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CONFORMED COPY
LOAN NUMBER 7032-PAN
Loan Agreement
(Second Basic Education Project)
between
REPUBLIC OF PANAMA
and
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
Dated January 24, 2001
LOAN NUMBER 7032-PAN
LOAN AGREEMENT
AGREEMENT, dated January 24, 2001, between the REPUBLIC OF PANAMA (the Borrower) 
and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank).
WHEREAS by an agreement dated April 3, 1996 between the Borrower and the Bank 
(the Basic Education Project Loan Agreement), the Bank agreed to make a loan to the 
Borrower in a principal amount of $35,000,000 to assist in financing the Basic 
Education Project on terms and conditions set forth in the Basic Education Project 
Loan Agreement;
WHEREAS the Borrower, having satisfied itself as to the feasibility and priority 
of the project described in Schedule 2 to this Agreement (the Project), has requested 
the Bank to assist in the financing of the Project; and
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 Fixed-Spread Loans" of the Bank, dated September 1, 1999 (the General 
Conditions) constitute an integral part of this Agreement.
Section 1.02. Unless the context otherwise requires, the several terms defined 
in the General Conditions and in the Preamble to this Agreement have the respective 
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meanings therein set forth and the following additional terms have the following 
meanings:
(a)
"Basic Education" means the public education services provided in the 
Borrower’s territory for Pre-School Education (as defined hereinafter), for Primary 
Education (as defined hereinafter), and for Lower Secondary Education (as defined 
hereinafter);
(b)
"CEFACEI" means a Centro Familiar y Comunitario de Educación Inicial, any 
one of the Borrower’s Community and Family Centers for Initial Education;
(c)
"CEFACEI Program" means Programa del Centro Familiar y Comunitario de 
Educación Inicial, the Borrower’s program to operate Community and Family Centers for 
Initial Education established pursuant to the Borrower’s Decree No.266 of October 6, 
1995;
(d)
"Construction Implementation Agreement" means the agreement to be entered 
into between the Borrower and the Construction Implementing Entity (as defined 
hereinafter) pursuant to Section 3.05 of this Agreement;
(e)
"Construction Implementing Entity" means the entity referred to in 
Section 3.05 (a) of this Agreement;
(f)
"Eligible Categories" means categories (1), (2), (3), (4), and (5) set 
forth in the table in Part A.1 of Schedule 1 to this Agreement;
(g)
"Eligible Expenditures" means the expenditures for goods, works and 
services referred to in Section 2.02 of this Agreement;
(h)
"Home-Based Initial Education Program" means Programa de Educación 
Inicial en el Hogar (Programa Madre a Madre),  MIEDUC’s program to train parents in 
better child education methods;
(i)
"IFARHU" means Instituto para la Formación y Aprovechamiento de Recursos 
Humanos,
the Borrower’s Institute for Human Resources Development, established 
pursuant to Decree No.1, published in the Borrower’s Official Gazette of January 12, 
1965;
(j)
"IFARHU Agreement" means the agreement to be entered into between the 
Borrower and IFARHU pursuant to Section 3.04 of this Agreement;
(k) 
"Implementation Letter" means the letter of even date herewith from the 
Borrower to the Bank which sets forth the Project monitoring indicators referred to in 
Section 3.09 of this Agreement;
(l)
"Lower Secondary Education" means Educación Pre-media, the public 
education services provided in the Borrower’s territory for the seventh through ninth 
grades of schooling;
(m)
"MIEDUC" means Ministerio de Educación, the Borrower’s Ministry of 
Education;
(n)
"Operational Manual" means the manual referred to in Section 3.11 of this 
Agreement;
(o)
"Pre-School Education" means Educación Pre-Escolar, the public education 
services provided in the Borrower’s territory for children aged four and five years 
old;
(p)
"Primary Education" means Educación Primaria, the public education 
services provided in the Borrower’s territory for the first through sixth grades of 
schooling;
(q)
"PCU" means the unit within MIEDUC established under Ministerial 
Resolution No. 768 of July 1, 1997 to be amended as required under Section 5.01 (e) of 
this Agreement;
(r)
"Project Management Committee" means the Borrower’s Project management 
committee referred to in Section 3.07 of this Agreement;
(s)
"Project Management Report" means each report prepared in accordance with 
Section 4.02 of this Agreement;
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(t)
"Revolving Fund" means the fund referred to in Section 3.01 (b) of this 
Agreement and established by the Borrower in the Banco Nacional de Panama, under the 
Basic Education Project;
(u)
"Secondary Education" means Educación Media, the Borrower’s public 
education services provided in the Borrower’s territory for the tenth through twelfth 
grades of schooling; and
(v)
"Special Account" means the account referred to in Part B of Schedule 1 
of this Agreement.
Section 1.03. Each reference in the General Conditions to the Project 
implementation entity shall be deemed as a reference to IFARHU and the Construction 
Implementing Entity, as the case may be.
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 this Agreement, an amount equal to thirty-five 
million Dollars ($35,000,000), as such amount may be converted from time to time 
through a Currency Conversion in accordance with the provisions of Section 2.09 of 
this Agreement.
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, works and consultants' services required for Parts A.1, A.3, A.4, B, and C of 
the Project and to be financed out of the proceeds of the Loan.
Section 2.03.  The Closing Date shall be June 30, 2005 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 front-end fee in an amount 
equal to one per cent (1%) of the amount of the Loan. Such fee shall be payable not 
later than sixty (60) days after the Effective Date.
Section 2.05. The Borrower shall pay to the Bank a commitment charge on the 
principal amount of the Loan not withdrawn from time to time, at a rate equal to: (i) 
eighty-five one-hundredths of one per cent (0.85%) per annum from the date on which 
such charge commences to accrue in accordance with the provisions of Section 3.02 (b) 
of the General Conditions to but not including the fourth anniversary of such date; 
and (ii) seventy-five one-hundredths of one per cent (0.75%) per annum thereafter.
Section 2.06. The Borrower shall pay interest on the principal amount of the 
Loan withdrawn and outstanding from time to time, at a rate for each Interest Period 
equal to the Variable Rate; provided, that upon a Conversion of all or any portion of 
the principal amount of the Loan, the Borrower shall, during the Conversion Period, 
pay interest on such amount in accordance with the relevant provisions of Article IV 
of the General Conditions.
Section 2.07. Interest and commitment charges shall be payable semiannually in 
arrears on April 15 and October 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.
Section 2.09. (a) The Borrower may at any time request any of the following 
Conversions of the terms of the Loan in order to facilitate prudent debt management:
(i)
a change of the Loan Currency of all or any portion of the 
principal amount of the Loan, withdrawn or unwithdrawn, to an 
Approved Currency;
(ii)
a change of the interest rate basis applicable to all or any 
portion of the principal amount of the Loan from a Variable Rate 
to a Fixed Rate, or vice versa; and
(iii)
the setting of limits on the Variable Rate applicable to all or 
any portion of the principal amount of the Loan withdrawn and 
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outstanding by the establishment of an Interest Rate Cap or 
Interest Rate Collar on said Variable Rate.
(b)
Any conversion requested pursuant to paragraph (a) of this Section that 
is accepted by the Bank shall be considered a "Conversion", as defined in Section 2.01 
(7) of the General Conditions, and shall be effected in accordance with the provisions 
of Article IV of the General Conditions and of the Conversion Guidelines. 
(c)
Without limitation upon the provisions of paragraph (a) of this Section, 
the Borrower and the Bank hereby agree that unless otherwise notified by the Borrower 
in accordance with the provisions of the Conversion Guidelines, the interest rate 
basis applicable to the aggregate principal amount of the Loan withdrawn during each 
Interest Period shall be changed from the initial Variable Rate to a Fixed Rate in 
accordance with the provisions of Article IV of the General Conditions and of the 
Conversion Guidelines.
Section 2.10. The Minister of Education and any person or persons whom he or she 
shall designate in writing is designated as representative of the Borrower for the 
purposes of taking any action required or permitted to be taken under the provisions 
of Section 2.02 of this Agreement and Article V 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, and, to this end: (i) shall carry out Parts A.1, A.3, B and C of the Project 
through MIEDUC; (ii) shall carry out Part A.4 of the Project through MIEDUC with the 
assistance of the Construction Implementing Entity; and (iii) shall cause IFARHU to 
carry out Part A.2 of the Project, all with due diligence and efficiency and in 
conformity with appropriate financial, administrative, environmental, technical and 
educational practices, and shall provide, promptly as needed, the funds, facilities, 
services and other resources required for the Project.
(b)
Without limitation upon the provisions of paragraph (a) above, the 
Borrower shall operate and maintain throughout the course of project implementation, 
the Revolving Fund with at least $250,000 equivalent in counterpart funds for the 
Project for purposes of the implementation of the Project.
Section 3.02. (a) Except as the Bank shall otherwise agree, procurement of the 
goods, works and consultants’ and other 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.
(b) 
The Borrower, through MIEDUC, shall, not later than March 31 of each 
year, starting as of March 31 2002, throughout the course of Project implementation, 
furnish to the Bank a report, of such scope and in such detail as the Bank shall 
request, by auditors acceptable to the Bank, on the compliance with the procurement 
procedures for the Project during the year in question.
Section 3.03. Except as the Borrower and the Bank shall otherwise agree, the 
Borrower shall provide, through MIEDUC,  evidence satisfactory to the Bank, by no 
later than January 31 of each year during Project implementation, starting as of 
January 31, 2001, that sufficient resources have been allocated  in the Borrower’s 
annual budget to cover all the counterpart funding requirements under this Project for 
the year in question.
Section 3.04. (a) For the purposes of Section 3.01 (a) (iii) above, the 
Borrower, through MIEDUC, shall enter into an agreement with IFARHU (the IFARHU 
Agreement), under terms and conditions satisfactory to the Bank, providing, inter 
alia, for: (i) the transfer of non-Loan proceeds counterpart funds to IFARHU on a 
grant basis and the provision of facilities, services and  other resources  to IFARHU, 
required to enable IFARHU to carry out Part A.2 of the Project; and (ii) the 
obligation  of IFARHU to carry out such Part of the Project in accordance with the 
terms and conditions set forth in this Agreement and in the Operational Manual, 
including the obligation to keep separate records and accounts of operations, 
services, and expenditures related to such Part of the Project and to provide to the 
Borrower the information necessary to enable the Borrower to comply with its 
obligations under Sections 4.01 and 4.02 of this Agreement.
(b)
The Borrower, through MIEDUC, shall exercise its rights and carry out its 
obligations under the IFARHU Agreement in such a manner as to protect the interests of 
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the Borrower and the Bank and to accomplish the purposes of the Loan, and, except as 
the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate, 
terminate, waive or fail to enforce the IFARHU Agreement or any provision thereof.
Section 3.05. (a) For the purposes of Section 3.01 (a) (ii) above, the Borrower, 
through MIEDUC, shall enter into an agreement with an entity selected by MIEDUC and 
acceptable to the Bank, (the Construction Implementation Agreement), under terms and 
conditions satisfactory to the Bank, providing, inter alia, for : (i) the transfer of 
Loan proceeds to the Construction Implementing Entity on a grant basis and the 
provision of facilities, services, and other resources to the Construction 
Implementing Entity required to enable the Construction Implementing Entity to assist 
MIEDUC in carrying out Part A.4 of the Project; and (ii) the obligation of the 
Construction Implementing Entity to carry out such Part of the Project in accordance 
with the terms and conditions set forth in this Agreement and in the Operational 
Manual, and to provide the Borrower with the information necessary to enable the 
Borrower to comply with its obligations under Sections 4.01 and 4.02 of this 
Agreement.
(b) 
The Borrower, through MIEDUC, shall exercise its rights and carry out its 
obligations under the Construction Implementation Agreement in such a manner as to 
protect the interests of the Borrower and the Bank and to accomplish the purposes of 
the Loan, and, except as the Bank shall otherwise agree, the Borrower shall not 
assign, amend, abrogate, terminate, waive or fail to enforce the Construction 
Implementation Agreement or any provision thereof.
Section 3.06. The Borrower, through MIEDUC, shall maintain, during the course of 
Project implementation, the PCU with the responsibility for the management, 
coordination, monitoring, supervision and evaluation of the Project, with a structure 
and functions satisfactory to the Bank, and staff (including a Project coordinator and 
a procurement specialist) with qualifications and experience satisfactory to the Bank.
Section 3.07. The Borrower, through MIEDUC, shall establish not later than six 
months after the Effective Date, and thereafter maintain, during the course of Project 
implementation, a Project management committee (the Project Management Committee) 
within MIEDUC, to assist the PCU in monitoring, supervising, and evaluating the 
Project, such committee to have a structure and functions satisfactory to the Bank, 
and to include among its members: the Borrower’s Vice-Minister of Education, the PCU 
Project coordinator, the Borrower’s General Director of Education and heads of the 
units in MIEDUC involved in the implementation of the Project.
Section 3.08. 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 for the 
future operation of the Project; and
(b)
afford the Bank a reasonable opportunity to exchange views with the 
Borrower on said plan.
Section 3.09. The Borrower shall:
(a)
maintain policies and procedures adequate to enable it to monitor and 
evaluate on an ongoing basis, in accordance with the indicators set forth in the 
Implementation Letter, 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, on or about January 31 of each year throughout the course of Project 
implementation, starting as of January 31, 2002,  a report integrating the results of 
the monitoring and evaluation activities performed pursuant to paragraph (a) of this 
Section, on the progress achieved in the carrying out of the Project during the 
calendar year preceding the date of said 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 not later than March 31 of each year throughout 
the course of Project implementation, or such later date as the Bank shall request, 
starting as of March 31, 2002 the relevant report referred to in paragraph (b) of this 
Section, and thereafter, take all measures required to ensure the efficient completion 
of the Project and the achievement of the objectives thereof, based on the conclusions 
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and recommendations of the said report and the Bank’s views on the matter.
Section 3.10. The Borrower, through MIEDUC, shall: (a) prepare by not later than 
December 15 of each year throughout the course of Project implementation, starting as 
of December 15, 2001, an action plan satisfactory to the Bank, said plan to include 
the annual work program for the implementation of the Project for the following 
calendar year; and (b) thereafter carry out, or cause to be carried out, said plan in 
accordance with its terms.
Section 3.11. The Borrower, through MIEDUC, shall carry out the Project, or 
shall cause the Project to be carried out, in accordance with an operational manual 
satisfactory to the Bank, said manual to provide key instruments for the execution and 
coordination of the Project, including: (a) procurement and financial management 
procedures; and (b) strategies to address, in a culturally appropriate manner, 
indigenous peoples concerns in the implementation of the Project, ensure adequate 
participation of indigenous peoples communities both as participants and beneficiaries 
of the Project, and introduce appropriate curricula to facilitate literacy and 
acquisition of basic educational skills for children of indigenous peoples communities 
while preserving their cultural values and identities. In case of any conflict between 
the terms of the Operational Manual and those of this Agreement, the terms of this 
Agreement shall prevail.
ARTICLE IV
Financial Covenants
Section 4.01. (a) The Borrower shall establish and thereafter at all times 
maintain in MIEDUC 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 
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 or statements of 
expenditure, 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 or statements of 
expenditure submitted during such fiscal year, together with the 
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procedures and internal controls involved in their preparation, 
can be relied upon to support the related withdrawals.
Section 4.02. (a) Without limitation upon the provisions of Section 4.01 of this 
Agreement, the Borrower shall carry out a time-bound action plan acceptable to the 
Bank for the strengthening of the financial management system referred to in paragraph 
(a) of said Section 4.01 in order to enable the Borrower, not later than June 30, 
2001, or such later date as the Bank shall agree, to prepare quarterly Project 
management reports, acceptable to the Bank, each of which: 
(i) 
(A) sets forth actual sources and applications of funds for the 
Project, both cumulatively and for the period covered by said 
report, and projected sources and applications of funds for the 
Project for the six-month period following the period covered by 
said report, and (B) shows separately expenditures financed out of 
the proceeds of the 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;
(ii)
(A) describes physical progress in Project implementation, both 
cumulatively and for the period covered by said report, and (B) 
explains variances between the actual and previously forecast 
implementation targets; and
(iii) sets forth the status of procurement under the Project and 
expenditures under contracts financed out of the proceeds of the 
Loan, as at the end of the period covered by said report.
(b)
Upon the completion of the action plan referred to in paragraph (a) of 
this Section, the Borrower shall prepare, in accordance with guidelines acceptable to 
the 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.
Section 4.03. The Borrower shall not later than 60 days after the Effective Date 
contract the auditors referred to in Section 4.01 (b) of this Agreement under terms 
and conditions satisfactory to the Bank.
ARTICLE V
Effective Date; Termination
Section 5.01. The following events are specified as additional conditions to the 
effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the 
General Conditions:
(a)
the IFARHU Agreement and the Construction Implementation Agreement, as 
the case may be, have been entered into between the respective parties thereto;
(b)
the Borrower has provided evidence that the financial management system 
referred to in Section 4.01 of this Agreement is in place and operational;
(c)
the Borrower has issued the Operational Manual; 
(d)
the Borrower has furnished to the Bank evidence satisfactory to the Bank 
that the Borrower is authorized to continue to operate the Revolving Fund throughout 
the course of Project implementation; and
(e) 
the Borrower has furnished to the Bank evidence satisfactory to the Bank 
that the PCU is authorized to remain operational throughout the course of Project 
implementation. 
Section 5.02. The date March 5, 2001 is hereby specified for the purposes of 
Section 12.04 of the General Conditions.
ARTICLE VI
Representative of the Borrower; Addresses
Section 6.01. Except as provided in Section 2.10 of this Agreement, the Minister 
of Economy and Finance of the Borrower is designated as representative of the Borrower 
for the purposes of Section 11.03 of the General Conditions.
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Section 6.02. The following addresses are specified for the purposes of Section 
11.01 of the General Conditions:
For the Borrower:
Ministerio de Economía y Finanza
Dirección de Crédito Público
Via España, Calle 52
Edificio OGAWA 4 Piso
Panamá, República de Panamá
Facsimile:
(507) 223-1405
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:
Facsimile:
INTBAFRAD
248423 (MCI) or
(202) 477-6391
Washington, D.C.
 64145 (MCI)
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized 
representatives, have caused this Agreement to be signed in their respective names in 
Panama City, Panama, as of the day and year first above written.
REPUBLIC OF PANAMA
By /s/ Norberto R. Delgado Durán
Authorized Representative
INTERNATIONAL BANK FOR
   RECONSTRUCTION AND DEVELOPMENT
By /s/ Claudia Costin
Acting Regional Vice President
Latin America and the Caribbean 
AGREED:
CONTRALORIA GENERAL DE LA REPUBLICA
By /s/ Alvin Weeden Gamboa
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 
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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
   % of
Loan Allocated
Expenditures
Category
  (Expressed in Dollars)
to be Financed
(1)
Works
  10,000,000
 
80%
(2)
Goods (other than
   8,640,000
100% of foreign
educational materials)
expenditures and
90% of local
expenditures
(3)
Educational materials,
   7,000,000
100% of foreign
including
printing services
expenditures and
90% of local
expenditures
(4)
Consultants’ services,
   4,300,000
100%
training and audits 
referred to in Part 
C.3 of the Project
(5)   Operating costs
   1,700,000
80%
(6)
Unallocated
   3,360,000
TOTAL
  35,000,000
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; 
(c)
the term "educational material" means textbooks, teachers’ and students’ 
guides and library books to be provided by the Borrower under the Project; 
(d)
the term training" means the expenditures incurred by the Borrower in 
connection with the carrying out of training activities under the Project, including 
travel costs and per diem of trainees, study tours, rental of facilities and 
equipment, and training materials; but excluding consultant fees;
(e) 
the term "operating costs" means expenditures incurred by the Borrower in 
operational, maintenance (including maintenance of vehicles and PCU computer 
equipment), travel and per diem costs for PCU staff, and administrative costs 
(including employment of administrative PCU staff) that would not have been incurred 
absent the Project; and 
(f)
the term "printing services" means the expenditures incurred by the 
Borrower for the printing and production of printed educational and training materials 
under the Project. 
3.
Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be 
made in respect of:
(a)
payments made for expenditures prior to the date of this Agreement; and
(b)
any Category set forth in the table in paragraph 1 of this Schedule 
unless and until the Borrower shall have paid to the Bank in full the front-end fee 
referred to in Section 2.04 of this Agreement.
4.
The Bank may require withdrawals from the Loan Account to be made on the basis 
of statements of expenditure for expenditures for: (a) goods; (b) works; (c) 
consultant services of firms; (d) individual consultant services; (e) training 
activities; and (f) operating costs, that are not subject to prior review by the Bank 
pursuant to Sections I and II, Part D.2, of Schedule 4 to this Agreement under such 
terms and conditions as the Bank shall specify by notice to the Borrower.
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B.
Special Account
1.
The Borrower shall open and maintain in Dollars a special deposit account in the 
Banco Nacional de Panama, on terms and conditions satisfactory to the Bank.
2.
After the Bank has received evidence satisfactory to it that the Special Account 
has been opened, withdrawals from the Loan Account of amounts to be deposited into the 
Special Account shall be made as follows:
(a)
until the Bank shall have received (i) the first Project Management 
Report referred to in Section 4.02 (b) of this Agreement and (ii) a request from the 
Borrower for withdrawal on the basis of Project Management Reports, withdrawals shall 
be made in accordance with the provisions of Annex A to this Schedule 1; and
(b)
upon receipt by the Bank of a Project Management Report pursuant to 
Section 4.02 (b) of this Agreement, accompanied by a request from the Borrower for 
withdrawal on the basis of Project Management Reports, all further withdrawals shall 
be made in accordance with the provisions of Annex B to this Schedule 1.
3.
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.
4.
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.
5.
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.
6.
(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.  Unless the Bank shall otherwise 
agree, no further deposit by the Bank into the Special Account shall be made until the 
Borrower has provided such evidence or made such deposit or refund, as the case may 
be.
(b)
If the 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 6 shall be credited to the Loan Account for subsequent withdrawal or 
Page  11
for cancellation in accordance with the provisions of the Loan Agreement.
Annex A to SCHEDULE 1
Operation of Special Account
When Withdrawals Are Not Made
On the Basis of Project Management Reports
1.
For the purposes of this Annex the term "Authorized Allocation" means the amount 
of $2,700,000 to be withdrawn from the Loan Account and deposited into the Special 
Account pursuant to paragraph 2 of this Annex.
2.
Withdrawals of the Authorized Allocation and subsequent withdrawals to replenish 
the Special Account shall be made as follows:
(a)
For withdrawals of the Authorized Allocation, the Borrower shall furnish 
to the Bank a request or requests for deposit into the Special Account of an amount or 
amounts which in the aggregate do not exceed the Authorized Allocation.  On the basis 
of each such request, the Bank shall, on behalf of the Borrower, withdraw from the 
Loan Account and deposit into the Special Account such amount as the Borrower shall 
have requested.
(b)
For replenishment of the Special Account, the Borrower shall furnish to 
the Bank requests for deposit into the Special Account at such intervals as the Bank 
shall specify. Prior to or at the time of each such request, the Borrower shall 
furnish to the Bank the documents and other evidence required pursuant to Part B.3 of 
Schedule 1 to this Agreement for the payment or payments in respect of which 
replenishment is requested. On the basis of each such request, the Bank shall, on 
behalf of the Borrower, withdraw from the Loan Account and deposit into the Special 
Account such amount as the Borrower shall have requested and as shall have been shown 
by said documents and other evidence to have been paid out of the Special Account for 
Eligible Expenditures. Each such deposit into the Special Account shall be withdrawn 
by the Bank from the Loan Account under one or more of the Eligible Categories.
3.
The Bank shall not be required to make further deposits into the Special 
Account, once the total unwithdrawn amount of the Loan minus the total amount of all 
outstanding special commitments entered into by the Bank pursuant to Section 5.02 of 
the General Conditions, shall equal the equivalent of twice the amount of the 
Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining 
unwithdrawn amount of the Loan shall follow such procedures as the Bank shall specify 
by notice to the Borrower.  Such further withdrawals shall be made only after and to 
the extent that the Bank 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.
Annex B to SCHEDULE 1
Operation of Special Account
When Withdrawals Are Made
On the Basis of Project Management Reports
1.
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 Schedule 1 to this Agreement. Each such 
deposit into the Special Account shall be withdrawn by the Bank from the Loan Account 
under one or more of the Eligible Categories.
2.
Each application for withdrawal from the Loan Account for deposit into the 
Special Account shall be supported by a Project Management Report.
3.
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: (a) the amount so requested; and 
(b) 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 Project Management Report to be remaining in the Special Account, shall not 
exceed $7,200,000.
SCHEDULE 2
Page  12
Description of the Project
The objectives of the Project are to: (a) improve the quality and efficiency of 
Basic Education in the territory of the Borrower and, in particular, to improve equity 
of access to Basic Education; (b) expand the coverage of Pre-school Education through 
community-based non-formal education models; and (c) strengthen the planning, 
supervision and policy-making capacity of MIEDUC.
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:
Improvement of Quality and Efficiency of Basic Education
1.
Provision of: (a) reading and other educational materials to all students 
attending Primary Education (multigrade classes and bilingual courses taught in 
Spanish
language and an indigenous peoples’ communities native language) and Lower 
Secondary Education schools; and (b) appropriate related training to teachers of such 
schools.
2.
Carrying out of an expanded scholarship program for Primary Education and Lower 
Secondary Education students selected on the basis of poverty criteria (including 
students from rural backgrounds and/or members of indigenous peoples communities).
3.
Design, operation, equipping and testing on a pilot basis a distance learning 
Basic Education model (Telebasica) for Lower Secondary Education in poor rural areas 
where there are no Secondary Education schools. 
4.
Rehabilitation and maintenance of existing educational infrastructure in 
geographic areas selected by the Borrower.
Part B:
Expansion of Non-Formal Pre-School Education Program
1.
Expansion of the coverage of Pre-School Education through the implementation of 
the CEFACEI Program and the Home-Based Initial Education Program in selected 
communities, including communities in rural, marginal urban and indigenous areas. 
2.
Provision of training to the community educators of CEFACEI, the parent leaders 
participating in the Home-Based Initial Education Program, as well as to the 
supervisors of such leaders.
3.
Study and implementation of improvements to the Home-Based Initial Education 
Program by, for example, studying and testing the possibility of introducing 
indigenous language materials and promoting the involvement of fathers and other 
members of the community.
Part C:
Institutional Strengthening
1.
Provision of technical assistance and training to strengthen MIEDUC’s planning, 
administrative and financial management, supervision and policy-making capacity at 
central, regional and provincial levels, through, for example, providing support to 
workshops with central, regional and provincial education officials to define the 
operational structure and functions to be performed at each level, and to expand 
community participation in the management of schools.  
2.
Provision of technical assistance to support: (a) the ongoing implementation of 
a management information system for the MIEDUC to improve sector planning and 
personnel management and establish linkages between the various levels of 
administration of the public education sector; and (b) the implementation of a 
national assessment system to measure student achievement levels at the third and 
sixth grade levels of schooling.
3.
Supervise, administer, and audit the Project.
* * *
The Project is expected to be completed by December 31, 2004.
SCHEDULE 3
Amortization Schedule
Page  13
1.
The following table sets forth the Principal Payment Dates of the Loan and the 
percentage of the total principal amount of the Loan payable on each Principal Payment 
Date (Installment Share).  If the proceeds of the Loan shall have been fully withdrawn 
as of the first Principal Payment Date, the principal amount of the Loan repayable by 
the Borrower on each Principal Payment Date shall be determined by the Bank by 
multiplying:  (a) the total principal amount of the Loan withdrawn and outstanding as 
of the first Principal Payment Date; by (b) the Installment Share for each Principal 
Payment Date, such repayment amount to be adjusted, as necessary, to deduct any 
amounts referred to in paragraph 4 of this Schedule, to which a Currency Conversion 
applies.
Installment Share
Payment Date
(Expressed as a %)
On each April 15 and October 15
Beginning October 15, 2005
through April 15, 2015
5%
2.
If the proceeds of the Loan shall not have been fully withdrawn as of the first 
Principal Payment Date, the principal amount of the Loan repayable by the Borrower on 
each Principal Payment Date shall be determined as follows:
(a)
To the extent that any proceeds of the Loan shall have been withdrawn as 
of the first Principal Payment Date, the Borrower shall repay the amount withdrawn and 
outstanding as of such date in accordance with paragraph 1 of this Schedule.
(b)
Any withdrawal made after the first Principal Payment Date shall be 
repaid on each Principal Payment Date falling after the date of such withdrawal in 
amounts determined by the Bank by multiplying the amount of each such withdrawal by a 
fraction, the numerator of which shall be the original Installment Share specified in 
the table in paragraph 1 of this Schedule for said Principal Payment Date (the 
Original Installment Share) and the denominator of which shall be the sum of all 
remaining Original Installment Shares for Principal Payment Dates falling on or after 
such date, such repayment amounts to be adjusted, as necessary, to deduct any amounts 
referred to in paragraph 4 of this Schedule, to which a Currency Conversion applies.
3.
(a)
Withdrawals made within two months prior to any Principal Payment Date 
shall, for the purposes solely of calculating the principal amounts payable on any 
Principal Payment Date, be treated as withdrawn and outstanding on the second 
Principal Payment Date following the date of withdrawal and shall be repayable on each 
Principal Payment Date commencing with the second Principal Payment Date following the 
date of withdrawal.
(b)
Notwithstanding the provisions of sub-paragraph (a) of this paragraph 3, 
if at any time the Bank shall adopt a due date billing system under which invoices are 
issued on or after the respective Principal Payment Date, the provisions of such 
sub-paragraph shall no longer apply to any withdrawals made after the adoption of such 
billing system. 
4.
Notwithstanding the provisions of paragraphs 1 and 2 of this Schedule, upon a 
Currency Conversion of all or any portion of the withdrawn principal amount of the 
Loan to an Approved Currency, the amount so converted in said Approved Currency that 
shall be repayable on any Principal Payment Date occurring during the Conversion 
Period, shall be determined by the Bank by multiplying such amount in its currency of 
denomination immediately prior to said Conversion by either: (i) the exchange rate 
that reflects the amounts of principal in said Approved Currency payable by the Bank 
under the Currency Hedge Transaction relating to said Conversion; or (ii) if the Bank 
so determines in accordance with the Conversion Guidelines, the exchange rate 
component of the Screen Rate.
5.
If the principal amount of the Loan withdrawn and outstanding from time to time 
shall be denominated in more than one Loan Currency, the provisions of this Schedule 
shall apply separately to the amount denominated in each Loan Currency, so as to 
produce a separate amortization schedule for each such amount.
SCHEDULE 4
Procurement
Section I.
Procurement of Goods and Works
Page  14
Part A:
General
Goods and works 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 and works 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)
Two-stage Bidding Procedure
The bidding procedure for textbooks, teachers’ and students’ guides and library 
books shall be carried out in two stages in accordance with the provisions of 
paragraph 2.6 of the Guidelines.
(b)
Preference for Domestically Manufactured Goods
The provisions of paragraphs 2.54 and 2.55 of the Guidelines and Appendix 2 
thereto shall apply to goods manufactured in the territory of the Borrower.
Part C:
Other Procurement Procedures 
1.
National Competitive Bidding
Works estimated to cost less than $500,000 equivalent per contract, up to an 
aggregate amount not to exceed $9,800,000 equivalent, and goods estimated to cost less 
than $250,000, up to an aggregate amount not to exceed $9,760,000 equivalent, may be 
procured under contracts awarded in accordance with the provisions of paragraphs 3.3 
and 3.4 of the Guidelines.
2.
National Shopping
Goods estimated to cost less than $50,000 equivalent per contract, up to an 
aggregate amount not to exceed $1,430,000 equivalent, may be procured under contracts 
awarded on the basis of national shopping procedures in accordance with the provisions 
of paragraphs 3.5 and 3.6 of the Guidelines.
3.
Direct Contracting
Textbooks selected by MIEDUC in consultation with the Bank, under contracts 
estimated to cost $4,440,000 equivalent or less in the aggregate, and works in 
isolated rural areas where effective competition is not possible under contracts 
estimated to cost $30,000 equivalent or less, per contract, up to an aggregate amount 
not to exceed $200,000 equivalent,  may, with the Bank's prior agreement, be procured 
in accordance with the provisions of paragraph 3.7 of the Guidelines.
4.
Procurement of Small Works
Works estimated to cost less than $250,000 equivalent per contract, up to an 
aggregate amount not to exceed $1,600,000 equivalent, may be procured under lump-sum, 
fixed-price contracts awarded on the basis of quotations obtained from three (3) 
qualified domestic contractors in response to a written invitation. The invitation 
shall include a detailed description of the works, including basic specifications, the 
required completion date, a basic form of agreement acceptable to the Bank, and 
relevant drawings, where applicable. The award shall be made to the contractor who 
offers the lowest price quotation for the required work, and who has the experience 
and resources to complete the contract successfully.
Part D:
Review by the Bank of Procurement Decisions
1.
Procurement Planning
Prior to the issuance of any invitation to bid for contracts, the proposed 
procurement plan for the Project shall be furnished to the Bank for its review and 
Page  15
approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the 
Guidelines. Procurement of all goods and works 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
(a)
With respect to each contract procured in accordance with Part B.1 above 
and the first two contracts procured in accordance with Part C.1 above, the procedures 
set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply.
(b)
With respect to contracts for computers, training materials, printing and 
distribution services, and school furniture to be procured in accordance with the 
procedures referred to in Part C.2 above and with respect to contracts for textbooks 
and works estimated to cost less than $30,000 to be procured in accordance with the 
procedures referred to in Part C.3 above, the following procedures shall apply:
(i)
prior to the execution of the first two contracts each year under 
shopping procedures, the Borrower shall provide to the Bank a 
report on the comparison and evaluation of quotations received;
(ii)
prior to the execution of the first two contracts each year 
procured under shopping procedures, contracts for works procured 
under direct contracting, and contracts for books procured under 
direct contracting, the Borrower shall provide to the Bank a copy 
of the specifications and the draft contract; and
(iii)
the procedures set forth in paragraphs 2 (f), 2 (g) and 3 of 
Appendix 1 to the Guidelines shall apply.
3.
Post Review
With respect to each contract not governed by paragraph 2 of this Part, the 
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:
Quality- and Cost-based Selection
1.
Except as otherwise provided in Part C of this Section, consultants’ services 
shall be procured under contracts awarded in accordance with the provisions of Section 
II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 
thereto, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to 
quality- and cost-based selection of consultants.
2.
The following provisions shall apply to consultants’ services to be procured 
under contracts awarded in accordance with the provisions of the preceding paragraph.  
The short list of consultants for services estimated to cost less than $40,000 
equivalent per contract, may comprise entirely national consultants in accordance with 
the provisions of paragraph 2.7 of the Consultant Guidelines.
Part C:
Other Procedures for the Selection of Consultants 
1.
Quality-based Selection
Services for the implementation of the Project other than services for 
supervision of works and financial and procurement audits up to an aggregate amount of 
$1,000,000 may be procured under contracts awarded in accordance with the provisions 
of 
paragraphs 3.1 through 3.4 of the Consultant Guidelines.
2.
Selection Under a Fixed Budget
Services for supervision of works, financial and procurement audits and training 
Page  16
up to an aggregate amount of $4,000,000 may be procured under contracts awarded in 
accordance with the provisions of paragraphs 3.1 and 3.5 of the Consultant Guidelines.
3.
Least-cost Selection
Services for supervision of works, financial and procurement audits and training 
estimated to cost less than $200,000 equivalent per contract up to an aggregate amount 
of $4,000,000 may be procured under contracts awarded in accordance with the 
provisions of paragraphs 3.1 and 3.6 of the Consultant Guidelines.
4.
Individual Consultants
Services for tasks that meet the requirements set forth in paragraph 5.1 of the 
Consultant Guidelines and estimated to cost $50,000 equivalent or less, up to an 
aggregate amount of $1,000,000 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 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 $100,000 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 individual 
consultants estimated to cost the equivalent of $50,000 or more and for those to be 
employed by the PCU, regardless of the cost of the contract, 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.
(c)
With respect to each contract for the employment of individual 
consultants estimated to cost less than $50,000 equivalent, the 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.
3.
Post Review
With respect to each contract not governed by paragraph 2 of this Part, the 
procedures set forth in paragraph 4 of Appendix 1 to the Consultant Guidelines shall 
apply.
Section III.
Special Provisions
 
A.
In addition and without limitation to any other provisions set forth in this 
Schedule or the Guidelines, the following principles of procurement shall expressly 
govern all procurement of goods and works referred to in Part B.1 of Section I of this 
Schedule: 
1.
Foreign bidders shall not be required to:
(a)
have a local representative for purposes of  submitting bids;
(b)
be registered with local authorities as a prerequisite for bidding; and
(c)
be associated with local contractors or suppliers.
2.
Bids may be:
Page  17
(a)
submitted at any reasonable time before bid opening, either by mail or 
courier or in person; and
(b)
accompanied by a bid security in the form and amount specified in the 
standard bidding documents.
3.
No provisional award shall be made at the time of bid opening.
4.
No minimum number of bids shall be required as a condition to award a contract.
 
5.
Contracts shall be awarded to the bidder whose bid has been evaluated as the 
lowest responsive bid, in accordance with criteria clearly set forth in the standard 
bidding documents.
6.
After contract award, performance securities shall be provided within the time 
period, and in form and amount specified in the standard bidding documents.
B.
In addition and without limitation to any other provisions set forth in this 
Schedule or the Guidelines, the following principles of procurement shall expressly 
govern all procurement of goods and works referred to in Part C.1 of Section I of this 
Schedule:
1.     Bids may be:
(a)
submitted at any reasonable time before bid opening, either by mail or 
courier or in person; and
(b)
accompanied by a bid security in the form and amount specified in the 
standard bidding documents.
2.
No provisional award shall be made at the time of bid opening.
 
3.
No minimum number of bids shall be required as a condition to award a contract.
 
4.
Contracts shall be awarded to the bidder whose bid has been evaluated as the 
lowest responsive bid, in accordance with criteria clearly set forth in the standard 
bidding documents.
5.
Contracts for civil works shall provide for mobilization advances, whenever 
appropriate.
6.
After contract award, performance securities shall be provided within the time 
period and in the form and amount specified in the standard bidding documents.
7.
Price adjustment provisions, acceptable to the Bank, may be included in work 
contracts.
C.
In addition to and without limitation to any other provisions set forth in this 
Schedule or the Consultant Guidelines, the following principles of procurement shall 
expressly govern all procurement of consultants’ services referred to in Section II of 
this Schedule:
1.
Foreign consultants shall not be required to:
(a)
be locally registered as a condition of participation in the selection 
process;
(b)
give any participation in or share of any consulting contracts to any 
local firm or person for the purposes of participating in the selection process or 
receiving an award, except in connection with a joint venture arrangement where:  (i) 
a sufficient number of capable domestic firms or individual consultants exist to allow 
a foreign consultant reasonable freedom of choice; (ii) the contribution of either 
party to the joint venture arrangement will not be constrained by any prescribed 
manner or extent of participation; and (iii) the foreign consultant is not required to 
associate itself with any specific named domestic firms or individual consultants;
(c)
furnish any certificate issued by a local authority about their legal 
capacity or tax status for the purposes of submitting a proposal; and
(d)
personally submit their proposals.
 
Page  18
2.
Consultants shall be selected from a short list of firms invited to submit 
proposals on the basis of terms of reference, employment conditions and evaluation 
criteria clearly set forth in the respective letter of invitation.