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CONFORMED COPY
CREDIT NUMBER 3524 MAG
Development Credit Agreement
(Rural Development Support Project)
between
REPUBLIC OF MADAGASCAR
and
INTERNATIONAL DEVELOPMENT ASSOCIATION
Dated June 22, 2001
CREDIT NUMBER 3524 MAG
DEVELOPMENT CREDIT AGREEMENT
AGREEMENT, dated June 22, 2001, between REPUBLIC OF MADAGASCAR (the Borrower) 
and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association).
WHEREAS (A) the Borrower has issued a letter of rural development policy, dated 
April 12, 2001, describing a program of actions, objectives and policies, including 
development of its Plan d’Action pour le Développement Rural (PADR), designed to 
promote the formulation and implementation of its rural development policy objectives 
(hereinafter referred to as "the Program"), and declared its commitment to the 
execution of the Program;
(B)
the Borrower, having satisfied itself as to the feasibility and priority 
of the Project described in Schedule 2 to this Agreement, has requested the 
Association to assist in the financing of the Project; 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 set forth in this 
Agreement;
NOW THEREFORE the parties hereto hereby agree as follows:
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ARTICLE I
General Conditions; Definitions
Section 1.01. The "General Conditions Applicable to Development Credit 
Agreements" of the Association, dated January 1, 1985 (as amended through October 6, 
1999), with the modifications set forth below to this Agreement (the General 
Conditions), constitute an integral part of this Agreement: 
(a)
A new paragraph (12) is added to Section 2.01 to read as set forth below, 
and the existing paragraphs (12) through (14) of said Section are accordingly 
renumbered as paragraphs (13) through (15):
"12.
‘Participating Country’ means any country that the Association 
determines meets the requirements set forth in Section 11 of Resolution No. 
194 of the Board of Governors of the Association, adopted on April 8, 1999; 
and ‘Participating Countries’ means, collectively, all such countries." ; and
(b)
The second sentence of Section 5.01 is modified to read:
"Except as the Borrower and the Association shall otherwise agree, no 
withdrawals shall be made: (a) on account of expenditures in the territories 
of any country which is not a Participating Country 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 Association, is prohibited by a decision of 
the United Nations Security Council taken under Chapter VII of the Charter of 
the 
United Nations."
Section 1.02. Unless the context otherwise requires, the several terms defined 
in the General Conditions and in the Preamble to this Agreement have the respective 
meanings therein set forth, and the following additional terms have the following 
meanings:
(a)
"Administrative, Accounting and Financial Manual" means the Borrower’s 
Administrative, Accounting and Financial Manual, dated March 26, 2001, giving details 
of administrative, accounting and financial procedures, and procurement and 
disbursement arrangements, as shall have been agreed with the Association for purposes 
of the implementation of the Project, as the same may be amended from time to time, 
and such term includes any schedules to the Administrative, Accounting and Financial 
Manual; 
(b)
"Beneficiary" means beneficiary of a Grant;
(c)
"Eligible Activity" means any activity under Part B or Part C of the 
Project, in respect of which a Grant has been, or may be, provided;
(d)
"Eligible Categories" means Category (1) set forth in the table in Part 
A.1 of Schedule 1 to this Agreement in respect of Parts A through C of the Project, 
and Categories (2) through (5) set forth in said table in respect of Parts D and E of 
the Project;
(e)
"Eligible Expenditures" means expenditures in respect of the reasonable 
cost of goods and services required for the Project, as well as amounts paid or to be 
paid under Grants, and to be financed out of the proceeds of the Credit allocated from 
time to time to the Eligible Categories in accordance with the provisions of Part A.1 
of Schedule 1 to this Agreement; 
(f)
"EPP" means Equipe Permanente de Pilotage, a permanent steering committee 
established by the Borrower to be responsible for the management of the PADR process;
(g)
"Grant" means a grant made, or to be made, out of the proceeds of the 
Credit to finance a Subproject or an Eligible Activity; 
(h)
"Grant Agreement" means an agreement referred to in paragraph 8 (g) of 
Schedule 4 to this Agreement, as the same may be amended from time to time, and such 
term includes all schedules and agreements supplemental to the Grant Agreement;
(i)
 "GTDR" means Groupe de Travail de Développement Rural Régional, a 
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regional rural development working group established by the Borrower in each of the 20 
Regions to be responsible for the management of the PADR process in the Region; 
(j)
"Implementation Manual" means the Implementation Manual referred to in 
paragraph 4 (a) of Schedule 4 to this Agreement, as same may be amended from time to 
time in agreement with the Association, and such term includes any schedules to the 
Implementation Manual;
(k)
"INSTAT" means Institut National de la Statistique, the Borrower’s 
National Statistics Institute;
(l)
"MINAGRI" means Ministère de l’Agriculture, the Borrower’s Ministry of 
Agriculture;
(m)
"MINEL" means Ministère de l’Elevage, the Borrower’s Ministry of 
Livestock;
(n)
"NPIU" means the National Project Implementation Unit referred to in 
paragraph 1 (b) of Schedule 4 to this Agreement;
(o)
"PADR" means Plan d’Action pour le Développement Rural, the Borrower’s 
Rural Development Action Plan established pursuant to Décret No. 99-022, dated January 
20, 1999, issued by the Prime Minister, to formulate and implement the Borrower’s 
rural development policy objectives;
(p)
"PPIU" means the Provincial Project Implementation Unit referred to in 
paragraph 2 (b) of Schedule 4 to this Agreement;
(q)
"PRDR" means Programme Régional pour le Développement Rural, the 
Borrower’s Regional Rural Development Program established to achieve its rural 
development objectives in each of the Regions;
(r)
"Project Account" means the project account referred to in Section 3.04 
to this Agreement;
(s)
"Project Management Report" means each report prepared in accordance with 
Section 4.02 of this Agreement;
(t)
"Project Preparation Advance" means the project preparation advance 
granted by the Association to the Borrower pursuant to the letter agreement signed on 
behalf of the Association on November 9, 2000, and countersigned on behalf of the 
Borrower on November 27, 2000;
(u)
"Project Steering Committee" or "PSC" means the Project Steering 
Committee referred to in paragraph 1 (a) of Schedule 4 to this Agreement; 
(v)
"Province" means any of the six main administrative sub-divisions of the 
Borrower’s territory;
(w)
"Region" means any of the twenty agro-ecological regions covered by a 
GTDR, and involved in the Project;
(x)
"Special Account" means either or both of the accounts referred to in 
Part B of Schedule 1 to this Agreement; 
(y)
"Subproject" means any activity under Part A of the Project, in respect 
of which a Grant has been, or may be, provided; and
(z)
"UPDR" means Unité de Politique de Développement Rural, the Borrower’s 
rural development policy unit.
ARTICLE II
The Credit
Section 2.01. The Association agrees to lend to the Borrower, on the terms and 
conditions set forth or referred to in the Development Credit Agreement, an amount in 
various currencies equivalent to sixty-nine million two hundred thousand Special 
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Drawing Rights (SDR 69,200,000).
Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit 
Account in accordance with the provisions of Schedule 1 to this Agreement for: (i) 
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; and (ii) amounts paid (or, if the Association shall so 
agree, to be paid) on account of withdrawals made under a Grant to meet the reasonable 
cost of eligible expenditures relating to a Subproject or other Eligible Activity, and 
in respect of which the withdrawal from the Credit Account is requested.
(b)
Promptly after the Effective Date, the Association shall, on behalf of 
the Borrower, withdraw from the Credit Account and pay to itself the amount required 
to repay the principal amount of the Project Preparation Advance withdrawn and 
outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn 
balance of the authorized amount of the Project Preparation Advance shall thereupon be 
canceled.
Section 2.03. The Closing Date shall be June 30, 2007 or such later date as the 
Association shall establish. The Association shall promptly notify the Borrower of 
such later date.
Section 2.04. (a) The Borrower shall pay to the Association a commitment charge 
on the principal amount of the Credit not withdrawn from time to time at a rate to be 
set by the Association as of June 30 of each year, but not to exceed the rate of 
one-half of one percent (1/2 of 1%) per annum.
(b)
The commitment charge shall accrue: (i) from the date sixty days after 
the date of this Agreement (the accrual date) to the respective dates on which amounts 
shall be withdrawn by the Borrower from the Credit Account or canceled; and (ii) at 
the rate set as of the June 30 immediately preceding the accrual date and at such 
other rates as may be set from time to time thereafter pursuant to paragraph (a) 
above. The rate set as of June 30 in each year shall be applied from the next date in 
that year specified in Section 2.06 of this Agreement.
(c)
The commitment charge shall be paid: (i) at such places as the 
Association shall reasonably request; (ii) without restrictions of any kind imposed 
by, or in the territory of, the Borrower; and (iii) in the currency specified in this 
Agreement for the purposes of Section 4.02 of the General Conditions or in such other 
eligible currency or currencies as may from time to time be designated or selected 
pursuant to the provisions of that Section.
Section 2.05. The Borrower shall pay to the Association a service charge at the 
rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of 
the Credit withdrawn and outstanding from time to time.
Section 2.06. Commitment charges and service charges shall be payable 
semiannually on May 1 and November 1 in each year.
Section 2.07. (a)  Subject to paragraphs (b), (c) and (d) below, the Borrower 
shall repay the principal amount of the Credit in semiannual installments payable on 
each   May 1 and November 1, commencing November 1, 2011 and ending May 1, 2041. Each 
installment to and including the installment payable on May 1, 2021 shall be one 
percent (1%) of such principal amount, and each installment thereafter shall be two 
percent (2%) of such principal amount.
(b)
Whenever: (i) the Borrower's per capita gross national product (GNP), as 
determined by the Association, shall have exceeded for three consecutive years  the 
level established annually by the Association for determining eligibility to access 
the Association's resources; and (ii) the Bank shall consider the Borrower 
creditworthy for Bank lending, the Association may, subsequent to the review and 
approval thereof by the Executive Directors of the Association and after due 
consideration by them of the development of the Borrower's economy, modify the 
repayment of installments under paragraph (a) above by: (A) requiring the Borrower to 
repay twice the amount of each such installment not yet due until the principal amount 
of the Credit shall have been repaid; and (B) requiring the Borrower to commence 
repayment of the principal amount of the Credit as of the first semiannual payment 
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date referred to in paragraph (a) above falling six months or more after the date on 
which the Association notifies the Borrower that the events set out in this paragraph 
(b) have occurred, provided, however, that there shall be a grace period of a minimum 
of five years on such repayment of principal.
(c)
If so requested by the Borrower, the Association may revise the 
modification referred to in paragraph (b) above to include, in lieu of some or all of 
the increase in the amounts of such installments, the payment of interest at an annual 
rate agreed with the Association on the principal amount of the Credit withdrawn and 
outstanding from time to time, provided that, in the judgment of the Association, such 
revision shall not change the grant element obtained under the above-mentioned 
repayment modification.
(d)
If, at any time after a modification of terms pursuant to paragraph (b) 
above, the Association determines that the Borrower's economic condition has 
deteriorated significantly, the Association may, if so requested by the Borrower, 
further modify the terms of repayment to conform to the schedule of installments as 
provided in paragraph (a) above.
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. (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 
the Project with due diligence and efficiency and in conformity with appropriate 
technical, administrative and financial practices, and with due regard to 
environmental and ecological considerations, 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 Association shall otherwise agree, the Borrower 
shall carry out the Project in accordance with the Implementation Program set forth in 
Schedule 4 to this Agreement.
(c)
The Borrower shall apply the proceeds of the Credit allocated to Category 
(1) of the table in paragraph 1 of Part A.1 of Schedule 1 to this Agreement to finance 
Grants under terms and conditions which shall have been approved by the Association, 
and which shall include the terms and conditions set forth in paragraph 8 of  Schedule 
4 to this Agreement.
Section 3.02. Except as the Association shall otherwise agree, procurement of 
the goods, works and consultants’ services required for the Project and to be financed 
out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to 
this Agreement.
Section 3.03. For the purposes of Section 9.06 of the General Conditions and 
without limitation thereto, the Borrower shall:
(a)
prepare, on the basis of guidelines acceptable to the Association, and 
furnish to the Association 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 
Association, a plan designed to ensure the continued achievement of the objectives of 
the Project; and
(b)
afford the Association a reasonable opportunity to exchange views with 
the Borrower on said plan.
Section 3.04. Without limitation upon its obligations under Section 3.01 of this 
Agreement, the Borrower shall:
(a)
maintain, in a commercial bank and on terms and conditions satisfactory 
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to the Association, an advance account in the currency of the Borrower (hereinafter 
referred to as the Project Account), to be operated and maintained by NPIU, into which 
it shall deposit from time to time its local counterpart contribution to the cost of 
the Project;
(b)
deposit into the Project Account an initial advance equivalent to 
$450,000, and thereafter replenish the Project Account on a quarterly basis, or 
whenever the balance thereof equals not more than one third of the amount of the 
initial deposit, whichever occurs first; and
(c)
ensure that funds deposited into the Project Account shall be used only 
for the purposes of defraying the cost of expenditures incurred in the execution of 
the Project which are not financed out of the proceeds of the Credit.
ARTICLE IV
Financial Covenants
Section 4.01. (a) The Borrower shall maintain or cause to be maintained a 
financial management system, including records and accounts adequate to reflect in 
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 Accounts, for each fiscal 
year audited, in accordance with appropriate 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 six months after the end of each such year, (A) 
certified copies of the financial statements referred to in 
paragraph (a) of this Section for such year as so audited; and (B) 
an opinion on such statements and reports of such audit, by said 
auditors, of such scope and in such detail as the Association 
shall have reasonably requested, including, as part of the 
information to be provided in each such report, a management 
letter concerning the Borrower's internal controls; and
(iii)
furnish to the Association such other information concerning said 
records and accounts and the audit thereof as the Association 
shall from time to time reasonably request.
(c)
For all expenditures with respect to which withdrawals from the Credit 
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 Association has received 
the audit report for the fiscal year in which the last withdrawal 
from the Credit Account was made, all records (contracts, orders, 
invoices, bills, receipts and other documents) evidencing such 
expenditures;
(iii)
enable the Association’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 
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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.
Section 4.02. (a) Without limitation upon the provisions of Section 4.01 of this 
Agreement, the Borrower shall carry out a time-bound action plan acceptable to the 
Association for the strengthening of its financial management system for the Project 
in order to enable the Borrower, not later than 18 months after the Effective Date, or 
such later date as the Association shall agree, to prepare quarterly Project 
Management Reports, acceptable to the Association, each of which:
(i) 
(A) sets forth actual sources and applications of funds for the 
Project, both cumulatively and for the period covered by said 
report, and projected sources and applications of funds for the 
Project for the six-month period following the period covered by 
said report, and (B) shows separately expenditures financed out of 
the proceeds of the Credit during the period covered by said 
report and expenditures proposed to be financed out of the 
proceeds of the Credit during the six-month period following the 
period covered by said report;
(ii)
(A) describes physical progress in Project implementation, both 
cumulatively and for the period covered by said report, and (B) 
explains variances between the actual and previously forecast 
implementation targets; and
(iii)
sets forth the status of procurement under the Project and 
expenditures under contracts financed out of the proceeds of the 
Credit, as at the end of the period covered by said report.
(b)
Upon the completion of the action plan referred to in paragraph (a) of 
this Section, the Borrower shall prepare, in accordance with guidelines acceptable to 
the Association, and furnish to the Association not later than 45 days after the end 
of each calendar quarter a Project Management Report for such period.
ARTICLE V 
Remedies of the Association
Section 5.01. Pursuant to Section 6.02 (l) of the General Conditions, the 
following additional event is specified, namely, that a situation has arisen which 
shall make it improbable that the Program, or a significant part thereof, will be 
carried out.
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 Project Steering Committee and NPIU have been established; 
(b)
the Project Account has been duly opened, and the amount of the initial 
advance deposited therein in accordance with Section 3.04 (b) of this Agreement;
(c)
the Borrower has appointed the auditors referred to in Section 4.01 (b) 
of this Agreement, under terms, conditions and terms of reference acceptable to the 
Association, and in accordance with the provisions of Section II of Schedule 3 to this 
Agreement;
(d)
the Implementation Manual has been duly approved by the Association, and 
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adopted by the Borrower; and
(e) 
PPIUs have been established in at least two Provinces, and the provincial 
director, accountant and procurement officer referred to in paragraph 3 (b) of 
Schedule 4 to this Agreement, duly recruited in each such PPIU under terms, conditions 
and terms of reference acceptable to the Association, and in accordance with the 
provisions of Section II of Schedule 3 to this Agreement. 
Section 6.02. 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.
Section 6.03. The obligations of the Borrower under Articles III and IV of this 
Agreement shall cease and determine on the date on which the Development Credit 
Agreement shall terminate or on the date fifteen 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 and Economy
B.P. 61
Antananarivo 101
Madagascar
Cable address: 
Facsimile:
MINFINECO
(261) 20 22 34530
Antananarivo
For the Association:
International Development Association
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
Facsimile:
INDEVAS
248423 (MCI) or
(202) 477-6391
Washington, D.C.
 64145 (MCI)
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized 
representatives, have caused this Agreement to be signed in their respective names in 
Antananarivo, Madagascar, as of the day and year first above written.
REPUBLIC OF MADAGASCAR
By /s/ Tantely Gabrio Andrianarivo
Authorized Representative
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INTERNATIONAL DEVELOPMENT ASSOCIATION
By /s/ Hafez Ghanem
Acting Regional Vice President
Africa Region
SCHEDULE 1
Withdrawal of the Proceeds of the Credit
A.
General
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
(Expressed in Expenditures
Category
SDR Equivalent)
to be Financed
(1)
Grants:
90% of amounts
of Grants disbursed
(a)
under Parts A.2 and A.3
   4,700,000 
of the Project
(b)
under Parts A.1, B and C  34,300,000
of the Project
(2)
Civil works
     100,000
100% of foreign
expenditures and
85% of local
expenditures
(3)
Equipment, vehicles
   1,600,000
100% of foreign
and materials 
expenditures and
85% of local
expenditures
(4)
Consultants’ services,
  16,900,000
100% of foreign
training and audits
expenditures and
85% of local
expenditures
(5)
Operating costs
   4,300,000
90%
(6)
Refunding of
     500,000
Amount due pursuant
Project Preparation
to Section 2.02 (b) of
Advance
this Agreement
(7)
Unallocated
   6,800,000
TOTAL
  69,200,000
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 
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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 "operating costs" means the incremental operating costs arising 
under the Project on account of local contractual support staff salaries, employment 
benefits, travel expenditures and other travel-related allowances; equipment rental 
and maintenance; vehicle operation, maintenance and repair; office rental and 
maintenance, materials and supplies; and utilities and communications' expenses.
3.
Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be 
made: 
(a)
in respect of payments made for expenditures prior to the date of this 
Agreement; and
(b)
 in respect of a Grant, unless the Grant has been provided in accordance 
with the procedures, and on the terms and conditions set forth or referred to in this 
Agreement and the Implementation Manual.
4.
The Association may require withdrawals from the Credit Account to be made on 
the basis of statements of expenditure for expenditures for: (i) goods under contracts 
not exceeding $50,000 equivalent; (ii) consulting and auditing services under 
contracts not exceeding $50,000 equivalent, in the case of consulting firms, and 
$30,000 equivalent, in the case of individual consultants; (iii) Grants for 
Subprojects or other Eligible Activities; (iv) civil works; (v) operating costs; and 
(vi) training, under such terms and conditions as the Association shall specify by 
notice to the Borrower.
B.
Special Accounts
1.
The Borrower shall open and maintain one special deposit account (hereinafter 
referred to as Special Account A) in respect of Category (1) of the table in Part A.1 
of Schedule 1 to this Agreement for the purposes of Parts A through C of the Project, 
and another special deposit account (hereinafter referred to as Special Account B) in 
respect of Categories (2), (3), (4) and (5) of the said table for the purposes of 
Parts D and E of the Project. Each special account shall be opened and maintained in 
dollars in a commercial bank on terms and conditions satisfactory to the Association, 
including appropriate protection against set-off, seizure or attachment. 
2.
After the Association has received evidence satisfactory to it that a Special 
Account has been opened, withdrawals from the Credit Account of amounts to be 
deposited into the Special Account shall be made as follows:
(a)
until the Association shall have received: (i) the first Project 
Management Report referred to in Section 4.02 (b) of this Agreement, and (ii) a 
request from the Borrower for withdrawal on the basis of Project Management Reports, 
withdrawals shall be made in accordance with the provisions of Annex A to this 
Schedule 1; and
(b)
upon receipt by the Association of a Project Management Report pursuant 
to Section 4.02 (b) of this Agreement, accompanied by a request from the Borrower for 
withdrawal on the basis of Project Management Reports, all further withdrawals shall 
be made in accordance with the provisions of Annex B to this  Schedule 1.
3.
Payments out of each Special Account shall be made exclusively for Eligible 
Expenditures.  For each payment made by the Borrower out of a Special Account, the 
Borrower shall, at such time as the Association shall reasonably request, furnish to 
the Association such documents and other evidence showing that such payment was made 
exclusively for Eligible Expenditures.
4.
Notwithstanding the provisions of Part B.2 of this Schedule, the Association 
shall not be required to make further deposits into a Special Account:
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(a)
if the Association determines at any time that any Project Management 
Report does not adequately provide the information required pursuant to Section 4.02 
of this Agreement;
(b)
if the Association determines at any time that all further withdrawals 
should be made by the Borrower directly from the Credit Account; or
(c)
if the Borrower shall have failed to furnish to the Association 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 Association pursuant to said Section in 
respect of the audit of: (A) the records and accounts for the Special Account, or (B) 
the records and accounts reflecting expenditures with respect to which withdrawals 
were made on the basis of Project Management Reports.
5.
The Association shall not be required to make further deposits into a Special 
Account in accordance with the provisions of Part B.2 of this Schedule, if, at any 
time, the Association shall have notified the Borrower of its intention to suspend in 
whole or in part the right of the Borrower to make withdrawals from the Credit Account 
pursuant to Section 6.02 of the General Conditions. Upon such notification, the 
Association shall determine, in its sole discretion, whether further deposits into the 
Special Account may be made and what procedures should be followed for making such 
deposits, and shall notify the Borrower of its determination.
6.
(a)
If the Association determines at any time that any payment out of a 
Special Account was made for an expenditure which is not an Eligible Expenditure, or 
was not justified by the evidence furnished to the Association, the Borrower shall, 
promptly upon notice from the Association, provide such additional evidence as the 
Association may request, or deposit into the Special Account (or, if the Association 
shall so request, refund to the Association) an amount equal to the amount of such 
payment.  Unless the Association shall otherwise agree, no further deposit by the 
Association 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.
(b)
If the Association determines at any time that any amount outstanding in 
a Special Account will not be required to cover payments for Eligible Expenditures 
during the six-month period following such determination, the Borrower shall, promptly 
upon notice from the Association, refund to the Association such outstanding amount.
(c)
The Borrower may, upon notice to the Association, refund to the 
Association all or any portion of the funds on deposit in any Special Account.
(d)
Refunds to the Association made pursuant to subparagraph (a), (b) or (c) 
of this paragraph 6 shall be credited to the Credit Account for subsequent withdrawal 
or for cancellation in accordance with the provisions of the Development Credit 
Agreement.
Annex A to SCHEDULE 1
Operation of Special Accounts
When Withdrawals Are Not Made
On the Basis of Project Management Reports
1.
For the purposes of this Annex, the term "Authorized Allocation" means an amount 
equivalent to $4,200,000 in the case of Special Account A, and $800,000 in the case of 
Special Account B, to be withdrawn from the Credit Account and deposited into the 
respective Special Account pursuant to paragraph 2 (a) of this Annex, provided, 
however, that unless the Association shall otherwise agree, the Authorized Allocation 
shall be limited to an amount equivalent to $2,100,000 in the case of Special Account 
A, and $400,000 in the case of Special Account B, until: (i) in the case of Special 
Account A, the aggregate amount of withdrawals from the Credit Account allocated to 
Parts A through C of the Project, plus the total amount of all outstanding special 
commitments entered into by the Association pursuant to Section 5.02 of the General 
Conditions for Parts A through C of the Project, shall be equal to or exceed the 
equivalent of SDR 10,000,000, and (ii) in the case of Special Account B, the aggregate 
amount of withdrawals from the Credit Account allocated to Parts D and E of the 
Project, plus the total amount of all outstanding special commitments entered into by 
Page  12
the Association pursuant to Section 5.02 of the General Conditions for Parts D and E 
of the Project, shall be equal to or exceed the equivalent of SDR 5,000,000.
2.
Withdrawals of a Special Account’s Authorized Allocation and subsequent 
withdrawals to replenish the Special Account shall be made as follows:
(a)
For withdrawals of the Special Account’s Authorized Allocation, the 
Borrower shall furnish to the Association a request or requests for deposit into the 
Special Account of an amount or amounts which in the aggregate do not exceed the 
Authorized Allocation.  On the basis of each such request, the Association shall, on 
behalf of the Borrower, withdraw from the Credit Account and deposit into the Special 
Account such amount as the Borrower shall have requested.
(b)
For replenishment of the Special Account, the Borrower shall furnish to 
the Association requests for deposit into the Special Account at such intervals as the 
Association shall specify. Prior to or at the time of each such request, the Borrower 
shall furnish to the Association the documents and other evidence required pursuant to 
Part B.3 of Schedule 1 to this Agreement for the payment or payments in respect of 
which replenishment is requested. On the basis of each such request, the Association 
shall, on behalf of the Borrower, withdraw from the Credit 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. Each such deposit into the Special Account shall be 
withdrawn by the Association from the Credit Account under one or more of the Special 
Account’s Eligible Categories.
3.
The Association shall not be required to make further deposits into a Special 
Account, once the total unwithdrawn amount of the Credit minus the total amount of all 
outstanding special commitments entered into by the Association pursuant to Section 
5.02 of the General Conditions, shall equal the equivalent of twice the amount of the 
Special Account’s Authorized Allocation. Thereafter, withdrawal from the Credit 
Account of the remaining unwithdrawn amount of the Credit shall follow such procedures 
as the Association shall specify by notice to the Borrower.  Such further withdrawals 
shall be made only after and to the extent that the Association 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.
Annex B to SCHEDULE 1
Operation of Special Accounts
When Withdrawals Are Made
On the Basis of Project Management Reports
1.
Except as the Association may otherwise specify by notice to the Borrower, all 
withdrawals from the Credit Account shall be deposited by the Association into the 
Special Accounts in accordance with the provisions of Schedule 1 to this Agreement. 
Each such deposit into a Special Account shall be withdrawn by the Association from 
the Credit Account under one or more of the Special Account’s Eligible Categories.
2.
Each application for withdrawal from the Credit Account for deposit into a 
Special Account shall be supported by a Project Management Report.
3.
Upon receipt of each application for withdrawal of an amount of the Credit, the 
Association shall, on behalf of the Borrower, withdraw from the Credit Account and 
deposit into the respective Special Account an amount equal to the lesser of: (a) the 
amount so requested; and (b) the amount which the Association has determined, based on 
the Project Management Report accompanying said application, is required to be 
deposited in order to finance Eligible Expenditures during the six-month period 
following the date of such report; provided, however, that the amount so deposited, 
when added to the amount indicated by said Project Management Report to be remaining 
in the Special Account, shall not exceed the equivalent of $6,400,000, in the case of 
Special Account A, or $1,100,000, in the case of Special Account B.
SCHEDULE 2
Page  13
Description of the Project
The objective of the Project is to contribute to the implementation of the PADR 
and selected elements of PRDRs by fostering development of revenue increasing 
activities, thus increasing incomes and reducing poverty in rural areas, while 
preserving the natural resources base.
The Project consists of the following parts, subject to such modifications 
thereof as the Borrower and the Association may agree upon from time to time to 
achieve such objectives:
Part A:
Productive Investments
1.
Identification, preparation, implementation and supervision of demand-driven 
productive investment activities relating to minor productive infrastructure, for the 
benefit of poor rural communities and producer associations, and provision of grants 
to finance such activities.
2.
Identification, preparation, implementation and supervision of demand-driven 
productive investment activities relating to agricultural production, for the benefit 
of poor rural communities and producer associations, and provision of grants to 
finance such activities.
3.
Identification, preparation, implementation and supervision of demand-driven 
productive investment activities relating to off-farm activities, for the benefit of 
poor rural communities and producer associations, and provision of grants to finance 
such activities.
Part B:
Support Services
1.
Provision of extension services, training and other technical support, including 
establishment of demonstrations plots and technology validation modules, and 
organization of tours and workshops, related to, and required for, implementation of 
Subprojects, for the benefit of rural communities and producer organizations, and 
provision of grants to finance such support services.
2.
Provision of support services for the benefit of rural communities and producer 
organizations to support small scale demand-driven extension and training services not 
necessarily linked to implementation of Subprojects, or to promote soil and water 
conservation, integrated pest management, product preparation and other such 
activities, and provision of grants to finance such support services.
3.
Provision of grants to support agricultural research through: (a) a competitive 
grant program involving research grants for applied research awarded on a competitive 
basis to address constraints involved in the implementation of Subprojects; or (b) 
sponsored research involving strategic and upstream research designed to address 
thematic or long-term constraints involved in the intensification, diversification or 
sustainability of production systems.
Part C: 
Community Development 
Implementation of demand-driven activities to strengthen rural communities and 
producer organizations, including: (a) preparation of participatory community 
development plans and producer organizations business plans; (b) development of 
organizational and managerial capabilities of rural communities and producer 
organizations; (c) establishment of voluntary savings accounts; and (d) workshops to 
facilitate the participation of Beneficiaries in the Project, and provision of grants 
to finance such activities.
Part D: 
Capacity Building and Policy Development
1.
Provision of technical advisory services and material assistance to support EPP 
and GTDRs in the exercise of their functions under PADR.
2.
Provision of technical advisory services and material assistance to MINAGRI and 
Page  14
MINEL to develop a program, in close collaboration with INSTAT and UPDR,  to produce 
agricultural statistics in a sustainable manner with a gradual implementation scheme, 
including: (a) strengthening of the statistical units of Ministries involved in rural 
development; (b) strengthening of the rural sector data base and undertaking of 
permanent and specific surveys; and (c) analysis and dissemination of statistical 
information.
3.
Provision of technical advisory services and material assistance to undertake 
studies, in close collaboration with UPDR,
to  monitor the impact of the 
macro-economic, regulatory and fiscal framework of the rural sector and to formulate 
new policies.  
4.
Provision of technical advisory services and material assistance to strengthen 
the environmental units of Ministries involved in rural development. 
Part E: 
Project Administration and Monitoring
Provision of technical advisory services and material assistance to support: (a) 
Project management and administration, including establishment and operation of an 
implementation unit at the central level and in each Province; and (b) monitoring and 
evaluation.
* * *
The Project is expected to be completed by December 31, 2006 .
SCHEDULE 3
Procurement and Consultants’ Services
Section I.
Procurement of Goods and Works
Part A:
General
1.
Goods and works shall be procured in accordance with (a) the provisions of 
Section I of the "Guidelines for Procurement under IBRD Loans and IDA Credits" 
published by the Bank in January 1995 and revised in January and August 1996, 
September 1997 and January 1999 (the Guidelines), and (b) the provisions of the 
following Parts of this Section I.
2.
In paragraphs 1.6 and 1.8 of the Guidelines, the references to "Bank member 
countries" and "member country" shall be deemed to be references, respectively, to 
"Participating Countries" and "Participating Country".
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 following provision shall apply to goods to be procured under contracts 
awarded in accordance with the provisions of paragraph 1 of this Part B.
Grouping of contracts
To the extent practicable, contracts for goods shall be grouped in bid packages 
estimated to cost $100,000 equivalent or more each.
Part C:
Other Procurement Procedures 
1.
National Competitive Bidding
Page  15
Goods estimated to cost less than $100,000 equivalent per contract, up to an 
aggregate amount not to exceed $800,000 equivalent, may be procured under contracts 
awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines; 
provided, however, that: (i) all bids shall be in one envelope which shall be opened 
in public; (ii) methods used in evaluation of bids and the award of contracts shall be 
made known to all bidders and not applied arbitrarily; (iii) any bidder shall be given 
adequate response time (four weeks) for preparation and submission of bids; (iv) bid 
evaluation and bidder qualification criteria shall clearly be specified in bidding 
documents and not applied arbitrarily; (v) eligible firms shall not be precluded from 
participation; (vi) no preference margin shall be granted to domestic suppliers; (vii) 
the award shall be made to the lowest evaluated bidder in accordance with 
pre-determined and transparent methods; (viii) bid evaluation reports shall clearly 
state the reasons for rejection of any non-responsive bid; and (ix) prior to issuing 
the first call for bids, draft standard bidding documents shall have been prepared and 
submitted to the Association, and found acceptable.
2.
National Shopping
Goods estimated to cost less than $30,000 equivalent per contract, up to an 
aggregate amount not to exceed $200,000 equivalent, may be procured under contracts 
awarded on the basis of national shopping procedures in accordance with the provisions 
of paragraphs 3.5 and 3.6 of the Guidelines.
3.
Community Participation
Goods and works required for Parts A through C of the Project shall be procured 
in accordance with procedures acceptable to the Association, and specified in the 
Implementation Manual.
4.
Procurement of Small Works
Works estimated to cost less than $20,000 equivalent per contract, up to an 
aggregate amount not to exceed $150,000 equivalent, may be procured under lump-sum, 
fixed-price contracts awarded on the basis of quotations obtained from three (3) 
qualified domestic contractors in response to a written invitation. The invitation 
shall include a detailed description of the works, including basic specifications, the 
required completion date, a basic form of agreement acceptable to the Association, and 
relevant drawings, where applicable. The award shall be made to the contractor who 
offers the lowest price quotation for the required work, and who has the experience 
and resources to complete the contract successfully.
5.
Procurement from UN Agencies
Vehicles may be procured through Inter-Agency Procurement Services Office 
(IAPSO), in accordance with the provisions of paragraph 3.9 of the Guidelines.
Part D:
Review by the Association of Procurement Decisions
1.
Procurement Planning
Prior to the issuance of any invitations to bid for contracts, the proposed 
procurement plan for the Project shall be furnished to the Association for its review 
and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the 
Guidelines. Procurement of all goods and works shall be undertaken in accordance with 
such procurement plan as shall have been approved by the Association, and with the 
provisions of said paragraph 1.
2.
Prior Review
With respect to each contract for goods estimated to cost the equivalent of 
$50,000 or more, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the 
Guidelines shall apply.
Page  16
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
Part A:
General
1.
Consultants’ services shall be procured in accordance with: (a) the provisions 
of the Introduction and Section IV of the "Guidelines:  Selection and Employment of 
Consultants by World Bank Borrowers" published by the Association in January 1997 and 
revised in September 1997 and January 1999, subject to the modifications thereto set 
forth in paragraph 2 of this Part A (the Consultant Guidelines), and (b) the 
provisions of the following Parts of this Section II.
2.
In paragraph 1.10 of the Consultant Guidelines, the references to "Bank member 
countries" and "member country" shall be deemed to be references, respectively, to 
"Participating Countries" and "Participating Country".
Part B:
Quality- and Cost-based Selection
1.
Except as otherwise provided in Part C of this Section, consultants’ services 
shall be procured under contracts awarded in accordance with the provisions of Section 
II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 
thereto, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to 
quality- and cost-based selection of consultants.
2.
The following provisions shall apply to consultants’ services to be procured 
under contracts awarded in accordance with the provisions of the preceding paragraph. 
The short list of consultants for services under Parts B through D of the Project, 
estimated to cost less than $50,000 equivalent per contract, may comprise entirely 
national consultants in accordance with the provisions of paragraph 2.7 of the 
Consultant Guidelines.
Part C:
Other Procedures for the Selection of Consultants 
1.
Quality-based Selection
Services for technical units attached to PPIUs and competitive grant programs 
under Part B.3 (a) of the Project shall be procured under contracts awarded in 
accordance with the provisions of paragraphs 3.1 through 3.4 of the Consultant 
Guidelines.
2.
Least-cost Selection
Services for financial audits estimated to cost less than $50,000 equivalent per 
contract may be procured under contracts awarded in accordance with the provisions of 
paragraphs 3.1 and 3.6 of the Consultant Guidelines.
3.
Single Source Selection
Services for sponsored research programs under Part B.3 (b) of the Project may, 
with the Association's prior agreement, be procured in accordance with the provisions 
of paragraphs 3.8 through 3.11 of the Consultant Guidelines.
4.
Selection Based on Consultants’ Qualifications
Services for training estimated to cost less than $100,000 equivalent per 
contract may be procured under contracts awarded in accordance with the provisions of 
paragraphs 3.1 and 3.7 of the Consultant Guidelines.
Page  17
5.
Individual Consultants
Services for tasks that meet the requirements set forth in paragraph 5.1 of the 
Consultant Guidelines, other than those specified or referred to in paragraphs 1 
through 4 of this Part, shall be procured under contracts awarded to individual 
consultants in accordance with the provisions of paragraphs 5.1 through 5.3 of the 
Consultant Guidelines.
Part D:
Review by the Association of the Selection of Consultants
1.
Selection Planning
Prior to the issuance to consultants of any requests for proposals, the proposed 
plan for the selection of consultants under the Project shall be furnished to the 
Association for its review and approval, in accordance with the provisions of 
paragraph 1 of Appendix 1 to the Consultant Guidelines.  Selection of all consultants’ 
services shall be undertaken in accordance with such selection plan as shall have been 
approved by the Association, and with the provisions of said paragraph 1.
2.
Prior Review
(a)
With respect to each contract for the employment of consulting firms 
estimated to cost the equivalent of $50,000 or more, the procedures set forth in 
paragraphs 1, 2 (other than the third subparagraph of paragraph 2 (a)) and 5 of 
Appendix 1 to the Consultant Guidelines shall apply.
(b)
With respect to each contract for the employment of consulting firms 
estimated to cost the equivalent of $30,000 or more, but less than the equivalent of 
$50,000, the procedures set forth in paragraphs 1, 2 (other than the second 
subparagraph of paragraph 2 (a)) and 5 of Appendix 1 to the Consultant  Guidelines 
shall apply.
(c)
With respect to each contract for the employment of individual 
consultants estimated to cost the equivalent of $30,000 or more, and the higher level 
staff of NPIU and PPIUs, the qualifications, experience, terms of reference and terms 
of employment of the consultants shall be furnished to the Association for its prior 
review and approval.  The contract shall be awarded only after the said approval shall 
have been given.
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 Consultant Guidelines shall 
apply.
SCHEDULE 4
Implementation Program
1.
The Borrower shall establish and maintain, at the central level:
(a) 
a Project Steering Committee (PSC) whose mandate, terms of reference and 
composition shall be acceptable to the Association, to monitor the progress of the 
Project, ensure its consistency with PADR and take corrective actions as needed, 
review and approve the consolidated work program and budget, and exercise oversight 
responsibilities and provide guidance; and
(b)
a National Project Implementation Unit (NPIU) whose mandate, terms of 
reference and composition shall be acceptable to the Association, to be responsible, 
subject to the general guidance and oversight functions of PSC, for overall 
coordination of the Project, including coordination of the preparation and 
implementation of the Project, consolidation of the annual work programs and budgets, 
preparation and production of the annual progress reports and financial statements, 
and establishment of a decentralized monitoring and evaluation systems of the various 
Page  18
activities supported under the Project.
2.
The Borrower shall take steps to ensure that:
(a)
a GTDR shall be established and maintained in each Region, on the basis 
of a mandate, terms of reference and composition acceptable to the Association, to be 
responsible for management of the PADR process in the Region; and
(b) 
a Provincial Project Implementation Unit (PPIU) shall be established and 
maintained in each Province, on the basis of a mandate, terms of reference and 
composition acceptable to the Association, to be responsible for accounting, financial 
reporting, procurement and disbursement functions, as well as the management, 
implementation and monitoring of Subprojects, in the Province.
3.
The Borrower shall take steps to ensure that:
(a)
NPIU shall be headed by a national project director, who shall be 
assisted by an administrative and financial management specialist, an accountant, a 
rural development specialist, a procurement officer, a monitoring and evaluation 
officer, and other suitably qualified and experienced staff in adequate numbers;
(b)
each PPIU shall be headed by a provincial director, who shall be assisted 
by an accountant, a rural development specialist, a procurement officer, a monitoring 
and evaluation officer, an agronomist, a producer organization and capacity building 
specialist, and other suitably qualified and experienced staff in adequate numbers; 
and
(c)
the positions of national project coordinator, provincial director, 
administrative and financial management specialist, accountant, rural development 
specialist, procurement officer, monitoring and evaluation officer, agronomist, and 
producer organization and capacity building specialist, which are referred to in this 
paragraph, shall be kept filled at all times by persons having qualifications and 
experience acceptable to the Association.
4.
The Borrower shall: 
(a)
prepare and transmit to the Association for comments, and thereafter 
adopt in form and substance acceptable to the Association, an Implementation Manual, 
giving details of all procedural arrangements as shall have been agreed with the 
Association for the implementation, monitoring and supervision of the Project, 
including procurement and disbursement arrangements; environmental assessment 
methodology; performance indicators; monitoring and evaluation guidelines; procedures 
for identification, appraisal, supervision, and monitoring and evaluation, of 
Subprojects and competitive grant programs under Part B.3 (a) of the Project, as well 
as procedures for the implementation of the pilot program under paragraph 9 of this 
Schedule; criteria for the selection of Beneficiaries, review and approval of 
Subprojects, and approval of Grants, applicable procurement, disbursement and other 
implementation guidelines; and model forms of Grant Agreements; and
(b)
carry out the Project in accordance with procedures set out in the 
Administrative, Accounting and Financial Manual, and Implementation Manual, and, 
except as the Association shall otherwise agree, shall not amend or waive any 
provision thereof, if such amendment or waiver may, in the opinion of the Association, 
materially or adversely affect the implementation of the Project.
5.
For purposes of the Project, the Borrower shall, not later than six months after 
the Effective Date, conclude a contract with a suitably qualified and experienced 
consulting firm for: (a) design and implementation of a computerized monitoring and 
evaluation, and accounting and financial management systems, based on internationally 
acceptable accounting principles acceptable to the Association; and (b) preparation of 
a training program and initial training of the staff of the Project on the efficient 
operation of the computerized system. 
6.
The Borrower shall submit to the Association, for its review or approval, as the 
Page  19
case may be:
(a)
not later than October 31 of each year, beginning October 31, 2001, a 
proposed annual work program and budget for the forthcoming fiscal year;
(b)
six-monthly and annual progress reports on the status of the Project, to 
be submitted not later than two months after the end of the reporting period, 
beginning with a report for the reporting period ending December 31, 2001;
(c)
reports as needed on the award of individual contracts under the Project; 
and
(d)
quarterly procurement reports giving details of: 
(i)
cost estimates and updated revised cost estimates, if any, for 
individual contracts and for the Project; 
(ii)
planned and revised timing, if any, of procurement actions, 
including advertising, bidding, contract award and completion time 
for individual contracts; and
(iii)
status of compliance with aggregate limits on prescribed 
procurement procedures, and with the Implementation Manual.
7.
(a)
The Borrower shall, not later than December 31 of each year,  undertake, 
in conjunction with the Association and other interested parties, an annual review of 
the Project or, in the case of the review to be undertaken not later than December 31, 
2003, a midterm review, during which they shall exchange views generally on all 
matters relating to the progress of the Project and the Program, and the performance 
by the Borrower of its obligations under the Development Credit Agreement, including 
the progress achieved by the Borrower under the Project and the Program, having regard 
to the monitoring indicators agreed upon between the Borrower and the Association.
(b)
Not later than one month prior to the review, the Borrower shall furnish 
to the Association, for its comments, a report, in such detail as the Association 
shall reasonably request, on the progress and status of the Project and the Program, 
and giving details, in particular, of the various matters to be discussed at such 
review.
(c)
Following the review, the Borrower undertakes to act promptly and 
diligently in order to take any corrective action deemed necessary to remedy any 
shortcoming noted in the implementation of the Project and the Program, or to 
implement such other measures as may have been agreed upon between the parties in 
furtherance of the objectives of the Project.
8.
Further to Section 3.01 (c) of the Development Credit Agreement, the proceeds of 
the Credit allocated to Category (1) of the table in Part A.1 of Schedule 1 to the 
Development Credit Agreement shall be subject to the following additional terms and 
conditions:
(a)
the amounts so allocated shall be used exclusively to provide Grants to 
finance Subprojects or other Eligible Activities, in accordance with criteria, and 
terms and conditions, set forth in the Implementation Manual;
(b)
no Grant shall be granted to finance a Subproject unless the Subproject 
is sustainable and of benefit to the poor, consistent with the Implementation Manual, 
and likely to stimulate agricultural growth;
(c)
every Subproject proposal shall be classified according to environmental 
impact category, and subjected as necessary to environmental impact analysis, to 
ensure that: (i) it is fully consistent with environmental appraisal criteria set out 
in the Implementation Manual; and (ii) where appropriate, mitigation measures designed 
to minimize adverse effects of the proposed Subproject are identified and incorporated 
Page  20
in the Subproject design;
(d)
Grants shall be provided for the benefit of eligible Beneficiaries, and 
according to a cost-sharing formula, which shall be acceptable to the Association and 
specified in the Implementation Manual; provided, however, that: 
(i)
the proceeds of a Grant shall not be used to finance taxes or 
duties levied on or in respect of eligible expenditures relating 
to a Subproject or other Eligible Activity, or any part thereof; 
(ii)
except as the Association shall otherwise agree, the amount of 
each Grant shall be: 
(A) 
in the case of a Subproject undertaken on a pilot basis 
pursuant to paragraph 9 of this Schedule, not more than 
$7,500 equivalent; 
(B) 
in the case of a Subproject other than a Subproject 
undertaken on a pilot basis pursuant to paragraph 9 of this 
Schedule, not more than $100,000 equivalent; and
(C)
in the case of any Eligible Activity under Part B.3 (a) of 
the Project, not less than $5,000 and not more than $50,000; 
and
(iii)
except as the Association shall otherwise agree, the Beneficiary’s 
contribution to the cost of any Subproject, measured both in cash 
and/or in kind, shall be not less than 15 percent of the total 
cost of the Subproject; 
(e) 
the first Subproject to be financed out of the proceeds of the Credit in 
each Province under each of Part A.1, A.2 and A.3 of the Project, as well as the first 
Eligible Activity to be financed thereunder in each Province under Part B.3 (a) of the 
Project, shall be subject to the prior review and approval of the Association;
(f)
goods, works and services required for the purposes of financing 
Subprojects and other Eligible Activities shall be procured in accordance with 
procedures referred to in Schedule 3 to this Agreement, and set forth in the 
Implementation Manual; and
(g)
for purposes of each Grant, an agreement (hereinafter referred to as 
Grant Agreement) shall be concluded with the Beneficiary in the form of the model 
provided in the Implementation Manual, setting forth the respective obligations of the 
parties thereunder, including details of disbursement schedules and procurement 
procedures, the amount of the Beneficiary’s contribution to the cost of the 
Subproject, and the additional terms and conditions specified in Schedule 5 to this 
Agreement.
9.
For purposes of agricultural production and off-farm activities under Parts A.2 
and A.3 of the Project, respectively, the Borrower shall:
(a)
for a period not exceeding 18 months after the Effective Date, implement 
such activities on a pilot basis and in selected geographical areas, and in accordance 
with criteria and implementation guidelines specified in the Implementation Manual 
(hereinafter referred to as "pilot program");
(b)
not later than 2 months prior to the end of the pilot program, carry out 
a review of the pilot program, and communicate the findings thereof to the 
Association, along with recommendations as appropriate in view of the pursuit or 
otherwise of such activities after the end of the pilot program; and
(c)
proceed thereafter to pursue such activities or take other action as 
appropriate, taking into account the results of the review referred to in subparagraph 
Page  21
(b) above and such comments as shall have been made thereon by the Association. 
10.
The Borrower shall undertake a study in view of the institutional strengthening 
of GTDRs, communicate the conclusions and recommendations thereof to the Association, 
not later than December 31, 2001, and proceed thereafter to implement such 
recommendations, taking into account such comments as shall have been made thereon by 
the Association. 
SCHEDULE 5
Additional Terms and Conditions of Grant Agreements
Each Grant Agreement shall include the following terms and conditions 
satisfactory to the Association:
1.
The Beneficiary shall be required to carry out and operate the Subproject or 
other Eligible Activity with due diligence and efficiency, and in accordance with 
sound technical, administrative and financial practices, and with due regard to 
appropriate environmental and ecological considerations.
2.
The Beneficiary shall have the obligation to ensure at all times that: (a) 
goods, works and consultants' services to be financed out of the proceeds of the 
Credit shall be procured in accordance with the provisions of Schedule 3 to this 
Agreement; (b) such goods, works and consultants' services shall be used exclusively 
for implementing the Subproject or other Eligible Activity, and achieving the 
objectives of the Project; and (c) upon completion of the Subproject or other Eligible 
Activity, such Subproject or other Eligible Activity shall be operated and maintained 
in accordance with the operation and maintenance plan agreed upon with the 
Beneficiary.
3.
The Borrower shall have the right to inspect, by itself or jointly with 
representatives of the Association, if the Association shall so request, the goods, 
works and services included in the Subproject or other Eligible Activity, the 
operation thereof and any relevant records and documents, and obtain any report in 
connection therewith, of such scope and in such detail as the Association shall 
reasonably request.
4.
The Beneficiary shall take out and maintain with responsible insurers, or make 
other satisfactory provision for, insurance against such risks and in such amounts as 
shall be consistent with appropriate business and/or agricultural practices.
5.
The Borrower shall have the right to obtain all such information as the Borrower 
and Association shall reasonably request relating to the administration, operations 
and financial condition of each Beneficiary, and the benefits derived from the 
Subproject or other Eligible Activity.
6.
The right of any Beneficiary to the use of the proceeds of the Credit, or any 
part thereof, shall be promptly suspended upon failure by such Beneficiary to perform 
any of its respective obligations under the Grant Agreement.