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CONFORMED COPY
CREDIT NUMBER 3124 BD
Development Credit Agreement
(Arsenic Mitigation - Water Supply Project)
between
PEOPLE’S REPUBLIC OF BANGLADESH
and
INTERNATIONAL DEVELOPMENT ASSOCIATION
Dated September 21, 1998
CREDIT NUMBER 3124 BD 
DEVELOPMENT CREDIT AGREEMENT 
AGREEMENT, dated September 21, 1998, between PEOPLE’S REPUBLIC OF BANGLADESH 
(the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). 
WHEREAS (A) 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;   
(B)
the Borrower intends to obtain from the Government of Switzerland acting 
through the Swiss Agency for Development and Cooperation (SDC) a grant in an amount 
equivalent to three million dollars ($3,000,000) (the Swiss Grant) to assist in 
financing part of the Project on terms and conditions set forth in an agreement  (the 
Swiss Grant Agreement) to be entered into between the Borrower and SDC; and
(C)
Switzerland and the Association intend to enter into an agreement (the 
Administration Agreement) making arrangements for the Association to process 
applications for withdrawal of the proceeds of the financing to be provided by 
Switzerland under the Swiss Grant Agreement and regulating certain other matters of 
common interest in connection with such financing. 
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, (as amended through December 2, 
1997), with the modifications set forth below (the General Conditions) constitute an 
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integral part of this Agreement.
(a)
A new paragraph (12) is added to Section 2.01 to read as set forth below, 
and the existing paragraphs (12) through (14) of said Section are accordingly 
renumbered as paragraphs (13) through (15):
"12. ‘Participating Country’ means any country that the Association 
determines meets the requirements set forth in Section 10 of Resolution No. 
183 of the Board of Governors of the Association, adopted on June 26, 1996; 
and ‘Participating Countries’ means, collectively, all such countries.
(b)
The second sentence of Section 5.01 is modified to read:
"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 Participating Country 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 and in the Preamble to this Agreement have the respective 
meanings therein set forth and the following additional terms have the following 
meanings: 
(a)
"LGD" means the Local Government Division within the Ministry of Local 
Government, Rural Development and Cooperatives of the Borrower; 
(b)
"DPHE" means the Department of Public Health Engineering under LGD; 
(c)
"PMU" means the Project Management Unit to be established and maintained 
pursuant to paragraph 3 of Schedule 4 to this Agreement; 
(d)
"TK" or "Taka" means the currency of the Borrower; 
(e)
"FY" and "Fiscal Year" means the fiscal year of the Borrower commencing 
on July 1 and ending on June 30 of the following year; and 
(f)
"Special Account" means the account referred to in Section 2.02(b) of 
this Agreement. 
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 equivalent to twenty-four million two hundred thousand Special 
Drawing Rights (SDR 24,200,000).
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 may, for the purposes of  the Project, open and maintain in 
Taka a special deposit account in a commercial 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. 
Section 2.03. The Closing Date shall be September 30, 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 
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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 canceled; and (ii) at 
the rate set as of the June 30 immediately preceding the accrual date and 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 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 15 and July 15 in each year. 
Section 2.07. (a)  Subject to paragraphs (b), (c) and (d) below, the Borrower 
shall repay the principal amount of the Credit in semiannual installments payable on 
each January 15 and July 15 commencing January 15, 2009 and ending July 15, 2038. Each 
installment to and including the installment payable on July 15, 2018 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 per capita gross national product (GNP), as 
determined by the Association, shall have exceeded for three consecutive years  the 
level established annually by the Association for determining eligibility to access 
the Association’s resources; 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 
repayment of installments under paragraph (a) above by: (A) 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; and (B) requiring the Borrower to commence 
repayment of the principal amount of the Credit as of the first semiannual payment 
date referred to in paragraph (a) above falling six months or more after the date on 
which the Association notifies the Borrower that the events set out in this paragraph 
(b) have occurred, provided, however, that there shall be a grace period of a minimum 
of five years on such repayment of principal. 
(c)
If so requested by the Borrower, the Association may revise the 
modification referred to in paragraph (b) above 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. 
(d)
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 
administrative, financial and health 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 
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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, works 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. 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 of 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, 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 and 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 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 
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Remedies of the Association
Section 5.01. (a) Pursuant to Section 6.02 (h) of the General Conditions, the 
following additional event is specified, namely, that subject to paragraph (b) of this 
Section:
(i)
the right of the Borrower to withdraw the proceeds of any grant or 
loan made to the Borrower for the financing of the Project shall 
have been suspended, canceled or terminated in whole or in part, 
pursuant to the terms of the agreement providing therefor; or
(ii)
any such loan shall have become due and payable prior to the 
agreed maturity thereof.
(b)
Paragraph (a) of this Section shall not apply if the Borrower establishes 
to the satisfaction of the Association that:
(i)
such suspension, cancellation, termination or prematuring is not 
caused by the failure of the Borrower to perform any of its 
obligations under such agreement; and
(ii)
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 event is specified, namely, that the event specified in paragraph 
(a) (ii) of Section 5.01 of this Agreement shall occur, subject to the proviso of 
paragraph (b) 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)
all conditions precedent to the effectiveness of the Swiss Grant 
Agreement have been fulfilled, other than those related to the effectiveness of this 
Agreement; and
(b)
the Borrower (i) has issued the letter of invitation for selection of an 
internationally recruited consulting firm to assist the Borrower in the carrying out 
of the Project, and (ii) has appointed the key staff for the PMU in a manner 
satisfactory to the Association. 
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 
Representative of the Borrower; Addresses 
Section 7.01. The Secretary, or the Additional Secretary, or any Joint 
Secretary, Joint Chief, Deputy Secretary, Deputy Chief, Senior Assistant Secretary, 
Assistant Secretary, Assistant Chief 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 People’s Republic of Bangladesh
Dhaka, Bangladesh
Cable address:
Telex:
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BAHIRSAMPAD
642226 SETU BJ
Dhaka
672796 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
248423 (MCI) or
Washington, D.C.
        64145 (MCI)
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized 
representatives, have caused this Agreement to be signed in their respective names in 
Dhaka, Bangladesh, as of the day and year first above written.
 PEOPLE’S REPUBLIC OF BANGLADESH
By /s/ S.A.M.S. Kibria 
Authorized Representative
INTERNATIONAL DEVELOPMENT ASSOCIATION
By /s/ Pierre Landell-Mills 
Country Director, Bangladesh
SCHEDULE 1
Withdrawal of the Proceeds of the Credit and the Swiss Grant
1.
The table below sets forth the Categories of items to be financed out of the 
proceeds of the Credit and the Swiss Grant, the allocation of the amounts of the 
Credit and the Swiss Grant to each Category and the percentage of expenditures for 
items so to be financed in each Category:
Amount of the
Amount of Swiss
Credit Allocated
Grant Allocated
   % of
(Expressed in
(Expressed in Expenditures
SDR Equivalent)
Dollar Equivalent)
to be Financed
(1)
Works            3,440,000               
_____
80%
(2)
Goods            2,310,000   
_____
100% of 
foreign
expenditures,
100% of local
expenditures
(ex-factory cost) 
and 80% of local 
expenditures 
for 
other items 
procured 
locally
(3)
Consultants’       2,640,000  
_____
100%                               
services 
(4) 
Training           2,390,000            3,000,000
51%
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and studies
(5)    Services for       8,950,000            _____
100%
interventions
under Part A
of the Project
(6)
Incremental        1,570,000             
_____
100%
staff salaries
(7)
Incremental          390,000            
_____
80%
administrative
       costs
(8)
Unallocated        2,510,000
_____
                TOTAL   24,200,000            3,000,000
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 "incremental staff salaries" means the cost of additional staff 
employed exclusively by PMU for purposes of the Project;  
(d)
the term "incremental administrative costs" means the cost of operation 
and maintenance of offices, vehicles and equipment procured under the Project; and 
(e)
the term "services for interventions under Part A of the Project" means 
services provided by NGOs, consultants and government agencies to do surveys, 
pre-feasibility studies, community development activities, health and education 
awareness activities, subproject feasibility analysis, subproject design and 
construction supervision.
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, 
except that withdrawals, in an aggregate amount not exceeding the equivalent of 
SDR 1,300,000, may be made on account of payments made for expenditures before that 
date but after January 1, 1998.
4.
The Association may require withdrawals from the Credit Account to be made on 
the basis of statements of expenditure for expenditures: (a) for goods and works under 
contracts costing less than $200,000 equivalent each; (b) for consultants’ services 
under contracts not exceeding the equivalent of $100,000, in the case of firms, and 
$50,000 in the case of individuals; and (c) under categories 4, 5, 6 and 7, under such 
terms and conditions as the Association shall specify by notice to the Borrower.
SCHEDULE 2 
Description of the Project
The objective of the Project is to reduce mortality and morbidity in rural and 
urban population caused by arsenic contamination of groundwater within sustainable 
water supply, health, and water management strategies. This Project is the first phase 
of a long-term effort to mitigate the impact of naturally occurring arsenic 
contamination of Bangladesh’s groundwater. 
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: 
On-site Mitigation  
1.
Community organization for planning and implementing field level subprojects 
through training and social mobilization support.
2.
Emergency screening of groundwater quality and arsenic content on a national 
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scale. 
3.
Emergency health interventions including screening of arsenicosis patients and 
training of medical personnel to complement activities in the health sector. 
4.
Emergency water supply interventions for temporary relief, including national 
water quality screening campaigns and low cost water treatment and storage systems, 
while more sustainable water supply is being planned. 
5.
Planning and implementation of financially sustainable rural water supply 
through the formation of village level organizations and the carrying out of cost 
recovery mechanisms in arsenic affected areas as a priority. 
6.
Development of a pond/surface water reservoir, exclusively for drinking 
purposes, as an alternative water supply option for each community in the rural areas, 
wherever possible.
7.
Planning of urban water supply systems in arsenic affected areas and 
implementation of interventions in water treatment for arsenic. 
8.
Community education and awareness campaigns in prevention and alleviation of 
arsenic contamination. 
9.
Support to central and regional Project implementation entities through the 
establishment of a PMU, three Regional Project Management Units, contracting of 
Non-Governmental Organizations (NGOs), and establishment of a collaborative subproject 
appraisal process.
Part B:
Improved Understanding of the Arsenic Problem 
1.
Collection and dissemination of information on arsenic contamination and on 
sustainable solutions to the arsenic crisis.
2.
Studies and research in arsenic affected areas on priority issues including: 
participatory planning and implementation of appropriate technology for water supply 
and sanitation, cost-recovery in rural and urban schemes, appropriate technology for 
arsenic testing and treatment, hydrogeology and geochemistry of arsenic in 
groundwater, and inter-sectoral impacts of water use on arsenic impact on water 
quality and the food chain.
Part C:
Strengthening of Implementation Capacity 
1.
Studies on the need for carrying out institutional reform in the water supply 
and sanitation sector. 
2.
Capacity building in project management and subproject appraisal through the 
carrying out of training and provision of technical assistance. 
3.
Capacity building on arsenic mitigation and participatory water supply and 
sanitation at the level of communities and villages, local and central government, 
DPHE, private and government laboratories, NGOs, health workers, physicians and 
medical students through the carrying out of training and provision of technical 
assistance. 
4.
Establishment of a National Arsenic Mitigation Information Center in DPHE under 
PMU to facilitate the networking of national and international entities working on the 
problem of arsenic contamination. 
5.
Establishment of a Technical Assessment Group for the evaluation and promotion 
of cost-effective technologies for the detection and treatment of arsenic in 
groundwater and the implementation of alternative water supply solutions.
6.
Support to internal (in-project) and external monitoring and evaluation systems 
for the Project.
*       *       *
The Project is expected to be completed by December 31, 2001.
SCHEDULE 3 
Procurement and Consultants’ Services 
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Section I.
Procurement of Goods and Works
Part A:
General 
1.
Goods and works shall be procured in accordance with (a) the provisions of 
Section I of the "Guidelines for Procurement under IBRD Loans and IDA Credits" 
published by the Bank in January 1995 and revised in January and August 1996 and 
September 1997, subject to the modifications thereto set forth in paragraph 2 of this 
Part A (the Guidelines), and (b) the provisions of the following Parts of this Section 
I. 
2.
In paragraphs 1.6 and 1.8 of the Guidelines, the references to "Bank member 
countries" and "member country" shall be deemed to be references, respectively, to 
"Participating Countries" and "Participating Country."
Part B:
Procurement Procedures 
1.
National Competitive Bidding 
Goods estimated to cost less than $200,000 equivalent per contract, up to an 
aggregate amount not to exceed $2,800,000 equivalent, and works estimated to cost more 
than $30,000 equivalent per contract, may be procured under contracts awarded in 
accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. 
2.
International or National Shopping 
Goods estimated to cost less than $20,000 equivalent per contract, up to an 
aggregate amount not to exceed $2,400,000 equivalent, 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.
Direct Contracting
Works costing $30,000 equivalent or less per contract up to an aggregate amount 
not to exceed $500,000 equivalent, may, with the Association’s prior approval, be 
procured in accordance with the provisions of paragraph 3.7 of the Guidelines. 
4.
Procurement of Small Works
Works estimated to cost equal or less than $30,000 equivalent per contract may 
be procured under lump-sum, fixed-price contracts awarded on the basis of quotations 
obtained from three (3) qualified domestic contractors in response to a written 
invitation, provided that the aggregate amount of such works does not exceed 
$5,000,000 equivalent. The invitation shall include a detailed description of the 
works, including basic specifications, the required completion date, a basic form of 
agreement acceptable to the Association, and relevant drawings, where applicable.  The 
award shall be made to the contractor who offers the lowest price quotation for the 
required work, and who has the experience and resources to complete the contract 
successfully.
Part C:
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 
or award any contracts, the proposed procurement plan for the Project for the first 
fiscal year of the Project period 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. The proposed procurement plans for subsequent fiscal years shall be 
furnished to the Association, for its review and approval, one month prior to the 
dates specified in paragraph 2 (a) of Schedule 4 to this Agreement. Procurement of all 
goods and works shall be undertaken in accordance with such procurement plans as shall 
have been approved by the Association, and with the provisions of said paragraph 1. 
2.
Prior Review
(a)
In each fiscal year, with respect to the first two contracts for civil 
works and the first two contracts for goods procured under national competitive 
bidding procedures, and thereafter each contract for works or goods estimated to cost 
the equivalent of $200,000 or more, the procedures set forth in paragraphs 2 and 3 of 
Appendix 1 to the Guidelines shall apply.
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(b)
With respect to all contracts under direct contracting and the first two 
contracts procured under shopping procedures in each fiscal year, the following 
procedures shall apply: 
(i)
prior to the selection of any supplier/execution of any such 
contract under shopping procedures, the Borrower shall provide to 
the Association a report on the comparison and evaluation of 
quotations received; 
(ii)
prior to the execution of any such contract procured under direct 
contracting or shopping procedures, the Borrower shall provide to 
the Association a copy of the specifications and the draft 
contract; and 
(iii)
the procedures set forth in paragraphs 2(f), 2(g) 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. 
Section II.
Employment of Consultants
Part A:
General
1.
Consultants’ services shall be procured in accordance with (a) the provisions of 
the Introduction and Section IV of the "Guidelines: Selection and Employment of 
Consultants by World Bank Borrowers" published by the Bank in January 1997 and revised 
in September 1997, subject to modifications thereto set forth in paragraph 2 of this 
Part A (the Consultant Guidelines),  and (b) the provisions of the following Parts of 
this Section II.   
2.
In paragraph 1.10 of the Consultant Guidelines, the references to "Bank member 
countries" and "member country" shall be deemed to be references, respectively, to 
"Participating Countries" and "Participating Country."
Part B:
Quality- and Cost-based Selection 
1.
Except as otherwise provided in Part C of this Section, consultants’ services 
shall be procured under contracts awarded in accordance with the provisions of Section 
II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 
thereto, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to 
quality- and cost-based selection of consultants. 
2.
The following provisions shall apply to consultants’ services to be procured 
under contracts awarded in accordance with the provisions of the preceding paragraph. 
The short list of consultants estimated to cost less than $200,000 equivalent per 
contract, may comprise entirely national consultants in accordance with the provisions 
of paragraph 2.7 of the Consultant Guidelines.
Part C:
Other Procedures for the Selection of Consultants  
1.
Selection Under a Fixed Budget
Services estimated to cost less than $200,000 equivalent per contract may be 
procured under contracts awarded in accordance with the provisions of paragraphs 3.1 
and 3.5 of the Consultant Guidelines. 
2.
Least-cost Selection
Services estimated to cost less than $100,000 equivalent per contract may be 
procured under contracts awarded in accordance with the provisions of paragraphs 3.1 
and 3.6 of the Consultant Guidelines. 
3.
Single Source Selection
Services estimated to cost less than $100,000 equivalent per contract may, with 
the Association’s prior agreement, be procured under contracts awarded in accordance 
with the provisions of paragraphs 3.8 through 3.11 of the Consultants’ Guidelines.
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Part D:
Review by the Association of the Selection of Consultants 
1.
Selection Planning 
Prior to the issuance to consultants of any requests for proposals, the proposed 
plan for the selection of consultants under the Project for the first fiscal year of 
the Project period shall be furnished to the Association for its review and approval, 
in accordance with the provisions of paragraph 1 of Appendix 1 to the Consultant 
Guidelines. The proposed plans for the selection of consultants for subsequent fiscal 
years shall be furnished to the Association, for its review and approval, one month 
prior to the dates specified in paragraph 2 (a) of Schedule 4 to this Agreement. 
Selection of all consultants’ services shall be undertaken in accordance with such 
selection plans as shall have been approved by the Association, and with the 
provisions of said paragraph 1. 
2.
Prior Review
(a)
With respect to each contract for the employment of individual 
consultants estimated to cost the equivalent of $50,000 or more, the qualifications, 
experience, terms of reference and terms of employment of the consultants shall be 
furnished to the Association for its prior review and approval. The contract shall be 
awarded only after the said approval shall have been given.
(b)
With respect to each contract for the employment of consulting firms 
estimated to cost the equivalent of $100,000 or more, the procedures set forth in 
paragraphs 1, 2 (other than the third subparagraph of paragraph 2(a)) and 5 of 
Appendix 1 to the Consultant  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 Consultant Guidelines shall 
apply.
SCHEDULE 4 
Implementation Program 
1.
The Borrower shall implement in a timely fashion an Action Plan, satisfactory to 
the Association, for the carrying out of the Project.
2.
The Borrower shall:
(a)
commencing in 1999, by June 30 of each year or such other date as the 
Borrower and the Association may agree, until completion of the Project, carry out an 
annual review of the Project jointly with the Association; and
(b)
one month prior to such review furnish to the Association: (i) a 
Subprogram for the following fiscal year, for approval by the Association; (ii) a 
report on the project monitoring indicators; (iii) a review of the implementation of 
the Action Plan, indicating progress achieved and suggesting remedial actions where 
needed; (iv) a report assessing progress in achieving the project objectives through 
participatory means; (v) a review of NGO participation in the programs of LGD and the 
coordination between the Borrower and such NGOs; and (vi) an assessment of the types 
of needs and the possibility of additional funding for the Project. 
3.
The Borrower shall promptly establish and maintain until completion of the 
Project a Project Management Unit (PMU) which shall assist LGD in the planning, 
monitoring and coordination of the Project.  In view of the nature of the Project, the 
PMU will have a level of gender balance reflecting the important role of women in 
rural water supply management. 
4.
The Borrower shall ensure that all Project works are implemented by community 
based organizations (hereinafter called CBOs) and according to standard agreements, 
satisfactory to the Association, between these CBOs and the PMU.
5.
The Borrower shall: 
(a)
furnish, by December 31, 1998, to the Association for its review a draft 
report on detailed and exhaustive eligibility criteria for subproject investments 
based on participatory, environmental and cost-effective principles. Such criteria as 
shall be agreed upon shall be applied in all subproject interventions; and
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(b)
by March 1, 1999, inform the Association that the procedures for 
environmental and social review of subprojects are in place as well as all other 
support mechanisms to ensure the timely development and implementation of subprojects. 
6.
The Borrower shall commence by January 15, 1999, a review of the activities of 
the institutions involved in the water and sanitation sector and subsequently 
implement a plan, in consultation with the Association, for increased efficiency and 
capacity building in the sector with a view to increasing the demand-responsive nature 
of the sector.
7.
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 
furnish to the Association, on or about March 1, 2001, a report 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 April 1, 2001, or such later date as the 
Association shall request, the report 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.
SCHEDULE 5 
Special Account
1.
For the purposes of this Schedule:
(a)
the term "eligible Categories" means Categories 1 through 7 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 
TK  94,000,000, 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 Association shall otherwise agree, the Authorized Allocation shall be limited to 
an amount equivalent to TK 47,000,000 until the aggregate amount of withdrawals from 
the Credit Account shall be equal to or exceed the equivalent of SDR 5,000,000. 
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 deposit 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.
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(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 
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 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, minus the total amount of all outstanding special commitments 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 with the relevant provisions of this Agreement, 
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including the General Conditions.