Afghanistan - Agricultural Development Bank Project : Credit 0202 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 202 AF Project Agreement (Agricultural Development Bank Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN DATED JUNE 24, 1970 CONFORMED COPY CREDIT NUMBER 202 AF Project Agreement (Agricultural Development Bank Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL DEVELOPMENT BANK OF AFGHANIST"AN DATED JUNE 24, 1970 froject Agrumrnt AGREEMENT, dated June 24, 1970, between INTERNA- TIONAL DEVELOPMENT AssocIATION (hereinafter called the Association) and the AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN (hereinafter called the AGBANK). WHEREAS by a development credit agreement of even date herewith (hereinafter called the Development Credit Agree- ment) between the Kingdom of Afghanistan (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower a develop- ment credit in various currencies equivalent to five million dollars ($5,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condi- tion that the AGBANK agrees to undertake certain obli- gations to the Association as hereinafter in this Project Agreement set forth; and WHEREAS the AGBANK, in consideration of the Associa- tion's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; Now THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions SECTION 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms de- fined in the Development Credit Agreement shall have the respective meanings therein set forth. ARTICLE II Particular Covenants of the AGBANK SECTION 2.01. The AGBANK shall carry out Parts I, II and III of the Project with due diligence and efficiency 4 and in conformity with sound administrative, agricultural and financial practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. SECTION 2.02. (a) The operating policies and procedures of the AGBANK in respect of the Project shall be as set forth in Schedule 1 to this Agreement and as the same may be amended from time to time by agreement among the Borrower, the Association and the AGBANK. (b) The AGBANK shall promptly revise its procedures and raise its interest rates so that it can follow lending terms, criteria and procedures uniform to those set forth in Schedule 1 to this Agreement with respect to its lending activities under the Project. Except as the Association shall otherwise agree, with respect to its other lending activities, the AGBANK shall follow lending terms, criteria and procedures consistent with those set forth in said Sched- ule 1 until the date of the final disbursement under the Development Credit Agreement. SECTION 2.03. The AGBANK shall: (i) establish and maintain separate accounts in respect of all funds disbursed and received on account of the Project; (ii) have such ac- counts audited annually by an independent auditor accept- able to the Association; and (iii) promptly after the prep- aration of the audit, and not later than four months after the close of its financial year, transmit to the Association certified copies of such audited accounts and a signed copy of the auditor's report. SECTION 2.04. The AGBANK shall maintain or cause to be maintained records adequate to identify the goods and services financed out of the proceeds of the Credit, to dis- close the use thereof in the Project, to record the progress of the Project (including the cost thereof) to show the re- sults achieved by the Project and to reflect in accordance 5 with consistently maintained sound accounting practices the operations and financial condition of the AGBANK; shall enable the Association's representatives to inspect such goods and any relevant records and documents; and shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the Project, such goods and services, and the operations, administration and financial condition of the AGBANK. SECTION 2.05. (a) The AGBANK and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the AGBANK and the Association shall from time to time exchange views through their representatives with regard to matters relat- ing to the purposes of the Credit, the Project and to the performance by the AGBANK of its obligations under this Agreement. (b) The AGBANK shall promptly inform the Associa- tion of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit or the performance by the AGBANK of its obligations under this Project Agreement. SECTION 2.06. The AGBANK shall at all times charge interest on all of its loans at rates sufficient to enable it to: (a) cover all operating expenditures and charges in- cluding taxes (if any) and interest payments on borrow- ings; (b) maintain adequate provisions for bad and doubt- ful debts; and (c) maintain adequate general reserves. SECTION 2.07. The AGBANK shall insure the imported goods to be financed out of the proceeds of the Credit against marine, transit and other hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indem- nity shall be payable in a currency freely usable by the AGBANK to replace or repair such goods. 6 SECTION 2.08. Except as shall be otherwise agreed be- tween the Association and the AGBANK: (i) the AGBANK shall cause all goods purchased under the Project to be used in the territories of the Borrower exclusively in con- nection with the Project; and (ii) the AGBANK shall cause title to all such goods as are sold to third parties to be obtained free and clear of encumbrances to third parties. SECTION 2.09. The AGBANK shall ensure that prior to the expiry of the current UNDP/SF Project it shall make arrangemenV, acceptable to the Association and the Bor- rower, for continuing its operations and conducting its affairs in accordance with sound business, economic and financial practices, under the supervision of experienced and competent management. In addition, the AGBANK shall recruit at least ten qualified University graduates on its staff within two years from the date of this Project Agreement. SECTION 2.10. (a) The AGBANK shall effect no changes in the positions of the President, or any of the Vice Presi- dents, without prior consultation with the Association. (b) The AGBANK shall adopt Loan Regulations and a Policy Statement as to the AGBANK's operational and lending policies, satisfactory to the Association. Such Loan Regulations and Policy Statement may be amended from time to time with the prior approval of the Association. SECTION 2.11. (a) The AGBANK shall not establish, acquire or take over any subsidiary except on terms and conditions satisfactory to the Association. (b) The AGBANK shall cause each of its subsidiaries, if any, and each of the subsidiaries established, acquired or taken over, after the date of the Development Credit Agree- ment, if any, to observe and perform the obligations of the AGBANK hereunder to the extent to which such obli- 7 gations shall or can be applicable thereto, as though such obligations were binding upon each of such subsidiaries. ARTICLE III Effective Date; Termination SECTION 3.01. This Project Agreement shall enter into force and effect on the Effective Date. If the Development Credit Agreement shall terminate pursuant to Section 10.04 of the General Conditions, the Association shall promptly notify the AGBANK of this event and, upon the giving of such notice, this Project Agreement and all obligations of the parties hereunder shall forthwith terminate. SECTION 3.02. This Project Agreement shall terminate and all obligations of the parties hereunder shall determine on a date twenty-five years from the date of this Agreement or upon termination of the Development Credit Agreement, whichever is earlier. ARTICLE IV Miscellaneous Provisions SECTION 4.01. No delay in exercising, or omission to exercise, any right, power, or remedy accruing to either party under this Project Agreement upon any default shall impair any such right, power or remedy or be construed to be a waiver thereof or an acquiescence in such default; nor shall the action of such party in respect of any default or any acquiescence in any default, affect or impair any right, power, or remedy of such party in respect of any other or subsequent default. SECTION 4.02. Any notice, demand or request required or permitted to be given or made under this Project Agree- ment shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be 8 delivered by hand or by mail, telegram, cable or radiogram to the party to which it is required or permitted to be given or made at its 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 demand or 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: Indevas Washington, D.C. For the AGBANK: Agricultural Development Bank of Afghanistan P.O. Box 414 Kabul, Afghanistan Cable address: AGBANK Kabul Afghanistan SECTION 4.03. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Project Agreement on behalf of the AGBANK may be taken or executed by its President or such other person or persons as he shall designate in writing. SECTION 4.04. The AGBANK shall furnish to the Asso- ciation sufficient evidence of the authority of the person or persons who will, on behalf of the AGBANK, take any action or execute any documents required or permitted to be taken or executed by the AGBANK pursuant to any of the provisions of this Agreement and the authenticated specimen signature of each such person. SECTION 4.05. This Agreement may be executed in sev- eral counterparts, each of which shall be an original and all collectively but one instrument. IN VITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and to be delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ J. BURKE KNAPP Vice President AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN By /s/ M. S. DANESHJO Authorized Representative 10 SCHEDULE 1 Operating Policies and Procedures 1. Technical Feasibility of Minor Irrigation Investments: To help assure technical feasibility of minor irrigation investments, all pumpsets and tubewell loans should have the approval from the technical standpoint of the Ground- water and Pump Expert referred to in Section 4.03(b) of the Development Credit Agreement, and loans for minor irrigation rehabilitation schemes should be technically eval- uated by MIS and should have approval of the Project Coordinating Committee referred to in Section 4.03(d) of the Development Credit Agreement. 2. Financial Feasibility of Farm Investments: To help assure financial feasibility of individual farm investments or of cooperative societies: (a) All investments in tractors, pumpsets and tubewells and farm mechanization would be evaluated in terms of the incremental returns from the additional investment on a case by case basis. The AGBANK would prescribe and adopt satisfactory methods of evaluation. (b) Loans for tractor purchase would be granted to a farmer (group of farmers, contractors or cooperative so- cieties) when engaged in cultivating about 40 ha of irri- gable land or upon reasonable evidence that there will be at least 1,000 hours' productive work in agriculture per year for the tractor in respect of which application for loan is made. (c) Farmers cultivating about 4 ha of irrigable land in provinces where adequate extension, input supply and mar- keting services exist, initially in areas served by the cotton improvement center in Kunduz, would be sold animal-drawn implements (polyculteurs) on credit upon certification from the appropriate extension officer that the farmer concerned 11 is participating in MAI's cotton and wheat improvement program. (d) The AGBANK's financing of the minor irrigation rehabilitation schemes would be initiated in regions of Northern and Central Afghanistan and the financing of tubewell investments in South-East Afghanistan and in Helmand, Farah and Herat Provinces. (e) Construction costs in respect of minor irrigation re- habilitation schemes would be financed by the AGBANK which would recover such costs from cash contributions of, and by making medium- or long-term loans to, farmers, groups of farmers or legally established associations of water users. For such construction costs payments would be made by the AGBANK to contractors or to the appro- priate agency (MAI, HVA and PDA) carrying out such construction. (f) The AGBANK would supplement its medium- and long-term loans to farmers under the Project with short- term loans from its own resources for farmers' purchase of seasonal inputs. 3. Lending Terms from the AGBANK to Farmers/Con- tractors and Associations of Water Users: (a) Loan Amounts: Medium- and long-term loans would not exceed, on the average, 80% of the cost of tractors and attachments, implements, pumps and minor irrigation reha- bilitation and 50% of the cost of well-digging and pump installation. (b) Charges on Loans: Charges on loans including inter- est and other charges will be not less than 8% per annum for medium- and long-term loans and 10% per annum for short-term loans. A penalty rate of 2% per annum will be charged for payments made after due date. (c) Loan Maturity: The maturity of loans would in no case exceed the useful life of the asset to be financed and 12 should take the repayment capacity of borrowers into con- sideration. Specifically, under the Project, loans for (i) tractor purchase would be for a period not exceeding five years; (ii) polyculteurs purchase for a period not exceed- ing three years; (iii) pumpsets for a period not exceeding six years; and (iv) minor irrigation rehabilitation schemes for a period not exceeding nine years. (d) Security Arrangements: Loans for tractors and pumpsets would be secured by mortgages or other appro- priate securities as specified in the AGBANK's Loan Reg- ulations or Policy Statement referred to in Section 4.06 of the Development Credit Agreement.