The World Bank 1818 H Street N.W. (202) 477-1234 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS August 13, 2020 H. E. Dr. Rania A. Al-Mashat Minister of International Cooperation OFFICIAL Ministry of International Cooperation DOCUMENTS 8 Adly Street Cairo Arab Republic of Egypt Re: EGYPT: Upper Egypt Local Development Program (Loan No. 8645-EG) Amendment to the Loan Agreement Excellency: We refer to the Loan Agreement dated October 6, 2016, between the Arab Republic of Egypt ("Borrower") and International Bank for Reconstruction and Development ("Bank") for the above-referenced Project, ("Loan Agreement"). We further refer to your letter of April 2020, requesting the Bank to extend the Closing Date of the Project and the need to make some further modifications to the Loan Agreement. We are pleased to inform you that the Bank concurs with your request and consequently the Loan Agreement is amended as set forth below: 1. All references to Annual Program Investment Plan are hereby replaced throughout the entire Agreement with "Annual Program Investment and Expenditure Plan". 2. Section I.C.2(b) of Schedule 2 to the Agreement is hereby amended to read as follows: "(b) (i) The Borrower shall maintain, throughout the implementation of the Program, a coordination office ("Program Coordination Office" or "P0C"), within the Ministry of Local Development, with functions, staffing, and resources acceptable to the Bank, to be comprised of, inter alia, representatives from the ministries responsible for local development, and trade and industry. (ii) Without limitation to sub-paragraph (i) immediately above, the Borrower shall, through the Ministry of Local Development, ensure that the PCO is responsible for: (i) the overall management, coordination, reporting, monitoring, and evaluation of Program implementation; (ii) providing technical support to the Steering Committee; (iii) hiring and interfacing with the Independent Verification Agent; (iv) carrying out Annual Performance Assessments; (v) carrying out the technical audits referred to under Part B.2 of the Program; and (vi) facilitating financial audits for the Program, all in accordance with the provisions of this Agreement and the Program Operational Manual." 3. Section I.C.2(d) of Schedule 2 to the Agreement is hereby amended to read as follows: "(d) The Borrower shall, through the Select Govemorates, maintain throughout the implementation of the Program, an advisory economic council in each of the Select Governorates ("Economic Council") reporting to the governor of the Select Governorate with functions, staffing, and resources acceptable to the Bank, comprising representatives from the private sector and civil society in adequate numbers, with experience and qualification acceptable to the Bank and as further detailed in the Program Operational Manual." 4. Section I.C.7 of Schedule 2 to the Agreement is hereby amended to read as follows: "7. To facilitate the carrying out of the Program, the Borrower shall transfer in a timely manner to the Qena Governorate and the Sohag Governorate the proceeds of the Loan withdrawn from time to time under Categories (1), (2), (3), (4), (5), (6), (9) and (10) in the table in paragraph 2 of Section IV.A of this Schedule. The Borrower shall ensure that such transfers shall be fully additional to the regular annual budget allocations made by the Borrower for the Qena Governorate and the Sohag Govemorate." 5. A new Section I.C.9 is hereby added to the Schedule 2 to the Agreement to read as follows: "9. Competitiveness Grants (a) The Borrower shall provide, for each Fiscal Year during the implementation of the Program starting from FY 20/21, a Competitiveness Grant to each Select Govemorate for the purpose of carrying out its respective Annual Program Investment and Expenditure Plan, based on: (i) the fulfillment by the Select Governorate of the Minimum Access Criteria for competitiveness for a given Fiscal Year starting from FY 20/21; and (ii) the achievement by the Select Governorate of a Performance Score for competitiveness starting from FY 20/21, all in accordance with principles, methodology and arrangements as set out in the Competitiveness Implementation Manual. -2- (b) The Borrower shall, through the PCO, carry out an Annual Performance Assessment of each Select Governorate for each Fiscal Year to evaluate: (i) the fulfillment of the Minimum Access Criteria for competitiveness; and (ii) the achievement of Performance Score for competitiveness; and, on the basis of such evaluation, to determine the amount of Competitiveness Grant, all in accordance with principles, methodology and arrangements as set out in the Competitiveness Implementation Manual." 6. The withdrawal table under Section IV.A.2 of Schedule 2 to the Agreement is hereby amended to read as set out in the attachment to this Amendment Letter. 7. Section IV.B.1(b) of Schedule 2 to the Agreement is hereby amended to read as follows: "(b) for any DLR under Category (1), (2), (3), (4), (5), (6), (9) or (10), until and unless the Borrower has furnished all required verification documents and information acceptable to the Bank within sixty (60) days from the date said DLR was achieved, or such later date as may be established by the Bank, showing that said DLR has been achieved. Such verification documents and information shall include verification reports from the Independent Verification Agent, based on reports prepared by the Borrower certifying the achievements of the DLRs in accordance with procedures and arrangements, and verification protocols acceptable to the Bank." 8. Section IV.B.4 of Schedule 2 is hereby deleted and replaced with the following: "4. The Closing Date is October 31, 2023." 9. The following existing paragraphs in the Definitions Section of the Appendix are amended to read as follows: "1. "Annual Performance Assessment" means the assessment referred to in paragraphs 4 (b) and 9 (b) of Section I.C of Schedule 2 to this Agreement, to be carried out by the PCO for each Fiscal Year for each Select Governorate, in accordance with principles, methodology and arrangements as set out in the Program Operational Manual." "2. "Annual Program Investment and Expenditure Plan" means the annual plan to be prepared by each Select Governorate for each Fiscal Year during the implementation of the Program, which sets out for each said year the infrastructure and services investments and expenditures to be carried out in the Select Governorate in said year as selected in accordance with principles, methodology and arrangements set out in the Program Operational Manual, in order to meet the objectives of the Program." "5. "Competitiveness Implementation Manual" means the manual for the Competitiveness Grant, Cluster Competitiveness Initiatives and Industrial Zone Modernization Plans, acceptable to the Bank, to be adopted by the Borrower as part -3- of the POM pursuant to the provisions of paragraph 3 of Section I.C of Schedule 2 to this Agreement, setting forth the detailed policies and procedures for said grant, initiatives and plans." "17. "Minimum Access Criteria" means the eligibility criteria, as set out in the Program Operational Manual, to be met by each Select Governorate in a given Fiscal Year in order to access both, the Performance Grant and the Competitiveness Grant for said Fiscal Year, and to be evaluated through an Annual Performance Assessment." 10. The following new paragraphs are added and placed in alphabetical order in the Definitions Section of the Appendix to the Agreement to read as follows, and the existing paragraphs are renumbered accordingly in alphabetical order: ""Competitiveness Grants" means the annual fiscal transfers from the Borrower's budget into the annual budgets of the Select Governorates, provided in addition to the regular annual budget allocations of the Select Governorates, on the basis of meeting the Minimum Access Criteria for competitiveness and achieving a Performance Score for competitiveness starting from FY 20/21, which the Select Governorates can utilize to undertake infrastructure and services investments identified in the Annual Program Investment and Expenditure Plans, all in accordance with principles, methodology and arrangements as set out in the Program Operational Manual." ""Performance Score" means a numerical score of a Select Governorate to be measured and evaluated through an Annual Performance Assessment, on the basis of performance metrics for: (a) competitiveness as set out in the Competitiveness Implementation Manual, in the case of Competitiveness Grants; or (b) investment selection and implementation as set out in the Performance Grant Manual, in the case of Performance Grants." All other provisions of the Loan Agreement remain in full force and effect, except as specifically amended by this Amendment Letter. Please confirm your agreement to the foregoing on behalf of the Borrower by countersigning and dating the corresponding form of confirmation set forth below, and returning one fully executed original of this letter to us and retaining one original for your records. This amendment letter shall become effective as of the date of this letter, upon receipt by the Bank of the countersigned copy of this letter. Sincerely yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ob6ert Bou Jaoude c W gypt, Yemen and Djibouti -4- AGREED AND CONFIRMED: ARAB REPUBLIC OF EGYPT B Authorized epres htative Name: Title: Wgstf IndM o(la @ooper-hron Date: Sk" -5- Attachment "Category Disbursement Linked Amount of the Loan Disbursement Resut (a aplicale)Calculation (including Disbursement Result (as applicable) Allocated Forula Linked Indicator as (expressed in USD)Formula applicable) (1) DLI #1: Increase in DLR #1: 20 percentage 31,250,000 DLR #1: Occupancy Rate in industrial point increase in For each of Qena zones in each of Qena Occupancy Rate in Governorate and Governorate and Sohag each of Qena Governorate (Occupancy Governorate and Sohag Rate baselines: 14% for Governorate Qena Governorate and 34% (i) $5,000,000 for the for Sohag Governorate for first 4 percentage FY 15/16) increase in Occupancy Rate; (ii) $1,250,000 for each additional 1 percentage point increase in Occupancy Rate (2) DLI #2: Number of DLR #2.1: Industrial 6,000,000 DLR #2.1: industrial zones in each of Zone Modernization $6,000,000 of which Qena Governorate and Plan developed and $3,000,000 for each Sohag Governorate adopted for each of of Qena Govemorate implementing their Qena Governorate and and Sohag respective Industrial Zone Sohag Governorate by Governorate Modernization Plan FY 17/18 (Baseline: 0 for FY 15/16) DLR #2.2.1: Industrial DLR#2.2.1: Zone Modernization ZoneModenizaion$8,000,000 of which Plan implemented in 2 $8,000,000 o whch .nutnlzne n$4,000,000 for each mndustrial zones ininutalze Qena ovemrateindustrial zone Qena Governorate DLR #2.2.2: Industrial DLR #2.2.2: $16,000,000 of Zone Modernization wi,000,000 f Plan implemented in 4 each $ndustnal zo industrial zones in Sohag Governorate DLR #2.3: Private DLR #2.3: management or public- $10,750,000 of private partnership which $5,375,000 for arrangement each industrial zone -6- implemented under the supervision of the relevant governorate in 1 industrial zone in each of Qena Governorate and Sohag Governorate (3) DLI #3: Number of DLR #3.1: 5 Cluster 32,000,000 DLR #3.1: Cluster Competitiveness Competitiveness $32,000,000 of Initiatives launched and Initiatives launched in which $4,000,000 for implemented in each of each of Qena each Cluster Qena Governorate and Governorate and Sohag Competitiveness Sohag Governorate Governorate by FY Initiative (Baseline: 0 for FY 15/16) 19/20 DLR #3.2: 5 Cluster DLR #3.2: $10,000,000 of Competitiveness which $1,000,000 for Initiatives implemented each Cluster in each of Qena Cptten Governorate and Sohag Inititive Governorate Initiative (4) DLI #4: Number of DLR #4.1: 6 district 12,000,000 DLR #4.1: district service centers that service centers in Qena $12,000,000 of reduced by at least 25% their Govemorate which $2,000,000 for average processing times (in each district service days) for issuing operating center licenses and construction permits to businesses calculated on the basis of the methodology set out in the DLR #4.2: 8 district DLR #4.2: POM (Baselines: 0 for each service centers in $16,000,000 of of Qena Governorate and Sohag Governorate which $2,000,000 for Sohag Governorate) each district service center (5) DLI #5: Minimum DLR #5.1 Each of 267,000,000 DLR #5.1: Access Criteria met and Qena Governorate and $30,000,000 of Performance Score achieved Sohag Govemorate has which $12,000,000 by Program Governorates to met the Minimum for Qena receive Performance Grants Access Criteria for FY Governorate and 16/17 $18,000,000 for Sohag Governorate DLR #5.2.1: Each of Qena Governorate and Sohag Govemorate has DLR #5.2.1: met the Minimum $30,000,000 of Access Criteria for FY which $12,000,000 17/18 for Qena Governorate and $18,000,000 for Sohag Governorate DLR #5.2.2: Pilot assessment of Performance Target for DLR,#5.2.2: $30,000,000 of FY17/18 carried out in which $12,000,000 each of Qena for Qena Govemorate and Sohag Govemorate and Governorate $18,000,000 for Sohag Governorate DLR #5.3.1: Each of Qena Governorate and Sohag Governorate has met the Minimum Access Criteria for FY 18/19 DLR #5.3.2: Each of Qena Governorate and Sohag Governorate has DLR #5.3.2: $0 achieved a Performance Target of at least 60% for FY 18/19 DLR #5.4.1: Each of Qena Govemorate and Sohag Govemorate has DLR #5.4.1: met the Minimum $30,000,000 of Access Criteria for FY which $12,000,000 19/20 for Qena Governorate and $18,000,000 for Sohag Governorate DLR #5.4.2: Each of Qena Governorate and Sohag Govemorate has DLR #5.4.2: achieved a $30,000,000 of Performance Target of which $12,000,000 1 for Qena at least 70% for FY Governorate and 19/20 $18,000,000 for Sohag Governorate DLR #5.5.1: Each of Qena Govemorate and DLR #5.5.1: $0 Sohag Governorate has met the Minimum Access Criteria for FY 20/21 DLR #5.5.2: Each of DLR #5.5.2: $0 Qena Governorate and Sohag Governorate has achieved a Performance Target of at least 80% for FY 20/21 DLR #5.6: Program DLR #5.6: Govemorates have met $6,000,000 of which Minimum Access of which $2,500,000 Criteria for for Qena Performance Grant in Governorate and the Annual $3,500,000 for Sohag Performance Governorate Assessment completed in FYI9/20 DLR #5.7: Program governorates have met DLR #5.7: Minimum Access $12,000,000 of Criteria for which of which Performance Grant in $5,0000,000 for the Annual Qena Governorate Performance and $7,000,000 for Assessment completed Sohag Govemorate in FY 20/21 DLR #5.8: Program governorates have met DLR #5.8: Minimum Access $17,000,000 of Criteria for which $7,000,000 for Performance Grant in Qena Governorate the Annual and $10,000,000 for Performance Sohag Govemorate Assessment completed in FY 21/22 DLR #5.9: Program DLR #5.9: governorates have $14,000,000 of achieved Performance which: Score for Performance Grants in the Annual For Qena Performance Governorate = Assessment completed [US$5,500,000 x in FY 19/20 Performance Score achieved by Qena Governorate] / 75 For Sohag Governorate= [US$8,500,000 x Performance Score achieved by Sohag Governorate] / 75 DLR #5.10: Program DLR#5.10: governorates have $28,000,000 of achieved Performance which: Score for Performance For Qena Grants in the Annual Goveorate Performance [US$ 11,000,000 x Assessment completed Performance Score in FY 20/21 achieved by Qena Governorate] /80 For Sohag Governorate = [US$17,000,000 x Performance Score achieved by Sohag Governorate] / 80 DLR #5.11: Program DLR #5.11: governorates have $40,000,000 of achieved Performance which: Score for Performance Grants in the Annual For Qena Performance Governorate = Assessment completed [US$16,000,000 x in FY 21/22 Performance Score -10- achieved by Qena Governorate] / 85 For Sohag Governorate = [US$24,000,000 x Performance Score achieved by Sohag Governorate] / 85 (6) DLI #6: Cumulative DLR #6: EGP 60,000,000 DLR #6: For each of value (EGP) of 1,050,000,000 Qena Governorate infrastructure and services equivalent for each of and Sohag investment expenditures Qena Governorate and Governorate: $2.857 paid by each of Qena Sohag Governorate for each new EGP Governorate and Sohag 100 equivalent paid Governorate under the for infrastructure and Program that has been services expenditures subject to technical audit covered by a carried out under Part B.2 of technical audit and the Program and certified certified acceptable acceptable by technical by technical auditor auditor (Baseline: 0 for FY 15/16) (7) Front-end Fee to be paid 1,250,000 pursuant to Section 2.03 of this Agreement in accordance with Section 2.05 (b) of the General Conditions (renumbered as such pursuant to paragraphs 3 and 5 of Section II of the Appendix to this Agreement and relating to Capitalizing Front-end Fee and Interest) (8) Interest Rate Cap or 0 Interest Rate Collar premium to be paid pursuant to Section 2.08(c) of this Agreement in accordance with Section 4.05 of the General Conditions (9) DLI #7: Minimum DLR #7.1: Program 87,000,000 DLR #7.1: access criteria met and governorates have met $6,000,000 of which performance score achieved Minimum Access $3,000,000 for each on competitiveness by Criteria on of Qena Governorate Program governorates to competitiveness in the and Sohag receive Competitiveness Annual Performance Governorate Grants Assessment completed in FY 20/21 -ll- DLR #7.2: Program governorates have met DLR #7.2: Minimum Access $6,000,000 of which Criteria on $3,000,000 for each competitiveness in the of Qena Govemorate Annual Performance and Sohag Assessment completed Goverorate in FY 21/22 DLR #7.3: Qena governorate has DLR #7.3: achieved Performance $37,125,000 for Score on Qena Governorate, of competitiveness in which $750,000 for each Annual each Performance Performance Score achieved Assessment completed in FY 20/21, 21/22 22/23 and 23/24, respectively DLR #7.4: Sohag DLR #7.4: governorate has $37,875,000 for achieved Performance Sohag Governorate, Score on of which $750,000 competitiveness in the for each Performance Annual Performance Score achieved Assessment completed in FY 20/21, 21/22 and 22/23 and 23/24, respectively (10) DLI #8: Timely conduct DLR #8.1: Annual 3,500,000 DLR #8.1: of Annual Performance Performance $1,500,000 Assessment and timely Assessment of Program communication to Program governorates governorates of indicative completed no later than allocation of Performance October 31, 2020 (or and Competitiveness Grants such later date as agreed with the Bank) and amount of annual allocation of both Grants for the subsequent FY announced no later than November 30, 2020 (or such later date -12- as agreed with the DLR #8.2: Bank) $1,500,000 DLR #8.2: Annual Performance Assessment of Program governorates completed no later than August 31, 2021 (or such later date as agreed with the Bank) and amount of annual allocation of both Grants for the subsequent FY announced no later than September 30, 2021 (or such later date as agreed with the Bank) DLR #8.3: $500,000 DLR #8.3: Annual Performance Assessment of Program governorates completed no later than August 31, 2022 (or such later date as agreed with the Bank) TOTAL AMOUNT $500,000,000" -13-