Conformed Copy - L4566 - Second Beijing Environment Project - Japanese Grant Agreement

Page 1 February 25, 1998 Minister Liu Zhongli Minister of Finance Ministry of Finance Sanlihe Beijing 100820 People's Republic of China Re: Japanese Grant for the Preparation of the Second Beijing Environment Project Grant Number TF 027034 Dear Sir: I am writing on behalf of the International Bank for Reconstruction and Development (the Bank) to indicate the Bank's agreement, as administrator of grant funds provided by Japan, to make a grant in an amount not exceeding six hundred thirty-nine thousand three hundred dollars ($639,300) (the Grant) to People's Republic of China (the Recipient). The Grant is made in response to the Recipient's request for financial assistance and for the purposes and on the terms and conditions set forth in the Annex to this Letter Agreement. The Recipient represents, by confirming its agreement below, that it is authorized to contract and withdraw the Grant for the said purposes and on the said terms and conditions. Please confirm your agreement with the foregoing, on behalf of the Recipient, by signing, dating, and returning to us the enclosed copy of this Letter Agreement. Upon receipt by the Bank of the copy of this Letter Agreement countersigned by you, this Letter Agreement will become effective as of the date of the countersignature. Very truly yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Yukon Huang Country Director, China East Asia and Pacific Region AGREED: PEOPLE'S REPUBLIC OF CHINA By /s/ Pan Xiaojiang Deputy Director Date: March 3, 1998 ANNEX Purposes, Terms, and Conditions of the Grant 1. Purposes and Activities 1. The purpose of the Grant is to assist the Recipient's Beijing Municipality in the preparation of a proposed Second Beijing Environment Project (Project) whose objective is to improve environmental conditions in Beijing through pollution abatement measures. The activities (the Activities) for which the Grant is given are as follows: (a) Preparing the Project's investment and technical assistance components Page 2 and implementation plans, including advice on alternatives and prototypes, review of feasibility studies and engineering designs and assistance in the preparation of bidding documents; (b) Providing specialist assistance, to carry out environmental modeling to evaluate the Project's environmental impacts and establish appropriate monitoring indicators; and (c) Providing training to the Recipient's Beijing Municipality staff on cleaner fuel systems technologies. 2. Implementation Generally 2.1 The Recipient shall: (a) carry out the Activities with due diligence and efficiency; (b) promptly provide the funds, facilities, services and other resources required for that purpose; (c) furnish all information covering the Activities and the use of the proceeds of the Grant as the Bank shall reasonably request; (d) from time to time exchange views with the Bank's representatives on the progress and results of the Activities; and (e) take all necessary measures required to enable the Bank to visit the territory of the Recipient for purposes related to the Grant. Without limitation on the foregoing, the Recipient shall, if the Bank shall so request, prepare and furnish to the Bank promptly upon completion of the Activities a report, in form and substance satisfactory to the Bank, on the results and impact of the Activities. 3. Procurement 3.1 Except as the Bank shall otherwise agree, procurement of the consultants' services required for the carrying out of the Activities and to be financed out of the proceeds of the Grant shall be governed by the provisions of Attachment I to this Annex. 4. Withdrawal of Grant Proceeds 4.1 The amount of the Grant shall be credited to an account opened by the Bank on its books in the name of the Recipient (the Grant Account), and may be withdrawn therefrom by the Recipient in accordance with the provisions of this Section 4, for expenditures in respect of the reasonable cost of services required for the Activities and to be financed out of the proceeds of the Grant. 4.2 The expenditures for the following items may be financed out of the proceeds of the Grant and shall be used exclusively in the carrying out of the Activities: Amount of the Grant % of Allocated (in Expenditures to Item Dollars be Financed (1) Consultants' 609,300 100% services (2) Training 30,000 100% Total 639,300 4.3 Notwithstanding the provisions of paragraph 4.2 above: (a) no withdrawals shall be made: (i) for payments made for expenditures prior to the date of signature of this Letter Agreement by the Bank; (ii) on account of payments for any taxes levied by or in the territory of the Recipient; (iii) on account of expenditures in the territories of any country which is not a member of the Bank or for services supplied from such territories; (iv) for the purpose of any payment to persons or entities, if such payment, to the Bank's knowledge, is prohibited by a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations; or (v) after December 31, 1999, or such later date as the Bank shall establish by written notice to the Recipient (the Closing Date), except that withdrawals may be made for expenditures incurred prior to the Closing Date if the corresponding application is received by the Bank. within four months after the Closing Date, after which time any Page 3 amount of the Grant remaining unwithdrawn from the Grant Account shall be canceled; and (b) if, in the Bank's opinion, an amount of the Grant allocated to any of the items in the table in paragraph 4.2 above will be insufficient to finance the expenditures for such item, the Bank may, by written notice to the Recipient, reallocate to such item an amount of the Grant then allocated to another item which, in the Bank's opinion; will not be necessary to meet other expenditures. 4.4 When the Recipient shall desire to withdraw any amount from the Grant Account, it shall deliver to the Bank a written application for withdrawal of such amount in the form specified by the Bank. Withdrawal applications shall be: (a) signed on behalf of the Recipient by the Minister of Finance or such other person as he or she shall have authorized in writing; and (b) be accompanied by such evidence in support of the application as the Bank shall reasonably request. Authenticated specimen signatures of the person authorized to sign withdrawal applications shall be provided with the first application bearing his or her signature. Each withdrawal application for an amount of the Grant and its supporting evidence must be sufficient in form and substance to satisfy the Bank that the Recipient is entitled to withdraw such amount from the Grant Account and that such amount is to be used in the carrying out of the Activities. The Bank shall pay the amounts withdrawn by the Recipient from the Grant Account only to or on the order of the Recipient. 4.5 The Bank may require withdrawals from the Grant Account to be made on the basis of statements of expenditure for expenditures for : (a) services of consulting firms costing less than US$100,000 equivalent; (b) services of individual consultants costing less than US$50,000 equivalent; and (c) training, all under such terms and conditions as the Bank shall specify by notice to the Recipient. 4.6 Withdrawals of the proceeds of the Grant shall be made in the currency of the Grant. The Bank, at the Recipient's request and acting as an agent of the Recipient, shall purchase with the currency of the Grant withdrawn from the Grant Account such currencies as shall be required to pay for expenditures to be financed out of the proceeds of the Grant. Whenever it shall be necessary, for the purposes of this Letter Agreement, to determine the value of one currency in terms of another, such value shall be as reasonably determined by the Bank. 4.7 To facilitate the carrying out of the Activities, the Recipient may open and maintain in U.S. dollars a special deposit account (the Special Account) in a commercial bank and on terms and conditions satisfactory to the Bank, 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 Attachment II to this Annex. 5. Accounts and Audits 5.1 (a) The Recipient shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Activities of the departments or agencies of the Recipient responsible for carrying out the Activities or any part thereof. (b) The Recipient shall: (i) have the records and accounts referred to in subparagraph (a) above and the records and accounts for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank 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 Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records and accounts and the audit thereof as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Grant Account were made on the basis of statements of expenditure, the Recipient shall: (i) maintain or cause to be maintained, in accordance with subparagraph (a) above, 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 Grant Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in subparagraph (b) above 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 Page 4 to support the related withdrawals. 6. Suspension and Cancellation 6.1 The Bank may at any time, by notice to the Recipient, suspend the right of the Recipient to make further withdrawals from the Grant Account if any of the following events has occurred and is continuing: (a) the Recipient has failed to comply with any of its obligations herein specified; or (b) the right of the Recipient, or any other entity to which the Bank has made a loan with the guarantee of the Recipient, to make withdrawals under any loan agreement with the Bank or any development credit agreement with the International Development Association shall have been suspended. 6.2 The Bank may, by written notice to the Recipient, terminate the right of the Recipient to make further withdrawals from the ,Grant Account: (a) at any time after the right of the Recipient to make withdrawals from the Grant Account shall have been suspended pursuant to the provisions of paragraph 6.1 above; or (b) if the Recipient shall have failed to take action, satisfactory to the Bank, within six months after the effective date hereof, to carry out the Activities. Attachment I Procurement Section I. Consultants' Services Part A: General Consultants' services shall be procured in accordance with the provisions of the Introduction and Section IV of the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers", published by the Bank in January 1997 and revised in September 1997 (the Consultant Guidelines), and the following provisions of this Section 1. Part B: Quality- and Cost-based Selection 1. Except as otherwise provided in Part C of this Section, consultants' services shall be procured under contracts awarded in accordance with the provisions of Section II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 thereto, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to quality- and cost based selection of consultants. 2. The following provisions shall apply to consultants' services to be procured under contracts awarded in accordance with the provisions of the preceding paragraph. The short list of consultants for services for Project design and environmental modeling under paragraph 1.1 (a) and (b) of the Annex, estimated to cost less than $20,000 equivalent per contract, may comprise entirely national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Part C: Other Procedures for the Selection of Consultants 1. Single Source Selection Services for Project design, environmental modeling and training under paragraph 1.1 (a), (b) and (c) of the Annex estimated to cost less than $100,000 equivalent per contract, may, with the Bank's prior agreement, be procured in accordance with the provisions of paragraphs 3.8 through 3.11 of the Consultant Guidelines. 2. Individual Consultants Services for Project design, environmental modeling and training under paragraph 1.1 (a), (b) and (c) of the Annex shall be procured under contracts awarded to individual consultants in accordance with the provisions of paragraph 5.1 through 5.3 of the Consultant Guidelines. Part D: Review by the Bank of the Selection of Consultants 1. Selection Planning Prior to the issuance to consultants of any requests for proposals, the proposed plan for the selection of consultants under the Activities shall be furnished to the Bank for its review and approval, in accordance wit the provisions of paragraph 1 of Appendix 1 to the Consultant Guidelines. Selection of all consultants