OFIC IA L- IDOGUMENTk CREDIT NBER 195 PAK Project Agreement (Puijab Urban Development Yroject) betveen INTERNATIONAL DEVELOPMENT ASSOCIATION and PROVINCE OF 7DNJAB and LAHORE DEVELOPMENT AUTHORITY and IUHORE VATER AND SANITATION AGENCY and LARORE METROPOLITAN CORPORATION and GUJRANVALA MUNICIPAL CORPORATION anL4 SIALKOT MUNICIPAL CORPORATION and MULTAN DEVELOPKENT AUTHORITY and PUNJAB ROAD TRANSPORT CORPORATION Dated , 1988 CREDIT NUMBER 1895 PAK PROJECT AGREEMENT AGREEMENT, dated 1988,'between INTERNATIONAL DEVELOPMENT SSOCIATION (the Association) and PROVINCE OF PUNJAB, actiht by its Governor (Punjab), LAHORE DEVELOPMENT AUTHORITY (LDA), LAHORE WATER AND SANITATION AGENCY (WASA), LAHORE METROPOLITAN CORPORATION (LMC), GUJRANWALA MUNICIPAL CORPORATION (GMC), SIALKOT MUNICIPAL CORPORATION (SMC), MULTAN DEVELOPMENT AUTHORITY (MDA) and PUNJAB ROAD TRANSPORT CORPORATION (PRTC). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Islamic Republic of Pakistan (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to sixty-five million nine hundred thousand Special Drawing Rights (SDR 65,900,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that Punjab and LDA, WASA, LMC, GMC, SMC, MDA and PRTC (the Implementing Agencies) agree to undertake such obligations toward the Association as are set forth in this Agreement; and (B) the proceeds of the credit provided for under the Development Credit Agreement will be made available to Punjab for its use and the use of the the Implementing Agencies on terms and conditions mutually satisfactory to the Borrower and the Association; WHEREAS Punjab and the Implementing Agencies, in considera- tion of the Association's entering into the Development Credit Agreement with the Borrower, have agreed to undertake the obligations set forth in this Agreement; 'NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement: and in the General Conditions (as so defined) have the respective meanings therein set forth. -2- ARTICLE II Execution of the Project Section 2.01. (a) Punjab and the Implementing Agencies declare their commitment to the objectives of the Project as set f forth in Schedule 2 to the Development Credit Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and urban development practices, and shall provide, or cause to be provided, 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 Association and Punjab and the Implementing Agencies shall otherwise agree, Punjab and the Implementing Agekidies shall carry out the Project in accordance with: (i) the Implementation Program set forth in Schedule 2 to this Agreement; and (ii) an Operational Action Plan acceptable to the Association, as such plan shall be updated from time to time. (c) Punjab shall utilize the proceeds of the Credit as follows: (i) in an amount equivalent to about SDR 8,300,000 for making available to HPEPD, for the purposes of Parts L.1 (a), L.2 (a), L.3 (a), L.3 (d), (relevant part) and L.3(e) (relevant part) of the Project and for establishing the PMU; (ii) in an amount equivalent to about SDR 470,000 for making available to E & T, for the purposes of Parts K and L.1 (f) of the Project; (iii) in an amount equivalent to about SDR 22,580,000 for on-lending to LDA, for the purposes of Parts E and F of the Project, under a Subsidiary Loan Agreement to be entered into between Punjab and LDA, under terms and conditions which shall have been approved by the Association and which shall include an interest rate of 4% per annum and a repayment period of 25 years, including a grace period of 6 years; -3- (iv) in an amount equivalent to about SDR 24,230,000 for on-lending to WASA, for the purposes of IN.arts A, B, C and D of the Project, under a Subsidiary Loan Agreement to be entered into between Punjab and WASA, under terms and conditions which shall have been approved by the Association and which shall include, in respect of Parts A and B of the Project, an interest rate of 11% per annum and a repayment period of 25 years, including a grace period of 6 years, and, in respect of Parts C and D of the Project, an interest rate of 4% per annum and a repayment period of 25 years, including a grace period of 6 years; (v) in an amount equivalent to about SDR 1,110,000 for on-lending to LMC, for the purposes of Part G of the Project, under a Subsidiary Loan Agreement to be entered into between Punjab and LMC, under terms and conditions which shall have been approved by the Association and which shall include an interest rate of 4% per annum and a repayment period of 25 years, including a grace period of 6 years; (vi) in an amount equivalent to about SDR 1,470,000 for on-lending to GMC, for the purposes of Part H of the Project, under a Subsidiary Loan Agreement to be entered into between Punjab and GMC, under terms and conditions which shall have been approved by the Association and which shall include, in respect of Parts H.1 (a) and (b) of the Project, an interest rate of 11% per annum, and, in respect of Parts H.1 (c) and H.2 of the Project, an interest rate of 4% per annum, and, in both cases, a repayment period of 25 years, including a grace period of 6 years; (vii) in an amount equivalent to about SDR 1,730,000 for on-lending to SMC, for the purposes of Part I of the Project, under a Subsidiary Loan Agreement to be entered into between Punjab and SMC, under terms and conditions which shall have been approved by the Association and which shall include, in respect of Parts I (a) and (b) of the Project, an interest -4- rate of 11% per annum , and, in respect of Part I (c) of the Project, an interest rate of 4% per annum, and, in both cases, a repayment period of 25 years, including a grace period of 6 years; (viii) in an amount equivalent to about SDR 300,000 for on-lending to MDA, for the purposes of Part J of the Project, under a Subsidiary Loan Agreement to be entered into between Punjab and MDA, under terms and conditions which shall have been approved by the Association and which shall include, in respect of Parts J.1 (a) and (b) of the Project, an interest rate of 11% per annum, and, in respect of Parts J.1 (c) and J.2 of the Project, an interest rate of 4% per annum, and, in both cases, a repayment period of 25 years, including a grace period of 6 years; and (ix) in an amount equivalent to about SDR 5,700,000 for making available to the Implementing Agencies, for the purposes of the portions of Part L of the Project for which they are responsible, on a grant basis. (d) Punjab shall exercise its rights under the Subsidiary Loan Agreements in such manner as to protect the interests of Punjab and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, Punjab shall not assign, amend, abrogate or waive the Subsidiary Loan Agreements or any provisions thereof. (e) Punjab shall, for the purposes of the parts of the Project for which it and GMC, SMC, and PRTC are responsible, and LDA, WASA, LMC and MDA shall, for the purposes of the parts of the Project for which they are respectively responsible, open and maintain in dollars special accounts in the National Bank of Pakistan on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Accounts shall be made in accordance with the provisions of Schedule 3 to the Development Credit Agreement. Section 2.02. 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 -5- the Credit shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.03. Punjab and the Implementing Agencies shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement and the parts of the Project for which they are responsible. Section 2.04. Punjab and the Implementing Agencies shall duly perform all their obligations under the Subsidiary Loan Agreements, Except as the Association shall otherwise agree, Punjab and the Implementing Agencies shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreements or any provisions thereof. Section 2.05. (a) Punjab and the Implementing Agencies shall, at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of their obligations under this Agreement and under the Subsidiary Loan Agreements, and other matters relating to the purposes of the Credit. (b) Punjab and the Implementing Agencies shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by Punjab and the Implementing Agencies of their obligations under this Agreement and under the Subsidiary Loan Agreements. ARTICLE III Management and Operations of the Implementing Agencies Section 3.01. The Implementing Agencies shall carry on their operations and conduct their affairs in accordance with sound administrative, financial and urban development practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. -6- Section 3.02. The Implementing Agencies shall at all times operate and maintain their plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and urban development practices. Section 3.03. The Implementing Agencies shall take out, and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial and Other Covenants Section 4.01. (a) Punjab and the Implementing Agencies shall maintain records and accounts adequate to reflect in accordance with sound accounting practices their operations and financial condition in respect of the Project. (b) Punjab and the Implementing Agencies shall: (i) have such records, accounts and related financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of their financial statements for such year as so audited, and (B) the report of such audit by said auditors, of such scone 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 as well as the audit thereof, as the Association shall from time to time reasonably request. -7- Section 4.02. (a) Except as the Association shall otherwise agree, Punjab shall cause WASA to adjust, and WASA shall adjust, in accordance with guidelines satisfactory to the Association, its tariff rates annually so as to achieve by FY91 and thereafter maintain an annual return of not less than 3.5% of the average current net value of WASA's fixed assets in operation. (b) Before March 31 in each of its fiscal years, WASA shall, on the basis of forecasts prepared by WASA and satisfactory to the Association, review whether it would meet the requirements set forth in paragraph (a) in respect of such year and the next following fiscal year and shall furnish to the Association the results of such review upon its completion. (c) If any such review shows that WASA would not meet the requirements set forth in paragraph (a) for WASA's fiscal years covered by such review, WASA shall promptly take all necessary measures in order to meet such requirements. (d) For the purposes of this Section: (i) The annual return shall be calculated by dividing WASA's net operating income for the fiscal year in question by one half of the sum of the current net value of WASA's fixed assets in operation at the beginning and at the end of that fiscal year. (ii) The term "net operating income" means total operat- ing revenues less total operating expenses. (iii) The term "total operating revenues" means revenues from all sources related to operations and other revenues incidental thereto. (iv) The term "total operating expenses" means all expenses related to operations, including adminis- tration, adequate maintenance, taxes and payments in lieu of taxes, and provision for depreciation on a straight-line basis at a rate of not less than 3.5% per annum of the average current gross value of WASA's fixed assets in operation, or other basis acceptable to the Association, but excluding interest and other charges on debt. -8- (v) The average current gross value of WASA's fixed assets in operation shall be calculated as one-half of the sum of the gross value of WASA's fixed assets in operation at the beginning and at the end of the fiscal year, as valued from time to time in accordance with sound and consistently maintained methods of valuation satisfactory to the Association. (vi) The term "current net value of WASA's fixed assets in operation" means the gross value of WASA's fixed assets in operation less the amount of accumulated depreciation, as valued from time to time in accordance with sound and consistently maintained methods of valuation satisfactory to the Association. Section 4.03. (a) Except as the Association shall otherwise agree, beginning in FY92, Punjab shall enable WASA to adjust, and WASA shall adjust, its tariff rates annually by the amount of the Consumer Price Index (CPI) percentage increase for the previous fiscal year plus a factor of not less than 7.5%, so as to enable WASA to produce, in each of its fiscal years beginning with FY 95, funds from internal sources equivalent to a proportion satis- factory to the Association of the three-year annual average of WASA's capital expenditure requirements for the preceding fiscal year, that fiscal year and the next following fiscal year. (b) Before March 31 in each of its fiscal years, WASA shall, on the basis of forecasts prepared by WASA and satisfactory to the Association, review whether it would meet the requirements set forth in paragraph (a) in respect of such year and the next following fiscal year and shall furnish to the Association a copy of such review upon its completion. (c) If any such review shows that WASA would not meet the requirements set forth in paragraph (a) for WASA's fiscal years covered by such review, WASA shall promptly take all necessary measures in order to meet such requirements. (d) For the purposes of this Section: (i) The term "funds from internal sources" means the difference between: -9- (A) the sum of revenues from all sources related to operations, consumer deposits and consumer contributions in aid of construction and net non-operating income; and (B) the sum of all expenses related to operations, including administration, adequate maintenance and taxes and payments in lieu of taxes (excluding provision for depreciation and other non-cash operating charges), debt service requirements, all cash dividends and other cash distributions of surplus and other cash outflows pther than capital expenditures. (ii) The term "net non-operating income" means the difference between: (A) revenues from all sources other than those related to operations; and (B) expenses, including taxes and payments in lieu of taxes, incurred in the generation of reve- nues in (A) above. (iii) The term "debt service requirements" means the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. (iv) The term "capital expenditures" means all expendi- tures incurred on account of fixed assets related to operations. (v) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Association. Section 4.04. Except as the Association shall otherwise agree, Punjab shall, not later than June 30, 1988, restructure as - 10 - equity not less than 33% of WASA's existing loans and amortization arrears. Section 4.05. Punjab shall, not later than June 30, 1989, take appropriate action to ensure that WASA will be given the proper authority to carry on its day-to-day operations and to undertake project implementation. Section 4.06. Punjab shall enable GMC, SMC and MDA to pre- pare, and GMC, SMC and MDA shall prepare, in consultation with the Association, not later than June 30, 1990, and thereafter imple- ment, an improved program, satisfactory to the Association, for levying water and sewerage charges related to supply costs in their respective cities. Section 4.07. (a) Punjab shall cause LDA and MDA each, in accordance with programs mutually satisfactory to Punjab and the Association, to adopt a land pricing policy which will: (i) ensure the maintenance of an overall financial surplus; and (ii) include provision for the financing of investments in non-revenue generating assets. (b) For the purposes of this Section: (i) The term "overall financial surplus" means the difference between the combined yearly capital and current receipts and the combined yearly capital expenditures and current expenditures. (ii) The term "non-revenue generating assets" means assets utilized in the provision of services not directly charged to beneficiaries. (iii) The term "capital receipts" means revenues received from the sale of assets. (iv) The term "current receipts" means revenues received from the provision of services and from rents and other user charges. (v) The term "capital expenditures' means expenditures incurred in the purchase and construction of assets. - 11 - (vi) The term "current expenditures" means expenditures other than capital expenditures related to operations. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of Punjab and the Implementing Agencies thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement ,shall terminate in accordance with its terms; or (ii) the date 25 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify Punjab and the Implementing Agencies of this event. Section 5.63. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: - 12 - For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT), Washington, D.C. 248423 (RCA) or 64145 (WUI) For Punjab: Planning and Development Board Government of Punjab Lahore, Pakistan Cable address: Telex: DEVELOPMENT 952-44868 Lahore, Pakistan Punjab Secretariat Lahore, Pakistan For LDA: Lahore Development Authority L.D.A. Plaza, Egerton Road Lahore Pakistan Cable address: Telex: DGLDA 952-44391 Lahore, Pakistan For WASA: Lahore Water and Sanitation Agency 4-A Gulberg V Lahore Pakistan - 13 - Cable address: Telex: EMDWASA 952-44868 Lahore, Pakistan For LMC: Lahore Metropolitan Corporation Jinnah Hall Lahore Pakistan Cable address: Telex: TAHORE METROPOLITAN CORPORATION Lahore, Pakistan 952-44391 For GMC: Gujranwala Municipal Corporation Jinnah Hall, G.T. Road Gujranwala Pakistan Cable address: GUJRANWALA MUNICIPAL CORPORATION Gujranwala, Pakistan For SMC: Sialkot Municipal Corporation Qila Sialkot Pakistan Cable address: SIALKOT MUNICIPAL CORPORATION Sialkot, Pakistan -14 For XDA: Multan Development Authority Pull Shadab IT Multan Pakistan Cable address; XULTAN DEVELOPMENT AUTHORITY Multan, Pakistan For PRTC: Punjab Road Transport Corporation 11-A Egerton Road Lahore Pakistan Cable address: TRANSCORP Lahore, Pakistan Section 6,02,. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Punjab and LDA, WASA, [MC, GMC, SMC, MDA and PRTC, or by Punjab and LDA, WASA, LC, GKC, SMC, MDA and PRTC on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by the Chairman, Planning and Development Board, in the case of Punjab, by the Director General, in the case of LDA, by the Managing Director, in the case of WASA, by the Mayor, in the case of [XC, by the Mayor, in the case of GMC, by the Mayor, in the case of SMC, by the Direqtor General, in the case of MDA, and by the Managing Direcpor, in the case of PRTC, or such other person or persons as they shall respectively designate in writing, and they shall respectively furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person,. Section 6,.03, This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument., 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. INTERNATIONAL DEVELOPMENT ASSOCIATION By Ao Regional Vice President Europe, 'ddle East and North Africa PROVINCE OF PUNJAB /5s/ 'r. d. By Authorized Representative LAHORE DEVELOPMENT AUTHORITY By Authorized Representative LAHORE WATER AND SANITATION AGENCY /./ A By Authorized Representative - 16 - LAHORE METROPOLITAN CORPORATION By Authorized Representative GUJRANWALA MUNICIPAL CORPORATION By Authorized Representative SIALKOT MUNICIPAL CORPORATION By Authorized Representative MULTAN DEVELOPMENT AUTHORITY By Authorized Representative PUNJAB ROAD TRANSPORT CORPORATION By Represntativ Authorized Representative - 17 - SCHEDULE 1 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part D hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. Bidders for the works included in Part D of the Project shall be prequalified as described in paragraph 2.10 of the Guidelines. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in Pakistan may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Preference for Domestic Contractors In the procurement of works in accordance with the procedures described in Part A.1 hereof, Punjab and the Implementing Agencies may grant a margin of preference to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part D: Other Procurement Procedures 1. Office and road safety equipment and other items estimated to cost less than the equivalent of $50,000 per contract, up to an aggregate amount not to exceed the equivalent of $3,500,000, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 2. Civil works, other than for Part D of the Project, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures - 18 - satisfactory to the Association. Bidders for such works, estimated to cost more than the equivalent of $300,000 per contract, shall be prequalified in accordance with procedures satisfactory to the Association. Part E: Review by the Association of Procurement Decisions 1. Review of prequalification: With respect to the prequalification of bidders as provided in Parts A.2 and D.2 hereof, the procedures set forth in para- graph 1 of Appendix 1 to the Guidelines shall apply. 2. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract for goods estimated to cost the equivalent of $300,000 or more, and with respect to each contract for civil works estimated to cost the equivalent of $600,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1. to the Guidelines shall apply. Where payments for such contract are to be made out of a Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of such Special Account in respect of such contract. (b) With respect to each contract not governed by the pre- ceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of a Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 3 to the Development Credit Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Association has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (a) (ii) of the Development Credit Agreement. - 19 - 3. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist Punjab and the Implementing Agencies in carrying out the Project, Punjab and the Implementing Agencies shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis 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. - 20 - SCHEDULE 2 Implementation Program 1. Project Agencies (a) Punjab shall have overall responsibility for Project implementation and coordination. (b) Subject to the arrangements set forth in this Schedule, specific responsibility for Project implementation shall be assigned as follows: (i) for Parts H, I, and L.1 (a), L.2 (a), L.2 (e) (relevant part), L.3 (a), L.3 (d) (relevant part) and L.3 (e) (relevant part) of the Project, to HPEPD, acting for Punjab, GMC and SMC; (ii) for Parts E, F, and L.1 (b), L.2 (b), L.3 (c), L.3 (d) (relevant part) and L.3 (e) (relevant part) of the Project, to LDA; (iii) for Parts A, B, C, D, L.1 (c), L.2 (c) and L.3 (e) (relevant part) of the Project, to WASA; (iv) for Parts G, L.1 (d) and L.2 (d) and L.3 (e) (relevant part) of the Project, to MC; (v) for Parts J, L.1 (e), L.2 (e) (relevant part), L.3 (b) and L.3 (e) (relevant part) of the Project, to MDA; (vi) for Part L.2 (f) of the Project, to PRTC; and (vii)' for Parts K and L.1 (f) of the Project, to E&T, acting for Punjab. 2. Project Policy Committee (PPC) and Project Management Unit (PHU) (a) Punjab shall exercise its responsibilities under paragraph 1 (a) of this Schedule through a Project Policy Committee (PPC), established within the Punjab Planning and Development Board, and a Project Management Unit (PMU), established within HPEPD. - 21 - (b) PPC shall consist of representatives of line departments of Punjab and of the Implementing Agencies and shall provide policy and technical guidance for carrying out the Project. (c) PMU shall be headed by a permanently assigned Director General and shall include Directors of Engineering, and Finance and Administration, four Deputy Directors (including one from the Local Government and Rural Development Department, reporting directly to the Director General) and such other senior and clerical and support staff as may be necessary. PMU shall, inter alia: (i) implement, as an integral part of HPEPD's development activities, the project components for which HPEPD is responsible under paragraph 1 (b) (i) of this Schedule; (ii) monitor the implementation of other project components, the carrying out of studies, the administration of training, the implementation of the Operational Action Plan, and the achievement of cost recovery targets and other policy objectives; (iii) update the Operational Action Plan, including the Implementing Agencies' work schedules, coordinate their activities, and ensure timely availability of resources to them; (iv) maintain records of withdrawal applications and disbursements; (v) coordinate the submission of audit reports to the Association; (vi) prepare and submit to the Association quarterly progress reports and other reports; and (vii) prepare and/or coordinate the preparation of possible future projects. 3. Land Acquisition Punjab and WASA shall take steps to ensure that the land required for the sewage treatment plants included in Part D of the Project will be acquired and in their possession not later than December 31, 1988. 4. Implementation of Studies Punjab and the concerned Implementing Agencies shall ensure that the recommendations of the various studies to be carried out under the Project will be implemented to the extent, in a manner, and within a time-frame satisfactory to the Association. 5. Procurement of ODA-Financed Goods Goods to be procured for the purposes of the Project and to be financed from the ODA Funding shall comply with specifications satisfactory to the Association. - 22 - 6. Employment of ODA-Financed Consultants Consultants to be employed for the purposes of the Project and to be financed from the ODA Funding shall have qualifications and experience and terms of reference satisfactory to the Association. 7. Progress Reports PMU shall, on the basis of monthly progress reports received from Punjab and the Implementing Agencies, prepare quarterly progress reports on the Project, in form and content satisfactory to the Association, and submit each such report to the Association within 30 days of the end of the quarter to which its relates. 8. Responsibility for Operation and Maintenance of Completed Works (a) HPEPD shall transfer, and GMC and SMC shall accept, responsibility for the operation and maintenance of the works and facilities, completed under Parts H and I of the Project, respectively, and LDA shall transfer, and WASA and LMC shall accept, responsibility for the operation and maintenance of the works and facilities, completed under the relevant portions of Parts E and F of the Project, all under arrangements satisfactory to the Association. (b) Responsibility for the operation and maintenance of the other works and facilities completed under the Project shall remain with the agencies responsible for constructing such works and facilities. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY