Page 1 CONFORMED COPY LOAN NUMBER 3972 IND Loan Agreement (Industrial Technology Development Project) between REPUBLIC OF INDONESIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated January 18, 1996 LOAN NUMBER 3972 IND LOAN AGREEMENT AGREEMENT, dated January 18, 1996, between the REPUBLIC OF INDONESIA (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications set forth below (the General Conditions) constitute an integral part of this Agreement: Page 2 (a) The last sentence of Section 3.02 is deleted. (b) The second sentence of Section 5.01 is modified to read: "Except as the Bank and the Borrower shall otherwise agree, no withdrawals shall be made: (a) on account of expenditures in the territories of any country which is not a member of the Bank or for goods produced in, or services supplied from, such territories; or (b) for the purpose of any payment to persons or entities, or for any import of goods, if such payment or import, to the knowledge of the Bank, is prohibited by a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations." (c) In Section 6.02, subparagraph (k) is relettered as subparagraph (l) and a new subparagraph (k) is added to read: "(k) An extraordinary situation shall have arisen under which any further withdrawals under the Loan would be inconsistent with the provisions of Article III, Section 3 of the Bank's Articles of Agreement." Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Action Plan" means the plan referred to in paragraph 3 of Schedule 5 to this Agreement dated September 25, 1995; (b) "Bank Indonesia" means the Borrower's central bank; (c) "Beneficiary" means an enterprise whose equity is more than 50% privately owned, established and operating in Indonesia, which is engaged in production or related services in the manufac-turing sector, including provision of technology consulting ser-vices, and with annual gross sales of less than Rp. 2,000,000,000; (d) "Central PMIU" means the coordinating unit referred to in paragraph 1 (b) of Schedule 5 to this Agreement established by the Borrower on November 30, 1995; (e) "DAPATI Grant" means a grant in Rupiah or in Dollars made or proposed to be made by the Borrower to a Beneficiary out of the proceeds of the Loan pursuant to paragraph 2 (c) of Schedule 5 to this Agreement to assist in financing a portion of the cost of a Sub-project; (f) "DAPATI Implementation Manual" means the manual, satisfactory to the Bank, adopted by the Borrower through MOI on November 24, 1995, as such manual may be revised pursuant to paragraph 2(e) of Schedule 5 to this Agreement, for purposes of providing DAPATI Grants to Beneficiaries for the carrying out of Sub-projects; (g) "DAPATI Management Contract" means the contract to be entered into between MOI and a management consulting firm pursuant to paragraph 2 of Schedule 5 to this Agreement, and the term "DAPATI Management Contractor" means the management consulting firm being a party to the DAPATI Management Contract; (h) "DAPATI Program" means the Borrower's program for improving the provision of technical services to Beneficiaries to enhance their competitiveness in domestic and international markets, by improving their productivity, product quality, product reliability, product design, delivery times, reduction of costs, and by introducing new technologies and techniques so as to diversify and enhance their overall production Page 3 capacities; (i) "MOI" means the Borrower's Ministry of Industry, and any successor thereto; (j) "MSTQ Master Plan" means the Borrower's five-year plan to upgrade individual industrial metrology, standards, testing and quality, including ISO 9000 certification; (k) "Project Management and Implementation Unit" and the acronym "PMIU" means each of the units referred to in paragraph 1 (a) of Schedule 5 to this Agreement, established by the Borrower on November 24, 1995; (l) "PTSI" means any one of the Borrower's public technology support institutions, including BPPI, BPPT, LIPI, IRDCI, BISm, RDCAC and KIM, and the following terms means the following institutions: "BPPI" means the Agency for Industrial Research and Development established within MOI; "BPPT" means the Agency for the Assessment and Application of Technology established by Presidential Decree No. 25 of 1978; "LIPI" means the Indonesian Institute of Sciences established by Presidential Decree No. 128 of 1967; "IRDCI" means the Research and Development Institute for the Chemical Industry established within MOI; "BISm" means the Semarang Industrial Research and Development Institute established within MOI; and RDCAC and KIM mean the laboratories established within LIPI; (m) "PUSTAN" means the Center for Industrial Standards established within MOI responsible for implementing Indonesia's national standards for industry and ISO 9000 certification of industrial enterprises in Indonesia; (n) "Rupiah" and "Rp" mean the currency of the Borrower; (o) "Service Provider" means an individual, a consulting firm or a technology support institution that possess the requisite qualifications and experience, set forth in the DAPATI Implementation Manual, to provide the technical services under a Sub-project, and the term "Service Providers" means, collectively, more than one Service Provider; (p) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (q) "Steering Committee" means the committee referred to in paragraph 1 (c) of Schedule 5 to this Agreement established by the Borrower on December 4, 1995; (r) "Sub-project" means the specific technical services to be provided under the DAPATI Program, and to be financed in part out of the proceeds of a DAPATI Grant, to a Beneficiary by a Service Provider in accordance with the DAPATI Implementation Manual and the provisions of this Agreement, to enhance the Beneficiary's competitiveness in domestic and international markets; and (s) "Technical Supervisory Committee" means the committee referred to in paragraph 2 (d) of Schedule 5 to this Agreement established by the Borrower on November 13, 1995. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, various currencies that shall have an aggregate value equivalent to the amount of forty seven million dollars ($47,000,000), being the sum of withdrawals of the proceeds of the Loan, with each withdrawal valued by the Bank as of the Page 4 date of such withdrawal. Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. (b) The Borrower may, for the purposes of the Project, open and maintain in dollars a special deposit account in Bank Indonesia on terms and conditions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 6 to this Agreement. Section 2.03. The Closing Date shall be December 31, 2001 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Interest Period equal to the Cost of Qualified Borrowings determined in respect of the preceding Semester, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rate applicable during such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Semester. (c) For the purposes of this Section: (i) "Interest Period" means a six-month period ending on the date immediately preceding each date specified in Section 2.06 of this Agreement, beginning with the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost, as reasonably determined by the Bank and expressed as a percentage per annum, of the outstanding borrowings of the Bank drawn down after June 30, 1982, excluding such borrowings or portions thereof as the Bank has allocated to fund: (A) the Bank's investments; and (B) loans which may be made by the Bank after July 1, 1989 bearing interest rates determined otherwise than as provided in paragraph (a) of this Section. (iii) "Semester" means the first six months or the second six months of a calendar year. (d) On such date as the Bank may specify by no less than six months' notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to read as follows: "(a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Quarter equal to the Cost of Qualified Borrowings determined in respect of the Page 5 preceding Quarter, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rates applicable during such Interest Period." "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Quarter." "(c) (iii) `Quarter' means a three-month period commencing on January 1, April 1, July 1 or October 1 in a calendar year." Section 2.06. Interest and other charges shall be payable semiannually on March 15 and September 15 in each year. Section 2.07. The Borrower shall repay the principal amount of 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 declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out: (i) Part A of the Project through MOI and LIPI; (ii) Part B of the Project through MOI; (iii) Part C of the Project through MOI, BPPT and LIPI; and (iv) Part D of the Project through MOI and BPPT, all with due diligence and efficiency and in conformity with appropriate industrial technology, financial and administrative practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Bank shall otherwise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 5 to this Agreement. Section 3.02. Except as the Bank shall otherwise agree, procurement of the goods and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section 3.03. For the purposes of Section 9.08 of the General Conditions and without limitation thereto, the Borrower shall: (a) prepare, on the basis of guidelines acceptable to the Bank, and furnish to the Bank not later than six (6) months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, a plan for the future operation of the Project; and (b) afford the Bank a reasonable opportunity to exchange views with the Borrower on said plan. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in Page 6 accordance with sound accounting practices the operations, resources and expenditures in respect of the Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information con- cerning said records and accounts and the audit thereof as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (l) of the General Conditions, the following additional event is specified, namely, that the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of any one of the PTSI. ARTICLE VI Effective Date Page 7 Section 6.01. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance c/o Directorate General of Budget Jalan Lapangan Banteng Timur 2-4 P.O. Box 2458 Jakarta 10710 Indonesia Cable address: Telex: FINMINISTRY 45799 DJMLN-A Jakarta 44319 DEPKEU-IA For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF INDONESIA By /s/ Arifin M. Siregar, Ambassador Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Russell Cheetham Regional Vice President East Asia and Pacific SCHEDULE 1 Withdrawal of the Proceeds of the Loan Page 8 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Equipment 12,700,000 100% of foreign expenditures, 100% of local expenditures (ex-factory cost) and 65% of local expenditures for other items pro- cured locally (2) Books and 1,600,000 90% database subscriptions (3) Training 1,700,000 80% (4) Technical Assistance: (a) Twinning Arrangements 14,200,000 80% (b) Consultants' services 4,600,000 80% (c) DAPATI Management Contract 2,000,000 100% (d) Research and policy studies 2,600,000 80% (5) DAPATI Grants 6,200,000 100% (6) Unallocated 1,400,000 __________ 47,000,000 ========== 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; and (c) the term "Twinning Arrangements" means the long term collaboration arrangements to be entered into between each of the PTSIs and internationally reputed laboratories and research and development institutions. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement; Page 9 (b) a DAPATI Grant under Category (5) unless: (i) the DAPATI Management Contract shall have been entered into pursuant to paragraph 2 (b) of Schedule 5 to this Agreement; and (ii) the grant has been made in accordance with the procedures and on the terms and conditions set forth or referred to in paragraph 2 (c) of Schedule 5 to this Agreement; and (c) Categories (1) and (4)(a) unless the Borrower shall have issued the necessary regulations and all other related instruments, satisfactory to the Bank, for purposes of implementing the Action Plan referred to in paragraph 3 of Schedule 5 to this Agreement. 4. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for expenditures for: (i) goods under Categories (1) and (2) under contracts costing less than $200,000 equivalent; (ii) training, twinning arrangements, and research and policy studies under Categories (3), (4)(a) and (4)(d) under contracts costing less than $100,000 equivalent; (iii) contracts under Category (4)(b) for the employment of consulting firms not exceeding $100,000 equivalent, and for the employment of individual consultants not exceeding $50,000 equivalent; and (iv) except for the first five contracts regardless of their costs, contracts under Category (5) for the employment of Service Providers estimated to cost less than $50,000 equivalent each, under such terms and conditions as the Bank shall specify by notice to the Borrower. SCHEDULE 2 Description of the Project The objective of the Project is to enhance the competitiveness of Indonesian industry, particularly of small and medium industries, in domestic and international markets through (i) the provision of public and private technology support services, (ii) facilitating access to technology service providers, (iii) the strengthening of public technology support institutions, and (iv) the effective formulation and coordination of industrial and technology policies. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: PART A: Implementation of the MSTQ Master Plan for industry, including programs to promote quality awareness in industry, comprehensive training programs for managers, supervisors and qualified personnel of small and medium industries, improvement of about five laboratories, and implementation of procedures for granting of ISO 9000 certification to small and medium industries on a pilot basis. PART B: Provision of DAPATI Grants to Beneficiaries for the carrying out of Sub-projects. PART C: Strengthening of PTSIs capabilities to: (a) carry out contract research and business development with industry, including core functions for contract management, contract administration, intellectual property management and communications; and (b) manage information systems in industrial research and development and laboratories, including finance and budget, human resources administration, project management, procurement and inventory management systems, through the provision of technical assistance, including twinning arrangements and equipment modernization. PART D: Strengthening of BPPI's and BPPT's capabilities for formulation of industrial and technology polices for research and development, through the provision of technical assistance. Page 10 * * * The Project is expected to be completed by June 30, 2001. SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* September 15, 2001 905,000 March 15, 2002 935,000 September 15, 2002 970,000 March 15, 2003 1,005,000 September 15, 2003 1,040,000 March 15, 2004 1,075,000 September 15, 2004 1,115,000 March 15, 2005 1,155,000 September 15, 2005 1,195,000 March 15, 2006 1,235,000 September 15, 2006 1,280,000 March 15, 2007 1,325,000 September 15, 2007 1,375,000 March 15, 2008 1,420,000 September 15, 2008 1,470,000 March 15, 2009 1,525,000 September 15, 2009 1,580,000 March 15, 2010 1,635,000 September 15, 2010 1,690,000 March 15, 2011 1,750,000 September 15, 2011 1,815,000 March 15, 2012 1,880,000 September 15, 2012 1,945,000 March 15, 2013 2,015,000 September 15, 2013 2,085,000 March 15, 2014 2,155,000 September 15, 2014 2,235,000 March 15, 2015 2,315,000 September 15, 2015 2,395,000 March 15, 2016 2,480,000 ___________________ * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. Premiums on Prepayment Pursuant to Section 3.04 (b) of the General Conditions, the premium payable on the principal amount of any maturity of the Loan to be prepaid shall be the percentage specified for the applicable time of prepayment below: Time of Prepayment Premium The interest rate (ex- pressed as a percentage per annum) applicable to the Loan on the day of prepayment multiplied by: Not more than three years 0.15 before maturity More than three years but 0.30 not more than six years before maturity More than six years but 0.55 Page 11 not more than eleven years before maturity More than eleven years but not 0.80 more than sixteen years before maturity More than sixteen years but not 0.90 more than eighteen years before maturity More than eighteen years before 1.00 maturity SCHEDULE 4 Procurement and Consultants' Services Section I. Procurement of Goods Part A: General Goods shall be procured in accordance with the provisions of Section I of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in January 1995 (the Guidelines) and the following provisions of this Section, as applicable. Part B: International Competitive Bidding 1. Except as otherwise provided in Part C of this Section, goods shall be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto. 2. The provisions of paragraphs 2.54 and 2.55 of the Guidelines and Appendix 2 thereto shall apply to goods manufactured in the territory of the Borrower and to be procured under contracts awarded in accordance with the provisions of paragraph 1 of this Part B. Part C: Other Procurement Procedures 1. Limited International Bidding Highly specialized laboratory equipment estimated to cost less than $200,000 equivalent per contract, up to an aggregate amount not to exceed $2,900,000 equivalent, and goods, which the Bank agrees can only be purchased from a limited number of suppliers, regardless of the cost thereof, may be procured under contracts awarded in accordance with the provisions of paragraph 3.2 of the Guidelines. 2. International Shopping Goods estimated to cost less than $50,000 equivalent per contract, up to an aggregate amount not to exceed $1,900,000 equivalent, may be procured under contracts awarded on the basis of international shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. 3. Direct Contracting Goods which are of a proprietary nature may, with the Bank's prior agreement, be procured in accordance with the provisions of paragraph 3.7 of the Guidelines. Part D: Review by the Bank of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to prequalify for Page 12 bidding or to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods shall be undertaken in accordance with such procurement plan as shall have been approved by the Bank, and with the provisions of said paragraph 1. 2. Prior Review With respect to each contract for goods estimated to cost the equivalent of $200,000 or more, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. Section II. Employment of Consultants 1. Consultants' services, including the services of the DAPATI Management Contractor, shall be procured under contracts awarded in accordance with the provisions of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981 (the Consultant Guidelines). For complex, time-based assignments, such contracts shall be based on the standard form of contract for consultants' services issued by the Bank, with such modifications thereto as shall have been agreed by the Bank. Where no relevant standard contract documents have been issued by the Bank, other standard forms acceptable to the Bank shall be used. 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Bank review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts, shall not apply to: (a) contracts for the employment of Service Providers estimated to cost less than $50,000 equivalent each, provided, however, that the first five Service Providers' contracts shall require Bank's prior review; or (b) contracts for the employment of consulting firms estimated to cost less than $100,000 equivalent each; or contracts for the employment of individual consultants estimated to cost less than $50,000 equivalent each. However, said exceptions to prior Bank review shall not apply to (a) the terms of reference for such contracts, (b) single-source selection of consulting firms, (c) assignments of a critical nature, as reasonably determined by the Bank, (e) amendments to contracts for the employment of Service Providers raising the contract value to $50,000 equivalent or above, (e) amendments to contracts for the employment of consulting firms raising the contract value to $100,000 equivalent or above, or (f) amendments to contracts for the employment of individual consultants raising the contract value to $50,000 equivalent or above. SCHEDULE 5 Implementation Program 1. For purposes of carrying out the Project the Borrower shall maintain, or cause to be maintained: (a) within each of BPPI, LIPI and BPPT, a Project Management and Implementation Unit (PMIU), headed by a qualified and experienced officer and assigned with such functions, powers, funds and staffing as shall be required to enable each PMIU to undertake the day-to-day implementation of the Project; Page 13 (b) the Central PMIU with representatives of the BPPI, LIPI and BPPT, headed by a qualified and experienced officer, to coordinate the activities of the PMIUs referred to in sub- paragraph (a) above; and (c) the Steering Committee with the overall responsibility for Project implementation and policy guidance, chaired by BAPPENAS, and with representatives of the Borrower's Ministry of Finance, BPPI, BPPT and LIPI, and representatives of the Indonesian Chamber of Commerce and Industry. 2. The Borrower shall, through MOI: (a) carry out Part B of the Project in accordance with the DAPATI Implementation Manual; (b) enter into a management contract with a management consulting firm, pursuant to Section II of Schedule 4 to this Agreement, to, inter alia, (i) carry out the day-to-day operations of the DAPATI Program in accordance with the DAPATI Implementation Manual, and (ii) maintain a reliable register and database of Service Providers; (c) make DAPATI Grants to Beneficiaries under contracts satisfactory to the Bank to finance a portion of the cost of a Sub-project in accordance with the terms and conditions set forth in the DAPATI Implementation Manual and in this Agreement; (d) maintain the Technical Supervisory Committee chaired by MOI and with representatives of the Borrower's Ministry of Finance, BAPPENAS, and BPPT, and representatives of the Indonesian Chamber of Commerce and Industry, and the Indonesian Association of Professional Consultants, for purposes of the overall management of the DAPATI Program; and (e) on March 31 of each year, commencing on March 31, 1996, exchange views with the Bank on the continued adequacy of the DAPATI Implementation Manual and, with the Bank's prior concurrence, promptly revise the said Manual as shall be required to achieve the objectives of the Project. 3. For purposes of carrying out Part C of the Project the Borrower shall implement an Action Plan for the commercialization or privatization, as the case may be, of each of the PTSIs, including performance targets satisfactory to the Bank. 4. The Borrower shall and shall cause its departments and agencies carrying out the Project to: (a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with performance indicators satisfactory to the Bank, the carrying out of the Project and the achievement of the objectives thereof; (b) prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank, not later than September 30, 1998, a report integrating the results of the monitoring and evaluation activities performed pursuant to paragraph (a) of this Section, on the progress achieved in the carrying out of the Project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date; and (c) review with the Bank, by November 1, 1998, or such later date as the Bank shall request, the report referred to in paragraph (b) of this Section, and, thereafter, take all Page 14 measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Bank's views on the matter. 5. Without limitation upon the provisions of paragraph 4 of this Schedule and Section 9.07 (a) of the General Conditions, by June 30 and December 31 in each year, commencing on December 31, 1996, the Borrower shall, and shall cause its departments and agencies responsible for carrying out the Project or any part thereof to, prepare and furnish to the Bank a progress report on the implementation of the Project, including procurement information and expenditure statement and progress in achieving the targets established for the PTSIs and the Project Performance Indicators. SCHEDULE 6 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (5) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $3,500,000 to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless the Bank shall otherwise agree, the Authorized Allocation shall be limited to an amount equivalent to $1,000,000 until the aggregate amount of withdrawals from the Loan Account plus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions shall be equal to or exceed the equivalent of $7,000,000. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for deposit into the Special Account of an amount or amounts which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment Page 15 or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account: (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; (b) if the Borrower shall have failed to furnish to the Bank, within the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit reports required to be furnished to the Bank pursuant to said Section in respect of the audit of the records and accounts for the Special Account; (c) if, at any time, the Bank shall have notified theBorrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Loan Account pursuant to the provisions of Section 6.02 of the General Conditions; or (d) once the total unwithdrawn amount of the Loan allocated to the eligible Categories, minus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. Page 16 (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.