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CONFORMED COPY
CREDIT NUMBER 3293 NEP
Development Credit Agreement
(Road Maintenance and Development Project)
between
KINGDOM OF NEPAL
and
INTERNATIONAL DEVELOPMENT ASSOCIATION
Dated December 22, 1999
CREDIT NUMBER 3293 NEP 
DEVELOPMENT CREDIT AGREEMENT 
AGREEMENT, dated December 22, 1999, between KINGDOM OF NEPAL (the Borrower) and 
INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association).
WHEREAS (A) the Borrower, having satisfied itself as to the feasibility and 
priority of the project described in Schedule 2 to this Agreement (the Project), has 
requested the Association to assist in the financing of the Project; and
(B) 
the Association has agreed, on the basis, inter alia, of the foregoing, 
to extend the credit provided for in Article II of this Agreement (the Credit) to the 
Borrower upon the terms and conditions set forth in this Agreement;
NOW THEREFORE the parties hereto hereby agree as follows: 
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 \0bDecember 2, 
1997) (the General Conditions) constitute an integral part of this Agreement.
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:
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(a)
“DOR” means the Department of Roads of the Borrower within MOWT (as 
hereinafter defined);
(b)
“EIA” means the Environmental Impact Assessment of the Borrower dated 
August 19, 1999 and approved by the Association, setting forth, inter alia, the 
assessment of environmental impacts of the construction of new roads under the Project 
and recommendations for mitigation of adverse impacts and enhancement of positive 
impacts based on such assessment;
(c)
“Eligible Categories” means categories (1), (2) and (3) set forth in the 
table in Part A.1 of Schedule 1 to this Agreement; 
(d)
“Eligible Expenditures” means the expenditures for goods and services 
referred to in Section 2.02(a) of this Agreement;
(e)
“EMAP” means each of (i) the Environmental Management Action Plan based 
on and resulting from the EIA, dated August 19, 1999 and approved by the Association, 
setting forth, inter alia, the measures to mitigate adverse environmental impacts and 
enhance positive environmental impacts of the construction of new roads under the 
Project, (ii) the Environmental Management Action Plan based on and resulting from the 
IEE (as hereinafter defined) for the upgrading of roads under the Project, dated July 
28, 1999 and approved by the Association, setting forth, inter alia, the measures to 
mitigate adverse environmental impacts and enhance positive environmental impacts of 
the upgrading of roads under the Project and (iii) the Environmental Management Action 
Plan based on and resulting from the IEE for the rehabilitation of roads under the 
Project, dated August 19, 1999 and approved by the Association, setting forth, inter 
alia, the measures to mitigate adverse environmental impacts and enhance positive 
environmental impacts of the rehabilitation of roads under the Project;
(f)
“Fiscal Year” or “FY” means the fiscal year of the Borrower, which begins 
approximately on July 16 of a calendar year and ends approximately on July 15 of the 
following calendar year;
(g)
“IEE” means each of (i) the Initial Environmental Examination of the 
Borrower dated July 28, 1999 and approved by the Association, setting forth, inter 
alia, the assessment of environmental impacts of the upgrading of roads under the 
Project and recommendations for mitigation of adverse impacts and enhancement of 
positive impacts based on such assessment and (ii) the Initial Environmental 
Examination of the Borrower dated August 19, 1999 and approved by the Association, 
setting forth, inter alia, the assessment of environmental impacts of the 
rehabilitation of roads under the Project and recommendations for mitigation of 
adverse impacts and enhancement of positive impacts based on such assessment;
(h)
“MOWT” means the Ministry of Works and Transport of  the Borrower; 
(i)
“Nepal Rastra Bank” means the central bank of the Borrower, established 
and operating pursuant to the Nepal Rastra Bank Act, 2012 (1955), as amended from time 
to time;
(j)
“Nepalese Rupees” or “NRs” means the currency of the Borrower;
(k)
“PCU” means the Project Coordination and Implementation Unit established 
in the DOR and responsible for, inter alia, the planning, implementation, coordination 
and management of supervision and monitoring and evaluation of activities to be 
carried out under the Project;
(l)
“Priority Investment Plan” means the Priority Investment Plan for the 
Road Sector (February 1997) of the Borrower, setting forth, inter alia, objectives, 
policies and actions to undertake priority projects for sustainable development of the 
strategic and rural road network for the period 1997-2006;
(m)
“Project Implementation Plan” means the Project Implementation Plan of 
the Borrower for the carrying out of the Project, dated September 1999 and approved by 
the Association, as the same may be updated from time to time with the agreement of 
the Association;
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(n)
“Project Management Report” means each report prepared in accordance with 
Section 4.02 of this Agreement;
(o)
“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 August 28, 1998 and on behalf of the Borrower on November 
18, 1998;
(p)
“RAP” means the Resettlement Action Plan of the Borrower dated June 1999 
and the Addendum thereto dated July 1999, both approved by the Association, setting 
forth, inter alia, the entitlement framework, institutional arrangements, 
implementation schedules, monitoring mechanisms and cost estimates for the 
resettlement and rehabilitation of people affected by the implementation of the 
Project;
(q)
“Roads Board” means a joint public and private sector board proposed to 
be established by the Borrower for the purpose of overseeing the management of the 
maintenance of the strategic, urban and rural road network and financial allocations 
for maintenance in the road sector;
(r)
“Road Fund” means a fund proposed to be established by the Borrower and 
managed by the Roads Board and comprising various sources including a portion of road 
user revenues earmarked for financing a portion of road maintenance requirements, 
including routine, recurrent, periodic and emergency maintenance operations; and
(s)
“Special Account” means the account referred to in Part B of Schedule 1 
to this Agreement.
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 this Agreement, an amount in various currencies 
equivalent to forty million one hundred thousand Special Drawing Rights \0b(SDR 
40,100,000).
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 
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.
(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 December 31, 2004 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.
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(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 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 Credit in semiannual installments payable on 
each March 15 and September 15 commencing March 15, 2010 and ending September 15, 
2039.  Each installment to and including the installment payable on September 15, 2019 
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 
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, and, to this end, shall carry out the Project, through DOR with the 
assistance of MOWT, with due diligence and efficiency and in conformity with 
appropriate administrative, financial, engineering, transport 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 Association shall otherwise agree, the Borrower 
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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 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 Project’s 
objectives; and
(b)
afford the Association a reasonable opportunity to exchange views with 
the Borrower on said plan.
ARTICLE IV
Financial Covenants
Section 4.01. (a) The Borrower shall maintain a financial management system, 
including records and accounts, and prepare financial statements in a format 
acceptable to the Association, adequate to reflect in accordance with sound financial 
management and accounting practices the operations, resources and expenditures related 
to 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, accounts and financial statements 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 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 Fiscal 
Year, (A) certified copies 
of the financial statements referred to 
in paragraph (a) of this Section for 
such Fiscal Year as so audited, 
and (B) an opinion on such financial 
statements, records and 
accounts and a report of such audit, by said auditors, 
of such scope 
and in such detail as the Association shall have reasonably 
requested; and
(iii)
furnish to the Association such other information concerning said 
records, 
accounts and financial statements, and the audit 
thereof, and concerning said 
auditors, as the Association may 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 Project Management Reports or statements of 
expenditure, the Borrower shall:
(i)
maintain or cause to be maintained, in accordance with paragraph 
(a) of this 
Section, records and separate accounts reflecting such 
expenditures;
(ii)
retain or cause to be retained, 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;
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(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 
as to whether the Project 
Management Reports or 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 the financial management system referred to in 
paragraph (a) of said Section 4.01 in order to enable the Borrower, not later than 
February 28, 2001, or such later date as the Association shall agree, to prepare 
trimesterly 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 eight-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 eight-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 trimester 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 an event shall have occurred 
which shall make it improbable that the Priority Investment Plan 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 this Agreement within the meaning of Section 12.01(b) of the General 
Conditions:
(a)
all bids have been received for contracts for all civil works for the 
first year of Project implementation and all proposals have been received for all 
consultants’ services for institutional strengthening and training assistance;
(b)
a Program Coordinator (Deputy Director General, Foreign Cooperation 
Branch of DOR), two Senior Divisional Engineers (including one Procurement Engineer), 
an Accounts Officer, an Accountant, an Environmental Engineer and a Social Planner 
have been appointed in the PCU;
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(c)
a draft of the proposed Nepal Roads Board Act or another equivalent 
legislation for the establishment of the Roads Board and the establishment of the Road 
Fund has been submitted to the Parliament Secretariat for the purpose of obtaining 
approval by the Parliament of the Borrower; and
(d)
all actions set forth in the action plan referred to in Section 4.02(a) 
of this Agreement for which the completion dates specified therein precede the 
Effective Date have been completed.
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.
ARTICLE VII
Representative of the Borrower; Addresses
Section 7.01. The Secretary, Ministry 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
His Majesty’s Government of Nepal
Kathmandu, Nepal
Cable address:
Telex:
ARTHA
2249-NEP
Kathmandu, Nepal
For the Association:
International Development Association
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
INDEVAS
248423 (MCI) or
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 
Kathmandu, Nepal, as of the day and year first above written.
KINGDOM OF NEPAL
By /s/ Ram Binod Bhattarai 
Authorized Representative
INTERNATIONAL DEVELOPMENT ASSOCIATION
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By /s/ Hans M. Rothenbuhler 
Country Director, Nepal
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)
Civil works
   27,800,000
100% of foreign
expenditures and 55%
of local expenditures
(2)
Goods
      700,000
100% of foreign
expenditures,
100% of local
expenditures
(ex-factory cost) and
90% of local expend-
itures for other items
procured locally
(3)
Consultants’services
    7,300,000
100%
and training
(4)
Refunding of
    1,200,000
Amount due
Project Preparation
pursuant to
Advance
Section 2.02(b) of
this Agreement 
(5)
Unallocated
    3,100,000
  ___________
TOTAL
   40,100,000
   ==========
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 
territory of any country other than that of the Borrower; and
(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.
3.
Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be 
made in respect of payments made for expenditures prior to the date of this Agreement, 
except that withdrawals, in an aggregate amount not exceeding the equivalent of \0bSDR 
3,700,000, may be made in respect of Categories (1), (2) and (3) set forth in the 
table in Part A.1 of this Schedule on account of payments made for expenditures before 
that date but after August 1, 1999.
4.
The Association may require withdrawals from the Credit Account to be made on 
the basis of statements of expenditure for expenditures for: (a) goods under contracts 
costing less than $50,000 equivalent each; (b) works under contracts costing less than 
$200,000 equivalent each; (c) services under contracts costing less than $50,000 
equivalent each for employment of consulting firms and $10,000 equivalent each for 
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employment of individual consultants; and (d) training; all under such terms and 
conditions as the Association shall specify by notice to the Borrower.
B.
Special Account
1.
The Borrower shall open and maintain in dollars a special deposit account in 
Nepal Rastra Bank, on terms and conditions satisfactory to the Association.
2.
After the Association has received evidence satisfactory to it that the 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 the Special Account shall be made exclusively for Eligible 
Expenditures.  For each payment made by the Borrower out of the 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 the Special Account:
(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, accounts and financial statements reflecting expenditures with respect to 
which withdrawals were made on the basis of Project Management Reports or statements 
of expenditure.
5.
The Association shall not be required to make further deposits into the 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 the 
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 
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the Special Account will not be required to cover payments for Eligible Expenditures 
during the eight-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 the Special Account.
(d)
Refunds to the Association made pursuant to sub-paragraph (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 this Agreement.
Annex A to SCHEDULE 1
Operation of Special Account 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 $2,000,000 to be withdrawn from the Credit Account and deposited into 
the Special Account pursuant to paragraph 2 of this Annex; provided, however, that 
unless the Association shall otherwise agree, the Authorized Allocation shall be 
limited to an amount equivalent to $1,000,000 until the aggregate amount of 
withdrawals from the Credit Account, plus the total amount of all outstanding special 
commitments entered into by the Association pursuant to Section 5.02 of the General 
Conditions, shall equal or exceed the equivalent of SDR 1,500,000.
2.
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 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 Eligible 
Categories.
3.
The Association shall not be required to make further deposits into the 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 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 Account 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 
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Special Account in accordance with the provisions of Schedule 1 to this Agreement.  
Each such deposit into the Special Account shall be withdrawn by the Association from 
the Credit Account under one or more of the Eligible Categories.
2.
Each application for withdrawal from the Credit Account for deposit into the 
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 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 eight-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 $8,000,000.
SCHEDULE 2
Description of the Project
The objectives of the Project are to assist the Borrower in: (i) strengthening 
the road sector planning by building upon the Priority Investment Plan framework; 
\0b(ii) reducing vehicle transport costs and delays; (iii) improving the access to 
district headquarters not currently served by road; (iv) promoting more sustainable 
funding and more efficient public sector management of road maintenance; and (v) 
generating temporary rural employment through adoption of labor-based road 
construction technologies and long-term employment for road maintenance and additional 
economic activities generated by the improved road network.
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:
Policy Reform
Implementing policy reform in the road sector to achieve sustainable maintenance 
management of the strategic, urban and rural road network through, inter alia: (i) the 
establishment and implementation of the Roads Board with public and private sector 
participation to oversee the management of the maintenance of such network and 
financial allocations for maintenance in the road sector; and (ii) the establishment 
and operation of the Road Fund to increase funding for road maintenance through 
enhanced road user contributions and efficiency of expenditures.
Part B:
Road Construction and Upgrading
1.
Constructing about 200 km of new dry-weather feeder roads and upgrading about 
260 km of existing dry-weather feeder roads to gravel road standard.
2.
Carrying out a program of resettlement and rehabilitation of people affected by 
the carrying out of Part B.1 of the Project.
Part C:
Road Rehabilitation
1.
Rehabilitating about 160 km of the strategic highway and feeder road network.
2.
Carrying out a program of resettlement and rehabilitation of people affected by 
the carrying out of Part C.1 of the Project.
Part D:
Road Maintenance
Implementing periodic maintenance of about 470 km of the strategic highway and 
feeder road network.
Part E:
Institutional Strengthening and Training
Strengthening the institutional capacity of MOWT/DOR through: (i) the provision 
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of support and training to (a) the Road Sector Skills Development Unit of DOR for 
local training, (b) the Geo-Environmental Unit of DOR to expand its capabilities in 
the implementation of environmental management action plans and resettlement and 
rehabilitation plans, (c) the Mechanical Training Center of DOR to assist with its 
commercialization, continuation of mechanical training and expansion of training to 
cover private sector personnel, (d) the Chief Technical Examiner Section of MOWT to 
enable it to establish a technical audit capacity and to undertake technical audits of 
DOR projects, and (e) the Planning and Design Branches of DOR for activities related 
to the existing Maintenance and Rehabilitation Coordination Unit of DOR and the 
Traffic Engineering and Safety Unit of DOR; (ii) the undertaking of semi-annual 
third-party operational audits of DOR’s operations; (iii) the undertaking of 
pre-investment studies and socio-economic impact studies of Project beneficiaries; 
(iv) the provision of equipment for office modernization and vehicles for field 
surveys and inspections; and (v) improvements to training and office facilities.
*          *          *
The Project is expected to be completed by June 30, 2004.
SCHEDULE 3
Procurement
Section I. 
Procurement of Goods and Works
Part A:
General
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 and revised in January and August 1996, September 1997 and 
January 1999 (the Guidelines) and the provisions of the following Parts of this 
Section I.
Part B:
International Competitive Bidding
1.
Except as otherwise provided in Part C of this Section, goods and works shall be 
procured under contracts awarded in accordance with the provisions of Section II of 
the Guidelines and paragraph 5 of Appendix I thereto.
2.
The following provisions shall apply to goods and works to be procured under 
contracts awarded in accordance with the provisions of paragraph 1 of this Part B.
(a)
Prequalification
Bidders for contracts for works estimated to cost $2,000,000 equivalent or more 
per contract shall be prequalified in accordance with the provisions of paragraphs 2.9 
and 2.10 of the Guidelines.
(b)
Grouping of Contracts
To the extent practicable, contracts for goods shall be grouped in bid packages 
estimated to cost $200,000 equivalent or more each.
(c)
Preference for domestically manufactured goods and domestic contractors
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 and works 
to be carried out by domestic contractors.
Part C:
Other Procurement Procedures
1.
National Competitive Bidding
(a)
The following may be procured under contracts awarded in accordance with 
the provisions of paragraphs 3.3 and 3.4 of the Guidelines: (i) works estimated to 
cost less than $500,000 equivalent per contract, up to an aggregate amount not to 
exceed $22,000,000 equivalent; and (ii) goods estimated to cost less than $200,000 
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equivalent per contract, up to an aggregate amount not to exceed $300,000 equivalent.
(b)
In order to ensure economy, efficiency, transparency and broad 
consistency with the provisions of Section 1 of the Guidelines:
(i)
invitations to bid shall be advertised in at least one widely 
circulated 
national daily newspaper, at least 30 days prior to 
the deadline for the 
submission of bids;
(ii)
bid documents shall be made available, by mail or in person, to 
all who are 
willing to pay the required fee;
(iii)
evaluation of bids shall be made in strict adherence to the 
criteria disclosed 
in the bidding documents, in a format and specified 
period agreed with the 
Association;
(iv)
bids shall be opened in public in one place, immediately after the 
deadline 
for submission of bids;
(v)
foreign bidders shall not be precluded from bidding and no 
preference of any 
kind shall be given to national bidders;
(vi)
qualification criteria (in case pre-qualifications were not 
carried out) shall 
be stated in the bidding documents, and if a 
registration process is required, 
a foreign firm declared as the 
lowest evaluated bidder shall be given a 
reasonable 
opportunity of registering, without let or hindrance;
(vii)
contracts shall be awarded to the lowest evaluated bidders;
(viii) post-bidding negotiations shall not be allowed with the lowest 
evaluated 
bidders or any other bidders;
(ix)
bids shall not be rejected merely on the basis of a comparison 
with an 
official estimate without the prior concurrence of 
the Association;
(x)
contracts shall not be awarded on the basis of nationally 
negotiated rates;
(xi)
re-bidding shall not be carried out without the prior concurrence 
of the 
Association;
(xii)
all bidders/contractors shall provide bid/performance security as 
indicated in 
the bidding/contract documents;
(xiii)
a bidder’s bid security shall apply only to a specific bid, and a 
contractor’s 
performance security shall apply only to the specific 
contract under which it 
was furnished;
(xiv)
split award or lottery in award of contracts shall not be carried 
out. When 
two or more bidders quote the same lowest price, an 
investigation shall be 
made to determine any evidence of 
collusion, following which (A) if collusion 
is determined, the parties 
involved shall be disqualified and the award shall 
then be made to the 
next lowest evaluated and qualified bidder and (B) if no 
evidence of 
collusion can be confirmed, then fresh bids shall be invited after 
receiving the concurrence of the Association;
(xv)
extension of bid validity shall not be allowed without the prior 
concurrence 
of the Association (A) for the first request for extension 
if it is longer 
than eight weeks and (B) for all subsequent 
requests for extension 
irrespective of the period;
(xvi)
bids shall not be invited on the basis of percentage premium or 
discount over 
the estimated cost; and
Page  14
(xvii) there shall not be any restrictions on the means of delivery of 
the bids.
2.
International or National Shopping
Goods estimated to cost less than $50,000 equivalent per contract, up to an 
aggregate amount not to exceed $200,000 equivalent, may be procured under contracts 
awarded on the basis of shopping procedures in accordance with the provisions of 
paragraphs 3.5 and 3.6 of the Guidelines. 
3.
Procurement of Small Works
Works estimated to cost less than $30,000 equivalent per contract, up to an 
aggregate amount not to exceed $2,000,000 equivalent, may be procured under lump-sum, 
fixed-price contracts awarded on the basis of quotations obtained from at least 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.
4.
Community Participation
Works estimated to cost less than $50,000 equivalent per contract, up to an 
aggregate amount not to exceed $2,000,000 equivalent when added to the works procured 
under paragraph 5 of this Part C, may be procured by community participation in 
accordance with the provisions of paragraph 3.15 of the Guidelines and procedures 
acceptable to the Association.
5.
Direct Contracting
The following may, with the Association’s prior agreement, be procured by direct 
contracting in accordance with the provisions of paragraph 3.7 of the Guidelines: (a) 
works estimated to cost less than $20,000 equivalent per contract, up to an aggregate 
amount not to exceed $2,000,000 equivalent when added to the works procured under 
paragraph 4 of this Part C; and (b) computer software for the financial management 
system up to an aggregate amount not to exceed $8,000 equivalent.
Part D:
Review by the Association 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 
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
(a)
With respect to (i) each contract for works estimated to cost the 
equivalent of $200,000 or more and (ii) 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.
(b)
With respect to (i) each contract for goods to be procured under 
paragraph 2 of Part C above, (ii) the first three contracts for works to be procured 
under paragraph 3 of Part C above, (iii) each contract for works to be procured under 
paragraph 4 of Part C above and estimated to cost the equivalent of $30,000 or more 
and (iv) each contract for goods and works to be procured under paragraph 5 of Part C 
above, the following procedures shall apply:
(i)
prior to the selection of any supplier under shopping or 
three-quotation 
procedures, the Borrower shall provide to the 
Association a report on the 
comparison and evaluation of 
Page  15
quotations received;
(ii)
prior to the execution of any contract referred to in this 
paragraph 2(b), the 
Borrower shall provide to the Association a 
copy of the specifications and the 
draft contract; and
(iii)
the procedures set forth in paragraphs 2(f), 2(g) 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, the 
procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply.
Section II.
Employment of Consultants
Part A:
General
Consultants’ services shall be procured in accordance with the provisions of the 
Introduction and Section IV of the “Guidelines: Selection and Employment of 
Consultants by World Bank Borrowers” published by the Bank in January 1997 and revised 
in September 1997 and January 1999 (the Consultant Guidelines) and the provisions of 
the following Parts of this Section II.
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, estimated to cost less than $200,000 
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.
Selection under a Fixed Budget
Services for assisting the Borrower in the implementation and monitoring of a 
program of resettlement and rehabilitation and environmental management under Parts B 
and C of the Project may be procured under contracts awarded in accordance with the 
provisions of paragraphs 3.1 and 3.5 of the Consultant Guidelines.
2.
Individual Consultants
Services for tasks that meet the requirements set forth in paragraph 5.1 of the 
Consultant Guidelines 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
Page  16
(a)
With respect to each contract for the employment of consulting firms 
estimated to cost the equivalent of $100,000 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 $50,000 or more, but less than the equivalent of 
$100,000, 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 $10,000 or more, 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.
(d)
With respect to each proposal for overseas training or overseas study 
tour, cost estimates and a description of the type and purpose of such training or 
study tour shall be furnished to the Association for its prior review and approval.  
The training or study tour, as applicable, shall be undertaken 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
Project Implementation Plan
1.
The Borrower shall carry out the Project in accordance with the Project 
Implementation Plan.
Project Coordination and Implementation Unit (PCU)
2.
The Borrower shall maintain the PCU with adequate numbers of professional staff 
with skills and experience and on terms of reference satisfactory to the Association, 
including without limitation (i) a Program Coordinator (Deputy Director General, 
Foreign Cooperation Branch), (ii) two Senior Divisional Engineers (including one 
Procurement Engineer), (iii) an Accounts Officer, (iv) two Accountants, (v) an 
Environmental Engineer, (vi) a Social Planner and (vii) two Assistant Engineers.
3.
The Borrower shall ensure that the key staff in the PCU listed in the preceding 
paragraph will not be transferred to other positions during the period of Project 
implementation (and in the case of the Accounts Officer, for the additional six months 
following the Closing Date), except with prior notice to the Association and as 
required by the applicable law of the Borrower.
Geo-Environmental Unit
4.
The Borrower shall: (i) by December 31, 2000, submit to the Association a 
specific action plan, satisfactory to the Association, for strengthening the 
capabilities of the Geo-Environmental Unit of DOR, including without limitation its 
capacity for preparing and monitoring environmental and social impact assessments; and 
(ii) thereafter implement such action plan in a manner satisfactory to the Association 
and submit to the Association on a quarterly basis a report of all the activities 
undertaken by such Unit.
Beneficiary Impact Assessment
5.
By October 31, 2001 and May 31, 2003, the Borrower shall: (i) conduct in a 
manner and with terms of reference satisfactory to the Association a socio-economic 
Page  17
assessment of impacts on Project beneficiaries of the road improvements made under the 
Project during the period preceding each such date, with the beneficiary participation 
in data collection and impact monitoring; and (ii) submit a report of each such 
assessment to the Association. Financial Management System
6.
The Borrower shall: (i) by February 29, 2000, complete the preparation of an 
accounts manual, satisfactory to the Association, for the operation of its financial 
management system; (ii) by March 31, 2000, start the training, with terms of reference 
satisfactory to the Association, of the adequate number of accounts staff of the PCU 
by using such accounts manual; and (iii) by February 29, 2000, appoint an assistant to 
the Procurement Engineer and a computer technician for the operation of the financial 
management system, both with qualifications and experience satisfactory to the 
Association.
Roads Board and Road Fund
7.
By December 31, 2001, the Borrower shall make the Roads Board and the Road Fund 
operational under the Nepal Roads Board Act or another equivalent legislation referred 
to in Section 6.01(c) of this Agreement, including the issuance of all necessary or 
appropriate regulations under such Act or equivalent legislation, in a manner 
satisfactory to the Association.
Survey of Quality of Road Works
8.
As part of the third-party operational audits of DOR’s operations under Part E 
of the Project, the Borrower shall: (i) by June 30 and December 31 of each year, 
arrange for a sample survey, with the scope and content satisfactory to the 
Association, of the overall quality of road construction and maintenance works carried 
out by DOR, to be conducted by an independent monitoring engineer with qualifications, 
experience and terms of reference satisfactory to the Association, and submit the 
results of each such survey to the Association; and (ii) thereafter implement in a 
manner satisfactory to the Association the recommendations resulting from each such 
survey.
Survey of Road Roughness and Visual Condition Rating
9.
By May 31 of each year, the Borrower shall: (i) conduct a survey of road 
roughness and visual condition rating on at least 50% of strategic highways and feeder 
roads of the Borrower (focusing on the strategic highway network and incrementally 
covering the rest of the network); and (ii) disseminate the results of each such 
survey in the Road Condition Report published by the Borrower.
Road Maintenance Funding
10.
During the period of Project implementation, the Borrower shall ensure that the 
annual allocations and expenditures for the maintenance of roads (comprising the 
strategic road network of highways and feeder roads managed by DOR), consisting of 
routine, periodic, recurrent and emergency maintenance expenditures but excluding 
funds contributed by external donors and other agencies and funds allocated to 
construction and upgrading works, will be systematically increased for each Fiscal 
Year to not less than the following amounts: NRs 700 million in FY1999/2000; NRs 850 
million in FY2000/01; NRs 950 million in FY2001/02; NRs 1,050 million in FY2002/03; 
and NRs 1,150 million in FY2003/04.
Road Maintenance Planning, Programming and Implementation
11.
The Borrower shall: (i) by March 1, 2000, submit to the Association an action 
plan, satisfactory to the Association, for strengthening DOR’s capabilities for road 
maintenance planning, programming and implementation; and (ii) thereafter implement 
such action plan in a manner satisfactory to the Association, including without 
limitation the implementation of the exit strategy for the Maintenance and 
Rehabilitation Coordination Unit of DOR and the streamlining of the maintenance 
planning and programming activities in the Planning Branch of DOR, by the earlier of 
(a) \0bSeptember 1, 2000 or (b) the award of the contracts for maintenance works for the 
second year of Project implementation.
Roads Not Included in Project Implementation Plan
Page  18
12.
The Borrower shall not use any part of the proceeds of the Credit to undertake 
civil works on any roads not included in the Project Implementation Plan, unless and 
until the Borrower has submitted to the Association documentation satisfactory to the 
Association for undertaking civil works for such roads, including without limitation a 
feasibility study report, an environmental management plan and a resettlement action 
plan.
Labor-based Road Construction Technologies
13.
The Borrower shall ensure that labor-based road construction technologies and 
local contractors and road user groups will be employed in the carrying out of the new 
road construction works under Part B.1 of the Project to the maximum extent possible 
and in a manner satisfactory to the Association.
Environmental Management Action Plans
14.
The Borrower shall implement the mitigation, monitoring and evaluation and all 
other actions set forth in the EIA, the IEEs and the EMAPs in accordance with the 
objectives, policies, procedures, time schedules and other provisions set forth 
therein and shall not take any action which would prevent or interfere with such 
implementation. Environmental Mitigation Measures in Civil Works Contracts
15.
The Borrower shall ensure that all civil works contracts, bid documents and 
bills of quantities for the roads covered by the Project will include the 
environmental mitigation measures set forth in the EIA, the IEEs, the EMAPs and the 
Environmental Management Guidelines of the Borrower published by DOR.
Resettlement Action Plan
16.
The Borrower shall:
(a)
implement the RAP in accordance with the objectives, policies, 
procedures, time schedules and other provisions set forth therein and shall not take 
any action which would prevent or interfere with such implementation;
(b)
submit to the Association updates to the RAP, satisfactory to the 
Association, based on detailed socio-economic surveys of project affected people and 
consistent with the principles set forth in the RAP, for those roads included in Part 
B.1 or C.1 of the Project for which such surveys had not been completed or engineering 
designs had not been finalized as of July 1999, before bids relating to works for such 
roads are invited or, if no bidding process is involved, before a contractor for works 
for such roads is selected in accordance with the provisions of Schedule 3 to this 
Agreement; and
(c)
implement the RAP with the updates referred to in subparagraph (b) of 
this paragraph in accordance with the objectives, policies, procedures, time schedules 
and other provisions set forth therein and shall not take any action which would 
prevent or interfere with such implementation.
Trimesterly Reports
17.
The Borrower shall, within forty-five (45) days after the end of each trimester, 
provide to the Association a trimesterly report setting forth (i) the progress of the 
Project implementation and the achievement of the indicators referred to in paragraph 
18 below and (ii) proposed action plans for each Part of the Project for the following 
trimester.
Monitoring and Evaluation; Mid-Term Review
18.
The Borrower shall:
(a)
maintain policies and procedures adequate to enable it to monitor and 
evaluate on an ongoing basis, in accordance with indicators satisfactory to the 
Association, the carrying out of the Project and the achievement of the objectives 
thereof;
Page  19
(b)
prepare, under terms of reference satisfactory to the Association, and 
furnish to the Association, by October 31, 2001, a report integrating the results of 
the monitoring and evaluation activities performed pursuant to subparagraph (a) of 
this paragraph, on the progress achieved in the carrying out of the Project during the 
period preceding the date of said report and setting out the measures recommended to 
ensure the efficient carrying out of the Project and the achievement of the objectives 
thereof during the period following such date; and
(c)
review with the Association, by November 30, 2001, or such later date as 
the Association shall request, the report referred to in subparagraph (b) of this 
paragraph and, thereafter, take all measures required to ensure the efficient 
completion of the Project and the achievement of the objectives thereof, based on the 
conclusions and recommendations of the said report and the Association’s views on the 
matter.