CONFORMED COPY CREDIT NUMBER 506 MAG Development Credit Agreement (AMENDED) (Village Livestock and Rural Development Project) between DEMOCRATIC REPUBLIC OF MADAGASCAR and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated May 25, 1977 DEVELOPMENT CREDIT AGREEMENT (AMENDED) AGREEMENT, dated May 25, 1977, between DEMOCRATIC REPUBLIC OF MADAGASCAR (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) Pursuant to a development credit agreement (Village Livestock and Rural Development Project) dated August 21, 1974 between the Borrower and the Association (hereinafter called the 1974 Agreement), the Association made a development credit to the Borrower in an amount in various currencies equivalent to nine million six hundred thousand dollars ($9,600,000) to assist in the financing of the project described in Schedule 2 to the 1974 Agreement, on the terms and conditions set forth in the 1974 Agreement; (B) Pursuant to the Borrower's Decree No. 76-103 dated March 12, 1976, the Borrower substantially amended the statutes of FAFIFAMA, the principal agency of the Borrower responsible for the implementation of the project described in Schedule 2 to the 1974 Agreement by (1) dissolving FAFIFAMA and reestablishing it as a "state farm" operating in accordance with the Borrower's Decrees Nos. 71-354 and 73-255, dated July 13, 1971 and August 31, 1973 respectively, and (2) merging FAFIFAMA with OVOMA, a Madagascar -2- corporation established on June 15, 1972 for the purpose of fattening cattle and marketing meat in the Borrower's territory; and (C) As a result of the changes referred to in paragraph (B) of this Preamble, the Borrower and the Association have agreed to amend the 1974 Agreement as now in force and effect and to substitute for that Agreement a new Development Credit Agreement incorporating such amendments and to be known as the Development Credit Agreement (Amended) (Village Livestock and Rural Development Project); NOW THEREFORE the parties hereto hereby agree as follows: - 3 - ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein subject, however, to the deletion of Sections 12.01 to 12.04 thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "FAFIFAMA" means the State Farm FAFIFAMA, an Etablissement Public A Caract&re Industriel et Commercial of the Borrower, established and operating under the Borrower's Decree No. 76-103 dated March 12, 1976, as such Decree may be amended from time to time by the Borrower; (b) "Livestock Development Departments" means FAFIFAMA's departments responsible for livestock development in the Borrower's Majunga Province; (c) "Commercial Department" means FAFIFAMA's D6partement de Commercialisation et d'Exploitation responsible for the commercial livestock fattening and marketing activities previously carried out by OVOMA; (d) "OMBY" means the Ranch State Farm OMBY, an Etablissement Public of the Borrower, established and operating under the Borrower's Decree No. 69-017 dated January 16, 1969 as such Decree may be amended from time to time by the Borrower; (e) "ODEMO" means Op6ration pour le D6veloppement du Moyen Ouest, a department of the Borrower's Ministry responsible for Rural Development; (f) "BTM" means the Borrower's National Rural Development Bank, established and operating pursuant to Decree No. 76-046, dated December 27, 1976; (g) "FAFIFAMA Project Funds Agreement (Amended)" means the agreement to be entered into between the Borrower and FAFIFAMA pursuant to Section 3.01 (d) of this Agreement, as the same may be amended from time to time with the approval of the Association; (h) "OMBY Financing Agreement (Amended)" means the agreement to be entered into between the Borrower and OMBY pursuant to Section 3.01 (f) of this Agreement, as the same may be amended from time to time with the approval of the Association; - 5 - (i) "BTM Financing Agreement" means the agreement to be entered into be-tween the Borrower and BTM pursuant to Section 3.01 (f) of this Agreement, as the same may be amended from time to time with the approval of the Association; (j) "Zone of Activity" means the area in which FAFIFAMA operates and such area includes the Prefectures of Majunga (excluding Majunga Municipality) and Maintirano and the Sub-Prefectures of Port Berger and Mampikony of the Prefecture of Antsohihy; and (k) "Fokonolona" means any of the political and administrative subdivisions of the Borrower existing at the village community level. -6- ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement (Amended) set forth or referred to, an amount in various currencies equivalent to nine million six hundred thousand dollars ($9,600,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Association, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Credit. Section 2.03. Except as the Association shall otherwise agree, contracts for the purchase of goods or for civil works to be financed out of the proceeds of the Credit, shall be procured in accordance with the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1980 or such other later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semi-annually on April 1 and October 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each April 1 and October 1, commencing October 1, 1984, and ending April 1, 2024, each installment to and including the installment payable on April 1, 1994 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. - 8 - ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out Parts A to C of the Project through FAFIFAMA, Part D of the Project through its Ministry of National Education, Part E of the Project through its Ministry responsible for Public Works, Part F of the Project through its Ministry responsible for Health, Parts G (i) and G,(ii) of the Project through OMBY, Parts G (iii) and G (iv) of the Project through ODEMO, Part H through its Ministry responsible for Rural Development and Part I through its Ministry responsible for Rural Development in cooperation with its Ministry of Finance, with due diligence and efficiency and in conformity with appropriate administrative, financial, agricultural and livestock practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) The Borrower shall cause its Ministries responsible for Public Works, Health and National Education to cooperate effectively with FAFIFAMA in the execution of Parts D, E and F of the Project, respectively. - 11 - to participating farmers for the execution of Part G (iv) of the Project on terms and conditions which shall have been approved by the Association (including inter alia interest at the rate of seven and one-fourth per cent (7-1/4%) per annum); and (iii) an amount equivalent to not less than one hundred thousand dollars ($100,000) to be utilized by ODEMO for the management of Part G (iv) of the Project on terms and conditions which shall have been approved by the Association; and (g) The Borrower shall exercise its rights under the FAFIFAMA Project Funds Agreement (Amended), the OMBY Financing Agreement (Amended) and the BTM Financing Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the FAFIFAMA Project Funds Agreement (Amended) or the OMBY Financing Agreement (Amended) or the BTM Financing Agreement or any provision thereof. - 12 - (h) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement (Amended), the Borrower shall cause: (i) FAFIFAMA to perform in accordance with the provisions of the FAFIFAMA Project Funds Agreement (Amended); (ii) OMBY to perform in accordance with the provisions of the OMBY Financing Agreement (Amended); and (iii) BTM to perform in accordance with the provisions of the BTM Financing Agreement, all the obligations therein set forth, shall take or cause to be taken all action necessary or appropriate to enable FAFIFAMA, OMBY and BTM to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. Section 3.02. (a) In order to assist FAFIFAMA in the execution of intensive veterinary service, the Borrower shall cause FAFIFAMA to employ (i) not later than June 30, 1977 or such later date as the Association shall agree, an animal production advisor, and (ii) two senior veterinarians whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. - 13 - (b) In order to assist ODEMO in the execution of the pilot pig program referred to in Part G (iv) of the Project, the Borrower shall cause ODEMO to employ on a full-time basis an animal production specialist whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 3.03. Except as the Association shall otherwise agree, the Borrower shall cause FAFIFAMA, in carrying out the civil works required under Part C of the Project, to employ contractors acceptable to the Association on terms and conditions satisfactory to the Association. Section 3.04. The Borrower shall: (a) (i) transfer to FAFIFAMA the basic responsibility for all livestock services in the Zone of Activity and confer upon FAFIFAMA the authority to carry out such services, (ii) make available to FAFIFAMA the personnel of the Provincial Livestock Service of Majunga Province working in the Zone of Activity and fill throughout the carrying out of the Project all the positions presently authorized for livestock services in the Zone of Activity and confer upon FAFIFAMA's General Manager full authority over such personnel, (iii) confer upon FAFIFAMA the authority to utilize budget funds of the Borrower allocated for use in the - 14 - Zone of Activity, and (iv) confer upon FAFIFAMA the authority to utilize all facilities and equipment of the Provincial Livestock Service in Majunga Province for the Zone of Activity, all in order to enable FAFIFAMA to carry out Parts A through D of the Project in accordance with the provisions of Schedule 4 to this Agreement as such Schedule may be amended from time to time; (b) provide FAFIFAMA, during the execution of the Project, with qualified and experienced staff in addition to the personnel referred to in paragraph (a) of this Section in accordance with a staffing plan as set forth in Schedule 4 to this Agreement; (c) ensure that a qualified and experienced person will at all times hold the position of General Manager of FAFIFAMA and any appointment to such position will be made only after consultation with the Association; (d) ensure that the Borrower's Majunga Province receives appropriate allocations of funds from the Borrower's budget for the carrying out of livestock services and that the relation between the funds from the Borrower's budget allocated to FAFIFAMA and those allocated to the Provincial Livestock Service of Majunga Province reflects the respective requirements of FAFIFAMA and such Provincial Livestock Service; and - 15 - (e) furnish to the Association for its review the Borrower's directives to the Chief of the Provincial Livestock Service of Majunga Province and the General Manager of FAFIFAMA specifying their resepctive responsibilties in the Zone of Activity. Section 3.05. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. Section 3.06. (a) The Borrower shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The Borrower: (i) shall maintain, and shall cause FAFIFAMA, OMBY, BNM and ODEMO to set up and maintain, separate records adequate to record the progress of the Project (including - 16 - the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit, and to disclose the use thereof in the Project; (ii) shall enable the Association's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds. Section 3.07. (a) The Borrower shall (i) furnish to the Association for its comments the program of the Borrower's Ministry of Public Works for the construction, improvement and maintenance of the roads included in Part E of the Project, and (ii) maintain said roads after the completion of the Project in accordance with sound engineering practices. (b) The Borrower shall obtain the approval of FAFIFAMA's General Manager for the selection of roads referred to in paragraph (a) of this Section prior to commencement of construction or improvement of such roads. Section 3.08. The Borrower shall establish, through its Ministry responsible for Health, the mobile health units included in Part F of the Project at eight centers in Majunga Province which shall be selected in consultation with FAFIFAMA and shall provide the necessary equipment and staff for their operation. - 17 - Section 3.09. For the purpose of carrying out Part C of the Project, the Borrower shall (i) cause FAFIFAMA to employ, not later than June 30, 1977 or such later date as the Association shall agree, for a period of about two years, a water engineer whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association, and (ii) promptly second to FAFIFAMA a hydrologist to assist the water engineer referred to in (i) of this Section. - 18 - ARTICLE IV Other Covenants Section 4.01. The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with consistently maintained appropriate 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. Section 4.02. (a) The Borrower shall cause each of FAFIFAMA, OMBY and BTM to maintain records adequate to reflect, in accordance with consistently maintained appropriate accounting practices, the operations and financial condition of each of them. (b) The Borrower shall cause FAFIFAMA, OMBY and BTM (with regard to ODEMO) to: (i) have the accounts and financial statements (balance sheets, statements of income and expenses and related statements, of each of them 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 copies of the financial statements of each of them for such year as so audited and (B) the report of such audit - 19 - 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 the accounts and financial statements of FAFIFAMA, OMBY and BTM (with regard to ODEMO), and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. (a) The Borrower shall cause each of FAFIFAMA, OMBY and BTM (with regard to ODEMO) to furnish to the Association for comments, not later than November 1 of each year or such later date as the Association shall agree, the budgets for the following year for their respective parts of the Project specifying the proposed program and the expenditures related thereto for such year. (b) The Borrower shall cause FAFIFAMA to furnish to the Association for its prior approval all proposed investments (including investment programs, projected cash flows and physical development descriptions) in, or borrowings for, any activity relating to commercial fattening and marketing and any other activity not included in the Project. (c) The Borrower shall ensure that (i) the activities of the Livestock Development Department will be administratively and financially separated from those of the Commercial Department, (ii) the staff assigned to the Livestock Development Department - 20 - will not assume duties of the staff of the Commercial Department and vice versa, and (iii) funds made available to FAFIFAMA under the FAFIFAMA Project Funds Agreement (Amended) will not be utilized by the Commercial Department. Section 4.04. The Borrower shall cause FAFIFAMA and OMBY to take out and maintain with responsible insurers, or to make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practices. Section 4.05. The Borrower shall cause FAFIFAMA and OMBY at all times to manage their affairs, maintain their financial position, plan their future expansion and carry on their operations, all in accordance with appropriate administrative, financial, agricultural and livestock practices and under the supervision of experienced and competent management assisted by qualified and competent staff. Section 4.06. The Borrower shall cause FAFIFAMA and OMBY at all times to take all such action as shall be necessary on their part to acquire, maintain and renew all rights, powers and privileges which are necessary or useful for the purpose of carrying out their obligations under the Project, and under the FAFIFAMA Project Funds Agreement (Amended) and the OMBY Financing Agreement (Amended), respectively. - 21 - Section 4.07. The Borrower shall cause FAFIFAMA and OMBY at all times to operate, maintain, renew and repair the facilities, equipment and machinery necessary or useful for the carrying out of the Project in accordance with appropriate engineering practices. Section 4.08. Except as the Association shall otherwise agree, the Borrower shall cause FAFIFAMA: (a) to obtain title to all goods financed out of the proceeds of the Credit free and clear of all encumbrances; and (b) to refrain from creating or maintaining any lien on the goods financed out of the proceeds of the Credit as security for any debt contracted for the purposes of the Commercial Department. Section 4.09. The Borrower shall take all action necessary to (i) maintain vaccine production and research services at satisfactory levels of scientific competence, (ii) provide said services with adequately trained and experienced staff, and (iii) produce adequate quantities of vaccine to meet the needs of the Project without reducing the supplies required for other vaccination programs in the territory of the Borrower. Section 4.10. The Borrower shall furnish to the Association for approval the proposals and terms of reference for overseas training programs, Project related research, Project monitoring and evaluation, and preparation of follow-up projects included in Part H of the Project. - 22 - Section 4.11. The Borrower shall, through its Ministry of Mines, provide FAFIFAMA with adequate technical support in addition to the services of the engineer referred to in Section 3.09 of this Agreement, to enable FAFIFAMA to carry out the construction and maintenance of the water facilities included in Part C of the Project. Section 4.12. The Borrower shall provide, through its Ministry responsible for National Education, the teachers required for the schools established under Part D of the Project. Section 4.13. For the purpose of carrying out the study referred to in Part I of the Project, the Borrower shall (i) employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association; (ii) not later than December 31, 1977 or such later date as the Association shall agree, furnish to the Association for its review the results and recommendations of such study; (iii) not later than June 30, 1978 or such later date as the Association shall agree, inform the Association of its proposed program to put into effect such recommendations; and (iv) thereafter, from time to time, but not less than once a year, consult with the Association on the adequacy of such program. - 23 - Section 4.14. The Borrower shall formulate, in consultation with the Association, and promptly take specific measures for the recovery of as large a portion of the costs of the various services provided by the Project as shall be reasonable having due regard to the incentives and capacity to pay of livestock producers. - 24 - ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) A default shall have occurred in the performance of any covenant, agreement or obligation on the part of the Borrower or FAFIFAMA under the FAFIFAMA Project Funds Agreement (Amended). (b) A default shall have occurred in the performance of any covenant, agreement or obligation on the part of the Borrower or of OMBY under the OMBY Financing Agreement (Amended). (c) A default shall have occurred in the performance of any covenant, agreement or obligation on the part of the Borrower or of BTM under the BTM Financing Agreement. (d) The Borrower's Decree No. 76-103, dated March 12, 1976 or FAFIFAMA's Cahier des Charges and its Annex dated March 1, 1977, or the Borrower's Decree No. 69-017, dated January 16, 1969 shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of FAFIFAMA or OMBY (i) to carry out their respective functions and responsibilities under the Project or (ii) to carry out any of their respective obligations under the FAFIFAMA Project Funds Agreement (Amended) or the OMBY Financing Agreement (Amended), respectively. - 25 - (e) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of FAFIFAMA, OMBY or BTM or for the suspension of the operations of any of them. (f) An extraordinary situation shall have arisen which shall make it improbable that FAFIFAMA, OMBY or BTM will be able to perform its respective obligations under the Project. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified: (a) any event specified in paragraph (a) or paragraph (b) or paragraph (c) of Section 5.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Association to the Borrower and FAFIFAMA or OMBY, as the case may be; and (b) any event specified in paragraph (d) or paragraph (e) of Section 5.01 of this Agreement shall occur. - 26 - ARTICLE VI Effective Date of this Agreement Termination of the 1974 Agreement Section 6.01. This Agreement shall not become effective until evidence satisfactory to the Association shall have been furnished to the Association that: (i) the execution and delivery of this Agreement on behalf of the Borrower have been duly authorized or ratified by all necessary governmental action; (ii) the execution and delivery of the FAFIFAMA Project Funds Agreement (Amended) on behalf of the Borrower and FAFIFAMA, respectively, have been duly authorized or ratified by all necessary corporate and governmental action; and (iii) the execution and delivery of the OMBY Financing Agreement (Amended) on behalf of the Borrower and OMBY, respectively, have been duly authorized or ratified by all necessary corporate and governmental action. Section 6.02. As part of the evidence to be furnished pursuant to Section 6.01 of this Agreement, the Borrower shall furnish to the Association an opinion or opinions satisfactory to - 27 - the Association of counsel acceptable to the Association or a certificate satisfactory to the Association of a competent official of the Borrower, showing: (a) that this Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and is legally binding upon the Borrower in accordance with its terms; (b) that the FAFIFAMA Project Funds Agreement (Amended) has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and FAFIFAMA, respectively, and is legally binding upon the Borrower and FAFIFAMA in accordance with its terms; and (c) that the OMBY Financing Agreement (Amended) has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and OMBY, respectively, and is legally binding upon the Borrower and OMBY in accordance with its terms. Section 6.03. (a) This Agreement shall come into force and effect on the date on which the Association dispatches to the Borrower notice of its acceptance of the evidence required by Section 6.01. (b) Upon the Effective Date of this Agreement, the 1974 Agreement and all obligations of the parties thereunder shall terminate. - 28 - Section 6.04. (a) If this Agreement shall not have come into force and effect by August 31, 1977, this Agreement and all obligations of the parties thereunder shall terminate, unless the Association, after consideration of the reasons for the delay, establishes a later date for the purposes of this Section. The Association shall promptly notify the Borrower of such date. (b) If this Agreement shall terminate pursuant to the pro- visions of paragraph (a) hereof, the 1974 Agreement shall continue in full force and effect, as if this Agreement had not been executed. Section 6.05. The obligations of the Borrower under Article IV of this Agreement and the provisions of paragraphs (a) and (b) of Section 5.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement (Amended) shall terminate or on a date seventeen years after the date of this Agreement, whichever shall be the earlier. - 29 - ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of Finance and Planning 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: Ministare des Finances et du Plan Antananarivo Democratic Republic of Madagascar Cable address: MINFIN Antananarivo For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) - 30 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, 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. DEMOCRATIC REPUBLIC OF MADAGASCAR By /s/ Norbert Rakotomala Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Michael Wiehen Acting Regional Vice President Eastern Africa - 31 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amount of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Vehicles and 100% of foreign equipment expenditures or 85% of local expenditures (a) Road Con- 600,000 struction and Main- tenance (Part E of the Proj- ect) (b) Other Equip- 620,000 ment, Parts A to D, and F and H of the Project (FAFIFAMA) (c) Other Equip- 75,000 ment, Parts G (i) and G (ii) of the Project (OMBY) - 32 - Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (d) Other Equip- 55,000 ment, Parts G (iii) and G (iv) of the Project (ODEMO/BTM) (2) Civil Works 75% (a) Boreholes 600,000 (b) Other Water 500,000 Development (Part C of the Project) (c) FAFIFAMA 540,000 Buildings (Parts A, D and F of the Project) (d) OMBY Buildings 60,000 (Part G (i) of the Project (e) ODEMO/BTM 150,000 Buildings (Part G (iv) of the Proj- ect - 33 - Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (3) Agricultural 75% Inputs (a) Animal Vac- 140,000 cines, Drugs, Seeds FAFIFAMA (Parts A, B, G and H of the Project) (b) Animal Vac- 20,000 cines, Drugs, Seeds OMBY (Part G (i) and (ii) of the Project) (c) Animal Vac- 20,000 cines, Drugs, Seeds BTM/ ODEMO (Part G (iii) and (iv) of the Project) (d) Steers OMBY 120,000 (Part G (ii) of the Proj- ect) (e) Steers and 140,000 pigs BTM/ ODEMO (Part G (iii) and (iv) of the Project 34 - Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (4) Technical ser- 410,000 100% of foreign vices expenditures and 80% of local ex- penditures (5) Incremental 65% Wages, Salaries, Fuel and Other Operating Costs (a) FAFIFAMA 1,385,000 (Parts A, C, E and G of the Proj- ect) (b) OMBY (Parts 325,000 G (i) and (ii) of the Project) (c) ODEMO/BTM 90,000 (Parts G (iii) and (iv) of the Project) (6) Unallocated 3,750,000 TOTAL 9,600,000 - 35 - 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Association that no proceeds of the Credit shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Credit decreases or increases, the Association may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Association. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expendi- tures: - 36 - (a) prior to August 21, 1974; (b) in respect of Categories (1), (2), (3) and (5) on account of expenditures incurred for Parts G (iii) and (iv) of the Project (i) until the Borrower has furnished to the Association detailed proposals for the organization of the beef-share-fattening and pilot pig program by ODEMO and the beef-share-fattening program by OMBY, and (ii) until the Association has dispatched notice to the Borrower that it accepts the evidence furnished to it that the BTM Financing Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and BTM, respectively, and is legally binding upon the Borrower and BTM in accordance with its terms; and (c) in respect of Category II on account of expenditures incurred for Part C of the Project until the Borrower has employed the water engineer referred to in Section 3.09 of this Agreement. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Association may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit which are then - 37 - allocated to another Category and which in the opinion of the Association are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement (Amended), by notice to the Borrower, cancel such amount of the Credit as, in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 38 - SCHEDULE 2 Description of the Project The Project consists of a four-year program of assistance to village livestock and rural development in the Borrower's Majunga Province (Parts A through F of the Project) and the Tsiroanomandidy Sub-Prefecture of Tananarive Province (Part G of the Project). The Project consists of the following main parts: Part A. Development of an intensive veterinary and livestock extension service. Part B. Improvement of about 10,000 hectares of communal pasture in about 200 villages through the introduction of sub-tropical planting. Part C. Construction of ponds, shallow wells and boreholes in about 300 villages. Part D. Construction of 28 village schools and of an agricultural training center. Part E. Improvement or construction of about 170 kilometers and maintenance of about 280 kilometers of secondary and tertiary roads. - 41 - SCHEDULE 3 Procurement A. International Competitive Bidding 1. Except as provided in Part B hereof, contracts for the purchase of goods or for civil works estimated to cost $100,000 equivalent or more shall be procured in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. Contracts for equipment for road construction and water supply development shall be grouped under arrangements satisfactory to the Association so as to encourage competition and permit bulk procurement consistent with appropriate technical and procurement practices. B. Other procedures 1. Goods estimated to cost less than $100,000 equivalent and veterinary equipment and supplies may be procured through local shopping on the basis of at least three suppliers' quotations. - 42 - 2. Cattle and pigs shall be procured locally through regular commercial channels from responsible suppliers. 3. The construction of boreholes, piggeries and buildings shall be procured through competitive bidding advertised locally, under procedures acceptable to the Association. 4. The construction of cattle handling facilities, buildings, housing, schools, water ponds and mobile health units shall be carried out directly by FAFIFAMA or through competitive bidding advertised locally under procedures acceptable to the Association. 5. The construction of shallow wells may be carried out by the Borrower through force account with the assistance of its appropriate technical services. 6. The construction, improvement and maintenance of roads shall be carried out by the Borrower's Ministry responsible for Public Works through force account. C. Review of Procurement Decisions by the Association 1. (a) Before bids for civil works and equipment estimated to cost the equivalent of $100,000 or more are invited, the Borrower shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising - 43 - procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (b) Before requesting quotations for goods, estimated to cost the equivalent of $20,000 or more but less than the equivalent of $100,000 or more, from suppliers, the Borrower shall furnish to the Association, for its comments, the technical specifications and shall make such modifications to the said specifications as the Bank shall reasonably request. (c) After bids or quotations have been received and evaluated, the Borrower shall, before a final decision on the award is made, inform the Association of the name of the bidder or supplier to which it intends to award the contract and the reasons for the intended award and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received or quotations obtained together with the recommendation for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. - 44 - (d) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids or quotations were asked or prequalification invited. (e) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract to be financed out of the proceeds of the Credit and not governed by the preceding paragraph, the Borrower shall furnish to the Association, promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of bids, or quotations, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. - 45 - SCHEDULE 4 Organization and Staffing of FAFIFAMA A. Organization FAFIFAMA's organization will comprise central management services and three departments: the Livestock Development Departments and the Commercial Department. The Livestock Development Departments are two: Veterinary and Animal Production and Civil Works (roads and water). The central management services will include a Service of Finance and Administration. B. Staffing 1. FAFIFAMA's staff will include staff recruited directly by FAFIFAMA and staff seconded by the Borrower from Government departments. Seconded staff will include staff from the Provincial Livestock Services of Majunga Province. The Borrower will second to FAFIFAMA an engineer from its Direction des Travaux Publics to assist FAFIFAMA in the planning and coordination of the road development program included in Part E of the Project. - 46 - 2. FAFIFAMA will recruit and employ directly staff as indicated in the following table: Central Management Services at Headquarters General Manager Director of Finance and Administration Accountant Administrative Agent Office Employees, Typists, Drivers Veterinary and Animal Production Department 1 Director (veterinarian) 1 Regional Director (veterinarian) 1 Animal Production Specialist Village Livestock Agents (100) Suporting Staff (including tractor drivers) Public Works and Water Department Water Engineer Engineering Technician Road Engineer Chief Mechanic Supporting Staff Commercial Department Director Accountant Supporting Staff (including herdsmen) FAFIFAMA will review the foregoing table annually with the Association. 3. The Village livestock agents will be appointed in consultation with the Fokonolona and will be located in several villages. The Fokonolona will be consulted with respect to the assessment of said agents performance.