Commencement: 14 July 1997

REPUBLIC OF VANUATU

LOAN AGREEMENT (SPECIAL OPERATIONS) (URBAN INFRASTRUCTURE PROJECT) BETWEEN THE REPUBLIC OF VANUATU AND THE ASIAN DEVELOPMENT BANK (RATIFICATION) ACT
NO. 1 OF 1997

Arrangement of Sections

1. Ratification
2. Commencement

----------------

Assent: 20/06/97
Commencement: 14/07/97

LOAN AGREEMENT (SPECIAL OPERATIONS) (URBAN INFRASTRUCTURE PROJECT) BETWEEN THE REPUBLIC OF VANUATU AND THE ASIAN DEVELOPMENT BANK (RATIFICATION) ACT

NO. 1 OF 1997

To provide for the ratification of the Loan Agreement (Special Operations) (Urban Infrastructure Project) between the Republic of Vanuatu and the Asian Development Bank.

BE IT ENACTED by the President and Parliament as follows: -

RATIFICATION

1. (1) The Loan Agreement (Special Operations) (Urban Infrastructure Project) between the Republic of Vanuatu and the Asian Development Bank signed on 29th July 1996 which is set out in the Schedule hereto is hereby ratified.

(2) The Agreement referred to in subsection (1) shall be binding on the Republic of Vanuatu in accordance with the terms thereof.

COMMENCEMENT

2. This Act shall come into force on the date of its publication in the Gazette.

________________

LOAN NUMBER 1448 VA (SF)

LOAN AGREEMENT
(Special Operations)

(Urban Infrastructure Project)

between

REPUBLIC OF VANUATU

and

ASIAN DEVELOPMENT BANK

DATED 29 JULY 1996

____________

LOAN AGREEMENT
(Special Operations)

LOAN AGREEMENT dated 29 July 1996, between REPUBLIC OF VANUATU (hereinafter called the Borrower) and ASIAN DEVELOPMENT BANK (hereinafter called the Bank).

WHEREAS

(A) the Borrower has applied to the Bank for a loan for the purposes of the Project described in Schedule 1 to this Loan Agreement; and

(B) the Government of the Borrower (hereinafter called the Government) has applied to the Bank for technical assistance for an Urban Growth Management Strategy for Port Vila, and a Sanitation Master Plan for Port Vila, and the Bank has agreed to provide to the Government technical assistance grants for such purposes; and

(c) the Bank has agreed to make a loan to the Borrower from the Bank’s Special Funds resources upon the terms and conditions hereinafter set forth.

NOW THEREFORE the parties hereto agree as follows:

ARTICLE 1

Loan Regulations; Definitions

Section 1.01. All the provisions of the Special Operations Loan Regulations of the Bank, dated 7 December 1982, are hereby made applicable to this Loan Agreement with the same force and effects as if they were fully set forth herein, subject, however, to the following modification (said Special Operations Loan Regulations as so modified being hereinafter called the Loan Regulations): Section 4.05 is deleted.

Section 1.02. Wherever used in this Loan Agreement, unless the context otherwise requires, the several terms defined in the Loan Regulations have the respective meanings therein set forth, and the following additional terms have the following meanings:

(a) "MOF" means the Borrower’s Ministry of Finance, or any successor thereto;

(b) "MOT" means the Borrower’s Ministry of Transport, or any successor thereto;

(c) "Municipal Council" means a Council established under Section 3 of the Municipalities Act;

(d) "Municipalities Act" means the Municipalities Act, 1981 [CAP. 126] of the Borrower;

(e) "NPO" means the Borrower’s National Planning Office, or any successor thereto;

(f) "Physical Planning Act" means the Physical Planning Act, 1986 [CAP. 193] of the Borrower;

(g) "PMD" means the Borrower’s Ports and Marine Department, or any successor thereto;

(h) "Port Vila Wharf" means the international wharf at Port Vila;

(i) "Project Executing Agency" means for the purposes of and within the meaning of the Loan Regulations, PWD which is responsible for the carrying out of the Project;

(j) "Project facilities" means the facilities to be constructed or to be provided under the Project;

(k) "PWD" means the Borrower’s Public Works Department, or any successor thereto; and

(l) "Town Clerk" means the person appointed under Section 19(1) of the Municipalities Act to be the Clerk for a Municipal Council.

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrower from the Bank’s Special Funds resources an amount in various currencies equivalent to six million nine hundred and thirteen thousand Special Drawing Rights (SDR 6,913,000).

Section 2.02. The Borrower shall pay to the Bank a service charge at the rate of one percent (1%) per annum on the amount of the Loan withdrawn from the Loan Account and outstanding from time to time.

Section 2.03. The service charge and any other charge on the Loan shall be payable semi-annually on 1 June and 1 December in each year.

Section 2.04. (a) Subject to the provisions of paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Loan withdrawn from the Loan Account in accordance with the amortization schedule set forth in Schedule 2 to this Loan Agreement.

(b) If the Bank shall determine, after due consideration by its Board of Directors, that (i) the Borrower’s gross national product per capita (per capita GNP) has exceeded $690 in constant 1985 dollars for five consecutive years and (ii) the Borrower has achieved the capacity to borrow from the Bank’s ordinary capital resources, the Bank may, notice to the Borrower, modify the terms of repayment of the Loan by increasing by 100 percent the amount of each maturity due thereafter until the principal amount of the Loan shall have been fully repaid. However, at the request of the Borrower, the Bank may, in lieu of so increasing any such maturity amounts, charge interest, at an annual rate to be agreed between the Borrower and the Bank, on the principal amount of the Loan withdrawn and outstanding from time to time in such a manner and to such extent as to yield the same grant element as would be obtained under the above-stated increase of maturity amounts.

(c) If, at any time after a modification of the lending terms pursuant to the provisions of paragraph (b) above the Bank shall, after due consideration by its Board of Directors, determine that the Borrower’s economic condition has deteriorated significantly, the Bank may, at the request of the Borrower, restore the original lending terms with respect to the remaining amount of the Loan withdrawn and outstanding.

ARTICLE III

Use of Proceeds of the Loan

Section 3.01. The Borrower shall cause the proceeds of the Loan to be applied to the financing of expenditures on the Project in accordance with the provisions of this Loan Agreement.

Section 3.02. The goods and services and other items of expenditure to be financed out of the proceeds of the Loan and the allocation of amounts of the Loan among different categories of such goods and services and other items of expenditure shall be in accordance with the provisions of Schedule 3 to this Loan Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank.

Section 3.03. Except as the Borrower and the Bank may otherwise agree, all goods and services to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions of Schedule 4 and Schedule 5 to this Loan Agreement. The Bank may refuse to finance a contract where goods or services have not been procured under procedures substantially in accordance with those agreed between the Borrower and the Bank or where the terms and conditions of the contract are not satisfactory to the Bank.

Section 3.04. Except as the Borrower and the Bank may otherwise agree the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively in the carrying out of the Project.

Section 3.05. Withdrawals from the Loan Account in respect of goods and services shall be made only on account of expenditures relating to:

(a) goods which are produced in and supplied from and services which are supplied from such member countries of the Bank as shall have been specified by the Bank from time to time as eligible sources for procurement; and

(b) goods and services which meet such other eligibility requirements as shall have been specified by the Bank from time to time.

Section 3.06. The closing date for withdrawal from the Loan Account for the purposes of Section 8.03 of the Loan Regulations shall be 31 December 2001 or such other date as may from time to time be agreed between the Borrower and the Bank.

ARTICLE IV

Particular Covenants

Section 4.01. (a) The Borrower shall cause the Project to be carried out with due diligence and efficiency and in conformity with sound administrative, financial, engineering and environmental practices.

(b) In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 6 to this Loan Agreement.

Section 4.02. The Borrower shall make available, promptly as needed, the funds, facilities, services, land and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project and for the operation and maintenance of the Project facilities.

Section 4.03. (a) In the carrying out of the Project, the Borrower shall cause competent and qualified consultants and contractors, acceptable to the Borrower and the Bank, to be employed to an extent and upon terms and conditions satisfactory to the Borrower and the Bank.

(b) The Borrower shall cause the Project to be carried out in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to the Borrower and the Bank. The Borrower shall furnish, or cause to be furnished, to the Bank, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as the Bank shall reasonably request.

Section 4.04. The Borrower shall ensure that the activities of its departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.

Section 4.05. (a) The Borrower shall make arrangements satisfactory to the Bank for insurance of the Project facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice.

(b) Without limiting the generality of the foregoing, the Borrower undertakes to insure, or cause to be insured, the goods to be imported for the Project and to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such goods.

Section 4.06. (a) The Borrower shall maintain or cause to be maintained, records and accounts adequate to identify the goods and services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, the operations and financial condition (to the extent relevant to the Project) of PWD and any other agencies of the Borrower responsible for the carrying out of the Project and operation of the Project facilities, or any part thereof.

(b) The Borrower shall –

(i) maintain, or cause to be maintained, separate accounts for the Project; 

(ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to the Bank;

(iii) furnish to the Bank, as soon as available but in any event not later than nine (9) months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of the Loan proceeds and compliance with the covenants of this Loan Agreement), all in the English language; and 

(iv) furnish to the Bank such other information concerning such accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request.

(c) The Borrower shall enable the Bank, upon the Bank’s request, to discuss the Borrower’s financial statements for the Project and its financial affairs related to the Project from time to time with the Borrower’s auditors and shall authorize and require any representative of such auditors to participate in any such discussions requested by the Bank, provided that any such discussion shall be conducted only in the presence of an authorized officer of the Borrower unless the Borrower shall otherwise agree.

Section 4.07. (a) The Borrower shall furnish, or cause to be furnished, to the Bank all such reports and information as the Bank shall reasonably request concerning –

(i) the Loan, and the expenditure of the proceeds and maintenance of the service thereof; 

(ii) the goods and services and other items of expenditure financed out of the proceeds of the Loan;

(iii) the Project;

(iv) the administration, operations and financial condition (to the extent relevant to the Project) of PWD and any other agencies of the Borrower responsible for the carrying out of the Project and operation of the Project facilities, or any part thereof; 

(v) financial and economic conditions in the territory of the Borrower and the international balance-of-payments position of the Borrower; and 

(vi) any other matters relating to the purposes of the Loan;

(b) Without limiting the generality of the foregoing, the borrower shall furnish, or cause to be furnished, to the Bank quarterly reports on the carrying out of the Project and on the operation and management of the project facilities. Such reports shall be submitted in such form and in such detail and within such a period as the Bank shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter.

(c) Promptly after physical completion of the Project, but in any event not later than three (3) months thereafter or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, in such form and in such detail as the Bank shall reasonably request on the execution and initial operation of the Project, including its cost, the performance by the Borrower of its obligations under this Loan Agreement and the accomplishment of the purposes of the Loan.

Section 4.08. The Borrower shall enable the Bank’s representatives to inspect the Project, the goods financed out of the proceeds of the Loan, and any relevant records and documents.

Section 4.09. The Borrower shall ensure that the Project facilities are operated, maintained and repaired in accordance with sound administrative, financial, engineering, environmental, and maintenance and operational practices.

Section 4.10. (a) It is the mutual intention of the Borrower and the Bank that no other external debt owed a creditor other than the Bank shall have any priority over the Loan by way of a lien on the assets of the Borrower. To that end, the Borrower undertakes –

(i) that, except as the Bank may otherwise agree, if any lien shall be created on any assets of the Borrower as security for any external debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and service charge and any other charge on, the Loan; and 

(ii) that the Borrower, in creating or permitting the creation of any such lien, will make express provision to that effect.

(b) The provisions of paragraph (a) of this Section shall not apply to –

(i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; or 

(ii) and lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date.

(c) The term "assets of the Borrower" as used in paragraph (a) of this Section includes assets of any political subdivision or any agency of the Borrower and assets of any agency of any such political subdivision, including the Reserve Bank of Vanuatu and any other institution performing the functions of a central bank for the Borrower.

ARTICLE V

Effectiveness

Section 5.01. A date ninety (90) days after the date of this Loan Agreement is specified for the effectiveness of the Loan Agreement for the purposes of Section 9.04 of the Loan Regulations.

ARTICLE VI

Miscellaneous

Section 6.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.02 of the Loan Regulations.

Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the Loan Regulations:

For the Borrower

Ministry of Finance
PMB 058
Port Vila, Vanuatu

Facsimile Number:
(678) 27937

For the Bank

Asian Development Bank
PO Box 789
0980 Manila, Philippines

Cable Address:

ASIANBANK
MANILA

Telex Numbers:

29066 ADB PH (RCA)
42205 ADB PM (ITT)
63587 ADB PN (ETPI)

Facsimile Numbers:

(63-2) 741-7961
(63-2) 632-6816
(63-2) 631-7961.

IN WITNESS WHEREOF the Parties hereto, acting through their representatives thereunto duly authorized, have caused this Loan Agreement to be signed in their respective names and to be delivered at the principal office of the Bank, as of the day and year first above written.

REPUBLIC OF VANUATU

By _______________________
Authorized Representative
Barak T. Sope
Minister of Finance

ASIAN DEVELOPMENT BANK

By _______________________
Muhammad E. Tusneem
Regional Representative,
SPRM

__________

SCHEDULE 1

Description of the Project

Objective

1. The primary objective of the Project is to implement an urban growth management strategy which will concurrently address public health, environmental, and economic concerns, through (i) improving the living conditions and public health of the people in the two main urban areas of Port Vila and Luganville; (ii) mitigating the adverse effects of urban growth on the environment and improving natural resource management; and (iii) promoting economic growth by enhancing conditions conducive to tourism.

Scope

2. The Project consists of the following:

Part A – Water Supply and Sanitation

(a) development and improvement of the potable water supply system in Luganville, including the water source, associated pump house and delivery network;

(b) lengthening of the Erakor causeway bridge and other selected sanitation measures; and

(c) improvement of surface water drainage in low-lying areas of the Sarakata district of Luganville, to reduce public health risks and alleviate flooding.

Part B – Rehabilitation and Improvement of Urban Roads and Traffic Management

(a) repair and resealing of existing primary and secondary roads in Port Vila and Luganville; and

(b) priority traffic management improvements in Port Vila and Luganville.

Part C – Rehabilitation and Improvement of Port Vila Wharf

Rehabilitation of Port Vila Wharf, including the repair of steel piles, concrete deck and fenders, and other improvements necessary to extent its useful working life.

3. The Project also includes the provision of consulting services. The Project is expected to be completed by 30 June 2001.

_______

SCHEDULE 2

Amortization Schedule

(Urban Infrastructure Project)

Date Payment Due						Payment of Principal
(expressed in Special Drawing Rights)*

1 December 2006						SDR	69,100
1 June 2007								69,100
1 December 2007							69,100
1 June 2008								69,100
1 December 2008							69,100
1 June 2009								69,100
1 December 2009							69,100
1 June 2010								69,100
1 December 2010							69,100
1 June 2011								69,100
1 December 2011							69,100
1 June 2012								69,100
1 December 2012							69,100
1 June 2013								69,100
1 December 2013							69,100
1 June 2014								69,100
1 December 2014							69,100
1 June 2015								69,100
1 December 2015							69,100
1 June 2016								69,100
1 December 2016							138,300
1 June 2017								138,300
1 December 2017							138,300
1 June 2018								138,300
1 December 2018							138,300
1 June 2019								138,300
1 December 2019							138,300

_____________________________________
* The figures in this column represent SDR equivalents determined as of the respective dates of withdrawal. The arrangements for payment of each maturity are subject to the provisions of Sections 3.04 and 4.03 of the Loan Regulations.

Date Payment Due						Payment of Principal
(expressed in Special Drawing Rights)*

1 June 2020								 138,300
1 December 2020							 138,300
1 June 2021								 138,300
1 December 2021							 138,300
1 June 2022								 138,300
1 December 2022							 138,300
1 June 2023								 138,300
1 December 2023							 138,300
1 June 2024								 138,300
1 December 2024							 138,300
1 June 2025								 138,300
1 December 2025							 138,300
1 June 2026								 138,300
1 December 2026							 138,300
1 June 2027								 138,300
1 December 2027							 138,300
1 June 2028								 138,300
1 December 2028							 138,300
1 June 2029								 138,300
1 December 2029							 138,300
1 June 2030								 138,300
1 December 2030							 138,300
1 June 2031								 138,300
1 December 2031							 138,300
1 June 2032								 138,300
1 December 2032							 138,300
1 June 2033								 138,300
1 December 2033							 138,300
1 June 2034								 138,300
1 December 2034							 138,300
1 June 2035								 138,300
1 December 2035							 138,300
1 June 2036								 137,300
								---------------------
					TOTAL		SDR	6,913,000
								=============

___________________
* The figures in this column represent SDR equivalents determined as of the respective dates of withdrawal. The arrangements for payment of each maturity are subject to the provisions of Sections 3.04 and 4.03 of the Loan Regulations.

________

SCHEDULE 3

Allocation and Withdrawal of Loan Proceeds

General

1. The table attached to this Schedule sets forth the Categories of goods, services and other items to be financed out of the proceeds of the Loan and the allocation of amounts of the Loan to each such Category (hereinafter called the Table). (Reference to "Category" or "Categories" in this Schedule is to a Category or Categories of the Table and reference to "Subcategory" or "Subcategories" in this Schedule is to a Subcategory or Subcategories of a Category.)

Taxes

2. No withdrawals from the Loan Account shall be made in respect of any local taxes.

Percentages of Bank Financing

3. Except as provided in this Schedule and as the Bank may otherwise agree, the items in the categories and subcategories listed in the Table shall be financed out of the proceeds of the Loan on the basis of the percentages set forth in the Table.

4. Notwithstanding paragraph 5 of this Schedule, any contract awarded to a local supplier after affective international competitive bidding or international shopping pursuant to the relevant provisions of Schedule 4 to this Loan Agreement shall be financed out of the proceeds of the Loan on the following basis:

(a) where the goods procured from a local supplier are manufactured locally, 100 percent of the ex-factory price of the goods supplied exfactory price of the goods supplied (exclusive of any taxes) ; and

(b) where the goods procured form a local supplier have been entirely imported, the foreign-currency component of the contract price.

Local Expenditure

5. (a) Loan proceeds up to the amount of SDR 615,000 may be withdrawn from the Loan Account in foreign currency for the purposes of financing local expenditure.

(b) Except as provided in this paragraph or as the Bank may otherwise agree, no withdrawals from the Loan Account shall be made in respect of any local expenditure on the Project.

Service Charge

6. The amount allocated to Category 5 is for financing the service chare on the Loan during the implementation period of the project. The Bank shall be entitled to withdraw from the Loan Account and pay to itself, on behalf of the Borrower, the amounts required to meet payments, when due, of such service charge.

Reallocation

7. Notwithstanding the allocation of Loan proceeds and the withdrawal percentages set forth in the Table and subject to paragraph 5 of this Schedule,

(a) if the amount o the Loan allocated to any Category appears to be insufficient to finance all agreed expenditures in that Category, the Bank may, by notice to the Borrower, -

(i) reallocate to such Category, to the extent required to meet the estimated shortfall, amounts of the Loan which have been allocated to another Category but, in the opinion of the Bank, are not needed to meet other expenditures, and 

(ii) if such reallocation cannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable to such expenditures in order that further withdrawals under such a Category may continue until all expenditures there under shall have been made; and

(b) if the amount of the Loan when allocated to any Category appears to exceed all agreed expenditures in that Category, the Bank may, by notice to the Borrower, reallocate such excess amount to any other Category.

Retroactive Financing

8. Withdrawals from the Loan Account may be made for reimbursement of reasonable expenditures incurred under the Project before the Effective Date, but not earlier than 20 September 1995, in connection with procurement of civil works, equipment and materials for Part B of the Project, and selection and recruitment of consultants, subject to a maximum amount equivalent to SDR 691,000.

_______

Attachment of Schedule 3

TABLE

ALLOCATION AND WITHDRAWAL OF LOAN PROCEEDS
(Urban Infrastructure Project)	
CATEGORY	Amount Allocated
(SDR)	PERCENTAGES OF BANK FINANCING	

Item		Percentage	Basis for Withdrawal from Loan Account	
	Category	Subcategory				
1. Civil Works	4,507,000				
Part A		2,088,000	79	percent of total expenditure (74% of foreign and 5% for local*)	
Part B		1,521,000	80	percent of total expenditure (70% for foreign and 10% of local*)	
Part C		898,000	87	percent of total expenditure (80% for foreign and 7% for local*)	
2. Equipment and Materials	574,000		100	percent of foreign expenditure	
3. Consulting Services	394,000				
Design and Supervision		353,000	100	percent of foreign expenditure	
Benefit Monitoring		41,000	100	percent of foreign expenditure	
4. Incremental Project Cost	207,000		100	percent of total expenditure 	
				(60% for foreign and 40% for local*)	
5. Service Charge	249,000		100	percent of amounts due	
6. Unallocated	982,000				
					
TOTAL	6,913,000				
*Exclusive of local taxes

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SCHEDULE 4

Procurement

1. Except as the Bank may otherwise agree, the procedures referred to in the following paragraphs of this Schedule shall apply in the procurement of goods and services to be financed out of the proceeds of the Loan. The term "services" in this Schedule does not include consulting services.

2. Procurement of goods and services shall be subject to the provisions of the "Guidelines for Procurement under Asian Development Bank Loans" revised January 1994, as amended from time to time, which have been furnished to the Borrower.

3. Procurement of goods and services shall be made without any restriction against, or preference for, any particular supplier or contractor or any particular class of suppliers or contractors, except as otherwise provided below.

4. Except as provided in paragraphs 5, 6 and 7 below or as the Bank may otherwise agree, the civil works contracts for Part B(a) and Part C of the Project and supply contracts (other than minor items) shall be awarded on the basis of international shopping as described in Chapter III of the Guidelines for Procurement.

Local Procurement

5. Civil works contracts for Part A, Part B(b) and the contact for repair of existing primary and secondary roads under Part B(a) of the Project may be awarded on the basis of local competitive bidding among prequalified contractors in accordance with procedures acceptable to the Bank. Prequalification, selection and engagement of contractors shall be subject to the approval of the Bank. After award, three copies of each such contract shall be furnished to the Bank.

Force account

6. Certain civil works for Parts A, B and C of the Project, estimated to cost no more than the equivalent of $1,000,000, may be carried out by the Project Executing Agency or other departments of the Borrower on a force account basis:

Direct procurement

7. Equipment and materials required for the development and improvement of the water supply system under Part A of the Project, and estimated to cost, in the aggregate, the equivalent of $1,000,000, may be procured directly. Prior to such procurement, a list of individual items to be procured, an estimate of their costs, an indication of potential sources of supply and any related documents shall be submitted to the Bank for approval. After award, three copies of each contract shall be furnished to the Bank.

_______

SCHEDULE 5

Consultants

1. The services of consultants shall be utilized in the carrying out of the Project, particular with regard to:

(a) Project implementation;

(b) Design and construction supervision; and

(c) Benefit monitoring and evaluation.

The terms of reference of the consultants shall be as determined by agreement between the Borrower and the Bank.

2. The selection, engagement and services of the consultants shall be subject to the provisions of this Schedule and the provisions of the "Guidelines on the Use of Consultants by Asian Development Bank and Its Borrowers" dated April 1979, as amended from time to time, which have been furnished to the Borrower and PWD.

3. Selection and engagement of the consultants shall be made without any restriction against, or preference for, any particular consultants or any particular class of consultants.

4. A Project Management Engineer shall be selected and engaged by the Borrower for Project implementation in accordance with the following procedures.

(a) A list of the candidates together with their qualifications and a draft contract shall be furnished to the Bank for approval before the selection of the consultant.

(b) Promptly after the contract is signed, the Bank shall be furnished with the evaluation of the candidates and a brief justification for the selection, together with three copies of the signed contract.

(c) If any substantial amendment of the contract is proposed after its execution, the proposed changes shall be submitted to the Bank for prior approval.

5. The consultants for design and construction supervision, and benefit monitoring and evaluation shall be selected and engaged by the Borrower in accordance with the following procedures.

(a) Invitation for Proposals. The invitation to submit proposals and all related documents shall be approved by the Bank before they are issued. For this purpose, three copies of the draft invitation to submit proposals, a list of consultants to be invited, the proposed criteria for evaluation of proposals and other related documents shall be submitted to the Bank. A period of at least 60 days shall be allowed for submission of proposals. A copy of the final invitation as issued, together with all related documents, shall be furnished to the Bank for information promptly after issuance.

(b) Draft Contract. A draft contract with consultants shall be furnished to the Bank for approval sufficiently before the commencement of evaluation of proposals.

(c) Proposal for Selection. After the proposals received have been evaluated and before negotiations are started with the consultants selected for negotiations approval of the Bank shall be obtained to the selection made. For this purpose, the Bank shall, promptly after the evaluation of proposals, be furnished with three copies of 

(i) an evaluation of the proposals (together with one set of each proposal not previously furnished to the Bank); 

(ii) justification for the selection; and 

(iii) an appropriate certificate of the eligibility of the proposed contract as required by the Bank.

(d) Execution of Contract. After the conclusion of negotiations but before the signing of the contract, the Bank shall be furnished with 

(i) the contract as negotiated for approval and

(ii) the evaluation of the proposals. Promptly after the contract is signed, the Bank shall be furnished with three copies of the signed contract. If any substantial amendment of the contract is proposed after its execution, the proposed changes shall be submitted to the Bank for prior approval.

_______

SCHEDULE 6

Project Implementation; Other Matters

I. Implementation Arrangements

Executing Agency

1. As the Project Executing Agency, PWD shall be responsible for implementation of the civil works under the Project, including detailed Project design, construction supervision and management of all physical works. The Borrower shall ensure that the municipalities of Port Vila and Luganville, PMD and NPO are also involved in the Project design and implementation activities. Staff from the two municipalities and PMD shall be seconded, as required, to PWD’s existing Project Management Unit (PMU) during Project implementation to ensure such involvement and to provide experience for future operations and maintenance of the Project facilities.

Project Management

2. The Borrower shall designate the Director of PWD at the Project Director. The Project Director shall be assisted in undertaking Project management by a full time consultant to be designated as the Project Management Engineer (PME) who shall be responsible for day-to-day activities and administration of the Project. The PME shall work in the PMU.

Project Coordination Committee

3. The Borrower shall ensure the MOF shall be responsible for overall Project coordination shall establish a Project Coordination Committee (PCC) for the Project. The PCC shall be chaired by the First Secretary of Finance who shall be the Project Coordinator. The Project Director shall act as Secretary of the PCC. The other members of the PCC shall be the Director of Finance in MOF, Director of NPO, Director of PMD, Director of Physical Planning, Director of Health, Principal Environment Officer and the Town Clerks of Port Vila and Luganville. The PCC shall meet at least quarterly to plan, schedule, monitor and review Project implementation.

II. Operation and Maintenance

Institutional Arrangements

4. PWD shall be responsible for the operation and maintenance (O & M) of primary and secondary roads and the Luganville water supply facilities; PMD shall be responsible for the O & M of Port Vila Wharf; and the Municipality of Luganville shall be responsible for the O & M of the Luganville surface water drainage system.

5. The Borrower shall ensure that agreements between PWD and the Port Vila and Luganville Municipalities concerning PWD’s responsibility for the maintenance of the bituminous surfaces of all primary (national) and secondary (access) roads within their respective urban areas, including the roads covered under the Project, are entered into by 30 June 1997 and successfully implemented.

Financial Arrangements

6. The Borrower shall, by 30 June 1997, examine its road user tax policies in consultation with the Bank and ensure that user charges are adjusted periodically in accordance with inflation and international prices in order to maintain such charges at current levels in real terms.

7. The Borrower shall ensure the allocation of adequate funds for road maintenance. The Borrower shall, in consultation with the Bank, determine annual increases in its road maintenance budget in real terms, taking into consideration the additional municipal roads put under the jurisdiction of PWD pursuant to the agreements referred to in paragraph 5 above. A report on such arrangements shall be included in the quarterly progress reports submitted to the Bank pursuant to Section 4.07(b) of this Loan Agreement.

Port Operations

8. The Borrower shall, by 30 June 1998 examine its international port operations, including its tariff policies, and agree with the Bank on the appropriate organizational arrangements and tariff policies to ensure that port services are delivered in an efficient and cost-effective manner.

III. Benefit Monitoring and Evaluation (BME)

9. The Borrower shall undertake BME for each Project component to ensure that the Project facilities are marked efficiently and that the benefits are maximized. The BME activities shall have strong community involvement and shall cover public health and socioeconomic changes, environmental improvements, and improvements in efficiency of municipality operations.

10. The BME activities shall be the responsibility of NPO. NPO shall submit a detailed implementation plan for the Bank’s review and concurrence within six months after the Effective Date. The BME plan shall be prepared and implemented in accordance with the Bank’s "Handbook on Benefit Monitoring and Evaluation". Annual report on BME shall be furnished to the Bank by NPO throughout Project implementation.

IV. Mid-Term Review

11. The Borrower shall undertake a mid-term review about two years after the Effective Date to enable an assessment of Project progress and the continuing relevance of Project components, and, if required, appropriate adjustments to Project scope and design. The review shall take special note of the recommendations of the technical assistance for the Sanitation Master Plan for Port Vila in reviewing the scope of Part A of the Project. The review shall focus on the Project scope and implementation status, sustained O & M, progress on policy issues, beneficiary participation, local resource mobilization and environmental impact.

V. Other Matters

Policy Matters

12. The Borrower shall, by 31 December 1997, introduce a budget management and recording system in PWD that enable PWD maintenance expenditures on: 

(i) urban roads in the national network; 

(ii) secondary urban roads under the municipal to whose maintenance is contracted to the PWD; and 

(iii) rural roads, to be separately identified so as to improve transparency in accounting.

Legislative Matters

13. The Borrower shall prepare and present water resources legislation, environmental impact assessment legislation and new comprehensive environmental management legislation for the consideration of its Parliament by 31 December 1997.

14. The Borrower shall also review and prepare amendments to the Physical Planning Act., so as to include provisions for a national building code, and present such amendments for the consideration of its Parliament by 31 December 1997.

15. The Borrower shall ensure acceptance of the existing or revised draft physical plans by the Municipal Councils for both Port Vila and Luganville by 31 December 1997.

Sustained Maintenance and Cost Recovery Matters

16. The Borrower shall ensure that by 31 December 1997 the municipalities of Port Vila and Luganville will prepare and submit annual accounts in accordance with their obligations under the Municipalities Act.

17. The Borrower shall introduce expenditure and income recording procedures for the Luganville water supply system to accurately track expenditures, as well as revenues, under different operating expenditure or revenue heads on a current basis, by 31 December 1997.

18. The Borrower shall adopt a two-part tariff structure for the Luganville water supply system, similar to the tariff structure currently in place in Port Vila, by 30 June 1997.

Land Acquisition

19. The Borrower shall, by 30 June 1997, provide rights-of-way and acquire land for: 

(i) the water supply source and transmission line for the Luganville water supply system; 

(ii) drainage improvements in Port Vila and Luganville.

(iii) road improvements in Port Vila and Luganville.

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