Page 1 CONFORMED COPY CREDIT NUMBER 3411-UG Development Credit Agreement (Privatization and Utility Sector Reform Project) between THE REPUBLIC OF UGANDA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated December 18, 2000 CREDIT NUMBER 3411-UG DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated December 18, 2000, between THE REPUBLIC OF UGANDA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS (A) the Association has received a letter dated April 18, 2000, (the Policy Letter) from the Borrower describing a program of actions, objectives and policies designed to promote private sector development in its territory through a privatization and utilities reform program (the Program) and declaring the Borrower’s commitment to the execution of the Program; (B) 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; 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; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Page 2 General Conditions; Definitions Section 1.01. The “General Conditions Applicable to Development Credit Agreements” of the Association, dated January 1, 1985 (as amended through October 6, 1999) (the General Conditions), constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) “MFPED” means the Borrower’s Ministry of Finance, Planning and Economic Development; (b) “Midterm Review” means the midterm review referred to in paragraph 5 (a) of Schedule 4 to this Agreement; (c) “Project Coordination Unit” or “PCU” means the Project Coordination Unit referred to in paragraph 6 of Schedule 4 to this Agreement; (d) “Project Implementation Manual” means the Project Implementation Manual referred to in paragraph 1 (a) of Schedule 4 to this Agreement; (e) “Project Management Report” means each report prepared in accordance with Section 4.02 of this Agreement; (f) “Project Preparation Advance” means the project preparation advance granted by the Association to the Borrower pursuant to the letter agreement signed on behalf of the Association on November 30, 1999 and on behalf of the Borrower on December 1, 1999; (g) “Project Year” means the 12 month period beginning from the Effective Date and ending 12 months thereafter and each successive 12 month period following thereafter; (h) “Remaining Public Enterprises” means the 39 industrial and commercial public enterprises listed in Class II to IV of the Borrower’s Public Enterprises Reform and Divestiture Statute, No. 9 of 1993 (as amended to the date of this Agreement) which have not, as of date of this Agreement, been divested or privatized; and (i) “Special Account” means the account referred to in Section 2.02 (b) of this Agreement. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to thirty-six million two hundred thousand Special Drawing Rights (SDR 36,200,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project 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 5 to this Agreement. (c) Promptly after the Effective Date, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and pay to itself the amount required Page 3 to repay the principal amount of the Project Preparation Advance withdrawn and outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn balance of the authorized amount of the Project Preparation Advance shall thereupon be canceled. Section 2.03. The Closing Date shall be January 31, 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 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 April 1 and October 1 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 April 1 and October 1 commencing October 1, 2010 and ending April 1, 2040. Each installment to and including the installment payable on April 1, 2020, shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. (b) Whenever (i) the Borrower's per capita gross national product (GNP), as determined by the Association, shall have exceeded for three consecutive years the level established annually by the Association for determining eligibility to access the Association's resources; and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due consideration by them of the development of the Borrower's economy, modify the repayment of installments under paragraph (a) above by: (A) requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid; and (B) requiring the Borrower to commence repayment of the principal amount of the Credit as of the first semiannual payment date referred to in paragraph (a) above falling six months or more after the date on which the Association notifies the Borrower that the events set out in this paragraph (b) have occurred, provided, however, that there shall be a grace period of a minimum of five years on such repayment of principal. (c) If so requested by the Borrower, the Association may revise the modification referred to in paragraph (b) above to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. Page 4 (d) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate privatization, financial and administrative practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Association shall otherwise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 4 to this Agreement. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants’ services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. For the purposes of Section 9.07 of the General Conditions and without limitation thereto, the Borrower shall: (a) prepare, on the basis of guidelines acceptable to the Association, and furnish to the Association not later than six (6) months after the Closing Date, or such later date as may be agreed for this purpose between the Borrower and the Association, a plan for the future operation of the Project; and (b) afford the Association a reasonable opportunity to exchange views with the Borrower on said plan. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than six (6) months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records and accounts and the audit thereof as the Association shall from time to time reasonably request. Page 5 (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of Project Management Reports or statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association’s representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the Project Management Reports or 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. Section 4.02. (a) Without limitation upon the provisions of Section 4.01 of this Agreement, the Borrower shall carry out a time-bound action plan acceptable to the Association for the strengthening of its financial management system for the Project in order to enable the Borrower, not later than January 1, 2001, or such later date as the Association shall agree, to prepare quarterly Project Management Reports, acceptable to the Association, each of which: (i) (A) sets forth actual sources and applications of funds for the Project, both cumulatively and for the period covered by said report, and projected sources and applications of funds for the Project for the six-month period following the period covered by said report, and (B) shows separately expenditures financed out of the proceeds of the Credit during the period covered by said report and expenditures proposed to be financed out of the proceeds of the Credit during the six-month period following the period covered by said report; (ii) (A) describes physical progress in Project implementation, both cumulatively and for the period covered by said report, and (B) explains variances between the actual and previously forecast implementation targets; and (iii) sets forth the status of procurement under the Project and expenditures under contracts financed out of the proceeds of the Credit, as at the end of the period covered by said report. (b) Upon the completion of the action plan referred to in paragraph (a) of this Section, the Borrower shall prepare, in accordance with guidelines acceptable to the Association, and furnish to the Association not later than 45 days after the end of each calendar quarter a Project Management Report for such period. ARTICLE V Effective Date; Termination Section 5.01. The following event is specified as an additional condition to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 Page 6 (b) of the General Conditions, namely that the Borrower has furnished to the Association a Project Implementation Manual in form and substance satisfactory to the Association. Section 5.02 The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Remedies of the Association Section 6.01. Pursuant to Section 6.02 (l) of the General Conditions, the following additional event is specified, namely that a situation has arisen which shall make it improbable that the Program, or a significant part thereof, will be carried out. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister responsible for finance 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, Planning and Economic Development P.O Box 8147 Kampala Uganda Cable address: Facsimile: FINSEC 230163 Kampala For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: Facsimile: INDEVAS 248423 (MCI) or 202 477-6391 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 the District of Columbia, United States of America, as of the day and year first above written. THE REPUBLIC OF UGANDA By /s/ Edith Ssempala Authorized Representative Page 7 INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Callisto Madavo Regional Vice President Africa 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 amounts 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 SDR Equivalent) to be Financed (1) Goods 470,000 90% (2) Consultants’ 17,050,000 100% services (3) Training 3,130,000 100% (4) Severance 10,430,000 100% of payments expenditures incurred (5) Operating 2,690,000 90% Costs (6) Refunding of 700,000 Amount due pursuant Project Preparation to Section 2.02 (c) of Advance this Agreement (7) Unallocated 1,730,000 TOTAL 36,200,000 2. For the purposes of this Schedule: (a) the term “foreign expenditures” means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; (b) the term “local expenditures” means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; (c) “Operating Costs” means the incremental operating costs (not related to training) arising under the Project on account of maintenance of vehicles, fuel, equipment, office supplies, utilities, consumables, travel and accommodation excluding salaries of the Borrower’s civil servants; and (d) “severance payments” means payments made by the Borrower’s public enterprises selected for privatization to their employees separated pursuant to the Borrower’s separation program described in the Borrower’s Policy Letter. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. Page 8 4. The Association may require withdrawals from the Credit Account to be made on the basis of statements of expenditure: (a) for goods under contracts not exceeding $100,000 equivalent each; (b) for consultants’ services under contracts not exceeding: (i) $100,000 each for consulting firms; and (ii) $50,000 each for individual consultants; and (c) for severance payments, under Category (4) in the table set forth in paragraph 1 of this Schedule, which shall have been made pursuant to Paragraph 7 of Schedule 4 to this Agreement; all under such terms and conditions as the Association shall specify by notice to the Borrower. SCHEDULE 2 Description of the Project The objectives of the Project are to support the Borrower in the carrying out of its policy to improve the quality, coverage and economic efficiency of commercial and utility services through (i) the divestiture and restructuring of the Remaining Public Enterprises still operating in the Borrower’s economy; (ii) increased private sector participation in the provision of infrastructure in sectors such as telecommunications, energy, water and rail transport; and (iii) the strengthening of the regulatory framework and institutions required to carry out the said policy. 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: Capacity Building for Privatization 1. Strengthening the technical, legal, accounting and investment banking capacity of the Borrower’s departments and agencies responsible for privatization through the provision of technical advisory services for (i) the bidding and listing of the Remaining Public Enterprises on the Borrower’s stock exchange; and (ii) the development and carrying out of any employee share ownership schemes required by the applicable divestiture programs. 2. The carrying out of a program designed to mitigate the social impact of labor retrenchment including (i) the funding of a portion of severance and other retrenchment costs of staff of the Remaining Public Enterprises; and (ii) the provision of technical advisory services to assist in the carrying out of the said program, including counseling and retraining. 3. The carrying out of a communication program designed to: (a) strengthen public confidence in the transparency of the Borrower’s divestiture procedures; and (b) convince the public of the Borrower’s commitment to: (i) the carrying out of its divestiture strategy, and (ii) the selection of a sound and appropriate method for the privatization of the Remaining Public Enterprises, including; (A) initiatives by the Borrower to explain the benefits of its privatization and divestiture program to specific targeted audiences; (B) provision by the Borrower of relevant information to management and employees of public enterprises scheduled for privatization; (C) the development of a specially tailored employee relations program to explain, among other things, the benefits and protection which the said program can offer to the employees; and Page 9 (D) the establishment of means through which stakeholders can express their opinions and concerns on privatization and divestiture issues and also provide feedback to PCU on stakeholders’ perceptions on privatization and divestiture issues. 4. The designing and carrying out of the overall communications strategy for the Project, including a determination of the costs associated with the production of promotional and information materials, through the provision of technical advisory services. 5. (a) The preparation of comprehensive environmental audits and remediation plans for the Remaining Public Enterprises scheduled for privatization, including the determination of responsibility for pre-existing environmental liabilities and their clean-up, through the provision of technical advisory services. (b) The preparation and carrying out of de-commissioning plans for the Remaining Public Enterprises scheduled for privatization and assets scheduled for closure, through the provision of technical advisory services. (c) The preparation and monitoring of environmental management plans to bring privatized enterprises into compliance with environmental requirements mandated by the Borrower’s laws and regulations, through the provision of technical advisory services. Part B: Strengthening Financial Oversight of Public Enterprises 1. The carrying out of financial oversight of public enterprises with a view to (i) improving financial discipline in the public enterprise sector and facilitating the settlement of cross arrears (A) between the Borrower and public enterprises and (B) among public enterprises; and (ii) reducing budgetary subsidies to the public enterprises, through the provision of technical advisory services and training. 2. The acquisition of equipment required for the financial oversight of public enterprises. Part C: Utility Sector Reform 1. (a) The design and carrying out of reforms in the utility sector to improve the quality of, and increase access to, telecommunications, electricity, water and sewage, and rail transport services. (b) The finalization of the design and operation of new sector structures in the telecommunications, electricity, rail transport and water and sewage services through the provision of technical advisory services, training and the selection of private sector buyers and concessionaires interested in the acquisition of public enterprises in the sectors referred to in 1 (a) above. (c) The preparation of proposals for regulatory reforms in the electricity, railways, and water and sanitation services through the provision of technical advisory services for (i) the establishment and building up of the capacity of independent regulators in the telecommunications, electricity, water and sewage, and transportation sectors; (ii) the training of staff; (iii) the conclusion of twinning arrangements with foreign regulators; and (iv) the acquisition of equipment for the relevant regulatory body. Part D: Project Management The training of Project staff in (i) privatization policies, procedures and regulation; and (ii) Project planning, accounting, auditing, procurement and other Project management skills, through the provision of technical advisory services. * * * The Project is expected to be completed by June 30, 2005. Page 10 SCHEDULE 3 Procurement and Consultants’ Services Section I. Procurement of Goods Part A: General Goods shall be procured in accordance with the provisions of Section I of the “Guidelines for Procurement under IBRD Loans and IDA Credits” published by the Bank in January 1995 and revised in January and August 1996, September 1997 and January 1999 (the Guidelines) and the provisions of the following Parts of this Section I. Part B: International Competitive Bidding 1. Except as otherwise provided in Part C of this Section, goods shall be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto. 2. The following provisions shall apply to goods to be procured under contracts awarded in accordance with the provisions of paragraph 1 of this Part B. (a) Grouping of contracts To the extent practicable, contracts for goods shall be grouped in bid packages estimated to cost $100,000 equivalent or more each. (b) Preference for domestically manufactured goods The provisions of paragraphs 2.54 and 2.55 of the Guidelines and Appendix 2 thereto shall apply to goods manufactured in the territory of the Borrower. Part C: Other Procurement Procedures 1. National Competitive Bidding Goods estimated to cost less than $100,000 equivalent per contract, up to an aggregate amount not to exceed $100,000 equivalent, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. 2. National Shopping Goods estimated to cost less than $30,000 equivalent per contract, up to an aggregate amount not to exceed $100,000 equivalent, may be procured under contracts awarded on the basis of national shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. Part D: Review by the Association of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Association for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods shall be undertaken in accordance with such procurement plan as shall have been approved by the Association, and with the provisions of said paragraph 1. 2. Prior Review With respect to each contract for goods estimated to cost the equivalent of $100,000 or more, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the Page 11 procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. Section II. Employment of Consultants Part A: General Consultants’ services shall be procured in accordance with the provisions of the Introduction and Section IV of the “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” published by the Bank in January 1997 and revised in September 1997 and January 1999 (the Consultant Guidelines) and the provisions of the following Parts of this Section II. Part B: Quality- and Cost-Based Selection 1. Except as otherwise provided in Part C of this Section, consultants’ services shall be procured under contracts awarded in accordance with the provisions of Section II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 thereto, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to quality- and cost-based selection of consultants. 2. The following provisions shall apply to services of consultants to be procured under contracts awarded in accordance with the provisions of the preceding paragraph. The short list of consultants for services estimated to cost less than $100,000 equivalent per contract, may comprise entirely national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Part C: Other Procedures for the Selection of Consultants 1. Selection Based on Consultants’ Qualifications Services estimated to cost less than $100,000 equivalent per contract may be procured under contracts awarded in accordance with the provisions of paragraphs 3.1 and 3.7 of the Consultant Guidelines. 2. Single Source Selection Services which are estimated to cost less than $50,000 equivalent per contract, may, with the Association's prior agreement, be procured in accordance with the provisions of paragraphs 3.8 through 3.11 of the Consultant Guidelines. 3. Individual Consultants Services for tasks that meet the requirements set forth in paragraph 5.1 of the Consultant Guidelines shall be procured under contracts awarded to individual consultants in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines. 4. Least Cost Selection Services estimated to cost less than $100,000 per contract, may be procured under contracts awarded in accordance with the provision of paragraphs 3.1 and 3.6 of the Consultants Guidelines. Part D: Review by the Association of the Selection of Consultants 1. Selection Planning Prior to the issuance to consultants of any requests for proposals, the proposed plan for the selection of consultants under the Project shall be furnished to the Association for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Consultant Guidelines. Selection of all consultants’ services shall be undertaken in accordance with such selection plan as shall have been approved by the Association, and with the provisions of said paragraph 1. 2. Prior Review (a) With respect to each contract for the employment of consulting firms Page 12 estimated to cost the equivalent of $200,000 or more, the procedures set forth in paragraphs 1, 2 (other than the third subparagraph of paragraph 2 (a)) and 5 of Appendix 1 to the Consultant Guidelines shall apply. (b) With respect to each contract for the employment of consulting firms estimated to cost the equivalent of $100,000 or more, but less than the equivalent of $200,000, the procedures set forth in paragraphs 1, 2 (other than the second subparagraph of paragraph 2 (a)) and 5 of Appendix 1 to the Consultant Guidelines shall apply. (c) With respect to each contract for the employment of individual consultants estimated to cost the equivalent of $50,000 or more, the qualifications, experience, terms of reference and terms of employment of the consultants shall be furnished to the Association for its prior review and approval. The contract shall be awarded only after said approval shall have been given. (d) With respect to each contract for (i) the employment of consultants under single source selection procedures; and (ii) all terms of reference irrespective of the value of the contract. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Consultant Guidelines shall apply. SCHEDULE 4 Implementation Program 1. (a) The Borrower shall prepare and furnish to the Association a Project Implementation Manual in form and substance satisfactory to the Association setting out details of all procedures, guidelines, timetables and criteria required for the Project. (b) The Borrower shall carry out the Project in accordance with the Project Implementation Manual and, except as the Association shall otherwise agree, the Borrower shall not amend or waive any provision of the Project Implementation Manual if, in the opinion of the Association, such amendment or waiver may materially and adversely affect the carrying out of the Project or the achievement of the objectives thereof. 2. The Borrower shall: (a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with the indicators set forth in Schedule 6 to this Agreement (i) the carrying out by the Borrower of the Project; and (ii) the achievement of the objectives thereof; (b) prepare, under terms of reference satisfactory to the Association, and furnish to the Association, on or about March 31 and September 30 of each year, a report integrating the results of the monitoring and evaluation activities performed pursuant to paragraph (a) of this Section, on (i) the progress achieved in the carrying out of the Project, during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Project; and (ii) the achievement of the objectives thereof during the period following such date; and (c) review with the Association by May 31 and November 30 of each year, or such later date as the Association shall request, the report referred to in subparagraph (b) of this paragraph, and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Association’s views on the matter. 3. The Borrower shall prepare and furnish to the Association no later than April 30, 2001, with respect to the First Project Year and each April 30, in subsequent Page 13 Project Years, an action plan including an annual work plan and budget and procurement plan in form and substance satisfactory to the Association. 4. The Borrower shall carry out all training, workshops and study tours under the Project on the basis of programs, which shall have been approved by the Association on a quarterly basis, and which shall, inter alia, identify (a) the training, workshops and study tours envisaged; (b) the personnel to be trained; (c) the institutions which will conduct the training; (d) the duration of the proposed training; and (e) an estimate of the cost. 5. (a) The Borrower shall, no later than October 30, 2002, carry out jointly with the Association, a Midterm Review of the progress made in carrying out the Project. The Midterm Review shall cover, among other things, the progress made in meeting the objectives of the Project, and the overall performance by the Borrower of the Project. (b) The Borrower shall carry out, no later than one month after the completion of the Midterm Review the recommendations of the Midterm Review as agreed with the Association and set out in an action plan for the Project satisfactory to the Association. 6. The Borrower shall maintain, and assign to MFPED, the Project Coordination Unit in a form and with functions, staffing and resources satisfactory to the Association. The functions of the PCU shall include: (i) assisting MFPED in the carrying out of the Borrower’s privatization program; (ii) ensuring overall coordination and coherence between the various sector strategies of the said program; (iii) the maintenance of a Privatization Unit in the PCU in a form and with functions, staffing and resources satisfactory to be responsible for the privatization of the Remaining Public Enterprises; (iv) the maintenance of a Utility Reform Unit in the PCU in a form and with functions, staffing and resources satisfactory to the Association to be responsible for the carrying out of the strategies for the reform and privatization of the telecommunications, electricity, rail transport and water and sewage services; and (v) the provision of the necessary support services in the procurement, accounting and administration, communications and legal areas of the Project. 7. In the implementation of the severance payments to be made to staff retrenched from public enterprises under part A of the Project, the Borrower shall cause the PCU to furnish to the Association (a) a detailed retrenchment plan for the relevant public enterprise, in form and substance satisfactory to the Association; and (b) evidence of certification issued by the Office of the Borrower’s Auditor General. SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term “eligible Categories” means Categories (1) through (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 allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and Page 14 (c) the term “Authorized Allocation” means an amount equivalent to $1,000,000 to be withdrawn from the Credit Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless the Association shall otherwise agree, the Authorized Allocation shall be limited to an amount equivalent to $500,000 until the aggregate amount of withdrawals from the Credit Account plus the total amount of all outstanding special commitments entered into by the Association pursuant to Section 5.02 of the General Conditions shall be equal to or exceed the equivalent of SDR6,000,000. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for deposit into the Special Account of an amount or amounts which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Association requests for deposits into the Special Account at such intervals as the Association shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; (b) if the Borrower shall have failed to furnish to the Association, within the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit reports required to be furnished to the Association pursuant to said Section in respect of the audit of the records and accounts for the Special Account; (c) if, at any time, the Association shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Credit Account pursuant to the provisions of Section 6.02 of the General Conditions; or Page 15 (d) once the total unwithdrawn amount of the Credit allocated to the eligible Categories, minus the total amount of all outstanding special commitments entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Association shall otherwise agree, no further deposit by the Association into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. SCHEDULE 6 Performance Indicators A. Outcome/Impact Indicators 1. Improved quality and coverage of services achieved in telecommunications, electricity and railways sectors, as further described in the table of infrastructure indicators furnished to the Association. 2. Privatization of 15 enterprises by completion of mid-term review, and 42 enterprises by June 30, 2005. 3. Indicators of regulated conditions: establishment and operationalization (enactment of legislation, appointment of regulators and institutionalization of agency) of sectoral regulatory agencies for (i) electricity by October 30, 2002; and (ii) water and sewage, and transport by June 30, 2005. 4. Indicators of fiscal impact of privatization (i) reduced subsidies to the public enterprise sector (excluding Class I enterprises) by 10% in 2001, 20% in 2002, 50% in 2003 and 100% by June 30, 2005. B. Output Indicators 1. Sale contracts are executed for, and sale proceeds collected from the divestiture of about 39 public enterprises. 2. The Borrower has paid in a timely fashion, from the Redundancy Account (replenished with privatization revenues and proceeds from the Credit), end-of-service benefits to retrenched workers. Page 16 3. The Borrower has carried out environmental audits for all enterprises identified in the table provided to the Association, before completion of each transaction (i) full audits and remediation plans for 10 enterprises; (ii) 1 partial audit; (iii) preparation and implementation of audits and de-commissioning plans for 5 enterprises; and (iv) preparation and monitoring of environmental management plans for all relevant enterprises. 4. The Borrower has carried out at least 4 communication programs per year, including information to the general public and specific audiences (i.e. business community, workers of enterprises slated for privatization, members of the Borrower’s Parliament). 5. Adoption of the Borrower’s sector policy, including enactment of appropriate legislation, for: (a) telecommunications and electricity sectors by October 31, 2002; and (b) water and sewage, and rail transport sectors by June 30, 2005. 6. Development of frequency spectrum management system by December 31, 2002. 7. (a) Development of new electricity sector structure, including grid code and commercial and financial arrangements by December 31, 2001. (b) Introduction of private sector participation in electricity distribution by December 31, 2001. (c) Introduction of private sector participation in electricity generation by December 31, 2002. (d) Sector regulator in place and operational by December 31, 2001. 8. (a) Completion and adoption by the Borrower by December 31, 2001 of a framework for privatization of water and sewage services. (b) Introduction of private sector participation and operation of some existing assets in the water and sewage sectors by December 31, 2003. 9. (a) Completion and adoption by the Borrower by December 31, 2001 of a framework for privatization of railway transport services. (b) Introduction of private sector participation and operation of URC by December 31, 2003. 10. (a) PMU has installed and commenced operating a management information system to monitor the financial performance of non-commercial public enterprises by December 31, 2001. (b) Settlement of cross arrears between the Borrower and its public enterprises by June 30, 2005. 11. (a) Arrangements to ensure adequate transparency of privatization transactions are in fully in force by the start of the Project. (b) Timely reporting on work program and auditing of accounts achieved by June 30, 2001. (c) Procurement process is efficient, timely and transparent throughout the Project.