Loan Agreement OFIV CIALS LOAN MBER 2232 IND DOCUIVE NTS. Public Disclosure Authorized. Public Disclosure Authorized

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized OFIV CIALS LOAN MBER 2232 IND DOCUIVE NTS Loan Agreement Public Disclosure Authorized (Nucleus Estates and Smallholders VII Project) between REPUBLIC OF INDONESIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized Dated, 1983

2 LOAN NUMBER 2232 IND LOAN AGREEMENT AGREEMENT, dated 4 4, 1983, between the REPUBLIC OF INDONESIA (hereinaf r called the Borrower) and the INTERNATIONAL BANK FOR RECO STRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; and (B) the Borrower has agreed, or will shortly agree, with Commonwealth Development Corporation (hereinafter called CDC) for a loan (hereinafter called the CDC Loan) in an amount equivalent to about $30,000,000 to assist in financing part of the Project on the terms and conditions set forth in an agreement (hereinafter called the CDC Loan Agreement); and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I 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 October 27, 1980, 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 this 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) "Basic Agrarian Lar:" means Law No. 5/1960 of the Borrower (Undang-Undang Pokok Agraria), as the same may be amended from time to time;

3 (b) "BAPPENAS" means the National Development Planning Agency of the Borrower; (c) "BI" means the BANK INDONESIA, established and operating under Law No. 13/1968 of the Borrower; (d) "BRI" means the BANK RAKYAT INDONESIA, established by and operating under Law No. 21/1968 of the Borrower; (e) "Credit Expenditures" means that part of expenditures incurred for Parts A.1, A.2 or A.3 of the Project and which are intended to be recovered from Settlers as provided in the Smallholder Credit Agreements.referred to in Section 1.02 (p) below, including inter alia expenditures for rubber, oil palm and subsistence crop development (including initial land clearing of food crop areas), related machinery and equipment, overhead costs for the establishment of tree crop development, settler housing, village roads and cash payments to new Settlers; (f) "DGE" means the Directorate General of Estates of the Borrower's Ministry of Agriculture; (g) "Estate" means any nucleus estate and other estate responsible for carrying out a part of the Project, including PTP VI, PTP XII, PNP VII, PNP XXVIII and such other estates as shall have been agreed upon between the Borrower and the Bank; (h) "Governing Regulation' means any of the Laws, Decrees or Regulations referred to in bections 1.02 (1), 1.02 (m) and 1.02 (r), as well as the Presideatial Decrees Nos. 44 and 45 of 1974; (i) "Hak Milik" means the right of ownership in land, as provided under the Basic Agrarian Law; respect of (j) "MOF" means the Borrower's Ministry of Finance; -2- (k) "Non-Credit Expenditures" means that "art c:f expenditures for Part A of the Project which are not intended to be recovered from Settlers, including inter alia expenditures for village infrastructure, main access roads, water supply and sanitation, health and educational facilities, and management fees payable to PTP VI, PTP XII and PNP VII;

4 (1) "PNP VII" and "PNP XXVIII" mean, respectively, Perusahaan Negara Perkebunan VII and Perusahaan Negara Perkebunan XXVIII, two state-owned estate enterprises of the Borrower established pursuant to Government Regulation No. 14/1968 or any respective successors thereto; (m) "PTP VI" and "PTP XII" mean, respectively, Perseroan Terbatas Perkebunan VI and Perseroan Terbatas Perkebunan XII, two public sector agricultural estate enterprises established pursuant to Law No. 9/1969 of the Borrower and des.gnated as such under Government Regulations No. 28/1971 and No. 25/1971, respectively, or any respective successors thereto; (n) "Rupiah" and "Rp" mean the currency of the Borrower; (o) "Settler" means a smallholder and his family settled or previously settled in a settlement area and participating under the Project, as the context may require; (p) "Smallholder Credit Agreements" means the respective agreements to be entered into between BRI and the Settlers pursuant to Section 3.03 (a) of this Agreement; (q) "Smallholder Development Agreements" means the respective agreements to be entered into between DGE and Estates pursuant to Section 3.03 (b) of this Agreement; and (r) "Team Khusus" means Team Khusus Proyek Kerjasama Luar Negeri, the team created under Decree No. 695/1979 of the Borrower's Minister of Agriculture to assist DGE in externally financed projects. ARTICLE II The Loar 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 one hundred fifty-four million six hundred thousand dollars ($154,600,000). 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

5 -4- 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. Section The Closing Date shall be June 30, 1989 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section Not later than the Effective Date, the Borrower shall pay to the Bank a fee equivalent to two million two hundred eighty-four thousand seven hundred twenty-nine dollars ($2,284,729). The fee shall be payable in such currency or currencies as the Bank shall specify. In the event that the Bank shall not have received full payment of the fee by the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount required for the full payment of the fee in the currency or currencies specified for the purpose. 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 (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one half percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.08

6 -5- of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost" of Qualified Borrowings means the cost, expressed as a percentage per annum, as reasonably determined by the Bank, provided that the amount of $8,520,500,000 referred to in (iii) (B) hereunder shall be reckoned at a cost of 10.93% per annum. (iii) "Qualified Borrowings" means (A) outstanding borrowings of the Bank drawn down after June 30, 1982; and (B) until July 1, 1985, the amount of $8,520,500,000 (representing borrowings of the Bank between July 1, 1981 and June 30, 1982) less any part thereof repaid earlier than July 1, (iv) "Semester" means the first six months or the second six months of a calendar year. Section Interest and other charges shall be payable semiannually on April 1 and October 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) For the purposes of estate development under Part B of the Project the Borrower shall: (i) make available to each Estate the portion of the proceeds of the Loan allocated to such estate pursuant to the provisions set forth in Schedule 1 to this Agreement under financing arrangements, in

7 -6- form and substance satisfactory to the Bank, which shall include inter alia the terms and conditions set forth in Schedule 5 to this Agreement; and (ii) make available to such estates such additional funds as shall be required by such estate to carry out its estate development under the Project under financing arrangements, which shall include inter alia the terms and conditions set forth in Schedule 5 to this Agreement. (c) The Borrower shall exercise its rights under the financing arrangements referred to in Section 3.01 (b) above 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 may otherwise agree, the Borrower shall not assign, amend, abrogate or waive such financing arrangements or any part thereof. (d) Without limitation or restriction upon the provisions of Section 3.01 (a) of this Agreement, the Borrower shall: (i) cause the Project to be carried out in accordance with the organization, management and implementation arrangements set forth in Schedule 7 to this Agreement; and (ii) ensure that the funds for Part A of the Project are provided and recovered in accordance with the provisions set forth in Section 3.03 (a) of this Agreement and Schedule 8 to this Agreement. Section In order to assist in the carrying out of the Project, the Borrower shall employ, or cause to be employed, agricultural, engineering and financial consultants and experts whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Borrower and the Bank in accordance with principles and procedures described in 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, and in accordance with an implementation schedule agreed upon between the Borrower and the Bank. Section Without limitation or restriction upon the provisions of Section 3.01 of this Agreement: (a) For the purposes of financing the Credit Expenditures under Parts A.1, A.2 and A.3 of the Project and of recovering the costs of Credit Expenditures from Settlers, the Borrower shall

8 -7- cause BRI to enter into Smallholder Credit Agreements with the Settlers about three years after their settlement and upon the Settlers obtaining Hak Milik, whose respective terms and conditions shall be satisfactory to the Bank, which shall include inter alia: repayment of principal and interest by Settlers in accordance with an amortization schedule covering a period of 17 years from the date of the Smallholder Credit Agreement, including a grace period of two years for oil palm and three years for rubber, with payment of interest by Settlers at an annual rate of 10.5% on the principal amount of the loan withdrawn and outstanding from time to time, said interest to be capitalized and added to principal during the grace period. (b) For the purposes of ensuring the prompt and efficient management, supervision and coordination of activities under Part A of the Project, the Borrower shall, through DGE, enter into a Smallholder Development Agreement with each Estate under terms and conditions satisfactory to the Bank and CDC, providing for the obligations of such Estate in respect to its Part or Parts of the Project, including inter alia the provisions set forth in Schedule 6 to this Agreement; and (c) The Borrower shall cause the parties to the Smallholder Credit Agreements and the Smallholder Development Agreements, respectively, to perform punctually their respective obligations under such Agreements. Section Without limitation or restriction upon the generality of Section 3.01 (a) of this Agreement, the Borrower shall cause DGE, with the assistance of Team Khusus, to prepare and submit to BAPPENAS and the Ministr-y of Finance a proposed annual work program and budget in accordance with the provisions of Schedule 8 to this Agreement. 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 proceeds of the Loan shall be used exclusively for the Project until its completion.

9 -8- Section (a) The Borrower shall furnish, or cause to be furnished, to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction, 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 shall: (i) maintain, or cause to be maintained, 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 sc vices financed out of the proceeds of the '.oan, and to disclose their use in the Project; (ii) enable the 3ank's 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) furnish, or cause to be furnished, to the Bank at 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) Upon the award by the Borrower of any contract for goods or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) 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.

10 -9- Section The Borrower shall prepare, or cause to be prepared, an estate sector investment program (including programs for each estate) relating to long-range plans ( ), including financial, managerial, technical and manpower aspects, and shall furnish such plan, or cause such plan to be furnished, by September 30, 1983, to the Bank for review and comment. Section (a) Except as the Borrower and the Bank shall otherwise agree, the Borrower shall ensure: (i) that each prospective Settler is promptly given access to about 1 ha of land for house, garden and food crops; and (ii) subject to the provision of paragraph (b) of this Section, that each Settler receives within three years after settlement Hak Milik to 2 ha of planted tree crops area and an additional area for a house lot, garden and ' od crops to give a total of about 3 ha, subject, however, to _,etention by BRI of the Hak Milik certificate as security for Settler debt; and (b) the Borrower, through the Project Manager as described in Schedule 7 to this Agreement, shall periodically review the performance of Settlers, and after consultation with the Provincial Coordinating Committee, shall take appropriate action in the case of any settler found to have been deficient in his work in the area being developed 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 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 each Estate to purchase from Settlers at a price determined in accordance with the principles set out in Schedule 6 to this Agreement, all processable oil palm or rubber, as the case may be, offered for sale and shall cause each Settler to sell to such estate at a price determined as aforesaid at least the quantity of such oil palm or rubber, as the case may be, required to amortize his debt obligations. 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

11 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, ipso facto and at no 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 constitu '-al 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 thp 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, or as secarity for payment of debt incurred for the purpose of financing the purchase 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 subsidivision 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 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 Estates, ministries or agencies of the Borrower responsible for carrying out the Project or any part thereof, including without limitation to the foregoing, separate accounts adequate to record

12 all expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure. (b) The Borrower shall retain, or cause to be retained, until one year after the Closing Date, all records (orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure and shall enable the Bank's accredited representatives to examine such records. (c) The accounts of each Estate and agency of the Borrower responsible for carrying out the Project or any part thereof, which are to be kept pursuant to the provisions of subsections (a) and (b) 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 each 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, including, without limitation to the foregoing, a separate opinion by said auditors in respect of the expenditures and records referred to in Section 4.02 (b) of this Agreement as to whether the proceeds of the Loan withdrawn from the Loan Account on the basis of statements of expenditures have been used for the purpose for which they were provided. Section (a) The Borrower shall cause each Estate to maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices their respective operations and financial conditions. (b) The Borrower shall cause each such Estate to: (i) have its accounts (including the accounts referred to in Section 4.02 (c) of this Agreement) 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 six months after the end of each such year, (A) certified copies of its 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

13 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 4.02 (b) of this Agreement as to whether the proceeds of the Loan withdrawn from the Loan Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and (iii) furnish to the Bank such other information concerning the accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request. Section The Borrower shall cause each Estate 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 each Estate at all times to manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with sound agricultural, business, engineering, environmental and financial practices and under the supervision of experienced and competent management and supervisors, assisted by qualified staff in adequate numbers. Section The Borrower shall cause each Estate: (a) to take all steps necessary to acquire, maintain and renew all such rights and interest in land and all such other rights, powers, privileges and franchises as are necessary or useful in the conduct of its business; and (b) at all times to operate and maintain its installations, 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 access and village roads and other village infrastructure facilities included in the Project to be maintained in accordance with sound engineering practices and shall make available, or cause to be made available, promptly as needed, sufficient funds and facilities for the purpose. Section (a) Except as the Bank shall otherwise agree: each Estate shall at all times maintain a ratio of long-term debt to equity of not more than 60:40.

14 (b) For the purposes of this Section: (i) the term "debt" means all debts incurred by the respective estate, including debts assumed or guaranteed by the respective estate except that "debt" shall, for this section only, not include debts incurred by an estate for buildings, and vehicles as a result of smallholder development expenditures; (ii) debt shall be deemed to be incurred (A) under a loan agreement or contract, on the date and to the extent it is drawn down pursuant to such loan agreement or contract; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee is entered into but only to the extent that the guaranteed debt is outstanding; (iii) the term "equity" means the respective estate's share capital, retained earnings, surplus and reserves (including any revaluation reserve but excluding any reserve allocated to cover specific liabilities); and Bank and CDC funds disbursed under the Project according to Schedule 5, paragraph 1 (a) (i) and (ii) which will be converted into share capital; and (iv) the term "long-term debt" means any debt maturing by its terms more than twelve months after the date on which it is originally incurred. 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 an Estate, or for the suspension of all or part of the operations of any such Estate; (b) an Estate shall have been unable to pay its debts as they mature or any action or proceeding shall have been taken

15 whereby any of its its creditors; properties shall or may be distributed among (c) a 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 arrangements referred to in Sections 3.01 (b), 3.03 (a) or 3.03 (b) of this Agreement, of its respective obligations under such arrangements; and (d) any of the arrangements referred to in Sections 3.01 (b), 3.03 (a) or 3.03 (b) 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. (e) (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of the CDC Loan made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor, or (B) the CDC Loan shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Bank that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof:

16 (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), (b) and (e) (i) (B), subject to the proviso of subparagraph (ii) of that paragraph, of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section (c) of the General Conditions, namely, that all conditions precedent to the effectiveness of the CDC Loan Agreement, except for the effectiveness of this Agreement, shall have been fulfilled. Section The date, 1983, is hereby specified for the purposes of ection 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

17 Cable address: Telex: MINISTRY FINANCE DJMLN JKT Jakarta DITJMON JKT DEPKEU JKT For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C United States of America Cable address: INTBAFRAD Washington, D.C. Telex: (ITT) (RCA) or (WUI) 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. Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By 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: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Part A.1 of 34% of amounts the Project 37,300,000 disbursed by the Borrower to an Estate (2) Part B.1 of 34% of amounts the Project 21,100,000 disbursed by the Borrower and BI to an Estate (3) Part A.2 of 34% of amounts the Project 18,300,000 disbursed by the Borrower to an Estate (4) Part B.2 of 34% of amounts the Project 7,700,000 disbursed by the Borrower and BI to an Estate (5) Part A.3 of 46% of amounts the Project 11,000,000 disbursed by the Borrower to an Estate (6) Part B.3 of 46% of amounts the Project 23,000,000 disbursed by the Borrower and BI to an Estate

19 Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (7) Consultants' 100% services and training under Part C.1 of the Project: (a) for PTP VI 1,500,000 (b) for PTP XII 1,000,000 (c) for PNP XXVIII 1,000,000 (8) Consultants' 3,000, % services and training under Part C.2.of the Project (9) Expenditures for 18,800, % of the amounts Part,C.3 of the disbursed by DGE Project to an Estate (10) Fee 2,284,729 Amount due (11) Unallocated 8,615,271 TOTAL 154,600, 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.

20 Notwithstanding the provisions of paragraph 1 above, the aggregate amount of disbursements to be withdrawn in any particular quarter by the Borrower to finance expenditures to be incurred by an Estate out of Categories 1 through 6 and Category 9 of paragraph 1 of this Schedule shall be determined by the Bank taking into account the cumulative amount of Project expenditures actually incurred by said Estate up to the end of the preceding quarter. For this purpose, the Borrower shall record said Project expenditures in statements of expenditures in form and substance satisfactory to the Bank, and forward to the Bank said statements of expenditures when submitting withdrawal applications in respect of Categories 1 through 6 and Category 9 of paragraph 1 of this Schedule. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for: (a) expenditures prior to the date of this Agreement; (b) expenditures in respect of Category (1) of the table set forth in paragraph 1 of this Schedule until the Bank shall have received evidence, in form and substance satisfactory to the Bank, of the execution and delivery of the Smallholder Development Agreement entered into by DGE pursuant to Section 3.03 (b) of this Agreement and the relevant Estate; (c) expenditures in respect of Category (2) of the table set forth in paragraph 1 of this Schedule until the Bank shall have received evidence, in form and substance satisfactory to the Bank, of the execution and delivery of the agreement entered into by the Borrower parsuant to Section 3.01 (b) of this Agreement and the relevant Estate; (d) expenditures in respect of Category (3) of the table set forth in paragraph 1 of this Schedule until the Bank shall have received (i) an appraisal report for Part A.2 and B.2 of the Project satisfactory to the Bank and (ii) evidence in form and substance satisfactory to the Bank, of the execution and delivery of the Smallholder Development Agreement entered into by DGE pursuant to Section 3.03 (b) of this Agreement and the relevant Estate; (e) expenditures in respect of Category (4) of the table set forth in paragraph 1 of this Schedule until the Bank shall have received (i) the appraisal report referred to in (d) (i)

21 above, and (ii) evidence, in form and substance satisfctory to the Bank, of the execution and delivery of the Agreement entered into by the Borrower pursuant to Section 3.01 (b) of this Agreement and the relevant Estate; (f) expenditures in respect of Category (5) of the table set forth in paragraph 1 of this Schedule until the Bank shall have received (i) an appraisal report for Part A.3 and B.3 of the Project satisfactory to the Bank and (ii) evidence, in form and substance satisfactory to the Bank, of the execution and delivery of the Smallholder -Development Agreement entered into by DGE pursuant to Section 3.03 (b) of this Agreement and the relevant Estate; and (g) expenditures in respect of Category (6) of the table set forth in paragraph 1 of this Schedule until the Bank shall have received (i) the appraisal report referred to in (f) (i) above, and (ii) evidence in form and substance satisfctory to the Bank, of the execution and delivery of the Agreement entered into by the Borrower pursuant to Section 3.01 (b) of this Agreement and the relevant Estate. 5. Notwithstanding the allocation of an amount of 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 such 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 w ould otherwise have been eligible for financing out of the proceeds of the Loan.

22 SCHEDULE 2 Description of the Project The Project is part of the Borrower's on-going program (hereinafter called the Program) to assist smallholder and estate development in its territories through: (i) establishing smallholders' settlements by means of the allocation and development of land and the delivery of a package of services and inputs to smallholders; and (ii) developing estate agriculture. The Project consists of the following Parts: Part A: Smallholder Development 1. Smallholder development in the District of Pasir, East Kalimantan province, with PTP VI as the nucleus estate, through: (a) land clearing and establishment of about 11,700 ha of rubber for about 5,850 smallholders and about 9,000 ha of oil palm for about 4,500 smallholders, and land clearing of aboui 5,175 ha for Settler house, garden and food crops; (b) construction of about 34 new villages, including construction of houses with water supply and sanitation facilities for the settlement of about 10,350 Settlers, and construction of about 315 km of access, village and collection roads, about 880 km of farm tracks, and about 415 m of bridges. 2. Smallholder development in the District of Sambas, West Kalimantan province, with PTP XII as the nucleus estate, through: (a) land clearing and establishment of about 12,000 ha of rubber for about 6,000 smallholders, and land clearing of about 3,000 ha for Settler house, garden and foodcrops; and (b) construction of about 22 new villages including construction of houses with water supply and sanitation facilities for the settlement of about 6,000 Settlers, and construction of about 115 km of access, village and collection roads, about 340 km of farm tracks, and about 60 m of bridges.

23 Smallholder development in the District of Luwu, South Sulawesi province, with PNP XXVIII as the nucleus estate, (assisted by PNP VII as implementing estate), through: (a) land clearing and ;blishment of about 5,000 ha of oil palm for about 2,_j0O smallholders, and land clearing of about 750 ha for Settler house, garden and food crops; and (b) construction of about 12 new villages, including construction of houses with water supply and sanitation facilities for the settlement of about 2,500 Settlers, and construction of about 90 km of access, village and collection roads, about 270 km of farm and estate tracks, and about 400 m of bridges. 4. The construction and staffing of, and provision of equipment for, various community facilities, including health centers, schools, market buildings and places of worship in each settlement area referred to under Parts A.1, A.2 and A.3 of the Project. 5. Smallholder development for Parts A.2 and A.3 is still being appraised by the Borrower, and the figures, although reasonable current estimates, are subject to change upon completion of the final appraisal report. Part B: Nucleus Estate Development: 1. Estate development by PTP VI in the District of Pasir, East Kalimantan Province, as follows: (a) land clearing and establishment of about 2,500 ha of rubber and about 3,000 ha of oil palm; (b) construction of (i) estate housing and buildings, and (ii) about 50 km of access and collection roads, about 220 km of estate tracks, and about 40 m of bridges; and (c) construction of a rubber factory (800 ton/month) and construction of a palm oil factory (35 ton/hr FFB); (d) construction of a bulking facility and wharf, including provision of barges; and

24 (e) provision of road construction and agricultural machinery. 2. Estate development by PTP XII in the District of Sambas, West Kalimantan Province, as follows: (a) land clearing and establishment of about 3,000 ha of rubber; (b) construction of estate housing and buildings; and about 40 km of access and collection roads, 110 km of estate tracks, and 50 m of bridges; (c) construction of a rubber factory (1,000 ton/month); and (d) provision of road construction and agricultural machinery. 3. Estate development of PNP XXVIII through PNP VII in the District of Luwu, South Sulawesi province, as follows: (a) land clearing and establishment of about 4,000 ha of oil palm; (b) construction of estate housing and buildings, and about 70 km of access and collection roads, about 210 km of estate tracks, and about 350 m of bridges; (c) construction of a palm oil factory (30 ton/hr FFB); (d) construction of a bulking facility and wharf, including provision of barges; and (e) provision of road construction and agricultural machinery. 4. Estate development for Parts B.2 and B.3 is still being appraised by the Borrower, and the figures, although reasonable current estimates, are subject to change upon completion of the final appraisal report. Part C: Technical Assistance and Program Support 1. Strengthening of the organizational and technical capabilities of Estates for the purposes of carrying out their respective parts of the Project described under Parts A and B above, through the provision of consultants' services and staff training.

25 A program of technical assistance to: (i) strengthen the technical capabilities of DGE and other agencies associated with estate crop development; and (ii) assist DGE in coordinating activities under the Project, preparing future estate crop development projects, and improving the marketing of smallholder production. 3. Assistance to Estates as may be agreed upon between the Borrower and the Bank for various start-up activities (including inter alia construction of housing and buildings, road construction and nurseries and field development, acquisition of essential machinery and equipment, and the provision of technical assistance) to initiate future nucleus estate and smallholder projects as may be agreed upon between the Borrower and the Bank. The Project is expected to be completed by December 31, 1988.

26 SCHEDULE 3 Amortization Schedule Date Payment Due Payment of Principal (expressed in dollars)* On each April 1 and October 1 beginning October 1, 1988 through October 1, ,155,000 On April 1, ,105,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal; see General Conditions, Section 3.04.

27 Preminms 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 3.04 (b) of the General Conditions: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of prepayment multiplied by: Not more than three years 0.15 before maturity More than three years but 0.30 not more than six years before maturity More than six years but 0.55 not more than 11 years before maturity More than 11 years but not 0.80 more than 16 years before maturity More than 16 years but not 0.90 more than 18 years before maturity More than 18 years before 1.00 maturity

28 SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of 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. For goods and works to be procured on the basis of international competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the 'asis of international competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids; and (iii) the cost of inland freight and other expenditures incidental to the delivery of the goods to the place of their use or installation shall be included.

29 B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule goods manufactured in the Republic of Indonesia may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in the Republic of Indonesia if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in the Republic of Indonesia equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in conection with the sale or delivery, pursuant to the bids, of the goods. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer