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CONFORMED COPY
INTERIM FUND CREDIT NUMBER N014 CE
Interim Fund
Development Credit Agreement
(Environmental Action I Project)
between
DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA
and
INTERNATIONAL DEVELOPMENT ASSOCIATION as Administrator of the interim
trust fund established with funds contributed by certain members of 
International Development Association pursuant to Resolution No. IDA 184 
of the Board of Governors of International Development Association
Dated April 22, 1997
INTERIM FUND CREDIT NUMBER N014 CE
INTERIM FUND DEVELOPMENT CREDIT AGREEMENT
AGREEMENT, dated April 22, 1997, between DEMOCRATIC SOCIALIST REPUBLIC OF SRI 
LANKA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) as 
administrator (the Administrator) of the interim trust fund (Interim Fund) established 
with funds contributed by certain members of the Association pursuant to Resolution 
No. IDA 184 (the Interim Fund Resolution) of the Board of Governors of the 
Association, adopted in June 26, 1996.
WHEREAS (A) by the Interim Fund Resolution the Interim Fund has been 
established, constituted of the funds contributed by certain members of the 
Association and administered by the Association acting as Administrator of the Interim 
Fund, in accordance with the provisions of the Interim Fund Resolution;
(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 
Administrator to assist in the financing of the Project through the provision of 
resources from the Interim Fund, and the Administrator has determined that such 
assistance would be in accordance with the provisions of the Interim Fund Resolution; 
and
WHEREAS the Administrator has agreed, on the basis, inter alia, of the 
foregoing, to extend the Interim Fund Credit to the Borrower upon the terms and 
conditions set forth in this Agreement;
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NOW THEREFORE the parties hereto hereby agree as follows:
ARTICLE I
General Conditions; Definitions
Section 1.01. The “General Conditions Applicable to Develop\1fment Credit 
Agreements” of the Association, dated January 1, 1985, with the modifications set 
forth below (the General Conditions) constitute an integral part of this Agreement:
(a)
The term “Association”, wherever used in the General Conditions means the 
International Development Association acting as Administrator of the Interim Fund 
referred to in the Preamble to the Interim Fund Development Credit Agreement;
(b)
The terms “Development Credit Agreement”, “Credit” and “Credit Account”, 
wherever used in the General Conditions, are amended to read “Interim Fund Development 
Credit Agreement”, "Interim Fund Credit” and “Interim Fund Credit Account”, 
respectively;
(c)
A new paragraph, numbered 15 is added to Section 2.01 to read as follows:
“15.
“Participating Country” means any country that meets the 
requirements set 
forth in Section 5(e) of Resolution No. IDA 184 of the Board 
of Governors of the 
Association, adopted on June 26, 1996, as 
determined by the Administrator as of the date on 
which the Interim Fund Credit was 
approved pursuant to Section 5(c) of said Resolution and “
Participating Countries” 
means, collectively, all such countries.
(d)
The last sentence of Section 3.02 is deleted.
(e)
The second sentence of Section 5.01 is modified to read:
“Except as the Administrator and the Borrower shall otherwise agree, no 
withdrawals 
shall be made: (a) on account of expenditures in the territories of any 
country which is not 
a 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 Administrator, is prohibited by 
a decision of 
the United Nations Security Council taken under Chapter VII of the Charter of 
the 
United Nations.”
(f)
In Section 6.02 and 7.01 of the General Conditions, the term 
“Association” shall also mean the International Development Association acting in its 
own capacity.
(g)
Section 6.03 is modified to read as follows:
“Section 6.03.  Cancellation by the Administrator.  If (a) the right of 
the Borrower  to make withdrawals from the Interim Fund Credit Account shall have been 
suspended with 
respect to any amount of the Interim Fund Credit for a 
continuous period of thirty days, or 
(b) at any time, the Administrator determines, 
after consultation with the Borrower, that an  amount of the Interim Fund Credit will 
not be required to finance the Project’s costs to be  financed out of the proceeds of 
the Interim Fund Credit, or (c) at any time the 
Administrator 
determines, with respect to any contract to be financed out of the proceeds of 
the 
Interim Fund Credit, that corrupt or fraudulent practices were engaged in by 
representatives of the Borrower or of a beneficiary of the Interim Fund Credit 
during the 
procurement or the execution of such contract, without the Borrower 
having taken timely and 
appropriate action satisfactory to the Administrator to 
remedy the situation, and 
establishes the amount of expenditures in 
respect of such contract which would otherwise 
have been eligible for 
financing out of the proceeds of the Interim Fund Credit, or (d) at 
any time, the 
Administrator determines that the procurement of any contract to be financed 
out of 
the proceeds of the Interim Fund Credit is inconsistent with the procedures set forth 
or referred to in the Interim Fund Development Credit Agreement and establishes the 
amount 
of expenditures in respect of such contract which would otherwise have 
been eligible for 
financing out of the proceeds of the Interim Fund Credit, or 
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(e) after the Closing Date, an 
amount of the Interim Fund Credit shall remain 
unwithdrawn from the Interim Fund Credit 
Account, the Administrator may, 
by notice to the Borrower, terminate the right of the 
Borrower to make 
withdrawals with respect to such amount.  Upon the giving of such notice, 
such 
amount of the Interim Fund Credit shall be canceled.”
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)
“MAL&F” means the Borrower’s Ministry of Agriculture, Lands and Forestry;
(b)
“MTEWA” means the Borrower’s Ministry of Transport, Environment and 
Women’s Affairs; 
(c)
“Special Account” means the Special Account to be opened by the Borrower 
pursuant to the provisions of Section 2.02 (b) of this Agreement;
(d)
“CEA” means the Central Environmental Authority established and operating 
under the National Environmental Act, No. 47 of 1980, as amended by Act No. 56 of 
1988; 
(e)
“NGO” means a non-governmental organization established in the Borrower’s 
territory; and
(f)
“Project Preparation Advance” means the project preparation advance 
granted by the Association to the Borrower pursuant to an exchange of letters dated 
February 10, 1995, February 21, 1995, March 13, 1996, and September 11, 1996 between 
the Borrower and the Association.
ARTICLE II
The Credit
Section 2.01. The Administrator agrees to lend to the Borrower, on the terms and 
conditions set forth or referred to in the Interim Fund Development Credit Agreement, 
an amount in various currencies equivalent to ten million seven hundred thousand 
Special Drawing Rights (SDR 10,700,000).
Section 2.02. (a) The amount of the Interim Fund Credit may be withdrawn from 
the Interim Fund Credit Account in accordance with the provisions of Schedule 1 to 
this Agreement for expenditures made (or, if the Administrator 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 Interim Fund Credit.
(b)
The Borrower may, for the purposes of the Project, open and maintain in 
dollars a special deposit account in its Central Bank on terms and conditions 
satisfactory to the Administrator.  Deposits into, and payments out of, the Special 
Account shall be made in accordance with the provisions of Schedule 5 to this 
Agreement.
(c)
Promptly after the Effective Date, the Administrator shall, on behalf of 
the Borrower, withdraw from the Interim Fund Credit Account and pay to the Association 
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 December 31, 2002 or such later date as 
the Administrator shall establish. The Administrator 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 Interim Fund 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 
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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 Interim Fund 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 Interim Fund Credit withdrawn and outstanding from time to time.
Section 2.06. Commitment charges and service charges shall be payable 
semiannually on March 15 and September 15 in each year.
Section 2.07. (a) Subject to paragraphs (b), (c) and (d) below, the Borrower 
shall repay the principal amount of the Interim Fund Credit in semi-annual 
installments payable on each March 15 and September 15 commencing September 15, 2007 
and ending March 15, 2037.  Each installment to and including the installment payable 
on March 15, 2017 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 gross national product per capita (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 Administrator may, subsequent to the review and 
approval thereof by the Executive Directors of the Association and after due 
consideration by the Administrator of the development of the Borrower’s economy, 
modify the terms of 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 Interim Fund Credit shall have been repaid; and (B) 
requiring the Borrower to commence repayment of the principal amount of the Interim 
Fund Credit as of the first semiannual payment date referred to in paragraph (a) above 
falling six months or more after the date in which the Administrator 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 Administrator 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 Administrator on the principal amount of the Credit withdrawn and 
outstanding from time to time, provided that, in the judgment of the Administrator, 
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 Administrator 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
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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 
administrative, financial and environmental practices, and shall provide, promptly as 
needed, the funds, facilities, services and other resources required for the Project.
(b)
Without limitation upon the provisions of paragraph (a) of this Section 
and except as the Borrower and the Administrator shall otherwise agree, the Borrower 
shall carry out the Project in accordance with the Implementation Program set forth in 
Schedule 4 to this Agreement.
Section 3.02. Except as the Administrator 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 Interim Fund Credit shall be governed by the provisions of 
Schedule 3 to this Agreement.
Section 3.03. For the purposes of Section 9.07 of the General Conditions, and 
without limitation thereto, the Borrower shall:
(a)
prepare, on the basis of guidelines acceptable to the Administrator, and 
furnish to the Administrator 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 
Administrator, a plan for the future operation of the Project; and
(b)
afford the Administrator a reasonable opportunity to exchange views with 
the Borrower on said plan.
ARTICLE IV
Financial Covenants
Section 4.01. (a) The Borrower shall maintain or cause to be maintained records 
and accounts adequate to reflect in accordance with sound accounting practices the 
operations, resources and expenditures in respect of the Project of the departments or 
agencies of the Borrower responsible for carrying out the Project or any part thereof.
(b)
The Borrower shall:
(i) 
have the records and accounts referred to in paragraph (a) of this 
Section 
including those for the Special Account for each 
fiscal year audited, in 
accordance with appropriate auditing 
principles consistently applied, by 
independent auditors 
acceptable to the Administrator;
(ii) 
furnish to the Administrator, as soon as available, but in any 
case not later 
than six months after the end of each such year, a 
certified copy of the 
report of such audit by said auditors, 
of such scope and in such detail as the 
Administrator shall have 
reasonably requested; and
(iii)
furnish to the Administrator such other information concerning 
said records, 
accounts and the audit thereof as the Administrator 
shall from time to time 
reasonably request.
(c)
For all expenditures with respect to which withdrawals from the Interim 
Fund 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 Administrator has 
received the audit 
for the fiscal year in which the last withdrawal from 
the Interim Fund Credit 
Account was made, all records (contracts, 
orders, invoices, bills, receipts 
and other documents) evidencing 
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such expenditures;
(iii)
enable the Administrator’s representatives to examine such 
records; and
(iv)
ensure that such records and accounts are included in the annual 
audit 
referred to in paragraph (b) of this Section and that the 
report of such audit 
contains a separate opinion by said auditors 
as to whether the statements of 
expenditure submitted during such fiscal 
year, together with the proce\1fdures 
and internal controls involved in 
their preparation, can be relied upon to 
support the related 
withdrawals.
ARTICLE V
Remedies of the Association and the Administrator
Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the 
following additional event is specified, namely, that the Borrower has taken any 
action for dissolution of CEA or suspension of its operations.
ARTICLE VI
Effective Date; Termination;
Designation of Administrator
Section 6.01. The following event is specified as an additional condition to the 
effectiveness of the Interim Fund Development Credit Agreement within the meaning of 
Section 12.01 (b) of the General Conditions, namely that the Borrower has appointed 
consultants satisfactory to the Administrator for the following activities under the 
Project:
(a)
under Part A thereof:
(i)
policy/planning assistance;
(ii)
contracting out CEA activities;
(iii)
reviewing salary structure and license fees; and
(iv)
clearing CEA’s license backlog.
(b)
under Part B thereof:
(i)
the baseline survey; and
(ii)
monitoring the work relating to land use mapping and planning; 
and community group formation.
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. In the event that the Executive Directors of the Association 
decide to terminate the functions of the Association as administrator of the Interim 
Fund pursuant to Section 7 of the Interim Fund Resolution, all of the rights and 
obligations of the Administrator under this Agreement shall be assumed by the 
Association in accordance with the Interim Fund Resolution and such decision of said 
Executive Directors, as of a date to be notified by the Administrator to the Borrower.
ARTICLE VII
Representative of the Borrower; Addresses
Section 7.01. The Secretary, or the Director General, External Resources 
Department, Ministry of Finance and Planning of the Borrower is designated as 
representative of the Borrower for the purposes of Section 11.03 of the General 
Conditions.
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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 Planning 
Democratic Socialist Republic of Sri Lanka
Colombo, Sri Lanka
Cable address:
Telex:
SECMINFIN
FINMIN 21409
Colombo
FORAID 21232
For the Association and the Administrator:
International Development Association
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
INDEVAS
197688 (TRT),
Washington, D.C.
248423 (RCA),
 64145 (WUI) or
 82987 (FTCC)
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized 
representatives, have caused this Agreement to be signed in their respective names in 
the District of Columbia, United States of America, as of the day and year first above 
written.
DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA
By  /s/  Jayantha Dhanapala
Authorized Representative
INTERNATIONAL DEVELOPMENT ASSOCIATION
as Administrator of the interim trust fund established with funds 
contributed by certain members of International Development
Association pursuant to Resolution No. IDA 184 of the Board
of Governors of International Development Association
By  /s/  Fakhruddin Ahmed
Acting Regional Vice President 
South Asia
SCHEDULE 1
Withdrawal of the Proceeds of the Interim Fund Credit
1.
The table below sets forth the Categories of items to be financed out of the 
proceeds of the Interim Fund Credit, the allocation of the amounts of the Interim Fund 
Credit to each Category and the percentage of expenditures for items so to be financed 
in each Category:
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   Amount of the
Interim Fund Credit
  % of
Allocated (Expressed
Expenditures
Category
               in SDR Equivalent)          
to be Financed
(1)
Equipment, materials 
100% of foreign
and vehicles
expenditures,
100% of local
(a)
for Parts A and B   
970,000
expenditures
of the Project
(ex-factory cost)
and 80% of local
(b)
for Part C of the
360,000
expenditures for
Project
other items procured
locally
(2)
Civil works (other
90%
than field works)
(a)
for Parts A and B
     1,700,000
of the Project
(b)
for Part C of the 
 40,000
Project
(3)
Field works
70%
(a)  
for Parts A and B
     1,080,000
of the Project
(b)
for Part C of the Project
290,000
(4)
Consultants’ services
100%
and training
(a)
for Parts A and B
     2,790,000
of the Project
(b)
for Part C of the
320,000
Project
(5)
Operating costs
90%
(a)
for Parts A and B
630,000
of the Project
(b)
for Part C of the
 20,000
Project
(6)
Incremental salaries
650,000
90% through 
for Parts A and B
December 31, 1998,
of the Project
70% through
December 31, 1999,
50% through
December 31, 2001,
and 25% thereafter
(7)
Refunding of Project
790,000
Amount due 
pursuant
Preparation Advance
to Section 2.02 (c)
of this Agreement
(8)
Unallocated
     1,060,000
   ___________
TOTAL                   10,700,000
   ==========
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2.
For the purposes of this Schedule:
(a)
the term “foreign expenditures” means expenditures in the currency of any 
country other than that of the Borrower for goods or services supplied from the 
territory of any country other than that of the Borrower;
(b)
the term “local expenditures” means expenditures in the currency of the 
Borrower or for goods or services supplied from the territory of the Borrower;
(c)
the term “operating costs” means costs incurred under the Project on or 
after April 1, 1997, for the operations and maintenance of vehicles, equipment, 
furniture, buildings and offices; and
(d)
the term “incremental salaries” means salaries for persons hired to fill 
positions created for the carrying out of the Project on or after April 1, 1997.
3.
Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be 
made in respect of:  (a) payments made for expenditures prior to the date of this 
Agreement; and (b) expenditures under Categories (1) (b), (2) (b), (3) (b), (4) (b) 
and (5) (b) until (i) a Memorandum of Understanding, satisfactory to the 
Administrator, between MTEWA, MAL&F and Provincial Department of Agriculture (PDA) of 
the Central Province shall have been concluded and entered into effect; (ii) the Land 
Steering Committee shall have been established pursuant to the provisions of paragraph 
6 (b) of Schedule 4 to this Agreement; (iii) the Natural Resource Management 
Specialist and catalysts required for the first year’s implementation program have 
been recruited; and (iv) the standard 30 year lease agreement referred to in paragraph 
6 (c) (i) of Schedule 4 to this Agreement has been prepared and utilized, to the 
Administrator’s satisfaction.
4.
The Administrator may require withdrawals from the Interim Fund Credit Account 
to be made on the basis of statements of expenditure for: (a) operating costs, 
incremental salaries and training; and (b) contracts not exceeding the equivalent of 
(i) $200,000 for goods and works; (ii) $100,000 for the services of consulting firms; 
and (iii) $50,000 for the services of individual consultants, under such terms and 
conditions as the Administrator shall specify by notice to the Borrower.
SCHEDULE 2
Description of the Project
The objective of the Project is to assist the Borrower in strengthening its 
institutional and policy framework for environmental management.
The Project consists of the following parts, subject to such modifications 
thereof as the Borrower and the Administrator may agree upon from time to time to 
achieve such objectives:
Part A:
Institutional Strengthening
1.
Establishing and strengthening a Policy Unit in the Environmental Division of 
the MTEWA through provision of additional staff, training, research facilities and 
publications, vehicles and office equipment, and related technical assistance to 
assist in the preparation of annual policy research and work programs, and for 
carrying out annual performance evaluations relating to project implementation and the 
state of the environment.
2.
Strengthening of the CEA, especially its regulatory and enforcement 
capabilities, through provision of additional staff, technical assistance, training, 
vehicles and equipment and construction of office facilities to share with the 
Environmental Division of MTEWA.
3.
Provision of technical assistance and related equipment for the development and 
implementation by MTEWA of an integrated environmental monitoring and information 
system.  
4.
Development and implementation of an NGOs outreach program through provision of 
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training and other opportunities to participate in activities relating to 
environmental policy, local natural resource management, soil conservation programs 
and environmental education.
5.
Development of a framework of economic-environmental linkages by (a) carrying 
out studies to analyze policy implications of such linkages; (b) disseminating  
reports on status of environmental activities in Sri Lanka; and (c) conducting 
workshops on improving adherence to sound environmental principles.
Part B:
Community Environment Initiatives Facility
Involving communities in the priority areas of the National Environmental Action 
Plan of the Borrower, through subprojects consisting of demonstrative environmental 
activities, and provision of training facilities for local communities in 
participatory work on environmental and conservation issues.
Part C:
Pilot Land Management
Carrying out a program of pilot land management activities in ten selected 
subwatersheds in the hilly areas of the Borrower’s Central Province to: (i) test and 
develop on a watershed basis suitable technologies for minimizing the land 
degradation; (ii) examine the feasibility of participatory management of 
microwatersheds by the beneficiaries; and (iii) define the technical and investment 
criteria in replicating watershed development activity in other hilly areas, all 
through the provision of crop inputs, field works, vehicles and equipment, mapping, 
evaluation studies, incremental staff and operating costs, village based nurseries, 
and related technical assistance and training.
*        *        *
The Project is expected to be completed by June 30, 2002.
SCHEDULE 3
Procurement and Consultants’ Services
Section I.
Procurement of Goods and Works
Part A:
General
Subject to the eligibility restrictions set forth to Section III of this 
Schedule, goods and works shall be procured in accordance with the provisions of 
Section I of the “Guidelines for Procurement under IBRD Loans and IDA Credits” 
published by the Bank in January 1995 (the Guidelines) and revised in January and 
August 1996, and the following provisions of this Section, as applicable.
Part B:
International Competitive Bidding
1.
Except as otherwise provided in Part C of this Section, goods shall be procured 
under contracts awarded in accordance with the provisions of Section II of the 
Guidelines and paragraph 5 of Appendix 1 thereto.
2.
The following provisions shall apply to goods to be procured under contracts 
awarded in accordance with the provisions of paragraph 1 of this Part B.
(a)
Grouping of Contracts
To the extent practicable, contracts shall be grouped together in homogenous 
packages.
(b)
Preference for Domestically Manufactured Goods
The provisions of paragraphs 2.54 and 2.55 of the Guidelines and Appendix 2 
thereto shall apply to goods manufactured in the territory of the Borrower.
Part C:
Other Procurement Procedures
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1.
National Competitive Bidding
(a)
Contracts for works (except farmers’ centers and field works) may be 
procured under contracts awarded in accordance with the provisions of paragraphs 3.3 
and 3.4 of the Guidelines.
(b)
Field equipment, as well as other goods estimated to cost $100,000 
equivalent or less per contract and $200,000 equivalent or less in the aggregate, may 
be procured under contracts awarded in accordance with the provisions of paragraphs 
3.3 and 3.4 of the Guidelines.
2.
National Shopping
Goods estimated to cost $50,000 equivalent or less per contract and $200,000 
equivalent or less in the aggregate, 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.
Force Account
Works which meet the requirements of paragraph 3.8 of the Guidelines and consist 
of field works and construction of farmers’ centers may, with the Administrator’s 
prior agreement, be carried out by force account in accordance with the provisions of 
said paragraph of the Guidelines.
Part D:
Review by the Administrator of Procurement Decisions
1.
Procurement Planning
Prior to the issuance of any invitations to prequalify for bidding or to bid for 
contracts, the proposed procurement plan for the Project shall be furnished to the 
Administrator 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 Administrator, and with the provisions of said paragraph 1.
2.
Prior Review
With respect to each contract for goods or works estimated to cost the 
equivalent of $200,000 or more, the procedures set forth in paragraphs 2 and 3 of 
Appendix 1 to the Guidelines shall apply.
3.
Post Review
With respect to each contract not governed by paragraph 2 of this Part D, the 
procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply.
Section II.   Employment of Consultants
1.
Subject to the eligibility restrictions set forth in Section III of this 
Schedule, consultants’ services shall be procured under contracts awarded in 
accordance with the provisions of the “Guidelines for the Use of Consultants by World 
Bank Borrowers and by the World Bank as Executing Agency” published by the Bank in 
August 1981 (the Consultant Guidelines).  For complex, time-based assignments, such 
contracts shall be based on the standard form of contract for consultants’ services 
issued by the Bank, with such modifications thereto as shall have been agreed by the 
Administrator. Where no relevant standard contract documents have been issued by the 
Bank, other standard forms acceptable to the Administrator shall be used.
2.
Notwithstanding the provisions of paragraph 1 of this Section, the provisions of 
the Consultant Guidelines requiring prior Administrator review or approval of budgets, 
short lists, selection procedures, letters of invitation, proposals, evaluation 
reports and contracts, shall not apply to (a) contracts for the employment of 
consulting firms estimated to cost less than $100,000 equivalent each or (b) contracts 
for the employment of individuals estimated to cost less than $50,000 equivalent each.  
However, said exceptions to prior Administrator review shall not apply to (a) the 
terms of reference for such contracts, (b) single-source selection of consulting 
Page  12
firms, (c) assignments of a critical nature, as reasonably determined by the 
Administrator, (d) amendments to contracts for the employment of consulting firms 
raising the contract value to $100,000 equivalent or above, or (e) amendments to 
contracts for the employment of individual consultants raising the contract value to 
$50,000 equivalent or above.
Section III.
Eligibility Restrictions
1.
Notwithstanding the provisions of paragraph 1.6 of the Guidelines, the proceeds 
of the Interim fund credit may only be withdrawn on account of expenditures for goods 
and works provided by nationals of, and produced in or supplied from, Participating 
Countries; consequently, nationals of countries that are not Participating Countries 
and bidders offering goods and works from such countries shall be disqualified from 
bidding for such contracts, and the bidding documents shall so specify.
2.
Notwithstanding the provisions of paragraph 1.02 of the Consultant Guidelines, 
only consultants from Participating Countries shall be eligible to provide services 
financed out the proceeds of the Interim Fund Credit.
SCHEDULE 4
Implementation Program
1.
The Borrower shall establish, or cause to be established, by July 31, 1997, a 
Policy Unit within the Environmental Division of MTEWA.
2.
The Borrower shall, no later than September 30, 1997, issue an updated National 
Environmental Action Plan, satisfactory to the Administrator, for the period l999 to 
2002.
3.
For purposes of carrying out Part A.2 of the Project, the Borrower shall ensure 
that studies on staff incentives, private sector involvement and an appropriate 
license fee structure for the CEA shall commence no later than September 30, 1997; 
action plans based on the results of such studies shall be furnished to the 
Administrator no later than March 31, 1998; and said plans shall be carried out after 
the Administrator has reviewed and approved said plans.
4.
The Borrower shall, no later than September 30, 1997, finalize the NGO outreach 
program to be carried out under Part A (4) of the Project; furnish said program to the 
Administrator for its review and approval; and thereafter implement it.
5.
For the purposes of overall coordination in the implementation of the Project, 
the Borrower shall, no later than July 31, 1997, establish and thereafter maintain 
with such membership, responsibilities and resources as shall be satisfactory to the 
Administrator:
(a)
a Steering Committee headed by the Secretary, MTEWA; and
(b)
a Committee on Integrating Environment and Development Policy jointly 
chaired by the Secretary, Ministry of Finance and Planning, and the Secretary, MTEWA.
6.
For the purposes of carrying out pilot land management programs under Part C of 
the Project, the Borrower shall:
(a) 
prepare five microcatchement plans not later than September 30, 1997, and 
five more such plans no later than April 30, 1998, all such plans to be satisfactory 
to the Administrator; 
(b) 
establish and thereafter maintain with membership, powers and 
responsibilities satisfactory to the Administrator, a Land Steering Committee; and 
(c) 
in the areas of the pilot land management programs cause its Forestry 
Department (i) to prepare and utilize standard lease agreements which shall, inter 
alia, provide for 30 year leases requiring lessees to carry out land management 
practices satisfactory to the Forestry Department and the Administrator, and (ii) to 
extend the term of existing permit holders on reservations for a minimum period of 
five years, which extension shall be conditional inter alia on the lessee carrying out 
Page  13
the management practices stipulated.
7.
The Borrower shall recruit, or cause to be recruited, additional staff for the 
Environmental Division of MTEWA and the CEA in accordance with a timetable 
satisfactory to the Administrator, which staff shall include, for the Environmental 
Division about 17 new professional/technical staff, and for the CEA about 48 new 
professional/technical staff and about 24 staff to fill approved positions.
8.
The Borrower shall:
(a)
by September 30, 1998, carry out in-depth review of the progress in 
carrying out the Project; promptly thereafter furnish a copy of the findings and 
recommendations of such review to the Administrator for discussion, and, as a result 
of such discussion, implement recommendations satisfactory to the Administrator; and 
(b)
by June 30, 2000, carry out a second in-depth review of the progress in 
carrying out the Project; promptly thereafter furnish a copy of the findings and 
recommendations of such review to the Administrator for discussion; and, as a result 
of such discussion, implement recommendations satisfactory to the Administrator.
9.
For carrying out Part B of the Project, the Borrower shall:
(a) 
maintain a Committee, with membership and responsibilities satisfactory 
to the Administrator, to select proposals for the financing of the subprojects; and 
cause such Committee to make a selection only after having an evaluation of such 
proposals carried out by consultants, provided that the evaluation of the first five 
proposals reviewed, and all subsequent proposals for subprojects estimated to cost 
$200,000 equivalent or more, will have been furnished to the Administrator for its 
approval prior to submission to the Committee;
(b)  
ensure that all proposals selected to be financed meet eligibility 
criteria agreed with the Administrator, including, without limitation, the following: 
(i) the participating organizations proposed to carry out the subprojects are local 
government authorities, non-governmental organizations, approved societies or research 
organizations, provided that such organizations shall (A) have at least two years of 
experience dealing with environmental issues and in organizing and assisting community 
groups, and (B) have adequate administrative, financial and managerial capacity; (ii) 
contribution of participating organizations of at least 20% either in cash or in kind; 
(iii) no involuntary resettlement is involved; and (iv) environmental benefits and 
risks have been assessed; 
(c)
prepare participation agreements, in form and substance satisfactory to 
the Administrator, setting out the responsibilities of MTEWA and the various 
participating organizations for implementing and supervising the selected proposals; 
and
(d)
hire services of specialists to carry out detailed evaluation of said 
Part of the Project on the average of twice a year.
10.
The Borrower shall maintain policies and procedures adequate to enable it to 
monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory 
to the Administrator, the carrying out of the Project and the achievement of the 
objectives thereof.
SCHEDULE 5
Special Account
1.
For the purposes of this Schedule:
(a)
the term “eligible Categories” means Categories (1) through (6) set forth 
in the table in paragraph 1 of Schedule 1 to this Agreement;
(b)
the term “eligible expenditures” means expenditures in respect of the 
reasonable cost of goods and services required for the Project and to be financed out 
of the proceeds of the Interim Fund Credit allocated from time to time to the eligible 
Categories in accordance with the provisions of Schedule 1 to this Agreement; and
Page  14
(c)
the term “Authorized Allocation” means an amount equivalent to $1,200,000 
to be withdrawn from the Interim Fund Credit Account and deposited into the Special 
Account pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless 
the Administrator shall otherwise agree, the Authorized Allocation shall be limited to 
an amount equivalent to $700,000 until the aggregate amount of withdrawals from the 
Interim Fund Credit Account plus the total amount of all outstanding special 
commitments entered into by the Administrator pursuant to Section 5.02 of the General 
Conditions shall be equal to or exceed the equivalent of SDR 4,000,000.
2.
Payments out of the Special Account shall be made exclusively for eligible 
expenditures in accordance with the provisions of this Schedule.
3.
After the Administrator has received evidence satisfactory to it that the 
Special Account has been duly opened, withdrawals of the Authorized Allocation and 
subsequent withdrawals to replenish the Special Account shall be made as follows:
(a)
For withdrawals of the Authorized Allocation, the Borrower shall furnish 
to the Administrator a request or requests for deposit into the Special Account of an 
amount or amounts which do not exceed the aggregate amount of the Authorized 
Allocation.  On the basis of such request or requests, the Administrator shall, on 
behalf of the Borrower, withdraw from the Interim Fund Credit Account and deposit into 
the Special Account such amount or amounts as the Borrower shall have requested.
(b)
(i)
For replenishment of the Special Account, the Borrower shall 
furnish to the 
Administrator requests for deposits into the Special 
Account at such intervals 
as the Administrator shall specify.
(ii)
Prior to or at the time of each such request, the Borrower shall 
furnish to 
the Administrator the documents and other evidence required 
pursuant to 
paragraph 4 of this Schedule for the payment or 
payments in respect of which 
replenishment is requested. On the basis 
of each such request, the 
Administrator shall, on behalf of 
the Borrower, withdraw from the Interim Fund 
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.  
All such deposits shall be withdrawn by the Administrator from the Interim Credit 
Account under the respective eligible Categories, and in the respective equivalent 
amounts, as shall have been justified by said documents and other evidence.
4.
For each payment made by the Borrower out of the Special Account, the Borrower 
shall, at such time as the Administrator shall reasonably request, furnish to the 
Administrator such documents and other evidence showing that such payment was made 
exclusively for eligible expenditures.
5.
Notwithstanding the provisions of paragraph 3 of this Schedule, the 
Administrator shall not be required to make further deposits into the Special Account:
(a)
if, at any time, the Administrator shall have determined that all further 
withdrawals should be made by the Borrower directly from the Interim Fund Credit 
Account in accordance with the provisions of Article V of the General Conditions and 
paragraph (a) of Section 2.02 of this Agreement;
(b)
if the Borrower shall have failed to furnish to the Administrator, 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 Administrator pursuant to said Section 
in respect of the audit of the records and accounts for the Special Account;
(c)
if, at any time, the Administrator 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 Interim Fund Credit Account pursuant to the provisions of Section 
6.02 of the General Conditions; or
(d)
once the total unwithdrawn amount of the Interim Fund Credit allocated to 
Page  15
the eligible Categories, minus the total amount of all outstanding special commitments 
entered into by the Association pursuant to Section 5.02 of the General Conditions 
with respect to the Project, shall equal the equivalent of twice the amount of the 
Authorized Allocation.
Thereafter, withdrawal from the Interim Fund Credit Account of the remaining 
unwithdrawn amount of the Interim Fund Credit allocated to the eligible Categories 
shall follow such procedures as the Administrator shall specify by notice to the 
Borrower. Such further withdrawals shall be made only after and to the extent that the 
Administrator shall have been satisfied that all such amounts remaining on deposit in 
the Special Account as of the date of such notice will be utilized in making payments 
for eligible expenditures.
6.
(a)
If the Administrator shall have determined at any time that any payment 
out of the Special Account: (i) was made for an expenditure or in an amount not 
eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the 
evidence furnished to the Administrator, the Borrower shall, promptly upon notice from 
the Administrator: (A) provide such additional evidence as the Administrator may 
request; or (B) deposit into the Special Account (or, if the Administrator shall so 
request, refund to the Administrator) an amount equal to the amount of such payment or 
the portion thereof not so eligible or justified. Unless the Administrator shall 
otherwise agree, no further deposit by the Administrator into said 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 Administrator shall have determined at any time that any amount 
outstanding in the Special Account will not be required to cover further payments for 
eligible expenditures, the Borrower shall, promptly upon notice from the 
Administrator, refund to the Administrator such outstanding amount.
(c)
The Borrower may, upon notice to the Administrator, refund to the 
Administrator all or any portion of the funds on deposit in the Special Account.
(d)
Refunds to the Administrator made pursuant to paragraphs 6 (a), (b) and 
(c) of this Schedule shall be credited to the Interim Fund Credit Account for 
subsequent withdrawal or for cancellation in accordance with the relevant provisions 
of this Agreement, including the General Conditions.