Page 1 CONFORMED COPY CREDIT NUMBER 2783 BD Development Credit Agreement (Coastal Embankment Rehabilitation Project) between PEOPLE'S REPUBLIC OF BANGLADESH and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated November 21, 1995 CREDIT NUMBER 2783 BD DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated November 21, 1995, between PEOPLE'S REPUBLIC OF BANGLADESH (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; WHEREAS the Borrower intends to obtain from the European Community (EC) a grant (the EC Grant) in an amount equivalent to 15,000,000 European Currency Units to assist in financing part of the Project, as well as a program of poverty alleviation activities complementary to the objectives of the Project, on the terms and conditions set forth in an agreement (the EC Financing Memorandum) to be entered into between the Borrower and the EC; 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 Page 2 Agreements" of the Association, dated January 1, 1985, with the modifications set forth below (the General Conditions) constitute an integral part of this Agreement: (a) The last sentence of Section 3.02 is deleted; and (b) The second sentence of Section 5.01 is modified to read as follows: "Except as the Borrower and the Association shall otherwise agree, no withdrawals shall be made: (a) on account of expenditures in the territories of any country which is not a member of the Bank or for goods produced in, or services supplied from, such territories; or (b) for the purpose of any payment to persons or entities, or for any import of goods, if such payment or import, to the knowledge of the Association, is prohibited by a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations." Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "BWDB" means the Bangladesh Water Development Board established and operating pursuant to the Bangladesh Water and Power Development Board Order, 1972 (P.O. No. 59 of 1972) as amended; (b) "Bangladesh Bank" means the Central Bank of Bangladesh established under Bangladesh Bank Order, 1972 (P.O. No. 127 of 1972) as amended; (c) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (d) "Taka" means the currency of the Borrower; (e) "Project Area" means the polders listed in the Attachment to Schedule 2 to this Agreement; (f) "FD" means the Forestry Department of the Borrower; (g) "Union" means the smallest administrative unit of local government and "Union Parishad" means the elected council governing the Union; (h) "NGO" means a Non-Governmental Organization; (i) "O&M" means operation and maintenance; (j) "PIU" and "FPIU" mean the Project Implementation Unit and Forestry Project Implementation Unit referred to in Sections 3.04 (a) and 3.04 (b), respectively, of this Agreement; (k) "PCC" means the Project Coordinating Committee established pursuant to paragraph 3 of Schedule 4 to this Agreement; (l) "DPCC" means any District Project Coordinating Committee established pursuant to paragraph 4 of Schedule 4 to this Agreement; (m) "Affected Persons" means persons who on account of the execution of the Project had or would have their: (a) standard of living adversely affected; or (b) right, title or interest in any house, land (including premises, agricultural and grazing land) or any other fixed or movable asset acquired or possessed, temporarily or permanently; or (c) business, occupation, work or place of residence or habitat adversely affected, and "Affected Person" means individually all those who qualify as "Affected Persons." (n) "Resettlement Action Plan" means the plan dated August 15, 1995, agreed upon between the Borrower and the Association for the resettlement and rehabilitation of the Affected Persons. (o) "Thana" means an administrative unit in a District; and (p) "TPCC" means a Thana Project Coordinating Committee established pursuant to paragraph 5 of Schedule 4 to this Agreement. ARTICLE II Page 3 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 equivalent to thirty-four million one hundred thousand Special Drawing Rights (SDR 34,100,000). 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 Bangladesh Bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section 2.03. The Closing Date shall be December 31, 2002 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 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 January 1 and July 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 January 1 and July 1 commencing January 1, 2006 and ending July 1, 2035. Each installment to and including the installment payable on July 1, 2015 shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. (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. Page 4 (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 engineering, forestry and resettlement 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. Without limitation upon the provisions of Section 3.01 (a) of this Agreement, the Borrower shall include in its budget annual allocations to be available for operation and maintenance of the Project facilities in accordance with a timetable acceptable to the Association. Section 3.03. (a) Except as the Association shall otherwise agree, procurement of the goods and works 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. (b) In order to assist BWDB and FD in carrying out the Project, the Borrower shall, (i) prior to the signature of any civil works contracts to be financed under the Credit, arrange for the services of consultants whose qualifications and terms of reference shall be satisfactory to the Association, and (ii) not later than February 15, 1996 employ NGOs whose qualifications and terms of reference shall be satisfactory to the Association to operate in each polder included in the Project with the responsibilities described in paragraph 10 of Schedule 4 to this Agreement. Section 3.04. The Borrower shall: (a) maintain until completion of the Project, a Project Implementation Unit (PIU) within BWDB, located in Chittagong, with terms of reference satisfactory to the Association, which shall be responsible for the overall implementation of the Project, other than Parts B.2 and B.3; (b) maintain until completion of the Project, a Forestry Project Implementation Unit (FPIU), located in Chittagong, with terms of reference satisfactory to the Association, which shall be responsible for implementation of Parts B.2 and B.3 of the Project; and (c) cause to be maintained until completion of the Project, an agreement, satisfactory to the Association, between BWDB and FD, setting forth specific responsibilities for project implementation of the two agencies and arrangements for coordination between them. Section 3.05. The Borrower shall carry out or cause to be carried out resettlement and rehabilitation of the Affected Persons in accordance with the provisions of the Resettlement Action Plan. Section 3.06. The Borrower shall: (a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory to the Association, the carrying out of the Project and the achievement of the objectives thereof; (b) prepare, under terms of reference satisfactory to the Association, and Page 5 furnish to the Association, on or about September 30, 1997 and September 30, 1999 reports integrating the results of the monitoring and evaluation activities performed pursuant to paragraph (a) of this Section, on the progress achieved in the carrying out of the Project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date; and (c) review with the Association, by November 30, 1997 and November 30, 1999 or such later dates as the Association shall request, the reports referred to in paragraph (b) of this Section, and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Association's views on the matter. Section 3.07. For the purposes of Section 9.07 of the General Conditions and without limitation thereto, the Borrower shall: (a) prepare, on the basis of guidelines acceptable to the Association, and furnish to the Association not later than six (6) months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, a plan for the future operation and maintenance of investments financed under the Project; and (b) afford the Association a reasonable opportunity to exchange views with the Borrower on said plan. 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 six 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 Page 6 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 Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of BWDB or for the suspension of its operations. (b) (i) Subject to subparagraph (ii) of this paragraph, the right of the Borrower to withdraw the proceeds of the EC Grant made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that: (A) such suspension, cancellation or termination is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional events are specified: (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur; and (b) the event specified in paragraph (b) (i) of Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (b) (ii) of that Section. ARTICLE VI Effective Date; Termination Section 6.01. 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) that all conditions for the effectiveness of the EC Grant, other than the effectiveness of this Agreement, have been fulfilled; and (b) that the Project Proforma for the carrying out of the Project has been approved by the Borrower. Section 6.02. 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 VII Representatives of the Borrower; Addresses Section 7.01. The Secretary, the Additional Secretary, Joint Secretary, Deputy Secretary, Senior Assistant Secretary or Assistant Secretary of the Economic Relations Division of the Ministry of Finance 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: Economic Relations Division Ministry of Finance Government of the Page 7 People's Republic of Bangladesh Dhaka, Bangladesh Cable address: Telex: BAHIRSAMPAD 642226 SETU BJ Dhaka 672797 SETU BJ For the Association: International Development Association 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) 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. PEOPLE'S REPUBLIC OF BANGLADESH By /s/ K. M. Ejazul Huq Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Mieko Nishimizu Acting Regional Vice President South Asia 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 26,030,000 90% (other than canal excavation) and construction materials (2) (a) Equipment and 260,000 100% of foreign vehicles (other expenditures, than motorcycles 100% of local and bicycles for expenditures field staff) (ex-factory cost) and 70% of local expenditures for other items pro- Page 8 cured locally (b) Motorcycles and 40,000 100% of foreign bicycles for expenditures, field staff 100% of local expenditures (ex-factory cost) and 70% of local expenditures for other items pro- cured locally (3) BWDB engineering 1,870,000 100% and administration costs (4) Surveys and 230,000 90% studies under Parts F.1 and F.2 of the Project (5) Operation 2,250,000 85% through FY 1999, and main- 65% in FY 2000 and tenance costs FY 2001, and 45% thereafter (6) Unallocated 3,420,000 TOTAL 34,100,000 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; (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; (c) the term "BWDB engineering and administration costs" means the costs incurred by BWDB after the date of this agreement and which are attributable to the implementation of the works to be carried out under Part A of the Project, calculated as a percentage of the costs of such works on a basis acceptable to the Association; and (d) the term "operation and maintenance costs" means the costs incurred after the date of this agreement on account of salaries, wages and contractual services for operation and maintenance of embankments in the polders included in the Project Area and associated drainage structures and channels, including work carried out by Force Account. 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. 4. The Association may require withdrawals from the Credit Account to be made on the basis of statements of expenditure for expenditures (a) for civil works contracts costing less than the equivalent of US$l50,000 each and contracts for vehicles and equipment costing less than the equivalent of $100,000 each, and (b) under categories (3), (4) and (5), under such terms and conditions as the Association shall specify by notice to the Borrower. 5. All withdrawal applications under Category (1) of this Schedule shall include a certification by the consultants retained under the Project of the quantity and quality of the work performed. SCHEDULE 2 Description of the Project The objectives of the Project are to provide improved cyclone protection and Page 9 increase agricultural production in the Project Area, through the carrying out of rehabilitation and improvement works on thirteen sea-facing embankments and of complementary programs to improve the functioning of the polders where such works are being carried out and eight additional polders for which sea-facing embankment repairs are taking place under other financing arrangements. 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: Civil Works Carrying out of a program of civil works during the period ending December 31, 2000, consisting of the following: 1. Major rehabilitation and improvement works on sea-facing embankments in the polders listed in paragraph 1 of the Attachment hereto, including major resectioning of about 80 km of embankment, retirement of about 75 km of embankment, replacement or construction of about 25 drainage structures in areas of major embankment repair, and repair or construction of about 7 km of protection works; and 2. Minor rehabilitation and improvement works in the polders listed in paragraphs 1 and 2 of the Attachment hereto, including minor embankment repairs (mainly on the non-coastal sections), minor repairs of existing revetments, re-excavation of drainage canals and repairs, replacement or addition of regulators/surface sluices in areas not covered in the program of major coastal embankment repairs under Part A.1 of the Project. Part B: Afforestation 1. Planting and maintenance of trees and other vegetation on embankment slopes (about 2,000 hectares) and provision of fertilizers and pesticides for the first three years of afforestation. 2. Planting and maintenance of trees on about 4,700 ha of embankment foreshore. 3. Establishment and operation of nurseries to provide seedlings for the embankment and foreshore afforestation programs described in Parts B.1 and B.2 above. Part C: Operation and Maintenance Designing and implementation of improved operation and maintenance systems for the embankments and associated drainage gates and canals in the Project Area. Part D: Resettlement Carrying out of a program of resettlement of Project Affected Persons. Part E: Environmental Measures Carrying out of environmental monitoring of the Project and provision of mitigating measures, if needed. Part F: Surveys, Investigations, Studies and Training Carrying out of: 1. surveys, during the period ending December 31, 2000, for minor civil works construction; 2. studies, during the period ending December 31, 2000, to investigate the possibility of cost-effective town protection works for Sandwip; 3. activities to coordinate agricultural development programs being implemented in the Project Area by the Borrower and NGOs with the progress of physical infrastructure improvement under the Project; and 4. training of staff of implementing agencies, participating NGOs and community participants in maintenance of embankments, afforestation development and environmental management. * * * Page 10 The Project is expected to be completed by June 30, 2002. Attachment A to Schedule 2 Project Areas 1. The following are the names and numbers of polders where all parts of the Project shall be carried out: a. Sharankhola (P 35/1) b. Pathergatha (P 40/2) c. Kuakata (P 48) d. Ramgati (P 59/2) e. Sudharam (P 59/3B) f. Companiganj (P 59/3C) g. Anowara (P 63/1A) h. Kurushkul (P 66/1) i. Teknaf (P 68) j. Matherbari (P 70) k. Sandwip (P 72) l. Hatiya (P 73/1A & 1B) 2. The following are the names and numbers of polders where all Parts of the Project other than Part A.1 shall be carried out: a. Sonagazi (P 61/1) b. Patenga (P 62) c. Chakoria (P 64/2B) d. Moheskhali (P 69) e. Kutubdia (P 71) 3. The following are the names and numbers of polders for which repairs of the embankments have been or are being financed under other financing arrangements, and where all parts of the Project other than Part A shall be carried out: a. Sitakundu (P 61/1) b. Bashkhali (P 64/1A) c. Chanua (P 64/1C) d. Cox's Bazaar (P 66/3) SCHEDULE 3 Procurement Procurement of Goods and Works Part A: General 1. Goods and works shall be procured in accordance with the provisions of Section I of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in January 1995 (the Guidelines) and the following provisions of this Schedule, as applicable. Part B: International Competitive Bidding 1. Except as otherwise provided in Part C of this Schedule, works shall be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto. 2. The following provisions shall apply to works to be procured under contracts awarded in accordance with the provisions of paragraph 1 of this Part B. (a) Prequalification Bidders shall be prequalified in accordance with the provisions of paragraphs 2.9 and 2.10 of the Guidelines. (b) Preference for domestic contractors The provisions of paragraphs 2.54 and 2.55 of the Guidelines and Appendix 2 thereto shall apply to works to be carried out by domestic contractors. Page 11 Part C: Other Procurement Procedures 1. National Competitive Bidding Works under Part A.2 of the Project (except for the structures on the sea-facing embankments in Chakoria polder) and vehicles and equipment (except those provided for in paragraph 2 of this Part C) may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. Such works shall be offered only to domestic contractors of Class A registration or foreign contractors meeting equivalent standards. Earth works shall be grouped to provide a minimum contract size of $150,000 equivalent. Bidders on contracts for structures shall be prequalified. 2. International or National Shopping Vehicles and equipment estimated to cost $50,000 equivalent or less per contract and $200,000 equivalent or less in the aggregate, may be procured under contracts awarded on the basis of international or national shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. 3. Force Account All operational works and emergency works following storms or floods under Part C of the Project and surveys and studies under Parts F.1 and F.2 of the Project, which meet the requirements of paragraph 3.8 of the Guidelines, and, in the case of the emergency works, costing $25,000 equivalent or less per package and $500,000 equivalent or less in the aggregate, may be carried out by force account in accordance with the provisions of said paragraph of the Guidelines. 4. Community Participation (a) Works required for routine maintenance under Part C of the Project may be carried out through community participation in accordance with procedures acceptable to the Association. (b) Works required for periodic maintenance and emergency repairs under Part C of the Project other than those provided for in paragraph 3 of this Part C may be carried out through community participation or under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. Part D: Review by the Association of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to prequalify for bidding or to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Association for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods and works shall be undertaken in accordance with such procurement plan as shall have been approved by the Association, and with the provisions of said paragraph 1. 2. Prior Review With respect to each contract for works estimated to cost the equivalent of $150,000 or more and each contract for vehicles and equipment estimated to cost the equivalent of $100,000 or more, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. SCHEDULE 4 Implementation Program A: Project Management 1. Project implementation Unit. Page 12 (a) The PIU shall, within its field of competence, be responsible, inter alia, for: (i) project planning and coordination in cooperation with BWDB's field divisions and FD; (ii) coordinating the activities of the main project consultants and contracting with, and coordinating, the work of the resettlement consultants and the NGOs assisting in the carrying out of embankment maintenance and afforestation; (iii) overseeing procurement under Part A.2 of the Project; (iv) carrying out procurement needed under Part A.1 of the Project; (v) assisting in the preparation and implementation of O&M training programs; (vi) coordinating the preparation of proposals for and the implementation by NGOs of the approved activities under Part H of the Project; (vii) monitoring project environmental and social impact and organizing appropriate mitigating measures; (viii) overseeing the preparation of project accounts and ensuring timely submission of withdrawal applications; and (ix) preparing and submitting project progress reports on a timely basis. (b) Within the PIU, there shall be a Project Resettlement Unit, headed by a Deputy Director, Resettlement, responsible for the carrying out of Part D of the Project. The PIU, as a whole, shall be headed by a Project Director, and include, in addition to the Deputy Director, Resettlement, a Deputy Project Director, Implementation and a Deputy Project Director, O&M, and consultant staff. 2. Forestry Project Implementation Unit. The FPIU shall be headed by a full-time Project Director, Afforestation, of a rank of Divisional Forest Officer or higher, who shall coordinate implementation of the FD component of the Project (as described below), and liaise with PIU to ensure coordination of these activities with portions of the Project undertaken by BWDB. The FPIU shall, within its field of competence, be responsible, inter alia, for: (a) planning and coordinating, in cooperation with the PIU and the FD field units: (i) the foreshore afforestation program; (ii) the establishment and operation of nurseries for producing mangrove seedlings for the foreshore afforestation program; (iii) the provision of technical supervision and funding support for the establishment of NGO-operated nurseries for producing non-mangrove seedlings for the embankment and foreshore afforestation programs; and (iv) the provision of technical support to BWDB for the embankment afforestation program (including training and support to the NGOs employed by BWDB and periodic quality control reporting); (b) contracting with and coordinating the activities of the NGOs employed for organizing foreshore afforestation and operation of nurseries; (c) procuring FD vehicles; (d) overseeing project accounts and ensuring timely submission of withdrawal requests; and (e) preparing and submitting to the PIU periodic project progress reports. 3. Project Coordinating Committee. (a) The Borrower shall, not later than November 15, 1995, establish and thereafter maintain until completion of the Project, a Project Coordinating Committee, with responsibility for reviewing progress of the Project and for issuing necessary policy decisions and directives. The PCC shall meet at least once every three months. (b) The PCC shall comprise, from the PIU, the Project Director, as chairman, the Deputy Project Directors, Implementation and O&M and the Deputy Director, Resettlement, as members; from FD, the Project Director, Afforestation; from MOA, the Director, Field Services Division; and a representative selected by the participating NGOs, all also as members, and a representative of the project consultants as an observer. 4. District Project Coordinating Committees. (a) The Borrower shall, not later than November 15, 1995, establish in each district in the Project Area, and thereafter maintain until completion of the Project, a District Project Coordinating Committee, to review progress of the project and ensure coordination at the district level. Each DPCC shall meet at least once every three months. (b) Each DPCC shall comprise the Deputy Commissioner of the district, as chairman, and two BWDB Executive Engineers from the district (one each for Page 13 implementation and O&M), the District Forestry Officer, a representative of the District Agricultural Extension Services, and a representative selected by the participating NGOs in the district, all as members, and a representative of the project consultants as an observer. 5. Thana Project Coordinating Committees. (a) The Borrower shall, not later than November 15, 1995, establish for each Thana in the Project Area, and thereafter maintain until completion of the Project, a Thana Project Coordinating Committee, with responsibility for: (i) disseminating information about project activities; (ii) soliciting comments and suggestions from the project beneficiaries; (iii) assisting in land acquisition and resettlement; (iv) promoting community participation in the afforestation and O&M activities; (v) supervising the adequacy of the embankment, afforestation and O&M activities; and (vi) mobilizing community support for preventing encroachment on the embankment. Each TPPC shall meet quarterly or more frequently as needed. (b) Each TPPC shall comprise the Thana Nirbahi Officer, as chairman, the Union Parishad Chairmen for all Unions in the Thana included in the Project Area, the BWDB Sub-divisional Engineer, the FD Range Officer, a representative of the Agricultural Extension Services and a representative selected by the participating NGOs in the Thana, all as members, and a representative of the project consultants as an observer. B. Community Participation in Afforestation and Routine Maintenance 6. BWDB shall, with a view to ensuring full community participation in afforestation and routine maintenance under the Project, enter into long-term lease agreements, satisfactory to the Association, under which individual families or groups of families in the Project Areas shall be provided homestead plots in the inland toe of the relevant embankment and the right to the produce from an area of the embankment, in return for carrying out routine maintenance of such area and planting and maintaining in such area suitable tree and grass species to strengthen the embankment. Each such lease agreement shall, inter alia, provide for: (a) payment by BWDB of cash to the settlers on a declining scale linked to the expected growth of their income from the produce of the embankment and the homestead; (b) provision by BWDB to the settlers of seedlings, fertilizer and pesticides needed for the first three years of planting and maintaining the embankment; and (c) appropriate sanctions to be applied to those settlers who fail to adequately carry out their embankment maintenance and afforestation obligations. 7. BWDB shall also (i) enter into agreements with community groups for the routine maintenance of the embankment sections in the Project Areas not being rehabilitated under the Project; (ii) enter into agreements with community groups or contractors for annual or biannual periodic maintenance of the embankment earthworks; and (iii) gradually transfer controlling activities at regulators/sluices from BWDB staff to the communities themselves. 8. FD shall enter into agreements, satisfactory to the Association, with community groups for carrying out foreshore afforestation under the Project. Such agreements shall provide, inter alia, for payment for the initial planting of the trees,and in areas where the foreshore is owned by the Borrower, for the community groups to be given the right to an agreed share of the income from the foreshore trees, in return for guarding the trees against poachers and replanting harvested trees using seedlings provided by FD, with the remaining income going to the Union Parishads for financing local investments. 9. FD shall enter into agreements satisfactory to the Association with landowners in areas where the foreshore land is privately owned. Such agreements shall provide, inter alia, (i) for trees to be planted on the landowner's land by FD, without cost to the landowners, in return for the landowners agreeing to maintain the areas under trees, including replanting harvested trees; and (ii) in foreshore areas not too saline for crop production, for the landowners to be paid every year agreed amounts based on the estimated value of foregone crop productions until the income from the produce of the trees becomes available. 10. The contracts for the employment of NGOs for the purposes of the Project pursuant to the provisions of Section 3.03(b) of this Agreement shall provide for the Page 14 NGOs: (a) in the case of NGOs employed by BWDB, to (i) enlist community support for project activities and for preventing encroachment on the embankments; (ii) organize, train and supervise embankment settlers in relation to routine maintenance and embankment afforestation activities, including certifying the quantity and quality of such activities to BWDB, recommending appropriate penalties in cases of inadequate performance, supplying fertilizer and pesticides to settlers for the initial 3 years after settlement, and monitoring results; and (iii) organize, train and supervise community groups for purposes of contracting to carry out routine and periodic maintenance activities; and (b) in the case of NGOs employed by FD, to (i) enlist community support for project activities and for preventing encroachment on the foreshore; (ii) organize and train community groups for foreshore afforestation activities, monitor their performance and certify its quantity and quality to FD; and (iii) establish and operate nurseries for the production of non-mangrove seedlings required for embankment and foreshore afforestation. BWDB and FD shall make every effort to employ the same NGO for these purposes in a given polder. C. Carrying Out of Works 11. Minor works to be carried out under Part A.2 of the Project and to be financed out of the proceeds of the Credit shall be selected based upon feasibility studies prepared or updated by the project consultants and if they satisfy the following criteria: (a) that the feasibility study for a given work has included an examination of the proposed works from a technical, environmental and economic perspective and has confirmed that the proposed works are technically sound and have an economic rate of return on investment of at least 15% (treating the major investment in the polder as a sunk cost) calculated in a manner satisfactory to the Association; and (b) that the proposed works have been planned with the participation of the residents of the area where the works are to be carried out. If the originally proposed works in a polder do not meet criteria (a) above, the list of works should be reduced and reanalyzed, while ensuring that the works include the minimum minor repairs required to ensure that the polder would be in operational condition after completion of the repairs on the sea-facing embankments. D. Vehicles and Equipment 12. The Borrower shall procure, or cause to be procured, all vehicles and equipment under the Project by December 31, 2000; provided that replacement motorcycles and bicycles for field staff supervising Parts B and C of the Project may be procured after that date. E. Progress Reports 13. BWDB shall, within a month of each reporting period, furnish to the Association a quarterly progress report on the Project, in form and substance satisfactory to the Association and incorporating suitable inputs received by BWDB from FD concerning the latter's project activities. SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (5) 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 Grant activities under Part B of the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligible Category in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $4,000,000 to be withdrawn from the Credit Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless the Page 15 Association shall otherwise agree, the Authorized Allocation shall be limited to an amount equivalent to $2,000,000 until the aggregate amount of withdrawals from the Credit Account plus the total amount of all outstanding special commitments entered into by the Association pursuant to Section 5.02 of the General Conditions shall be equal to or exceed the equivalent of SDR 8,000,000. 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 into the Special Account of an amount or amounts 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 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 Category, 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 Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; (b) if the Borrower shall have failed to furnish to the Association, within the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit reports required to be furnished to the Association pursuant to said Section in respect of the audit of the records and accounts for the Special Account; (c) if, at any time, the Association shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Credit Account pursuant to the provisions of Section 6.02 of the General Conditions; or (d) 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. Page 16 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 depositby 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 with the relevant provisions of this Agreement, including the General Conditions.