THE WORLD BANK IBRD * IDA I WORLD BANKGROUP OFFICIAL DOCUMENTS April27,2017 H.E. Olavo Correia Minister of Finance and Planning Ministry of Finance and Planning Avenida Amilcar Cabral C.P. 30, Praia Cabo Verde Re: Cabo Verde: Advance Agreement for Preparation of Proposed of Fiscal Risk Monitoring and SOE Reform Project (P160796) Project Preparation Advance No. V0800 Excellency: In response to the request for financial assistance made on behalf of Cabo Verde ("Recipient"), I am pleased to inform you that the International Development Association ("World Bank") proposes to extend to the Recipient an advance out of the World Bank's Project Preparation Facility in an amount not to exceed five hundred and fifty thousand Dollars ($550,000) ("Advance") on the terms and conditions set forth or referred to in this letter agreement ("Agreement"), which includes the attached Annex, to assist in financing the activities described in the Annex ("Activities"). The objective of the Activities is to facilitate the preparation of a proposed project designed to improve fiscal risk and SOE monitoring by strengthening the government's capacity to manage fiscal risks associated with its SOE portfolio and to support targeted reforms in the national airline and social housing program ("Project"), for the carrying out of which the Recipient has requested the World Bank's financial assistance. The Recipient represents, by confirming its agreement below, that: (a) it understands that the provision of the Advance does not constitute or imply any commitment on the part of IBRD or IDA to provide financing in support of the Project; and (b) it is authorized to enter into this Agreement and to carry out the Activities, repay the Advance and perform its other obligations under this Agreement, all in accordance with the provisions of this Agreement. 1818 H Street NW * Washington, DC 20433 USA H.E. Olavo Correia -2- April 27, 2017 Please confirm the Recipient's agreement to the foregoing by having an authorized official of the Recipient sign and date the enclosed copy of this Agreement, and returning it to the World Bank. Upon receipt by the World Bank of this countersigned copy, this Agreement shall become effective as of the date of the countersignature. Very truly yours, INTERNATIONAL DEVELOPMENT ASSOCIATION Louis J. Cord Country Director for Cabo erde Africa Region AGREED: CABO VERDE vio da Byi> Authorized Miu o Name '9 tA O i/A2-) Title hA{ 1 0&Ma Ctt&C Date: 1)6143/Qd1j- Enclosures: (1) "Standard Conditions for Advances Made by the World Bank under its Project Preparation Facility", dated July 31, 2010; and (2) Disbursement Letter for the Advance of the same date as this Agreement, together with "World Bank Disbursement Guidelines for Projects", dated May 1, 2006. PPA No. V0800 ANNEX H.E. Olavo Correia -3- April 27, 2017 Article I Standard Conditions; Definitions 1.01. Standard Conditions. The "Standard Conditions for Advances Made by the World Bank under its Project Preparation Facility" dated July 31, 2010, ("Standard Conditions"), constitute an integral part of this Agreement. 1.02. Definitions. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the Standard Conditions or in this Agreement. For purposes of this Agreement, the following terms mean: "Casa para Todos" means the Recipient's social housing program, established pursuant to Decree No 27/2010 of 23 August 2010. Article II Execution of the Activities 2.01. Description of the Activities. The Activities for which the Advance is provided consist of the following parts: (a) Supporting the preparation of a Recipient's national State Owned Enterprise (SOEs) reform program. (b) Supporting the preparation of terms for reference for the project. (c) Capacity building to the unit in charge of SOEs, privatization and public private partnerships within the Recipient's Ministry of Finance and Planning. (d) Supporting a diagnosis of the government SOE portfolio and make proposals for structure and function of future SOE oversight/holding arrangements. (e) Advise government on the financial, legal and institutional implications of planned reforms to their social housing program (Casa Para Todos). (f) Supporting the strengthening of: (i) the Recipient's macroeconomic analysis, ensuring capacity building and knowledge transfer; and (iii) the budget preparation process through improved forecasting. (g) Preparation of the project manual. (h) Preparation of a citizen/beneficiary engagement strategy for the planned reforms in the national airline. 2.02. Execution of the Activities Generally. The Recipient declares its commitment to the objectives of the Activities. To this end, the Recipient shall carry out the Activities in accordance with the provisions of: (a) Article II of the Standard Conditions; (b) this Article II; and (c) the "Guidelines on Preventing and H.E. Olavo Correia -4- April 27, 2017 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. 2.03. Institutional and Other Arrangements. The Recipient, through its Minister of Transport, shall vest the implementation of the Activities in the Project Coordination Unit of the Transport Sector Reform Project (P126516). To this end, the Recipient shall ensure that the PCU shall be maintained, throughout the implementation of the Activities, with adequate resources, staffing and terms of reference acceptable to the World Bank, including, but not limited to, a national director, an operational coordinator, who will be responsible for the day to day management of the Activities, an administrative and finance Officer, an accountant and a procurement officer. 2.04. Monitoring, Reporting and Evaluation ofthe Activities. The Recipient shall monitor and evaluate the progress of the Activities in accordance with the provisions of Section 2.08 of the Standard Conditions. 2.05. Financial Management. (a) The Recipient shall ensure that a financial management system is maintained in accordance with the provisions of Section 2.09 of the Standard Conditions. (b) The Recipient shall ensure that interim un-audited financial reports for the Activities are prepared and furnished to the World Bank not later. than 45 days after the end of each calendar quarter, covering the quarter, in form and substance satisfactory to the World Bank. (c) The Recipient shall have its Financial Statements audited in accordance with the provisions of Sections 2.09 (b) of the Standard Conditions. A single audit will be requested. Such audit of the Financial Statements shall cover the period commencing with the effectiveness of the PPA. The audited Financial Statements of the PPA shall be furnished to the World Bank not later than six months after the closing of the PPA. 2.06. Procurement (a) General. All goods, non-consulting services and consultants' services required for the Advance and to be financed out of the proceeds of the Advance shall be procured in accordance with the requirements set forth or referred to in: (i) Section I of the "Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011 (revised July 2014) ("Procurement Guidelines"), in the case of goods and non-consulting services; (ii) Sections I and IV of the "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011 (revised July 2014) ("Consultant Guidelines") in the case of consultants' services; and (iii) the provisions of this Section, as the same shall be elaborated in the procurement plan prepared and updated from time to time by the Recipient for the Advance in accordance with paragraph 1.18 of the Procurement Guidelines and paragraph 1.25 of the Consultant Guidelines ("Procurement Plan"). (b) Definitions. The capitalized terms used in the following paragraphs of this Section to describe particular procurement methods or methods of review by the World Bank of particular contracts, H.E. Olavo Correia -5- April 27, 2017 refer to the corresponding method described in Sections II and III of the Procurement Guidelines, or Sections II, III, IV and V of the Consultant Guidelines, as the case may be. (c) Particular Methods of Procurement of Goods and Non-consulting Services (i) Except as otherwise provided in sub-paragraph (ii) below, goods and non- consulting services shall be procured under contracts awarded on the basis of International Competitive Bidding. (ii) The following methods, other than International Competitive Bidding, may be used for procurement of goods and non-consulting services for those contracts which are specified in the Procurement Plan: (A) National Competitive Bidding, subject to the following additional provisions; (B) Shopping; and (C) Direct Contracting. (iii) The following additional provisions shall apply to National Competitive Bidding: (a) bids shall be advertised in national newspapers with wide circulation; (b) bid evaluation, bidder qualification and award criteria shall be specified clearly in the bidding documents; (c) bidders shall be given an adequate response time (minimum four weeks following the date of the invitation to bid or the date of availability of the bidding documents, whichever is later) to prepare and submit bids; (d) bids shall be awarded to the lowest evaluated bidder; (e) eligible bidders, including foreign bidders, shall not be precluded from participating; and (f) no preference margin shall be granted to domestic contractors. (d) Particular Methods of Procurement of Consultants' Services (i) Except as otherwise provided in item (ii) below, consultants' services shall be procured under contracts awarded on the basis of Quality- and Cost-based Selection. (ii) The following methods, other than Quality- and Cost-based Selection, may be used for the procurement of consultants' services for those assignments which are specified in the Procurement Plan: (A) Least-Cost Selection; (B) Selection based on Consultants' Qualifications; (C) Single-source Selection of consulting firms; (D) Single-source procedures for the Selection of Individual Consultants]. (e) Review by the World Bank of Procurement Decisions. The Procurement Plan shall set forth those contracts which shall be subject to the World Bank's Prior Review. All other contracts shall be subject to Post Review by the World Bank. (f) Document Retention. Notwithstanding the provisions of paragraphs 2(j) and 5 of Appendix 1 to the Procurement Guidelines, and paragraphs 2(k) and 5 of Appendix 1 to the Consultant Guidelines, the Recipient: (i) shall retain all documentation with respect to each contract as described in said paragraphs for at least seven years and six months after the Closing Date set forth in Section 3.03 of this Agreement; (ii) shall furnish such documentation to the World Bank at any time upon request; and (iii) hereby authorizes the World Bank to disclose such documentation to the Donor.. Article III Withdrawal of the Advance H.E. Olavo Correia -6- April 27, 2017 3.01. Eligible Expenditures. The Recipient may withdraw the proceeds of the Advance in accordance with the provisions of: (a) Article III of the Standard Conditions; (b) this Section; and (c) such additional instructions as the World Bank may specify by notice to the Recipient (including the "World Bank Disbursement Guidelines for Projects" dated May 2006, as revised from time to time by the World Bank and as made applicable to this Agreement pursuant to such instructions), to finance 100% of Eligible Expenditures consisting of goods, services, Training and Operating Costs inclusive of Taxes. For purposes of this Section, the following terms mean: "Operating Costs" means the reasonable, incremental operating expenditures, which would not exist absent of the Activities, incurred by the Recipient on account of the preparation, implementation and management of the Activities, as approved by the World Bank based on budgets acceptable to the World Bank, including travel expenditures and other travel-related allowances; equipment rental and maintenance; vehicle operation, maintenance and repair; office rental and maintenance; materials and supplies; and utilities, media information campaigns and communications' expenses, but excluding salaries, fees, honoraria, bonuses and any other salary supplements of the Recipient's civil servants. "Training" means any costs associated with capacity building activities including the contracting of consultants, preparation of training materials, per diem and travel costs as well as any miscellaneous equipment. 3.02. Withdrawal Conditions. Notwithstanding the provisions of Section 3.01 of this Agreement, no withdrawal shall be made for payments made prior to the date of countersignature of this Agreement by the Recipient. 3.03. Refinancing Date. The Refinancing Date is December 20, 2017. Article IV Terms of the Advance 4.01. Service Charge. The Recipient shall pay a service charge on the Withdrawn Advance Balance at the rate of three-fourths of one percent (3/4 of 1%) per annum. The service charge shall accrue from the respective dates on which amounts of the Advance are withdrawn and shall be paid in arrears in accordance with the provisions of Section 4.02 of this Agreement. Service charges shall be computed on the basis of a 360-day year of twelve 30-day months. 4.02. Repayment. The Withdrawn Advance Balance shall be repaid by the Recipient to the World Bank (together with any service charges accrued thereon) in accordance with the provisions of Article IV of the Standard Conditions and the following provisions: (a) Refinancing under the Refinancing Agreement: If, on or before the Refinancing Date, a Refinancing Agreement has been executed by all of its parties, then the full amount of the Withdrawn Advance Balance shall be repaid to the World Bank (together with any service charges accrued on the Advance to the date of repayment) as soon as the Refinancing Agreement becomes effective, by means of a withdrawal by the World Bank of an amount of the Refinancing Proceeds equivalent to the Withdrawn H.E. Olavo Correia -7- April 27, 2017 Advance Balance plus such service charges, in accordance with the provisions of the Refinancing Agreement. (b) Repayment in the absence of a Refinancing Agreement: If, on or before the Refinancing Date, no Refinancing Agreement has been executed by all of its parties, or if, by such date or at any time thereafter, it has been so executed but terminates without becoming effective, then: (i) if the amount of the Withdrawn Advance Balance does not exceed $50,000, it shall be repaid by the Recipient to the World Bank (together with service charges accrued on the Withdrawn Advance Balance to the date of repayment) on such date as the World Bank shall specify in a notice to the Recipient, which shall in no event be earlier than 60 days following the date of dispatch of such notice; and (ii) if the amount of the Withdrawn Advance Balance exceeds $50,000, it (together with service charges accrued on the Withdrawn Advance Balance to the Notice Date) (the "Aggregate Balance") shall be paid by the Recipient to the World Bank in ten approximately equal semiannual installments, in the amounts and on the dates ("Payment Dates") which the World Bank shall specify in a notice to the Recipient. In no event shall the first Payment Date be set earlier than 60 days following the date ("Notice Date") of dispatch of such notice. The Recipient shall pay a service charge on the Aggregate Balance at the rate of three-fourths of one percent (3/4 of 1%) per annum, payable in arrears on each Payment Date. The service charge shall be computed on the basis of a 360-day year of twelve 30-day months. Article V Recipient's Representative; Addresses 5.01. Recipient's Representative. The Recipient's Representative referred to in Section 9.02 of the Standard Conditions is the minister responsible for finance and planning. 5.02. Recipient's Address. The Recipient's Address referred to in Section 9.01 of the Standard Conditions is: Minister of Finance and Planning Ministry of Finance and Planning Avenida Amilcar Cabral C.P. 30, Praia Cabo Verde Telex: Facsimile: 5.03. World Bank's Address. The World Bank's Address referred to in Section 9.01 of the Standard Conditions is: International Development Association 1818 H Street, N.W. H.E. Olavo Correia -8- April 27, 2017 Washington, D.C. 20433 United States of America Telex: Facsimile: 248423 (MCI) or (1)-202-477-6391 64145 (MCI)