Project Agreement CONFORMED COPY CREDIT NUMBER 400 IND INTERNATIONAL DEVELOPMENT ASSOCIATION BANK RAKYAT INDONESIA DATED JUNE 22, 1973

Transcription

1 Public Disclosure Authorized CREDIT NUMBER 400 IND CONFORMED COPY Public Disclosure Authorized Project Agreement (Smallholder and Private Estate Tea Project) Public Disclosure Authorized BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND BANK RAKYAT INDONESIA Public Disclosure Authorized DATED JUNE 22, 1973

2 CONFORMED COPY CREDIT NUMBER 400 IND Project Agreement (Smallholder and Private Estate Tea Project) BE"'WEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND BANK RAKYAT INDONESIA DATED JUNE 22, 1973

3 PROJECT AGREEMENT AGREEMENT, dated June 22, 1973, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and BANK RAKYAT INDONESIA (hereinafter called BRI). WHEREAS by the Development Credit Agreement of even date heiewith between Republic of Indonesia (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to seven million eight hundred thousand dollars ($7,800,000), on the terms and conditions set forth in the Development Credit Agreement, and on the condition that BRI agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and BRI, the proceeds of the credit provided for under the Development Credit Agreement relating to Parts A and B of the Project will be made available to BRI on the terms and conditions therein set forth; and WHEREAS BRI, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth and the following additional term has the following meaning: "Sub-loan contract" means the contract to be entered into with each Sub-borrower pursuant to the provisions of Section 2.02(b) of this Agreement. ARTICLE II Execution of the Project Section BRI shall provide, through Sub-loans to assist Sub-borrowers in carrying out Parts A and B of the Project described in Schedule 2 to the

4 4 Development Credit Agreement, financial assistance with due diligence and efficiency and in conformity with appropriate administrative, agricultural, financial and engineering practices. Section (a) BRI shall exercise its rights in relation to each Sub-loan in such manner as to protect the interests of the Association and BRI, to comply with its obligations under this Agreement and the Subsidiary Loan Agreement and to achieve the purposes of the Project. (b) In complying with its obligation under paragraph (a) of this Section, unless the Association shall otherwise agree, BRI shall process and make Sub-loans to Sub-borrowers pursuant to the provisions set forth in Schedule I to this Agreement and, in addition, BRI shall make Sub-loans on terms whereby BRI shall obtain, by written contract or by other appropriate legal means satisfactory to the Association with the Sub-borrower, rights adequate to protect the interests of the Association and BRI, including security arrangements satisfactory to the Association adequate to secure the due service of the Sub-loan, and the right of BRI to: (i) (ii) require the Sub-borrower to carry out the field or factory rehabilitation or new factory construction with due diligence and efficiency and in accordance with appropriate technical, financial and managerial standards and in the case of private tea. estates and PTPs, to maintain adequate records; require that (1) factory machinery for PTPs and vehicles for private tea estates and PTPs to be financed out of the proceeds of the Sub-loan be procured pursuant to the Guidelines; (2) all other goods (other than fertilizers and pesticides) and services (other than the services of consultants) to be financed out of the proceeds of the Sub-loan by private tea estates and PTPs shall be purchased at a reasonable price and shall include the solicitation of not less than three price quotations, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and availability of maintenance facilities and spare parts therefor, and, in the case of services, of their quality and the competence of the parties rendering them; provided, however, that for the purpose of standardization, factory machinery and equipment included in Part B(i) of the Project may be procured directly from the original supplier with the recommendation of the consultants referred to in Section 3.04(i) of the Development Credit

5 5 Agreement and the approval of the Association; and (3) the goods and services to be financed out of the proceeds of the Sub-loan shall be used exclusively by each respective Sub-borrower in the carrying out of the field or factory rehabilitation or new factory construction; (iii) require that all proposed contracts for the procurement of goods and services included in Parts A(ii) and B of the Project be submitted to BRI for approval prior to the award thereof; (iv) inspect, by itself or jointly with representatives of the Association if the Association shall so request, such goods and the sites, works, plants and construction included in the field or factory rehabilitation or new factory construction, the operation thereof and any relevant records and documents; (v) (vi) (vii) require that the Sub-borrower, in the case of private tea estates and PTPs, shall employ the consultants referred to in Section 3.04(i) of tle Development Credit Agreement; require that the Sub-borrower, in the case of private tea estates and PTPs, shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with appropriate business practice and that, without any limitation upon the foregoing, such insurance shall cover marine, transit and other hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Sub-loan to the place of use or installation, and that any indemnity thereunder shall be payable in a currency freely usable by such Sub-borrower to replace or repair such goods; require that the Sub-borrower, in the case of private tea estates and PTPs, shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial resources and expenditures with respect to its respective Part of the Project and shall also (1) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to BRI; (2) furnish to BRI as soon as available, but

6 6 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 BRI shall have reasonably requested; and (3) furnish to BRI such other information concerning the accounts and financial statements of such Sub-borrowers and the audit thereof as BRI shall from time to time reasonably request; (viii) (ix) obtain all such information as the Association or BRI shall reasonably request relating to the foregoing and to the administration, operations and financial resources and expenditures of the Sub-borrower; and suspend or terminate the right of the Sub-borrower to the use of the proceeds of the Sub-loan upon failure by such Sub-borrower to perform its obligations under the Sub-loan contract with BRI. In the case of private tea estates and PTPs, BRI shall also provide for the rillht to call for immediate repayment of the Sub-loan by the Sub-borrower upon failure by Sub-borrower to perform its obligations under the Sub-loan contract with BRI. (c) BRI shall review the interest rates referred to in paragraph B of Schedule I to this Agreement whenever the Borrower makes adjustments in the interest rates in effect in the territories of the Borrower and, after consulting with the Borrower on its adjusted lending and discount rates, BRI shall make its best efforts to make appropriate adjustments in the interest rates contained in the Sub-loan contracts referred to in paragraph (b) of this Section and in the Subsidiary Loan Agreement. Section 2,03. (a) BRI shall cause the PTPs to construct the black tea factories referred to in Part B(ii) of the Project on sites approved by PMU and in accordance with the designs and specifications prepared by the consultants referred to in Section 3.04(i) of the Development Credit Agreement and approved by PMU and the Association. (b) BRI shall cause the PTPs to employ adequate and competent staff, including a full time resident factory manager, for each such factory. Section (a) With respect to its Part of the Project, BRI: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof)

7 7 and to identify the goods and services financed out of the proceeds of the Credit relent to it by the Borrower and out of its own funds, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of Section 5.03 of this Agreement, enable the Association's representatives to examine the Project, the goods financed out of such proceeds and funds 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 the proceeds of the Credit so relent to it and of its own funds and the goods and services financed out of such proceeds and funds. (b) Without limitation upon its obligations contained in paragraph (a) of this Section, BRI shall establish and maintain a separate account in respect of Parts A and B of the Project, and shall send to PMU and the Association: (i) quarterly statements of such account within six weeks after the end of each quarter and (ii) promptly upon their preparation but not later than four months after the end of the period covered thereby, annual statements of such account, certified by auditors acceptable to the Association. Section BRI shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, BRI shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. ARTICLE Ill Management and Operations of BRI Section BRI shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section Except as the Association and BRI shall otherwise agree, BRI: (i) shall not sell. lease, transfer or otherwise dispose of any of its property or assets used in the execution of its Part of the Projiect, except in the ordinary course of business: and (ii) shall take all action necessary to maintain its corporate existence and right to carry on operations and to acquire, maintain and renew all rights, powers, privileges and franchises necessary or useful in the conduct of its business. Section (a) BRI shall ensure that adequate and competent managerial and operational staff shall he employed in its Bandung office and in its branch and field olfices participating in the Project.

8 8 (b) BRI shall employ a financial advisor acceptable to the Association on terms and conditions satisfactory to the Association to carry out Part F(iii) of the Project. Section BRI shall regularly inspect the financial condition of Sub-borrowers under the Project. ARTICLE IV Financial Covenants Section BRI shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices and with the recommendations of the financial advisor referred to in Section 3.03(b) of this Agreement which are consistent with such practices, its operations and financial resources and expenditures relating to the Project. Section BRI shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and 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 BRI and the audit thereof as the Association shall from time to time reasonably request. ARTICLE V Consultation, Information and Inspection Section The Association and BRI shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and BRI shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of BRI and other matters relating to the purpose of the Credit. Section The Association and BRI shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the

9 9 accomplishment of the purposes of the Credit, the performance by either of them of its obligations under this Agreement or the performance by the Borrower and BRI of their respective obligations under the Subsidiary Loan Agreement. Section BRI shall enable the Association's representatives to examine all sites, offices. properties and equipment of BRI and any relevant records and documents relating to the Project. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section (a) This Agreement and all obligations of the Association and of BRI thereunder shall terminate on the earlier of the following two dates: (i) (ii) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or a date 20 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a)(ii) of this Section, the Association shall promptly notify BRI of this event. Section All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted

10 10 to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: For BRI: International Development Association 1818 H Street, N.W. Washington, D.C United States of America Cable address: INDEVAS Washington, D.C. Kantor Besar Bank Rakyat Indonesia Jalan Veteran 8 Jakarta, Indonesia P. 0. Box 94-JKT. Cable address: KABEBRI Jakarta Section Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of BRI may be taken or executed by BRI or such other person or persons as BRI shall designate in writing. Section BRI shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of BRI, take any action or execute any documents required or permitted to be taken or executed by BRI pursuant to any of the provisions of this Agreement. Section This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument.

11 11 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ I.P.M. Cargill Regional Vice President Asia BANK RAKYAT INDONESIA By /s/ Sjarif Thajeb Auithorized Representative

12 12 A. Processing of Sub-loans by BRI 1. Smallholders SCHEDULE 1 Sub-loans Smallholders who seek Sub-loans under the Project may apply for credit in the form of input supplies (fertilizers, pesticides and planting materials) and cash (for incremental hired labor) by submitting an application to BRI which specifies that: (a) the applicant's holdings include at least one-quarter ha of tea, (b) such land is suitable for tea planting, (c) the applicant holds cultivation rights for his land, (d) the applicant's land is within the area referred to in Schedule 2 to the Development Credit Agreement and (e) the applicant will restrict replanting to 50% of his existing tea holdings, up to a maximum of one ha. Each smallholder's application will be prepared with the assistance of a PMU Tea Officer who will specify the applicant's input and cash requirements for the proposed Sub-loan. Such application will include the Tea Officer's verification that the applicant has demonstrated sound tea husbandry practices. BRI will enter into a written Sub-loan contract with the applicant provided that BRI has: (i) approved the creditworthiness of the applicant, and (ii) received satisfactory evidence of the applicant's right to cultivate the area of land specified in the application. Input supplies will be obtained by the smallholder upon presentation to specified distributors of supply certificates issued by BRI under the Sub-loan contract. BRI will then disburse to the distributors under the contracts referred to in Section 2.03(b) of the Development Credit Agreement. Cash credit will be disbursed to the smallholder under the Sub-loan contract on a monthly basis pursuant to the requirements stated in the approved application. BRI will obtain written confirmation annually from PMU that the smallholder's performance under the Sub-loan contract is technically satisfactory. BRI will extend further credit to the smallholder only upon such confirmation from PMU of the smallholder's satisfactory technical performance and upon confirmation by BRI of the smallholder's continued satisfactory creditworthiness. 2. Private tea estates a. Private tea estates which seek Sub-loans under Part A(ii) of the Project will be required initially to prepare and submit a development plan for field development to PMU for approval. PMU will assist in the preparation of

13 13 development plans as required and will specify the applicant's input requirements for field development under the proposed Sub-loan. Such application will also specify that: (i) the applicant is a legal entity established under the laws of the Borrower and domiciled in the territories of the Borrower, and (ii) the applicant holds an undisputed right of exploitation to lands covered in the proposed development plan, which right is registered in the appropriate Land Registry Office and shall remain valid until the final repayment date of the proposed Sub-loan. BRI will then enter into a written Sub-loan contract with the applicant if it approves the creditworthiness and managerial capacity of the applicant. Goods (other than fertilizers and pesticides) and services (other than the services of consultants) for field rehabilitations will be procured by the Sub-borrower pursuant to the approved development plan. For such goods and services, BRI will disburse against invoices and pay receipts. BRI will obtain written confirmation semi-annually from PMU that the estate's performance under the development plan and the Sub-loan contract is technically satisfactory. Fertilizers and pesticides will be obtained by the private tea estates upon presentation to specified distributors of supply certificates issued by BRI under the Sub-loan contract. BRI will then disburse to the distributors under the contracts referred to in Section 2.03(b) of the Development Credit Agreement. b. Private tea estates which seek Sub-loans under Part B(i) of the Project will be required initially to submit an application for factory rehabilitations to PMU and BRI for their respective approval. Such application will also specify that: (i) the applicant is a legal entity established under the laws of the Borrower and domiciled in the territories of the Borrower, and (ii) the applicant holds an undisputed right of exploitation to lands covered in the proposed application, which right is registered in the appropriate Land Registry Office and shall remain valid until the final repayment date of the proposed Sub-loan. BRI will then enter into a written Sub-loan contract with the applicant if it approves the creditworthiness and managerial capacity of the applicant. Goods and services (other than the services of consultants) for factory rehabilitations will be procured by the Sub-borrower pursuant to the designs and specifications prepared by the consultants referred to in Section 3.04(i) of the Development Credit Agreement and approved by PMU and the Association. For such goods and services, BRI will disburse against invoices and evidences of payment, and for directly imported goods, evidences of shipment, pursuant to the terms of the contracts with suppliers and civil works contractors and to the approved designs and specifications.

14 14 3. PTPs PTPs which seek Sub-loans under Part B(ii) of the Project will be required initially to submit an application for new factory construction to PMU and BRI for their respective approval. Such application will specify, inter alia, that the applicant holds a right of exploitation to lands covered in the proposed application, which right is registered in the appropriate Land Registry Office and shall remain valid until the final repayment of the proposed Sub-loan. BRI will then enter into a written Sub-loan contract with the applicant if it approves the proposed managerial capacity of the applicant with respect to the new factory. Goods and services (other than the serices of consultants) for new factory construction will be procured by the Sub-borrower pursuant to the designs and specifications prepared by the consultants referred to in Section 3.04(i) of the Development Credit Agreement and approved by PMU and the Association.' For such goods and services, BRI will disburse against invoices and evidences of payment, and for directly imported goods, evidences of shipment, pursuant to the terms of the contracts with suppliers and civil works contractors and to the approved designs and specifications. B. Terms and Conditions of Sub-loans 1. Sinallholders (a) (b) Amount: BRI will finance the total investment cost of goods and services as stated in the approved application. Repayment terms: a maximum of 15 years including a maximum grace period of 5 years. (c) Interest rate: 12% per annum on the amounts withdrawn and outstanding. Interest will also be payable during the grace period. (d) Security: Pursuant to BRI's standard practices. 2. Private tea estates: field rehabilitations (a) (b) Amount: BRI will finance about 90% of the total investment cost of goods and services as stated in the approved development plan. Repayment terms: a maximum of 18 years including a maximum grace period of 8 years.

15 15 (c) (d) Interest rate: 12% per annum on amounts withdrawn and outstanding. Interest will also be payable during the grace period. Security: On fixed and movable assets financed under the Project and such other security as BRI shall reasonably request. 3. For the purposes of sub-paragraphs I and 2 of this paragraph, the term "investment cost" means, for areas proposed to be rehabilitated, the additional cost of goods and services to be incurred from year to year for the first three years of such rehabilitation, and for areas proposed to be replanted, the cost to be incurred during the first three years of such replanting and 100% of the land clearing cost. 4. Private tea estates: factory rehabilitations (a) (b) (c) (d) Amount: BRI will finance about 7517 of the total investment cost of goods and services as stated in the approved designs and specifications. Repayment terms: a maximum of 15 years including a maximum grace period of 5 years. Interest rate: 12% per annum on amounts withdrawn and outstanding. Interest will also be payable during the grace period. Security: On fixed and movable assets financed under the Project and such other security as BRI shall reasonably request. 5. PTPs: New tea factories (a) Amount: BRI will finance about 65% of the total investment cos*t as stated in the approved designs and specifications. (b) Repayment terms: a maximum of 15 years including a maximum grace period of 5 years. (c) Interest rate: 12% per annum on amounts withdrawn and outstanding. Interest will also be payable during the grace period. (d) Security: On fixed and movable assets financed under the Project and such other security as BRI shall reasonably request.