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March
24,
1998
His Excellency
Arben Malaj
Minister of Finance
Ministry of Finance
Bulevardi
"Desmoret e Kombit"
Tirana, Albania
Re:
Japanese Grant for Community Works Project
Grant Number TF025528
Excellency:
I
am writing on behalf of the International Development Association (the 
Association) to indicate the Association
’s
agreement, as administrator of grant funds 
provided by Japan, to make a grant in an amount not exceeding two hundred nine 
thousand five hundred United States dollars ($209,500) (the Grant) to Albania (the 
Recipient).
The Grant is made in response to the Recipient's request for financial 
assistance and for the purpose and on the terms and conditions set forth in the Annex 
to this Letter Agreement.  The Recipient represents, by confirming its agreement 
below, that it is authorized to contract and withdraw the Grant for the said purpose 
and on the said terms and conditions.
Please confirm your agreement with the foregoing, on behalf of the Recipient, by
signing, dating, and returning to us the enclosed copy of this Letter Agreement. Upon 
receipt by the Association of the copy of this Letter Agreement countersigned by you, 
this Letter Agreement will become effective as of the date of the countersignature.
Very truly yours,
INTERNATIONAL DEVELOPMENT ASSOCIATION
By
/s/
A.
Hartmann
Country Director
Albania, Croatia Country Department
Europe and Central Asia Region
AGREED:
ALBANIA
By
/s/
A.
Malaj
Authorized Representative
Date: April 4, 1998
ANNEX
Purposes, Terms, and Conditions of the Grant
1.
Purposes and Activities
1.1.
The purpose of the Grant is to assist the Recipient in carrying out studies, 
preparing guidelines and training personnel necessary to prepare the Community Works 
Project.
1.2.
The activities (the Activities) for which the Grant is given are as follows:
(a)
carrying out studies, identify constraints, and make recommendations on 
local government finance, local government administration and legal framework for 
local government administration and finance;
(b) 
institutional strengthening through revision of internal regulations and 
operational guidelines for community participation and technical, economic and 
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environmental analysis of subprojects and through staff training; and
(c) 
carrying out a socio-economic impact study of a sample of infrastructure 
subjects financed and completed under the Rural Development Project, with a view to 
incorporating the lessons learned. 
2.
Implementation Generally
The Recipient shall, through the Albanian Development Fund, established as an 
independent entity with juridical personality pursuant to Government Decision No. 427 
of September 8, 1994: (a) carry out the Activities with due diligence and efficiency; 
(b) promptly provide the funds, facilities, services and other resources required for 
that purpose; (c) furnish all information covering the Activities and the use of the 
proceeds of the Grant as the Association shall reasonably request; (d) from time to 
time exchange views with the Association's representatives on the progress and results 
of the Activities; and (e) take all necessary measures required to enable the 
Association to visit the territory of the Recipient for purposes related to the Grant. 
Without limitation on the foregoing, the Recipient shall, if the Association shall so 
request, prepare and furnish to the Association promptly upon completion of the 
Activities a report, in form and substance satisfactory to the Association, on the 
results and impact of the Activities.
3.
Procurement
Except as the Association shall otherwise agree, procurement of the consultants
’
services required for the carrying out of the Activities and to be financed out of the 
proceeds of the Grant shall be governed by the provisions of Attachment I to this 
Annex.
4.
Withdrawal of Grant Proceeds
4.1.
The amount of the Grant shall be credited to an account opened by the 
Association on its books in the name of the Recipient (the Grant Account), and may be 
withdrawn therefrom by the Recipient in accordance with the provisions of this Section 
4, for expenditures in respect of the reasonable cost of services required for the 
Activities and to be financed out of the proceeds of the Grant.
4.2.
The expenditures for the following items may be financed out of the proceeds of 
the Grant and shall be used exclusively in the carrying out of the Activities:
Amount of the
%
of
Grant Allocated
Expenditures to
Item
(in United States dollar)
be Financed
Consultants’
services and training
209,500
100%
TOTAL
209,500
4.3.
Notwithstanding the provisions of paragraph 4.2 above, no withdrawals shall be 
made: (i) for payments made for expenditures prior to the date of signature of this 
Letter Agreement by the Association, except that withdrawals, in an aggregate amount 
not exceeding $50,000, may be made on account of payments made for expenditures before 
that date but not after the Closing date; (ii) on account of payments for any taxes 
levied by or in the territory of the Recipient; (iii) on account of expenditures in 
the territories of any country which is not a member of the Association or for 
services supplied from such territories; (iv) for the purpose of any payment to 
persons or entities if such payment, to the Association’s knowledge, is prohibited by 
a
decision of the United Nations Security Council taken under Chapter VII of the 
Charter of the United Nations; or (v) after December 31, 1998 or such later date as 
the Association shall establish by written notice to the Recipient (the Closing Date), 
except that withdrawals may be made for expenditures incurred prior to the Closing 
Date if the corresponding application is received by the Association within four (4) 
months after the Closing Date, after which time any amount of the Grant remaining 
unwithdrawn from the Grant Account shall be canceled.
4.4.
When the Recipient shall desire to withdraw any amount from the Grant Account, 
it shall deliver to the Association a written application for withdrawal of such 
amount in the form specified by the Association. Withdrawal applications shall be: (a) 
signed on behalf of the Recipient by the Finance Minister or such other person as he 
or she shall have authorized in writing; and (b) be accompanied by such evidence in 
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support of the application as the Association shall reasonably request
.
Authenticated
specimen signatures of the person authorized to sign withdrawal applications shall be 
provided with the first application bearing his or her signature.  Each withdrawal 
application for an amount of the Grant and its supporting evidence must be sufficient 
in form and substance to satisfy the Association that the Recipient is entitled to 
withdraw such amount from the Grant Account and that such amount is to be used in the 
carrying out of the Activities.  The Association shall pay the amounts withdrawn by 
the Recipient from the Grant Account only to or on the order of the Recipient.
4.5.
The Association may require withdrawals from the Grant Account to be made on the 
basis of statements of expenditure for expenditures for: (a) services of consulting 
firms costing less than $50,000 equivalent; and (b) services of individual consultants 
costing less than $50,000 equivalent, all under such terms and conditions as the 
Association shall specify by notice to the Recipient. 
4.6.
Withdrawals of the proceeds of the Grant shall be made in the currency of the 
Grant.  The Association, at the Recipient
’s
request and acting as an agent of the 
Recipient, shall purchase with the currency of the Grant withdrawn from the Grant 
Account such currencies as shall be required to pay for expenditures to be financed 
out of the proceeds of the Grant.  Whenever it shall be necessary, for the purposes of 
this Letter Agreement, to determine the value of one currency in terms of another, 
such value shall be as reasonably determined by the Association.
4.7.
To facilitate the carrying out of the Activities, the Recipient may open and 
maintain in US dollar a special deposit account (the Special Account) in Bank of 
Albania 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 Attachment II to this Annex.
5.
Accounts and Audits
5.1.
(a)
The Recipient 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 Activities of the departments 
or agencies of the Recipient responsible for carrying out the Activities or any part 
thereof.
(b)
The Recipient shall: (i) have the records and accounts referred to in 
subparagraph
(a)
above and the records and accounts 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.
(c)
For all expenditures with respect to which withdrawals from the Grant 
Account were made on the basis of statements of expenditure, the Recipient shall: (i) 
maintain or cause to be maintained, in accordance with subparagraph (a) above, 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 Grant 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 subparagraph (b) 
above and that the report of such audit contains a separate opinion by said auditors 
as to whether the statements of expenditure submitted during such fiscal year, 
together with the procedures and internal controls involved in their preparation, can 
be relied upon to support the related withdrawals.
6.
Suspension and Cancellation
6.1.
The Association may at any time, by notice to the Recipient, suspend the right 
of the Recipient to make further withdrawals from the Grant Account if any of the 
following events has occurred and is continuing: (a) the Recipient has failed to 
comply with any of its obligations herein specified; or (b) the right of the 
Recipient, or any other entity to which the International Bank for Reconstruction and 
Development
(the
Bank) has made a loan with the guarantee of the Recipient, to make 
withdrawals under any loan agreement with the Bank or any development credit agreement 
with the Association shall have been suspended.
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6.2.
The Association may, by written notice to the Recipient, terminate the right of 
the Recipient to make further withdrawals from the Grant Account: (a) at any time 
after the right of the Recipient to make withdrawals from the Grant Account shall have 
been suspended pursuant to the provisions of paragraph 6.1 above; or (b) if the 
Recipient shall have failed to take action, satisfactory to the Association, within 
six months after the effective date hereof, to carry out the Activities.
Attachment I
Procurement
Consultants
’
Services
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 (the 
Consultant Guidelines) and the following provisions of this Attachment.
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.
Part C:
Other Procedures for the Selection of Consultants
1.
Selection Based on Consultants’ Qualifications
Services for local government studies, technical and participation specialists, 
and impact studies under paragraph 1.2 (a), (b) and (c) of the Annex 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 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
5.01 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.
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 Activities 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 for 
services estimated to cost the equivalent of $50,000 or more, but less than the 
equivalent of $100,000, 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.
(b)
With respect to each contract for the employment of individual 
consultants estimated to cost the equivalent of $50,000 or more, the qualifications, 
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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.
3.
Post Review
With respect to each contract not governed by paragraph 1 of this Part, the 
procedures set forth in paragraph 4 of Appendix 1 to the Consultant Guidelines shall 
apply.
Attachment II
Special Account
1.
For the purposes of this Attachment:
(a)
the term "eligible item" means the item set forth in the table in 
paragraph
4.2 of the Annex to this Letter Agreement;
(b)
the term "eligible expenditures" means expenditures in respect of the 
reasonable cost of services required for the Activities and to be financed out of the 
proceeds of the Grant; and
(c)
the term "Authorized Allocation" means an amount equivalent to $100,000 
to be withdrawn from the Grant Account and deposited into the Special Account pursuant 
to paragraph
3
(a) of this Attachment.
2.
Payments out of the Special Account shall be made exclusively for eligible 
expenditures in accordance with the provisions of this Attachment.
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)
The Recipient shall furnish to the Association a request or requests for 
a
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 Recipient, withdraw from the Grant 
Account and deposit into the Special Account such amount or amounts as the Recipient 
shall have requested.
(b)
(i)
For replenishment of the Special Account, the Recipient 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 Recipient shall 
furnish to the Association the documents and other evidence 
required pursuant to paragraph 4 of this Attachment 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 Recipient, withdraw from the Grant Account 
and deposit into the Special Account such amount as the Recipient 
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 Grant Account under the 
eligible item, and in the respective equivalent amounts, as shall 
have 
been justified by said documents and other evidence.
4.
For each payment made by the Recipient out of the Special Account, the Recipient 
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 Attachment, 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 Recipient directly from the Grant Account;
(b)
if the Recipient shall have failed to furnish to the Association, within 
the period of time specified in paragraph 5.1 (b) (ii) of the Annex to this Letter 
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Agreement, any of the audit reports required to be furnished to the Association
pursuant to said paragraph 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 Recipient of its 
intention to suspend in whole or in part the right of the Recipient to make 
withdrawals from the Grant Account pursuant to the provisions of paragraph 6.1 of the 
Annex to this Letter Agreement; or
(d)
once the total unwithdrawn amount of the Grant shall equal the equivalent 
of twice the amount of the Authorized Allocation.
Thereafter, withdrawals from the Grant Account of the remaining unwithdrawn amount of 
the Grant shall follow such procedures as the Association shall specify by notice to 
the Recipient.  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 Attachment; or (ii) was not justified by the evidence 
furnished to the Association, the Recipient 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 
Recipient 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 Recipient shall, promptly upon notice from the Association, 
refund to the Association such outstanding amount.