Page 1 CREDIT NUMBER 2153 PAK Project Agreement (Agricultural Credit Project) among INTERNATIONAL DEVELOPMENT ASSOCIATION and STATE BANK OF PAKISTAN and PROVINCE OF PUNJAB Dated September 28, 1990 CREDIT NUMBER 2153 PAK PROJECT AGREEMENT AGREEMENT, dated September 28, 1990, among INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and STATE BANK OF PAKISTAN (SBP) and PROVINCE OF PUNJAB acting by its Governor (Punjab). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Islamic Republic of Pakistan (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to one million two hundred thousand Special Drawing Rights (SDR 1,200,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that SBP and Punjab agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by arrangements to be made between the Borrower and SBP and between the Borrower and Punjab, the proceeds of the credit provided for under the Development Credit Agreement will be made available to SBP and Punjab on a grant basis; and WHEREAS SBP and Punjab, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, have agreed to undertake the obligations set forth in this Agreement; Page 2 NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) SBP and Punjab declare their commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement, and, to this end, shall carry out Parts C and D of the Project, respectively, with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering, agricultural credit research and data processing practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Parts C and D of the Project, respectively. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and SBP and Punjab shall otherwise agree, SBP and Punjab shall carry out Parts C and D of the Project, respectively, in accordance with the Implementation Program set forth in Schedule 2 to this Agreement. (c) SBP and Punjab shall, for the purposes of Parts C and D of the Project, respectively, open and maintain in dollars special accounts in a commercial bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Accounts shall be made in accordance with the provisions of Schedule 2 to the Development Credit Agreement. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods and consultants' services required for Parts C and D of the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.03. SBP and Punjab shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06 and 9.07 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports and maintenance, respectively) in respect of the Project Agreement and Parts C and D of the Project, respectively. Section 2.04. (a) SBP and Punjab shall, at the request of the Association, exchange views with the Association with regard to the progress of Parts C and D of the Project, respectively, the performance of their respective obligations under this Agreement, and other matters relating to the purposes of the Credit. (b) SBP and Punjab shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Parts C and D of the Project, respectively, the accomplishment of the purposes of the Credit, or the performance by SBP and Punjab of their respective obligations under this Agreement. ARTICLE III Financial Covenants Section 3.01. (a) SBP and Punjab 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 Parts C and D of the Page 3 Project, respectively, of the departments or agencies of SBP and Punjab responsible for carrying out Parts C and D of the Project, respectively, or any part thereof. (b) SBP and Punjab shall: (i) have such records and accounts, including those for the Special Accounts, 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, 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 and accounts as well as the audit thereof, as the Association shall from time to time reasonably request. ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 4.02. (a) This Agreement and all obligations of the Association and of SBP and Punjab thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date twenty (20) years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify SBP and Punjab of this event. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE V Miscellaneous Provisions Section 5.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement among the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radio gram to the party to which it is required or permitted to be given or made at such party's 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 request. The addresses so specified are: For the Association: International Development Association Page 4 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 197688 (TRT), Washington, D.C. 248423 (RCA) 64145 (WUI) or 82987 (FTCC) For SBP: State Bank of Pakistan I.I Chundrigar Road P.O. Box 4456 Karachi, Pakistan Cable address: Telex: PAK MONEY 2754 SBP PK For Punjab: Planning and Development Board Government of Punjab Lahore, Pakistan Cable address: Telex: DEVELOPMENT 952-44868 Lahore, Pakistan Punjab Secretariat Lahore, Pakistan Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of SBP and Punjab, or by SBP and Punjab on behalf of the Borrower under the Development Credit Agreement, may be taken or executed, in the case of SBP, by the Executive Director in-charge of the Agriculture Credit Department, and in the case of Punjab, by the Director, Revenue Academy, Punjab or such other person or persons as they shall designate in writing, and they shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 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. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ M. Wiehen Acting Regional Vice President Europe, Middle East and North Africa STATE BANK OF PAKISTAN PROVINCE OF PUNJAB By /s/ M. Afzal Page 5 Authorized Representative SCHEDULE 1 Procurement and Consultants' Services Section I:Procurement of Goods Part A: International Competitive Bidding 1. Except as provided in Part C hereof, goods shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. To the extent practicable, contracts for goods shall be grouped in bid packages estimated to cost the equivalent of $100,000 or more each. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.l hereof, goods manufactured in Pakistan may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Other Procurement Procedures Equipment and vehicles estimated to cost less than the equivalent of $20,000 per contract, up to an aggregate amount not to exceed the equivalent of $100,000 for each of SBP and Punjab, may be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Association. Part D: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $20,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contracts are to be made out of a Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of a Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 2 to the Development Credit Agreement. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II:Employment of Consultants In order to assist SBP and Punjab in carrying out Parts C and D of the Project, SBP and Punjab shall employ research and data Page 6 processing consultants, respectively, whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by the World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. SCHEDULE 2 Implementation Program 1. SBP's Implementation Arrangements (a) Responsibility for implementing Part C of the Project shall be assigned to SBP's Agricultural Credit Department. (b) A Research Advisory Committee (RAC) shall be constituted not later than September 30, 1990 to guide the planning and implementation of research under Part C of the Project and to disseminate the results of such research among policy makers. RAC shall be chaired by a representative of SBP, which shall also provide a secretariat for RAC, and shall include, as members, representatives of the PBC, ADBP, NCBs, Federal Bank for Cooperatives, research institutes and universities. 2. Punjab's Implementation Arrangements Responsibility for implementing Part D of the Project shall be assigned to the Director of the Revenue Academy in Lahore under the supervision of the Punjab Revenue Board. The Director shall be assisted by two tehsildars (revenue officers) to be appointed at the district level not later than December 31, 1990.