Loan Agreement. Public Disclosure Authorized CONFORMED COPY LOAN NUMBER 1751 IND. Public Disclosure Authorized

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1 Public Disclosure Authorized CONFORMED COPY LOAN NUMBER 1751 IND Public Disclosure Authorized Loan Agreement (Nucleus Estates and Smallholders III Project) Public Disclosure Authorized between REPUBLIC OF INDONESIA and INTERNATIONAL BANK FO RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized Dated August 13, 1979

2 LOAN NUMBER 1751 IND LOAN AGREEMENT AGREEMENT, dated August 13, 1979, between REPUBLIC OF INDONESIA (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). ARTICLE 1 General Conditions; Definitions Section The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section Wherever used in thi, Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "APBD" means ANGGARAN PENDAPATAN DAN BELANJA DAERAH, the Provincial/Kabupaten Revenues and Expenditures budget; (b) "Basic Agrarian Law" means Law No. 5/1960 of the Borrower (UNDANG-UNDANG POKOK AGRARIA), as the same may be amended from time to time; (c) "BI" means Bank Indonesia, established by and operating under Law No. 13/1968 of the Borrower; (d) "BIMAS Program" means the Borrower's program (BIMBINGAN MASAL), administered through the BIMAS Secretariat, for raising food crop production and farm income by supplying credit and agricult,'ral inputs to farmers, established pursuant to Presidential Decree No. 95/1969 of the Borrower; (e) "BRI" means the BANK RAKYAT INDONESIA, established by and operating under Law No. 21/1968 of the Borrower;

3 -2- (f) "Credi.t Expenditures" means expenditures for Part A of the Project which are intended to be recovered from Participating Settlers as provided in the Smallholder Financing Arrangements, including, inter alia, expenditures for rubber and subsistence crop development (including initial land clearing of food crop areas), and related machinery, vehicles and PTP overhead costs based on 10% of the direct costs of rubber establishment (excluding machinery and equipment), settler housing, primary and secondary village roads and cash payments to new settlers; (g) "Danau Salak Settlement Area" means an area of about 23,700 ha about 67 km east of Banjarmasin in the Borrower's Province of South Kalimantan and includes the Kabupaten of Banjar and Tapin; (h) "DGE" means the Directorate General of Estates of the Borrower's Ministry of Agriculture; (i) "DPD" means DINAS PERKEBUNAN DAERAH, the Provincial Estates Crop Services; (j) "Financing Agreement" means the agreement to be entered into between the Borrower or BI, acting on behalf of the Borrower, and BRI, pursuant to Section 3.03 (b) (i) of this Agreement; (k) "Governing Regulation" means any of (i) Presidential Decrees Nos. 44 and 45 of 1974; or (ii) the Decrees/Regulations/ Instructions referred to in subsections (d), (p), (s), (t) and (u) of this Section 1.02; (1) "Hak Milik" means the right of ownership in respect of land, as provided under the Basic Agrarian Law; (m) "INPRES" means INSTRUKSI PRESIDEN, the Borrower's program for funding Provincial and Kabupaten high priority community projects; (n) "Non-Credit Expenditures" means expenditures for Part A of the Project which are to be financed from (i) the annual budget sources of the Borrower and the Provincial Governments of Jambi and South Kalimantan (INPRES and APBD) and (ii) the proceeds of the Loan in the case of resettlement and construction of and provision for Planting Materials Supply Units, and some minor estate housing and buildings and vehicles, which are not intended

4 -3- to be recovered from Participating Settlers. Non-credit expenditures will include, inter alia, expenditures for village infrastructure (excluding roads), water supply, health component, resettlement of families to Danau Salak, office equipment and management fees of 5% of the direct costs of rubber development, excluding machinery and equipment; (o) "Participating Settler" means a settler and his family settled either in the Danau Salak Settlement Area or in the Rimbo Bujang Settlement Area under Part A of the Project, or previously settled in the Rimbo Bujang Settlement Area, as the context may require; (p) "PNP" means a PERUSAHAAN NEGARA PERKEBUNAN, a stateowned enterprise of the Borrower established and so designated under Government Regulation No. 14/1968; (q) "PNP I" means PERUSAHAAN NEGARA PERKEBUNAN I, and any successor thereto; (r) "Provincial Coordinating Committees" means the committees established at the Provincial level in South Kalimantan and in Jambi to coordinate the planning and the implementation of Part A.1 and A.2, respectively, of the Project, as more fully set forth in paragraph 1 (b) of Schedule 5 to this Agreement; (s) "PTP" means a PERSEROAN TERBATAS PERKEBUNAN which is a public sector agricultural estate of the Borrower established pursuant to Law No. 9/1969 of the Borrower; (t) "PTP VI" means PERSEROAN TERBATAS PERKEBUNAN VI established and so designated under Government Regulation No. 28/1971, pursuant to Law No. 9/1969 of the Borrower, and any successor or successors thereto; (u) "PTP XVIII" means PERSEROAN TERBATAS PERKEBUNAN XVIII established and so designated under Government Regulation No. 23/1972, pursuant to Law No. 9/1969 of the Borrower, and any successor or successors thereto; (v) "Rimbo Bujang Settlement AreE" means an area in the Borrower's Province of Jambi approximately 200 km from the Provincial capital and includes a gross area of about 68,000 ha allocated for 6,000 transmigrant families, 4,000 ha of Marga land for new settlers and 7,500 ha for the nucleus estate;

5 -4- (w) "Rupiah" and "Rp" mean the currency of the Borrower; (x) "Smallholder Financing Arrangements" means the respective agreements to be entered into between the Borrower or BI on behalf of the Borrower and BRI, BRI and PTP XVIII, and BRI and PTP VI, for the purposes of Part A of the Project, pursuant to Section 3.03 (b) of this Agreement; (y) "Smallholder Rubber Development Agreements" means the respective agreements to be entered into between DGE and PTP XVIII and between DGE and PTP VI, for the purposes of Part A of the Project, pursuant to Section 3.03 (a) of this Agreement; (z) "Sub-Financing Agreements" means the respective agreements to be entered into between BRI and PTP XVIII and BRI and PTP VI pursuant to Section 3.03 (b) (ii) of this Agreement; and (aa) "Subsidiary Loan Agreements" means the respective subsidiary loan agreements to be entered into between the Borrower or BI on behalf of the Borrower and PTP XVIII and PNP I respectively, for the purposes of Part B of the Project, pursuant to Section 3.05 of this Agreement. ARTICLE II The Loan Section The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to ninety-nine million dollars ($99,000,000). Section The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expenditures made (or, if the Bank 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 Loan. Section Except as the Bank shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Loan, shall be governed by the provisions of Schedule 4 to this Agreement.

6 -5- Section The Closing Date shall be December 31, 1986, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time, Section The Borrower shall pay interest at the rate of seven and nine-tenths per cent (7.90%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section Interest and other charges shall be payable semiannually on February 1 and August 1 in each year. Section The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section (a) The Borrower shall carry out the Project, or cause the Project to be carried out, with due diligence and efficiency and in conformity with appropriate administrative, agricultural, engineering, environmental and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Except as the Borrower and the Bank shall otherwise mutually agree, the Project shall be carried out in accordance with the organization and management arrangements set forth in Schedule 5 to this Agreement. Section Except as the Borrower and the Bank shall otherwise agree, the Borrower shall employ or cause to be employed consultants and specialists whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, as follows: (a) to assist DGE in carrying out a hydrology survey of the Danau Salak Settlement Area;

7 -6- (b) by December 31, 1979, to assist PTP XVIII for three years (i) an infrastructure program manager to aid in the development of roads and villages and (ii) a rubber processing engineer; (c) by December 31, 1979, to assist PNP I in estate operations for three years (i) an estate processing manager, (ii) a production management specialist, and (iii) a financial manager; and (d) to assist DGE in monitoring progress of the Project with respect to field conditions, housing and infrastructure. Section Except as the Borrower and the Bank may otherwise agree, the Borrower shall, for purposes of Parts A and B of the Project, cause agreements to be entered into, in form and substance satisfactory to the Bank, as follows: (a) For rubber development: (i) a Smallholder Rubber Development Agreement between DGE and PTP XVIII (for the purposes of Part A.1 of the Project); and (ii) a Smallholder Rubber Development Agreement between DGE and PTP VI (for the purposes of Part A.2 of the Project); said Smallholder Rubber Development Agreements to include, inter alia, the provisions set forth in Schedule 6 to this Agreement. (b) For the financing of Credit Expenditures and certain Non-Credit Expenditures (paragraphs 1 and 2 of Schedule 7 hereto) for Part A of the Project and the recovery of such Credit Expenditures from Participating Settlers: (i) a Financing Agreement between the Borrower or BI, acting on behalf of the Borrower, and BRI; and (ii) Sub-Financing Agreements, respectively, between BRI and PTP XVIII (for the purposes of Part A.1 of the Project) and BRI and PTP VI (for the purposes of Part A.2 of the Project); said agreements referred to under this paragraph (b) to include, inter alia, the provisions set forth in Schedule 7 to this Agreement. Section Without limitation or restriction upon the provisions of Section 3.01 (a) hereof, the Borrower shall cause the parties to the agreements referred to in Section 3.03 above to punctually perform their respective obligations thereunder.

8 -7- Section (a) The Borrower shall relend the proceeds of the Loan allocated for Part B of the Project to PTP XVIII (for Part B.1) and PNP I (for Part B.2), respectively, together with such additional funds as shall be required by PTP XVIII and PNP T to carry out the said Part B.1 and B.2, respectively, of the Project, under a subsidiary loan agreement (herein called the PTP XVIII Subsidiary Loan Agreement and the PNP I Subsidiary Loan Agreement respectively) in form and substance satisfactory to the Bank, which agreements shall include, inter alia, the terms and conditions set forth in Schedule 8 to this Agreement. (b) The Borrower shall exercise its rights under the Subsidiary Loan Agreements in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreements or any provision thereof. Section (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity. shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Bank shall otherwise agree, all goods and services financed out of the pvoceeds of the Loan shall be used exclusively for the Project until its completion. Section (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) shall enable the Bank's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank at

9 -8- regular intervals all such information as the Bank shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Bank of their respective obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. Section The Borrower shall take or cause to be taken all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for carrying out the Project and shall furnish to the Bank, promptly after such acquisition, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to the Project. Section Except as the Borrower and the Bank shall otherwise agree, the Borrower shall until such time as the BIMAS Program is extended to serve adequately Participating Settlers, cause PTP XVIII and FTP VI to continue to supply food crop inputs for said Participating Settlers. Section Except as the Borrower and the Bank shall otherwise agree, the Borrower shall cause PTP XVIII and PTP VI to purchase from Participating Settlers all rubber offered for sale (including quantities required to be delivered to amortize Participating Settler debt obligations) at a price equivalent to about 70% of the prevailing f.o.b. dry rubber price, subject, however to adjustment from time to time, by joint decision of the respective Provincial Coordinating Committees and DGE, for: (a) significant reduction in the quality of rubber offered, or in such f.o.b. price from those prevailing at the date of this Agreement; or (b) significant increase in the rubber collection, processing or marketing costs of PTP XVIII or PTP VI, from those prevailing at the date of this Agreement.

10 -9- Section (a) Except as the Borrower and the Bank shall otherwise agree, the Borrower shall ensure, subject to the provision of paragraph (b) of this Section 3.11, that each Participating Settler receives: (i) (ii) within six months after settlement of the Participating Settler (A) in the Danau Salak Settlement Area, a certificate evidencing conditional Hak Milik to 4 ha of lane, and (B) in Marga land in the Rimbo Bujang Settlement Area a certificate evidencing conditional Hak Milik to 2 ha of land; within three years after settlement full Hak Milik to such land, subject, however, to retention by BRI of the Hak Milik certificate as security for Participating Settler debt; and (iii) with respect to existing settlers who obtain, or have obtained, Hak Milik to their land, the Hak Milik certificate shall be retained by, or pledged to, BRI as security for their debt. (b) The Borrower, through the Provincial Coordinating Committees, shall periodically review the performance of Participating Settlers, and shall take appropriate action in the case of any settler found to have been deficient in his work in the rubber area being developed by PTP XVIII or PTP VI or in the husbandry of his land. Without limiting the generality of the foregoing, the Borrower shall not, except as otherwise mutually agreed between the Borrower and the Bank, issue any certificate evidencing full Hak Milik in respect of land to any settler who has so been found deficient. - Section Except as the Borrower and the Bank shall otherwise agree, the Borrower shall cause DGE (in respect of Part A of the Project), and the Ministry of Agriculture Supporting Staff (in respect of Part B of the Project), to prepare and furnish to the Bank for review and comment, by October 31, 1979 and thereafter by October 31 of each year, a proposed annual budget and work program showing in detail the program of work for the Project to be undertaken by each such agency during the following year. Section (a) Except as the Borrower and the Bank shall otherwise agree, the Borrower shall require the Project Managers

11 assisted by the Provincial Coordinating Committees: (i) to prepare and send to DGE for the Borrower's approval at least 6 months prior to the start of each fiscal year, annual budgets for Non- Credit Expenditures under Part A of the Project; and (ii) to maintain appropriate cost accounts acceptable to the Borrower and the Bank in respect of such expenditures. (b) Without limitation or restriction upon the provisions of Section 3.01 (a) of this Agreement, the Borrower shall, whenever it shall appear that the funds available from INPRES or APBD are insufficient to meet the budgeted requirements for Non-Credit Expenditures, make arrangements satisfactory to the Bank to provide the necessary additional funds to meet such requirements. Section The Borrower shall carry out, or cause to be carried out, a detailed hydrology survey to test the suitability of the proposed locations for villages in the Danau Salak Settlement Area. Such survey shall begin no later than December 31, 1979, and shall be completed within six months after it has begun. Section The Borrower through its Minister of Agriculture will cause the DGE, not later than September 30, 1979, to strengthen the present project staffing in DGE responsible for project implementation to be organized as the Team for Assistance for Nucleus Estates and Smallholders Projects to further assist the DGE in the implementation of projects, in particular, the planning, execution, monitoring and evaluation of such projects. ARTICLE IV Other Covenants Section (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, Jso facto and at no

12 - 11- cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any administrative subdivision thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and other foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section (a) The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with consistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof, including without limitation to the foregoing, separate accounts reflecting all expenditures Iscribed in Category (2) (e) of the table in paragraph 1 of SL.nedule 1 to this Agreement on account of which withdrawals are requested from the Loan Account on the basis of certificates of expenditure. (b) The Borrower shall retain, until one year after the Closing Date, all records (orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals a-e requested from the Loan Account on the basis of certificates of expenditure and shall enable the Bank's accredited representatives to examine such records.

13 (c) Without limitation or restriction upon the provisions of Section 4.02 (a), the Borrower shall cause PTP XVIII, PTP VI and PNP I each to maintain separate accounts in respect of expenditures for Parts A.1 and B.1, A.2, and B.2 of the Project, respectively. (d) The accounts of all agencies of the Borrower participating in the implementation of the Project or any part thereof, relating to the Project, which are to be kept pursuant to the provisions of subsections (a), (b) and (c) of this Section 4.02, shall be audited each fiscal year in accordance with appropriate auditing principles consistently applied by independent auditors acceptable to the Bank, and as soon as available, but in any case not later than six months after the end of ench such year, the Bank shall be furnished with certified copies of such accounts for such year as so audited and the report of such audit by such auditors of such scope and in such detail as the Bank shall have reasonably requested. Section (a) The Borrower shall cause PTP XVIII, PTP VI and PNP I to maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices their respective operations and financial conditions. (b) In addition to the audits envisaged under Section 4.02 (d) of this Agreement the Borrower shall cause PTP XVIII and PNP I each to: (i) have their respective accounts and 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 Bank; (ii) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of their respective financial statements for such year as so audited and (B) the reports of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested including, without limitation to the foregoing, a separate opinion by said auditors in respect of the expenditures and records referred to in Section 4.01 (b) of this Agreement as to whether the proceeds of the Loan wi.thdrawn from the Loan Account on the basis of certificates of expenditure have been used for the purpose for which they were provided; and (iii) furnish to the Bank such other information concerning the respective accounts and financial statements and the audits thereof as the Bank shall from time to time reasonably request.

14 Section The Borrower shall cause PTP XVIII, PTP VI and PNP I to take out and maintain with responsible insurers, or to make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section The Borrower shall cause PTP XVIII and PNP I each at all times to manage their affairs, maintain their financial position, plan their future expansion and carry on their operations, all in accordance with sound agricultural, business, engineering, environmental and financial practices and under the supervision of experienced and competent management and supervisors, if any, assisted by qualified staff in adequate numbers. Section Except as the Borrower and the Bank shall otherwise agree, the Borrower shall cause PTP XVIII and PNP I, until the Closing Date, to send to the Bank, respectively, for its review and comments, by October 31 of each year, and with respect to PTP XVIII prior to final approval by its Board of Supervisors, respectively, the proposed budgets for the following year and financial forecasts for the budget year and the four following years all of such scope and in such detail as the Bank shall reasonably request. I: Section The Borrower shall cause PTP XVIII and PNP (a) to take all steps necessary to acquire, maintain and renew all such rights and interests in land and all such other rights, powers, privileges and franchises as are necessary or useful in the conduct of their respective business; and (b) at all times to operate and maintain their respective installations, rubber and oil palm plantings, including, inter alia, the areas developed or replanted under the Project, equipment and other property, and promptly as required to make all necessary repairs and renewals thereof, all in accordance with sound agricultural, business, and engineering practices. Section The Borrower shall cause the roads and bridge structures included in the Project to be maintained in accordance with sound engineering and financial practices and shall make available, or cause to be made available, sufficient funds and facilities for the purpose.

15 ARTICLE V Remedies of the Bank Section For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of PTP XVIII or PTP VI or PNP I or for the suspension of all or part of their respective operations; (b) PTP XVIII or PTP VI or PNP I shall have been unable to pay its debts as they mature or any action or proceeding shall have been taken by PTP XVIII or PTP VI or PNP I or by others whereby any of the property of PTP XVIII or PTP VI or PNP I shall or may be distributed among its creditors; (c) The Governing Regulation or any provision thereof shall have been repealed, amended, suspended, varied or waived, so as to affect adversely: (i) the carrying out of the Project; (ii) the performance by the Borrower of any other of its obligations under this Agreement; or (iii) the performance by any party to any of the agreements referred to in Section 3.03 or in Section 3.05 of this Agreement, of its respective obligations under such agreement; and (d) Any of the agreements referred to in Section 3.03 or Section 3.05 of this Agreement shall have been terminated or abrogated without the concurrence of the Bank, or any party to any such agreement shall have failed to perform any of its obligations thereunder so as to affect adversely the objectives of the Project or any part thereof. Section For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) any of the events specified in paragraphs (c) and (d) of Section 5.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower; and (b) any of the events specified in paragraphs (a) and (b) of Section 5.01 of this Agreement shall occur.

16 ARTICLE VI Termination Section The date November 13, 1979, is hereby specified for the purposes of Section of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section of the General Conditions. Section The following addresses are specified for the purposes of Section of the General Conditions: For the Borrower: Ministry of Finance c/o Director General for International Monetary Affairs Jalan Lapangan Banteng Timur 4 Jakarta, Indonesia Cable address: Telex: For the Bank: MINISTRY FINANCE DITJMON KT JAKARTA DEPKEU JKT International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C United States of America Cable address: TelEx: INTBAFRAD (ITT) Washington, D.C (RCA) or (WUI)

17 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, 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. REPUBLIC OF INDONESIA By /s/ D. Ashari Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ S. S. Husain Regional Vice President East Asia and Pacific

18 SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Category Amount of the Loan Allocated % of (Expressed in Expenditures Dollar Equivalent) to be Financed (1) Expenditures for Settlement at Danau Salak and Rimbo Bujang (Part A of the Project) (a) Civil works 1,900,000 70% (b) Agricultural ma- 7,700,000 chinery, vehicles and equipment (i) directly imported 100% of foreign expenditures (ii) locally manu- 95% of local factured (ex- expenditures cept vehicles (ex-factory) included under sub-category (iv)) (iii) imported farm 65% of local equipment pro- expenditures cured locally (iv) locally as- 40% sembled vehicles

19 Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (c) Agrochemicals 5,000,000 (i) Urea 50% (ii) Other 100% of foreign expenditures (d) Expenditures for: 23,200,000 65% (i) rubber development including overheads, initial land clearing for food crop area and cash payments in subsistence package (excluding agricultural machinery, vehicles and equipment and agrochemicals included under sub-categories (b) and (c) above) (ii) Resettlement and primary and secondary village road construction and upgrading of primary village roads (2) Development of FTP XVIII and PNP I (Part B.1 and B.2 of the Project) (a) Civil works 6,600,000 70%

20 Category Amount of the Loan Allocated % of (Expressed in Expenditures Dollar Equivalent) to be Financed (b) Agricultural and 13,800,000 processing plant machinery, vehicles and equipment (i) directly imported 100% of foreign expenditures (ii) locally manu- 95% of local factured (ex- expenditures cept vehicles (ex-factory) included under sub-category (iv)) (iii) imported farm 65% of local equipment pro- expenditures cured locally (iv) locally 40% assembled vehicles (c) Agrochemicals 4,800,000 (i) Urea 50% (ii) Other 100% of foreign expenditures (d) Expenditures for 3,700,000 20% rubber and oil palm development (other than agricultural and processing plant machinery, vehicles and equipment and agrochemicals included under sub- Categories (b) and (c) above)

21 Category Amount of the Loan Allocated % of (Expressed in Expenditures Dollar Equivalent) to be Financed (e) Resettlement 900,000 60% (f) Consultants' 1,000, % services (3) Consultants' and inspection services; 1,100, % training and start-up vehicles and assistance for Part C of the Project (4) Unallocated 29,300,000 TOTAL 99,000, For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower. and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in compliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank.

22 Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures: (a) prior to the date of this Agreement, except that, subject to the conditions specified in sub-paragraphs (b) to (e) below, withdrawals in an aggregate amount not exceeding the equivalent of $1,200,000 may be made on account of expenditures for (i) machinery for PTP XVIII and for PTP VI (Category (1) (b)); (ii) establishment of nurseries, land clearing and machinery for PTP XVIII (Categories (2) (b) and (2) (d)); and (iii) establishment of nurseries, land clearing and housing for PNP I (Categories (2) (b) and (2) (d)), made before that date but after November 1, 1978; (b) under Category (1) (Part A.1 of the Project), unless and until evidence satisfactory to the Bank shall have been furnished to the Bank: (i) that DGE and PTP XVIII have entered into the agreement referred to in Section 3.03 (a) (i) of the Loan Agreement in accordance with the provisions thereof; and (ii) that BI, BRI and PTP XVIII have entered into the agreements referred to in Section 3.03 (b) of the Loan Agreement in accordance with the provisions thereof; (c) under Category (1) (Part A.2 of the Project) unless and until evidence satisfactory to the Bank shall have been furnished to the Bank: (i) that DGE and PTP VI have entered into the agreement referred to in Section 3.03 (a) (ii) of the Loan Agreement in accordance with the provisions thereof; and (ii) that BI, BRI and PTP VI have entered into the agreements referred to in Section 3.03 (b) of the Loan Agreement in accordance with the provisions thereof; (d) under Category (2) (Part Bl of the Project) unless and until evidence satisfactory to the Bank shall have been furnished

23 to the Bank that BI and PTP XVIII have entered into the PTP XVIII Subsidiary Loan Agreement referred to in Section 3.05 (a) of the Loan Agreement in accordance with the provisions thereof; and (e) under Category (2) (Part B.2 of the Project), unless and until evidence satisfactory to the Bank shall have been furnished to the Bank that BI and PNP I have entered into the PNP I Subsidiary Loan Agreement referred to in Section 3.05 (a) of this Agreement in accordance with the provisions thereof. 5. Notwithstanding the allocation of an amount :f the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for sucti item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan.

24 SCHEDULE 2 Description of the Project The Project is part of the Borrower's program to assist smallholder tree crop development in its territories through smallholder settlement of new areas and support for previously settled smallholders, by means of (i) the development and allocation of land and the delivery of a package of services and inputs to smallholders through the Borrower's public sector estates (herein sometimes referred to as "nucleus estates"), the DGE, the BRI, the DPD, and other agencies and authorities of the Borrower at the national and provincial levels, and (ii) the strengthening of the Borrower's public sector estates so as to enable them to participate as nucleus estates for smallholder development in the future, and of other governmental agencies and authorities having responsibility in relation to the smallholder and public estate sectors. The Project consists of the following Parts: Part A: Smallholder Settlement with Development of New Land through Nucleus Estates 1. New Settlement at Danau Salak, South Kalimantan, with PTP XVIII as the nucleus estate, including: (a) construction in the Danau Salak Settlement Area of about eighteen new villages, with a total of about 4,000 settler houses and the settlement of about 4,000 Participating Settlers, each village shall have without limitation, access to the following new or existing facilities, village offices, primary school, mosque, market buildings, community center, sub-health center and nursery house, all such facilities to serve the said Participating Settlers, and equipping and staffing of school facilities and health facilities in all villages; (b) establishment of a Planting Materials Supply Unit at Tungkap to provide at cost planting material to Participating Settlers on a cash basis and to develop extension services and model demonstration farms;

25 (c) construction and upgrading of about 72 km of all-weather primary village roads, about 55 km of secondary village roads, about 300 km of rubber collection tracks and sundry small bridge structures to serve the said Participating Settlers; (d) block planting of about 12,000 ha of rubber and the maintenance thereof by PTP XVIII for at least the first three years and by Participating Settlers thereafter; (e) supply and distribution of seeds and fertilizer to Participating Settlers commencing in the first year of settlement to support food crop production on an area of about one ha; and (f) provision of adequate water supply and sanitation facilities in each village. 2. New Settlement at Rimbo Bujang, Jambi, with PTP VI as the nucleus estate, including: (a) construction in the Rimbo Bujang Settlement Area of about 2,000 houses, as required, for 2,000 new settler families from areas in and adjacent to the Marga land, and construction of about 15 rubber development offices all such facilities to serve the said Participating Settlers; (b) establishment of a Planting Materials Supply Unit to provide, at cost, planting material to Participating Settlers on a cash basis and extension services to Participating Settlers; (c) construction of about 25 km of all-weather primary village roads, about 13 km of secondary village roads and about 400 km of rubber collection t-.cks to serve the said Participating Settlers; and (d) block planting of 16,000 ha of rubber and the maintenance thereof by PTP VI for at least the first three years and by Participating Settlers thereafter.

26 Part B: Estate Development 1. Strengthening of PTP XVIII, South Kalimantan: (a) block planting of 4,000 ha of rubber and the maintenance thereof by PTP XVIII; (b) construction of about 480 houses and rehabilitation of about 415 existing houses and construction of offices, garages, workshops and social utility buildings and the rehabilitation of existing estate buildings; (c) expansion of the capacity of the existing crumb rubber factory from six mt/day to eleven mt/day; and (d) construction and placing into service of a new crumb rubber factory with a capacity of twenty mt/day. 2. Rehabilitation of PNP I, Aceh: (a) block planting of 6,790 ha of new rubber and rehabilitation of about an additional 2,355 ha of existing rubber; (b) planting of new oil palm on 2,135 ha and rehabilitation of about 2,990 ha of existing oil palm estates; (c) construction of 2,064 houses for estate employees and construction and rehabilitation of estate buildings, garages and workshops; (d) expansion of the capacity of the oil palm mill at Tanjung Seumantoh from thirty mt FFB/hr to sixty mt FFB/hr; and (e) construction of two new crumb rubber factories, one at Kebun Lama and one at Julu Rayeu, each with a capacity of twenty mt/day. 3. Establishment of a nucleus estate by PTP VI at Rimbo Bujang of about 5,000 ha of rubber.

27 Part C: Program Support 1. The continuation of the program of technical assistance to DGE including about sixty man-months of inspection services and about 40 man-months to assist present and future smallholder project studies. 2. Assistance for construction of housing and nursery development and procurement of essential machinery for future nucleus estate and smallholder projects as would be agreed between the Borrower and the Bank. The Project is expected to be completed by June 30, R

28 SCHEDULE 3 Amortization Schedule Date Payment Due Payment of Principal (expressed in dollars)* On each February 1 and August 1 beginning February 1, 1986 through February 1, ,535,000 On August 1, ,555,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal.

29 Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.20% More than three years but not more than six years before maturity 2.35% More than six years but not more than eleven years before maturity 4.35% More than eleven years but not more than sixteen years before maturity 6.30% More than sixteen years but not more than eighteen years before maturity 7.10% More than eighteen years before maturity 7.90%

30 SCHEDULE 4 Procurement I. General Provisions A. Smallholders Component (Part A of the Project) 1. Except as provided in paragraphs 2 through 6 and C below, agrochemicals, Planting Materials Supply Units, agricultural machinery and vehicles for rubber and oil palm development, and equipment for road construction, shall be procured in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. Contracts for the purchase of agricultural machinery, materials for planting materials supply units, and road construction equipment estimated to cost less than $50,000 equivalent may be awarded on the basis of prudent shopping after solicitation of at least three price quotations, provided, however, that the aggregate total amount so procured shall not exceed $350,000 equivalent each for Parts A.1 and A.2 of the Project. 3. Up to $100,000 equivalent in value of fertilizers and agrochemicals may be procured by PTP XVIII annually and PTP VI annually for purposes of Part A of the Project, on the basis of prudent shopping after solicitation of at least three price quotations. 4. Supplies and equipment required for the implementation of the agreements between DGE and PTP XVIII for Part A.1 of the Project and between DGE and PTP VI for Part A.2 of the Project referred to in Section 3.03 (a) (i) and (ii), respectively, of this Agreement, other than agricultural machinery, vehicles and road construction equipment and

31 agrochemicals covered by the provisions of paragraphs 1 and 2 above, shall be procured in accordance with the Borrower's normal procurement procedures applicable to Government-owned estates. 5. Civil works for Part A.1 and A.2 of the Project which are to be financed as Credit Expenditures, including the construction of housing, estate workshops and garages and farm roads (but excluding the Planting Materials Supply Units), shall be carried out by PTP XVIII and PTP VI, respectively, directly or under contract awarded on the basis of local competitive bidding to prequalified contractors in accordance with the Borrower's normal procurement procedures. 6. Civil works for construction and upgrading of primary and secondary village roads shall be carried out by estates directly or under contracts awarded on the basis of local competitive bidding to prequalified contractors in accordance with the Borrower's normal procurement procedures. B. Estates Development (Part B of the Project) 1. Except as provided in paragraphs 2, 3 and C below, agricultural machinery, vehicles and equipment, and agrochemicals, shall be procured in accordance with procedures consistent with those set forth in the Guidelines, on the basis of international competive bidding as described in Part A of the Guidelines. 2. Contracts for the procurement of office equipment, agricultural and processing plant machinery, and equipment which are estimated to cost less than $50,000 equivalent, may be awarded on the basis of prudent shopping after solicitation of at least three price quotations, provided, however, that the aggregate total amount so procured shall not exceed $350,000 equivalent each for Parts B.1 and B.2 of the Project. 3. Up to $100,000 equivalent in value of agrochemicals may be procured by PTP XVIII annually and PNP I

32 annually for the purposes of Part B of the Project on the basis of prudent shopping after solicitation of at least three price quotations. 4. Civil works for Part B.1 and B.2 of the Project shall be carried out by PTP XVIII and PNP I, respectively, except that construction of housing shall be carried out under contract awarded on the basis of local competitive bidding to prequalified contractors in accordance with the Borrower's normal procurement procedures. C. Contracts for up to ten vehicles necessary for start-up use by consultants may be procured under the respective consultants' contracts on the basis of at least three price quotations. D. For goods to be procured on the basis of international competitive bidding, in addition to the paragraph requirements 1.2 of of the -Guidelines, the Borrower prepare shall and forward to the Bank as soon and as in possible, any event not later than 60 days prior date to of the availability to the public of the or first prequalification tender documents relating thereto, case as may the be, a general procurement notice, and in such detail form and containing such information as shall the reasonably Bank request; the Bank will arrange publication for the of such notice in order to provide notification timely to prospective bidders of to the bid opportunity for the goods in question. The Borrower provide shall the necessary information to update annually such notice so long as any goods remain to be the procured basis of on international competitive bidding. E. For the purpose of evaluation and comparison of the bids supply for of goods to be procured on international the basis of competitive bidding, (i) bidders required shall be to state in their bid the c.i.f. entry) (port price of for imported goods, or the ex-factory for domestically price manufactured goods; (ii) and customs other import duties taxes on imported goods, and sales similar and taxes on domestically supplied excluded; goods, shall and be (iii) the cost to the Borrower of freight inland and other expenditures incidental ery to the of deliv- goods to the place of their use or shall installation be included.