OFFIC-AL DOCUMENTS CREDIT NUMBER IDA 6431-UZ Financing Agreement (Institutional Capacity Building Project) be電Ween REPUBLIC OF UZBEKISTAN snd INTERNATI0NALDEVEL0PMENTASS0CIATI0N 国日目国国■日日国日日日日日日日日日日日日日日日日日ー国国日国国国■■日日■■■■■■■日日日日園園国国国国国国国国国国日日日日日日日日日日日日日日日日日日日日日日日日日日日日日日国自国国園国国国園日国園国園国園ー園 国日日日日日日日日日日日日国国国国園日国国国国日日日日日日日日日日日日日日日日日日日国園 CREDIT NUMBER IDA 6431-UZ FINANCING AGREEMENT AGREEMENT dated as of the Signature Date between REPUBLIC OF UZBEKISTAN ("Recipient") and INTERNATIONAL DEVELOPMENT ASSOCIATION ("Association"). 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) apply to and form 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. ARTICLE 11 - FINANCING 2.01. The Association agrees to extend to the Recipient a credit, which is deemed as Concessional Financing for purposes of the General Conditions, in the amount of thirty-three million Dollars ($ 33,000,000) (variously, "Credit" and "Financing"), to assist in financing the project described in Schedule I to this Agreement ("Project"). 2.02. The Recipient may withdraw the proceeds of the Financing in accordance with Section III of Schedule 2 to this Agreement. 2.03. The Maximum Commitment Charge Rate is one-half of one percent (1/2 of 1%) per annum on the Unwithdrawn Financing Balance. 2.04. The Service Charge is the greater of. (a) the sum of three-fourths of one percent (3/4 of 1%) per annum plus the Basis Adjustment to the Service Charge; and (b) three-fourths of one percent (3/4 of I %) per annum; on the Withdrawn Credit Balance. 2.05. The Interest Charge is the greater of- (a) the sum of one and a quarter percent (1.25%) per annurn plus the Basis Adjustment to the Interest Charge; and (b) zero percent (0%) per annum; on the Withdrawn Credit Balance. -2- 2.06. The Payment Dates are May 15 and November 15 in each year. 2.07. The principal amount of the Credit shall be repaid in accordance with the repayment schedule set forth in Schedule 3 to this Agreement. 2.08. The Payment Currency is Dollar. ARTICLE III - PROJECT 3.01. The Recipient declares its commitment to the objective of the Project. To this end, the Recipient shall carry out the Project through MoF, and in accordance with the provisions of Article V of the General Conditions and Schedule 2 to this Agreement. ARTICLE IV - EFFECTIVENESS; TERMINATION 4.01. The Additional Conditions of Effectiveness consist of the following: (a) The Recipient has adopted the Project Operational Manual in form and substance satisfactory to the Association. (b) The Recipient has established the PIU with composition, staff, resources and terms of reference satisfactory to the Association. 4.02. The Effectiveness Deadline is the date ninety (90) days after the Signature Date. 4.03. For purposes of Section 10.05 (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 Signature Date. ARTICLE V - REPRESENTATIVE; ADDRESSES 5.01. The Recipient's Representative is its Minister of Finance. 5.02. For purposes of Section 11.01 of the General Conditions: (a) the Recipient's address is: Ministry of Finance Istiqlol Street 29 -3- Tashkent 100017 Republic of Uzbekistan; and (b) the Recipient's Electronic Address is: Telex: Facsimile: E-mail 1 6360 IK BOL (998-71) 239-1569 info@mf.uz (998-71) 239-1259 5.03. For purposes of Section 11.01 of the General Conditions: (a) The Association's address is: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America; and (b) the Association's Electronic Address is: Telex: Facsimile: 248423 (MCI) 1-202-477-6391 -4- AGREED as of the Signature Date. REPUBLIC OF UZBEKISTAN By 4 thorized epresentative Name: Djamshid Kuchkarov Title: Deputy Prime Minister and Minister of Finance Date: July 19, 2019 INTERNATIONAL DEVELOPMENT ASSOCIATION By Authorized Representative Name: Lilia Burunciuc Title: Regional Director, Central Asia Date: July 19, 2019 -5- SCHEDULE 1 Project Description The objective of the Project is to strengthen public financial management and enable the market operation of the corporate sector. The Project consists of the following parts: Component 1. Improving Public Financial Management 1.1 Capacity Building for Budgeting and Effective Public Investment (a) Support for the development and implementation of capacity building programs to enhance: (i) budgeting capacity with a special focus on the process of preparation, results, monitoring and accountability; and (ii) public investment management capacity of the MIFT, MoF and other key ministries for the development of sustainable investment projects, including pre-screening, economic analysis and selection of investment proposals with due consideration to climate change and disaster risks mitigation and adaptation; and (iii) the ability of the Recipient's institutions to identify, develop, analyze, present, execute and monitor infrastructure investment projects. (b) Support for MOF to carry out financial analysis of the SOEs' strategic development and capital investment plans. 1.2 Treasury System Improvements Support for Treasury: (a) to expand its systems coverage to, inter alia, include USD and other foreign currency accounts as well as budget transactions of all the Recipient's budget entities; (b) to develop procedures and guidelines for conducting payments through a Treasury Single Account; (c) to improve the Treasury's cash management system; and -6- (d) to improve business processes and operations through the introduction and operation of new information technology systems. (e) the assessment of existing public financial management information systems and information and communication technology environment, including users' current capacity for further development of the integrated financial management information system concept and its implementation strategy. 1.3 Public Sector Accounting Support for the improvement of institutionalized accountability of the Recipient's institutions including: (a) carrying out of an overall analysis on the difference between the current national accounting standards and practices with International Public Sector Accounting Standards, including the development of a comprehensive public sector accounting reform roadmap linked to the Recipient's integrated public financial management reform strategy; (b) the development of comprehensive national public sector accounting standards and a unified chart of accounts, including (i) the drafting of supporting regulations on the new public sector accounting and financial reporting developed under Component I of the Project; (ii) development and testing of procedures for financial statement consolidation; (iii) piloting the new accounting standards and framework through the application of an entity-level accounting software; and (iv) capacity building, change management and awareness program on the new accounting standards and framework; and (c) establishment of a certification system on the new accounting standards. 1.4 Public Internal Control and Internal Audit Support for the improvement of institutionalized accountability of the Recipient's institutions by upgrading internal controls and audit frameworks including the development and implementation of: (a) a new public internal control framework; and (b) a new public sector internal audit framework including (i) drafting of new legislation for public sector internal audit; (ii) developing risk-based guidelines and manuals following international good practices and standards; (iii) developing and piloting an internal audit management software; (iv) designing and implementing learning and awareness programs (including change management) on the new internal audit framework; and (v) developing a concept for a certification system on such framework. -7- Component 2. Improving Conditions for Market Operation of the Corporate Sector 2.1 Improving the Legal and Regulatory Framework for SOE Strategic Ownership and Performance on an Equal Footing with Private Sector (a) Provision of technical assistance: (i) to develop a coherent and well-articulated SOE ownership policy and restructuring strategy, including the steps of gradual implementation and the piloting in selected SOEs before full implementation; and (ii) to carry out a comprehensive review and update of the Recipient's legal and regulatory framework for SOEs' governance. (b) Strengthening institutions and developing tools for improved SOE oversight and governance including: (i) capacity building for ASAM's, MoF's, and the Recipient's Foreign Investment Promotion Agency's staff and for the staff of other agencies performing SOE ownership and oversight functions for the Recipient; (ii) development and implementation of an SOE performance monitoring system in ASAM; (iii) setting the policies and procedures on SOEs data collection and processing; (iv) supporting the gradual transition of the largest SOEs to International Financial Reporting Standards (IFRS) and International Standards of Audit (ISA) to increase the reliability and quality of financial information of SOEs; (v) development and implementation of guidelines for SOEs' financial performance evaluation; and (vi) upgrading and implementing an information and technology platform for aggregation and timely publication of the SOEs financial statements. 2.2 Development of a System Database for ASAM Technical support to ASAM to assist in the assessment of a new information and technology system to collect and manage data collected from SOEs, provision of the selected information and technology system. -8- 2.3 Project Preparation Facilities (a) Provision of technical assistance for the development of two preparation facilities to support (i) the preparation of restructuring and privatization transactions of selected SOEs (the divestments), and (ii) development of public-private partnerships. (b) Capacity building and training for agencies involved in the privatization of SOEs and the development of PPPs. (c) Carry out a comprehensive review and update of the Recipient's legal and regulatory framework on privatization process and procedures. 2.4. Technical Assistance on Communications and Employee Outreach Provision of technical assistance to ASAM and other relevant institutions to (i) develop a communications strategy on the transformation towards an economy led by the private sector; and (ii) build capacity to ensure implemention of various communications and employee outreach activities. Component 3. Improving Support Mechanisms for Reforms 3.1 Technical assistance to the Economic Council for the implementation of the Reform Roadmap 2019-2021 to foster private-led economic growth. 3.2 Technical Assistance to Regulatory Agencies and other public sector agencies performing economic regulatory functions as the Recipient may propose and the Association may agree. Component 4. Project Management 4.1. Provision of support to carry out Project management activities, including, monitoring, evaluation, coordination and supervision of the Project, and Project audits. 4.2. Carrying out of studies or other activities as needed to achieve the objectives of the Project as may be proposed by the Recipient and approved by the Association. -9- SCHEDULE2 Project Execution Section I. Implementation Arrangements A. Institutional Arrangements. 1. The Recipient shall, through MoF, establish and, thereafter maintain throughout the Project implementation, a PIU for the purposes of day-to-day Project management, monitoring and supervision with a composition, staff, resources and terms of reference described in the POM and satisfactory to the Association. 2. The Recipient shall establish not later than two (2) months after the Effective Date and, thereafter maintain throughout the Project implementation, a Project Implementation Advisory Board for purposes of monitoring the progress of the Project and facilitating the resolution of inter-institutional implementation challenges, with a composition and membership, resources and terms of reference described in the POM and satisfactory to the Association. 3. For purposes of carrying out the activities under Component 2 of the Project, the Recipient, through MoF, shall coordinate with and ensure the provision of technical support of ASAM and PPP Agency, as described in the POM. 4. The Recipient, through MoF, shall carry out the Project in accordance with the requirements, criteria, organizational arrangements and operational procedures set forth in this Agreement and in the POM and shall not amend, suspend, abrogate or waive any provisions of the POM without prior written approval of the Association. In case of any inconsistency between the provisions of the POM and those of this Agreement, those of this Agreement shall prevail. 5. The Recipient, through MoF, shall not later than one (1) month after the Effective Date, established an automated accounting information system, satisfactory to the Association, for recording Project records and generation of Project financial statements. B. Environmental and Social Standards. 1. The Recipient, through MoF, shall ensure that all consultancies related to technical assistance, design and capacity building under the Project, the application of whose results could have environmental, social and health and safety implications, shall only be undertaken pursuant to terms of reference reviewed and found satisfactory by the Association; and 2. The Recipient, through MoF, shall maintain and publicize the availability of a grievance mechanism, in form and substance satisfactory to the Association, to -10- hear and determine fairly and in good faith all complaints raised in relation to the Project and take all measures necessary to implement the determinations made by such mechanism in a manner satisfactory to the Association. Section II. Project Monitorin2, Reporting and Evaluation The Recipient, through MoF, shall furnish to the Association each Project Report not later than forty-five (45) days after the end of each calendar semester, covering the calendar semester. Section III. Withdrawal of the Proceeds of the Financing A. General Without limitation upon the provisions of Article II of the General Conditions and in accordance with the Disbursement and Financial Information Letter, the Recipient may withdraw the proceeds of the Financing to finance Eligible Expenditures; in the amount allocated and, if applicable, up to the percentage set forth against each Category of the following table: Percentage of Expenditures to be Amount of the Credit Financed Allocated (exclusive of Taxes other Category (expressed in USD) than Withheld Taxes) Goods, non-consulting 33,000,000 100% services, consulting services, Training and Operating Costs for the Project TOTAL AMOUNT 33,000,000 B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part A above, no withdrawal shall be made for payments made prior to the Signature Date. 2. The Closing Date is November 30, 2024. SCHEDULE 3 Repayment Schedule Principal Amount of the Credit Date Payment Due repayable (expressed as a percentage)* On each May 15 and November 15: commencing November 15, 2024 to and 1.65% including May 15, 2044 commencing November 15, 2044 to and 3.40% including May 15, 2049 * The percentages represent the percentage of the principal amount of the Credit to be repaid, except as the Association may otherwise specify pursuant to Section 3.05 (b) of the General Conditions. -12- APPENDIX 1. "Anti-Corruption Guidelines" means, for purposes of paragraph 5 of the Appendix to the General Conditions, the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011 and as of July 1, 2016. 2. "ASAM" means the Recipient's Agency for State Assets Management established pursuant to the Recipient's Presidential Resolution No. 5630 and the Recipient's Presidential Decree No. 4112, both dated Januarys 14, 2019. 3. "Basis Adjustment to the Interest Charge" means the Association's standard basis adjustment to the Interest Charge for credits in the currency of denomination of the Credit, in effect at 12:01 a.m. Washington, D.C. time, on the date on which the Credit is approved by the Executive Directors of the Association, and expressed either as a positive or negative percentage per annum. 4. "Basis Adjustment to the Service Charge" means the Association's standard basis adjustment to the Service Charge for credits in the currency of denomination of the Credit, in effect at 12:01 a.m. Washington, D.C. time, on the date on which the Credit is approved by the Executive Directors of the Association, and expressed either as a positive or negative percentage per annum. 5. "Category" means the category set forth in the table in Section III.A of Schedule 2 to this Agreement. 6. "Economic Council" means the Recipient's economic council established pursuant to the Recipient's Presidential Resolution No. 5614 dated January 8, 2019. 7. "Foreign Investment Promotion Agency" means the Recipient's agency under the MIFT established pursuant to President of Uzbekistan Decree No. 4135 dated January 28, 2019. 8. "General Conditions" means the "International Development Association General Conditions for IDA Financing, Investment Project Financing", dated December 14, 2018. 9. "International Financial Reporting Standards" or "IFRS" means the standards set forth by the International Accounting Standards Board of the IFRS Foundation. 10. "International Public Sector Accounting Standards" or "IPSAS" means the set of accounting standards issued by IPSAS Board for use by public sector. 11. "International Standards of Auditing" or "ISA" means professional standards for the performance of financial audit of financial information, issued by International -13- Federation of Accountants (IFAC) through the International Auditing and Assurance Standards Board (IAASB). 12. "International Standards for Supreme Audit Institutions" or "ISSAI" means the standards for auditing public entities and which were approved by International Organization of Supreme Audit Institutions (INTOSAI). 13. "MoF" means the Recipient's Ministry of Finance or any successor thereto acceptable to the Association. 14. "MIFT" means the Recipient's Ministry of Investments and Foreign Trade or any successor thereto acceptable to the Association. 15. "Operating Costs" means the expenses incurred on account of Project implementation, management and monitoring, which are the expenditures that would not have been incurred in the absence of the Project, including utilities, supplies, bank charges, communications, equipment maintenance, advertising expenses, translations, fuel, travel and per diems for employees of the PIU, salaries of PIU staff (but excluding salaries of officials or employees of the Recipient's civil service, as well as any contributions by these officials or employees to any social fund) including Social Charges, and any other incremental expenses incurred by the PIU on account of Project implementation, provided that all said expenses are acceptable to the Association. 16. "PPP" means public-private partnership; and "PPPs" means the plural thereof. 17. "PPP Agency" means the Recipient's agency in charge with private and public partnerships established pursuant to Recipient's Presidential Decree No3980 dated October 20, 2018. 18. "Procurement Regulations" means, for purposes of paragraph 87 of the Appendix to the General Conditions, the "World Bank Procurement Regulations for IPF Borrowers", dated July 2016, revised November 2017 and August 2018. 19. "Project Implementation Advisory Board" or "PIAB" means the board to be established pursuant to the provisions of Section I.A.2 of Schedule 2 to the Financing Agreement. 20. "Project Implementation Unit" or "PIU" means the unit to be established and maintained pursuant to the provisions of Section I.A.1 of Schedule 2 to the Financing Agreement. 21. "Project Operational Manual" or "POM" means the manual referred to in Section I.A.4 of Schedule 2 to the Financing Agreement. -14- 22. "Reform Roadmap 2019-2021" means the roadmap set forth in the Recipient's Presidential Resolution No. 5614 dated January 8, 2019. 23. "Regulatory Agency" means any of the Recipient's agencies participating in Component 3 of the Project; and "Regulatory Agencies" means the plural thereof. 24. "SOE" means any state-owned enterprise; and "SOEs" means the plural thereof. 25. "Social Charges" means any payments or contributions for health benefits, unemployment benefits, disability insurance, workers' compensation benefits, retirement (pension or social security) benefits, and life insurance, or any other benefits according to the Recipient's legislation. 26. "Signature Date" means the later of the two dates on which the Recipient and the Association signed this Agreement and such definition applies to all references to "the date of the Financing Agreement" in the General Conditions. 27. "Training" means expenditures (other than those for consultants' services) incurred for training and training-related activities under the Project, including seminars, workshops and study tours, travel and subsistence allowances for training participants, trainers' fees, rental of training facilities, preparation and reproduction of training materials and other activities incidental to the preparation and implementation of training activities. 28. "Treasury" means the MoF treasury of the Recipient or any successor thereto acceptable to the Association. 29. "Treasury Single Account" means the Recipient's single account maintained within its Treasury for revenue and income collection and payments. 30. "USD" means the lawful currency of the United States of America. 31. "Withheld Taxes" means the following taxes withheld at source: taxes for social charges; income taxes for residents and non-residents; and custom registrations duties withheld at the source.