CREDIT NUMBER 1651 BD

Development Credit Agreement

(Shrimp Culture Project)

between

PEOPLE'S REPUBLIC OF BANGLADESH

and

INTERNATIONAL DEVELOPMENT ASSOCIATION

Dated , 1986

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CREDIT NUMBER 1651 BD

DEVELOPMENT CREDIT AGREEMENT

AGREEMENT, dated 74 , 1986, betweenPEOPLE'S REPUBIC OF BANGALDESH (the orrower) and INTERNATIONALDEVELOPMENT ASSOCIATTON (the Association).

WHEREAS (A) the Borrower, having satisfied itself as to thefeasibility and priority of the Project described in Schedule 2

to this Agreement, has requested the Association to assist in the

financing of the Project;

(B) the Borrower intends to obtain from the United Nations

Development Programme (hereinafter called UNDP) a grant (the UNDP

Grant) in an amount of $4,500,000 equivalent to assist in financ-

ing Part D of the Project on the terms and conditions set forthin an agreement (hereinafter called the UNDP Project Document) to

be entered into between the Borrower and UNDP; and

WHEREAS the Association has agreed, on the basis, interalia, of the foregoing, to extend the Credit to the Borrower upon

the terms and conditions set forth in this Agreement;

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

General Conditions; Definitions

Section 1.01. The General Conditions Applicable to Develop-ment Credit Agreements of the Association, dated January 1, 1985,(the General Conditions), with the deletion of the last sentence

of Section 3.02 thereof, constitute an integral part of this

Agreement.

Section 1.02. Unless the context otherwise requires, the

several terms defined in the General Conditions and in the

Preamble to this Agreement have the respective meanings thereinset forth and the following additional terms have the following

meanings:

(a) "BB" means the Bangladesh Bank established underBangladesh Bank Order, 1972 (President's Order No. 127 of 1972);

(b) "SB" means the Sonali Bank established and operatingunder the laws of the Borrower;

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(c) "BKB" means the Bangladesh Krishi Bank established and

operating under the laws of the Borrower;

(d) "DOF" means the Department of Fisheries of the Bor-

rower's Ministry of Fisheries and Livestock;

(e) "BWDB" means the Bangladesh Water Development Board

established and operating pursuant to the Bangladesh Water and

Power Development Boards Order, 1972 (President's Order No. 59 of

1972);

(f) "PIUo means the Project Implementation Unit established

within DOF pursuant to paragrapb 1 of Schedule 4 to this Agree-

ment;

(g) "Subsidiary Loan Agreement" means the agreement to be

entered into between the Borrower and Bangladesh Bank pursuant to

Section 3.02 (a) of this Agreement, as the same may be amended

from time to time, and such term includes all schedules to the

Subsidiary Loan Agreement;

(h) "Participation Agreements" means the agreements to be

entered into between Bangladesh Bank and the Participating Banks

pursuant to Section 3.02 (c) of this Agreement, as said

agreements may be amended from time to time;

(i) "Participating Banks" means SB and BKB, and such other

banks as the Borrower and the Association may agree, which have

entered into a Participation Agreement with Bangladesh Bank

pursuant to Section 3.02 (c) of this Agreement;

(j) "Ultimate Borrowers" means any person, group of persons

or any other entity eligible to receive a loan from a

Participating Bank under the Project, for investments in shrimp

farming, marketing equipment or hatcheries;

(k) "Project Area" means an area comprising the Main

Project Area and the Additional Project Areas;

(1) "Main Project Area" means an area consisting of about

1,400 ha in Khulna district and about 5,600 ha in Cox's Bazar

district;

(m) "Additional Project Areas" means about 2,500 ha of

Project Area to be selected by the Borrower and approved by the

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Association pursuant to Section 3.04 of this Agreement and forwhich extension services, credit and training are to be providedunder the Project; and

(n) "Special Account" means the Account referred to in Sec-

tion 2.02 (b) of this Agreement.

ARTICLE II

The Credit

Section 2.01. The Association agrees to lend to the Bor-rower, on the terms and conditions set forth or referred to inthe Development Credit Agreement, an amount in various currencies

equivalent to twenty million six hundred thousand Special Drawing

Rights (SDR 20,600,000).

Section 2.02. (a) The amount of the Credit may be withdrawnfrom the Credit Account in accordance with the provisions of

Schedule 1 to this Agreement, as such Schedule may be amended

from time to time by agreement between the Borrower and the

Association, for expenditures made (or, if the Association shallso agree, to be made) in respect of the reasonable cost of goodsand services required for the Project described in Schedule 2 tothis Agreement and to be finance1 out of the proceeds of theCredit.

(b) The Borrower shall, for the purposes of Parts A and Cof the Project, open and maintain in dollars a special accountin Bangladesh Bank on terms and conditions satisfactory to theAssociation. Deposits into, and payments out of, the Special

Account shall be made in accordance with the provisions of

Schedule 5 to this Agreement.

Section 2.03. The Closing Date shall be December 31, 1991 or

such later date as the Association shall establish. The Asso-ciation shall promptly notify the Borrower of such later date.

Section 2.04. (a) The Borrower shall pay to the Associationa commitment charge at the rate of one-half of one percent (1/2of 1%) per annum on the principal amount of the Credit not with-drawn from time to time. The commitment charge shall accrue from

a date sixty days after the date of the Development Credit Agree-

ment to the respective dates on which amounts shall be withdrawn

by the Borrower from the Credit Account or shall be cancelled.

(b) The commitment charge shall be paid: (i) at such

places as the Association shall reasonably request; (ii) without

restrictions of any kind imposed by, or in the territory of, the

Borrower; and (iii) in the currency specified in this Agreement

for the purposes of Section 4.02 of the General Conditions or in

such other eligible currency or currencies as may from time to

time be designated or selected pursuant to the provisions of that

Section.

Section 2.05. The Borrower shall pay to the Association a

service charge at the rate of three-fourths of one percent (3/4

of 1%) per annum on the principal amount of the Credit withdrawn

and outstanding from time to time.

Section 2.06. Commitment charges and service charges shall

be payable semiannually on June 1 and December 1 in each year.

Section 2.07. The Borrower shall repay the principal amount

of the Credit in semiannual installments payable on each June 1

and December 1 commencing June 1, 1996, and ending December 1,

2035. Each installment to and including the installment payable

on December 1, 2005 shall be one-half of one percent (1/2 of 1%)

of such principal amount, and each installment thereafter shall

be one and one-half percent (1-1/2%) of such principal amount.

Section 2.08. The currency of the Unites States of America

is hereby specified for the purposes of Section 4.02 of the

General Conditions.

ARTICLE III

Execution of the Project

Section 3.01. (a) The Borrower declares its commitment to

the objectives of the Project as set forth in Schedule 2 to this

Agreement, and, to this end, shall carry out the Project with due

diligence and efficiency and in conformity with appropriate

administrative, financial, engineering and fisheries practices,

and shall provide, promptly as needed, the funds, facilities,

services and other resources required for the Project.

(b) Without limitation upon the provisions of paragraph (a)

of this Section, the Borrower shall carry out the Project in

accordance with the Implementation Program set forth in Sched-

ule 4 to this Agreement, as such Schedule may be amended from

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time to time by agreement between the Borrower and the Associa-tion.

(c) Without limitation to the generality of paragraph (a)above, the Borrower shall ensure that adequate funds will be

allocated to BWDB for the operation and maintenance of Projectfacilities.

Section 3.02. (a) The Borrower shall relend to BB for

purposes of Part B of the Project the proceeds of the Credit

allocated to Category (3) of paragraph 1, Schedule 1 to thisAgreement, under a subsidiary loan agreement to be entered intobetween the Borrower and BB upon terms and conditions satisfac-tory to the Association, which shall include those set forth in

Part I of Schedule 6 to this Agreement.

(b) The Borrower shall exercise its rights under the

Subsidiary Loan Agreement in such manner as to protect the

interests of the Borrower and the Association and to accomplishthe purposes of the Credit, and except as the Association shallotherwise agree, the Borrower shall not assign, amend, abrogateor waive the Subsidiary Loan Agreement or any provision thereof.

(c) The Borrower shall cause BB to enter into Participation

Agreements with the Participating Banks providing for the on-

lending of the funds lent to BB by the Borrower for purposes of

Part B of the Project, upon terms and conditions satisfactory tothe Association, which shall include those set forth in Part II

of Schedule 6 to this Agreement.

(d) The Borrower shall ensure that short-term credit to

ultimate borrowers under the Project shall be made available bythe Participating Banks and refinanced by BB upon terms and

conditions satisfactory to the Association.

Section 3.03. Except as the Association shall otherwiseagree, procurement of the goods, works and consultants' servicesrequired for the Project and to be financed out of the proceeds

of the Credit shall be governed by the provisions of Schedule 3to this Agreement.

Section 3.04. The Borrower shall select the Additional

Project Areas in accordance with criteria satisfactory ti the

Association and shall furnish to the Association, fe; its

approval, proposals for inclusion of such Areas in the Project.

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Section 3.05. The Borrower shall cause Bangladesh Bank to

prepare and furnish to the Association, a Banking Plan whichshall include, inter alia, Bangladesh Bank's role in the imple-mentation of the Project, proposals for banking coverage of theProject Area (including the involvement of the ParticipatingBanks in a supervised credit scheme), lending targets, andphasing, staffing and training arrangements, criteria and

procedures for loan processing, procurement and construction,coordination arrangements, and supervision, monitoring and

reporting requirements.

Section 3.06. In order to ensure the timely acquisition ofthe land required for the construction of the embankments, andother structures included in the Project, the Borrower shallsubmit or cause to be submitted land acquisition plans to the

concerned Deputy Commissioners at least nine months before the

land is needed for construction; and to this effect the Borrowershall provide or cause to be provided to the concerned Deputy

Commissioners, in a timely manner, the funds, vehicles, surveyequipment and staff necessary for verification and approval of

land acquisition plans.

ARTICLE IV

Financial Covenants

Section 4.01. (a) The Borrower shall maintain or cause to be

maintained records and accounts adequate to reflect in accordance

with sound accounting practices the operations, resources and

expenditures in respect of the Project of the departments or

agencies of the Borrower responsible for carrying out the Project

or any part thereof, including, without limitation to the fore-going, records and accounts in accordance with normal commercial

practices with respect to the hatcheries to be operated by PIU.

(b) The Borrower shall:

(i) have the accounts referred to in paragraph (a)of this Section including the Special Account

for each fiscal year audited, in accordancewith appropriate auditing principles consistentlyapplied, by independent auditors acceptable to theAssociation;

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(ii) furnish to the Association, as soon as available,but in any case not later than nine months after

the end of each such year, a certified copy of the

report of such audit by the 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 said accounts and the audit thereof

and said record.- as the Association shall from

time to time reasonably request.

(c) For all expenditures with respect to which withdrawals

are requested from the Credit Account on the basis of statements

of expenditure, the Borrower shall:

(i) maintain or cause to be maintained, in accordance

with paragraph (a) of this Section, separate

records and accounts reflecting such expenditures;

(ii) retain, until at least one year after Association

has received the audit report for the fiscal year

in which the last withdrawal from the Credit

Account was made, all records (contracts, orders,

invoices, bills, receipts and other documents)

evidencing such expenditures;

(iii) enable the Association's representatives to

examine such records; and

(iv) ensure that such separate accounts are included in

the annual audit referred to in paragraph (b) of

this Section and that the report thereof contains,

in respect of such separate accounts, a separate

opinion by the said auditors as to whether the

proceeds of the Credit withdrawn in respect of

such expenditures have been used for the purpose

for which they were provided.

Section 4.02. The Borrower shall carry out a program

designed to recover the full cost of investment and operation and

maintenance of the embankments and regulators constructed or

rehabilitated under Part A of the Project. To this effect the

Borrower shall:

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(a) by December 31, 1987 enact legislation and takeall other measures necessary to set recoverycharges which will ensure full cost recoverywithin a 20 year period;

(b) thereafter make such biennial adjustments to suchcharges as shall be warranted by actual investmentand operation and maintenance costs; and

(c) improve its collection procedures as necessa,ry toensure full payment of the recovery chargesspecified in paragraphs (a) and (b) above.

ARTICLE V

Remedies of the Association

Section 5.01. Pursuant to Section 6.02 (h) of the GeneralConditions, the following additional events are specified:

(a) a change shall have been made in the Subsidiary LoanAgreement or in the Participation Agreement without the Asso-ciation's consent; and

(b) (i) subject to subparagraph (ii) of this paragraph:

(A) the right of the Borrower to withdraw theproceeds of any grant or loan made to theBorrower for the financing of the Projectshall have been suspended, cancelled orterminated in whole or in part, pursuantto the terms of the agreement providingtherefor; or

(B) any such loan shall have become due andpayable prior to the agreed maturity thereof.

(ii) Subparagraph (i) of this paragraph shall not applyif the Borrower establishes to the satisfactionof the Association that: (A) such suspension,cancellation, termination or prematuring is notcaused by the failure of the Borrower to performany of its obligations under such agreement; and(B) adequate funds for the Project are availableto the Borrower from other sources on terms and

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conditions consistent with the abligations of the

Borrower under this Agreement.

Section 5.02. For the purposes of Section 7.01 (d) of the

General Conditions, the following additional events are speci-

fied:

(a) the event specified in paragraph (a) 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 Asso-

ciation to the Borrower; and

(b) the event specified in paragraph (b) (i) (B) of Sec-

tion 5.01 of this Agreement shall occur, subject to the proviso

of paragraph (b) (ii) of that Section.

ARTICLE VI

Effective Date; Termination

Section 6.01. The following events are specified as addi-

tional conditions to the effectiveness of the Development Credit

Agreement within the meaning of Section 12.01 (b) of the General

Conditions:

(a) all conditions precedent to the effectiveness of the

UNDP Project Document (other than, if . applicable, the

effectiveness of this Agreement) have been fulfilled;

(b) the Subsidiary Loan Agremeent and the Participation

Agreements have been entered into pursuant to Section 3.02 (a)

and (c) of this Agreement;

(c) a Banking Plan, satisfactory to the Association, has

been furnished to the Association pursuant to Section 3.05 of

this Agreement;

(d) the key staff for the PIU has been duly appointed

pursuant to paragraph 1 (ii) of Schedule 4 to thIs Agreement;

(e) two Superintending Engineers within BWDB have been duly

designated pursuant to paragraph 3 (ii) of Schedule 4 to this

Agreement; and

(f) the Project Proforma for carrying out the Project have

been approved by the Borrower.

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Section 6.02. The following is specified as an additionalmatter, within the meaning of Section 12.02 (b) of the GeneralConditions, to be included in the opinion or opinions to befurnished to the Association, namely, that the Subsidiary LoanAgreement has been duly authorized or ratified by the Borrowerand BB and is legally binding upon the Borrower and BB in accor-dance with its terms.

Section 6.03. The date 90 days after the date of this Agree-ment is hereby specified for the purp7ses of Section 12.04 of theGeneral Conditions.

Se:tion 6.04. The provisions of paragraph (b) of Section5.02 of this Agreement shall cease and determine on the date onwhich the Development Credit Agreement shall terminate or on thedate 20 years after the date of this Agreement, whichever shallbe the earlier.

ARTICLE VII

Representatives of the Borrower; Addresses

Section 7.01. The Secretary or any Additional Secretary,Joint Secretary, Deputy Secretary or Section Officer of theExternal Resources Division of the Ministry of Finance of theBorrower is designated as representative of the Borrower for thepurposes of Section 11.03 of the General Conditions.

Section 7.02. The following addresses are specified for thepurposes of Section 11.01 of the General Conditions:

For the Borrower:

External Resources DivisionMinistry of FinanceGovernment of the People's

Republic of BangladeshDhaka, Bangladesh

Cable address: Telex:

BAHIRSAMPA-0 642226 SETU BJDhaka

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For the Association:

International Development Association

1818 H Street, N.W.Washington, D.C. 20433

United States of America

Cable address: Telex:

INDEVAS 440098 (ITT)

Washington, D.C. 248423 (RCA) or64145 (WUI)

IN WITNESS WHEREOF, the parties hereto, acting through their

duly authorized representatives, have caused this Agreement to be

signed in their respective names in the District of Columbia,

United States of America, as of the day and year first above

written.

PEOPLE'S REPUBLIC OF BANGLADESH

ByAuthorized Representative

INTERNATIONAL DEVELOPMENT ASSOCIATION

ByRegional Vice President

South Asia

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SCHEDULE 1

Withdrawal of the Proceeds of the Credit

1. The table below sets forth the Categories of items to befinanced out of the proceeds of the Credit, the allocation of theamounts of the Credit to each Category and the percentage ofexpenditures for items so to be financed in each Category:

Amount of theCredit Allocated % of(Expressed in Expenditures

Category SDR Equivalent) to be Financed

(1) Civil works 10,400,000 90%(including con-struction mate-rials)

(2) Equipment and 800,000 100% of foreignvehicles expenditures,

100% of localexpenditures(ex-factorycost) and 70%of local ex-

penditures forother items pro-cured locally

(3) Loans under Part B 80% of the amountof the Project disbursed by BB

to refinance such(a) under Part B (i) 3,500,000 loans

(b) under Part B (ii) 2,000,000

(4) Staff salaries 2,000,000 Amounts specifiedand operating in the Annex tocosts this Schedule

(5) Unallocated 1,900,000

TOTAL 20,600,000

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2. For the purposes of this Schedule:

(a) the term "foreign expenditures" means expenditures inthe currency of any country other than that of the Borrower forgoods or services supplied from the territory of any countryother than that of the Borrower; and

(b) the term "local expenditures" means expenditures in thecurrency of the Borrower or for goods or services supplied fromthe territory of the Borrower.

3. Notwithstanding the provisions of paragraph 1 above, nowithdrawals shall be made in respect of: (a) payments made forexpenditures prior to the date of this Agreement; and (b)expenditures in respect of Category (3) (b) until the Associationshall have approved the selection of Additional Project Areaspursuant to Section 3.04 of this Agreement.

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ANNEX

Staff Salaries 1/ and Operating Costs

1. Disbursement shall be made as follows:

Percentage ofeligible expenses2!to be financed untilall disbursementsunder Category 4 reach Aggregatethe aggregate amount amount expressed

opposite to each in SDRpercentage equivalent

95% 1,000,000

80% 1,300,000

60% 1,700,000

40% 2,000,000

2. Disbursements will be made on the basis of statements of

expenditure made by BWDB and PIU.

1/ For the purpose of this Annex, the term "Salaries" 3/

includes allowances.

2/ Eligible expenses comprise incremental staff salaries and

operating costs of BWDB and PIU.

3/ Incremental staff means all staff of BWDB and PIU workingfull time on Project implementation; BWDB and PIU staffworking part time on Project implementation will also

qualify in proportion to the contribution.

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SCHEDULE 2

Description of the Project

The objectives of the Project are to intensify the produc-tion of shrimp thereby increasing shrimp exports, farm incomesand nutrition in coastal areas.

The Project consists of the following parts, subject to suchmodifications thereof as the Borrower and the Association mayagree upon from time to time to achieve such objectives:

Part A: Shrimp-farming Infrastructure

Construction, in the Main Project Area, of embankments,water control structures and shrimp hatcheries.

Part B: Medium-term Credit

Provision of credit by BB through refinancing of loans madeby the Participating Banks to Ultimate Borrowers: (i) in the MainProject Area, to finance on-farm investments, hatcheries, andmarketing equipment, and (ii) in the Additional Project Areas, tofinance on-farm investments and secondary embankments.

Part C: Institutional Support to DOF and BWDB.

Strengthening DOF and BWDB through the establishment of aShrimp Culture Extension Service, the carrying out of civil works(including the construction of two Demonstration Farms and Train-ing Centers and one office building for DOF headquarters) and theprovision of equipment, staff and operating costs.

Part D: Technical Assistance and Training

Provision of consultants' services, training and overseasfellowships.

The Project is expected to be completed by June 30, 1991.

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SCHEDULE 3

Procurement and Consultants' Services

Section I. Procurement of Goods and Works

Part A. International Competitive Bidding

Except as provided in Part C hereof, goods shall be procured

under contracts awarded in accordance with procedures consistent

with those set forth in Sections I and II of the "Guidelines for

Procurement under IBRD Loans and IDA Credits" published by the

Bank in May 1985 (the Guidelines).

Part B. Preference for Domestic Manufacturers

In the procurement of goods in accordance with the proce-

dures described in Part A of this Schedule, goods manufactured

in Bangladesh may be granted a margin of preference in accor-

dance with, and subject to, the provisions of paragraphs 2.55 and

2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2

thereto.

Part C. Other Procurement Procedures

1. Contracts for civil works (other than those for Part B of

the Project) shall be awarded on the basis of local competitive

bidding procedures satisfactory to the Association.

2. Contracts for equipment and vehicles (other than those for

Part B of the Project) which, to the extent practicable, cannot

be grouped in bid packages estimated to cost the equivalent of

$100,000 or more, shall be awarded on the basis of local competi-

tive bidding procedures satisfactory to the Association, up to an

aggregate amount of $500,000; provided, however, that items of

equipment and vehicles estimated to cost less than the equivalent

of $10,000, up to an aggregate amount of $100,000 equivalent, may

be procured through prudent shopping on the basis of at least

three price quotations from different sources.

3. Civil works and equipment and vehicles for Part B of the

Project may be procured through normal commercial channels.

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Part D. Review by the Association of Procurement Decisions

1. Review of invitations to bid and of proposed awards andfinal contracts:

(a) With respect to the first contract for each type ofcivil works (embankments, regulators and buildings) andthereafter each contract for civil works estimated to cost theequivalent of $200,000 or more, and each contract for goodsestimated to cost the equivalent of $100,000 or more, theprocedures set forth in paragraphs 2 and 4 of Appendix 1 to theGuidelines shall apply. Where payments for such contract are tobe made out of the Special Account, such procedures shall bemodified to ensure that the two conformed copies of the contractrequired to be furnished to the Association pursuant to saidparagraph 2 (d) shall be furnished to the Association prior tothe making of the first payment out of the Special Account inrespect of such contract.

(b) With respect to each contract not governed by the pre-ceding paragraph, the procedures set forth in paragraphs 3 and 4of Appendix 1 to the Guidelines shall apply. Where payments forsuch contract are to be made out of the Special Account, suchprocedures shall be modified to ensure that the two conformedcopies of the contract together with the other informationrequired to be furnished to the Association pursuant to saidparagraph 3 shall be furnished to the Association as part of theevidence to be furnished pursuant to paragraph 4 of Schedule 5(the Special Account Schedule) to this Agreement.

(c) The provisions of the preceding subparagraphs (a) and(b) shall not apply to contracts on account of which the Associa-tion has authorized withdrawals from the Credit Account on thebasis of statements of expenditure. Such contracts shall beretained in accordance with Section 4.01 (c) (ii) of this Agree-ment.

2. The figure of 15% is hereby specified for purposes of para-graph 4 of Appendix 1 to the Guidelines.

Section II. Employment of Consultants

In order to assist the Borrower in carrying out the Project,the Borrower shall employ or cause to be employed consultantswhose qualifications, experience and terms and conditions of

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employment shall be satisfactory to the Association. Such

consultants shall be selected in accordance with principles and

procedures satisfactory to the Association on the basis of the

"Guidelines for the Use of Consultants by World Bank Borrowers

and by the World Bank as Executing Agency" published by the Bank

in August 1981.

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SCHEDULE 4

Implementation Program

1. The Borrower will (i) promptly establish, maintain andoperate the PIU with staffing, powers, functions andresponsibilities satisfactory to the Association, and (ii)promptly appoint thereto the following key staff necessary forits initial operation: a Project Director and an AssistantDirector Extension.

2. The Borrower will cause PIU: (i) to assist the Borrower inthe monitoring and evaluation of the Project, including, but notlimited to, the monitoring of the agricultural aspects in thepaddy/shrimp rotation in Polder 20; (ii) to set up operation andmaintenance committees, satisfactory to the Association, in eachshrimp-farming block constituted under the Project; (iii) toliaise closely with BWDB; and (iv) to carry out all trainingac,:ivities under the Project in accordance with a training planwhich shall be furnished to the Association for approval byDecember 31, 1986 and updated thereafter by December 31 of eachyear of Project execution.

3. The Borrower will cause BWDB to: (i) operate two separateField Divisions, each headed by an Executive Engineer underthe supervision of a Superintending Engineer with staff, powersand responsibilities satisfactory to the Association; and (ii)promptly designate two Superintending Engineers each to beresponsible for the supervision of the work program of therespective Executive Engineers referred to in (i) above.

4. The Borrower shall take all necessary action, including thepassing of legislation, to ensure that, by December 31, 1986,DOF, or any other department or agency of the Borrower, will begiven the authority to grant: (i) long-term saline water intakepermits for the Project Area, and (ii) long-term leases of notless than 10 years in public land (with reasonable fees) toshrimp farmers in the Cox's Bazar district (Rampur).

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SCHEDULE 5

Special Account

1. For the purposes of this Schedule:

(a) the term "eligible Categories" means Categories (1),

(2) and (4) set forth in the table in paragraph 1 of Schedule 1

to this Agreement;

(b) the term "eligible expenditures" means expenditures in

respect of the reasonable cost of goods and services required for

Parts A and C of the Project and to be financed out of the

proceeds of the Credit allocated from time to time to the

eligible Categories in accordance with the provisions of Schedule

1 to this Agreement; and

(c) the term "Authorized Allocation" means an amount

equivalent to SDR 1,500,000 to be withdrawn from the Credit

Account and deposited in the Special Account pursuant to para-

graph 3 (a) of this Schedule.

2. Except as the Association shall otherwise agree, payments

out of the Special Account shall be made exclusively for eligible

expenditures in accordance with the provisions of this Schedule.

3. After the Association has received evidence satisfactory to

the Association that the Special Account has been duly opened,withdrawals of the Authorized Allocation and subsequent with-

drawals to replenish the Special Account may be made as follows:

(a) On the basis of a request or requests by the Borrower

for a deposit or deposits which add up to the aggregate amount of

the Aithorized Allocation, the Association shall, on behalf of

the Borrower, withdraw from the Credit Account and deposit in the

Special Account such amount or amounts as the Borrower shall have

requested.

(b) The Borrower shall furnish to the Association requests

for replenishment of the Special Account at such intervals as the

Association shall specify. On the basis of such requests, the

Association shall withdraw from the Credit Account and deposit

into the Special Account such amounts as shall be required to

replenish the Special Account with amounts not exceeding the

amount of payments made out of the Special Account for eligible

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expenditures. Each such deposit shall be withdrawn by the

Association from the Credit Account under the respective eligibleCategories, and in the respective equivalent amounts, as shallhave been justified by the evidence supportiTcg the request forsuch deposit furnished pursuant to paragraph 4 of this Schedule.

4. For each payment made by the Borrower out of the SpecialAccount for which the Borrower requests replenishment pursuant to

paragraph 3 (b) of this Schedule, the Borrower shall furnish tothe Association, prior to or at the time of such request, suchdocuments and other evidence as the Association shall reasonablyrequest, showing that such payment was made for eligible expen-ditures.

5. (a) Notwithstanding the provisions of paragraph 3 of thisSchedule, no further deposit into the Special Account shall be

made by the Association when either of the following situationsfirst arises:

(i) the Association shall have determined that allfurther withdrawals should be made directly by theBorrower from the Credit Account in accordancewith the provisions of paragraph (a) of Section2.02 of this Agreement; or

(ii) when the total unwithdrawn amount of the Creditallocated to eligible Categories for Parts A andC of the Project, minus the amount of any out-standing agreement to reimburse made by theAssociation with respect to Parts A and C of theProject, shall be equal to the equivalent of twicethe amount of the Authorized Allocation.

(b) Thereafter, withdrawal from the Credit Account of theremaining unwithdrawn amount of the Credit allocated to the

eligible Categories for Parts A and C of the Project shA1l followsuch procedures as the Association shall specify by notice to theBorrower. Such further withdrawals shall be made only after andto the extent that the Association shall have been satisfied that

all such amounts remaining on deposit in the Special Account asof the date of such notice have been or will be utilized in

making payments for eligible expenditures.

6. (a) If the Association shall have determined at any time

that any payment out of the Special Account: (i) was made for any

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expenditure or in any amount not eligible pursuant to paragraph 2

of this Schedule, or (ii) was not justified by the evidence

furnished pursuant to paragraph 4 of this Schedule, the Borrower

shall, promptly upon notice from the Association deposit into the

Special Account (or, if the Association shall so request, refund

to the Association for crediting to the Credit Account) an amount

equal to the amount of such payment or the portion thereof not so

eligible or justified. No further deposit by the Association into

the Special Account shall be made until the Borrower has made

such deposit or refund.

(b) If the Association shall have determined at any time

that any amount outstanding in the Special Account will not be

required to cover further payments for eligible expenditures, the

Borrower shall, promptly upon notice from the Association, refund

to the Association such outstanding amount for crediting to the

Credit Account.

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SCHEDULE 6

Lending Terms and Conditions

Part ISubsidiary Loan Agreement

1. Borrower to BB

(a) Annual interest rate of not less than 6% (before deductionof a foreign exchange risk fee of 2.5%).

(b) Repayment period of 12 years.

(c) Foreign exchange risk to b,e borne by BB.

(d) Refinancing of up to 80% of BB's refinance.

2. BB to refinance short-term credit made available by Partici-pating Banks to Ultimate Borrowers.

Part II

Participation Agreements

1. BB to Participating Banks

(a) Annual interest rate of not less than 8.5%.

(b) Repayment period of 8 years.

(c) Refinancing of up to:

(i) 72% for loans for hatcheries and marketing equipment,and

(ii) 78% for loans for on-farm investments.

2. Participating Banks to Ultimate Borrowers

(a) Annual interest rate of not less than 16%

(b) Repayment period of 5 to 7 years.

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(c) Refinancing of up to:

(i) 70% for loans for hatcheries and marketing equipment;and

(ii) 90% for loans for on-farm investments.

3. Participating Banks to make available short-term credit toUltimate Borrowers under the Project as and when needed.

INTERNATIONAL DEVELOPMENT ASSOCIATION

CERTIFICATE

I hereby certify that the foregoing is a true

copy of the original in the archives of the Interna-

tional Development Association.

In witness whereof I have signed this Certifi-

cate and affixed the Seal of the Association

thereunto the L.. day of

198 .

FOR SECRETARY