Page 1 CONFORMED COPY LOAN NUMBER 3139 MA Project Agreement (Rubber Industry Smallholders Development Authority Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and RUBBER INDUSTRY SMALLHOLDERS DEVELOPMENT AUTHORITY Dated January 11, 1990 LOAN NUMBER 3139 MA PROJECT AGREEMENT AGREEMENT, dated January 11, 1990, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and RUBBER INDUSTRY SMALLHOLDERS DEVELOPMENT AUTHORITY (RISDA). WHEREAS (A) by the Loan Agreement of even date herewith between Malaysia (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to seventy-one million dollars ($71,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that RISDA agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and RISDA, part of the proceeds of the loan provided for under the Loan Agreement will be made available to RISDA on the terms and conditions set forth in the said Subsidiary Loan Agreement; and WHEREAS RISDA, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: Page 2 ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) RISDA declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and agricultural practices, and shall provide, or cause to be provided, 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 Bank and RISDA shall otherwise agree, RISDA shall carry out the Project in accordance with the Implementation Program set forth in Schedule 2 to this Agreement. Section 2.02. Except as the Bank shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.03. RISDA shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9,08 and 9.09 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement. Section 2.04. RISDA shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, RISDA shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.05. (a) RISDA shall, at the request of the Bank, exchange views with the Bank with regard to progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) RISDA shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of Loan, or the performance by RISDA of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of RISDA Section 3.01. RISDA shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering, agricultural and environmental practices under the supervision of Page 3 qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. RISDA shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and agricultural practices. Section 3.03. RISDA shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) RISDA shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) RISDA shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than nine months after the end of each such year, (A) certified copies of its financial statements for such year as so audited, and (B) the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested; (iii) furnish to the Bank such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request; and (iv) furnish to the Bank by December 31, 1990, the statements and reports referred to in Section 4.01 (b) (ii) hereinabove, covering the period up to the end of the Borrower's fiscal year 1989. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of RISDA thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly Page 4 notify RISDA thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between 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 radiogram 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 Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For RISDA: P.O. BOX 11067 Jalan Ampang 50734 Kuala Lumpur Malaysia Cable address: Telex: RISKUL MA 31211 Kuala Lumpur Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of RISDA may be taken or executed by its Director General or such other person or persons as the Director General shall designate in writing, and RISDA shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. 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 BANK FOR Page 5 RECONSTRUCTION AND DEVELOPMENT By /s/ Attila Karaosmanoglu Regional Vice President Asia RUBBER INDUSTRY SMALLHOLDERS DEVELOPMENT AUTHORITY By /s/ Albert S. Talalla Authorized Representative SCHEDULE 1 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding 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). Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in Malaysia 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 1. Works under Parts A and B of the Project may be carried out by smallholders in accordance with procedures satisfactory to the Bank. 2. Contracts for works under Parts D and E of the Project may be awarded on the basis of local competitive bidding procedures satisfactory to the Bank. 3. The following may be awarded in accordance with procedures satisfactory to the Bank on the basis of bids from at least five contractors eligible under the Guidelines: (a) Contracts for works under Part D of the Project up to an aggregate amount not exceeding the equivalent of $5,000,000. (b) Contracts for works under Part E of the Project up to an aggregate amount not exceeding the equivalent of $2,000,000. 4. Contracts for goods under Part C of the Project up to an aggregate amount not exceeding the equivalent of $4,000,000, may be awarded on the basis of local competitive bidding procedures satisfactory to the Bank. 5. Miscellaneous items grouped in packages estimated to cost less than the equivalent of $20,000 per package and Page 6 up to an aggregate amount not exceeding the equivalent of $1,000,000, may be procured in accordance with the Borrower's procurement procedures satisfactory to the Bank. 6. Proprietary chemicals may be procured directly from qualified suppliers in accordance with procedures satisfactory to the Bank. 7. Planting materials may be provided by nurseries in accordance with procedures satisfactory to the Bank. Part D: Review by the Bank of Procurement Decisions Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract awarded in accordance with procedures described in Part A hereof, and with respect to each contract estimated to cost the equivalent of $2,000,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. (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. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which the Bank has authorized withdrawals from the Loan Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (a) (ii) of the Loan Agreement. Section II: Employment of Consultants In order to assist RISDA in carrying out the Project, RISDA shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank 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 2 Implementation Program 1. RISDA shall, in accordance with a program satisfactory to the Bank, improve its institutional efficiency. 2. RISDA shall by September 30, 1990 complete, in accordance with terms of reference satisfactory to the Bank, the studies under Part I of the Project. 3. Crop choice continues to be the prerogative of the replanters, except in cases where such choices are agroclimatically unsuitable. RISDA shall, therefore, refrain from administrative intervention to enforce specific crop ratios in replanting. 4. RISDA shall: (a) establish and maintain a record of trainees by gender; and Page 7 (b) begin implementation of a program satisfactory to the Bank: (i) to increase the number of women trainees at RISDA training institutes; and (ii) to expand facilities for in-situ training of women in villages. 5. RISDA shall, with respect to Part H of the Project, submit to the Bank for approval, all proposals for overseas training. 6. RISDA shall, with respect to Part E of the Project: (a) upgrade specifications for agricultural access roads to those for agricultural roads; (b) establish a separate account for infrastructure maintenance; and (c) provide adequate and timely funds for infrastructure maintenance.