CONFORMED COPY CREDIT NUMBER 670 YAR DEVELOPMENT CREDIT AGREEMENT (Sana'a Second Water Supply and Sewerage Project) between YEMEN ARAB REPUBLIC and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated January 14, 1977 S DEVELOPFNT CREDIT AGREEMENT AGREEMENT, dated January 14, 1977, between YE.4EN ARAB REPUBLIC (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) the Borrower has requested the Association to assist in the financing of Parts B (1), (3) and (4), C and D of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) the Borrower intends to contract from the Arab Fund for Economic and Social Development (hereinafter called the Arab Fund) a loan (hereinafter called the Arab Fund Loan) in an amount in Kuwaiti Dinars equivalent to about seventeen million one hundred thousand dollars ($17,100,000) to assist in financing Part A of the Project on the terms and conditions set forth in an agreement (here- inafter called the Arab Fund Loan Agreement) to be entered into between the Borrower and the Arab Fund; (C) the Borrower intends to contract from other external sources, financial assistance amounting to about fourteen million five hundred thousand dollars (M4,500,000) equivalent for the financing of Part B (2) of the Project. (D) Parts A, B and C of the Project will be carried out by the National Water and SeweraFe Authority (hereinafter called the Authority), an autonomous agency of the Borrower established under the Borrower's Law No. 13-73 of the year 1973, with the Borrower's -2- assistance and, as part of such assistance, the Borrower will make available to the Authority the funds required for carrying out Parts A, B and C of the Project, including part of the proceeds of the Credit as hereinafter provided and the funds referred to in Recitals (B) and (C) of this Agreement; (E) Part D of the Project will be carried out by the Borroweri and WHEREAS the Association has agreed, on the basis inter alia of the fore6oing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth and in the Project Agreement of even date herewith between the Association and the Authority; NOW THEREFORE the parties hereto hereby agree as follows: -3- ARTICLE I eneri "onditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agree- ments of the Association being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Awreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Association and the Authority of even date herewith, as the same may be amended from time to time. and such term includes all sched- ules to the Project Agreement and all agreements supnlemental to the Project Agreement; (b) "Subsidiary Financing Agreement" means the agreement to be entered into between the Borrower and the Authority pursuant to Section 3.01 (c) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Financing Agreement; and (c) "Yemeni Rial" means the currency of the Borrower. SI ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equiva- lent to ten million dollars (t10,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, a,s such Schedule may be amended from time to time by agreement between the Borrower and the Association, 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 and to be financed out of the proceeds of the Credit. Section 2.03. Except as the Association shall otherwise agree, contracts for the purchase of goods or for civil works to be fi- nanced out of the proceeds of the Credit, shall be procured in ac- cordance with the provisions set forth or referred to in Section 2.05 of the Project Agreement. Section 2.04. The Closing Date shall be June 30, 1982, or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 S of 1%) per annum on the princi-al amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semi-annually on May 15 and November 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each May 15 and November 15 commencing May 15, 1987, and ending November 15, 2026, each installment to and including the installment payable on November 15, 1996 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.00. The currency of the United States of America is hereby specified for the purDoses of Section 4.02 of the Gen- eral Conditions. Section 2.09. The Minister of Development of the Borrower is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section r.02 of this Agreement and Article V of the General Conditions. S ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out Part D of the Project through its Central Planning Organization with due dili- gence and efficiency and in conformity with appropriate adminis- trative, management, training, financial and engineering practices, and shall provide, promptly as needed, the funds, facilities, ser- vices and other resources required for the purpose. (b) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Bor- rower shall cause the Authority to perform in accordance with the provisions of the Project Agreement and the Subsidiary Financing Agreement all the obligations therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable the Authority to perform such obligations, and shall not take or permit to be taken any action which would prevent or inter- fere with such performance. (c) For the purpose of carrying out Parts B (1), (3) and (4) and C of the Project, the Borrower shall (i) relend an amount equi- valent to five million four hundred thousand dollars ($5,400,000), and (ii) make available, as a capital contribution, an amount equi- valent to four million two hundred thousand dollars ($4,200,000) out of the proceeds of the Credit to the Authority under a subsidi- ary financing agreement to be entered into between the Borrower and the Authority under terms and conditions which shall have been approved by the Association. S 7- (d) The Borrower shall exercise its rights under the Sub- sidiary Financing Agreement in such manner as to protect the in- terests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall other- wise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Financing Agreement or any provision thereof. Section 3.02. In order to assist the Borrower in carrying out Part D of the Project, the Borrower shall employ engineering and management consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Associ- ation. Section 3.03. The Borrower: (a) shall maintain records ade- quate to record the progress of Part D of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit, and to disclose the use thereof in Part D of the Project; (b) shall enable the Association's ac- credited representatives to examine any relevant records and docu- ments pertaining to Part D of the Project; and (c) shall furnish to the Association all such information as the Association shall reasonably request concerning Part D of the Project, the expendi- tures of the proceeds of the Credit and the goods and services financed out of such proceeds. Section 3.04. In consultation with the Association and not later than July 1, 1977, or such other date as may be agreed be- tween the Borrower and the Association, the Borrower shall take all measures necessary to cause the adoption and the enforcement thereafter of a plumbing code for the Sana'a area. SI -8- Section 3.05. In consultation with the Association, and not later than March 31, 1978, or such other date as may be agreed be- tween the Borrower and the Association, the Borrower shall take all measures necessary to ensure the prompt and satisfactory im- plementation of a master urban development plan for the Sana'a area after such date. Section 3.06. Not later than December 31, 1978, or such other date as may be agreed between the Borrower and the Association, the Borrower shall take all measures necessary to ensure that all dwellings in Sana'a which are connected to the water supply system shall also be connected to the fronting sewers. Section 3.07. Based on the results of the study referred to in Section 2.03 of the Project Agreement, and not later than July 1, 1978, or such other date as may be agreed between the Borrower and the Association, the Borrower shall adopt a program, satisfactory to the Association, for the construction of public conveniences and the provision of other sanitation measures for the population of Sana'a not served with sewers under the Project, and shall there- after implement such program with due diligence and efficiency. S -9- ARTICLE IV Other Covenants Section 4.01. The Borrower shall maintain records adequate to reflect in accordance with consistently maintained appropriate ac- counting practices the operations, resources and expenditures, in respect of Part D of the Project, of its Central Planning Organi- zation. - 10 - ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) The Authority shall have failed to perform any covenant, agreement or obligation of the Authority under the Project Agree- ment; (b) An extraordinary situation shall have arisen which shall make it improbable that the Authority will be able to perform its obligations under the Project Agreement; (c) Law No. 13-73 of the Borrower shall have been amended, suspended, abrogated, repealed or waived in such a way as to ma- terially and adversely affect the ability of the Authority to carry out the covenants, agreements and obligations set forth in the Project Agreement; (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Authority or for the suspension of its operations; (e) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of the Arab Fund Loan or of any - 11 - other financing other than the Credit made available to the Borrower for the financing of Parts A and B (2) of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of any agreement providing therefor; or (B) The Arab Fund Loan or any other financing shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that: (A) such suspension, cancel- lation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreements; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consis- tent with the obligations of the Borrower under this Agreement and of the Authority under the Project Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of 60 S - 12 - days after notice thereof shall have been given by the Association to the Borrower and the Authority; and (b) any event specified in paragraphs (c), (d) and (e) (i) (B) of Section 5.01 of this Agreement shall occur. S S - 13 - ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agree- ment within the meaning of Section 12.01 (b) of the General Condi- tions: (a) the execution of the Project Agreement on behalf of the Authority has been duly authorized or ratified by all necessary governmental and corporate action; (b) the execution of the Subsidiary Financing Agreement on behalf of the Borrower and the Authority, respectively, has been duly authorized or ratified by all necessary governmental and cor- porate action; (c) the Arab Fund Loan Agreement has been duly signed on behalf of the Borrower and the Arab Fund, respectively; and (d) the agreement or agreements providing for the finan- cial assistance referred to in Recital (C) of this Agreement have been duly signed on behalf of the parties thereto. Section 6.02. The following are specified as additional mat- ters, within the meaning of Section 12.02 (b) of the General Con- ditions, to be included in the opinion or opinions to be furnished to the Association: S - 114- (a) That the Project Agreement has been duly authorized or ratified by the Authority, and is legally binding upon the Authority in accordance with its terms; and (b) That the Subsidiary Financing Agreement has been duly authorized or ratified by the Borrower and the Authority, and is legally binding upon the Borrower and the Authority in accordance with its terms. Section 6.03. The date May 16, 1977, is hereby specified for the purposes of Section 12.04 of the General Conditions. SI - 15 - ARTTCLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of Development of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Development Sana'a .Lemen Arab Republic Cable address: Telex: CENPLAI 266 CENPLAN Sana'a SANA'A Yemen Arab Republic For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: TNDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (wUT) - 16 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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. YEMEN ARAB REPUBLIC By /s/ Yahya M. Al-Mutawakel Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Martijn J.W.M. Paijmans Acting Regional Vice President Europe, Middle East and North Africa -17 - 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 amount of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Equipment and ma- 3,500,000 100% of foreign terials for Part expenditures, B (1), (3) and 100% of local (4) of the Proj- expenditures (ex- ect factory) and 85% of local expen- ditures for lo- cally procured imported equip- ment and materi- als (2) Civil works for 3,900,000 60% Part B (3) and (4) of the Project (3) Consultants' services 400,ooo 100% of foreign for construction su- expenditures pervision under Part B of the Project and for Part C (2) of the Project S - 18 - Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (4) Technical assistance W00,000 100% of foreign and related equipment expenditures and and materials for Part 85% of local ex- D of the Project penditures for locally procured imported equip- ment and mate- rials (5) Unallocated 1,800,000 TOTAL 10,000,000 S -19 - 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Association that no proceeds of the Credit shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in re- spect of any item to be financed out of the proceeds of the Credit decreases or increases, the Association may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Association. 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Association has reasonably estimated that the amount - 20 - of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Cate- gory, the Association myj, by notice to the Borrower: (i) reallo- cate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit which are then allocated to an- other Category and which in the opinion of the Association are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that fur- ther withdrawals under such Category may continue until all expen- ditures thereunder shall have been made. 6. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expendi- tures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, can- cel such amount of the Credit as, in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 21 - SCHEDULE 2 Description of the Project The Project is designed to assist (a) the Borrower in strength- ening the local construction industry in the Borrower's territories, and (b) the Authority in improving the water supply and sewerage system in Sana'a, in strengthening its management and staff and in carrying out feasibility studies of water supply and sewerage for the cities of Ibb and Dhamar. The Project consists of the following Parts: Part A: Water Supply (1) Construction of, and the purchase and installation of equipment for, about 10 wells. (2) Purchase and installation of well header and transmission pipeline to convey water to the headworks. (3) Purchase and installation of booster pumps at the head- works to increase the pumping capacity by about 150 liters per second. (4) Construction of a reservoir with a capacity of about 10,000 cubic meters. (5) Purchase and laying of distribution pipes. (6) Purchase and installation of about 18,000 house connec- tions and about 50 public taps. - 22 - (7) Purchase and installation of laboratory equipment. Part B: Sewerage (1) Purchase of sever pipes, materials for about 8,700 house connections and sever maintenance equipment. (2) Laying of severs and sewage collectors and installation of house connections in the most densely populated areas of Sana'a. (3) Construction of stabilization ponds with a capacity of about 65,600 cubic meters per day and an average deten- tion time of about 25 days. (4) Construction of, and the purchase and installation of equipment for, raw sewage and final effluent pumping stations. Part C: Studies, Management Support and Training (1) Strengthening of the Authority's management and staff through appropriate support and training. (2) Carrying out of feasibility studies of water supply and sewerage for the cities of Ibb and. Dhamar. - 23 - Part D: Local Construction Industry (1) Preparation of forecasts of required construction indus- try needs and related manpower and training requirements and the training of the Borrower's administration offi- cials in the preparation of tender documents, bidding procedures and contract supervision. (2) Provision of a training course for local contractors. (3) Provision of overseas training for graduate Yemeni civil engineers. (4) Provision of iscellaneous equipment and material for Part D (1) and (2). The Project is expected to be completed by December 31, 1981.