CONFORMED COPY
CREDIT NUMBER 794 YAR
Development Credit Agreement
(Third Highway Project)
between
YEMEN ARAB REPUBLIC
and
INTERNATIONAL DEVELOPMENT ASSOCIATION
Dated May 31, 1978


CREDIT NUMBER 794 YAR
DEVELOPMENT CREDIT AGREEMENT
AGREEMENT, dated May 31, 1978, between YEMEN ARAB REPUBLIC
(hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT
ASSOCIATION (hereinafter called the Association).
WHEREAS (A) the Borrower has requested the Association
to assist in the financing of the foreign exchange cost of the
Project described in Schedule 2 to this Agreement by extending
the Credit as viereinafter provided;
(B) the Borrower intends to contract from another external
source of finance (hereinafter called the Co-Financier) a loan
(hereinafter called the Co-Financier Loan) in an amount equivalent
to about eleven million dollars ($11,000,000) to assist in financ-
ing the Project on the terms and conditions set forth in an
agreement (hereinafter called the Co-Financier Loan Agreement) to
be entered into between the Borrower and the Co-Financier; and
WHEREAS the Association has agreed, on the basis inter
alia of the foregoing, to extend the Credit to the Borrower upon
the terms and conditions hereinafter set forth;
NOW THEREFORE the parties hereto hereby agree as follows:
ARTICLE I
General Conditions; Definitions
Section 1.01. The parties to this Agreement accept all
the provisions of the General Conditions Applicable to Development
Credit Agreements of the Association, dated March 15, 1974,
with the same force and effect as if they were fully set forth
herein (said General Conditions Applicable to Development Credit
Agreements of the Association being hereinafter called the
General Conditions).
Section 1.02.  Wherever used in this Agreement, 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) "Authority" means the Highway Authority established
under the Borrower's Decree No. 16 of the year 1972, or any such
other agency of the Borrower, having approximately the same powers


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and responsibilities, as shall be designated by the Borrower to
succeed the Authority;
(b) "VTC" means the Vocational Training Center of the
Authority; and
(c) "TPU" means the Training Production Unit of the Autho-
rity.
ARTICLE II
The Credit
Section 2.01. The Association agrees to lend to the Borrower,
on the terms and conditions in the Development Credit Agreement
set forth or referred to, an amount in various currencies equiva-
lent to eleven million five hundred thousand dollars
($11,500,000).
Section 2.02. The amount of the Credit may be withdrawn
from the Credit Account in accordance with the provisions of
Schedule 1 to this Agreement, as such Schedule may be amended from
time to time by agreement between the Borrower and the Associa-
tion, for expenditures made (or, if the Association shall so
agree, to be made) in respect of the reasonable cost of goods and
services required for the Project and to be financed out of the
proceeds of the Credit.
Section 2.03. Except as the Association shall otherwise
agree, procurement of the goods to be financed out of the proceeds
of the Credit, shall be governed by the provisions of Schedule 3
to this Agreement.
Section 2.04. The Closing Date shall be March 31, 1983
or such later date as the Association shall establish.       The
Association shall promptly notify the Borrower of such later
date.
Section 2.05. The Borrower shall pay to the Association
a service charge at the rate of three-fourths of one per cent
(3/4 of 1%) per annum on the principal amount of the Credit
withdrawn and outstanding from time to time.
Section 2.06. Service charges shall be payable semiannually
on January 1 and July 1 in each year.


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Section 2.07. The Borrower shall repay the principal amount
of the Credit in semiannual installments payable on each January 1
and July 1 commencing July 1, 1988, and ending January 1, 2028
each installment to and including the installment payable on
January 1, 1998, to be one-half of one per cent (1/2 of 1%) of
such principal amount, and each installment thereafter to be one
and one-half per cent (1-1/2%) of such principal amount.
Section 2.08. The currency of the United States of America
is hereby specified for the purposes of Section 4.02 of the
General C!nditions.
ARTICLE III
Execution of the Project
Section 3.01. The Borrower shall carry out the Project
through the Authority with due diligence and efficiency and in
conformity with appropriate financial, administrative and engi-
neering practices, and shall provide, promptly as needed, the
funds, facilities, services and other resources required for the
purpose.
Section 3.02. In order to assist the Authority in its opera-
tions, the Borrower shall employ, or cause the Authority to
employ, experts whose qualifications, experience and terms and
conditions of employment shall be satisfactory to the Association.
Such experts will be employed in the numbers, for the periods and
for the positions agreed between the Borrower and the Association.
Section 3.03. For the implementation of Part D.1 of the Proj-
ect, the Borrower shall cause the Authority: (i) to establish a
training division located at the Authority's headquarter; such
division shall be responsible for the development of the Author-
ity's over-all training policy, the preparation of training
programs, including those under the Project, and the supervision
of training operations; (ii) to employ, under procedures accept-
able to the Association, specialists whose qualifications, experi-
ence and terms and conditions of employment shall be satisfactory
to the Association; three of such specialists shall work as heads
of said training division, VTC and TPU, respectively, and the rest
as training instructors; (iii) to employ, or provide from the
existing staff of the Authority, qualified local technicians to
work as assistant instructors with said specialists in the imple-
mentation of the training program under Part D.1 of the Project,


in numbers adequate to ensure the effective implementation of said
program; and (iv) to ensure that the maintenance personnel of the
Authority is assigned periodically and at reasonable intervals to
attend training programs at VTC and TPU.
Section 3.04. For the implementation of Part E of the Proj-
ect, the Borrower shall employ, or cause the Authority to employ,
engineering consultants whose qualifications, experience and terms
and conditions of employment shall be satisfactory to the Asso-
ciation.
Section 3.05. The Borrower shall cause the road included
under Part A.1 and the stations included under Part A.2 of the
Project to be constructed in accordance with design standards
acceptable to the Association.
Section 3.06. (a) The Borrower undertakes to insure, or
make adequate provision for the insurance of, the imported goods
to be financed out of the proceeds of the Credit against hazards
incident to the acquisition, transportation and delivery thereof
to the place of use or installation, and for such insurance
any indemnity shall be payable in a currency freely usable by
the Borrower to replace or repair such goods.
(b) Except as the Association shall otherwise agree, the
Borrower shall cause all goods and services financed out of
the proceeds of the Credit to be used exclusively for the Project.
Section 3.07. (a) The Borrower shall furnish, or cause the
Authority to furnish, to the Association, promptly upon their
preparation, the plans, specifications, reports, contract docu-
ments and construction and procurement schedules for the Project,
and any material modifications thereof or additions thereto, in
such detail as the Association shall reasonably request.
(b) The Borrower: (i) shall maintain, or cause the Authority
to maintain, records and procedures adequate to record and mor'tor
the progress of the Project (including its cost and the benefits
to be derived from it), to identify the goods and services
financed out of the proceeds of the Credit, and to disclose their
use in the Project; (ii) shall enable the Association's accredited
representatives to visit the facilities and construction sites
included in the Project and to examine the goods financed out of
the proceeds of the Credit and any relevant records and documents;
and (iii) shall furnish, and shall cause the Authority to furnish,


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to the Association at regular intervals all such information as
the Association shall reasonably request concerning the Project,
its cost and, where appropriate, the beaefits to be derived from
it, the expenditure of the proceeds of the Credit and the goods
and services financed out of such proceeds.
(c) Promptly after completion of the Project, but in any
event not later than six months after the Closing Date or such
later date as may be agreed for this purpose between the Borrower
and the Association, the Borrower, acting through the Authority,
shall prepare and furnish to the Association a report, of such
scope and in such detail as the Association shall reasonably
request, on the execution and initial operation of the Project,
its cost and the benefits derived and to be derived from it, the
performance by the Borrower and the Association of their respec-
tive obligations under the Development Credit Agreement and the
accomplishment of the purposes of the Credit.
ARTICLE IV
Other Covenants
Section 4.01. The Boarower shall cause the Authority to
maintain records adequate to reflect in accordance with consis-
tently maintained appropriate accounting practices the operations
and financial condition of the Authority.
Section 4.02. (a) The Borrower, acting through the Authority,
shall ensure that the dimensions and axle loads of vehicles using
the Borrower's roads are consistent with the structural and
geometric design standards of the roads used.
(b) In order to enable the Authority to effectively enforce
the provisions of the preceding paragraph (a), the Borrower shall:
(i) ensure that the stations for vehicle loading control to be
established under Part A (2) of the Project, will operate under
competent management and technical staff and in accordance with
appropriate administrative procedures; and (ii) issue, within
three years from the date of this Agreement, the detailed execu-
tive regulations necessary for the efficient enforcement, by the
Authority assisted by the Borrower's concerned agencies, of the
Borrower's legislation and regulation on vehicle loading control
over the paved road system of the Borrower.
Section 4.03. Without any limitation or restriction upon any
of its other obligations under this Agreement, the Borrower shall


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provide the Authority with funds in local and foreign currencies,
sufficient to procure, operate and maintain the road maintenance
equipment and spare parts required under the Borrower's road
maintenance program for the fiscal years 1978/1979 through
1980/1981.
Section 4.04. Without limitation upon the provisions of
Section 4.03 of this Agreement, the Borrower shall cause the
Authority to adequately maintain the Borrower's highway system and
road maintenance equipment and shall cause all necessary repairs
and renewals thereof to be made promptly, all in accordance with
appropriate engineering standards and economic practices, and
shall provide, promptly as needed, the funds, facilities, services
and other resources required for the foregoing.
Section 4.05. The Borrower shall cause the Authority to
introduce operational and accounting procedures adequate to ensure
the functional separation between the Authority's maintenance and
construction divisions.
ARTICLE V
Remedies of the Association
Section 5.01. For the purposes of Section 6.02 of the General
Conditions, the following additional events are specified pursuant
to paragraph (h) thereof:
(a) The Co-Financier Loan Agreement shall have failed
to become effective by March 31, 1979, or such other date as the
Association may establish; provided, however, that the provisions
of this paragraph shall not apply if the Borrower establishes to
the satisfaction of the Association that adequate funds for the
Project are available to the Borrower from other sources on terms
and conditions consistent with the obligations of the Borrower
under this Agreement.
(b) (i) subject to subparagraph (ii) of this paragraph:
(A) the right of the Borrower to withdraw the
proceeds of the Co-Financier loan shall have
been suspended, cancelled or terminated in
whole or in part, pursuant to the terms of the
Co-Financier Loan Agreement; or


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(B) the Co-Financier Loan shall have become due
and payable prior to the agreed maturity
thereof.
(ii) subparagraph (i) of this paragraph shall not apply
if the Borrower establishes to the satisfaction of
the Association that:
(A) such   suspension,  cancellation,   termination
or prematuring is not caused by the failure of
the Borrower to perform any of its obligations
under such agreement; and
(B) adequate funds for the Project are available
to the Borrower from other sources on terms
and conditions consistent with the obligations
of the Borrower under this Agreement.
Section 5.02. For the purposes of Section 7.01 of the
General Conditions, the following additional event is specified
pursuant to paragraph (d) thereof, namely, that the event speci-
fied in paragraph (b) (i) (B) of Section 5.01 of this Agreement
shall occur.
ARTICLE VI
Effective Date; Termination
Section 6.01. The following events are specified as addi-
tional conditions to the effectiveness of the Development Credit
Agreement within the meaning of Section 12.01 (b) of the General
Conditions:
(a) the Co-Financier Loan Agreement has been duly signed
on behalf of the parties thereto; and
(b) the Borrower has employed pursuant to Section 3.03 of
this Agreement, an equipment procurement officer and a Chief
Engineer (or an acting Chief Engineer).
Section 6.02. The date September 28, 1978, is hereby speci-
fied for the purposes of Section 12.04 of the General Conditions.
Section 6.03. The obligations of the Borrower under Article
IV of this Agreement and the provisions of Section 5.02 of this


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Agreement shall cease and determine on the date on which the
Development Credit Agreement shall terminate or on a date twenty
years after the date of this Agreement, whichever shall be the
earlier.
ARTICLE VII
Representatives of the Borrower; Addresses
Section 7.01. The Central Planning Organization 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:
Central Planning Organization
P.O. Box 175
Sanaa
Yemen Arab Republic
Cable address:                    Telex:
CENPLAN                           266
For the Association:
International Development Association
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:                    Telex:
INDEVAS                           440098 (ITT)
Washington, D.C.                  248423 (RCA) or
64145 (WUI)


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IN WITNESS WHEREOF, the parties hereto, acting through their
representatives thereunto duly authorized, have caused this
Agreement to be signed in their respective names in the District
of Columbid, United States of America, as of the day and year
first above written.
YEMEN ARAB REPUBLIC
By Is/ Abduljalil Homarah
Authorized Representative
INTERNATIONAL DEVELOPMENT ASSOCIATION
By /s/ Munir P. Benjenk
Regional Vice President
Europe, Middle East and North Africa


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SCHEDULE 1
Withdrawal of the Proceeds of the Credit
1.   The table below sets forth the Categories of imported items
to be financed out of the proceeds of the Credit, the allocation
of amounts of the Credit to each Category and the percentage of
expenditures for items so to be financed in each category:
Amount of the
Credit Allocated          % of
(Expressed in        Expenditures
Category                 Dollar Equivalent)    to be Financed
(1) Equipment and                 4,200,000        100% of foreign
spare parts for                                expenditures
road maintenance
and training
(2) Consultants'                  1,000,000        100% of foreign
services                                       expenditures
(3) Technical Assistance          4,300,000        100% of foreign
and Training                                   expenditures
(4) Unallocated                   2,000,000
TOTAL    11,500,000
2.   For the purposes of this Schedule, the term "foreign expen-
ditures" 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.
3.   The disbursement percentages have been calculated in compli-
ance with the policy of the Association that no proceeds of the
Credit 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 Credit
decreases or increases, the Association may, by notice to the


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Borrower, increase or decrease the disbursement percentage then
applicable to such item as required to be consistent with the
aforementioned policy of the Association.
4.   Notwithstanding the provisions of paragraph 1 above, no
withdrawals shall be made in respect of payments made for expendi-
tures prior to the date of this Agreement.
5.   Notwithstanding the allocation of an amount of the Credit
or the disbursement percentage set forth in the table in paragraph
1 above, if the Association has reasonably estimated that the
amount of the Credit then allocated to any Category will be
insufficient to finance all expenditures in that Category, the
Association may, by notice to the Borrower: (i) reallocate to such
Category, to the extent required to meet such estimated shortfall,
proceeds of the Credit which are then allocated to another
Category and which in the opinion of the Association are not
needed to meet other expenditures; and (ii) if such reallocation
cannot fully meet the estimated shortfall, reduce the disburse-
ment percentage then applicable to such expenditures in order
that further withdrawals under such Category may continue until
all expenditures thereunder shall have been made.
6.   If the Association 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, no expen-
ditures for such item shall be financed out of the proceeds of
the Credit and the Association may, without in any way restricting
or limiting any other right, power or remedy of the Association
under the Development Credit Agreement, by notice to the Borrower,
cancel such amount of the Credit as, in the Association's reason-
able opinion, represents the amount of such expenditures which
would otherwise have been eligible for financing out of the
proceeds of the Credit.


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SCHEDULE 2
Description of the Project
The Project consists of the following parts:
Part A:   Construction and Related Supervision
1.   The resurfacing of about 3 km at the turn-off to Turba
on the Taiz-Mocha road.
2.   The construction of five stations for vehicle loading
control.
3.   The construction of buildings for five maintenance
stations, mechanical workshops, and warehouses and
offices for three regional centers.
4.   The construction of extensions to a training center for
the Authority at Taiz.
Part B:   Equipment for the Authority
1.   The provision of road maintenance equipment and spare
parts.
2.   The provision of workshop and training equipment
and spare parts.
Part C:   Road Maintenance
The implementation of a road maintenance program for
the years 1978/79 through 1980/81 for a road network of
about 1,700 km of paved and about 1,000 km of gravel
roads.
Part D:   Training and Technical Assistance
1.   A training program for the Authority's maintenance
personnel, including the provision of on the job train-
ing and fellowships for overseas training.
2.   Technical assistance comprising the employment of 20
experts to fill key on-line positions in the Authority.


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Part E:   Studies
1.   The preparation of a highway master plan.
2.   The preparation of the detailed engineering for
strengthening some priority sections in the Borrower's
paved roads.
The Project is expected to be completed by March 31, 1982.


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SCHEDULE 3
Procurement
A.   International Competitive Bidding
1.   Except as provided in Part B hereof, contracts for the
purchase of goods shall be procured in accordance with proced-
ures consistent with those set forth in the "Guidelines for
Procurement under World Bank Loans and IDA Credits" published by
the Bank in March 1977 (hereinafter called the Guidelines), on the
basis of international competitive bidding as described in Part A
of the Guidelines.
2.   For goods to be procured on the basis of international com-
petitive bidding under the Project and in addition to the require-
ments of paragraph 1.2 of the Guidelines, the Borrower shall
prepare and forward to the Association as soon as possible,
and in any event not later than 60 days prior to the date of
availability to the public of the first tender documents relating
thereto, a general procurement notice, in such form and detail and
containing such information as the Association shall reasonably
request; the Association will arrange for the publication of such
notice in order to provide timely notification to prospective
bidders of the-opportunity to bid for the goods in question. The
Borrower shall provide the necessary information to update such
notice annually so long as any goods remain to be procured on the
basis of international competitive bidding.
B.   Other Procurement Procedures
Contracts for the purchase of goods estimated to cost not
more than the equivalent of $100,000 per contract and $600,000 in
the aggregate, may be awarded in accordance with the applicable
procedures of the Borrower acceptable to the Association.
C.   Review of invitations to bid and of proposed awards and
final contracts:
1.   With respect to all contracts estimated to cost the equiva-
lent of $100,000 or more:
(a) Before bids are invited, the Borrower shall furnish
to the Association, for its comments, the text of the invitations
to bid and the specifications and other bidding documents,
together with a description of the advertising procedures to be


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followed for the bidding, and shall make such modifications in the
said documents or procedures as the Association shall reasonably
request. Any further modification to the bidding documents shall
require the Association's concurrence before it is issued to the
prospective bidders.
(b) After bids have been received and evaluated, the Bor-
rower shall, before a final decision on the award is made, inform
the Association of the name of the bidder to which it intends to
award the contract and shall furnish to the Association, in suffi-
cient time for its review, a detailed report on the evaluation and
comparison of the bids received, and such other information as the
Association shall reasonably request. The Association shall, if it
determines that the intended award would be inconsistent with the
Guidelines or this Schedule, promptly inform the Borrower and
state the reasons for such determination.
(c) The terms and conditions of the contract shall not,
without the Association's concurrence, materially differ from
those on which bids were asked.
(d) Two conformed copies of the contract shall be furnished
to the Association promptly after its execution and prior to
the submission to the Association of the first application for
withdrawal of funds from the Credit Account in respect of such
contract.
2.   With respect to each contract to be financed out of the pro-
ceeds of the Credit and not governed by the preceding paragraph,
the Borrower shall furnish to the Association, promptly after
its execution and prior to the submission to the Association of
the first application for withdrawal of funds from the Credit
Account in respect of such contract, two conformed copies of such
contract, together with the analysis of the respective bids,
recommendations for award and such other information as the
Association shall reasonably request. The Association shall, if it
determines that the award of the contract was not consistent with
the Guidelines or this Schedule, promptly inform the Borrower and
state the reasons for such determination.