The World Bani I 1 (202) 473-1000 INTERNATIONAL BANI F OR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVI OPMENT ASSOCIATION W Cable Address: INDEVAS Date: 11- /1L Mr. Jangro Lee Director International Financial Institutions Division International Finance Bureau Ministry of Strategy and Finance Government Complex Gwr cheon 427 725 Republic of Korea Amendment to the Administration Agreement between the Republic of Korea, acting through its Ministry 6f Strategy and Finance, and the International Bank for Reconstruction and Development and the International Development Association concerning. the Korea Trust Fund for Economic and Peace- building Transitions (TFO71368) Dear Mr. Lee: 1. We refer to the Administration Agreement between the Republic of Korea, acting through its Ministry of Strategy and Finance (the "Donor"), and the International Bank for Reconstruction and Development ("IBRD") and the International Development Association ("IDA") (collectively, the "Bank") regarding the Korea Trust Fund for Economic and Peace- building Transitions (TF071368) (the "Trust Fund") dated October 3, 2009, as amended (the "Admiinistration Agreement"). 2. Pursuant to recent discussions between the Bank and the Donor, the Bank proposes to ameid the Administration Agreement. For this purpose, this letter shall constitute an amendment to the Administration Agreement ("Amendment"). 3. Section 12 "Communications and Addresses" of the Administration Agreement shall be ame:ided to read as follows: "Except as provided for in paragraph 4.2 above, any notice, request or other communication to be given or made under this Agreement shall be in writing and delivered by mail, facsimile or e-mail to the respective party's address specified below or at such other address as such party notifies in writing to the other party from time to time: RCA 248423. L VVUI 64145 0 FAX (202) 477-6391 -2- For the Bank: R6isin De Burca Senior Operations Officer Fragile and Conflict-Affected Countries Group Operations Policy and Country Services The World Bank 1818 H Street, NW Washington, DC 20433 U.S.A. Tel: +1 202.458.4007 Fax: +1 202.522.2266 For the Donor: Mr. Jangro Lee Director International Financial Institutions Division International Finance Bureau Ministry of Strategy anc Finance Government Complex Gwacheon 427 725 Republic of Korea Tel: + 82 -2-2150-4830 Fax: + 82 -2-503-6772 4. Annex 1 "Description of Activities, Expenditures and Governance Arrangement under the Korea Trust Fund for Economic and Peace-building Transitions" to the Administration Agrcement shall be replaced in its entirety by Annex "Description of Activities, Expenditures and Governance Arrangement under ihe Korea Trust Fund for Economic and Peace-building Trai sitions" attached to this Amendment. 5. All other terms of the Administration Agreement shall remain the same. 6. The Bank will disclose this Amendment and related information on this Trust Fund in accordance with the World Bank Pclicy on Access to Information. By entering into this Amendment, the Donor consents to disclosure of this Amendment and related information on this ]rust Fund. -3- 7. Please confirm your agreement with the foregoing, on behalf of the Donor, by signing and dating the two originals of this Amendment, retaining one original for your records and retuming the other original to the Bank. Upon receipt by the Bank of the original Amendment counersigned by you, this Amendment will become effective as of the date of the coun:ersignature. Sincerely, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL VELOPMENT ASSOCIATION J el el an D ecto Fragile & Con1ic ted States Group Operatiors Po y & Country Services AGREED: MINISTRY OF STRATEGY AND FINANCE OF THE REPUBLIC OF KOREA By: Date: 96_____ _/ Z__L Namre: Jangro Lee Title: Director, International Finan.e Bureau -4- ANNEX Description of Activities, Expenditures and Governance Arrangement under the Korea Trust Fund for Economic and Peace-building Transitions This Annex shall be applicable to and form an integral part of the agreement entered into between the Bank and the Donor that provides contributions (the aggregate of all contributions from the Donor, the "Contributions") to be administered by the Bank for the Trust Fund. 1. Objectives The overarching goal of the Trust Fund is to address the needs of state and local governance and peace-building' in fragile and conflict-prone and conflict-affected situations. Specifically the Trust Fund aims to: A. Support measures to improve governance and institutional performance in: (i) fragile, conflict-prone, or conflict-affected member countries of IBRD, which are either in or emerging from arrears; (ii) areas or territories of IBRD member countries that are fragile, conflict-prone, or conflict affected; and (iii) fragile, conflict-prone, or conflict-affected non- members in respect of which the Executive Directors shall have determined that assistance from IBR[) or the Association or both is in the interests of the membership as a whole. The main priorities for support would be fragile countries and areas of countries in political, economic and social transition as well as more localized assistance to member countries or areas of member countries that are in political transition or low intensity conflict or at risk of conflict. Notwithstanding the above, the Trust Fund will allocate fifty percent (50%) of the Con:ributions in the region comprising East Asia and the Pacific Islands. This objective would focus on strengthening, building and rebuilding state effectiveness through institutional strengthening and economic governance interventions2; and B. Support the reconstruction and development of: (i) fragile, conflict-prone, or conflict- affected member countries of IBRD; (ii) areas or territories of IBRD member countries that are fragile, conflict-prone, or conflict affected (either in or emerging from arrears); and (iii) fragile, conflict-prone, or conflict-affected non-members in respect of which the Executive Directors shall have determined that assistance f-om IBRD or the Association or both is in the interests of the membership as a whole. The Trust Fund will place priority on engagements in the region For the purpose of this Agreement the term "peace-building activities" means: activities that can be undertaken or finan,-ed consistently with the Bank's mandatt and legal and policy framework that include the broad spectrum of reconstruction and institution-building efforts necessary for a country to recover from conflict and that support the formutation of integrated strategies in order to lay the foundation for sustainable development including social and economic reintegration of conflict-affected populations, financing labor-intensive employment initiatives, financial support and technical assistance for economic ieconstruction, and rebuilding legal and judicial systems. 2 Such activities can be those undertaken or linanced consistently with the Bank's mandate and legal and policy framcwork that are directed at strengthening, nuilding, or rebuilding institutions of governance that are capable of providing the population with transparent and accountable management of public finances and state assets, invesrnent in human capital and social development, the rule of law, basic services and infrastructure, and an enabli-g environment for market formation, among other functions. -5- comprising East Asia and the Pacific Islands and will allocate fifty percent (50%) of the Cont7ibutions to this region. This objective would place emphasis on post-conflict recovery, bridging the gap between humanitarian relief and development activities, addressing heightened conflict risk and growing tens ions, designing more conflict sensitive development interventions, responding to the targeted neecds of vulnerable or conflict-affected populations, and deepening the knowledge base for successful intervention via research. 2. Activities Activities to be financed includ-, but are not limited to the following: (a) Under objective A abov-: (i) Recipient-executed activities: Strengthening of governance at national and subnational levels; activities relating to the transparent and accountable collection, management, and use of public resources for all government functions, including the security sector, within the Bank's mandate; creating inclusive, cohesive, and accountable institutions; support for the establishment cf property rights and asset restitution mechanisms; providing initial salary support to alleviate fiscal pressure in weak states; (ii) Bank-executed activities: providing leadership and technical training; and establishing assistance programs that attract diasporas, develop human capital, and facilitate south-south exchanges. (b) Under objective B above: (i) Bank-executed activities and/or Recipient-executed activities: Investment in social and economic infrastructure, community-driven development- type mechanisms and funds; social and economic integration of conflict- affected populations, including cash transfers; (ii) Bank-executed activities: providing technical assistance on economic issues to peace mediation processes; employment creation and support to the private sectcr; access to justice and establishment of the rule of law; developing watching briefs; support to cross border public goods (such as regional integration); and support to victims of violence or conflict enduring psychological duress. 3. Eligible Expenditures Categories of eligible expenditures for Bank-executed activities include: Bank staff costs (direct and indirect costs), extended term consultants costs and field benefits, short term consultant fees, contractual services, travel expenses, media and workshop costs, associated overheads, and when the provisions of the Bank's operational policy on rapid response to crises and -mergencies apply for Bank execution, equipment cost or lease. -6- Categories of eligible expenditures for Recipient-executed activities include: the finanicing of taxes; goods, works, consulting, operating costs and training procured by grant to the Recipients. 4. Governance Arrangements All grants to be made for projects to be administered under a Grant Agreement shall be processed by the State and Peace-Building Fund Committee (the "SPF Committee") constituted pursuant to IBRD Resolution No. 2008-0002 and IDA Resolution No. 2008-0001. The SPF Convnittee will be supported by a se,retariat (the "Secretariat") which will manage the Trust Fund. Concept Notes submitted by country teams will be endorsed by the Secretariat leading to full project/proposal preparation and a quality review process. Final proposals will be submitted to the SPF Committee for approval. The Donor and the Bank shall hold consultations once a year to ag-ee upon a yearly strategy for the Trust fund and report on project performances. All grants financing projects for an amount equaling or exceeding five hundred thousand United States Dollars (USD500,000) shall be submitted to the Donor's prior approval Grant proposals shall be reviewed based on the following set of eligibility criteria, namely that those member countries of the Bank for which such proposals are drawn possess one or more of the following characteristics: fragile states and/or fragile situations as defined by the Country Policy and Institutional Assessment (CPIA) rating of 3.2 or lower (reflecting poor gove-nance and weak institutional capacity); the presence of a United Nations or regional peacekeeping or political mission; cuTent violent conflict; violent conflict within the past 10 years; insufficient IDA grant allocations during a transition process when needs are high; current situation of arrears or emerging therefrom; and deteriorating situations, including an escalating risk of falling into arrears or violent conflict. For all grants approved pursuant to the preceding paragraph, the Bank shall, as administrator on behalf of the Donor, enter into grant agreements (the "Grant Agreements") each for the provision of Contributions for the purposes of this Agreement on terms and conditions set forth in the respective Grant Agreement. Upon the written request of the member, the Bank may act as executing agency for the recipient in carrying out the activities to be financed by the grant consistent with the Bank's policies and procedures.