Page 1 CONFORMED COPY CREDIT NUMBER 2445 KE Development Credit Agreement (Second Agricultural Sector Management Project) between REPUBLIC OF KENYA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated March 1, 1993 CREDIT NUMBER 2445 KE DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated March 1, 1993, between REPUBLIC OF KENYA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Page 2 Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "CB" means the Borrower's Cotton Board established pursuant to the Cotton Act, Chapter 335 of the laws of the Borrower; (b) "DRSRS" means the Department of Resource, Surveys and Remote Sensing of the Ministry of Planning and National Development; (c) "ESTU" means the Executive Secretariat and Technical Unit of the Parastatal Reform Program Committee; (d) "GIS" means Geographical Information System; (e) "KSA" means the Kenya Sugar Authority established pursuant to the Agriculture Act, Chapter 318 of the laws of the Borrower; (f) "MOA" means the Borrower's Ministry of Agriculture; (g) "MOCD" means the Borrower's Ministry of Cooperative Development; (h) "MOLD" means the Borrower's Ministry of Livestock Development; (i) "NEAP" means the Borrower's National Environment Action Plan; (j) "NES" means the National Environment Secretariat within the Ministry of Environment and Natural Resources; (k) "NGO" means a Non-Governmental Organization; (l) "ODC" means the Oilseeds Development Council to be established under the Project; (m) "SSRS" means the Sugar Sector Restructuring Study referred to in Part B of the Project; (n) "Project Preparation Advance" means the project preparation advance granted by the Association to the Borrower pursuant to a letter dated August 31,1992, from the Association and confirmed by the Borrower on September 21, 1992; (o) "Special Project Preparation Advance" means the special project preparation advance granted by the Bank to the Borrower, pursuant to an exchange of letters dated May 8, 1991, and June 4, 1991, and November 6, 1991, and June 1, 1992, between the Borrower and the Bank; (p) "Special Account" means the account referred to in Section 2.02 of this Agreement; and (q) "bring to the point of sale" means that for the enterprise concerned the following have been completed: the valuation of assets and liabilities, and evaluation of such enterprise, preparation of the strategy for privatization and determination of the modality for sale, as well as preparation, advertisement and issuance of the prospectus or the tender documents. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies Page 3 equivalent to thirteen million eight hundred thousand Special Drawing Rights (SDR 13,800,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special deposit account in its central bank on terms and conditions satisfactory to the Association, 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 Schedule 5 to this Agreement. (c) Promptly after the Effective Date, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and pay to itself the amount required to repay the principal amount of the Project Preparation Advance and the Special Project Preparation Advance withdrawn and outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn balance of the authorized amount of the Project Preparation Advance and the Special Project Preparation Advance shall thereupon be cancelled. Section 2.03. The Closing Date shall be December 31, 1997, or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date or at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next payment date in that year specified in Section 2.06 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on March 1 and September 1 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semi- annual installments payable on each March 1 and September 1 commencing March 1, 2003, and ending September 1, 2032. Each installment to and including the installment payable on September 1, 2012, shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. Page 4 (b) Whenever (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years; and (ii) the Bank shall consider the Borrower creditworthy for Bank lending; the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due consideration by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate agricultural, financial and administrative practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Association shall otherwise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 4 to this Agreement. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. The Borrower shall: (a) not later than December 31, 1993, restructure CB with greater industry participation; and (b) not later than June 30, 1994, have privatized at least three of CB's cotton ginneries, and privatized, or brought to the point of sale, the remaining three CB gins. Section 3.04. The Borrower shall, not later than December 31, 1994, following the completion of SSRS, carry out the privatization plan for the sugar industry, in a manner satisfactory to the Association, which shall include, by December 31, 1994, privatizating two sugar factories, and privatizating, or bringing to the point of sale, the remaining sugar factories. Section 3.05. The Borrower shall, not later than December 31, 1993: (a) establish ODC, with terms of reference satisfactory to the Association; and (b) establish a mechanism satisfactory to the Association, to enable ODC to be self-sustaining. Page 5 Section 3.06. The Borrower shall upon completion of the studies on the cooperative sector, referred to in Part D of the project, but in any case not later than December 31, 1993, discuss and reach agreement with the Association on an action plan to implement the recommendations of said studies. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower 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 Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section 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 Association; (ii) furnish to the Association, as soon as available, but in any case not later than nine months after the end of each such year, a certified copy of 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, accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account or payment out of the Special Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section 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 to support the related withdrawals. ARTICLE V Page 6 Effective Date; Termination Section 5.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the Borrower shall have appointed the NEAP Coordinator referred to in paragraph 7 of Schedule 4 to this Agreement, on terms and conditions and with qualifications and experience satisfactory to the Association; (b) the Borrower shall have appointed the financial controller referred to in paragraph 2 of Schedule 4 to this Agreement, on terms and conditions and with qualifications and experience satisfactory to the Association; (c) the Borrower shall have established the DRSRS Steering Committee referred to in paragraph 6 of Schedule 4 to this Agreement; (d) the Borrower has prepared the packages for inviting technical assistance proposals, satisfactory to the Association and ESTU has approved the terms of reference of the consultants working on privatization of cotton ginneries and sugar factories; and (e) the Borrower has prepared the training program for Part E of the Project with details of the first year's training, satisfactory to the Association. Section 5.02. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representatives of the Borrower; Addresses Section 6.01. The Minister at the time responsible for finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance P.O. Box 30007 Nairobi, Kenya Cable address: Telex: FINANCE 2282 MINFIN Nairobi Nairobi For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) 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 Page 7 States of America, as of the day and year first above written. REPUBLIC OF KENYA By /s/ Denis D. Afande Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Francis X. Colaco Acting Regional Vice President Africa SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Civil works 140,000 100% of foreign expenditures and 60% of local expenditures (2) Vehicles, furniture 850,000 100% of foreign and equipment expenditures and 80% of local expenditures (3) Consultants' 6,750,000 100% services and studies (4) Training 2,710,000 100% (5) Incremental operating costs: (a) Aircraft 530,000 100% of foreign operation expenditures (excluding fuel) Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (b) Vehicles 90,000 100% of foreign expenditures, 80% of local expen- ditures up to an aggregate of $70,000, 50% of local expenditures up to an aggregate of $100,000, and 30% Page 8 of local expen- ditures thereafter (c) Office expenditure 270,000 100% of foreign and equipment expenditures, maintenance, and 80% of local allowances expenditures up to an aggregate of $200,000, 50% of local expenditures up to an aggregate of $320,000 and 30% of local expen- ditures thereafter. (6) Refunding of 350,000 Amounts due Project pursuant to Preparation Section 2.02 (c) Advance of this Agreement Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (7) Refunding of 60,000 Amounts due pur- Special Project suant to Section Preparation 2.02 (c) of this Advance Agreement (8) Unallocated 2,050,000 _________ TOTAL 13,800,000 ========== 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. SCHEDULE 2 Description of the Project The objectives of the Project are to: (a) develop key agricultural sub-sectors by fostering greater private sector involvement; (b) reform the cooperative sector to make cooperatives more efficient and responsive to member needs; (c) increase the overall efficiency of MOA and MOLD by rationalizing their role, structure and strategic functions; and (d) ensure the sustainable use of the Borrower's physical resources by strengthening the Borrower's capability to factor in the impact on the environment of agricultural programs and policy initiatives. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: Cotton Sub-Sector Development 1. Establishment of an appropriate legal and institutional Page 9 framework for the cotton industry, including a restructured CB. 2. Facilitation of reforms in the processing and marketing of cotton, including the privatization of the six CB cotton ginneries, rationalization of the organizational structure of the cotton cooperatives, and establishment of quality control systems for lint. 3. Improvement in the technological support to cotton farmers, including development of a system for the production of good quality seed, formulation of appropriate research programs and strengthening the extension system. 4. Provision of training and acquisition of equipment to support above activities. Part B: Sugar Sub-Sector Restructuring 1. Carrying out a sugar sub-sector restructuring study. 2. Formulation of privatization/restructuring plans for five sugar factories. 3. Strengthening the regulatory framework for the sugar industry and developing the capacity of KSA to fulfill its functions. Part C: Oilseeds Sub-Sector Development 1. Establishment of a legal, institutional and policy framework for the sustainable development of the oilseeds sub-sector to achieve cost-effective import substitution and export promotion. 2. Formulation of appropriate research and extension programs to provide technological support to oilseed farmers. 3. Improvement of skills amongst key personnel involved in oilseed research, extension and processing. 4. Provision of training and acquisition of equipment for above activities. Part D: Program to Restructure Cooperative Sector 1. Review of cooperative legislation with a view to liberalizing the sector and making cooperatives independent member controlled organizations. 2. Carrying out a study to determine the phased transfer of MOCD's functions to the cooperative movement. 3. Carrying out a study on rationalizing MOCD's new role. 4. Carrying out studies on critical cooperative policy-related areas. Part E: MOA/MOLD Capacity Building 1. Identification, formulation of plans as necessary, and sub- sequent implementation of the revised roles and functions of MOA and MOLD in a changing liberalized agricultural sector framework. 2. Strengthening management of operations in technical units of MOA and MOLD, that will remain in the public sector. 3. Facilitating commercialization and cost recovery in appro- priate functions of MOA and MOLD, including the provision of agricultural services. 4. Facilitating privatization of appropriate functions of MOA and MOLD. 5. Provision of training, carrying out of studies and acquisition of vehicles and equipment for abovementioned activities. Page 10 6. Construction and furnishing of prefabricated office space for about twenty officers. Part F: Strengthening of DRSRS 1. Carrying out a detailed management study of DRSRS, to examine DRSRS' current capability and outline a core program of activities for the next three years. 2. Assistance for the GIS. 3. Support for aerial services, including operation of aircraft for natural resource-related work, repair and maintenance. 4. Support for information services, including the publications program, library, literature database, and extension services to users; acquisition of computer and peripheral equipment and supplies, provision of staff training, workshops and extension training of users of DRSRS products and library materials and equipment. 5. Strengthening data quality and staff productivity. Part G: NEAP 1. Final preparation and implementation of NEAP including: (a) appointment of a NEAP Coordinator; (b) establishment of a policy steering committee; (c) formation of a NEAP Working Group; (d) formation of task groups to prepare individual components of NEAP; and (e) setting up of advisory group of donors, private sector and NGOs. 2. Acquisition of office equipment and transport for above activities. * * * The Project is expected to be completed by June 30, 1997. SCHEDULE 3 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 1992 (the Guidelines). 2. To the extent practicable, contracts for goods shall be grouped into bid packages estimated to cost the equivalent of $100,000 or more. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in Kenya 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. Page 11 Part C: Other Procurement Procedures 1. Items or groups of items for goods and vehicles estimated to cost the equivalent of $100,000 or less per contract, up to an aggregate amount equivalent to $750,000, and for civil works estimated to cost $200,000 or less per contract, up to an aggregate amount equivalent to $200,000, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 2. Items or groups of items for goods estimated to cost the equivalent of $20,000 or less per contract, up to an aggregate amount equivalent to $220,000, may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Association. 3. Spare parts for aircraft may be procured on the basis of arrangements by inviting bids from the original manufacturers of the aircraft and from manufacturers of components and sub-assemblies where applicable. 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 $50,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the 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 the 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 5 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals from the Credit Account are to be made on the basis of statements of expenditure. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants In order to assist the Borrower in carrying out the Project, the Borrower shall employ consultants 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 World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. SCHEDULE 4 Implementation Program Parts A, B, C and E Page 12 1. Parts A, B, C and E of the Project shall be implemented under the overall direction of the Agriculture Sector Committee to be established by the Borrower not later than March 31, 1993, to be co- chaired by the Permanent Secretaries of MOA and MOLD. The other members shall be the Director of the External Resources Department of the Ministry of Finance, representatives of MOCD and ESTU, and the chairpersons of CB and KSA. The chairperson of ODC shall become a member once ODC is established and a chairperson appointed. The committee shall have overall policy guidance, resources allocation and review responsibility for these parts of the Project. 2. The day-to-day implementation of Parts A, B, C and E of the Project shall be managed by the ASMP Management and Implementation Committee (MIC), chaired by the Project Coordinator. The Committee shall be comprised of the heads of the Development Planning Departments of MOA, MOLD and MOCD, heads of Technical Departments of MOA and MOLD and the Financial Controller to be appointed under the Project. The MIC shall develop project teams in technical and sectoral areas to implement Parts A, B and C of the Project. 3. The privatization of cotton ginneries and sugar factories shall conform to the Policy Paper on the Public Enterprise Reform and Privatization published on July 1, 1992, by the Borrower. ESTU in its role within the Agriculture Sector Committee referred to in paragraph 1 above, shall approve the terms of reference of the privatization consultants under Parts A and B of the Project and supervise the privatization aspects of the consultants' activities. Part D of the Project 4. Part D of the Project shall be implemented by MOCD. The head of the Development Planning Department of MOCD shall be Project Coordinator. Part E of the Project 5. The Borrower shall, not later than December 31, 1994, following work done under Part E of the Project, discuss and agree with the Association on an action plan to strengthen key technical functions of MOA/MOLD, and commence the commercialization and/or privatization of identified MOA/MOLD functions. The Borrower shall by March 31 in each year, prepare and furnish to the Association a detailed annual training program based on identified training needs, cost effectiveness considerations and an evaluation of the previous year's training program. Part F of the Project 6. The Director of DRSRS shall be responsible for implementing Part F of the Project. The Borrower shall establish a steering committee, chaired by the Permanent Secretary of the Ministry of Planning and National Development and consisting of the Permanent Secretaries of MOA, MOLD, Ministry of Environment and Natural Resources, Ministry of Regional Development, Ministry of Arid, Semi- Arid and Wasteland, the Director of the Kenya Wildlife Services and the Director-General of the Kenya Agricultural Research Institute. The DRSRS Steering Committee shall meet at least twice a year and shall be responsible for ensuring that the DRSRS work program focuses on the Borrower's high priority natural resources-related issues. DRSRS shall, by March 31 in each year, prepare and furnish to the Association, a management/work plan, acceptable to the Association, which shall be endorsed by the Steering Committee, and shall also incorporate the lessons learned from the evaluation of the previous year's management/work plan. Part G of the Project 7. The NEAP shall be prepared in two stages: (a) The first stage shall focus on getting agreement on the NEAP process itself and the institutional framework for its implementation. This shall involve, inter alia: (i) an explanation of the concept of the NEAP process Page 13 based on broad participation, (ii) formation of a representative group to discuss this process, and (iii) appointment of a NEAP coordinator with experience satisfactory to the Association; and (b) the second stage shall involve the implementation of the NEAP process, including, inter alia, (i) preparation of terms of reference for Task Groups, and (ii) initiation of the work of the Task Groups. Mid-term Review 8. The Borrower shall, not later than December 31, 1995, carry out jointly with the Association a mid-term review of the Project. At least three months prior to such review, the Borrower shall prepare and furnish to the Association, such reports as shall be needed to undertake the review. The review shall focus on the progress in implementing the Project and in particular assess: (a) the progress of recruiting and managing technical assistance, assessing its impact and sustainability, (b) implementation against performance indicators, (c) implementation of training programs under Part E of the Project, and (d) long-term impact and performance of technical assistance and officer consultants. SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (4) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $200,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it 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 Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Association requests for deposits into the Special Account at such intervals as the Association shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required, pursuant to paragraph 4 of this Schedule, for the payment or payments in respect of which replenishment is requested. On the basis of each Page 14 such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account, such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Arti- cle V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Credit allocated to the eligible Categories, less the amount of any outstanding special commitment entered into by the Association, pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Association shall otherwise agree, no further deposit by the Association into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made, pursuant to paragraphs 6 (a), (b) and (c) of this Schedule, shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance Page 15 with the relevant provisions of this Agreement, including the General Conditions.