Page 1 CONFORMED COPY GRANT NUMBER H636-AF Financing Agreement (Additional Financing for National Emergency Rural Access Project) between ISLAMIC REPUBLIC OF AFGHANSITAN and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated December 27, 2010 Page 2 2 Page 3 FINANCING AGREEMENT AGREEMENT dated December 27, 2010, entered into between the ISLAMIC REPUBLIC OF AFGHANISTAN (“Recipient”) and INTERNATIONAL DEVELOPMENT ASSOCIATION (“Association”) for the purpose of providing additional financing for the Original Project (as defined in the Appendix to this Agreement). The Recipient and the Association hereby agree as follows: ARTICLE I — GENERAL CONDITIONS; DEFINITIONS 1.01. The General Conditions (as defined in the Appendix to this Agreement) constitute an integral part of this Agreement. 1.02. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the General Conditions or in the Appendix to this Agreement or in the Original Financing Agreement, as the case may be. ARTICLE II — FINANCING 2.01. The Association agrees to extend to the Recipient, on the terms and conditions set forth or referred to in this Agreement, a grant in an amount equivalent to twenty five million five hundred thousand Special Drawing Rights (SDR 25,500,000) (“Financing”) to assist in financing the project described in Schedule 1 to this Agreement (“Project”). 2.02. The Recipient may withdraw the proceeds of the Financing in accordance with Section IV of Schedule 2 to this Agreement. 2.03. The Maximum Commitment Charge Rate payable by the Recipient on the Unwithdrawn Financing Balance shall be one-half of one percent (1/2 of 1%) per annum. 2.04. The Payment Dates are February 15 and August 15 in each year. 2.05. The Payment Currency is United States Dollars. Page 4 2 ARTICLE III — PROJECT 3.01. The Recipient declares its commitment to the objectives of the Project. To this end, the Recipient shall carry out Part A and parts of Part C of the Project through MPW and Part B and parts of Part C of the Project through MRRD, in accordance with the provisions of Article IV of the General Conditions. 3.02. Without limitation upon the provisions of Section 3.01 of this Agreement, and except as the Recipient and the Association shall otherwise agree, the Recipient shall ensure that the Project is carried out in accordance with the provisions of Schedule 2 to this Agreement. ARTICLE IV — EFFECTIVENESS; TERMINATION 4.01. The Additional Condition of Effectiveness consists of the following, namely, that the letter of amendment to the Original Financing Agreement has been duly countersigned by an authorized representative of the Recipient, and is in force and effect. 4.02. The Effectiveness Deadline is the date ninety (90) days after the date of this Agreement. 4.03. For purposes of Section 8.05(b) of the General Conditions, the date on which the obligations of the Recipient under this Agreement (other than those providing for payment obligations) shall terminate is twenty (20) years after the date of this Agreement. ARTICLE V — REPRESENTATIVE; ADDRESSES 5.01. The Recipient’s Representative is its Minister of Finance. 5.02. The Recipient’s Address is: Ministry of Finance Pashtunistan Watt Kabul, Islamic Republic of Afghanistan Facsimile: 93-20-210-3258 Page 5 3 5.03. The Association’s Address is: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable: Telex: Facsimile: INDEVAS 248423 (MCI) 1-202-477-6391 Washington, D.C. AGREED at Kabul, Islamic Republic of Afghanistan, as of the day and year first above written. ISLAMIC REPUBLIC OF AFGHANISTAN By /s/ Omar Zakhilwal Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Samantha de Silva Authorized Representative Page 6 4 SCHEDULE 1 Project Description The objective of the Project is to assist the Recipient in enabling the population living in its rural areas to benefit from the year-round access to basic services and facilities through the rehabilitation and maintenance of rural access infrastructure under the Recipient’s National Rural Access Program. The Project consists of the Original Project (as amended to the date of this Agreement). Page 7 5 SCHEDULE 2 Project Execution Section I. Implementation Arrangements A. Institutional Arrangements The Recipient shall implement the Project in accordance and in compliance with the provisions set forth in sub-Sections I.A through I.E and Section V of Schedule 2 to the Original Financing Agreement, which Sections and sub- Sections are incorporated herein by reference and apply, mutatis mutandis , to this Agreement. B. Anti-Corruption The Recipient shall ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines. Section II. Project Monitoring, Reporting and Evaluation A. Project Reports The Recipient shall monitor and evaluate the progress of the Project and prepare Project Reports in accordance with the provisions of Section 4.08 of the General Conditions and on the basis of indicators agreed with the Association. Each Project Report shall cover the period of one (1) calendar quarter, and shall be furnished to the Association not later than forty-five (45) days after the end of the period covered by such report. B. Financial Management, Financial Reports and Audits 1. The Recipient shall maintain or cause to be maintained a financial management system in accordance with the provisions of Section 4.09 of the General Conditions. 2. Without limitation on the provisions of Part A of this Section, the Recipient shall prepare and furnish to the Association not later than forty-five (45) days after the end of each calendar quarter, interim unaudited financial reports for the Project covering the quarter, in form and substance satisfactory to the Association. 3. The Recipient shall have its Financial Statements audited in accordance with the provisions of Section 4.09(b) of the General Conditions. Each audit of the Financial Statements shall cover the period of one (1) fiscal year of the Recipient, commencing with the fiscal year in which the first withdrawal was made under the Project. The audited Financial Statements for each such period shall be Page 8 6 furnished to the Association not later than six (6) months after the end of such period. Section III. Procurement A. General 1. Goods and Works. All goods and works required for the Project and to be financed out of the proceeds of the Financing shall be procured in accordance with the requirements set forth or referred to in Section I of the Procurement Guidelines, and with the provisions of this Section. 2. Consultants’ Services. All consultants’ services required for the Project and to be financed out of the proceeds of the Financing shall be procured in accordance with the requirements set forth or referred to in Sections I and IV of the Consultant Guidelines, and with the provisions of this Section. 3. Definitions. The capitalized terms used below in this Section to describe particular procurement methods or methods of review by the Association of particular contracts, refer to the corresponding method described in the Procurement Guidelines, or Consultant Guidelines, as the case may be. B. Particular Methods of Procurement of Goods and Works 1. International Competitive Bidding. Except as otherwise provided in paragraph 2 below, goods and works shall be procured under contracts awarded on the basis of International Competitive Bidding. 2. Other Methods of Procurement of Goods and Works. The following table specifies the methods of procurement, other than International Competitive Bidding, which may be used for goods and works. The Procurement Plan shall specify the circumstances under which such methods may be used: Procurement Method (a) National Competitive Bidding* (b) Direct Contracting (c) Shopping (d) Community Participation** * National Competitive Bidding procedures shall be subject to the following additional procedures: Page 9 7 (i) Standard bidding documents approved by the Association shall be used. (ii) Invitations to bid shall be advertised in at least one (1) widely circulated national daily newspaper and bidding documents shall be made available to prospective bidders, at least twenty eight (28) days prior to the deadline for the submission of bids. (iii) Bids shall not be invited on the basis of percentage premium or discount over the estimated cost. (iv) Bidding documents shall be made available, by mail or in person, to all who are willing to pay the required fee. (v) Foreign bidders shall not be precluded from bidding. (vi) Qualification criteria (in case pre-qualifications were not carried out) shall be stated on the bidding documents, and if a registration process is required, a foreign firm determined to be the lowest evaluated bidder shall be given reasonable opportunity of registering, without any hindrance. (vii) Bidders may deliver bids, at their option, either in person or by courier service or by mail. (viii) All bidders shall provide bid security or a bid security declaration form as indicated in the bidding documents. A bidder’s bid security or the declaration form shall apply only to a specific bid. (ix) Bids shall be opened in public in one (1) place preferably immediately, but no later than one (1) hour, after the deadline for submission of bids. (x) Evaluation of bids shall be made in strict adherence to the criteria disclosed in the bidding documents, in a format, and within the specified period, agreed with the Association. (xi) Bids shall not be rejected merely on the basis of a comparison with an official estimate without the prior concurrence of the Association. (xii) Split award or lottery in award of contracts shall not be carried out. When two (2) or more bidders quote the same price, an investigation shall be made to determine any evidence of collusion, following which: (A) if collusion is determined, the parties involved shall be disqualified and the award shall then be made to the next lowest evaluated and qualified bidder; and (B) if no evidence of collusion can be confirmed, Page 10 8 then fresh bids shall be invited after receiving the concurrence of the Association. (xiii) Contracts shall be awarded to the lowest evaluated bidders within the initial period of bid validity so that extensions are not necessary. Extension of bid validity may be sought only under exceptional circumstances. (xiv) Extension of bid validity shall not be allowed without the prior concurrence of the Association: (A) for the first request for extension if it is longer than four (4) weeks; and (B) for all subsequent requests for extensions irrespective of the period. (xv) Negotiations shall not be allowed with the lowest evaluated or any other bidders. (xvi) Re- bidding shall not be carried out without the Association’s prior concurrence. (xvii) All contractors or suppliers shall provide performance security as indicated in the contract documents. A contractor’s or a supplier’s performance security shall apply to a specific contract under which it was furnished. ** Community Participation shall be carried out in accordance with paragraph 3.17 of the Procurement Guidelines and the procedures set out in the Project Implementation Manual. C. Particular Methods of Procurement of Consultants’ Services 1. Quality- and Cost-based Selection. Except as otherwise provided in paragraph 2 below, consultants’ services shall be procured under contracts awarded on the basis of Quality and Cost-based Selection. 2. Other Methods of Procurement of Consultants’ Services . The following table specifies methods of procurement, other than Quality and Cost-based Selection, which may be used for consultants’ services. The Procurement Plan shall specify the circumstances under which such methods may be used. Procurement Method (a) Quality-Based Selection (b) Single-Source Selection (c) Least-Cost Selection (d) Selection Based on the Consultants’ Qualifications (e) Selection under a Fixed Budget Page 11 9 (f) Individual Consultants Page 12 10 D. Review by the Association of Procurement Decisions Except as the Association shall otherwise determine by notice to the Recipient, the following contracts shall be subject to Prior Review by the Association: (a) each contract for goods estimated to cost the equivalent of $200,000 or more; (b) each contract for works estimated to cost the equivalent of $500,000 or more; (c) all contracts for goods or works procured on the basis of Direct Contracting regardless of value; (d) each contract for consultant’s services provided by a firms estimated to cost the equivalent of $100,000 or more; (e) each contract for consultants’ services provided by an individual estimated to costs the equivalent of $50,000 or more; and (f) each contract for consultants’ services procured on the basis of Single-Source Selection regardless of value. All other contracts shall be subject to Post Review by the Association. Section IV. Withdrawal of the Proceeds of the Financing A. General 1. The Recipient may withdraw the proceeds of the Financing in accordance with the provisions of Article II of the General Conditions, this Section, and such additional instructions as the Association shall specify by notice to the Recipient (including the “World Bank Disbursement Guidelines for Projects” dated May 2006, as revised from time to time by the Association and as made applicable to this Agreement pursuant to such instructions), to finance Eligible Expenditures as set forth in the table in paragraph 2 below. 2. The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Financing (“Category”), the allocations of the amounts of the Financing to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category: Category Amount of the Financing Allocated (expressed in SDR) Percentage of Expenditures to be Financed (inclusive of Taxes) (1) Goods, works and consultants’ services, Training, Routine Maintenance Grants and Incremental Operating Costs for the Project 25,500,000 100% Page 13 11 TOTAL AMOUNT 25,500,000 For purposes of the above table of Eligible Expenditures, the following terms have the following meaning: (a) “Incremental Operating Costs” means incremental expenses incurred on account of Project implementation, support and management including the rental of office space, the operation, maintenance, rental and insurance of vehicles, fuel costs, communications supplies and charges, advertisement expenses, books and periodicals, office administration and maintenance costs, bank transaction charges, utility charges, domestic travel and per diem, and incremental salaries of MRRD and MPW staff on account of Project implementation; and (b) “Training” means the reasonable costs of trainings, workshops and conferences conducted in the territory of the Recipient or, subject to the prior no-objections of the Association, attended overseas by MPW’s and MRRD’s staff, including the purchase and publications of material, rental of facilities, course fees and travel and subsistence allowances for trainees. B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made for payments made prior to the date of this Agreement 2. The Closing Date is December 31, 2013. Page 14 12 APPENDIX Section I. Definitions 1. “Anti-Corruption Guidelines” means the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants”, dated October 15, 2006 with the modifications set forth in Section II of this Appendix. 2. “Category” means a category set forth in the table in Section IV of Schedule 2 to this Agreement. 3. “Consultant Guidelines” means the “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” published by the Bank in May 2004 and revised in October 2006 and May 2010. 4. “General Conditions” means the “International Development Association General Conditions for Credits and Grants”, dated July 31, 2010. 5. “Original Financing Agreement” means the financing agreement for a National Emergency Rural Access Project between the Recipient and the Association, dated March 10, 2008 as amended to the date of this Agreement (Grant H344- AF). 6. “Original Project” means the Project described in Schedule 1 of the Original Financing Agreement. 7. “Procurement Guidelines” means the “Guidelines: Procurement under IBRD Loans and IDA Credits” published by the Bank in May 2004 and revised in October, 2006 and May 2010. Section II. Modifications to the Anti-Corruption Guidelines The modifications to the Anti-Corruption Guidelines are as follows: 1. Section 5 is re-numbered as Section 5(a) and a new Section 5(b) is added to read as follows: “… (b) These Guidelines also provide for the sanctions and related actions to be imposed by the Bank on Borrowers (other than the Member Country) and all other individuals or entities who are recipients of Loan proceeds, in the event that the Borrower or the individual or entity has been debarred by another financier as a result of a determination by such financier that the Borrower or the individual or entity has engaged in fraudulent, corrupt, coercive or collusive practices in connection with the use of the proceeds of a financing made by such financier.” Page 15 13 2. Section 11(a) is modified to read as follows: “… (a) sanction in accordance with prevailing Bank’s sanctions policies and procedures (fn13) a Borrower (other than a Member Country) ( fn 14) or an individual or entity, including (but not limited to) declaring such Borrower, individual or entity ineligible publicly, either indefinitely or for a stated period of time: (i) to be awarded a Bank-financed contract; (ii) to benefit from a Bank- financed contract, financially or otherwise, for example as a sub-contractor; and (iii) to otherwise participate in the preparation or implementation of the project or any other project financed, in whole or in part, by the Bank, if at any time the Bank determines (fn 15) that such Borrower, individual or entity has engaged in corrupt, fraudulent, collusive, coercive or obstructive practices in connection with the use of loan proceeds, or if another financier with which the Bank has entered into an agreement for the mutual enforcement of debarment decisions has declared such person or entity ineligible to receive proceeds of financings made by such financier or otherwise to participate in the preparation or implementation of any project financed in whole or in part by such financier as a result of a determination by such financier that the Borrower or the individual or entity has engaged in fraudulent, corrupt, coercive or collusive practices in connection with the use of the proceeds of a financing made by such financier.” Footnotes: “13. An individual or entity may be declared ineligible to be awarded a Bank financed contract upon completion of sanctions proceedings pursuant to the Bank’s sanctions policies and procedures, or under the procedures of temporary suspension or early temporary suspension in connection with an ongoing sanctions proceeding, or following a sanction by another financier with whom the Bank has entered into a cross debarment agreement, as a result of a determination by such financier that the firm or individual has engaged in fraudulent, corrupt, coercive or collusive practices in connection with the use of the proceeds of a financing made by such financier.” “14. Member Country includes officials and employees of the national government or of any of its political or administrative subdivisions, and government owned enterprises and agencies that are not eligible to bid under paragraph 1.8(b) of the Procurement Guidelines or participate under paragraph 1.11(c) of the Consultant Guidelines.” “15. The Bank has established a Sanctions Board, and related procedures, for the purpose of making such determinations. The procedures of the Page 16 14 Sanctions Board sets forth the full set of sanctions available to the Bank. In addition, the Bank has adopted an internal protocol outlining the process to be followed in implementing debarments by other financiers, and explaining how cross-debarments will be posted on the Bank’s website and otherwise be made known to staff and other stakeholders.”