunding of the Advance shall be made in accordance with the Financial Provisions Applicable to Advances from the Ozone Projects Trust Fund for Project Preparation (the Financial Provisions) set forth in Attachment 11. 7. For the purposes of this Letter of Agreement, the term "Trust Account" means the account opened by the Trustee on its books in the name of the Recipient to which the amount of the Advance is credited. 8. To facilitate carrying out the Activities, the Recipient may open an account (the Special Account) in US dollars in a bank on terms and conditions satisfactory to the Trustee. Deposits into, and Payments out of, the Special Account shall be made in accordance with the provisions of Attachment III. The Trustee so selected shall confirm in a form acceptable to the Trustee that the funds in the Special Account will be segregated as a special deposit for the specific purposes for which the Advance is made and that the funds are not subject to claims of set-off, seizure, or attachment. 9. The date three years from the date on which the Trustee signs this letter of Agreement is hereby specified for the purposes of paragraph 9 of the Financial Provisions (Attachment II). No withdrawals of the Advance shall be made after that data, and any amount of the Advance then remaining unwithdrawn shall be canceled, unless the Trustee establishes a later date for the purposes of paragraph 9 10. Withdrawal applications from the Trust Account for the Advance funds shall be signed on behalf of the Recipient by the Minister of Finance or any person designated in writing by the Minister. Authenticated specimen signatures of the designated persons shall be provided with the first application ATTACHMENT II Financial Provisions Applicable to Advances from the Ozone Projects Trust Fund for Project Preparations 1. On receipt of a written application for withdrawal from the Trust Account in the form specified by the Trustee, the Trustee shall disburse to, or on the order of, the Recipient funds from the Advance to meet. expenditures specified in paragraph 2 of Attachment I to the Letter of Agreement (eligible expenditures). Each application for withdrawal shall be: (a) signed by an authorized representative of Recipient; and (b) accompanied by evidence of expenditures made or, if Trustee shall so agree, to be made. 2. The Advance shall be made in U.S. dollars. The amounts of the Advance shall be Page 4 disbursed in various currencies equivalent to the amount required to meet an eligible expenditure to be financed by the Advance. 3. Withdrawals shall be made only for expenditures for services supplied front, or goods produced in, countries eligible under the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Trustee in January 1995 and revised in January and August 1996 and September 1997 and January 1999. The amount of the Advance disbursed carries no interest or other charges and is made available on a non-reimbursable basis. 5. The Trustee may, by notice to the Recipient, suspend at any time further withdrawals of the Advance if: (a) funds withdrawn have not been used for the purpose agreed between the Recipient and the Trustee; or (b) the Activities are not carried out in accordance with the standards or methods agreed between the Recipient and the Trustee. 6. At any time after withdrawals of the Advance have been suspended pursuant to these provisions, the Trustee may. by notice to the Recipient, cancel any amount of the Advance remaining unwithdrawn. 7. If the funds withdrawn have not been used for the purpose agreed between the Recipient and the Trustee, then upon suspension as provided in paragraph 5 above, the Recipient shall, promptly upon written notice from the Trustee, refund to the Trustee an amount equal to the amount so used or any portion thereof specified by the Trustee, 8. The Trustee may cancel the Advance in full by written notice to the Recipient if, within 180 days after the date of the countersignature of the Trustee's letter making the Advance the Recipient has not, in the opinion of the Trustee, started any of the Activities for which the Advance was made. 9. As specified in paragraph 8 of Attachment I to this Letter of Agreement, no application for withdrawals will be accepted by the Trustee three years from the date on which the Trustee signs this Letter of Agreement. The unwithdrawn amount of the Advance wilt then be canceled by the Trustee. 10. The Recipient shall: (a) maintain or cause to be maintained separate records and separate accounts adequate to reflect in accordance with sound accounting practices the expenditures financed by the Advance; (b) have such .records and accounts (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 Trustee; and (c) furnish to the Trustee, not later than six months after the end of each fiscal year, a certified copy of the report of such audit by such auditors, or such detail as Trustee shall have reasonably requested. ATTACHMENT III Special Deposit Account 1. For the purposes of this Attachment: (a) the term "eligible expenditures" means expenditures in respect of the reasonable cost ref services required for the Activities to be financed out of the proceeds of the Advance; (b) the term "Authorized Allocation" means an amount equivalent to USS70,000 to be withdrawn from the Advance and deposited in the Special Deposit Account (the Special Account) pursuant to paragraph 3 (a) of this Attachment; and (c) the term "categories" means categories of items to be financed out of the proceeds of the Advance as set forth in Paragraph 2 of Attachment 1. 2. Payments out of the Special Account shall be made exclusively for eligible Page 5 expenditures in accordance with the provisions of this Attachment. 3. After the Trustee has received satisfactory evidence that the Special Account has been duly opened. withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows- (a) For withdrawals of the Authorized Allocation, the Recipient shall furnish to the Trustee a request or requests for a deposit or deposits that do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests the Trustee shall, on behalf of the Recipient, deposit in the Special Account such amount out of the proceeds of the Advance as the Recipient requests. (b) For replenishment of the Special Account. die Recipient shall furnish to the Trustee requests for deposits into the Special Account at such intervals as the Trustee shall specify. Prior to or at die time of each such request, the Recipient shall furnish to the Trustee the documents and other evidence required pursuant to paragraph 4 of this Attachment for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Trustee shall, on behalf of the Recipient. deposit into the Special Account out of the proceeds of the Advance such amount as is requested by the Recipient and shown by said documents and other evidence to have been made out of the Special Account for eligible expenditures. 4. For each payment made by the Recipient out of the Special Account, the Recipient shall (at such time as the Trustee shall reasonably request) furnish to the Trustee such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Attachment, the Trustee shall not be required to make further deposits into the Special Account: (a) if at any time the Trustee determines that all further withdrawals of the Advance should be made by the Recipient directly from the Trust Account in accordance with paragraph 2 of Attachment 11; or (b) once the total unwithdrawn amount of the Advance equals the equivalent of twice the amount of the Authorized Allocation. Thereafter. withdrawal of the Advance proceeds remaining unwithdrawn shall follow such procedures as the Trustee shall specify by notice to the Recipient. Such further withdrawals shall be made only after and to the extent that the Trustee shall have been satisfied that all such amount remaining on deposit in the Special Account as of the date of such notice shall be used in making payments for eligible expenditures. 6. (a) If the Trustee determines at any time that any payment out of the Special Account was: (i) made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Attachment; or (ii) riot justified by the evidence furnished to the Trustee; then the Recipient shall, promptly upon notice from the Trustee, provide such additional evidence as the Trustee may request, or deposit into the Special Account (or, if the Trustee shall so request, refund to the Trustee) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Trustee shall otherwise agree, no further deposit by the Trustee into the Special Account shall be made until the Recipient has provided such evidence or made such deposit or refund, as the case may be. (b) If the Trustee determines at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures. the Recipient shall, promptly upon notice from the Trustee, refund to the Trustee such outstanding amount. (c) The Recipient may, upon notice to the Trustee, refund to the Trustee all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Trustee made pursuant to paragraphs 6 (a), (b) and (c) of this Attachment shall be credited to the Trust Account for subsequent withdrawal or cancellation in accordance with the relevant provisions of this Letter of Agreement. Page 6