Development Credit Agreement

Transcription

1 Public Disclosure Authorized CREDIT NUMBER 355 IND CONFORMED COPY Public Disclosure Authorized Development Credit Agreement (Beef Cattle Development Project) Public Disclosure Authorized BETWEEN REPUBLIC OF INDONESIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized DATED JANUARY 31, 1973

2 CONFORMED COPY CREDIT NUMBER 355 IND Development Credit Agreement (Beef Cattle Development Project) BETWEEN REPUBLIC OF INDONESIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JANUARY 31, 1973

3 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated January 31, 1973, between REPUBLIC OF INDONESIA (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). ARTICLE I General Conditions; Definitions Section The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated January 31, 1969, with the same force and effect as if they were fully set forth herein, subject, however, to the deletion of Sections 5.01 and 6.02(h) thereof and to the renumbering of Section 6.02(i) into 6.02(h) thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, 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) "Corporation" means P. T. Bina Mulyu Ternak, a limitedl liability company established and operating under the laws of the Borrower. (b) "Financing Agreement" means the financing agreement entered into between the Borrower and the Corporation pursuant to Section 3.02(a) of this Agreement. (c) "Agricultural Loan" means any loan included in Part D of the Project. ARTICLE II The Credit Section The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to three million six hundred thousand dollars ($3,600,000).

4 4 Section The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule I to this Agreement, as such Schedule shall be amended from time to time, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed under the Development Credit Agreement; provided, however, that, except as the Association shall otherwise agree, no withdrawal shall be made on account of expenditures in the territories of any country which is not a member of the Bank (other than Switzerland) or for goods produced in, or services supplied from, such territories. Section Except as the Association shall otherwise agree, the goods and services (other than services of consultants) required for Parts A, B and C of the Project and to be financed out of the proceeds of the Credit, shall be procured in accordance with, and subject to, the provisions set forth in Schedule 3 to this Agreement. Section The Closing Date shall be March 3 1, 1980 or such other date as shall be agreed between the Borrower and the Association. Section The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section Service charges shall be payable semi-annually on March I and September 1 in each year. Section The Borrower shall repay the principal amount of the Credit withdrawn from the Credit Account in semi-annual installments payable on each March I and September 1 commencing March 1, 1983 and ending September 1, 2022, each installment to and including the installment payable on September 1, 1992 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section The Borrower shall cause the Project to be carried out with due diligence and efficiency and in conformity with appropriate agricultural,

5 5 administrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section (a) The Borrower shall make available to the Corporation the funds required for Parts A, B, C, E. I and E.2 of the Project (including the proceeds of the Credit allocated thereto) under a financing agreement to be entered into between the Borrower and the Corporation under terms and conditions acceptable to the Association. (b) The Borrower shall exercise its rights under the Financing Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit and, except as the Association shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the Financing Agreement or any provision thereof. Section In carrying out Part A of the Project, the Borrower shall cause the Corporation to employ qualified and experienced contractors. Section The Borrower shall cause the agricultural credit program included in Part D of the Project to be carried out in accordance with the provisions of Schedule 4 to this Agreement, as such Schedule shall be amended from time to time. Section In order to assist the Corporation in the establishment of an effective accounting system (Part E.1 of the Project), the Borrower shall cause the Corporation to employ qualified and experienced independent accountants. Section The Borrower shall employ consultants acceptable to the Association upon terms and conditions satisfactory to the Association to prepare the report provided for in Part E.3 of the Project. Section (a) The Borrower shall cause the Corporation to insure, or to make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit made available under the Financing Agreement 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 Corporation to replace or repair such goods. (b) Except as the Association shall otherwise agree, all goods and services financed out of the proceeds of the Credit shall be used exclusively for the Project until its completion.

6 6 Section (a) The Borrower shall furnish to the Association, 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 Association shall reasonably request. (b) The Borrower: (i) shall cause the Corporation to maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit, and to disclose the use thereof in the Project; (ii) shall enable the Association's accredited representatives to inspect the Project, the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of th proceeds of the Credit and the goods and services financed out of such proceeds. Section Except as the Borrower and the Association shall otherwise agree, the Borrower shall: (a) grant to the Corporation appropriate long-term leaseholds as required to establish and operate the ranches included in Part A of the Project; (b) allow, at the request of the Corporation, crossbreeding of cattle on the ranches included in Part A of the Project, under controlled conditions; (c) issue and renew promptly as needed all licences or permits required by the Corporation to operate its telecommunication facilities; and (d) monitor, through its Directorate General of Animal Production and Health, the results of the pasture and crop trials included in Part C of the Project. ARTICLE IV Other Covenants Section (a) The Borrower shall cause the Corporation to maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices the operations and financial condition of the Corporation. (b) The Borrower shall cause the Corporation to: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and

7 7 related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of the Corporation and the audit thereof as the Association shall from time to time reasonably request. Section The Borrower shall cause the Corporation to take out and maintain with responsible insurers, or to make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section (a) The Borrower shall cause the Corporation at all times to manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with appropriate business, financial, agricultural and engineering practices and under the supervision of experienced and competent management and supervisors, assisted by qualified staff in adequate numbers. (b) The Borrower shall ensure that before an appointment is made to the position of member of the Corporation's Direksi (executive management) or to a similar position, the Association shall be informed of the names, qualifications and experience of the persons considered for appointment to such position and shall be afforded a reasonable opportunity to exchange views with the Borrower on the qualifications and experience of such persons. (c) One member of the Corporation's Dewan Komisaris (Board of Supervisors) shall be a representative of the Borrower's Directorate General of Animal Production and Health. (d) Until April 1, 1978, the Borrower shall cause the Corporation to employ an Executive Assistant to the President Director to manage the Corporation's Department of Animal Production and Technical Assistance, and Ranch Managers in adequate numbers, acceptable to the Association, upon terms and conditions satisfactory to the Association. Section The Borrower shall cause the Corporation: (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 its business; and

8 8 (b) at all times to operate and maintain its installations, equipment and other property, and promptly as required make all necessary repairs and renewals thereof, all in accordance with appropriate business, agricultural and engineering practices. ARTICLE V Consultation, Information and Inspection Section The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Borrower and the Association shall from time to time, at the request of either party: (a) exchange views through their representatives with regard to the performance of their respective obligations under the Development Credit Agreement, the administration, operations and financial condition of the Corporation and, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out any part of the Project, and other matters relating to the purposes of the Credit; and (b) furnish to the other all such information as it shall reasonably request with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and economic conditions in the territories of the Borrower, including its balance of payments, and the external debt of the Borrower, of any of its political subdivisions and of any agency of the Borrower or of any such political subdivision. Section (a) The Borrower shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the administration, operations and financial condition of the Corporation and, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out any part of the Project. (b) The Borrower and the Association shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the maintenance of the service thereof or the performance by either of them of its obligations under the Development Credit Agreement. Section The Borrower shall afford all reasonable opportunity for accredited representatives of the Association to visit any part of the territories of the Borrower for purposes related to the Credit.

9 9 ARTICLE VI Taxes and Restrictions Section The principal of, arid service charges on, the Credit shall be paid without deduction for, and free from, any taxes imposed under the laws of the Borrower or laws in effect in its territories. Section The Development Credit Agreement shall be free from any taxes on jr in connection with the execution, delivery or registration thereof, imposed under the laws of the Borrower or laws in effect in its territories. Section The payment of the principal of, and service charges on, the Credit shall be free from all restrictions, regulations, controls and moratoria of any nature imposed under the laws of the Borrower or laws in effect in its territories. ARTICLE VII Remedies of the Association Section If any event specified in Section 7.01 of the General Conditions or in Section 7.03 of this Agreement shall occur and shall continue for the period, if any, therein set forth, then at any subsequent time during the continuance thereof, the Association, at its option, may by notice to the Borrower declare the principal of the Credit then outstanding to be due and payable immediately together with the service charges thereon and upon any such declaration such principal and service charges shall become due and payable immediately, anything to the contrary in the Development Credit Agreement notwithstanding. Section For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) The Corporation shall have been unable to pay its debts as they mature or any action or proceeding shall have been taken by the Corporation or by others whereby any of the property of the Corporation shall or may be distributed among its creditors. (b) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Corporation or for the suspension of all or part of the operations of the Corporation. (c) The legislation and charter under which the Corporation is incorporated, or any provisions thereof, shall have been amended, suspended or abrogated without the prior concurrence of the Association.

10 10 Section For the purposes of Section 7.01 of the General Conditions, the following additional events are specified, namely, that any event specified in Section 7.02 of this Agreement shall occur. ARTICLE VIII Effective Date; Termination Section The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 10.01(b) of the General Conditions: (a) that the members of the Corporation's Direksi and the Executive Assistant to the President Director in charge of the Corporation's Department of Animal Production and Technical Assistance have been appointed and have taken up their posts; (b) that the Financing Agreement has been duly executed and delivered on behalf of the Borrower and the Corporation, and has been duly authorized or ratified by all necessary governmental and corporate action; and (c) that the Borrower has granted to the Corporation appropriate and effective long-term leaseholds as required to establish and operate two of the ranches on Sulawesi included in Part A of the Project. Section The following are specified as additional matters, within the meaning of Section 10.02(b) of the General Conditions, to be included in the opinion or opinion-s to be furnished to the Association: (a) that the Corporation is a legal entity duly organized and operating under the laws of the Borrower; (b) that the Financing Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and the Corporation, and constitutes a valid and binding obligation of the Borrower and the Corporation in accordance with its terms; and (c) that the leaseholds referred to in Section 8.01(c) of this Agreement are valid and effective. Section The date Ap ' 20, 1973 is hereby specified for the purposes of Section of the General Conditions.

11 11 Section The obligations of the Borrower under Section 3.09, Article IV and Section 7.03 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date thirty years after the date of this Agreement, whichever shall be the earlier. ARTICLE IX 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 9.03 of the General Conditions. Section The following addresses are specified for the purposes of Section 9.01 of the General Conditions: For the Borrower: Ministry of Finance Post Office Box 2 1 Jakarta, Indonesia Cable address: Ministry Finance Jakarta For the Association: International Development Association 1818 H Street, N.W. Washington, D.C United States of America Cable address: INDEVAS Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed

12 12 in their respective names and to be delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF INDONESIA By /s/ SjarifThajeb Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ I.P.M. Cargill Regional Vice President Asia

13 13 SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of amounts of the Credit to each Category and the percentage of eligible expenditures so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed I. Ranch devel- 1,900, % of foreign opment (vehi- expenditures cles, machin- 95% of local exery, equipment penditures exand materials) factory and 83% of other local expenditures (off the shelf) II. Livestock 640,000 40% of total expenditures III. Technical assist- 500, % of foreign ance, including expenditures staff training IV. Agricultural Loans 300,000 50% of amounts disbursed V. Unallocated 260,000 TOTAL 3,600, For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures for goods produced in, or services supplied from, the territories, and in the currency, of any country other than the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower, or for goods procured in, or services supplied from, the territories of the Borrower; and

14 14 (c) the term "total expenditures" means the aggregate of foreign and local expenditures. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) expenditures prior to the date of this Agreement; (b) payments for taxes imposed directly under the laws of the Borrower or laws in effect in its territories on goods or services, or on the importation, manufacture, procurement or supply thereof. To the extent that the amount represented by the percentage set forth in the third column of the table in paragraph I above in respect of any Category would exceed the amount payable net of all such taxes, such percentage shall be reduced to ensure that no proceeds of the Credit will be withdrawn on account of payments for such taxes; and (c) amounts disbursed under Agricultural Loans until the Association shall have notified the Borrower that: (i) (ii) (iii) it has received an acceptable form of Agricultural Loan agreement, it agrees that an adequate number of experienced and qualified extension officers shall be available to enable the Borrower to duly carry out Part D of the Project, and it agrees that the Corporation has gained significant technological results and experience to adequately support the development of the private ranches to be financed under Agricultural Loans. 4. Notwithstanding the allocation of an amount of the Credit set forth in the second column of the table in paragraph I above: (a) if the estimate of the expenditures under any Category shall decrease, the amount of the Credit then allocated to such Category and no longer required therefor will be reallocated by the Association by increasing correspondingly the unallocated amount of the Credit; (b) if the estimate of the expenditures under any Category shall increase, the percentage set forth in the third column of the table in paragraph I above in respect of such expenditures shall be applied to the amount of such increase,

15 15 and a corresponding amount will be allocated by the Association, at the request of the Borrower, to such Category from the unallocated amount of the Credit, subject, however, to the requirements for contingencies, as determined by the Association, in respect of any other expenditures; and (c) if the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in Section 2.03 of this Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credik Agreement, by notice to the Borrower, cancel such amount of the Credit as in the Association s reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. 5. Notwithstanding the percentages set forth in the third column of the table in paragraph 1 above, if the estimate of local expenditures under Category I or of total expenditures under Category It shall increase and no proceeds of the Credit are available for reallocation to such Category, the Association may, by notice to the Borrower, adjust the percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made.

16 16 SCHEDULE 2 Description of the Project The Project is designed to increase the Borrower's cattle production and consists of the following: Part A. Ranch development The development of seven ranches of the Corporation of about 12,000 hectares each for the breeding and fattening of beef cattle including the establishment of a herd of about 2000 to 2300 cows on each ranch; six ranches shall be located in the Province of South Sulawesi near the port of Pare-Pare and one in the District of Kabaroe on the island of Sumba; ranch development shall also include pasture development, the construction of fences, water supply and storage facilities and staff housing, and the installation of telecommunication facilities. Part B. Seed production The establishment of a grass seed production center on an area of about 50 to 100 hectares on one of the Corporation's ranches. Part C. Research Pasture and crop trials on areas of about 200 to 250 hectares on each of said ranches of the Corporation, including: 1. the introduction of new or improved plant species; 2. the determination of economical fertilizer application rates; 3. the development of cheap land preparation methods; 4. investigation into the possibilities of aerial sowing and topdressing; and 5. the determination of effective means of animal feeding. Part D. Agricultural credit program A pilot program of agricultural credits to eligible cattle farmers in the Provinces of South Sulawesi and Sumba for the development of small

17 17 and medium-size ranches; the credits shall inter alia finance pasture and herd development, construction of water supply facilities and housing, and acquisition of machinery and equipment; the aggregate agricultural credit amount to be made available under the program is expected not to exceed the equivalent of $600,000. Part E. Technical assistance 1. The establishment of an effective accounting system for the Corporation. 2. A program of on-ranch training abroad of the Corporation's Deputy Executive Assistant to the President Director in charge of the Department of Animal Production and Technical Assistance and of the Assistant Ranch Managers in tropical pasture and ranch management and ley farming. 3. A report for the preparation of a subsequent project of cattle development on small and medium-size ranches in areas ecologically similar to the areas included in the present Project, such report to be based on significant results obtained from the research carried out as part of this Project and suitable to support requests for financial assistance from sources outside Indonesia. The Project is expected to be completed by January 1980.

18 18 SCHEDULE 3 Procurement A. Grouping of Contracts Contracts for vehicles, machinery, equipment and materials for ranch development shall be grouped in sizes appropriate to meet the requirements of the Project. B. Contracts governed by Guidelines Contracts for vehicles, machinery, equipment and materials for ranch development estimated to cost the equivalent of $25,000 or more shall be procured on the basis of international competition under procedures consistent with the Guidelines for procurement under World Bank Loans and IDA Credits, published by the Bank in April 1972, as revised in October 1972; provided, however, that in respect of contracts for machinery and equipment, at the option of the Borrower, advertisements may be limited to newspapers of general circulation in Indonesia and copies of invitations to bid (or the advertisement) need not be transmitted to representatives of member countries of the Bank or Switzerland. In addition, the following rules shall apply: (a) Before bids are invited, the Borrower shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, inform the Association of the name of the bidder to whom it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the reasons for the intended award. The Association shall, if it determines that the intended award would be inconsistent with the procedures set forth or referred to in this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked.

19 19 (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract. C. Supplemental Ru/es on Bid Evaluation and Comparison 1. For the purpose of evaluation and comparison of bids for contracts referred to in Part B of this Schedule 3, customs duties and other import taxes on imported goods, and sales and similar taxes on locally produced goods, shall be excluded, except to the extent hereinafter provided, and bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for locally produced goods. The cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be taken into account in the evaluation of bids in accordance with paragraph 4.7 of the Guidelines for Procurement. 2. For purposes of the provisions hereinafter set forth, the following terms shall have the following meanings: (a) Preferred Domestic Bid means a bid offering goods manufactured in 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 Indonesia of not less than 20% of the ex-factory bid price. (b) Non-preferred Domestic Bid means any other bid offering goods manufactured in Indonesia. (c) Foreign Bid means any bid other than those specified in (a) or (b) above, 3. For goods included in Category I of the Allocation of Credit Proceeds, a margin of preference may be granted by the Borrower to Preferred Domestic Bids. Such preference shall be granted by adding to each Foreign Bid, for the purpose only of comparison with Preferred Domestic Bids, an amount (hereinafter called "Domestic Preference Margin") equal to the smaller of (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for th offered in the bid, or (ii) 15% of the c.i.f. bid price of such goods. 4. If Preferred Domestic Bids are received, the comparison among all evaluated bids for each contract shall be made in the stages and with the preferences indicated below:

20 20 Stage Bids to be Compared Preference I All Preferred Domestic Bids None and Non-preferred Domestic Bids. 11 (a) Lowest evaluated bid under Add Domestic Stage 1, if Preferred Preference Domestic Bid, with all Margin to Foreign Bids; Foreign Bids or (b) Lowest evaluated bid under None Stage 1, if Non-preferred Domestic Bid, with all Foreign Bids. Ill If lowest evaluated bid under None Stage 11 is not the lowest evaluated bid under Stage 1, all Foreign Bids. 5. The bidding documents shall clearly indicate any preference which will be granted to Preferred Domestic Bids, the information required to establish the eligibility of a bid for such preference and the methods and stages that will be followed in the evaluation and comparison of bids to give effect to such preference. D. Other Contracts Other contracts for vehicles, machinery, equipment and materials for ranch development and contracts for livestock and civil works shall be concluded only after fair domestic competitive bidding or prudent shopping, whichever shall be most appropriate to obtain a competitive price. With respect to any such contract the Borrower shall furnish to the Association, promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of bids or quotations received, a summary description of the reasons for the award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract is not consistent with the above provisions, promptly inform the Borrower and state the reasons for such determination.

21 21 SCHEDULE 4 Agricultural Credit Program The agricultural credit program included in Part D of the Project shall be carried out in accordance with the following provisions: 1. Training of Extension Officers The Borrower shall make suitable arrangements to provide adequate technical and economic training to the extension officers of the Borrower's Directorate General of Animal Production and Health who are to provide the extension services required to prepare and supervise the implementation of the ranch development plans included in the Project (hereinafter referred to as the Extension Service). 2. Preparation of Ranch Development Plans The Extension Service shall prepare together with each farmer who in the opinion of the Extension Service meets the eligibility requirements set forth in paragraph 3(a) of this Schedule (hereinafter referred to as Project Farmer): (a) an appropriate ranch development plan specifying the estimated requirements for development of his ranch and a financing plan tailored to the financial needs of the farmer and his ranch development plan; and (b) a suitable application for an Agricultural Loan. 3. Lending Institution The Borrower shall conclude arrangements satisfactory to the Association with Bank Rakyat Indonesia, or another lending institution acceptable to the Association, providing inter alia that Bank Rakyat Indonesia or such other lending institution shall: (a) upon recommendation of the Extension Service, and the Executive Assistant of the President Director in charge of the Corporation's Department of Animal Production and Technical Assistance, make Agricultural Loans to Project Farmers on the terms and conditions set forth in paragraph 4 of this Schedule; and (b) maintain records adequate to reflect in accordance with consistently maintained sound accounting practices the disbursements made and debt service

22 22 payments received under each Agricultural Loan and enable accredited representatives of the Association to inspect such records. 4. Terms and Conditions of Agricultural Loans Agricultural Loans shall be made in accordance with the requirements set forth in the ranch development plan for the Project Farmer applying for such loan, and upon inter alia the following terms and conditions: (a) (i) (ii) (iii) Agricultural Loans shall bc made exclusively to cattle farmers who: have, and must be expected to maintain during the subsequent thirty years, an effective leasehold for a small or medium-size tract of ranch land suitable for cattle farming; have a herd of cattle and sufficient experience to successfully implement their respective ranch development plans; and shall be able to make. a contribution in cash or in kind towards meeting the cost of their respective ranch development plans at least equivalent to ten per cent (10%) of the estimated cost of such plans; (b) the amount of an Agricultural Loan shall together with the farmer's contribution meet the estimated total cost of the ranch development plan for which it is made; (c) Agricultural Loans shall have such maturities and shall carry such interest or other charges as shall be agreed upon between the Borrower and the Association; (d) vaccinated; all cattle of' the borrowing farmer shall at all times be adequately (e) until his ranch development plan shall have been fully implemented, the borrowing farmer shall not sell any of his cattle without the prior approval of the Extension Service and the bank having made the Agricultural Loan; (f) Agricultural Loans shall be made under agreements which shall be substantially in accordance with a form of Agricultural Loan agreement acceptable to the Association; and

23 23 (g) Agricultural Loan agreements shall provide for appropriate assurances that the borrowing farmer: (i) shall carry out his ranch development plan with due diligence and efficiency and in accordance with appropriate agricultural and financial practices; (ii) shall make his counterpart contribution as defined in sub-paragraph (a)(iii) of this paragraph 4; and (iii) shall manage his affairs and carry on his operations in accordance with appropriate agricultural and business practices. The Borrower shall cause the Agricultural Loan agreements to be enforced in such manner as to protect the interests of the Borrower, the Association and the bank having made the Agricultural Loan. Two conformed copies of the Agricultural Loan agreement together with the applicable ranch development plan shall be furnished to the Association promptly after it! execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such agreement. 5. Implementation of Ranch Development Plans The Borrower shall through the Directorate General of Animal Production and Health make available experienced and qualified extension officers in adequate numbers to assist and supervise the Project Farmers in the implementation of their respective ranch development plans. For that purpose, the extension officers shall closely cooperate with the Corporation to enable the Project Farmers to benefit from the technological results and the experience gained by the Corporation. The Borrower shall ensure that goods and livestock to be financed out of the proceeds of an Agricultural Loan shall be procured only after prudent shopping.