Page 1 January 22, 1992 His Excellency Khamphoui Reoboualapha Deputy Prime Minister and Minister of Economy, Planning and Finance Ministry of Economy, Planning and Finance Vientiane, Lao P.D.R. Re: Development Credit No 2079 Upland Agriculture Development Project - Amendment to Development Credit Agreement We refer to the Development Credit Agreement (upland Agriculture, Development Project) between Lao People's Democratic Republic (the Borrower) and the International Development Association (the Association) dated February 23, 1990. We refer also to your letter of October 18, 1991 requesting the Association to modify the flow of fund arrangement under the Project. The Association is pleased to inform you that, after due consideration, it has agreed to amend the Development Credit Agreement as follows: 1. Subparagraph (d) of Section 1.02 of the Development Credit Agreement is here~y deleted and replaced by the following: "(d) 'PSC' means the Borrower's Project Steering Committee;". 2. The following subparagraphs are hereby added to Section 1.O2 of the Development Credit Agreement: "(g) 'Participating Financial Institution' and 'PFI' mean any bank or credit institution duly established under the laws of the Borrower which has entered into a Participation Agreement with the Borrower; (h) 'Participation Agreements' means the agreement to be entered into between the Borrower and a PFI; (i) 'Sub-borrower' means any individual farmer, group of farmers or owner of a light agro-processing or cottage business to which a Participating Credit Institution has made has made a Sub-loan; and (j) 'Sub-loan' means a loan made by a Participating Financial Institution out of the proceeds of the Credit to a Sub-borrower to finance a specific farm production or agro-processing activity." 3. Section 2.02 (a) of the Development Credit Agreement i~ hereby amended by inserting (1) the language "(1) Sub-loans under Part A.l of the Project; and (ii)" between the words in respect of" and "the reasonable cost of goods"; and (2) the language "Parts A.2, B, C, D and E of" between the words "required for" and "the Project". 4. A new Section 3.04 shall be inserted in the text of the Oevelopment Credit Agreement and shall read as follows: "Section 3.04. Without limitation upon the provisions of paragraph (a) of Section 3.01, the Borrower shall re-lend five million four hundred seventy thousand Special Drawing Rights (SDR 5,470,000) to PFIs carrying out activities under Part A.1 of the Project for on lending to Sub-borrowers, all in accordance with terms and conditions acceptable to the Association including, without limitation (i) interest rates sufficient to cover the PFI's operating costs; (ii) the foreign exchange risk to be borne by the Borrower; (iii) the provision that re-lending and on-lending interest rates shall be annually reviewed by the Association and, if necessary, adjusted, pursuant to procedures and criteria acceptable to the Association; and (iv) that the goods, works and services to Page 2 be financed under Part A.1 of the Project be purchased at a reasonable price, account being taken of relevant factors such as time of delivery, efficiency and reliability of the goods and availability of maintenance facilities and spare parts there for, and, in the case of services, of their quality and the competence of the parties rendering them." The table set forth in Paragraph l of Schedule 1 of the Development Credit Agreement is hereby amended to read as follows: Category Amount of the Credit % of Allocated (Expressed Expenditures in SDR Equivalent) to be Financed (3) Fuels, ferti- lizer and materials 300,000 100% of foreign expenditures for directly imported items, 100% of local expenditures (ex-factory cost) and 80% of local expenditures for other items procured locally (4)Studies 80,000 100% (5) Sub-loans under 5,470,000 80% Part A.1 of the Project (6) Refunding of Project Preparation Advance 1,000 Amount due pursuant Section 2.02(c) of this Agreement (7) Unallocated 2,549,000 Total 15,900,000 Paragraph 3 of Schedule 1 of the Development Credit Agreement is hereby amended to read as follows: "Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures (a) for Categories other than Category (5) prior to the date of the Development Credit Agreement or (b) for Category is) prior to effectiveness of this Amendment." 7. The heading of Part A in Schedule 2 to the Development Credit Agreement is hereby amended to read "Crop and Other Farm Production". 8. Part A.l of Schedule 2 to the Development Credit Agreement ~ hereby amended by deleting the word "and" between the words "crops" and the "valley" in the second line and by adding the words "and other farm production and processing" after the word "crops" at the end of the paragraph. 9. The figures "$2,000,000" and "$600,000" appearing in Part D of Schedule 3 of the Development Credit Agreement are hereby deleted and replaced by the figures $300,000", respectively. 10. All reference~ to "NPCC" Ln Schedule 4 of the Development Credit Agreement shall be deemed to refer to "PSC". Page 3 11. Paragraph (g) of Schedule 4 is hereby deleted ln its entirety. The semi-colon and the word ~and~ at the end of paragraph (f) are hereby removed and placed at the end of paragraph (e) and a full stop is hereby inserted at the end of paragraph (f). Paragraph 1 (a) of Schedule 5 is hereby amended as follows: "(a) the term "eligible Categories' means Categories (l), (2), (3), (4) and (5) setforth in the table in paragraph l of Schedule l to this Agreement.~ This Amendment shall not become effective until (i) has been signed by the Borrower and the Association; and (ii) evidence satisfactory to the Association shall have been furnished to the Association that the Borrower has entered into a Participation Agreement with atleast two Participating Financial Institutions~. Please confirm your agreement with the foregoing amendments by signing and dating the enclosed confirmation form and by returning it to us for our records. Sincerely Callisto Madavo Director Country Department I East Asia and Pacific Region CONFIRMED: LAO PEOPLE'S DEMOCRATIC REPUBLIC By: Khamphoui Keoboalapha Authorized Representative Date: March 11, 1992