Page 1 The World Bank 1818 H Street N.W. (202) 477-1234 I NTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS CONFORMED COPY November 15, 2010 Dr. Gordon Hein Vice President of Programs The Asia Foundation 465 California Street, 9th Floor San Francisco, CA 94104 Re: State and Peace-Building Fund (SPF) SPF Grant No. TF097551 Opportunities and Challenges for Aid Delivery in Sub-National Conflict Areas (East and South Asia Countries) Dear Dr. Hein, In response to the request for financial assistance made on behalf of the Asia Foundation (the “Recipient”), I am pleased to inform you that the International Bank for Reconstruction and Development (“IBRD”) and International Development Association (“IDA”) (collectively, the “World Bank”), acting as administrator of grant funds provided by various donors under the SPF, proposes to extend to the Recipient for the benefit of the Kingdom of Thailand, Republic of Indonesia, Republic of the Philippines and Socialist Republic of Sri Lanka (each, the “Member Country”), a grant in an amount not to exceed one million seven hundred seventy thousand United States Dollars (U.S.$1, 770,000) (the “Grant”) on the terms and conditions set forth or referred to in this letter agreement (“Agreement”), which includes the attached Annex, to assist in the financing of the project described in the Annex (the “Project”). This Grant is funded out of the abovementioned trust fund for which the World Bank receives periodic contributions. In accordance with Section 3.02 of the Standard Conditions (as defined in the Annex to this Agreement), the Recipient may withdraw the Grant proceeds subject to the availability of such funds. The Recipient represents, by confirming its agreement below, (i) that it is authorized to enter into this Agreement and to carry out the Project in accordance with the terms and conditions set forth or referred to in this Agreement; and (ii) that it will seek the necessary and appropriate governmental clearances and approvals to carry out all the Activities associated with the Project. Please confirm the Recipient’s agreement to the foregoing by having an authorized official of the Recipient sign and date the enclosed copy of this Agreement, and returning it to the World Bank. Upon receipt by the World Bank of this countersigned copy, this Agreement shall become effective as of the date of the countersignature. Very truly yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT/INTERNATIONAL DEVELOPMENT ASSOCIATION /s/ Magdolna Lovei for John Roome Sector Director Sustainable Development Department East Asia and Pacific Region Page 2 Dr. Gordon Hein 2 SPF Grant No. TF097551 AGREED: THE ASIA FOUNDATION By /s/ Gordon Hein Authorized Representative Name Gordon Hein Title Vice President, Programs Date: 11/18/2010 Enclosures: (1) Standard Conditions for Grants Made by the World Bank out of Various Funds, dated July 31, 2010. (2) Disbursement Letter dated November 15, 2010 together with World Bank Disbursement Guidelines for Projects, dated May 1, 2006. Page 3 Dr. Gordon Hein 3 SPF Grant No. TF097551 ANNEX Article I Standard Conditions; Definitions 1.01. Standard Conditions. The Standard Conditions for Grants Made by the World Bank out of Various Funds dated July 31, 2010 ( “Standard Conditions”), with the modifications set forth in Section I of the Appendix to this Agreement, constitute an integral part of this Agreement. 1.02. Definitions. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the Standard Conditions or in this Agreement. Article II Project Execution 2.01. Project Objectives and Description. The objectives of the Project are to (i) improve the international development partners’ understanding of the dynamics of the selected sub-national conflict areas in South Asia and South-East Asia (Mindanao in the Philippines, Southern Thailand, Aceh in Indonesia and Northern and Eastern Sri Lanka); (ii) provide recommendations on how development partners can strengthen peace-building approaches in sub-national conflict zones; (iii) strengthen the awareness of policy makers and key civil society stakeholders in relevant countries of relevant experiences and practice in other countries in the region; and (iv) prepare guidelines for developing conflict-sensitive development assistance strategies in sub- national conflict environments. The Project consists of the following activities (the “Activities”): (a) Multi-Country Sub-National Conflict Analysis: Carrying out qualitative and quantitative research on development assistance on selected sub-national conflict cases, with the objective of developing recommendations on how to ensure effective aid delivery. (b) Knowledge and Experience Exchange: (i) Facilitate exchanges and dialogues among key government and civil society actors from the selected four countries, on good practices and key lessons for governance and public investment in sub-national conflict areas; and (ii) organize regional workshops and observation tours for policy-makers, key officials responsible for sub-national conflict areas, and civil society leaders to discuss the challenges and approaches for improving governance and development in these areas. (c) Guidelines and Training Materials : Development of a guideline and practical training materials that will help aid partners to develop locally relevant and conflict-sensitive development assistance strategies in sub-national conflict environments. 2.02. Project Execution Generally. The Recipient declares its commitment to the objectives of the Project. To this end, the Recipient shall carry out the Project in accordance with the provisions of: (a) Article II of the Standard Conditions; (b) the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Page 4 Dr. Gordon Hein 4 SPF Grant No. TF097551 Grants”, dated October 15, 2006 (“Anti-Corruption Guidelines”), with the modifications set forth in Section II of the Appendix to this Agreement; and (c) this Article II. Page 5 Dr. Gordon Hein 5 SPF Grant No. TF097551 2.03. Institutional and Other Arrangements. The Recipient shall establish and thereafter maintain throughout the implementation of the Project, an advisory panel comprised of experts in peace-building, development and security and conflict assessment methodologies to guide the Project implementation process. 2.04. Donor Visibility and Visit . (a) The Recipient shall take or cause to be taken all such measures as the World Bank may reasonably request to identify publicly the Donors ’ support for the Project. (b) For the purposes of Section 2.09 of the Standard Conditions, the Recipient shall, upon the World Bank’s request, take all reasonable measures required on its part to enable the representatives of the Donors to visit any accessible part of each Member Country’s territory for purposes related to the Project. 2.05. Project Monitoring, Reporting and Evaluation. (a) The Recipient shall monitor and evaluate the progress of the Project and prepare Project Reports in accordance with the provisions of Section 2.06 of the Standard Conditions and on the basis of the indicators set forth below in paragraph (b) of this Section. Each Project Report shall cover the period of one (1) calendar semester, and shall be furnished to the World Bank not later than one (1) month after the end of the period covered by such report. (b) The performance indicators referred to above in paragraph (a) consist of the following: (i) Submission of research methodology under Part (a) of the Project, satisfactory to the World Bank; (ii) Completion of the selected sub-national conflict case studies; (iii) Completion and dissemination of the synthesis report; (iv) Presentation of findings to relevant national and interested international stakeholders; (v) Number of learning events, exchange visits and consultative processes; (vi) Seniority and number of client, donor and civil society representatives participating in learning events, study tours, workshops, and field visits, and evaluations of events and learning activities received from participants; and (vii) Preparation of operationally relevant guidelines produced from the Activities under the Project; (c) The Recipient shall prepare the Completion Report in accordance with the provisions of Section 2.06 of the Standard Conditions. The Completion Report shall be furnished to the World Bank not later than four (4) months after the Closing Date. Page 6 Dr. Gordon Hein 6 SPF Grant No. TF097551 2.06. Financial Management. (a) The Recipient shall ensure that a financial management system is maintained in accordance with the provisions of Section 2.07 of the Standard Conditions. (b) The Recipient shall ensure that interim unaudited financial reports for the Project are prepared and furnished to the World Bank not later than forty five (45) days after the end of each calendar semester, covering the semester, in form and substance satisfactory to the World Bank. (c) The Recipient shall have its Financial Statements audited in accordance with the provisions of Section 2.07 (b) of the Standard Conditions. Each such audit of the Financial Statements shall cover the period of one (1) fiscal year of the Recipient. The audited Financial Statements for each such period shall be furnished to the World Bank not later than six (6) months after the end of such period. 2.07. Procurement (a) General . All services required for the Project and to be financed out of the proceeds of the Grant shall be procured in accordance with the requirements set forth or referred to in: (i) Sections I and IV of the “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” published by the World Bank in May 2004 and revised in October 2006 and May 2010 (“Consultant Guidelines”) in the case of consultants’ services; and (ii) the provisions of this Section, as the same shall be elaborated in the procurement plan prepared and updated from time to time by the Recipient for the Project in accordance with paragraph 1.16 of the Procurement Guidelines and paragraph 1.24 of the Consultant Guidelines (“Procurement Plan”). (b) Definitions . The capitalized terms used in the following paragraphs of this Section to describe particular procurement methods or methods of review by the World Bank of particular contracts, refer to the corresponding method described in the Consultant Guidelines. (c) Particular Methods of Procurement of Consultants’ Services (i) Except as otherwise provided in item (ii) below, consultants’ services shall be procured under contracts awarded on the basis of Quality- and Cost-based Selection. (ii) The following methods may be used for the procurement of consultants’ services for those assignments which the Bank agrees meet the requirements set forth in the Consultant Guidelines for their use: (A) Quality-based Selection; (B) Selection under a Fixed Budget; (C) Least Cost Selection; (D) Selection based on Consultants’ Qualifications; (E) Single- source Selection; (F) Selection of Individual Consultants; and (G) Sole Source Procedures for the Selection of Individual Consultants. Page 7 Dr. Gordon Hein 7 SPF Grant No. TF097551 (d) Review by the World Bank of Procurement Decisions . The Procurement Plan shall set forth those contracts which shall be subject to the World Bank’s Prior Review. All other contracts shall be subject to Post Review by the World Bank. Article III Withdrawal of Grant Proceeds 3.01. Eligible Expenditures. The Recipient may withdraw the proceeds of the Grant in accordance with the provisions of: (a) the Standard Conditions; (b) this Section; and (c) such additional instructions as the World Bank may specify by notice to the Recipient (including the “World Bank Disbursement Guidelines for Projects” dated May 2006, as revised from time to time by the World Bank and as made applicable to this Agreement pursuant to such instructions), to finance Eligible Expenditures as set forth in the following table. The table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Grant (“Category”), the allocations of the amounts of the Grant to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category: For the purpose of this paragraph, the terms: (i) “Training and Workshops” means reasonable costs incurred by the Recipient for the Project related to training, including purchase, translation and publication of materials, rental of facilities, course fees, workshop supplies, rental of equipment, reasonable honorarium of resource persons, and travel, accommodation and subsistence of participants, including study tours in neighboring provinces and countries; and (ii) “Incremental Operating Costs” means reasonable expenditure incurred by the Recipient on account of implementation and management of the Project (which expenditures would not have been incurred absent of the Project), including the Recipient’s staff travel costs, allowances, costs of vehicle rental, fuel and maintenance, communication costs, office supplies and equipment, office rental fees, utilities, and consumables required for holding meetings related to the Project, and the basic salaries for incumbent personnel of the Recipient working on the Project; and (iii) “Associated Overhead Costs” means a reasonable portion of the Recipient’s overhead costs, excluding Incremental Operating Costs. Category Amount of the Grant Allocated (expressed in USD) Percentage of Expenditures to be Financed (inclusive of Taxes) (1) Consultants’ services, including audit, Training and Workshops and Incremental Operating Costs, including Salaries of Project Staff 1,564,000 100% (2) Associated Overhead Costs 206,000 100% TOTAL AMOUNT 1,770,000 Page 8 Dr. Gordon Hein 8 SPF Grant No. TF097551 3.02. Withdrawal Conditions. Notwithstanding the provisions of Section 3.01 of this Agreement, no withdrawal shall be made for payments made prior to the date of countersignature of this Agreement by the Recipient. 3.03. Withdrawal Period. The Closing Date referred to in Section 3.06 (c) of the Standard Conditions is November 30, 2012. Article IV Recipient’s Representative; Addresses 4.01. Recipient’s Representative . The Recipient’s Representative referred to in Section 7.02 of the Standard Conditions is the Vice President of Programs, The Asia Foundation. 4.02. Recipient’s Address . The Recipient’s Address referred to in Section 7.01 of the Standard Conditions is: The Asia Foundation 465 California Street, 9th Floor San Francisco, CA 94104 Tel: Facsimile: 1-415-982-4640 1-415-392-8863 4.03. World Bank’s Address . The World Bank’s Address referred to in Section 7.01 of the Standard Conditions is: International Bank for Reconstruction and Development/International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable: Telex: Facsimile: INTBAFRAD INDEVAS 248423 (MCI) or 1-202-477-6391 Washington, D.C. 64145 (MCI) Page 9 Dr. Gordon Hein 9 SPF Grant No. TF097551 APPENDIX Modifications to the Standard Conditions and the Anti-Corruption Guidelines Section I. The Standard Conditions are modified as follows: T he definition of “Member Country” in Section 17 of the Appendix, “Definitions,” is modified to read as follows: “17. ‘Member Country’ means the member of the World Bank in whose territory the Project is carried out or any of such member’s political or administrative subdivisions. If the Grant is extended by the World Bank to such member as a party to the Grant Agreement, the term ‘Member Country’ and ‘Recipient’ refer to the same entity. If the Project is carried out in the territory of more than one member of the World Bank, ‘Member Country’ refers separately to each such member.” Section II. The modifications to the Anti-Corruption Guidelines are as follows: 1. Section 5 is re-numbered as Section 5(a) and a new Section 5(b) is added to read as follows: “…(b) These Guidelines also provide for the sanctions and related actions to be imposed by the Bank on Borrowers (other than the Member Country) and all other individuals or entities who are recipients of Loan proceeds, in the event that the Borrower or the individual or entity has been debarred by another financier as a result of a determination by such financier that the Borrower or the individual or entity has engaged in fraudulent, corrupt, coercive or collusive practices in connection with the use of the proceeds of a financing made by such financier.” 2. Section 11(a) is modified to read as follows: “… (a) sanction in accordance with prevailing Bank’s sanctions policies and procedures (fn13) a Borrower (other than a Member Country) (fn 14) or an individual or entity, including (but not limited to) declaring such Borrower, individual or entity ineligible publicly, either indefinitely or for a stated period of time: (i) to be awarded a Bank- financed contract; (ii) to benefit from a Bank-financed contract, financially or otherwise, for example as a sub-contractor; and (iii) to otherwise participate in the preparation or implementation of the project or any other project financed, in whole or in part, by the Bank, if at any time the Bank determines (fn 15) that such Borrower, individual or entity has engaged in corrupt, fraudulent, collusive, coercive or obstructive practices in connection with the use of loan proceeds, or if another financier with which the Bank has entered into an agreement for the mutual enforcement of debarment decisions has declared such person or entity ineligible to receive proceeds of financings made by such financier or otherwise to participate in the preparation or implementation of any project financed in whole or in part by such financier as a result of a determination by such financier that the Borrower or the individual or entity has engaged in fraudulent, corrupt, coercive or collusive practices in connection with the use of the proceeds of a financing made by such financier.” Page 10 Dr. Gordon Hein 10 SPF Grant No. TF097551 Footnotes: “13. An individual or entity may be declared ineligible to be awarded a Bank financed contract upon completion of sanctions proceedings pursuant to the Bank’s sanctions policies and procedures, or under the procedures of temporary suspension or early temporary suspension in connection with an ongoing sanctions proceeding, or following a sanction by another financier with whom the Bank has entered into a cross debarment agreement, as a result of a determination by such financier that the firm or individual has engaged in fraudulent, corrupt, coercive or collusive practices in connection with the use of the proceeds of a financing made by such financier.” “14. Member Country includes officials and employees of the national government or of any of its political or administrative subdivisions, and government owned enterprises and agencies that are not eligible to bid under paragraph 1.8(b) of the Procurement Guidelines or participate under paragraph 1.11(c) of the Consultant Guidelines.” “15. The Bank has established a Sanctions Board, and related procedures, for the purpose of making such determinations. The procedures of the Sanctions Board sets forth the full set of sanctions available to the Bank. In addition, the Bank has adopted an internal protocol outlining the process to be followed in implementing debarments by other financiers, and explaining how cross-debarments will be posted on the Bank’s website and otherwise be made known to staff and other stakeholders.”