World Bank Document · crop development (including related machinery, vehicles, and PNP/PTP...

CONFORMED COPY

LOAN NUMBER 1499 IND

Loan Agreement(Nucleus Estates and Smallholders I Project)

between

REPUBLIC OF INDONESIA

and

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

Dated November 18, 1977

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LOAN NUMBER 1499 IND

LOAN AGREEMENT

AGREEMENT, dated November 18, 1977, between REPUBLIC OFINDONESIA (hereinafter called the Borrower) and INTERNATIONALBANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called theBank).

ARTICLE 1

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept allthe provisions of the General Conditions Applicable to Loanand Guarantee Agreements of the Bank, dated March 15, 1974,with the same force and effect as if they were fully set forthherein (said General Conditions Applicable to Loan and GuaranteeAgreements of the Bank 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) "MOA" means the Borrower's Ministry of Agriculture;

(b) "DGE" means the Directorate General of Estates of the

MOA;

(c) "Bina Marga" means the Directorate General of Highwaysof the Borrower's Ministry of Public Works and Electric Power;

(d) "BRI" means the Bank Rakyat Indonesia, established byand operating under Law No. 21/1968 of the Borrower;

(e) "BI" means Bank Indonesia, established by and operatingunder Law No. 13 of 1968 of the Borrower;

(f) "Agraria" means the Directorate General of AgrarianAffairs of the Borrower's Ministry of Home Affairs;

(g) "PNP" means a Perusahaan Negara Perkebunan, a state-owned enterprise of the Borrower established and so designatedunder Government Regulation No. 14 of 1968;

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(h) "PTP" means a Perseroan Terbatas Perkebunan which isa public sector agricultural estate of the Borrower establishedpursuant to Law No. 9 of 1969 of the Borrower;

(i) "PNP X" means Perusahaan Negara Perkebunan X, and anysuccessor thereto;

(j) "PTP V" and "PTP XI" mean respectively PerseroanTerbatas Perkebunanan V and Perseroan Terbatas Perkebunan XI,established and so designated under Government Regulations No. 27of 1971 and No. 34 of 1971, respectively, pursuant to Law No. 9of 1969 of the Borrower, and any successor or successors thereto;

(k) "MOA Support Staff" means the Staff established underthe Decree of the Borrower's Minister of Agriculture No. 129/Kpts/Op3/19 76, dated March 8, 1976, to assist the Minister of Agricul-ture in the supervi ion of the activities of the PNPs and PTPs, asmore fully stipulat 1 in the Minister of Agriculture's InstructionNo. 04/Ins/Op/3/1976, dated March 8, 1976, and any successorthereto;

(1) "LPTI" means Lembaga Penelitian Tanaman Industri, theBorrower's Industrial Crops Research Institute at Bogor;

(m) "LPP" means the Lembaga Pendidikan Perkebunan, theBorrower's Estates Training Institute at Yogyakarta, establishedand existing in accordance with Decree No. 28/Kpts/Org/2/1970,dated February 3, 1970, of the Borrower's Minister of Agriculture;

(n) "BIMAS Program" means the Borrow.er's program (BimbinganMasal), administered through the BIMAS Secretariat, for raisingfood crop production and farm income by supplying credit and agri-cultural inputs to farmers, established pIrsuant to PresidentialDecree No. 95/1969 of the Borrower;

(o) "BRI Village Unit" means an extension of BRI at thevillage unit level, provided for in the Presidential Decree

No. 4 of 1973 of the Borrower, established to provide bankingservices for agricultural and rural development;

(p) "DPD" means Dinas Perkebunan Daerah, the ProvincialAgricultural Estates Crop Service;

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(q) "KUD" means Koperasi Unit Desa, a village-level cooper-ative organized in accordance with Presidential Decree No. 4 of1973;

(r) "BUUD" means Badan Usaha Unit Desa, a village-levelbusiness enterprise, organized in accordance with PresidentialDecree No. 4 of 1973 for eventual conversion into a KUD;

(s) "Basic Agrarian Law" means Law No. 5 of 1960 of the

Borrower (Undang-Undang Pokok Aeraria), as the same may be amendedfrom time to time;

(t) "HAk Milik" means the right of ownership in respect ofland, as provided under the Basic Agrarian Law;

(u) "Rubber Development Agreements" mean the respectiveagreements entered into between DGE and PTP V and between DGE andPNP X, for purposes of Part A of the Project, pursuant to Section3.03 (a) of this Agreement;

(v) "Smallholder Financing Arrangements" mean the respectiveagreements entered into between BI on behalf of the Borrower andBRI, BRI and PTP V, and BRI and PNP X, for the purposes of Part Aof the Project, pursuant to Section 3.03 (b) of this Agreement;

(w) "Subsidiary Loan Agreements" mean the respectivesubsidiary loan agreements entered into between BI on behalf ofthe Borrower and PNP X and PTP XI respectively, for the purposesof Part B of the Project, pursuant to Section 3.05 of thisAgreement;

(x) "Provincial Coordinating Committees" mean the Committeesestablished at the Provincial level respectively in Aceh and inSouth Sumatera to coordinate the planning and the implementationof Part A of the Project, as more fully set out in paragraph 1 (b)of Schedule 5 to this Agreement;

(y) "Alue Iemerah Settlement Area" means an area about 89 km

from the town of Langsa, in the Borrower's Province of Aceh,adjacent to PNP I's Julo Rayeu Estate, having a net plantable area

of about 17,500 ha of land suitable for rubber development;

(L) "Tebenan Settlement Area" means an area about 75 km

from the town of Palembang, in the Borrower's Province of South

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Sumatera, adjacent to PNP X's Tebenan Estate, having a netplantable area of about 11,250 ha of land suitable for rubberdevelopment;

(aa) "Settlement Areas" means the Alue Iemerah SettlementArea and the Tebenan Se tlement Area;

(bb) "Estate Areas" mean the areas to be developed respec-tively by PNP X and PTP XI under Part B of the Project;

(cc) "Participating Settler" means a settler and his family(if any) settled either in the Alue Iemerah Settlement Area or inthe Tebenan Settlement Area under Part A of the Project, as thecontext may require;

(dd) "Credit Expenditures" mean expenditures for Part A ofthe Project which are intended to be recovered from ParticipatingSettlers as provided in the Smallholder Financing Arrangements,including, inter alia, expenditures for rubber and subsistencecrop development (including related machinery, vehicles, andPNP/PTP overhead costs of about 15% of direct costs of rubberestablishment), settler housing, and minor roads;

(ee) "Non-Credit Expenditures" mean expenditures for Part Aof the Project which are to be financed from the annual budgetsources of the Borrower and the Provincial Governments of Acehand South Sumatera (INPRES and APBD, as supplemented from APBN)and which are not intended to be recovered from ParticipatingSettlers, including, inter alia, expenditures for village infra-structure, main access and village roads and health services;

(ff) "INPRES" means Instruksi Presiden, the Borrower'sprogram for funding Provincial and Kabupaten high prioritycommunity projects;

(gg) "APBN" means Anggaran Pendapatan dan Belanja Negara,the State Revenues and Expenditures budget;

(hh) "APBD" means Anggaran Pendapatan dan Belanja Daerah,the Provincial/Y bupaten Revenues and Expenditures budget;

(ii) "Fourth Agricultural Estates Project" means the Projectdescribed in Schedule 2 to the Development Credit Agreementdated June 28, 1972 between the Borrower and the InternationalDevelopment Association (Credit No. 319 IND);

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(jj) "DIP" means Daftar Isian Proyek, a project budgetdocument of the Borrower;

(kk) "Governing Regulation" means any of (i) PresidentialDecrees No. 44 and 45 of 1974; or (ii) the Decrees/Regulations/Instructions referred to in Sub-sections (g), (h), (j), (k), (m),(n), (o) and (q)/(r) of this Section 1.02; and

(11) "Rp" and "Rupiah" mean the currency of the Borrower.

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrower, on theterms and conditions in the Loan Agreement set forth or referredto, an amount in various currencies equivalent to sixty-fivemillion dollars ($65,000,000).

Section 2.02. The amount of the Loan may be withdrawn fromthe Loan Account in accordance with the provisions of Schedule 1to this Agreement, as such Schedule may be amended from time totime by agreement between the Borrower and the Bank, for expendi-tures made (or, if the Bank shall so agree, to be made) in respectof the reasonable cost of goods and services required for theProject described in Schedule 2 to this Agreement and to befinanced out of the proceeds of the Loan.

Section 2.03. Except as the Bank shall otherwise agree, con-tracts for the purchase of goods or for civil works to be financedout of t.e proceeds of the Loan, shall be procured in accordancewith the provis'Lons of Schedule 4 to this Agreement.

Section 2.04. The Closing Date shall be June 30, 1982 or suchlater date as the Bank shall otherwise establish. The Bank shallpromptly notify the Borrower of such later date.

Section 2.05. The Borrower shall pay to the Bank a commitmentcharge at the rate of three-fourths of one per cent (3/4 of 1%)per annum on the principal amount of the Loan not withdrawn fromtime to time.

Section 2.06. The Borrower shall pay interest at the rate ofseven and nine-tenths per cent (7.9%) per annum on the principalamount of the Loan withdrawn and outstanding from time to time.

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Section 2.07. Interest and other charges shall be payablesemi-annually on March 1 and September 1 in each year.

Section 2.08. The Borrower shall repay the principal amountof the Loan in accordance with the amortization schedule set forth

in Schedule 3 to this Agreement.

ARTICLE III

Execution of the Project

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

efficiency and in conformity with appropriate agricultural,

administrative, economic, engineering and financial practices,

and shall provide, promptly as needed, the funds, facilities,services and other resources required for the purpose.

(b) Except as the Borrower and the Bank shall otherwise

mutually agree, the Project shall be carried out in accordancewith the organization and management arrangements set forth in

Schedule 5 to this Agreement.

Section 3.02. Except as the Borrower and the Bank shall

otherwise mutually agree, the Borrower shall employ or cause to be

employed consultants and specialists whose qualifications and

experience and terms and conditions of employment shall besatisfactory to the Bank, as follows:

(i) within DGE, to assist DGE in planning, implementa-tion, monitoring and evaluation of its estate crops

and smallholder development programs: (A) by Febru-

ary 28, 1978, one specialist in each of (1) projectand program preparation, implementation and evalua-

tion, and (2) project finance, procurement and

administration, each for about three years; and

(B) about 200 man-months of short-term consultancy'ervices;

(ii) within MOA, to assist the MOA Support Staff: (A) by

February 28, 1978, one specialist in each of (1)investment appraisal and investment planning/programing/budgeting, (2) financial management and

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control, (3) production management, (4) processing/estate ngineering, (5) marketing, and (6) organi-zation ot inspection services, each for about threeyears; (B) a firm of consultants having relevantexperience in public sector estates for about 220man-months of consultancy services to assist in thefurther development of the information, accountingand budgeting systems of the public sector estates;and (C) about 200 man-months of short-term consul-tancy services to assist in project preparation,feasibility studies, and to provide other relatedservices;

(iii) within LPP, to assist in the preparation and imple-mentation of new training programs, particularly inbusiness management and technical training in cropproduction, processing and marketing, four special-ists, each for about 3 years;

(iv) within PNP X, to assist in the implementation ofPart B.1 of the Project, one specialist in each of(1) administration and finance, (2) palm oilprocessing, and (3) field management, each forabout three years; and about 24 man-months ofshort-term consultancy services;

(v) within PTP XT. to assist in the implementation ofPart B.2 of iLe -oject, one specialist in each of(1) production (for about 4 years), (2) finance forabout 4 years) . & ) -state engineering andprocessing (for &sout 2 years), and about 40man-months of short-term consultancy services(including inter alia, a specialist in coconutagronomy), the specialists under (1) and (2) toserve each for two years as Operational Assistantsto the respective directors of PTP XI for produc-tion and finance and as advisors thereafter; and

(vi) about 80 man-months of specialists' servicesto provide independent inspection services to PNP Xand PTP XI for about 5 years.

Section 3.03. Except as the Borrower and the Bank shallotherwise mutually agree, the Borrower shall, for purposes ofPart A of the Project, cause agreements to be entered into, inform and substance satisfactory to the Bank, as follows:

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(a) For rubber development: (i) between DGE and PTP V (forthe purposes of Part A.1 of the Project); and (ii) between DGEand PNP X (for the purposes of Part A.2 of the Project); saidagreements referred to under this paragraph (a) to include, interalia, the provisions set forth in Schedule 6 to this Agreement;

(b) For the financing of Credit Expenditures for Part A ofthe Project and the recovery of such expenditures from Partici-pating Settlers:

(i) a Financing Agreement between BI, acting on behalfof the Borrower, and BRI; and

(ii) Sub-Financing Agreements respectively between BRIand PTP V (for the purposes of Part A.1 of theProject) and BRI and PNP X (for the purposes ofPart A.2 of the Project);

said agreements referred to under this paragraph (b) to include,inter alia, the provisions set forth in Schedule 7 to thisAgreement.

Section 3.04. Without limitation or restriction upon theprovisions of Section 3.01 (a) hereof, the Borrower shall causethe parties to the agreements refeired to in Section 3.03 above topunctually perform their respective obligations thereunder.

Section 3.05. (a) The Borrower shall relend the proceeds ofthe Loan allocated for Part B of the Project respectively to PNP X(for Part B.1) and PTP XI (for Part B.2) under subsidiary loanagreements (respectively herein called the PNP X Subsidiary LoanAgreement and the PTP XI Subsidiary Loan Agreement) in form andsubstance satisfactory to the Bank, which agreements shallinclude, inter alia, the terms and conditions set forth in Sched-ule 8 to this Agreement.

(b) The Borrower shall exercise its rights under the Sub-sidiary Loan Agreements in such manner as to protect the interestsof the Borrower and the Bank and to accomplish the purposes ofthe Loan, and except as the Bank shall otherwise agree, theBorrower shall not assign, amend, abrogate or waive the SubsidiaryLoan Agreements or any provision thereof.

Section 3.06. (a) The Borrower undertakes to insure, or causeto be insured, or make, or cause to be made, adequate provision

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for the insurance of, the imported goods to be financed out of the

proceeds of the Loan against hazards incident to the acquisition,transportation and delivery thereof to the place of use orinstallation, and for such insurance any indemnity shall be

payable in a currency freely usable to replace or repair such

goods.

(b) Except as the Bank shall otherwise agree, all goodsand services financed out of the proceeds of the Loan shallbe used exclusively for the Project until its completion.

Section 3.07. (a) The Borrower shall furnish or cause to befurnished to the Bank, promptly upon their preparation, the plans,specifications, reports, contract documents and work and procure-ment schedules for the Project, and any material modificationsthereof or additions thereto, in such detail as the Bank shallreasonably request.

(b) The Borrower: (i) shall maintain or cause to be main-tained records adequate to record the progress of the Project(including the cost thereof) and to identify the goods andservices financed out of the proceeds of the Loan, and to disclosethe use thereof in the Project; (ii) shall enable the Bank'saccredited representatives to visit the facilities and construc-tion sites included in the Project and to examine the goodsfinanced out of the proceeds of the Loan and any relevant recordsand documents; and (iii) shall furnish or cause to be furnished tothe Bank all such information as the Bank shall reasonably requestconcerning the Project, the expenditure of the proceeds of theLoan and the goods and services financed out of such proceeds.

Section 3.08. The Borrower shall take or cause to be takenall such action as shall be necessary to acquire as and whenneeded all such land and rights in respect of land as shall berequired for carrying out the Project and shall furnish to theBank, promptly after such acquisition, upon request, evidencesatisfactory to the Bank that such land and rights in respect ofland are available for purposes related to the Project.

Section 3.09. (a) Except as the Bank and the Borrower shallotherwise mutually agree, the Borrower shall:

(i) not later than June 30, 1978, extend the coverageof the BIMAS Program to serve the settlers in the

Alue Iemerah and Tebenan Settlement Areas;

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(ii) ensure that an adequate number of BRI MobileUnits are established in the Alue Iemerah andTebenan Settlement Areas at the commencement ofthe BIMAS Program in said areas; and

(iii) until such time as the BIMAS Program is extendedto adequately serve settlers as envisaged undersubparagraph (i), cause PTP V and PNP X respec-tively to continue to procure and supply food cropinputs for Participating Settlers.

Section 3.10. Except as the Borrower and the Bank shallotherwise mutually agree, the Borrower shall cause PNP I andPNP X to purchase from Participating Settlers all rubber offeredfor sale (including quantities required to be delivered toamortize Participating Settler debt obligations) at a priceequivalent to about 70% of the prevailing f.o.b. price, subject,however to adjustment from time to time, by decision of therespective Provincial Coordinating Committees, for: (i) signif-icant reduction in the quality of rubber offered, or in the f.o.b.price, from those prevailing at the date of this Agreement; and/or(ii) significant increase in the rubber collection, processing ormarketing costs of PNP I or PNP X, from those prevailing at thedate of this Agreement.

Section 3.11. (a) Except as the Borrower and the Bank shallotherwise mutually agree, the Borrower and the Bank shall ensure,subject to the provision of paragraph (b) of this Section 3.11,that each Participating Settler receives:

(i) within 6 months after settlement, a certificateevidencing conditional Hak Milik to 5 ha of land(comprising 2 ha of block planted rubber land,a 1/5 ha house lot, and 2.8 ha of additionalland); and

(ii) within 3 years after settlement, full Hak Milikto such land, subject, however, to retentionby BRI of the Hak Milik certificate as security forParticipating Settler debt.

(b) The Borrower shall periodically review the performanceof Participating Settlers, and shall take appropriate action inthe case of any settler found to have been deficient in his workin the rubber area being developed by the PNP/PTP or in the

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husbandry of his land. Without limiting the generality of theforegoing, the Borrower shall not, except as otherwise mutuallyagreed between the Borrower and the Bank, issue any certificateevidencing full Hak Milik in respect of land to any settlerwho has so been found deficient.

Section 3.12. Except as the Borrower and the Bank shallotherwise mutually agree, the Borrower shall cause (i) DGE (inrespect of Part A of the Project), and (ii) through the MOASupport Staff (in respect of Part B of the Project), each of PNPX, PTP XI and LPP, to prepare and furnish to the Bank for reviewand comment, by December 31, 1977 and thereafter by September 30of each year, an annual work program showing in detail the programof work for the Project to be undertaken by each such agencyduring the following year, including without limitation therecruitment and training of required personnel.

Section 3.13. The Borrower shall take all necessary measuresto establish the MOA Support Staff on a permanent basis, or makealternative -arrangements in consultation with the Bank to ensurethat its intended functions will continue to be adequately carriedout.

Section 3.14. The Borrower shall cause PTP XI to afford theBank a reasonable opportunity to comment on the qualifications andexperience and terms and conditions of employment of the con-sultants/architects proposed to be appointed for the design andsupervision of construction of PTP XI's new head office at Bogor,prior to the time such appointment is made.

Section 3.15. Except as the Borrower and the Bank shallotherwise mi-tually agree, the Borrower shall:

(i) by March 31, 1979, improve the existing road fromPalembang to the Tebenan Settlement Area and thenew Betung Oil Palm Estate to be established underPart B.1 (b) of the Project, to asphalt standardadequate to support 6-ton trucks at 40 km per hour;

(ii) without limitation or restriction upon the provi-sions of Section 3.08 of this Agreement, grant toPNP X, by December 31, 1977, a long-term lease (HakGuna Bangunan) to the land required for the con-struction and operation of the bulking installationincluded under Part B.1 (c) of the Project.

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Section 3.16. Except as the Borrower and the Bank shallotherwise mutually agree, the Borrower shall cause:

(i) PTP XI to submit to the Bank for its review andcomments by June 1, 1978, for the purposes of PartB.2 (h) of the Project, a detailed program for itsreorganization and the rationalization of itsoperations (including, without limitation, pro-posals for the reduction of the number of itsestates, their. consolidation into larger managementunits, the transfer of uneconomic assets, thecessation of uneconomic activities, and thetransfer of its head office to Bogor);

(ii) PTP XI to implement, by December 31, 1979, suchparts of the aforesaid program as shall have beenmutually agreed to between the Borrower and theBank; and

(iii) PNP X to divest itself, by December 31, 1979, ofits entire interest in the Pagar Alam Estate.

Section 3.17. Except as the Borrower and the Bank shallotherwise mutually ag,:ee, without limitation or restrictionupon the provisions of Section 3.01 (a) of this Agreement, theBorrower shall provide sufficient funds to PNP X in the form ofequity and to PTP XI in the form of loans, so as to enable PNP Xand PTP XI respectively to carry out Parts B.1 and B.2 of theProject, and to carry out their respective operations withadequate working capital and cash balances.

Section 3.18. (a) Except as the Borrower and the Bank shallotherwise mutually agree, the Borrower shall require the Pro-vincial Coordinating Committees: (i) to prepare and submit to DGEfor approval at least 6 months prior to the start of each fiscalyear, annual budgets for Non-Credit Expenditures under Part A ofthe Project; and (ii) to maintain appropriate cost accountsacceptable to DGE and the Bank in respect of such Expenditures.

(b) Without limitation or restriction upon the provisionsof Section 3.01 (a) of this Agreement, the Borrower shall, when-ever it shall appear that the funds available from APBN, INPRESand/or APBD are insufficient to meet the budgeted requirementsfor Non-Credit Expenditures, make arrangements satisfactory to theBank to provide the necessary additional funds to meet suchrequirements.

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ARTICLE IV

Other Covenants

Section 4.01. (a) It is the policy of the Bank, in makingloans to, or with the guarantee of, its members not to seek, innormal circumstances, special security from the member concernedbut to ensure that no other external debt shall have priorityover its loans in the allocation, realization or distributionof foreign exchange held under the control or for the benefit ofsuch member. To that end, if any lien shall be created on anypublic assets (as hereinafter defined), as security for any

external debt, which will or might result in a priority for the

benefit of the creditor of such external debt in the allocation,realization or distribution of foreign exchange, such lien shall,

unless the Bank shall otherwise agree, ipso facto and at no

cost to the Bank, equally and ratably secure the principal of,and interest and other charges on, the Loan, and the Borrower,

in creating or permitting the creation of such lien, shall makeexpress provision to that effect; however, that, if for anyconstitutional or other legal reason such provision cannot be

made with respect to any lien created on assets of any of its

political or administrative subdivisions, the Borrower shall

promptly and at no cost to the Bank secure the principal of,

and interest and other charges on, the Loan by an equivalent

lien on other public assets satisfactory to the Bank.

(b) The foregoing undertaking shall not apply to: (i)any lien created on property, at the time of purchase thereof,solely as security for payment of the purchase price of such

property; and (ii) any lien arising in the ordinary course ofbanking transactions and securing a debt maturing not more than

one year after its date.

(c) As used in this Section, the term "public assets"means assets of the Borrower, of any political or administrativesubdivision thereof and of any entity owned or controlled by,or operating for the account or benefit of, the Borrower or anysuch subdivision, including gold and other foreign exchange

assets held by any institution performing the functions of a

central bank or exchange stabilization fund, or similar functions,

for the Borrower.

Section 4.02. (a) The Borrower shall maintain or cause tobe maintained records adequate to reflect in accordance with

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consistently maintained sound accounting practices the operations,resources and expenditures, in respect of the Project, of thedepartments or agencies of the Borrower responsible for carryingout the Project or any part thereof.

(b) Without limitation or restriction upon the provisions of

Section 4.02 (a), the Borrower shall cause PTP V and PNP X each tomaintain separate accounts in respect of expenditures respectivelyfor Parts A.1 and A.2 of the Project.

(c) The accounts of all agencies of the Borrower partici-pating in the implementation of the Project or any part thereof,relating to the Project, which are to be kept pursuant to the

provisions of Subsections (a) and (b) of this Section 4.02,shall be audited each fiscal year in accordance with appropriateauditing principles consistently applied by independent auditorsacceptable to the Bank, and as soon as available, but in anycase not later than six months after the end of each such year,the Bank shall be furnished with certified copies of such accountsfor such year as so audited and the report of such audit bysuch auditors of such scope and in such detail as the Bank shallhave reasonably requested.

Section 4.03. (a) The Borrower shall cause PNP X and PTP XIto maintain records adequate to reflect in accordance with consis-tently maintained appropriate accounting practices their respec-tive operations and financial conditions.

(b) In addition to the audits envisaged under Section4.02 (c) of this Agreement the Borrower shall cause PNP X and PTPXI each to: (i) have their respective accounts and financialstatements (balance sheets, statements of income and expenses andrelated statements) for each fiscal year audited, in accordancewith appropriate auditing principles consistently applied, byindependent auditors acceptable to the Bank; (ii) furnish to theBank as soon as available, but in any case not later than fourmonths after the end of each such year, (A) certified copies oftheir respective financial statements for such year as so auditedand (B) the reports of such audit by said auditors, of such scopeand in such detail as the Bank shall have reasonably requested;and (iii) furnish to the Bank such other information concerningthe respective accounts and financial statements and the auditthereof as the Bank shall from to time reasonably request.

Section 4.04. The Borrower shall cause PNP X and PTP XI totake out and maintain with responsible insurers, or to make

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other provision satisfactory to the Bank for, insurance againstsuch risks and in such amounts as shall be consistent withappropriate practice.

Section 4.05. (a) The Borrower shall cause PNP X and PTP XIeach at all times to manage their affairs, maintain their finan-cial position, plan their future expansion and carry on theiroperations, all in accordance with sound business, financial,agricultural and engineering practices and under the supervisionof experienced and competent management and supervisors, if any,assisted by qualified staff in adequate numbers.

(b) The Borrower shall ensure that before an appointment ismade to the position of member of the Direksi (executive manage-ment) of PNP X or PTP XI or to any similar position, the Bankshall be informed of the names, qualifications and experienceof the persons considered for appointment to such position andshall be afforded a reasonable opportunity to exchange views withthe Borrower on the qualifications and experience of such persons.If any supervisory board is established for PNP X in the future,or if there is any change proposed in the supervisory board of PTPXI, the same procedure shall be followed prior to the appointmentof its members.

Section 4.06. Except as the Borrower and the Bank shallotherwise mutually agree, the Borrower shall cause PTP XI, untilthe Closing Date, to submit to the Bank for its review and com-ments, by September 30 of each year, and prior to final approvalby PTP XI's Direksi, its proposed budget for the following yearand financial forecasts for the budget year and the four followingyears all of such scope and in such detail as the Bank shallreasonably request.

Section 4.07. Except as the Borrower and the Bank shallotherwise mutually agree, the Borrower shall take all necessarymeasures to convert PNP X into a PTP (Perseroan TerbatasPerkebunan) by June 1, 1978.

Section 4.08. Except as the Borrower and the Bank shallotherwise mutually agree, the Borrower shall make arrangementssatisfactory to the Bank to relieve PNP X and PTP XI from anyrequirement to pay dividends or make similar payments for a periodof not less than six years commencing December 31, 1977.

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otherwise mutually agree, the Borrower shall ensure that, until

the Closing Date:

(1) PNP X and PTP XI are not burdened with managementor financial obligations additional to those

arising from the implementation of the Project;

(ii) PNP X will not undertake any new investments

not included in the Project unless such investments

do not involve the expenditure in the aggrEgate inany one year of an amount exceeding Rupiahs

250,000,000.


otherwise mutually agree, the Borrower shall ensure that PNP Xshall, from its own resources or from funds made available to PNP

X on terms and conditions satisfactory to the Bank, complete the

second phase of the oil palm planting program referred to under

Part B.1 (b) of the Project, during the period 1982-1984.

Section 4.11. The Borrower shall cause PNP X and PTP XI

each:

(a) to take all steps necessary to acquire, maintain and

renew all such rights and interests in land and all such other

rights, powers, privileges and franchises as are necessary or

useful in the conduct of their business; and

(b) at all times to operate and maintain their installa-

tions, oil palm and rubber plantings, equipment and other

property, and promptly as required to make all necessary repairs

and renewals thereof, all in accordance with sound business,

agricultural and engineering practices.

ARTICLE V

Remedies of the Bank

Section 5.01. For the purposes of Section 6.02 of the General

Conditions, the following additional events are specified pursuant

to paragraph (k) thereof:

-17-

(a) The Borrower or any other authority having jurisdictionshall have taken any action for the dissolution or disestablish-ment of PTP V or PNP X or PTP XI or for the suspension of all or

part of their respective operations;

(b) PNP X or PTP XI shall have been unable to pay its debts

as they mature or any action or proceeding Ghall have been takenby PNP X or PTP XI or by others whereby any of the property ofPNP X or PTP XI shall or may be distributed among its creditors;

(c) The Governing Regulation or any provision thereof shallhave been repealed, amended, suspended, varied or waived, so as to

affect adversely: (i) the carrying out of the Project; (ii) theperformance by the Borrower of any other of its obligationsunder this Agreement; or (iii) the performance by any party to any

of the agreements referred to in Section 3.03 or in Section 3.05of this Agreement, of its respective obligations under suchagreement;

(d) Any of the agreements referred to in Section 3.03 orSection 3.05 of this Agreement shall have been terminated or

abrogated without the concurrence of the Bank, or any party toany such agreement shall have failed to perform any of its

obligations thereunder so as to affect adversely the objectives of

the Project or any part thereof; and

(e) The Borrower shall have failed to carry out any ofits obligations under the Development Credit Agreement for theFourth Agricultural Estates Project.

Section 5.02. For the purposes of Section 7.01 of the GeneralConditions, the following additional events are specified pursuantto paragraph (h) thereof:

(a) any of the events specified in paragraphs (c), (d) and(e) of Section 5.01 of this Agreement shall occur and shallcontinue for a period of 30 days after notice thereof shall havebeen given by the Bank to the Borrower; and

(b) any of the events specified in paragraphs (a) and (b)of Section 5.01 of this Agreement shall occur.

- 18 -

ARTICLE VI

Termination

Section 6.01. The date February 20, 1978 is hereby specifiedfor the purposes of Section 12.04 of the General Conditions.

ARTICLE VII

Representative of the Borrover; Addkesses

Section 7.01. The Minister of Finance of the Borrower isdesignated as representative of the Borrower for the purposesof Section 11.03 of the General Conditions.

Section 7.02. The following addresses are specified forthe purposes of Section 11.01 of the General Conditions:

For the Borrower:

Ministry of FinancePost Office Box 21Jakarta, Indonesia

Cable address: Telex:

MINISTRY FINANCE DITJMONJakarta 46415

For the Bank:

International Bank forReconstruction and Development

1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address: Telex:

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

64145 (WUI)

- 19 -

IN WITNESS WHEREOF, the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused this Agree-ment to be signed in their respective names in the District ofColumbia, United States of America, as of the day and year firstabove written.

REPUBLIC OF INDONESIA

By /s/ Roesmin NurjadinAuthorized Representative

INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

By /s/ S. S. HusainRegional Vice President

East Asia and Pacific

- 20 -

SCHEDULE 1

Withdrawal of the Proceeds of the Loan

1. The table below sets forth the Categories of items to befinanced out of the proceeds of the Loan, the allocation of theamounts of the Loan to each Category and the percentage ofexpenditures for items so to be financed in each Category:

Amount of theLoan Allocated % of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(1) Credit Expendituresfor Settlement atAlue Iemerah (PartA.1 of the Project)

(a) Civil Works 1,900,000 50%

(b) Vehicles and 1,900,000Equipment

(i) directlyimported 100% of foreign

expenditures

(ii) locally 95% of ex-manufactured factory cost(except vehi-cles includedunder sub-category (iv))

(iii) imported farm 65% of localequipment expendituresprocuredlocally

(iv) locally as- 40% of localsembled vehi- expenditurescles

(c) Agro-chemicals 4,000,000 100% of c.i.f.cost

- 21 -

Amount of theLoan Allocated % of

(Expressed in Expenditures


(d) Expenditures for 3,800,000 50%rubber development(other than equip-ment and agro-chemicals in-cluded undersub-categories(b) and (c)above)

(2) Credit Expenditures forSettlement at Tebenan(Part A.2 of theProject)

(a) Civil Works 1,200,000 50%

(b) Vehicles and 1,200,000equipment

(i) directly 100% of foreignimported expenditures

(ii) locally manu- 95% of ex-factured (ex- factory costcept vehiclesincluded undersub-category

(iv))

(iii) imported farm 65% of localequipment pro- expenditurescured locally

(iv) locally assem- 40% of localbled vehicles expenditures

(c) Agro-chemicals 2,600,000 100% of c.i.f.cost

- 22 -



(d) Expenditures for 2,400,000 50%rubber development(other than equip-ment and agro-chemicals includedunder sub-categories (b)and (c) above)

(3) Expansion of PNP X(Part B.1 of theProject)

(a) Housing construc- 2,200,000 40% of localtion expenditures

(b) Agricultural 1,400,000machinery,vehi-cles and farmequipment (otherthan equipmentincluded underCategory 3 (c)below), andoffice and tele-communicationsequipment


(ii) locally 95% of ex-manufactured factory cost(except vehi-cles includedunder sub-category (iv))


- 23 -



(iv) locally 40% of localassembled expendituresvehicles

(c) Processing plant 7,500,000equipment


(ii) procured 80% of locallocally expenditures

(d) Agro-chemicals 2,600,000 100% of c.i.f.(excluding urea costfertilizer)

(e) Consultants' ser- 640,000 100% of foreignvices (including expenditures

inspection services)

(4) Rehabilitation of

PTP XI (Part B.2of the Project)

(a) Civil Works for 3,800,000 70%processing plants;and housing con-struction carriedout prior toDecember 31, 1979

(b) Agricultural ma- 2,700,000chinery, vehiclesand farm equipment(other than equip-ment included underCategory 4 (c)below), and officeand telecommunica-tions equipment

- 24 -




(ii) locally manu- 95% of ex-factured factory cost(except vehi-cles includedunder sub-category (iv))


(iv) locally as- 40% of localsembled ve- expenditureshicles

(c) Processing Plant 1,700,000equipment


(ii) procured 80% of locallocally expenditures

(d) Agro-chemicals 3,200,000 100% of c.i.f.(excluding urea costfertilizer)

(e) Consultants' 1,600,000 100% of foreignservices (includ- expendituresing Inspectionservices)

(5) Consultants' andInspection servicesand Training forPart C of the Project

- 25 -



(a) Consultants' and 6,700,000 100% of foreign

Inspection expenditures

services and 100% oflocal Consul-tants' fees

(b) Overseas Training 300,000 100%

for LPP andPNP/PTP staffs

(6) Unallocated 11,660,000

TOTAL 65,000,000

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

compliance with the policy of the Bank that no proceeds of the

Loan 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 Loan

decreases or increases, the Bank 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 Bank.

4. Notwithstanding the provisions of paragraph 1 above, no

withdrawals shall be made:

- 26 -

(i) in respect of payments made for expenditures priorto the date of this Agreement, except that, subjectto the conditions specified below in sub-paragraphs(ii) to (v), withdrawals in an aggregate amount notexceeding the equivalent of $1,200,000 may be madeon account of expenditures for (A) establishment ofrubber nurseries for PTP V and PNP X (Categories 1(c), 1 (d), 2 (c) and 2 (d)), and (B) land clear-ing, rubber and coconut nurseries, rubber rehabili-tation works, processing equipment and vehiclesfor PTP XI (Category 4 (b), (c) and (d)), madebefore that date but after December 1, 1976.

(ii) in respect of payments made for expendituresunder Category (1) (Part A.1 of the Project),unless and until evidence satisfactory to the Bankshall have been furnished to the Bank:

(A) that DGE and PTP V have entered into theagreement referred to in Section 3.03 (a)(i) of the Loan Agreement in accordance withthe provisions thereof; and

(B) that BI, BRI and PTP V have entered into theagreements referred to in Section 3.03 (b)of the Loan Agreement in accordance with theprovisions thereof;

(iii) in respect of payments made for expenditures underCategory (2) (Part A.2 of the Project) unless anduntil evidence satisfactory to the Bank shall havebeen furnished to the Bank:

(A) that DGE and PNP X have entered into theagreement referred to in Section 3.03 (a) (ii)of the Loan Agreement in accordance with theprovisions thereof; and

(B) that BT, BRI and PNP X have entered into theagreements referred to in Section 3.03 (b) ofthe Loan Agreement in accordance with theprovisions thereof;

(iv) in respect of payments made for expenditures underCategory (3) (Part B.1 of the Project) unless and

- 27 -

until evidence satisfactory to the Bank shall havebeen furnished to the Bank:

(A) that PNP X has appointed the consultants/specialists referred to in Section 3.02 (iv)of the Loan Agreement in\ accordance withthe provisions thereof; and

(B) that BI and PNP X have entered into (1) thePNP X Subsidiary Loan Agreement referred to in

Section 3.05 (a) of the Loan Agreement in

accordance with the provisions thereof and (2)

an agreement in form and substance satisfac-tory to the Bank, amending the subsidiary loanagreement referred to in SectY.on 3.01 (b) ofDevelopment Credit Agreement for the FourthAgricultural Estates Project, so as to conformPNP X's repayment obligations uader such sub-

sidiary loan agreement to the aame amortiza-tion schedule as shall be provided under thePNP X Subsidiary Loan Agreement; and

(v) in respect of payments made for expendituresunder Category (4) (Part B.2 of the Project),unless and until evidence satisfactory to the Bankshall have been furnished to the Bank:

(A) that PTP XI has appointed (1) the cperationalassistants and consultants/ specialistsreferred to in Section 3.02 (v) of thisAgreement, in accordance with the provisionsthereof, and (2) independent auditors in

accordance with the provisions of Section 4.03

(b) of this Agreement; and

(B) that BI and PTP XI have entered into the PTP

XI Subsidiary Loan Agreement referred toin Section 3.05 (a) of this Agreepent inaccordance with the provisions thereof.

5. Notwithstanding the allocation of an amount of the Loan orthe disbursement percentages set forth in the table in paragraph

1 above, if the Bank has reasonably estimated that the amountof the Loan then allocated to any Category will be insufficient

to finance the agreed percentage of all expenditures in that

- 28 -

Category, the Bank may, by notice to the Borrower: (i) reallocateto such Category, to the extent required to meet the estimated

shortfall, proceeds of the Loan which are then allocated to

another Category and which in the opinion of the Bank are notneeded to meet other expenditures, and (ii) if such reallocationcannot fully meet the estimated shortfall, reduce the disbursement

percentage then applicable to such expenditures in order thatfurther withdrawals under such Category may continue until allexpenditures thereunder shall have been made.

6. If the Bank 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, noexpenditures for such item shall be financed out of the proceedsof the Loan and the Bank may, without in any way restrictingor limiting any other right, power or remedy of the Bank underthe Loan Agreement, by notice to the Borrower, cancel such amountof the Loan as, in the Bank's reasonable opinion, represents

the amount of such expenditures which would otherwise have beeneligible for financing out of the proceeds of the Loan.

- 29 -

SCHEDULE 2

Description of the Project

The Project is part of the Borrower's program to assistsmallholder tree crop development in its territories throughsmallholder settlement of new areas and support for previouslysettled smallholders, by means of (i) the development and alloca-tion of land and the delivery of a package of services and inputsto smallholders through the Borrower's public sector estates(herein sometimes referred to as "nucleus estates"), the BRI, theDPD, and other agencies and authorities of the Borrower at thenational and provincial levels, and (ii) the strengthening of theBorrower's public sector estates so as to enable them to partici-pate as nucleus estates for smallholder development in the future,and of other governmental agencies and authorities having respon-sibility in relation to the smallholder and public estate sectors.

The Project consists of the following Parts:

Part A: Smallholder Settlement with Development of New Landthrough Nucleus Estates

1. New settlement at Alue Iemerah, Aceh, with PTP V as thenucleus estate, including:

(a) Construction in about seven development schemes in theAlue Iemerah Settlement Area of about seven central villages andabout 14 satellite villages, with a total of about 3,500 settlerhouses, and the settlement of about 3,500 Participating Settlers,each central village to include, without limitation, a villagecenter, village office, primary school, village health post,mosque, community center and nursery house, and each satellitevillage to include a first aid post, community hall, mushalla,and nursery house;

(b) Equipping and staffing of school facilities in eachcentral village and health facilities in all villages;

(c) Construction of about 44 km of all-weather roads, about84 km of village roads, about 14 km of primary rubber area roads,about 164 km of secondary rubber area roads and about 105 km offarm roads and tracks;

- 30 -

(d) Block-planting of about 7,000 ha of rubber, and the

maintenance thereof by PTP V for at least the first three yearsand by Participating Settlers thereafter;

(e) Allocation of 2 ha of block-planted rubber, and 3 ha

of additional land to each Participating Settler;

(f) Distribution of seeds and fertilizer to ParticipatingSettlers commencing in the first year of settlement to supportfood crop production within an aggregate area at full developmentof about 10,500 ha (3 ha for each Participating Settler, including1/5 ha for each Participating Settler's house lot);

(g) Provision of adequate water supply and sanitationfacilities in each village; and

(h) Establishment of agricultural credit, extension and

cooperative services.

2. New settlement at Tebenan, South Sumatera, with PNP X asthe nucleus estate, including:

(a) Construction in about five development schemes inthe Tebenan Settlement Area of about four central villages andabout ten satellite villages, with a total of about 2,250 settlerhouses, and the settlement of about 2,250 Participating Settlers,each central village and satellite village to include, withoutlimitation, the facilities referred to under paragraph (a) ofPart A.1 of the Project;

(b) Equipping and staffing of school facilities in eachcentral village and health facilities in all villages;

(c) Construction of about 24 km of all-weather roads,about 46 km of village roads, about 9 km of primary rubberarea roads, about 100 km of secondary rubber area roads andabout 70 km of farm roads and tracks;

(d) Block-planting of about 4,500 ha of rubber, and the

maintenance thereof by PNP X for at least three years and byParticipating Settlers thereafter;

(e) Allocation of 2 ha of block-planted rubber, and 3 ha

of additional land to each Participating Settler;

- 31 -

(f) Distribution of seeds and fertilizer to ParticipatingSettlers commencing in the first year of settlement to supportfood crop production with an aggregate area at full development ofabout 6,750 ha (3 ha for each Participating Settler, including 1/5ha for each Participating Settler's house lot);

(g) Provision of adequate water supply and sanitationfacilities in each village; and

(h) Establishment of agricultural credit, extension andcooperative services.

Part B: Estate Development

1. Expansion of PNP X (Lampung and South Sumatera):

(a) Expansion of the PNP X planting program included underthe Fourth Agricultural Estates Project to include in additionto the said program about 3,300 ha of rubber development andabout 800 ha of oil palm development, both in the Province ofLampung;

(b) Acquisition by PNP X of about 7,300 ha of new landsuitable for oil palm development, adjacent to the Tebenan rubberestate, and of about 1,000 ha of the Oud Wassenar Estates, bothas a part of the new Betung Oil Palm Estate in the Province ofSouth Sumatera, to comprise at full development about 10,000 haof oil palm, and the planting of about 5,000 ha of oil palm, tobe followed by the planting of about 5,000 additional hectares ofoil palm;

(c) Construction of housing for about 1800 families inthe rubber and oil palm areas referred to under Part B.1 (a)above and for about 640 families at the Betung Oil Palm Estatereferred to under Part B.1 (b) above, to house incremental estatelaborers and their families associated with the planting programsreferred to under such Parts;

(d) Construction and placing into service of an oil palmmill at the Betung Oil Palm Estate with an initial capacity of30 tons fruit bunches per hour and designed for eventual expansionto a capacity of 60 tons fruit bunches per hour, and constructionof associated water supply facilities;

- 32 -

(e) Construction and placing into service of a bulking

installation on the Musi River about 7 km downstream from

Palembang, with an initial capacity of about 3,000 tons and

designed for eventual expansion to a capacity of about 10,800

tons, including without limitation a wharf, pumphouse and boiler

room, weighbridge, office and three 1,000 ton storage tanks; and

(f) Expansion of the Bekri oil palm mill in Lampung to

increase its capacity to 40 tons fruit bunches per hour; and

(g) Expansion of the Kedaton block rubber processing plant

in Lampung to increase its capacity to 40 tons per day.

2. Rehabilitation and Diversification of PTP XI (West Java):

(a) Replanting of about 3,700 ha of rubber, rehabilitation

of about 13,000 ha of rubber, and new planting of about 4,200 ha

of high-yielding coconuts;

(b) (i) Construction and placing into service at

Klapanunggal of a latex concentrate plant with an initial capacity

of about 16 tons per day, designed for expansion of capacity to

about 26 tons per day; and (ii) consolidation of existing con-

centrate facilities through closure of the Pasir Waringin Plant

and expansion of the Serpong Plant;

(c) Consolidation of PTP XI sheet rubber production in the

Banten area through expansion of the Bojong Datar sheet factory

to a capacity of 10 tons per day, rehabilitation of existing

facilities and closure of several small sheet factories;

(d) Consolidation of PTP XI block rubber production through

expansion of the existing factory to a capacity of about 18 tons

per day;

(e) Rehabilitation of about 100 km of access roads, 250 km

of primary and secondary estate roads and 33 bridges; a five-year

replacement program of run-down vehicles and equipment; and

construction of (A) staff housing for about 30 and labor housing

for about 860 families and (B) a new head office for PTP XI

at Bogor; and

(f) Rationalization of PTP XI estate operations through

cessation of uneconomic field, processing and manufacturing

activities, transfer of uneconomic land units and grouping

of estate areas into larger management units.

- 33 -

Part C: Program Support

1. Technical assistance to DGE.

A program of technical assistance to the DGE to assist inplanning, implementation, monitoring and evaluation of (a) Part Aof the Project, and (b) DGE's development program as a whole,including employment for about 3 years by DGE of the followingconsultants, or as may be otherwise mutually agreed between theBorrower and the Bank:

(i) a specialist in project and program preparation,implementation and evaluation;

(ii) a specialist in project finance, procurement andadministration; and

(iii) short-term consultancy services for projectpreparation, inspection services, monitoring, andvillage and settlement planning.

2. Technical Assistance to Public Sector Estates/MOA SupportStaff.

A program of technical assistance to the MOA Support Staffto strengthen its capability to provide guidance to the Borrower'spublic sector estates, including employment for about 3 yearswithin the MOA Support Staff of specialists and short-termconsultants as follows, or as may be otherwise mutually agreedbetween the Borrower and the Bank:

(i) a specialist in investment appraisal and investmentplanning/programming/budgeting;

(ii) a specialist in financial management and control;

(iii) a specialist in production management;

(iv) a specialist in processing/estate engineering;

(v) a specialist in marketing;

(vi) a specialist in the organization of inspectionservices;

- 34 -

(vii) consultancy services for the development of

information, accounting and budgeting systems;

and

(viii) short-term consultancy services for projectpreparation, feasibility studies and other related

services.

3. Strengthening of the Estates Training Institute (LPP).

A program to strengthen and expand the facilities of the LPP

designed to improve business management training and technical

training in crop production, processing and marketing, through:

(i) employment by LPP of 4 qualified and experienced

advisors, each for about 3 years;

(ii) provision of local and overseas training for LPP

lecturers and selected senior management staff of

the Borrower's PNPs and PTPs;

(iii) appointment of about 10 additional lecturers to the

staff of the LPP;

(iv) reorganization of the LPP along functional lines;

and

(v) establishment of a sub-center of the LPP at Medan

and appointment of about 5 lecturers to teach

rubber and oil palm agronomy and processing.

The Project is expected to be completed by December 31, 1981.

- 35 -

SCHEDULE 3

Amortization Schedule

Payment of PrincipalDate Payment Due (expressed in dollars)*

On each March I and September 1

beginning March 1, 1983through March 1, 1997 2,165,000

On September 1, 1997 2,215,000

* To the extent that any portion of the Loan is repayable ina currency other than dollars (see General Conditions,Section 4.02), the figures in this column represent dollarequivalents determined as for purposes of withdrawal.

- 36 -

Premiums on Prepayment

The following percentages are specified as the premiumspayablc 3L1 repayment in advance of maturity of any portion ofthe principal amount of the Loan pursuant to Section 3.05 (b)of the General Conditions:

Time of Prepayment Premium

Not more than three yearsbefore maturity 1.20%

More than three years butnot more than six yearsbefore maturity 2.35%

More than six years but notmore than eleven yearsbefore maturity 4.35%

More than eleven years butnot more than sixteenyears before maturity 6.30%

More than sixteen years butnot more than eighteenyears before maturity 7.10%

More than eighteen yearsbefore maturity 7.90%

- 37 -

SCHEDULE 4

Procurement

I. General Provisions

A. Smallholder Settlement Components(Part A of the Project)

Vehicles, Equipment and Agrochemicals

1. Except as provided in paragraphs 2, 3 and 4 below,contracts for the purchase of agricultural machinery forrubber development, vehicles and other road equipment, andfertilizer and chemicals required for Part A of the Projectshall be procured in accordance with procedures consistentwith those set forth in the "Guidelines for Procurement underWorld Bank Loans and IDA Credits", published by the Bank inMarch 1977 (hereinafter called the Guidelines) including thepertinent provisions of the General Introduction thereto, onthe basis of international competitive bidding as describedin Part A of the Guidelines.

2. Contracts for the purchase of agricultural machinery,vehicles and other road equipment estimated to cost less thanthe equivalent of $50,000 may be awarded on the basis ofcompetitive bidding following local advertising only, or onthe basis of prudent shopping after solicitation of at leastthree price quotations, subject, however, to an aggregatetotal amount not exceeding the equivalent of $250,000 eachfor PTP V (for Part A.1 of the Project) and PNP X (for PartA.2 of the Project).

3. Up to the equivalent of $100,000 in value of fertilizersand chemicals may be procured by each PTP V and PNP Xannually, respectively for purposes of Parts A.1 and A.2 ofthe Project, on the basis of competitive bidding followinglocal advertising only or on the basis of prudent shoppingafter solicitation of at least three price quotations.

Rubber Development

4. Supplies and equipment required for the implementationof the contracts between DGE and PTP V for Part A.1 of theProject and DGE and PNP X for Part A.2 of the Project

- 38 -

respectively referred to in Section 3.03 (a) of this Agree-

ment, other than agricultural machinery, vehicles and road

equipment and fertilizers and chemicals covered by the

provisions of paragraphs 1, 2 and 3 above, shall be procured

in accordance with the Borrower's normal procurement pro-

cedures applicable to Government-owned estates.

Civil Works

5. Civil works for Part A of the Project which are to be

financed as Credit Expenditures, including the construction

of housing, estate workshops and garages and farm roads,

shall be carried out respectively by PTP V and PNP X directly

or under contract awarded on the basis of local competitive

bidding to prequalified contractors in accordance with the

Borrower's normal procurement procedures.

B. Estate Development (Part B of the Project)

Vehicles, Equipment and Agrochemicals

1. Except as provided in paragraphs 2 and 3 below, agricul-

tural and processing plant machinery, vehicles and equipment,

and fertilizers and chemicals, shall be procured in accor-

dance with procedures consistent with those set forth in the

Guidelines, on the basis of international competitive bidding

as described in Part A of the Guidelines.

2. Contracts for the procurement of office equipment, and

contracts for the procurement of agricultural and processing

plant chinery, vehicles and equipment which are estimated

to cost less than the equivalent of $50,000, may be awarded

on the basis of competitive bidding following local adver-

tising only, or on the basis of prudent shopping after

solicitation of at least three price quotations, subject,

however, to an aggregate total amount not exceeding the

equivalent of $250,000 in the case of PNP X (for Part B.1 of

the Project) and not exceeding the equivalent of $250,000 in

the case of PTP XI (for Part B.2 of the Project.)

3. Up to the equivalent of $100,000 in value of fertilizers

and chemicals may be procured by each PNP X and PTP XI

annually respectively for the purposes of Parts B.1 and B.2

of the Project on the basis of competitive bidding following

local advertising only or on the basis of prudent shopping

after solicitation of at least three price quotations.

- 39 -

Civil Works

4. Civil works for Part B of the Project shall be carriedout respectively by PNP X and PTP XI, except that construc-tion of housing shall be carried out under contract awardedon the basis of local competitive bidding to prequalifiedcontractors in accordance with the Borrower's normal procure-ment procedures.

II. Evaluation and Comparison of Bids for Goods; Preference forDomestic Manufacturers

1. For the purpose of evaluation and comparison of bids forthe supply of goods except those to be procured in accordancewith local procedures: (i) bidders shall be required to statein their bid the c.i.f. (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, shallbe excluded; and (iii) the cost to the Borrower of inland freightand other expenditures incidental to the delivery of goods tothe place of their use or installation shall be included.

2. Goods manufactured in Indonesia may be granted a margin ofpreference in accordance with, and subject to, the followingprovisions:

(a) All bidding documents for the ptocurement of goodsshall clearly indicate any preference which will be granted,the information required to establish the eligibility of a bidfor such preference and the following methods and stages that willbe followed in the evaluation and comparison of bids.

(b) After evaluation, responsive bids will be classifiedin one of the following three groups:

(1) Group A: bids offering goods manufactured inIndonesia if the bidder shall have established tothe satisfaction of the Borrower and the Bank thatthe manufacturing cost of such goods includes avalue added in Indonesia equal to at least 20%of the ex-factory bid price of such goods.

(2) Group B: all other bids offering goods manufacturedin Indonesia.

- 40 -

(3) Group C: bids offering any other goods.

(c) All evaluated bids in each group shall be first comparedamong themselves, excluding any customs duties and other importtaxes on goods to be imported and any sales or similar taxeson goods to be supplied domestically, to determine the lowestevaluated bid of each group. Such lowest evaluated bids shallthen be compared with each other, and if, as a result of thiscomparison, a bid from group A or group B is the lowest, it shallbe 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 bidsshall be further compared with the lowest evaluated bid from groupA after adding to the c.i.f. bid price of the imported goodsoffered in each group C bid, for the purpose of this furthercomparison only, an amount equal to (i) the amount of customsduties and other import taxes which a non-exempt importer wouldhave to pay for the importation of the goods offered in suchgroup C bid; or (ii) 15% of the c.i.f. bid price of such goodsif said customs duties and taxes exceed 15% of such price. Ifthe group A bid in such further comparison is the lowest, it.shall be selected for the award; if not, the bid from groupC which as a result of the comparison under paragraph (c) isthe lowest evaluated bid shall be selected.

III. Review of Procurement Decisions by the Bank

1. Review of invitations to bid and of proposed awards and finalcontracts:

With respect to all contracts for machinery, vehicles, equip-ment, furniture, agrochemicals, fertilizer and other materialsestimated to cost the equivalent of $50,000 or more, and allcontracts for civil works estimated to cost the equivalent of$100,000 or more:

(a) Before bids are invited, the Borrower shall furnish orcause to be furnished to the Bank, for its comments, the text ofthe invitations to bid and the specifications and other biddingdocuments, together with a description of the advertising pro-cedures to be followed for the bidding, and shall make suchmodifications in the said documents or procedures as the Bankshall reasonably request. Any further modification to the biddingdocuments shall require the Bank's concurrence before it is issuedto the prospective bidders.

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(b) After bids have been received and evaluated, theBorrower shall, before a final decision on the award is made,inform the Bank or cause the Bank to be informed of the name ofthe bidder to which it is intended to award the contract and shallfurnish or cause to be furnished to the Bank, in sufficient timefor its review, a detailed report, by the consultants referred toin Section 3.02 (i) (2) in the case of procurement for Part A ofthe Project, and in Sections 3.02 (iv) and 3.02 (v) in the case ofprocurement respectively for Parts B.1 and B.2 of the Project, onthe evaluation and comparison of the bids received, together withthe recommendations for award and such other information as theBank shall reasonably request. The Bank shall, if it determinesthat the intended award would be inconsistent with the Guidelinesor this Schedule, promptly inform the Borrower and state thereasons for such determination.

(c) The terms and conditions of the contract shall not,without the Bank's concurrence, materially differ from thoseon which bids were asked or prequalification invited.

(d) Two conformed copies of the contract shall be furnishedto the Bank promptly after its execution and prior to the submis-sion to the Bank of the first application for withdrawal of fundsfrom the Loan Account in respect of such contract.

3. With respect to each contract to be financed out of theproceeds of the Loan and not governed by the preceding paragraph,the Borrower shall furnish or cause to be furnished to the Bank,promptly after its execution and prior to the submission to theBank of the first application for withdrawal of funds from theLoan Account in respect of such contract, two conformed copies ofsuch contract, together with the analysis of the respective bids,recommendations for award and such other information as the Bankshall reasonably request. The Bank shall, if it determines thatthe award of the contract was not consistent with the Guidelinesor this Schedule, promptly inform the Borrower and state thereasons for such determination.

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SCHEDULE 5

Organization and Management

1. Smallholder Settlement

(a) Director General of Estates

Overall direction and coordination of the implementationof Part A of the Project will be the responsibility of theDirector General of Estates, assisted by his senior staff andby the two specialists referred to under Part C.1 of theProject.

The DGE will be responsible, inter alia, for:

(i) project and village master planning and preparationof annual work programs;

(ii) advice to the Provincial Coordinating Committees(see paragraph (b) below) and the Project Managers(see paragraph (c) below) on settler recruitmentand selection procedures, design and supervision ofsettler participation agreements, crop processingand marketing arrangements;

(iii) approval of project budgets and coordination andorganization of project financing arrangements;

(iv) administration of project procurement; and

(v) preparation and execution of contracts between theDGE and the nucleus estate for rubber developmentand at a later date for extension, processing, andmarketing services.

(b) Provincial Coordinating Committees

There shall be established and maintained a ProvincialCoordinating Committee (PCC) for each Part A.1 and Part A.2of the Project. Each PCC shall have as its chairman and chiefexecutive the Chairman of BAPPEDA, as deputy chief executivethe head of the DPD, and the following additional members:the respective Project Managers (see paragraph (c) below);

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the respective managers of PTP V and PNP X; and the respec-tive Bupatis. Others may be invited to participate in theirwork from time to time.

The Provincial Coordinating Committees will be respon-sible for coordinating the implementation of those functionsunder Part A of the Project which are within the jurisdictionand responsibility of the respective Provincial Governments,including, inter alia, construction of village infrastruc-ture, roads and facilities for health and education, foodcropping programs and the grant of land rights to Partici-pating Settlers. For these purposes the PCC will, interalia:

(i) prepare programs and budgets for implementationof Provincial Government functions under Part A ofthe Project in accordance with a master plan;

(ii) coordinate and monitor the activities of theProvincial Government agencies concerned withprovision of village infrastructure, main accessand village roads, health, educational andcommunity facilities, and the implementation offood cropping programs;

(iii) advise and assist the respective Project Managersin settler recruitment and administration; and

(iv) determine from time to time the rubber priceto be paid by the respective nucleus estates toParticipating Settlers, in accordance with theprovisions of Section 3.10 of the Loan Agreement.

(c) Project Managers

There shall be appointed a person with appropriatequalifications and experience to serve as Project Manager foreach Part A.1 and Part A.2 of the Project. Each ProjectManager will report directly to the Director General ofEstates and will be responsible for the implementation ofthose functions under Part A of the Project which are withinthe jurisdiction and responsibility of DGE, including, interalia, the supervision of block rubber planting, settleradministration and overall project coordination. For thesepurposes, each Project Manager will be responsible, interalia, for:

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(i) preparation of an action program, subject tothe approval of the DGE, for implementation of

master plans, and annual work programs;

(ii) preparation of budgets for all functions underPart A of the Project other than rubber developmentand other than functions for which ProvincialGovernment agencies are responsible;

(iii) supervision and coordination of the implementationof project and village master plans by the nucleusestate and Provincial Government agencies;

(iv) design and supervision of settler participationagreements, land transfers, and allocation ofhouse, food crop and rubber areas;

(v) settler recruitment and selection, and arrangementsfor settler training; and

(vi) monitoring and reporting on project progress tothe DGE, the Provincial Government and the Bank.

(d) Bupati

The Bupati (head of the Kabupaten) will be responsible,under the direction of the PCC, inter alia, for:

(i) implementation of those functions under Part A ofthe Project which are within the jurisdiction ofthe Provincial/Kabupaten Government, in particularthose to be funded through INPRES and KabupatenAPBD;

(ii) coordination of the BIMAS Program in the respective

Settlement Areas;

(iii) preparation of INPRES and Kabupaten APBD budgets

for Part A of the Project in accordance with a

master plan; and

(iv) coordinating his work program with the work programof the Project Manager.

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(e) Nucleus Estates.

Except as otherwise provided by the last sentence ofthis paragraph, the nucleus estates PTP V and PNP X willdevelop rubber areas for smallholders and be responsible,inter alia, for:

(i) For a period of up to three years after planting:Clearing land for planting rubber, construction ofsettler houses and water supplies, rubber plantingand maintenance, construction of rubber area roads,and procurement and application of inputs forrubber development and settler training;

(ii) For a period from three years after planting toproduction: Procurement and supervision of applica-tion of inputs, maintenance of rubber roads,settler training, particularly in rubber tapping,and extension activities; and

(iii) During the production period: Provision of organi-zation of latex collection for cost recovery, andthe provision of comprehensive processing andmarketing services, and extension activities.

PNP I will replace PTP V in performing the services referredto in (iii) above.

(f) BRI

BRI will be responsible, inter alia, for:

(i) as handling bank on behalf of the Borrower,channeling funds for rubber development to thenucleus estates;

(ii) maintenance of settler loan accounts; and

(iii) provision of short-term credit to settlers forfood cropping through the BIMAS program.

2. Estate Development

The executive management of PNP X and the Boards of Super-visors and Management of PTP XI will be responsible for implemen-tation of Parts B.1 and B.2 of the Project, respectively, subjectto the overall responsibility for management and coordination ofthe MOA.

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3. Program Support

(a) Smallholder Development

The Director General of Estates will be responsible forutilizing the program of technical assistance to theDGE.

(b) Estate Development

The MOA Support Staff will be responsible for imple-menting the programs of technical assistance to (i)the MOA Support Staff and (ii) the LPP.

4. Monitoring and Evaluation

The Director General of Estates and the two specialistsreferred to under Part C.1 of the Project will be responsible forestablishing and implementing a monitoring and evaluation systemin respect of Part A of the Project.

5. Participating Ministries/Agencies

Ministry/AgencyPrimarily Responsible

Project Component for Implementation

Part A - Smallholder Settlement

Parts A.1 (a) -MOA/DGEand A.2 (a) -Chairman of BAPPEDA

-Bupati-PTP V (Part A.1 (a))-PNP X (Part A.2 (a))

Parts A.1 (b) -Kabupaten Agencies forand A.2 (b) Education and Health

-Chairman of BAPPEDA

Parts A.1 (c) -Chairman of BAPPEDAand A.2 (c) -Bupati

-Provincial and KabupatenAgencies for PublicWorks (Dinas PekerjaanUmum)

-PTP V (Part A.1 (c))-PNP X (Part A.2 (c))

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Ministry/AgencyPrimarily Responsible

Project Component for Implementation

Parts A.1 (d) -PTP V (Part A.1 (d))and A.2 (d) -PNP X (Part A.2 (d))

Parts A.1 (e) -Provincial Directorateand A.2 (e) of Agraria

Parts A.1 (f) -Provincial and Kabupatenand A.2 (f) Agencies for Food Crops

(Dinas Pertanian)-Provincial Directorate of

Cooperatives (DirektoratKoperasi Daerah)

-BUUDs/KUDs-PTP V (Part A.1 (f))-PNP X (Part A.2 (f))

Parts A.1 (g) and -Provincial and KabupatenA.2 (g) Agencies for Health

-PTP V (Part A.1 (g))-PNP X (Part A.2 (g))

Parts A.1 (h) -Provincial and Kabupatenand A.2 (h) Agencies for Food Crops

(Dinas Pertanian)-Chairman of BAPPEDA-BRI-Provincial Directorate ofCooperatives (DirektoratKoperasi Daerah)-BUUD's/KUD's

Part B.1 - Estate Development -MOA/PNP X(Lampung and SouthSumatera)

Part B.2 - Estate Development -MOA/PTP XI(West Java)

Part C.1 -MOA/DGE

Part C.2 -MOA Support Staff

Part C.3 -MOA/LPP

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SCHEDULE 6

Provisions to be Included

in Rubber Development Agreements

The Rubber Development Agreements to be entered into among

DGE and PTP V and DGE and PNP X respectively shall require the

respective nucleus estates* to undertake, inter alia, as follows:

(1) to operate rubber nurseries, clear future rubber land,

construct settler houses, install water supplies, plant and main-

tain rubber, and construct rubber area roads, all in accordance

with specifications designated by DGE;

(2) to procure and apply rubber area inputs in accordance

with the relevant procurement procedures specified in Schedule 4

to the Loan Agreement, on the basis of tender specifications

prepared by DGE;

(3) to train Participating Settlers in rubber planting and

maintenance in accordance with syllabi prepared in consultation

with DGE;

(4) to provide food crop inputs to Participating Settlers in

the first year of settlement in accordance with criteria specified

by DGE;

(5) to maintain rubber roads to appropriate standards;

(6) to provide training in rubber tapping, extention,

processing and marketing services, as required by the DGE and the

respective Provincial Governments;

(7) to employ Participating Settlers during the first three

years after rubber planting, and additional casual labor where

required, in accordance with normal estate practices and

procedures;

(8) to employ adequate staff, as agreed between DGE and the

nucleus estate;

* As referred to in paragraph 1 (e) of Schedule 5 to this

Agreement, it is envisaged that PNP I will replace PTP V in

performing certain services during the production period,

starting in year 7.

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(9) to maintain proper accounts of all expenditures for PartA of the Project;

(10) to prepare annual budgets;

(11) to facilitate inspection of all works under Part A ofthe Project by the DGE and the Bank; and

(12) to collect rubber from Participating Settlers in paymentof Participating Settler debt obligations to BRI in accordancewith the Smallholder Financing Arrangements specified in Schedule7 to the Loan Agreement, and to purchase all additional rubberoffered for sale by Participating Settlers, at the pricesspecified from time to time by the Provincial CoordinatingCommittees.

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SCHEDULE 7

Provisions to be Includedin Smallholder Financing Arrangements

1. The Smallholder Financing Arrangements shall consist of:

(a) a Financing Agreement between BI, acting for and onbehalf of the Borrower, and BRI, to provide for the channeling ofthe proceeds of the Loan allocated to Credit Expenditures for PartA of the Project, and the Borrower's contribution to the financingof such Credit Expenditures, to BRI; and

(b) Sub-Financing Agreements respectively between BRI andPTP V and between BRI and PNP X, to provide for the further chan-neling of the funds referred to under paragraph 1 (a) respectivelyto PTP V and PNP X.

2. The Financing Agreement referred to under paragraph 1 (a)shall require BI, inter alia, to make available to BRI the pro-ceeds of the Loan withdrawn for Credit Expenditures (presentlyestimated at about $22,000,000 equivalent), and all such addi-tional funds as are allocated by the Borrower (presently estimated

at about Rupiahs 5.8 billion through FY 1982, as detailed in

paragraph 3 below) to cover the total requirements for Credit

Expenditures. For these purposes, Credit Expenditures shallbe defined as those expenditures for Part A of the Project whichare intended to be recovered from Participating Settlers throughrubber collections, and shall include the costs of:

(i) land clearing;

(ii) fertilizers and chemicals (including pesticides);

(iii) wages and salaries of Participating Settlers andcasual labor;

(iv) machinery, vehicles and equipment for rubberdevelopment;

(v) settler housing;

(vi) a subsistence package including first year seed andfertilizer and cash payments not exceding 15,000Rupiahs per family;

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(vii) primary and secondary estate roads and farm tracks;and

(viii) estate overhead costs as approved by DGE of about15% of the direct costs of rubber establishment andrelated machinery and equipment (other thanvehicles).

3. The Borrower's contribution to meet the total requirementsfor Credit Expenditures shall be provided from sources in theMinistry of Finance on the basis of approved annual budgets. TheBorrower's annual contributions to meet these requirements arepresently estimated as follows:

FY 1977 Rupiahs 800 million


FY 1979 Rupiahs 1,200 million




TOTAL 5,800 million

4. BI shall, under the Financing Agreement with BRI, makeavailable to BRI, and BRI shall, under Sub-Financing Agreementsrespectively with PTP V and PNP X, make available to PTP V and PNPX, the amounts required to meet Credit Expenditures respectivelyfor Parts A.1 and A.2 of the Project (including both the amountsto be provided by the Borrower and those to be provided from theproceeds of the Loan). Such amounts shall be determined on thebasis of annual budgets approved at least 3 months before thestart of each fiscal year, and shall be advanced to PTP V and PNPX quarterly, sufficiently in advance so as to enable PTP V and PNPX to carry out their respective functions under Part A of theProject without delays resulting from unavailability of funds. Toenable BRI to release in time the required funds to PTP V and PNPX, the Financing Agreement shall provide for arrangements underwhich such funds will be made available to BRI in advance of BRI'sneed to release such funds to PTP V/PNP X. PTP V and PNP X shallbe authorized, within the approved annual budgets, and subject to

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the approval of DGE, to anticipate their quarterly requirementsshould project implementation proceed more rapidly than planned,provided adequate notice thereof is given to BRI and BI. Withoutlimitation upon the foregoing, advances to PTP V and PNP X to meettheir quarterly requirements shall include the requirements to bemet from the Borrower's contribution and those to be financed from

the proceeds of the Loan.

5. The requirements for Credit Expenditures are presentlyestimated to be financed as follows:

Part A.1 (PTP V)

From the proceeds of the Loan: the equivalent of

$13,000,000

From the Borrower: Rupiahs 3,700 million

Part A.2 (PNP X)

From the proceeds of the Loan: the equivalent of$9,000,000

From the Borrower: Rupiahs 2,100 million

6. The funds to be made available by BI to BRI and by BRI to PTPV and PNP X, respectively, as set forth above, shall be risk free

to BRI, PTP V and PNP X; that is, such funds shall be repayable:(i) by PTP V (or, when PTP V is replaced by PNP I as the Bor-rower's designated representative for collection of Participating

Settler debt obligations, by PNP I) and PNP X to BRI, only fromthe proceeds of rubber received from Participating Settlers, inaccordance with the provisions set forth in paragraph 9 below, and(ii) by BRI to BI, only from repayments received by BRI from PTP V

(or PNP I) and PNP X pursuant to (i) above.

7. BI and BRI shall be paid a handling fee in the aggregate atthe rate of 0.5% per annum on the amounts disbursed to PTP V andPNP X for Credit Expenditures and outstanding, or at such otherrate as the Borrower, BI and BRI may agree, said fee to be dividedamong BI and BRI as the parties may agree from time to time. Saidhandling fee shall not be included as a part of Credit Expendi-tures to be recovered from Participating Settlers, and shall bepayable semi-annually by the Borrower directly to BI and BRI.

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8. PTP V and PNP X shall be required to establish and maintainappropriate accounts to record all Credit Expenditures. After thethird year of settlement, BRI shall establish and maintainindividual smallholder accounts for Participating Settlers, towhich shall be charged each Participating Settler's share ofCredit Expenditures, in accordance with criteria and procedures tobe agreed between the Borrower, BRI and the Bank.

9. BRI, PTP V and PNP X shall require Participating Settlers toenter into Credit Agreements under which each ParticipatingSettler will agree, inter alia, to repay his share of CreditExpenditures charged to his individual smallholders' account, inkind, on the following basis:

(i) the Participating Settler's debt obligation shallbear no interest during the first three years andshall bear interest thereafter at the rate of 12%per annum on the amounts outstanding, said interestto be capitalized and added to principal during thefollowing three years, and payable thereafterstarting in the 7th year until the principal amountis fully repaid;

(ii) principal shall be amortized over not more than 15years commencing in the 7th year;

(iii) Participating Settlers shall be required to deliverperiodically (on a weekly basis) to the respectivenucleus estates in payment of debt obligations,fixed quantities of rubber expressed in kilogramsestablished from time to time by decision of theProvincial Coordinating Committees, on the basis ofestimated average annual yields of smallholdersfrom 2 ha of rubber, not to exceed 25% of suchyields per annum;

(iv) Participating Settlers shall be credited for therubber so delivered in payment of debt obligations(and any additional rubber offered for sale to thenucleus estate) at the prices determined from timeto time by the respective Provincial CoordinatingCommittees in accordance with the provisions ofSection 3.10 of the Loan Agreement; and

(v) grace and repayment periods shall be measured fromthe year in which block-planted rubber allocated toa Participating Settler was planted.

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SCHEDULE 8

Provisions to be Includedin Subsidiary Loan Agreements

A. PNP X Subsidiary Loan Agreement

1. Principal Amount: The equivalent in Rupiahs of theamount withdrawn from the Loan Account on account of expen-ditures for Part B.1 of the Project, estimated at about$20,000,000 equivalent;

2. Interest: Subsidiary Loan will bear no interest throughJanuary 1, 1981. Thereafter interest will accrue at the rateof 15% per annum on the amounts withdrawn and outstanding,said interest to be capitalized and added to the aforesaidprincipal amount semi-annually until the first principalrepayment falls due, and payable thereafter in accordancewith paragraph 3.

3. Amortization: Twenty four approximately equal semi-annual installments including both principal and interestwith the first installment due January 1, 1985.

4. Other: Performance covenants of PNP X satisfactoryto the Bank.

B. PTP XI Subsidiary Loan Agreement

1. Principal Amount: The equivalent in Rupiahs of theamount withdrawn from the Loan Account on account of expen-ditures for Part B.2 of the Project, estimated at aboutthe equivalent of $14,600,000.

2. Interest: Subsidiary Loan will bear no interest untilJanuary 1, 1981. Thereafter interest will accrue at the rateof 15% per annum on the amounts withdrawn and outstanding,said interest to be capitalized and added to the aforesaidprincipal amount semi-annually until the first principalrepayment falls due, and payable thereafter in accordancewith paragraph 3.

3. Amortization: Fourteen approximately equal semi-annualinstallments including both principal and interest with thefirst installment due January 1, 1985.

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4. Other: (i) local currency loans to PTP XI, estimatedat about the equivalent of $3,500,000, to be made on the sameterms as set forth in paragraphs 2 and 3 above; (ii) perfor-mance covenants of PTP XI satisfactory to the Bank.

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