OFFICIAL DOCUMENTS CREDIT NUMBER 1885 CHA Development Credit Agreement (Northern Irrigation Project) between PEOPLE'S REPUBLIC OF CHINA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated ,1988 CREDIT NUMBER 1885 CHA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated a / , 1988, between PEOPLE'S REPUBLIC OF CHINA (2e Borrower) and INTERNATIONAL DEVEL- OPMENT ASSOCIATION (thei ssociation). 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 Project will be carried out by Nei Monggol and Ningxia Hut Autonomous Regions (hereinafter called, Nei Monggol and Ningxia, respectively, and, the Regions collectively) with the Borrower's assistance and, as part of such assistance, the Bor- rower will make available ,.o the Regions the proceeds of the Credit as provided in this Aireement; 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 between the Association and the Regions; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Develop- ment Credft Agreements" of the Association, dated January 1, 1985, with the jast sentence of Section 3.02 deleted (the General Condi- tions) 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) "Project Agreement" means the agreement between the Association and the Regions 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; 2 (b) "Nei Monggol Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (c) "Ningxia Special Account" means the account referred to in Section 2.02 (c) of this Agreem6nt; (d) "Special Accounts" means Nei Monggol Special Account and the Ningxia Special Account; (e) "km" means kilometer; and 0 (f) "ha" means hectare. 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 Devel- opment Credit Agreement, an amount in various currencies equivalent to seventy-two million seven hundred thousand Special Drawing Rights (SDR 72,700,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the pr&wisions of Schedule 1 to this Agreement for expenditures made (or, if the Association shall so agree, to be made) in respect of the reason- able cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in the name of Nei fionggol in dollars a special account in a bank and on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 3 to this Agreement. (c) The Borrower shall, for the purposes of the Project, open and maintain in the name of Ningxia in dollars a special account in a bank and on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1995 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. -3- 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 a date sixty days after the date of this Agreement (the accrual date) to the rep3pective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; (ii) at the rate set as of the June 30 immediately preceding the accrual date or 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 as of the next payment date in that year specified in Section 2.06 of this Agreement, except that the rate set as of June 30, 1988 shall be applied as of July 1, 1988. (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 oftpne 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) and (c) 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, 1998, and ending February 15, 2023. Each installment to and including the installment payable on February 15, 2008, 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 gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years, and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, -4- the Association may, subsequent to the review and approval thereof by the Execut ve Directors of the Association and after due consideration by them of the development of the Borrower's economy, ,modifY the terms of,repayment of installments under paragraph (a) above by 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. If so requested by the Borrower, t e Association may revise such modification to include, in lieu of some or alloof the increase in the amounts of such installment the,payment of interest at an annual rate agreed with the Msociation on "the principal amount of the Credit withdrawn and outstanding from time to time, provided"that, in the judgment of the A ;sociation, such revision shall not change the grant element obitained under the above-mentioned repayment modification. (c) If, at any tim after a modification of terms pursuant to paragraph (b) abtove, the Association determines that the Bor- rower's economic condition has deteriorated significantly, the Association may, if 'so requested by the Borrower, further modify the terms of repaymeit to conform to the schedule of installments as provided in paragr4ph (a) above. "Section 2.08. The currency of the United Stiites 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 the Development Credit Agreement, shall cause the Regions to perform in accordance with the provisions of the Project Agreement all the obligations of the Regions 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 the Regions to perform such obligations, and shall not take or permit to be taken any action whiclh would prevent or interfere with such performance. (b) The Borrower shall make available the equivalent of SDR 46,600,000 and SDR 26,100,000 to Nei Monggol and Ningxia, respectively, out of the proceeds of the Credit to the Regions on terms and- conditions satisfactory to the Association which shall -5- include that the proceeds of the Credit shall be repaid over a period of twenty years, including five years of grace and the payment of interest at the rate of 4% per annum. 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 the Regions pursuant to Section 2.03 of the Project Agreement. Section 3.04. The Borrower shall ensure that the Project activities will comply with the Borrower's environmental control standards acceptable to the Association. ARTICLE IV Remedies of the Association Section 4.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) Either of the Regions shall have failed to perform any of its obligations under the Project Agreement. (b) As a resul) of events which have occurred after the date of this Agreement, an extraordinary situation shall have arisen which shall make it improbable that either of the Regions will be able to perform its obligations under the Project Agreement. Section 4.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional event is specified, namely, the event specified in paragraph (a) of Section 4.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower. 00 -6- ARTICLE V Effective Date; Termination Section 5.01. The following event is specified as additional conditions to the,, effectiveness of this Agreement within the meaning of Section 12.01 (b) of the General Conditions, namely, that the Borrower's State Council has approved this Agreement. Section 5.02. The following is specified as an additional matter, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furn- ished to the Association, namely, that the Project Agreement has been duly authorized or ratified by each of the Regions, and is legally binding upon the Regions in accordance with its terms. Section 5.03. 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 VI Representative of the Borrower; Addresses Section 6.01. 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 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower; Minister of Finance Ministry of Finance- Sanlihe Beijing People's Republic of China Cble address: Telex: FINANMIN 22486 MFPRC CN Beijing -7- For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused thi 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. PEOPLE'S REPUBLIC OF CHINA By 5 HX. Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President Asia -8- o 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 E,DR Equivalent) to be Financed (1) Works: (a) Civil works under Part A of the Project for: (i) trunk 6,350,000 50% drain and Honghebu pumping station (ii) mobilization 360,000 100% advance for (a)(i) above (iii) other than (i) 11,280,000 30% and (ii) above (excluding the cost of" materials under (2) (a) below) -9- ,Nmount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (b) Civil works under Part B of the Project for: drains, canals, 13,610,000 40% stutres, buildin5, facilities, fish pondS and land 0 Ogvelopment (excludiig the cost of steel under (2) (b) below, cement and timber) (2) Machinery, 100% of foreign equipment and ) expenditures, materialsi ) 100% of local ) expenditures (a) under Part A 27,870,000) (ex-factory of the Project ) cost) and 75% of '< ) lqcal expendi- (b) under Part B 11,460,000) tures for other of the Project ) ttems procured ) locally 1n 00 -10- Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (3)i Consultants' ser- 100% vices, overseas o training and study tours (a) under Part A 710,000 of the Project (b) under Part B 1,060,000 of the Projectg a TOTAL 72,700,000 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; 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 with- drawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals: (i) in an aggregate amount not exceeding the equivalent of SDR 500,000, 'may be made on account of payments made for expenditures for site preparation, temporary and foundation works under Category (1) (a) (i) fdr Part A of the Project before that date but after September 1, 1987; and (ii) in an aggregate amount not exceeding the equivalent of SDR 710,000, may be ,made on account of payments made for expenditures for the c6nstiactioti of canals and structures under Category (1 (b) for Part B of the Project before that date but after September 1, 1987. a LI7* SCHEDULE 2 Description of the Yrqject The objectives of the Project are: (i) to assist Nei 14onggo. in increasing agrieltural production through the rehabilitation and completion of an existing irrigation scheme; and (ii) to assist pingxia in alleviating poverty by upgrading and expanding irrigation and drainage workg and relocating farm :fmilies on newly irrigated land. 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 objectivés: Part A: Nel Monggol Component 0 1. Rehabilitation of part of the Hetao Irrigation Area covering abouf: 210,000 ha through: (a) improvement of °170-4m of ,the 202-km trunk drain, including channel excavation, slope protetion, construction of ptructures and a new drainage pumping stat:ion (b) improvement of the 230-km trunk canal by addition of Control structure and canal lining; (c) improve hent and construction of a network of main, sub- main and branch drains and canals; and )~ development of on-farm irrigation and drainage systems. 12, provision of construction, operation and °maintenance machinery, and equipment. 3. Pyovision of fertilizer and other agricutural inpts, 4. Construction of agro-technicai extension units and provision of cquipment. 5. Provision of training, study tours and consulting services designed to introduce new technologies and improve management skills. Part B: Ningxia Component 1. Gonstruction of irrigation and drainage works to (a) provide new irrigation facilities Io 14,200 ha of uncultivated land throIg main and branch cpals, lateral and sublateral canals, pumping stations and pariggs structures; (b) complete and upgrade existing on-farm facilities for 17,100 ha throggh lateral and sublateral canals and structures; and (c) upgrade canals and drains serviräg 4,900 ha of waterlogged cropped land through channel improvement mand installation of structu:res. 2. Provision of machinery, equipment and vehicles for system operation and g1aintenance. 3. Resettlement of about 11,000 farm familips (about 54,150 persons) including provision of building materials, agricultural inpu,ts and machinery, water supply, electricity, and social services. 4. provipipn fpr study of the Yinbei area to prepare a comprehensive agricultural development plan for 130,000 ha of existing cultivated land and 100,000 ha of potentially irrigable land. 5. Provision of training and technical assistance to upgrade the ttchnicl and managerial skills of project staff and to train new settlers in irrigated agriculture, The Project is expected to be completed by December 31, 1994. -13- SCHEDULE 3 Nei Monggol Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) (a), (2) (a) and (3) (a) 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 Part A of 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 (c) the term "Authorized Allocation" means an amount equiva- lent to SDR 2,500,000 to be withdrawn from the Credit Account and deposited in the Spedial Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, 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 may be made as follows: (a) On the basis of a request or requests,by the Borrower for a deposit or deposits which add up to the aggregate amount of he Authorized Allocation, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of-the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Asso- ciation from the Credit Account under the respective eligible 1N61 14 Categories, and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, prior to or at the time of such request, such and, other evidence as the Association shall reasonably request, show- ing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) 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 Condi- tions and paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Credit allo- cated to the eligible Categories, minus the amount of any outstanding special commitment entered into by the Association pursuant -to Section 5.02 of the General Conditions with respect, to Part A of the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligi- ble 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 any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furn- ished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association deposit into the Special Account (or, if the Association shall so request, refund - 15 - to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No furthe;: deposit by the Association into the Special Account shall be made until the Borrower has made such deposit or refund. (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 for crediting to the Credit Account. - 16 - SCHEDULE 4 Ningxia Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) (b), (2) (b) and (3) (b) 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 Part B of 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 (c) the term "Authorized Allocation" means an amount equiva- lent to SDR 1,800,000 to be f'ithdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, 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 may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the Special Account such amounts as shall 'be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Asso- ciation from the Credit Account under the respective eligible - 17 - Categories, and in the respective equivalent amounts, as shall hav4 been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Spe6ial Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, prior to or at the time of such request, such and other evidence as the Association shall reasonably reque5t, show- ing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) 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 Condi- tions and paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Credit allo- cated to the eligible Categories, minus the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to Part B of the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligi- ble 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 any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furn- ished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association deposit into the Special Account (or, if the Association shall so request, refund - 18 - to the Association) an amount equal to the amount of such payment or the portion th ereof not so eligible or justified. No further deposit by the Association into the Special Account shall be made until the Borrower has made such deposit or refund. (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 for crediting to the Credit Account. -