Page 1 CONFORMED COPY LOAN NUMBER 4450 MA Loan Agreement (Year 2000 Technical Assistance Project) between MALAYSIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated March 31, 1999 LOAN NUMBER 4450 MA LOAN AGREEMENT AGREEMENT, dated March 31, 1999, between MALAYSIA (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. 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 (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 have the respective meanings therein set forth and the Page 2 following additional terms have the following meanings: (a) “Eligible Categories” means categories (1), (2) and (3), set forth in the table in Part A.1 of Schedule 1 to this Agreement; (b) “Eligible Expenditures” means the expenditures for goods and services referred to in Section 2.02 of this Agreement; (c) “MAMPU” means the Malaysian Administration Modernization Unit within the Borrower’s Prime Minister’s Department, established and operating pursuant to General Circular Letter No. 9 of 1977, dated August 30, 1977, from the Chief Secretary to the Government (No. PM(S) 18108), and to be maintained pursuant to paragraph A.1 (a) of Schedule 5 to this Agreement; (d) “Operational Manual” means the manual to be adopted by the Borrower, through MAMPU, in accordance with the provisions of paragraph B.1 of Schedule 5 to this Agreement, as the same may be amended from time to time with the agreement of the Bank; (e) “PAU” means the Project Administration Unit within MAMPU, established and maintained in accordance with the provisions of paragraph A.3 of Schedule 5 to this Agreement; (f) “Project Management Report” means each report prepared in accordance with Section 4.02 of this Agreement; (g) “Special Account” means the account referred to in Part B of Schedule 1 to this Agreement; (h) “Y2K Problem” means potential problems that might be encountered by computer hardware, software, and other related systems in processing year-date information for the year 2000 and beyond. (i) “Y2K Project Team” means the National Y2K Project Team in the Borrower’s Ministry of Energy, Communication and Multimedia, established and operating pursuant to the March 25, 1998 decision of the Borrower’s Cabinet of Ministers, and to be maintained in accordance with the provisions of paragraph A.1 (b) of Schedule 5 to this Agreement. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount equal to one hundred million Dollars ($100,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank 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 Loan. Section 2.03. The Closing Date shall be December 31, 2001 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a fee in the amount of one percent (1%) of the amount of the Loan. On or promptly after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount of the said fee. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. (a) The Borrower shall pay interest on the principal amount of the Page 3 Loan withdrawn and outstanding from time to time in accordance with the provisions of Schedule 3 to this Agreement. Section 2.07. Interest and other charges shall be payable semiannually on June 15 and December 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the provisions of Schedule 3 to this Agreement. 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 financial, management and administrative practices and technical standards, 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 Bank shall otherwise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 5 to this Agreement. Section 3.02. Except as the Bank shall otherwise agree, procurement of the goods and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section 3.03. For the purposes of Section 9.08 of the General Conditions and without limitation thereto, the Borrower shall: (a) prepare, on the basis of guidelines acceptable to the Bank and furnish to the Bank 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 Bank, a plan designed to ensure the continued achievement of the Project’s objectives; and (b) afford the Bank a reasonable opportunity to exchange views with the Borrower on said plan. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain a financial management system, including records and accounts, and prepare financial statements in a format acceptable to the Bank, adequate to reflect the operations, resources and expenditures related to the Project. (b) The Borrower shall: (i) have the records, accounts and financial statements referred to in paragraph (a) of this Section and the records and accounts for the Special Account for each fiscal year audited, in accordance with auditing standards acceptable to the Bank, consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of the financial statements referred to in paragraph (a) of this Section for such year as so audited, and (B) an opinion on such statements, records and accounts and report of such audit, by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning such records Page 4 and accounts, and the audit thereof, and concerning said auditors, as the Bank may from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of Project Management Reports, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and separate accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank’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 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. The Borrower shall prepare, in accordance with guidelines acceptable to the Bank, and furnish to the Bank not later than 45 days after the end of each calendar quarter, a Project Management Report for such period, which: (a) (i) 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 (ii) shows separately expenditures financed out of the proceeds of the Loan during the period covered by said report and expenditures proposed to be financed out of the proceeds of the Loan during the six-month period following the period covered by said report; (b) (i) describes physical progress in Project implementation, both cumulatively and for the period covered by said report, and (ii) explains variances between the actual and previously forecast implementation targets; and (c) sets forth the status of procurement under the Project and expenditures under contracts financed out of the proceeds of the Loan, as at the end of the period covered by said report. ARTICLE V Effective Date; Termination Section 5.01. The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely that MAMPU has adopted and put into effect the Operational Manual in accordance with the provisions of paragraph B (1) of Schedule 5 to this Agreement. 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 Representative of the Borrower; Addresses Section 6.01. The Secretary General to the Treasury, Ministry of Finance, is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Page 5 Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: The Treasury Jalan Duta 50592 Kuala Lumpur Malaysia Cable address: Telex: MA 30242 or MA 32369 For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 248423 (MCI) 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. MALAYSIA By /s/ Dato’ GHAZZALI Sheikh Abdul Khalid Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Ngozi Okonjo-Iweala Authorized Representative SCHEDULE 1 Withdrawal of the Proceeds of the Loan A. General 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollars) to be Financed (1) Goods 84,000,000 100% of foreign expenditures and Page 6 65% of local expenditures (2) Consultants' 13,000,000 100% Services and training (3) Operating Costs 2,000,000 60% (4) Fee 1,000,000 Amount due pursuant to Section 2.04 of this Agreement TOTAL 100,000,000 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; and (c) the term “Operating Costs” means the following expenditures required for the operation of the PAU: office space rental, office supplies, costs for travel of project staff, equipment operating and communications costs. 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, except that withdrawals, in an aggregate amount not exceeding the equivalent of $10,000,000 may be made in respect of Categories (1) and (2) set forth in the table in paragraph 1 of Part A of this Schedule on account of payments made for expenditures before that date but after February 1, 1999. B. Special Account 1. The Borrower shall open and maintain in dollars a special deposit account in a commercial bank, on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure and attachment. Except as the Bank may otherwise specify by notice to the Borrower, all withdrawals from the Loan Account shall be deposited by the Bank into the Special Account in accordance with the provisions of this Schedule. Payments out of the Special Account shall be made exclusively for Eligible Expenditures. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for Eligible Expenditures. 2. Except as the Bank shall otherwise agree, after the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals from the Loan Account of amounts to be deposited into the Special Account shall be made as follows: (a) Each application for withdrawal from the Loan Account shall be supported by a Project Management Report. (b) Upon receipt of each application for withdrawal of an amount of the Loan, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account an amount equal to the lesser of: (i) the amount so requested; and (ii) the amount which the Bank has determined, based on the Project Management Report accompanying said application, is required to be deposited in order to finance Eligible Expenditures during the six-month period following the date of such report; provided, however, that the amount so deposited, when added to the amount indicated by said report to be remaining in the Special Account, shall not exceed the equivalent of $20,000,000. Each such deposit into the Special Account shall be withdrawn by the Bank from the Loan Account under one or more of the Special Account’s Page 7 Eligible Categories. 3. Notwithstanding the provisions of Part B.2 of this Schedule, the Bank shall not be required to make further deposits into the Special Account: (a) if the Bank determines at any time that any Project Management Report does not adequately provide the information required pursuant to Section 4.02 of this Agreement; (b) if the Bank determines at any time that all further withdrawals should be made by the Borrower directly from the Loan Account; or (c) if the Borrower shall have failed to furnish to the Bank 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 Bank pursuant to said Section in respect of the audit of (A) the records and accounts for the Special Account or (B) the records and accounts reflecting expenditures with respect to which withdrawals were made on the basis of Project Management Reports. 4. The Bank shall not be required to make further deposits into the Special Account in accordance with the provisions of Part B.2 of this Schedule if, at any time, the Bank 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 Loan Account pursuant to Section 6.02 of the General Conditions. Upon such notification, the Bank shall determine, in its sole discretion, whether further deposits into the Special Account may be made and what procedures should be followed for making such deposits, and shall notify the Borrower of its determination. 5. (a) If the Bank determines at any time that any payment out of the Special Account was made for an expenditure which is not an Eligible Expenditure, or was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank, provide such additional evidence as the Bank may request, or deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment. (b) If the Bank determines at any time that any amount outstanding in the Special Account will not be required to cover payments for Eligible Expenditures during the six-month period following such determination, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Bank made pursuant to sub-paragraph (a), (b) or (c) of this paragraph 5 shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the provisions of the Loan Agreement. SCHEDULE 2 Description of the Project The objective of the Project is to assist the Borrower, on an urgent basis: (i) to prevent or minimize the disruption in the Borrower’s social and economic infrastructure that would be caused by the failure of critical central, state and local government systems to process data properly after December 31, 1999 due to the Y2K Problem; (ii) to monitor closely the Y2K Problem nationally; and (iii) to prepare measures to deal with possible disruption arising from the Y2K Problem. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: Part A: Government Sector Remediation 1. Carrying out of a program of Y2K Problem remediation by assisting selected federal, state and local government agencies in the following areas: Page 8 (a) diagnosis of potential Y2K Problem and technical and impact analysis of such problem; and (b) implementation of remediation plans through replacement of commonly-used systems by standardized software, upgrading of the hardware and software platform infrastructure, modification of existing systems and development of contingency plans. 2. Strengthening of the project management capacity of MAMPU. Part B: Y2K Project Team Activities 1. Carrying out of a program to strengthen the capacity of the Y2K Project Team to coordinate and monitor the implementation of Y2K Problem remediation nationally. 2. Dissemination of knowledge about the Y2K Problem through execution of a publicity campaign; establishment of a telephone hot-line system; expansion of an existing website and establishment of links to relevant websites; and carrying out of targeted seminars. 3. Carrying out of selective audits of critical sectors and entities to assess their Y2K Problem remediation efforts . 4. Analysis of the adequacy of the Borrower’s legal framework to address any consequences arising out of the Y2K Problem, including the allocation of responsibility and imposition of sanctions. 5. Development and coordination of contingency plans for situations arising from Y2K Problems, at the national and sectoral levels. * * * The Project is expected to be completed by June 30, 2001. SCHEDULE 3 Interest and Principal Repayment Provisions A. General Definitions For purposes of this Schedule, the following terms have the following meanings: (a) “Disbursed Amount” means, in respect of each Interest Period, the aggregate principal amount of the Loan withdrawn from the Loan Account in such Interest Period. (b) “Interest Period” means the initial period from and including the date of this Agreement to, but excluding, the first Interest Payment Date occurring thereafter, and after the initial period, each period from and including an Interest Payment date to, but excluding, the next following Interest Payment Date. (c) “Interest Payment Date” means any date specified in Section 2.07 of this Agreement. (d) “Rate Fixing Date” means, for each Disbursed Amount, the first day of the Interest Period next following the Interest Period in which such Disbursed Amount is withdrawn. B. Interest 1. The principal amount of the Loan shall be divided into Disbursed Amounts. Interest shall accrue on each Disbursed Amount outstanding from time to time at a rate based on a floating rate index prior to its Rate Fixing Date and at a fixed rate from its Rate Fixing Date, as described in paragraph 2 of this Part B. 2. (a) From the date of withdrawal of each amount of each Disbursed Amount withdrawn and outstanding, to but not including the Rate Fixing Date for such Disbursed Amount, interest on each such amount shall accrue, at a rate equal to the Page 9 applicable: (i) LIBOR Base Rate; plus (ii) LIBOR Total Spread. (b) From the Rate Fixing Date for each Disbursed Amount until final repayment thereof, interest on such Disbursed Amount shall accrue, at a rate equal to the applicable: (i) Fixed Base Rate; plus (ii) Fixed Total Spread. 3. For purposes of paragraph 2 of this Part B, the following terms have the following meanings: (a) “LIBOR Base Rate” means, for the Interest Period in which a Disbursed Amount is withdrawn, the London interbank offered rate for six-month deposits in dollars for value the first day of such Interest Period (or, in the case of the initial Interest Period, for value the day occurring on the Interest Payment Date preceding the first day of such Interest Period), as reasonably determined by the Bank and expressed as a percentage per annum. (b) “LIBOR Total Spread” means, for the Interest Period in which each Disbursed Amount is withdrawn: (i) three-fourths of one percent (3/4 of 1%); (ii) minus (or plus) the weighted average margin, for such Interest Period, below (or above) the London interbank offered rates, or other reference rates, for six-month deposits, in respect of the Bank's outstanding borrowings or portions thereof allocated by the Bank to fund single currency loans or portions thereof made by it that include such Disbursed Amount for such Interest Period; as reasonably determined by the Bank and expressed as a percentage per annum. (c) “Fixed Base Rate” means, for each Disbursed Amount, the equivalent of the London interbank offered rate for six-month deposits in dollars for value on the Rate Fixing Date for such Disbursed Amount, expressed as a single fixed interest rate based on the fixed interest rates corresponding to the repayment installments of such Disbursed Amount, as reasonably determined by the Bank and expressed as a percentage per annum. (d) “Fixed Total Spread” means, for each Disbursed Amount: (i) three-fourths of one percent (3/4 of 1%); (ii) minus (or plus) the cost margin, applicable on the Rate Fixing Date for such Disbursed Amount, below (or above) the London interbank offered rates, or other reference rates, for six-month deposits, in respect of the Bank's outstanding borrowings or portions thereof allocated to fund single currency loans or portions thereof made by it that include such Disbursed Amount; plus (iii) the Bank's risk spread applicable on the Rate Fixing Date for such Disbursed Amount; as reasonably determined by the Bank and expressed as a percentage per annum. 4. The Bank shall notify the Borrower of LIBOR Base Rate, LIBOR Total Spread, Fixed Base Rate and Fixed Total Spread applicable to each Disbursed Amount, promptly upon the determination thereof. 5. Whenever, in light of changes in market practice affecting the determination of the interest rates referred to in this Schedule, the Bank determines that it is in the interest of its borrowers as a whole and of the Bank to apply a basis for determining Page 10 the interest rates applicable to the Loan other than as provided in this Schedule, the Bank may modify the basis for determining the interest rates applicable to amounts of the Loan not yet withdrawn upon not less than six (6) months' notice to the Borrower of the new basis. The new basis shall become effective on the expiry of the notice period unless the Borrower notifies the Bank during said period of its objection thereto, in which case said modification shall not apply to the Loan. C. Repayment 1. Subject to the provisions of paragraph 2 of this Part C, the Borrower shall repay each Disbursed Amount of the Loan in semiannual installments payable on each June 15 and December 15, the first such installment to be payable on the seventh (7th) Interest Payment Date following the Rate Fixing Date for such Disbursed Amount and the last such installment to be payable on the twenty-fourth (24th) Interest Payment Date following the Rate Fixing Date for such Disbursed Amount. Each installment shall be one-eighteenth (1/18) of such Disbursed Amount. 2. Notwithstanding the provisions of paragraph 1 of this Part C, if any installment of principal of each Disbursed Amount would, pursuant to the provisions of said paragraph 1, be payable after December 15, 2014, the Borrower shall also pay on said date the aggregate amount of all such installments. 3. After each Disbursed Amount shall have been withdrawn, the Bank shall promptly notify the Borrower of the amortization schedule for such Disbursed Amount. SCHEDULE 4 Procurement 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 following provisions of Section I of this Schedule. 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 $500,000 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. (c) Notification and Advertising The invitation to prequalify or bid for each contract estimated to cost $10,000,000 equivalent or more shall be advertised in accordance with the procedures applicable to large contracts under paragraph 2.8 of the Guidelines. Part C: Other Procurement Procedures 1. Limited International Bidding Page 11 Goods, up to an aggregate amount not to exceed $16,000,000 equivalent, which the Bank agrees can only be purchased from a limited number of suppliers, may be procured under contracts awarded in accordance with the provisions of paragraph 3.2 of the Guidelines. 2. National Competitive Bidding Goods estimated to cost less than $500,000 equivalent per contract, up to an aggregate amount not to exceed $29,000,000 equivalent, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. 3. National Shopping Goods estimated to cost $100,000 equivalent or less per contract, up to an aggregate amount not to exceed $7,000,000 equivalent, may be procured under contracts awarded on the basis of national shopping procedures acceptable to the Bank in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. 4. Direct Contracting Goods which must be purchased from the original supplier to be compatible with existing equipment and costing $42,000,000 equivalent or less in the aggregate, may, with the Bank’s prior agreement, be procured in accordance with the provisions of paragraph 3.7 of the Guidelines. Part D: Review by the Bank 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 Bank 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 Bank, and with the provisions of said paragraph 1. 2. Prior Review The procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply with respect to the following contracts: (i) all contracts to be procured in accordance with either of the procedures referred to in Parts B and C.1 of this Section I; (ii) all contracts estimated to cost $500,000 equivalent or more; and (iii) each year, the first five contracts to be procured in accordance with the procedures referred to in Part C.2 of this Section I. 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 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 following provisions of Section II of this Schedule. Part B: Procedures for the Selection of Consultants 1. Quality-based Selection Manpower-intensive services including repetitive tasks such as file and data-base verification, clean up and update, up to an aggregate amount not to exceed $3,000,000 equivalent, may be procured under contracts awarded in accordance with the Page 12 provisions of paragraphs 3.1 and 3.6 of the Consultant Guidelines. 2. Individual Consultants Services that meet the requirements set forth in paragraph 5.1 of the Consultant Guidelines, in an aggregate amount not to exceed $2,000,000 equivalent, may be procured under contracts awarded to individual consultants in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines. 3. Single Source Selection Services immediately required to initiate contingency planning, define the scope of Y2K Problem for affected systems and develop implementation plans, in an aggregate amount not to exceed $15,000,000 equivalent, may, with the Bank’s prior agreement, be procured in accordance with the provisions of paragraphs 3.8 through 3.11 of the Consultant Guidelines. Part C: Review by the Bank 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 Bank 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 Bank, and with the provisions of said paragraph 1. 2. Prior Review (a) With respect to each contract for the employment of consulting firms 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 Bank for its prior review and approval. The contract shall be awarded only after the said approval shall have been given. 2. 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 5 Implementation Program A. Project Management 1. The Borrower shall maintain: (a) MAMPU with functions, responsibilities and resources satisfactory to the Bank, and managed and staffed with qualified personnel in adequate number to: (i) direct the implementation of the Project; (ii) analyze the impact of the Y2K Problem on essential social and economic services provided by the public sector; and (iii) assist selected federal, state and local government agencies in the implementation of their respective remediation plans; and Page 13 (b) the Y2K Project Team with functions, responsibilities and resources satisfactory to the Bank, and managed and staffed with qualified personnel in adequate number to, inter alia: (i) monitor the Y2K Problem remediation efforts on a nation-wide basis; (ii) assist in the coordination and implementation of such efforts by carrying out a campaign to disseminate information and best practices; and (iii) undertake contingency planning at the national level and coordinate contingency planning on a sectoral basis. 2. The Borrower shall establish and, thereafter, maintain an approval committee, with composition and terms of reference satisfactory to the Bank, to review and select, in accordance with criteria acceptable to the Bank, remediation plans submitted by line agencies for support and assistance under the Project. 3. The Borrower shall establish and, thereafter, maintain a Project Administration Unit within MAMPU satisfactory to the Bank, managed and staffed with qualified personnel in adequate number and provided with sufficient resources, to undertake the daily management of the Project, including procurement, accounting, supervision and monitoring activities. B. Project Implementation 1. The Borrower shall carry out the Project in accordance with an Operational Manual satisfactory to the Bank. The Borrower shall, through MAMPU, adopt and put into effect such Operational Manual which shall establish, inter alia: (i) the managerial, financial and administrative policies and procedures for the execution of the Project; (ii) the guidelines for diagnosis of the Y2K Problem in government agencies and for technical and impact analyses; (iii) policies and procedures for preparation and submission of remediation plans by federal, state and local government agencies and for selection of such plans for financing under the Project. 2. The Borrower shall not modify any provisions of the Operational Manual without the prior concurrence of the Bank. 3. The Borrower shall: (i) by June 15 and December 15 of each year, commencing on June 15, 1999, prepare under terms of reference acceptable to the Bank and provide to the Bank for its prior approval, a semi-annual work plan for the next succeeding six months, and thereafter (ii) implement such plan in a manner satisfactory to the Bank. 4. The Borrower shall carry out the training under Parts A.2 and B.1 of the Project in accordance with a program satisfactory to the Bank. C. Monitoring and Reporting 1. The Borrower shall, through MAMPU, maintain policies and procedures adequate to enable it to: (a) monitor and evaluate on an ongoing basis, in accordance with indicators acceptable to the Bank the carrying out of the Project and the achievement of the objectives thereof; (b) prepare under terms of reference satisfactory to the Bank, and furnish to the Bank, quarterly reports on or about February 15, May 15, August 15 and November 15 of each year, commencing on August 15, 1999 integrating the results of the monitoring and evaluation activities performed pursuant to sub-paragraph (a) above, on the progress achieved in the carrying out of the Project during the period preceding the date of each such report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date; and (c) review with the Bank, by such date as the Bank shall request, each report referred to in sub-paragraph (b) above and, thereafter, take all measures required to ensure the efficient implementation of the Project and the achievement of the objectives thereof, based on the conclusion and recommendations of each such report and the Bank’s views on the matter. Page 14 2. For purposes of paragraph 1 of this Part C, the Borrower shall, inter alia: (i) engage independent entities acceptable to the Bank, to carry out under terms of reference satisfactory to the Bank quarterly audits of the physical progress in Project implementation in relation to the level of expenditures during the same period; and (ii) incorporate the reports of such technical audits into the reports referred to in paragraph 1 (b) above.