CONFORMED COPY CREDIT NUMBER 813 PAK Development Credit Agreement (Punjab Extension and Agricultural Development Project) between ISLAMIC REPUBLIC OF PAKISTAN and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated June 8, 1978 CREDIT NUMBER 813 PAK DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 8, 1978, between ISLAMIC REPUBLIC OF PAKISTAN, acting by its President (hereinafter called the Bor- rower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association.) WHEREAS (A) the Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; and (B) the Project will be carried out by the Borrower's Province of Punjab (hereinafter referred to as Punjab) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to Punjab the proceeds of the Credit as hereinafter provided; and WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth aid in the Project Agreement of even date herewith between the Association and Punjab; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agree- ments of the Association being ,ereinafter called the General Condition-). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: -2- (a) "Project Agreement" means the agreement between the Association and Punjab of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; (b) "Project Area" means the Districts of Rahimyar Khan, Vehari, Sheikhupura, Sarghoda and Jhelum in Punjab; and (c) "Project Implementation Schedule" means the schedule of even date herewith, in accordance with which the Borrower and Punjab intend to implement the Project. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to twelve million five hundred thousand dollars ($12,500,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Association, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Credit, shall be governed by the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1984 or such later date as the Association shall establish. The Associa- tion shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit with- drawn and outstanding from time to time. -3- Section 2.06. Service charges shall be payable semiannually on February 1 and August 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each February 1 and August 1 commencing August 1, 1988, and ending February 1, 2028, each installment to and including the install- ment payable on February 1, 1998, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.09. The Secretary to the Government of Pakistan, Economic Affairs Division or his nominee is designated as repre- sentative 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) Without any limitation or restriction upon any of its other obligations under the Development Credit Agree- ment, the Borrower shall cause Punjab to perform in accordance with the provisions of the Project Agreement all the obligations therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable Punjab to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall make the proceeds of the Credit available to Punjab under terms and conditions which shall have been approved by the Association. Section 3.02. (a) In order to assist in carrying out the Project, the Borrower shall employ or cause to be employed, consultants, including those specified in Schedule 4 to this Agreement, whose qualifications, experience and terms and -4- conditions of employment shall be satisfactory to the Association. Said consultants shall be appointed in accordance with Schedule 4 to this Agreement. (b) The Borrower shall ensure that the consultants referred to in paragraph (a) of this Section shall be provided for the duration of their employment with suitable facilities, adequate and qualified counterpart staff and such other appropriate support as may be necessary for the timely and efficient discharge of their activities under the Project. Section 3.03. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. Section 3.04. The Borrower shall take or cause to be taken all such action as shall be necessary to acquire in accordance with the Project Implementation Schedule all such land and rights in respect of land as shall be required for carrying out the Project and shall furnish to the Association, promptly after such acquisition, evidence satisfactory to the Association that such land and rights in respect of land are available for purposes related to the Project. Section 3.05. The Borrower shall cause the extension staff of the Water and Power Development Authority of Pakistan to cease providing direct crop production advice to farmers in the Bhalwal tehail of the Sarghoda District upon implementation of the Project in aforesaid tehsil. ARTICLE IV Remedies of the Association Section 4.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: -5- (a) Punjab shall have failed to perform any covenant, agree- ment or other obligation of Punjab under the Project Agreement; and (b) an extraordinary situation shall have arisen which shall make it improbable that Punjab shall be able to perform its obligations under the Project Agreement. Section 4.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (d) thereof, namely, that any event specified in paragraph (a) of Section 4.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been gii2n by the Association to the Borrower. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the execution and delivery of the Project Agreement on behalf of Punjab have been duly authorized or ratified by all necessary corporate and governmental action; (b) the staff positions referred to in Section 2.04 (a) of the Project Agreement have been authorized; (c) the Punjab Director General (Extension), whose qualifi- cations and experience shall be satisfactory to the Association, has been appointed; (d) the Project Review Committee referred to in Section 2.09 (i) of the Project Agreement has been established; and (e) the Project Revolving Fund has been established and the initial deposit in the Fund has been made as provided in Section 2.11 of the Project Agreement. Section 5.02. The following is specified as an additional matter, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be -6- furnished to the Association, namely, that the Project Agreement has been duly authorized or ratified by Punjab, and is legally binding upon Punjab in accordance with its terms. Section 5.03. The date September 12, 1978 is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Secretary to the Government of Pakistan, Economic Affairs Division is designated as representative of the Borrower for the purposes of Section 11.03 of the General Condi- tions. Section 6.02. The following addresses are specified for the purpose of Section 11.01 of the General Conditions: For the Borrower: The Secretary to the Government of Pakistan Economic Affairs Division Islamabad Pakistan Cable address: ECONOMIC Islamabad For the Association: International Devv.Iopment Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) -7- IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. ISLAMIC REPUBLIC OF PAKISTAN By /s/ Nisar Ali Shah Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Robert Picciotto Acting Regional Vice President South Asia -8- SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil works 2,400,000 50% (2) Vehicles, equip- 3,000,000 ment and materials (a) directly 100% of foreign imported expenditures (b) locally 100% of local manufac- expenditures tured (ex-factory) (c) goods pro- 70% cured locally (3) Staff salaries 3,700,000 30% and travel allowances (4) Consultants' 1,200,000 100% services (5) Overseas 300,000 100% of foreign training expenditures (6) Unallocated 1,900,000 TOTAL 12,500,000 -9- 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Association that no proceeds of the Credit shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Credit decreases or increases, the Association may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Association. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expendi- tures prior to the date of this Agreement. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph I above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Association may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit which are then allo- cated to another Category and which in the opinion of the Associa- tion are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expendi- tures for such item shall be financed out of the proceeds of the - 10 - Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as, in the Association's reason- able opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 11 - SCHEDULE 2 Description of the Project The Project is designed to strengthen agricultural extension services and develop adaptive research farms in the Project Area, and consists of the following Parts: A. Staffing Program Implementation of a staffing program to increase the number of trained agricultural extension staff in the Project Area by about 590 persons. B. Buildings Construction or acquisition of about 1,330 units of extension staff housing and service buildings. C. Equipment 1. Provision -f equipment for extension services, including bicycles, motor cycles and motor vehicles as appropriate to the functional staff requirements. 2. Provision of about 30 tractors (of about 80 hp) for use in the Jhelum District. D. Adaptive Research Farms Establishment and development of five adaptive research farms through the provision of staff, buildings, equipment and vehicles (including tractors). E. Extension Methodology Introduction and implementation of a sound agricultural extension methodology in the Project Area, with particular emphasis on continuous training of extension workers and regular farm visits. The Project is expected to be completed by December 31, 1983. - 12 - SCHEDULE 3 Procurement A. International Competitive Bidding 1. Except as provided in Part B hereof, contracts for the purchase of goods shall be procured in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods to be procured on the basis of international competitive bidding under the Project and in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Association as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procure- ment notice, in such form and detail and containing such informa- tion as the Association shall reasonably request; the Association will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the oppor- tunity to bid for the goods in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods remain to be procured on the basis of inter- national competitive bidding. B. Other Procurement Procedures 1. Civil works shall be carried out in accordance with the Borrower's competitive bidding procedures satisfactory to the Association. 2. Vehicles may be procured in accordance with the Borrower's procurement procedures satisfactory to the Association, provided that the aggregate expenditure of vehicles so procured shall not exceed the equivalent of $350,000. C. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods except those to be procured in accordance with - 13 - local procedures: (i) bidders shall be required to state in their bid the c.i.f. (Pakistan port of entry) price for imported goods, or the ex-factory price for domestically manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically supplied goods, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in Pakistan may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Pakistan if the bidder shall have established to the satisfaction of the Borrower and the Associa- tion that the manufacturing cost of such goods includes a value added in Pakistan equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Pakistan. (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. (d) If, as a result of the comparison under paragraph (c) above, the lowest bid is a bid from group C, all group C - 14 - bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph (c) is the lowest evaluated bid shall be selected. D. Review of Procurement Decisions by the Association 1. Review of invitarions to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equiv- alent of $100,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Association of the name of the bidder to which it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evalua- tion and comparison of the bids received, and such other informa- tion as the Association shall reasonably request. The Association shall, if it determines that the intended award would be incon- sistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked or prequalification invited. - 15 - (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract to be financed out of the pro- ceeds of the Credit and not governed by the preceding paragraph, the Borrower shall furnish to the Association, promptly after its execution and piior to the submission to the Association of the first applicatio, for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. - 16 - SCHEDULE 4 Consultants Designations and Periods of Euployment 1. Training and Extension Planning Consultant November 15, 1978 to November 14, 1982 2. Dry Farming and Soil Conservation Expert November 15, 1978 to November 14, 1979 June 1, 1980 to September 30, 1980 August 1, 1981 to November 30, 1981 May 1, 1982 to August 31, 1982 3. Farm Planning and Farm Management Consultant July 1, 1979 to October 31, 1980 August 1, 1981 to October 31, 1981 March 1, 1982 to May 31, 1982 September 1, 1983 to November 30, 1983 4. Monitoring and Evaluation Expert June 1, 1979 to July 31, 1979 June 1, 1980 to July 31, 1980 June 1, 1982 to July 31, 1982