CONFORMED COP! CREDIT NUMBER 479 IND Development Credit Agreement (Bali Tourism Project) BETWEEN REPUBLIC OF INDONESIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JUNE 14, 1974 CONFORMED COPY CREDIT NUMBER 479 IND Development Credit Agreement (Bali Tourism Project) BETWEEN REPUBLIC OF INDONESIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JUNE 14, 1974 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 14, 1974, between REPUBLIC OF INDONESIA (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). 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) "BTDC" means P.T. Bali Tourism Development Corporation, a limited liability company (perseroan terbatas) established and operating under the laws of the Borrower; (b) "BTDB" means Bali Tourism Development Board established by Presidential Decree No. 26 of 1972 of the Borrower; (c) "PLN" means Perusahaan Umum Listrik Negara, a public corporation established and operating under the laws of the Borrower; (d) "PERUMTEL" means Perusahaan Unum Telekomunikasi, a public corporation established and operating under the laws of the Borrower; (e) "Estate" means the tourism estate included in the Project; and (f) "Governing Laws" means the Charter of BTDC dated November 12, 1973 as published in the Borrower's Lembaran Negara and the Statement of Objectives, referred to in Section 3.04(c) of this Agreement, concurred to by the Association, all as amended with the concurrence of the Association. 4 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 equivalent to sixteen million dollars ($16,000,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule I to this Agreement, as such Schedule may be amended from time to time, for expenditures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 described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Credit. (b) The Borrower hereby designates the following representatives for the purpose of taking any action required or permitted to be taken under the provisions of paragraph (a) of this Section and Article V of the General Conditions: (i) BTDC for any such action under Categories I, II and III in Schedule 1 to this Agreement, in respect of goods or services required for Part A of the Project; and (ii) PERUMTFL for any such action under Category II in Schedule 1 to this Agreement, in respect of goods or services required for the telecommunication facilities included in Part B.3 of the Project. Section 2.03. Except as the Association shall otherwise agree, contracts for the purchase of goods, the carrying out of works or services (other than consultants' services) for the Project and to be financed out of the proceeds of the Credit, shall be awarded in accordance with the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be August 31, 1979 or such other date as shall be agreed between the Borrower and the Association. 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 semi-annually on April 15 and October 15 in each year. 5 Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each April 15 and October 15 commencing October 15, 1984, and ending April 15, 2024, each installment to and including the installment payable on April 15, 1994 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 Conditions. ARTICLE III Execution of the Project Section 3.01. The Borrower shall cause the Project to be carried out with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and agricultural practices as follows: (a) BTDC shall carry out Part A of the Project; (b) the roads included in Part B of the Project shall be constructed under the responsibility of the Borrower's Ministry of Public Works and Power; (c) the power facilities included in Part B of the Project shall be constructed by PLN; (d) the telecommunication facilities included in Part B of the Project shall be installed by PERUMTEL; and (e) the program included in Part C of the Project shall be carried out under the responsibility of the Borrower's Ministry of Agriculture. The Borrower shall cause all its departments, agencies and political subdivisions and all agencies of its political subdivisions, responsible for carrying out the Project or any part thereof, to cooperate effectively with each other. The Borrower shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 3.02. (a) For the purpose of carrying out the Project, and without limitation upon the foregoing, the Borrower shall, except as the Association may otherwise agree: (i) enter into arrangements with PLN, in form and substance satisfactory to the Association, pursuant to which the Borrower 6 shall provide to PLN promptly as needed the funds required to construct the power generation, transmission and distribution facilities included in Part B of the Project, and PLN shall complete such facilities as and when required to serve the Estate; (ii) make available to BTDC the funds required from time to time to meet the expenditures on Part A of the Project, under a financing agreement entered into between the Borrower and BTDC on terms and conditions satisfactory to the Association including inter alia that the proceeds of the Credit allocated from time to time to the expenditures on Part A of the Project shall be relent to BTDC and that the balance of the funds required by BTDC to carry out Part A of the Project shall be made available in the form of equity contributions; the Borrower shall ensure that sufficient liquid funds to cover the budgeted expenditures estimated by BTDC to be made on Part A of the Project during each calendar quarter shall be available to BTDC not later than the fifteenth day of each such quarter; (iii) relend the proceeds of the Credit allocated from time to time to expenditures for the telecommunication facilities included in Part B of the Project to PERUMTEL under a subsidiary loan agreement to be entered into between the Borrower and PERUMTEL on terms and conditions satisfactory to the Association; and (iv) pass on the proceeds of the Credit allocated from time to time to other expenditures on the Project by the Borrower in the form of budgetary transfers. (b) The Borrower shall exercise its rights under said financing agreement and subsidiary loan agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive either agreement or any provision thereof. Section 3.03. The Borrower shall ensure that the following consultants acceptable to the Association shall be employed, upon terms and conditions satisfactory to the Association, to assist as and when needed in the carrying out of the Project: (a) an expert familiar with Balinese society and culture and the impact of tourism thereon, to be employed by BTDB; 7 (b) an expert in land development planning, to be employed by BTDB; (c) consultants for final design and supervision of construction of the civil works included in, and for assistance with procurement under, Part A of the Project, to be employed by BTDC; (d) an expert in tourism-related land development and the hotel industry and a financial expert to assist BTDC's President Director, an accounting firm to assist BTDC's Financial Director and an engineering consultant to assist BTDC's Director of Technical Operations, all to be employed by BTDC to provide assistance in the initial management and operation of the Estate; and (e) an agricultural consultant to assist in the establishment and initial operation of the demonstration farm, and a poultry expert to assist in the development and implementation of the program for the improvement of poultry and egg production, included in Part C of the Project, both to be employed by the Office of Agriculture of the Province of Bali. Section 3.04. Except as the Borrower and the Association shall otherwise agree, the Borrower shall: (a) cause BTDC to prepare by December 31, 1974 a diagram setting forth in detail the critical path for carrying out the Project, to review such critical path quarterly with all departments, agencies, political subdivisions and agencies of political subdivisions of the Borrower, responsible for the carrying out of the Project or any part thereof, and furnish semi-annually to the Association the results of such reviews; (b) ensure that the civil works inct ded in Parts A, B.1 and C of the Project will be carried out by contractors acceptable to the Association upon terms and conditions satisfactory to the Association; (c) cause BTDC to determine and submit to the Association not later than December 31, 1974 for its concurrence a statement of objectives; (d) cause BTDC to furnish to the Association not later than December 3 1, 1974 copies of its proposed model form of lease and lease-sale agreements, and a statement of its lease policies based on its statement of objectives referred to in the preceding paragraph (c), and shall ensure that BTDC will enter into such agreements only in accordance with lease policies acceptable to the Borrower and the Association; (e) ensure that the Governor for Bali will issue not later than March 3 1, 1975 a decree promulgating appropriate zoning regulations for the Bukit Peninsula (Bali); 8 (f) cause BTDC to furnish to the Association not later than December 3 1, 1974 copies of the schedule of accommodation of the hotel training center included in Part A of the Project and its equipment, as well as the curricula, student selection criteria and staffing plan for the center, fLrnish to the Association not later than June 30, 1975 copies of the final detailed design of such center and equipment, and to implement such designs, curricula, selection criteria and staffing plan only after their approval by the Borrower and the Association; (g) cause Bank Rakyat Indonesia to provide adequate medium-term credit on reasonable terms to the farmers designated by the Office of Agriculture of the Province of Bali to participate in the poultry and egg production improvement program included in Part C of the Project; and (h) cause BTDC to establish a detailed organization plan including staff requirements for its operations and to furnish to the Association a copy of such plan not later than December 31, 1975. Section 3.05. (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, all goods and services financed out of the proceeds of the Credit shall be used exclusively for the Project until its completion. Section 3.06. (a) The Borrower shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents 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 records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit, and to disclose the use thereof 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 to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds. 9 Section 3.07. The Borrower shall take or cause to be taken all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for the construction (and operation) of the facilities included in the Project and shall furnish to the Association, promptly after such acquisition, evidence satisfactory to the Association that such land and rights in respect of land are available for purposes related to the Project. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall cause BTDC to maintain records adequate to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of BTDC. (b) The Borrower shall cause BTDC to: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of BTDC and the audit thereof as the Association shall from time to time reasonably request. Section 4.02. The Borrower shall cause BTDC to take out and maintain with responsible insurers, or to make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 4.03. The Borrower shall ensure that BTDC shall: (a) at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with its Governing Laws and with sound business, financial and tourism practices and under the supervision of experienced and competent management, assisted by qualified staff in adequate numbers; (b) before making an appointment to the position of President Director, Technical Director, Financial Director or Chief of the Technical Field Unit, inform the Association of the names, qualifications and experience of the persons 10 considered for such appointment and afford the Association a reasonable opportunity to exchange views with BTDC on the qualifications and experience of such persons; (c) 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 its business; (d) at all times operate and maintain its installations, equipment and other property, and promptly as required make all necessary repairs and renewals thereof, all in accordance with sound business and engineering practices; and ( not sell, lease, transfer or otherwise dispose of any of its property or assets, except in the normal course of its business, unless the Borrower and the Association shal otherwise agree. Section 4.04. The Borrower shall ensure that BTDC shall be advised on the management and operation of the hotel training center included in the Project by a committee chaired by a senior official of BTDC and including in its membership representatives of the Tourism Office of the Province of Bali and the hotels situated on the Estate. Section 4.05. Until 1985, the Borrower shall continue to limit the number of hotel rooms of international standard offered on Bali outside the Estate to 1,600 rooms or such other limit as shall be agreed between the Borrower and the Association. For the purposes of this Section, the term "hotel room of international standard" shall mean any fully air-conditioned guest bedroom in a hotel which has at least one hundred air conditioned guest bedrooms, modern kitchen facilities and a swimming pool. Section 4.06. Except as the Association shall otherwise agree, the Borrower shall ensure until 1985 that BTDC shall not incur any debt other than the debt incurred under its financing agreement referred to in Section 3.02 of this Agreement. For the purpose of this Section: (i) "debt" means any indebtedness of BTDC maturing by its terms more than one year after the date on which it is originally incurred; and (ii) debt shall be deemed to be incurred on the date of execution and delivery of a contract, loan agreement or other instrument providing for such debt. Section 4.07. (a) Except as the Borrower and the Association shall otherwise agree, the Borrower shall cause BTDC: (i) to establish, maintain and collect for each of BTDC's fiscal years water supply, sewerage and waste disposal tariffs which, if BTDC were to sell 2,600,000 cubic meters of water during such year, would yield a return of at least eleven per cent (I 1%) of the average current gross value of BTDC's fixed assets in operation in the same year for the provision of water supply, sewerage and waste disposal services; and (ii) to review, before June 1 in each of its fiscal years, on the basis of realistic forecasts of revenues and costs, the adequacy of its tariffs and sales of water to produce in the current fiscal year such annual return, and to furnish to the Association the results of such review. (b) The annual rate of return specified in paragraph (a) shall be calculated by using as the denominator the average between the aggregate current gross values of BTDC's fixed assets in operation for the provision of water supply, sewerage and waste disposal services at the beginning and at the end of the fiscal year for which the calculation is made and as numerator the operating income of BTDC for the same fiscal year and accountable to the same services. (c) Until one tnousand seven hundred (1,700) hotel guest bedrooms will have been placed into service on the Estate, the Borrower shall promptly as needed provide sufficient liquid funds to BTDC to cover any cash deficit which BTDC might incur. (d) For the purposes of this Section: (i) the term "current gross value of BTDC's fixed assets" means at any given date the gross value of such assets as valued or revalued in accordance with appropriate methods acceptable to the Association; and (ii) the term "operating income" shall mean the difference between: (1) all operating revenues accruing from BTDC's water supply, sewerage and waste disposal services; and (2) all operating and administrative costs relating thereto, including maintenance and taxes, if any, but excluding provision for depreciation and debt service requirements. 12 Section 4.08. (a) The Borrower shall cause BTDB to realize its purpose and assist the Province of Bali in the development of tourism on Bali, in accordance with appropriate administrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) The Borrower shall cause BTDB to establish a secretariat which shall be adequately staffed with qualified and experienced personnel, and cause the secretariat to cooperate closely with the Tourism Office of the Province of Bali. ARTICLE V Remedies of the Association Section 5.01. The Association may, upon the occurrence of certain events specified in Sections 6.02 or 7.01 of the General Conditions or in Sections 5.02 and 5.03 of this Agreement and the continuance thereof for the period, if any, specified for the purpose: (i) suspend in whole or in part the right of the Borrower to make withdrawals from the Credit Account or (ii) declare the principal of the Credit then outstanding to be due and payable immediately together with the charges thereon. Section 5.02. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of BTDC or BTDB or for the suspension of their respective operations; (b) the Borrower shall have suspended, terminated, repealed or substantially amended any of the Governing Laws or any provision thereof, to affect materially and adversely the management or operations of BTDC; and (c) BTDC shall have become unable to pay its debts as they mature or any action or proceeding shall have been taken by BTDC or by others whereby any of the property of BTDC shall or may be distributed among its creditors. Section 5.03. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified, namely, that any of the events specified in Section 5.02 of this Agreement shall occur. 13 ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01(b) of the General Conditions: (a) The execution and delivery of the financing agreement and subsidiary loan agreement referred to in Section 3.02 of this Agreement between the Borrower and BTDC and PERUMTEL, respectively, have been duly authorized and ratified by all necessary corporate and governmental action. (b) The Chief of the Technical Field Unit of BTDC has been appointed and has taken up his post. (c) The land development and hotel expert specified in Section 3.03(d) of this Agreement has been appointed and has taken up his post. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02(b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) That the financing agreement and subsidiary loan agreement referred to in paragraph (a) of the preceding Section have been duly authorized and ratified by, and executed and delivered on behalf of, the Borrower, BTDC and PERUMTEL, respectively, and constitute valid and binding obligations of the respective parties thereto in accordance with their respective terms. (b) That BTDC has been duly established as a perseroan terbatas and that its Charter has been published in the Borrower's Lembaran Negara and together with the approval of the Charter by the Borrower's Minister of Justice duly transcribed into the appropriate public registers. (c) That BTDC has the free use of at least 310 ha. of land situated at Nusa Dua (Bali) for a period of not less than thirty years. Section 6.03. The date September 12, 1974, is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.04. The obligations of the Borrower under Article IV of this Agreement and the provisions of Section 5.03 of this Agreement shall cease and 14 determine on the date on which the Development Credit Agreement shall terminate or on a date twenty-five years after the date of this Agreement, whichever shall be the earlier. 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 Post Office Box 21 Jakarta Indonesia Cable address: MINISTRY FINANCE Jakarta For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed 15 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/ Abdul Habir Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / Raymond J. Goodman Acting Regional Vice President Asia 16 SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the 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 Category(Expressed in Expenditures Ctgr Dollar Equivalent) to be Financed I. Civil works 7,000 50% (representing for Parts A, the estimated for- B.1 and C of eign expenditure the Project component) II. Vehicles (other 2,400,000 100% of foreign than sedans and expenditures, 95% station wagons), of local expend- equipment and itures ex-factory, furniture other and 70% of other than for Part B.2 local expenditures of the Project, for goods and telephone cables 111. Consultants' 1,900,000 100% of foreign services and expenditures overseas training IV. Unallocated 3,00,00 TOTAL 16,000,000 2. For the purposes of this Schedule: (a) the term 'foreign expenditures" means expenditures for goods or services supplied from the territory, and in the currency, of any country other than the Borrower; and 17 (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 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 any event occurs which shall affect the amount of any such taxes included in the cost of any item to be financed out of the proceeds of the Credit, the Association may, by notice to the Borrower, correspondingly adjust the disbursement percentage then applicable to such item. 4. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of expenditures prior to the date of this Agreement, except that withdrawals may be made up to an aggregate amount of $250,000 equivalent under Category I and up to an aggregate amount of $100,000 equivalent under Category III on account of expenditures incurred after July 1, 1973 and prior to the date of this Agreement. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph I above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of 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 disbursement 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 expenditures 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 reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. 18 SCHEDULE 2 Description of the Project The Project is for the development of tourism on the island of Bali and consists of the following: Part A: 1. The establishment of a torrism estate at Nusa Dua on the Bukit Peninsula adequate to accommodate hotels offering a combined total of about 2,500 guestrooms, together with the necessary infrastructure and utilities on the Estate (including internal roads and streets; electrical installations for the ammenity core and street lighting; facilities for water, sewerage and solid waste disposal; landscaping; and common buildings), and infrastructure improvements in the adjacent villages of Benoa and Bualu. 2. Design, construction and equipment of a hotel training center between Denpasar and Sanur capable of accommodating about three hundred basic-level trainees and about one hundred medium-level trainees. 3. Training of staff of BTDC. Part B: 1. Design and construction of an access road between Tuban airport and Nusa Dua and a road from Tuban airport to Tohpati by-passing Denpasar, and upgrading of the eleven multipurpose roads in the central part of Bali specified in the Annex to this Schedule 2. 2. Design and construction of a 5 Mw extension to the existing 30 Mw power generating plant near Denpasar and a 70 kV double circuit transmission line between the plant and the Estate together with switching substations and underground distribution network on the Estate. 3. Installation of telephone and telex facilities adequate to serve the needs of the Estate and the hotels to be established thereon. Part C: A program designed to develop the production and processing of Balinese agricultural products, including the creation of a ten ha. 19 demonstration farm for vegetable grading and seeds production, a special agricultural program including the provision of agricultural credit to improve poultry and egg production, and the establishment of equitable marketing arrangements for farmers supplying Balinese hotels and restaurants. The Project is expected to be completed by August 31, 1978. 20 ANNEX Multipurpose roads Approximate length Tohpati-Klungkung Road 36 km Klungkung-Besakih Road 22 km Peteluan-Bangli Road 11 km Sakah-Teges-Bedulu-Tampaksiring 20 km Teges-Ubud Road 5 km Bedulu-Semabaung Road 2 km Batubulan-Payangan Road 21 km Peguyangan-Sangeh Road 19 km Kediri-Tanahlot Road 11 km Ubung-Kediri Road 16 km Mengwitani-Pancasari Road 36 km 21 SCHEDULE 3 Procurement A. General Procedures 1. Except as provided in Part A.3 hereof, contracts shall be awarded under procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in April 1972, as revised in October 1972 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. Contracts will be grouped to the extent that this will be practical and economic. Bidders for civil works contracts shall be required to prequalify. 3. Advertisements for contracts for civil works or furniture estimated to cost the equivalent of $100,000 or less may be limited to newspapers of general circulation in Indonesia. Contracts for telecommunications equipment shall be awarded after negotiations with the manufacturers of such equipment then employed in Bali. B. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.f. Bali 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, shall be excluded; and (iii) the cost of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in Indonesia may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 22 (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Indonesia if the bidder shall have established to the satisfaction of the Borrower and the Association that the manufacturing cost of such goods includes a value 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 manufactured in Indonesia. (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be 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 evaluated group C bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid, or, if said customs duties and taxes exceed 15% of the c.i.f. price of such goods, (ii) 15% of the c.i.f. bid price of such goods. If the group A bid in such further comparison is the lowest evaluated bid, it shall be selected for the award; if not, the lowest evaluated bid from group C shall be selected. C. Evaluation and Comparison of Bids for Civil Works; Preferences for Domestic Contractors With respect to any contract for civil works included under Category I of the table set forth in Schedule 1 to the Development Credit Agreement, the Borrower may grant a margin of preference of 7-1/2% to domestic contractors, as determined by the Borrower, in accordance with, and subject to, the following provisions: 23 (a) Contractors shall be required to prequalify as provided in Part A of this Schedule and applicants for qualification applying also for such preference shall be asked to provide, as part of the information for qualification, such information, including details of ownership, as shall be required to determine whether, according to the classification established by the Borrower and accepted by the Association, a particular firm or group of firms qualifies for a domestic preference. The bidding documents shall clearly indicate the preference and the method that will be followed in the evaluation and comparison of bids to give effect to such preference. (b) After bids have been received and reviewed by the Borrower, responsive bids will be classified into the following groups: (i) bids offered by domestic contractors eligible for preference; and (ii) bids offered by other contractors. For the purpose of evaluation and comparison of bids an amount equal to 7-1/2% of the bid amount shall be added to bids received under group (ii) above. D. Review of Procurement Decisions by Association 1. Review of prequalification. The Borrower shall, before qualification is invited, inform the Association in detail of the procedure to be followed and shall introduce such modifications in said procedure as the Association shall reasonably request. The list of prequalified bidders, together with a statement of their qualifications and, where applicable, of their eligibility for domestic preference under Part C above and of the reasons for the exclusion of any applicant for prequalification and for such eligibility, shall be furnished by the Borrower to the Association for its comments before the applicants are notified, and the Borrower shall make such additions to, deletions from, or modifications in, the said list as the Association shall reasonably request. 2. Review of invitation to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equivalent of $200,000 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 24 to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Association shall reason- l0y 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 Borrower 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 the reasons for the intended award and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the recommendation for award 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 or prequalification was invited. (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. 3. With respect to each contract to be financed out of the proceeds 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 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.