/ CL I CREDIT NUMBER 1300 BD

Development Credit Agreement(Eleventh Imports Program)

between

PEOPLE'S REPUBLIC OF BANGLADESH

and

INTERNATIONAL DEVELOPHENT ASSOCIATION

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CREDIT NUMBER 1300 BD

DEVELOPMENT CREDIT AGREEMENT

AGREEMENT, dated9ac0 a t',Me, between PEOPLE'S REPUBLICOF BANGLADESH (hereinafter called the Borrower) and INTERNATIONALDEVELOPMENT ASSOCIATION (hereinafter called the Association).

ARTICLE I

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept all theprovisions of the General Conditions Applicable to DevelopmentCredit Agreements of the Association, dated June 30, 1980, withthe 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 hereinafter called the GeneralConditions).

Section 1.02. Wherever used in this Agreement, unless thecontext otherwise requires, the several terms defined in theGeneral Conditions have the respective meanings therein set forthand the following additional terms have the following meanings:

(a) "BADC" means Bangladesh Agricultural Development Cor-poration, a corporate entity established under the BangladeshAgricultural Development Corporation Ordinance, 1961 (OrdinanceNo. XXXVII of 1961), and includes any successor thereto;

(b) "BKB" means the Bangladesh Krishi Bank, an agriculturaldevelopment finance institution established under the BangladeshKrishi Bank Order, 1973 (P.O. No. 27 of 1973);

(c) "BWDB" means the Bangladesh Water Development Board,established and operating pursuant to the Bangladesh Water andPower Development Boards Order 1972 (P.O. No. 59 of 1972) or anysuccessor thereto;

(d) "MOF" means the Ministry of Food of the Borrower;

(e) "Policy Improvements" means the collective measures theBorrower intends to take in pursuance of sound economic develop-ment policies, including inter alia those associated with theBorrower's public investment budget as well as those set forth inSchedule 3 to this Agreement;

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(f) "Tk" or "taka" means the currency of the Borrower;

(g) "SITC" means the United Nations Standard InternationalTrade Classification, 1974 Revision (SITC, Rev. 2), published inCommodity Indexes for the Standard International Trade Classifi-cation, Revised, Statistical Papers, Series M. No. 34/Rev.2(1975);

(h) "TIP Reform Program" means the Borrower's Trade andIndustrial Policy Reform Program to be carried out as a sub-project under the Fourth Technical Assistance Credit No. 1124between the Borrower and the Association, dated March 31, 1981,and described in Schedule 4 to this Agreement; and

(i) "Sanction Limit" means the maximum amount of investmentthat the development finance institutions of the Borrower areauthorized to approve as the cost of a single industrial projectin the private sector.

ARTICLE II

The Credit

Section 2.01. The Association agrees to lend to the Bor-rower, on the terms and conditions in the Development CreditAgreement set forth or referred to, an amount in various curren-cies equivalent to one hundred million eight hundred thousandSpecial Drawing Rights (SDR 100,800,000).

Section 2.02. The amount of the Credit 'may be withdrawnfrom the Credit Account in accordance with the provisions ofSchedule 1 to this Agreement, as such Schedule may be amendedfrom time to time by agreement between the Borrower and theAstociation, for expenditures made (or, if the Association shallso agree, to be made) in respect of the reasonable cost of goodsand services required for the Project and to be financed out ofthe proceeds of the Credit.

Section 2.03. The Project is a part of the Borrower's pro-gram: (i) to make available foreign exchange to eligibleimporters for the import, into the Borrower's territory, of goodsand services necessary for the carrying out of the PolicyImprovements; (ii) to continue and consolidate ongoing exportdevelopment programs; and (iii) to carry out the PolicyImprovements.

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Section 2.04. Except as the Association shall otherwiseagree, procurement of the-goods required for the Project and tobe financed out of the proceeds of the Credit, shall be governedby the provisions of Schedule 2 to this Agreement.

Section 2.05. The Closing Date shall be June 30, 1985, orsuch later date as the Association shall establish. The Associa-tion shall promptly notify the Borrower of such later date.

Section 2.06. (a) The Borrower shall pay t3 the Associationa commitment charge at the rate of one-half of one per cent (1/2of 1%) per annum on the principal amount of the Credit not with-drawn from time to time. The commitment charge shall accrue fromua date sixty days after the date of the Development Credit Agree-ment to the respective dates on which amounts shall be withdrawnby the Borrower from the Credit Account or shall be cancelled.

(b) The commitment charge shall be paid: (i) at such placesas the Association shall reasonably request; (ii) withoutrestrictions of any kind imposed by, or in the territory of, theBorrower; and (iii) in the currency specified in this Agreementfor the purposes of Section 4.02 of the General Conditions or insuch other eligible currency or currencies as may from time totime be designated or selected pursuant to the provisions of thatSection.

Section 2.07. The Borrower shall pay to the Association aservice charge at the rate of three-fourths of one per cent (3/4of 1%) per annum on the principal amount of the Credit withdrawnand outstanding from time to time.

Section 2.08. Service charges and commitment charges shallbe payable semiannually on April 1 and October 1 in each year.

Section 2.09. The Borrower shall repay the principal amountof the Credit in semiannual installments payable on each April 1and October 1 commencing April 1, 1993, and ending October 1,2032, each installment to and including the installment payableon October 1, 2002, to be one-half of one per cent (1/2 of 1%) ofsuch principal amount, and each installment thereafter to be oneand one-half per cent (1-1/2%) of such principal amount.

Section 2.10. The currency of the United Kingdom of GreatBritain and Northern Ireland is hereby specified for the purposesof Section 4.02 of the General Conditions.

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Section 2.11. The authorized representatives of the Bangla-desh Bank are designated as representatives of the Borrower forthe purposes of taking any action required or permitted to betaken under the provisions of Section 2.02 of this Agreement andArticle V of the General Conditions.

ARTICLE III

Execution of the Project

Section 3.01. (a) The Borrower shall carry out the Project,or cause it to be carried out, with due diligence and efficiency.

(b) The Borrower shall:

(i) promptly upon receipt of appropriate applicationsfrom the eligible importers issue, or cause to beissued, such import licenses as shall be requiredto carry out the Project;

(ii) make available, or cause to be made available tothe eligible importers promptly as needed, suchamounts of foreign exchange as shall be reqt .redto import goods to be financed out of the proceedsof the Credit; and

(iii) take all such action as shall be necessary tofacilitate the timely importation of goods to befinanced out of the proceeds of the Credit.

Section 3.02. (a) The Borrower shall cause the importedgoods to be financed out of the proceeds of the Credit to beinsured, or cause adequate provision to be made fDr the insurancethereof, against hazards incident to the acquisition, transporta-tion and delivery thereof to the place of use or installation,and for such insurance any indemnity shall be payable in a cur-rency freely usable by the Borrower to replace or repair suchgoods.

(b) Except as the Association shall otherwise agree, theBorrower shall cause all goods and services financed out of theproceeds of the Credit to be used exclusively for the purposesdescribed in Section 2.03 hereof.

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Section 3.03. (a) The Borrower shall: (i) maintain recordsand procedures adequate to record and monitor the progress of theProject and to identify the goods and services financed out ofthe proceeds of the Credit; (ii) enable the Association's repre-sentatives to examine the goods financed out of the proceeds ofthe Credit and any relevant records and documents; and (iii)furnish to the Association all such information as the Associa-tion shall reasonably request concerning the Project, the program(referred to in Section 2.03 of this Agreement) of which theProject is a part, the cost of the Project and, where appro-priate, the benefits to be derived from it, the expenditure ofthe proceeds of the Credit and the goods and services financedout of such proceeds.

(b) Upon the award by the Borrower of any contract forgoods to be financed out of the proceeds of the Credit, theAssociation may publish a description thereof, the name andnationality of the party to whom the contract was awarded andthe contract price.

(c) The Borrower shall, not later than six months after theClosing Date or such later date as may be agreed for this purposebetween the Borrower and the Association, prepare and furnish tothe Association a report, of such scope and in such detail as theAssociation shall reasonably request, on the execution and ini-tial operation of the Project, the benefits derived and to bederived therefrom, the performance by the Borrower and the Asso-ciation of their respective obligations under this Agreement andthe accomplishment of the purposes of the Credit.

Section 3.04. (a) The Borrower shall deposit amounts in takaequivalent to the amounts disbursed by the Association pursuantto Section 2.02 of this Agreement, in an account currently beingmaintained with the Bangladesh Bank, which amounts are to bedescribed in accordance with standard practice, as the proceedsfrom "IDA Credit No. 1300 BD".

(b) The amounts referred to in paragraph (a) of thisSection shall be utilized entirely to finance the Borrower'sdevelopment programs.

(c) The Borrower shall, not later than July 31 of eachcalendar year, inform the Association of the local currency pro-visions made in the Borrower's Annual Development Program for thefiscal year which began on the preceding July 1, for the develop-ment projects being financed by the Association.

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(d) The Borrower shall inform the Association on a quar-terly basis of the amounts of taka allocated or released for theprojects being financed by the Association.

Section 3.05. The Borrower shall maintain or cause to bemaintained records adequate to reflect in accordance with consis-tently maintained appropriate accounting practices the opera-tions, resources and expenditures, in respect of the Project, ofthe departments or agencies of the Borrower responsible forcarrying out the Project or any part thereof.

Section 3.06. Except as the Association may otherwise agreethe Borrower shall take, or cause to be taken, the actionsdescribed in Schedule 3 to this Agreement for the purpose ofcarrying out the Policy Improvements.

Section 3.07. In order to assist the Borrower in the carry-ing out of the TIP Reform Program the Borrower shall employconsultants whose qualifications, experience and terms and condi-tions of employment shall be satisfactory to the Association,such consultants to be selected in accordance with principles andprocedures satisfactory to the Association on the basis of the"Guidelines on the Use of Consultants by World Bank Borrowers andthe World Bank as Executing Agency," published by the Bank inAugust, 1981.

Section 3.08. The Borrower and the Bank shall, not laterthan April 15, 1983, exchange views cn the progress achieved inthe carrying out of the Policy Improvements. Prior to suchexchange of views, the Borrower shall furnish to the Associationfor its review and comments a report on the progress achieved inthe carrying out of said Policy Improvements, in such detail asthe Association shall reasonably request.

ARTICLE IV

Effective Date; Termination

Section 4.01. The following events are specified as addi-tional conditions to the effectiveness of the Development CreditAgreement within the meaning of Section 12.01 (b) of the GeneralConditions that:

(a) the Borrower shall have issued import licenses inrespect of goods to be financed out of the proceeds of the Credit

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covering foreign exchange allocations aggregating not less than$55,000,000 equivalent;

(b) the Borrower shall have signed the contracts with theforeign consultants required for the carrying out of the TIPReform Program in accordance with the provisiGns of Section 3.07of this Agreement and in a manner satisfactory to theAssociation;

(c) the Borrower shall have issued an administrative orderinstructing BWDB: (i) to promptly offer for sale, with a view tocompleting such sale by June 30, 1984, BWDB's stock of rentallowlift pumps; (ii) not to increase BWDB's rental stock oflow-lift pumps by any acquisition thereof; and (iii) not torestrict farmers from buying shallow tubewells from sources otherthan BWDB in areas where BWDB's projects are being carried out;and

(d) the Association shall have received evidence, satis-factory to the Association, that the Borrower has taken allnecessary steps to ensure that farmers and farmers' groups haveaccess to credit from banking and cooperative institutions forthe purchase of used minor irrigation equipment.

Section 4.02. The date YyLrl 10 1 q3 , is herebyspecified for the purposes of Sect'on 12.04 of the GeneralConditions.

Section 4.03. The obligations of the Borrower under Sections3.04 (c) and (d), 3.06 and 3.07 of this Agreement shall cease anddetermine on the date on which the Development Credit Agreementshall terminate or on a date 10 years after the date of thisAgreement, whichever shall be the earlier.

ARTICLE V

Representative of the Borrower; Addresses

Section 5.01. Any Secretary, Additional Secretary, JointSecretary, Deputy Secretary or Section Officer of the External

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Resources Division of the Ministry of Finance and Planning of theBorrower is designated as the representative of the Borrower forthe purposes of Section 11.03 of the General Conditions.

Section 5.02. The following addresses are specified for thepurposes of Section 11.01 of the General Conditions:

For the Borrower:

External Resources DivisionMinistry of Finance and PlanningGovernment of the People's

Republic of BangladeshDaccaBangladesh

Cable address: Telex:

BAHIRSAMPAD SETU BJ 65886Dacca

For the Association:

International Development Association1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address, Telex:

INDEVAS 440098 (ITT)Washington, D.C. 248423 (RCA) or

64415 (WUI)

IN WITNESS WHEREOF, the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused thisAgreement to be signed in their respective names in the District

9

of Columbia, United States of America, as of the day and yearfirst above written.

PEOPLE'S REPUBLIC OF BANGLADESH

By

V

Authorized Representative

INTERNATIONAL DEVELOPMENT ASSOCIATION

By A -

Regional Vice PresidentSouth Asia

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SCHEDULE 1

Withdrawal of the Proceeds of the Credit

1. All goods imported into the People's Republic of Bangladeshmay be financed out of the proceeds of the Credit, except that nowithdrawals shall be made in respe.-t of:

(a) expenditures for goods to be supplied under a contractwhich a national or international financing institutionor any other agency shall have financed or agreed tofinance;

(b) expenditures for goods intended for a military orpara-military purpose or for luxury consumption;

(c) without limitation to the foregoing paragraphs (a) and(b), expenditures for items included in the followingSITC groups or sub-groups:

Group Sub-Group Description of Items

112 - Alcoholic beverages

121 - Tobacco, unmanufactured,tobacco refuse

122 - Tobacco, manufactured

667 - Pearls, precious and semi-preciousstones, unworked or worked

688 - Uranium depleted in U235 and tho-rium, and their alloys, unwrought orwrought, and articles thereof, n.e.s.;waste and scrap of uranium depleted inU235 and of thorium

718 718.7 Nuclear reactors, and parts thereof,n.e. s.

897 897.3 Jewelry of gold, silver or platinumgroup metals (except watches and watchcases) and goldsmiths' wares (includ-ing set gems);

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(d) expenditures for items under SITC Group 661, Subgroup661.2, in the form of clinker;

(e) expenditures for items under SITC Group 672, Subgroup672.5, other than billets imported exclusively for usein rerolling mills;

(f) expenditures for items in any single SITC Division inexcess of 25% of the total amount of the Credit;

(g) payments made for expenditures prior to the date ofthis Agreement;

(h) expenditures in the currency of the Borrower or forgoods supplied from the territory of the Borrower; and

(i) payments for taxes levied by, or in the territory of,the Borrower on goods, or on the importation,procurement or supply thereof.

2. Without limitation or restriction upon any other provisionsof this Schedule, no withdrawals shall be made in respect ofexpenditures to be financed out of the proceeds of the Creditafter the aggregate of the proceeds of the Credit withdrawn fromthe Credit Account and the total amount of such commitments shallhave reached the equivalent of SDR 50,400,000 unless (a) theAssociation shall be satisfied, after an exchange of views whichshall take place pursuant to Section 3.08 of this Agreement, ofthe progress achieved by the Borrower in the carrying out ofthe Policy Improvements referred to in such section, and (b) the-Borrower shall have issued import licenses in respect of theremaining goods to be financed out of the proceeds of the Credit.

3. If the Association shall have reasonably determined that theprocurement of any item is inconsistent with the procedures setforth or referred to in this Agreement, no expenditures for suchitem shall be financed out of the proceeds of the Credit.

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SCHEDULE 2

Procurement

1. Except as provided in paragraph 3 of this Schedule, con-tracts for goods shall be let through international competitivebidding under procedures consistent with those set forth in PartA of the current edition of the "Guidelines for Procurement underWorld Bank Loans and IDA Credits" dated March 1977 (hereinaftercalled the Guidelines), subject to the modifications set forth inparagraph 2 below.

2. The Guidelines are hereby modified as follows:

(a) By the deletion of paragraph 1.2 of the Guidelines andthe substitution therefor of the following:

"1.2 Notification and Advertising

The international community should be notified in atimely manner (see also para. 3.1) of the opportunity tobid. This will be done by advertising invitations to applyfor inclusion in a bidder's invitation list, prequalify, orbid, in at least one newspaper of general circulation in theBorrower's country and by at least one of the followingmethods:

(i) a notice in the United Nations publication, Devel-opment Forum, Business Edition; or

(ii) an advertisement in a newspaper, periodical ortechnical journal of wide international -circula-tion; or

(iii) notice to local representatives of countries andterritories referred to in these Guidelines, thatare potential suppliers of the goods required."

(b) By the addition at the end of paragraph 2.9 of theGuidelines of the following:

"As an alternative, bidding documents may require thebidder to state the bid price in a single currency widelyused in international trade and specified in the biddingdocuments."

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(c) By the deletion of sub-paragraphs (a) and ('1 of para-graph 2.10 of the Guidelines and the substitution f subpara-graph (a) of the following:

"(a) Payments under the contract will be made in thecurrency in which the price has been stated in the success-ful bid."

(d) By the deletion of the third sub-paragraph of paragraph3.8 of the Guidelines and the substitution therefor of the fol-lowing:

"Customs duties and import taxes should be excluded forthe purpose of comparison among bids for the supply ofgoods."

(e) By the deletion of paragraph 3.9 of the Guidelines.

3. Whenever the Borrower and the Association shall be satisfiedthat goods of a specific type, design or manufacture shall berequired in the interest of equipment standardization or of othervalid considerations relating to the efficient utilization ofexisting productive capacity, such goods may be procured on anegotiated basis on terms and conditions satisfactory to theAssociation. In addition, contracts or purchase orders for goods(other than proprietary items) estimated to cost the equivalentof less than $500,000 each may be awarded on the basis of thenormal procurement procedures of the purchaser of such goods, upto an aggregate amount of $15,000,000.

4. With respect to each contract referred to in paragraph 1 ofthis Schedule, the Borrower shall furnish to the Association,prior to the submission to the Association of the first applica-tion for withdrawal of funds from the Credit Account in respectof such contract, two conformed copies of such contract, togetherwith the analysis of the respective bids and recommendations foraward, a description of the advertising and tendering proceduresfollowed and such other information as the Association shall rea-sonably request.

5. With respect to each contract referred to in paragraph 3 ofthis Schedule, the Borrower shall furnish to the Association,prior to the submission to the Association of the first applica-tion for withdrawal of funds from the Credit Account in respect

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thereof, any relevant documentation and information the Associa-tion may reasonably request to support withdrawal applicationsthereunder.

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SCHEDULE 3

Policy Improvements

A. General

1. Policy Improvements under the Credit concern the allo-cation and utilization of resources to industrial and agricul-tural development.

2. Dates by which actions are required to be taken pur-suant to this Schedule may be extended by notice from the Asso-ciation to the Borrower.

B. Actions to be taken

1. The Borrower shall, or shall cause BADC, BKB and BWDBto:

(a) not later than July 15 of each fiscal year, assess thefull current replacement cost on July 1 of such fiscal year perunit of unused shallow tubewells and unused 1-cusec low-liftpumps to be marketed by BADC and BKB and of unused 1-cusec lowlift pumps to be marketed by BWDB each fiscal year in a mannersatisfactory to the Association which shall include, inter alia,duties, taxes and incidental costs and shall reflect the takaexchange rate applicable on such date;

(b) commencing August 1 of each fiscal year, charge buyersunit sales prices for such items sufficient to cover such costs;and

(c) adjust rental rates for 1-cusec and 2-cusec LLPs in thesame proportion and as of the same date as unit sales prices areadjusted pursuant to the provisions of paragraphs (a) and (b) ofthis Section.

2. The Borrower shall ensure that: (a) the import dutiesimposed and duty drawbacks granted by the Borrower in order toprotect domestic manufacturers and/or assemblers of irrigationequipment and components thereof shall be equally extended toprivate and public sector manufacturers and/or assemblers of suchequipment and components; and (b) irrigation equipment andcomponents thereof locally manufactured or assembled by publicsector enterprises shall be sold at the same price to public orprivate sector purchasers of such equipment and components.

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3. The Borrower shall ensure that the issuance of licensesfor the importation of shallow tubewell and low-lift pump enginesshall not require from importers or distributors, directly or

indirectly, the purchase of locally manufactured or assembledengines.

4. The Borrower shall increase, or shall cause MOF toincrease, the ration issue price of foodgrains as of the samedate as any increase in the procurement price for foodgrainsbecomes effective and in an amount, in taka per unit of weight,of not less than the amount of such increase. For the purpose ofthis section the ration issue price shall be the price charged bythe Borrower for foodgrains sold from stocks held by MOF and theprocurement price shall be the price paid by MOF for locally pro-duced foodgrains.

5. The Borrower shall enable public sector industrial cor-porations to adjust, in consultation with the concerned Ministry,the sale price of the products of their enterprises to the extentrequired to cover any change in the foreign exchange cost ofimported inputs and in the fuel and energy costs for the produc-tion of such products, and the Borrower shall not require anyprior governmental approval if such adjustment does not exceed10% of the original price of such products in effect prior tosuch adjustment.

6. The Borrower shall, not later than March 15, 1983,raise the Sanction Limit to the extent required to raise thevalue in real terms of such limit to the avr -e level prevailingin the Borrower's fiscal year commenc- a July 1, 1977 andending on June 30, 1978.

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SCHEDULE 4

The TIP Reform Program is designed to review the Borrower'strade and industrial policies and consists of the followingparts:

(a) establishing sector planning and project identificationprocedures;

(b) implementation of an Effective Protection Study andstrengthening of the Tariff Commission operations;

(c) implementation of a study of the Net Value Added ofIndustrial Products as a basis for the allocation of Import En-titlement Certificates;

(d) implementation of a study on investment incentives;

(e) improvements in the promotion of private industrialinvestment;

(f) identification and development of new export productlines; and

(g) improvement of industrial statistics.

INTERNATIONAL DEVELOPMENT ASSOCIATION

CERTIFICATE

I hereby certify that the foregoing is a true

copy of the original in the archives of the Interna-

tional Development Association.

In witness whereof I have signed this Certifi-

cate and aMxed the Seal of the Association

thereunto the LQ day of

198 .

FORSECRETARY