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CONFORMED COPY
CREDIT NUMBER 3251 CHA
Development Credit Agreement
(Sichuan Urban Environment Project)
between
PEOPLE’S REPUBLIC OF CHINA
and
INTERNATIONAL DEVELOPMENT ASSOCIATION
Date January 9, 2001
CREDIT NUMBER 3251 CHA
DEVELOPMENT CREDIT AGREEMENT
AGREEMENT, dated January 9, 2001, between PEOPLE’S REPUBLIC OF CHINA (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 has also requested the International Bank for Reconstruction 
and Development (the Bank) to provide additional assistance towards the financing of 
the Project and by an agreement of even date herewith between the Borrower and the 
Bank (the Loan Agreement), the Bank is agreeing to provide such assistance in an 
aggregate principal amount equal to one hundred million Dollars ($100,000,000) (the 
Loan); 
(C)
the Borrower and the Association intend, to the extent practicable, that  
the proceeds of the Credit be disbursed on account of expenditures in respect of the 
Project before disbursements of the proceeds of the Loan provided for in this 
Agreement are made; 
(D)
the Project will be carried out by Sichuan Province (Sichuan) with the 
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Borrower’s assistance, and as part of such assistance, the Borrower will make 
available to Sichuan the proceeds of the Credit as provided in this Agreement and the 
proceeds of the Loan as provided in the Loan Agreement; and
WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, 
to extend the Credit to the Borrower upon the terms and conditions set forth in this 
Agreement and in the Project Agreement of even date herewith among the Association, 
the Bank and Sichuan;
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 
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 have the respective meanings therein set forth and the 
following additional terms have the following meanings:
(a)
“Affected Persons” means persons who on account of the execution of the 
Project had or would have their: (a) standard of living adversely affected; or (b) 
right, title or interest in any house, land (including premises, agricultural and 
grazing land) or any other fixed or movable asset acquired or possessed, temporarily 
or permanently; or (c) business, occupation, work or place of residence or habitat 
adversely affected, and “Affected Person” means any of the Affected Persons.
(b)
“Category” means a category of items set forth in the table in paragraph 
1 of Schedule 1 to this Agreement.
(c)
“Chengdu” means Chengdu municipality in Sichuan, and any successor 
thereto.
(d)
“Chengdu Drainage Company” means the Chengdu Drainage Company, Ltd., a 
state-owned limited liability company established and operating pursuant to its 
Charter of July, 1998, which was approved on August 6, 1998, by Chengdu Municipal 
Construction Commission; and to Business License No. 5101001800031, dated August 6, 
1998, issued by Chengdu Industrial and Commercial Administration Bureau, and any 
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successor thereto.
(e)
“Deyang” means Deyang municipality in Sichuan, and any successor thereto.
(f)
“Deyang Sewage Treatment Corporation” means Deyang Qing Yuan Sewage 
Treatment Company, Ltd., a limited liability company established and operating 
pursuant to its charter of February, 1999, which was approved in March, 1999 by Deyang 
Construction Commission; and to Business License No. 20512328-2, dated April 29, 1999, 
issued by Deyang Industrial and Commercial Administration Bureau, and any successor 
thereto.
(g)
“Environmental Assessment” means the Sichuan Urban Environment Project 
Environmental Assessment of Parts A, B and D of the Project, dated December 1998, 
which includes environmental mitigation measures and the administrative and monitoring 
arrangements to ensure the implementation of such measures. 
(h)
“Guanghan” means Guanghan municipality in Sichuan, and any successor 
thereto.
(i)
“Industrial Pollution Control Action Plan” means the action plan dated 
March 22, 1999, setting forth activities to be carried out by Sichuan to control and 
minimize wastewater pollution in the Min and Tuo River Basins. 
(j)
“Leshan” means Leshan municipality in Sichuan.
(k)
“Leshan Environmental Sanitation Management Bureau” and “LESMB” means the 
bureau responsible for environmental sanitation management in Leshan.
(l)
“Leshan Water Supply General Company” means Leshan Water Supply General 
Company, a state-owned enterprise established and operating pursuant to its Charter, 
which was  approved on December 12, 1986, by Leshan Construction Commission; and to 
Business License No. 20695038-6, dated April 22, 1996, issued by Leshan Industrial and 
Commercial Administration Bureau, and any successor thereto.
(m) 
“Leshan Wastewater Treatment Company” means Leshan Wastewater Treatment 
Company, Ltd., a state-owned limited liability company established and operating 
pursuant to its Charter of April 13, 1998, which was approved on April 13, 1998, by 
Leshan Construction Commission; and to Business License No. 20696835-9, dated July 15, 
1998, issued by Leshan Industrial and Commercial Administration Bureau, and any 
successor thereto.
(n)
“Loan Agreement” means the agreement of even date herewith between the 
Borrower and the Bank for the Project, as such agreement may be amended from time to 
time; and such term includes the “General Conditions applicable to Loan and Guarantee 
Agreements for Single Currency Loans” of the Bank, dated May 30, 1995 (as amended 
through December 2, 1997), as applied to such agreement, and all schedules and 
agreements supplemental to the Loan Agreement.
(o)
“Luzhou” means Luzhou municipality in Sichuan, and any successor thereto.
(p)
“Luzhou Water Supply Company” means Luzhou Water Supply Company, a 
state-owned enterprise established and operating in accordance with its charter of 
March 28, 1998, which was approved on April 18, 1998, by Luzhou Municipal Construction 
Committee; and to Business License No. 20470299-5, dated March 31, 1998, issued by 
Luzhou Industrial and Commercial Administration Bureau, and any successor thereto.
(q)
“PMO” means the project management office maintained pursuant to the 
provisions of paragraph 1(a)(i) of Schedule 2 to the Project Agreement.
(r)
“Project Agreement” means the agreement among the Association, the Bank 
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and Sichuan of even date herewith, as the same may be amended from time to time, and 
such term includes all schedules and agreements supplemental to the Project Agreement.
(s)
“Project Municipalities” means, collectively, Chengdu, Deyang, Guanghan, 
Leshan and Luzhou, and “Project Municipality” means, individually, any of the Project 
Municipalities.
(t)
“Project Municipality’s Respective Part of the Project” means for:
(i)
Chengdu:  Parts E and F of the Project; 
(ii)
Deyang:  Parts C(1), C(2), E and F of the Project;
(iii)
Guanghan:  Part D(2) of the Project;
(iv)
Leshan:  Parts A(4), C(1), C(2), C(3), C(4), D(1), E and F of the 
Project; and
(v)
Luzhou:  Parts C(1), C(2), C(3), C(4), E and F of the Project.
(u)
“Resettlement Action Plan” means the Sichuan Urban Environment Project 
Resettlement Action Plan or SUEP RAP, dated April 1999, which sets out the procedures 
governing land acquisition, resettlement and compensation for Affected Persons for 
Parts A and B of the Project, as well as monitoring and reporting arrangements to 
ensure compliance with said plan, as such SUEP RAP may be revised from time to time in 
agreement with the Association.
(v)
“Special Account” means the account referred to in Section 2.02(b) of 
this Agreement.
(w)
“Sichuan” means the Borrower’s Sichuan Province, and any successor 
thereto.
(x)
“Subsidiary Loan Agreements” means, collectively, the agreements to be 
entered into between each of the Project Municipalities (excluding Guanghan) and its 
Utility Company pursuant to paragraph 7 of Schedule 2 to the Project Agreement, as the 
same may be amended from time to time, and such term includes schedules to said 
agreements; and “Subsidiary Loan Agreement” means, individually, any of the Subsidiary 
Loan Agreements.
(y)
“Utility Company” means in respect of:
(i)
Chengdu:  the Chengdu Drainage Company; 
(ii)
Deyang: the Deyang Sewage Treatment Corporation;
(iii)
Leshan: the Leshan Water Supply General Company and Leshan 
Wastewater Treatment Company; and
(iv)
Luzhou:  the Luzhou Water Supply Company,
collectively, referred to as “Utility Companies.” 
(z)
“Utility Company’s Respective Part of the Project” means:
(i)
for Chengdu Drainage Company: Part A(1) of the Project;
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(ii)
for Deyang Sewage Treatment Corporation: Part B(1) of the Project;
(iii)  for Leshan Wastewater Treatment Company: Part A(3) of the Project; 
(iv)
for Leshan Water Supply General Company: Part A(2) of the Project; 
and
(v)
for Luzhou Water Supply Company: Part B(2) of the Project.
(aa)
“Yuan” and “¥” mean the currency of the Borrower.
Section 1.03. Each reference in the General Conditions to the Project 
implementation entity shall be deemed as a reference to Sichuan, each of the Project 
Municipalities and the respective Utility Company of each Project Municipality.
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 one million five hundred thousand Special Drawing 
Rights (SDR 1,500,000).
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 
Dollars 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 3 to this Agreement.
Section 2.03. The Closing Date shall be June 30, 2006, or such later date as the 
Association shall establish. The Association shall promptly notify the Borrower of 
such later date.
Section 2.04. (a) The Borrower shall pay to the Association a commitment charge 
on the principal amount of the Credit not withdrawn from time to time at a rate to be 
set by the Association as of June 30 of each year, but not to exceed the rate of 
one-half of one percent (1/2 of 1%) per annum.
(b)
The commitment charge shall accrue: (i) from the date sixty days after 
the date of this Agreement (the accrual date) to the respective dates on which amounts 
shall be withdrawn by the Borrower from the Credit Account or 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 
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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 February 15 and August 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 February 15 and August 15 commencing August 15, 2009, and ending February 15, 
2034.  Each installment to and including the installment payable on February 15, 2019, 
shall be one and one-fourth percent (1-1/4%) of such principal amount, and each 
installment thereafter shall be two and one-half percent (2-1/2%) 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, without any 
limitation or restriction upon any of its other obligations under this Agreement, 
shall cause Sichuan to perform in accordance with the provisions of the Project 
Agreement all the obligations of Sichuan therein set forth, shall take and cause to be 
taken all action, including the provision of funds, facilities, services and other 
resources, necessary or appropriate to enable Sichuan to perform such obligations, and 
shall not take or permit to be taken any action which would prevent or interfere with 
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such performance.
(b)
The Borrower shall make available to Sichuan the proceeds of the Credit 
on the following principal terms:
(i)
The principal amount so made available: (A) shall be the 
equivalent in terms of Special Drawing Rights 
(determined on the date or 
respective dates of withdrawal from the Credit Account) of the value of the 
currency or currencies so withdrawn; and (B) shall be repaid in a foreign 
currency selected by the Borrower 
in amounts  equivalent 
(determined as of the date or respective dates of repayment) to the amount referred 
to in subparagraph (A) above.
(ii)
The Borrower shall recover from Sichuan such principal amount over 
a period of seventeen (17) years, 
inclusive of a grace 
period of  five (5) years.
(iii)
The Borrower shall charge a service charge on such principal 
amount withdrawn and outstanding from time to 
time at a rate equal to 
the service charge applicable to the Credit pursuant to the provisions of  Section 
2.05 of this Agreement. 
(iv)
The Borrower shall charge a commitment fee on such principal 
amount not withdrawn from time to time at a 
rate equal to the 
commitment charge applicable to the Credit pursuant to the provisions of Section 2.04 
of this 
Agreement. 
(c)
The Borrower shall make the proceeds of the Loan available to Sichuan on 
the following principal terms:
(i)
The principal amount so made available shall be the amount in 
Dollars (determined on the date, or 
respective dates, of 
withdrawal from the Loan Account) of the value of the currency or currencies so 
withdrawn.  The following amounts shall be recovered by the 
Borrower in Dollars: (A) the principal amount 
so made available; and (B) 
an amount equal to one percent (1%) of the Loan (collectively, the Loan Amount).
(ii)
The Borrower shall recover from Sichuan the Loan Amount  over a 
period of twenty (20) years, inclusive of a 
grace period of five (5) 
years.
(iii)
The Borrower shall charge interest on such principal amount 
withdrawn and outstanding from time to time at 
a rate equal to the 
rate of interest applicable from time to time to the Loan pursuant to the provisions 
of 
Section 2.06 of the Loan Agreement.
(iv)
The Borrower shall charge a commitment fee on such principal 
amount of the Loan so made available and not 
withdrawn from time to 
time at a rate equal to the commitment charge applicable to the Loan pursuant to the 
provisions of Section 2.05 of the Loan 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 1 to 
the Project Agreement.
Section 3.03. The Borrower and the Association hereby agree that the obligations 
set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions 
(relating to insurance, use of goods and services, plans and schedules, records and 
reports, maintenance and land acquisition, respectively) shall be carried out by 
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Sichuan pursuant to Section 2.03 of the Project Agreement.
ARTICLE IV
Financial Covenants
Section 4.01. (a)  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 sound 
accounting practices, records and accounts 
reflecting such 
expenditures;
(ii)
retain, until at least one year after the Association has received 
the audit report for the fiscal year in 
which the last withdrawal 
from the Credit Account or payment out of the Special Account was made, all 
records (contracts, orders, invoices, bills, receipts 
and 
other documents) evidencing such expenditures;
(iii)
enable the Association’s representatives to examine such records; 
and
(iv)
ensure that such records and accounts are included in the annual 
audit referred to in paragraph (b) of this 
Section and that the 
report of such audit contains a separate opinion by said auditors as to whether the 
statements of expenditures 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.
(b)
The Borrower shall:
(i)
have the records and accounts referred to in paragraph (a) (i) 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, including 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; 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.
ARTICLE V
Remedies of the Association
Section 5.01. Pursuant to Section 6.02(l) of the General Conditions, the 
following additional events are specified:
(a)
Sichuan shall have failed to perform any of its obligations under the 
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Project Agreement. 
(b)
As a result of events which have occurred after the date of the 
Development Credit Agreement, an extraordinary situation shall have arisen which shall 
make it improbable that Sichuan will be able to perform its obligations under the 
Project Agreement.
(c)
Any of the parties to any of the Subsidiary Loan Agreements shall have 
failed to perform any of its respective obligations thereunder.
Section 5.02. Pursuant to Section 7.01(h) of the General Conditions, the 
following additional event is specified, namely, any of the events specified in 
paragraph (a) or (c) of Section 5.01 of this Agreement shall occur and shall continue 
for a period of sixty (60) days after notice thereof shall have been given by the 
Association to the Borrower.
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 Loan Agreement have 
been fulfilled, other than those related to the effectiveness of this Agreement.
(b)
The Subsidiary Loan Agreements have been executed on behalf of the 
Project Municipalities (excluding Guanghan) and each of their respective Utility 
Companies.
Section 6.02. The following events are specified as additional matters, within 
the meaning of Section 12.02(b) of the General Conditions, to be included in the 
opinion or opinions to be furnished to the Association: 
(a)
The Project Agreement has been duly authorized or ratified by Sichuan and 
is legally binding upon Sichuan in accordance with its terms.
(b)
Each of the Subsidiary Loan Agreements has been duly authorized or 
ratified by each of the parties thereto and is legally binding on said parties in 
accordance with its terms.
Section 6.03. 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 Minister 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:
Ministry of Finance
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Sanlihe
Beijing 100820
People’s Republic of China
Cable address:
Telex:
FINANMIN
22486 MFPRC CN
Beijing 
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 
Beijing, People's Republic of China, as of the day and year first above written.
PEOPLE’S  REPUBLIC  OF  CHINA
By /s/ Zhu Guangyao
Authorized Representative
INTERNATIONAL  DEVELOPMENT  ASSOCIATION
By /s/ Yukon Huang
Authorized Representative 
SCHEDULE 1
Withdrawal of the Proceeds of the Credit and the Loan
1.
The table below sets forth the Categories of items to be financed out of the 
proceeds of the Credit and of the Loan, the allocation of the amounts of the Credit 
and of the Loan to each Category and the percentage of expenditures for items so to be 
financed in each Category:
PLEASE SEE ORIGINAL FOR TABLE, DONE IN WRONG FORMAT
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 
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territory of any country other than that of the Borrower, provided, however, that 
expenditures in the currency of the Hong Kong Special Administrative Region of the 
Borrower for goods and services supplied from said region and expenditures in the 
currency of the Macau Special Administrative Region of the Borrower for goods or 
services supplied from said region shall be deemed to be “foreign expenditures”; and
(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.
3.
Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be 
made in respect of:
(a)
payments made for expenditures under the Project prior to the date of 
this Agreement, except that withdrawals, in an aggregate amount not exceeding the 
equivalent of $100,000 for expenditures by Luzhou under Part C(4) of the Project may 
be made in respect of Category 5(d) on account of payments made for expenditures 
before that date but after April 1, 1999; and
(b)
payments made for expenditures by each Utility Company and LESMB under 
Categories 1(a), 1(b), 1(c), 1(d), 1(e) and 1(f) until such Utility Company and LESMB 
shall have entered into agreements, acceptable to the Association, in accordance with 
Section II of Schedule 1 to the Project Agreement, with consultancy firms for the 
provision of training, institutional and financial technical assistance services and 
construction supervision services under Part E of the Project.
4.
The Association and the Bank may require withdrawals from the Credit Account and 
the Loan Account to be made on the basis of statements of expenditure for expenditures 
for:
(a)
works under contracts costing less than $6,000,000 equivalent each; 
(b)
goods under contracts costing less than $400,000 equivalent each; 
(c)
consultants’ services under contracts with firms or individuals, each 
costing less than $100,000 equivalent or $50,000 equivalent respectively; and
(d)
training, regardless of the cost thereof,
all under such terms and conditions as the Association and the Bank shall specify by 
notice to the Borrower.
SCHEDULE 2
Description of the Project
The objective of the Project is to assist Sichuan in the first phase of its long 
term environmental improvement program to: (a) improve urban environmental services 
with a view to reducing environmental degradation of its water and land resources; (b) 
provide an adequate supply of safe water to its growing urban population and economy; 
and (c) maintain water quality at levels which are compatible with the needs of the 
river basins of the Min and Tuo Rivers, thereby protecting the water quality of the 
Yangtze River. 
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:
Min River Basin Water Quality Recovery
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Improving the quality of water supplied, the treatment of wastewater and solid 
waste management through:
(1)
Chengdu Wastewater 
Laying of about 7 kilometers (km) of interceptor sewers; and construction of 
secondary sewer connections, including link sewers and a 300,000 cubic meter per day 
(m3/day) wastewater treatment plant in Chengdu.
(2)
Leshan Water Supply
Construction of an intake, a 3-km raw water main, one or more water treatment 
plants with a total capacity of 100,000 m3/day, transmission mains and a pumping 
station; and strengthening of the water supply distribution network in Leshan. 
(3)
Leshan Wastewater
Laying of about 18 km of interceptor sewers and steel main, link sewers and 
connections; and phased construction of 3 pumping stations with a total capacity of 
416,000 m3/day, construction of a 0.85-km river crossing in Leshan and preliminary 
treatment of wastewater.
(4)
Leshan Solid Waste Management
Improvements to solid waste management, comprising of solid waste collection, 
transfer and disposition in landfills in Leshan, through expansion of a landfill; 
construction of a transfer station, a vehicle storage and repair facility and leachate 
treatment facilities; and provision of collection and transportation vehicles, 
containers and landfill operation equipment.
Part B:
Tuo River Basin Water Quality Recovery
Improving the quality of water supplied and the treatment of wastewater through:
(1)
Deyang Wastewater
Laying of about 7 km of interceptor sewers, link sewers and connections; phased 
construction of a 100,000 m3/day capacity wastewater treatment plant; and construction 
of a river crossing in Deyang.
(2)
Luzhou Water Supply
(a)
Construction in Beijiao, Luzhou, of pumps at the existing intake, a 
50,000 m3/day capacity water treatment plant, about 31 km of transmission mains and 
about 10 km of distribution mains; and improvement of the water supply distribution 
network in Luzhou.
(b)
Construction in Daxikou, Luzhou, of an intake, a water treatment plant of 
50,000 m3/day capacity, transmission mains and reservoirs; and strengthening of the 
water supply distribution network in Luzhou. 
Part C:
Urban Management Information System
Establishing provincial urban management information systems and municipal 
infrastructure information systems through the development of:
(1)
An office automation support system (OAS) for statistical data collection and 
analysis; a decision support system (DSS) for infrastructure planning and management; 
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and an environmental management information system (EMIS) for environmental monitoring 
and management, at the provincial level. 
(2)
An urban decision support system (UDSS) for infrastructure planning and 
management in Deyang and Luzhou.
(3)
An infrastructure operations system (IOS) for wastewater management in Leshan 
and water management in Luzhou; and a database of existing water and wastewater 
infrastructure for Leshan and Luzhou, by conducting a survey of underground pipes and 
creating an inventory of related existing facilities.
(4)
Baseline data necessary for the establishment of urban management information 
systems in Leshan and Luzhou, by carrying out topographic mapping of said 
municipalities.
Part D:
Environmental Protection and Rehabilitation
(1)
Preservation of the Grand Buddha site in Leshan, including improvement of access 
to and environmental protection of the site and provision of management support and 
advisory services.
(2)
Improvement of the management, exhibition facilities and environmental 
conditions of the Sanxingdui Museum in Guanghan.
(3)
Establishment of a regional conservation laboratory and an associated training 
program in Chengdu to improve its conservation, restoration and research capabilities. 
Part E:
Institutional Strengthening, Training and Construction Supervision
Strengthening the capacity of provincial level agencies concerned with urban 
environment protection, Project Municipalities (excluding Guanghan) and their 
respective Utility Company in: (1) project, financial and institutional management and 
utility operation; and (2) construction management and supervision, through the 
provision of equipment, consultants’ services and training.
Part F:
Resettlement 
Resettlement and rehabilitation of Affected Persons in connection with the 
carrying out of Parts A and B of the Project.
* * *
The Project is expected to be completed by June 30, 2005.
SCHEDULE 3
Special Account
1.
For the purposes of this Schedule:
(a)
the term “eligible Categories” means Categories (1), (2), (3), (4) and 
(5) set forth in the table in paragraph 1 of Schedule 1 to this Agreement;
(b)
the term “eligible expenditures” means expenditures in respect of the 
reasonable cost of goods and services required for the Project and to be financed out 
of the proceeds of the Credit or the Loan allocated from time to time to the eligible 
Page  14
Categories in accordance with the provisions of Schedule 1 to this Agreement; and
(c)
the term “Authorized Allocation” means an amount equivalent to $7,000,000 
to be withdrawn from the Credit Account or the Loan 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 $4,000,000 until the aggregate amount of 
withdrawals from the Credit Account and the Loan Account plus the total amount of all 
outstanding special commitments entered into by the Association or the Bank pursuant 
to Section 5.02 of the respective General Conditions shall be equal to or exceed the 
equivalent of $30,000,000.
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 or the Loan Account and deposit into 
the Special Account such amount or amounts as the Borrower shall have requested.
(b)
(i)
For replenishment of the Special Account, the Borrower shall 
furnish to the Association requests for 
deposits into the 
Special Account at such intervals as the Association shall specify.
(ii)
Prior to or at the time of each such request, the Borrower shall 
furnish to the Association the documents 
and other evidence 
required pursuant to paragraph 4 of this Schedule for the payment or payments in 
respect 
of which replenishment is requested. On the basis of each 
such request, the Association shall, on behalf of 
the Borrower, 
withdraw from the Credit Account or the Loan Account and deposit into the respective 
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 respective Special Account for eligible expenditures. All 
such 
deposits shall be withdrawn by the Association from the Credit 
Account or the Loan 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 or from the Loan Account in accordance with the 
provisions of Section 2.02 of the Loan Agreement and Article V of the General 
Conditions applicable thereto;
(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 or 
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to the Bank pursuant to Section 3.01 of the Loan Agreement, 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 or the Loan Account pursuant to the provisions of Section 6.02 
of the respective 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 or the Bank pursuant to Section 5.02 of the respective 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 and the Loan Account of the remaining 
unwithdrawn amount of the Credit and the Loan 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 or the Bank) 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 or the Bank all or any portion of the funds on deposit in the Special 
Account.
(d)
Refunds to the Association made pursuant to paragraphs 6(a), 6(b) and 
6(c) of this Schedule shall be credited to the Credit Account or the Loan Account for 
subsequent withdrawal or for cancellation in accordance with the relevant provisions 
of the Development Credit Agreement or the Loan Agreement, including the General 
Conditions applicable thereto.