E "FFICI A CREDIT NUMBER 1320 MAL

DOCU M ENTS$

Project Agreement

(Second Fisheries Project)

between

INTERNATIONAL DEVELOPMENT ASSOCIATION

and

STATE TRADING ORGANIZATION

Dated ,1983

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CREDIT NUMBER 1320 MAL

PROJECT AGREEMENT

AGREEMENT, dated 4-> , 1983, betweenINTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called theAssociation) and STATE TRADING ORGANIZATION (hereinafter calledSTO).

WHEREAS (A) by the Development Credit Agreement of even dateherewith between the Republic of Maldives (hereinafter called theBorrower) and the Association, the Association has agreed to makeavailable to the Borrower an amount in various currencies equi-valent to four million eight hundred thousand Special DrawingRights (SDR 4,800,000), on the terms and conditions set forth inthe Development Credit Agreement, but only on condition that STOagrees to undertake such obligations toward the Association asare hereinafter set forth;

(B) the Borrower has applied to the International Fundfor Agricultural Development (hereinafter called the Fund) fora loan (hereinafter called the Fund Loan) in an amount equiva-lent to one million nine hundred thousand Special Drawing Rights(SDR 1,900,000) to assist in financing the Project described inthe Development Credit Agreement on the terms and conditions setforth in an agreement (hereinafter called the Fund Loan Agree-ment) between the Borrower and the Fund;

(C) the Fund intends to appoint the Association as Cooper-ating Institution to administer the Fund Loan in accordance withthe provisions of the Development Credit Agreement, and the Asso-ciation is prepared to accept such appointment;

(D) by a subsidiary loan agreement to be entered intobetween the Borrower and STO, the proceeds of the credit providedfor under the Development Credit Agreement will be made availableto STO on the terms and conditions therein set forth; and

WHEREAS STO, in consideration of the foregoing, has agreedto undertake the obligations hereinafter set forth;

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

Definitions

Section 1.01. Wherever used in this Agreement, unless thecontext shall otherwise require, the several terms defined in the

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Development Credit Agreement and in the General Conditions (as so

defined) have the respective meanings therein set forth and the

following term, namely that, the Fisheries Advisory Board means

the Board established by the Presidential Decree No. IE/30/79/136

dated September 29, 1979.

ARTICLE II

Execution of the Project

Section 2.01. STO shall carry out the Project described in

Schedule 2 to the Development Credit Agreement with due diligence

and efficiency and in conformity with appropriate administrative,

financial, engineering and fisheries practices.

Section 2.02. STO shall by May 31, 1983, establish and,

thereafter maintain, (a) a Fish Marketing Division responsible

for collection, freezing and marketing of fish and (b) a Fuel

Distribution Division responsible for distributing fuel.

Section 2.03. STO shall determine fish prices for different

varieties of fish, taking into account the quality and handling

costs involved, in accordance with the criteria recommended by

the Fisheries Advisory Board.

Section 2.04. STO shall prepare a financing plan, satis-

factory to the Association for the purpose of transferring owner-

ship of STO'S fishing vessels, acquired under the Project, to

private operators.

Section 2.05. STO shall ensure that the Association shall be

given an opportunity to comment on the specifications and

contract terms and conditions of the refrigeration plant to be

financed by the Norwegian Grant prior to the awarding of its

contract.

Section 2.06. STO shall make fuel readily available to all

mechanized vessels in the Project Area at a price consistent with

the criteria provided under Section 4.03 of the Development

Credit Agreement by February 28, 1985.

Section 2.07. In order to assist STO in carrying out the

Project, STO shall employ consultants whose qualifications,

experience and terms and conditions of employment shall be

satisfactory to the Association, such consultants to be selected

in accordance with the principles and procedures satisfactory to

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the Association on the basis of the "Guidelines for the Use ofConsultants by World Bank Borrowers and by the World Bank asExecuting Agency" published by the Bank in August 1981, and asset forth in Schedule 1 to this Agreement.

Section 2.08. Except as the Association shall otherwiseagree, procurement of the goods and civil works required for theProject and to be financed out of the proceeds of the Credit,shall be governed by the provisions of Schedule 4 to the Develop-ment Credit Agreement.

Section 2.09. (a) STO undertakes to insure, or make adequateprovision for the insurance of, the goods to be financed out ofthe proceeds of the Credit or the Fund Loan made available to itby the Borrower against hazards incident to the acquisition,transportation and delivery thereof to the place of use orinstallation, and for such insurance any indemnity shall be pay-able in a currency freely usable by STO to replace or repair suchgoods.

(b) STO shall cause all goods and services financed out ofthe proceeds of the Credit or the Fund Loan made available to itby the Borrower to be used exclusively for the purposes of theProject.

Section 2.10. (a) STO shall furnish to the Association andthe Fund, promptly upon their preparation, the plans, specifica-tions, reports, contract documents and construction, work andprocurement schedules for the Project, and any material modifica-tions thereof or additions thereto, in such detail as the Asso-ciation shall reasonably request.

(b) STO shall: (i) maintain records and procedures torecord adequate and monitor the progress of the Project (includ-ing its cost and, where appropriate, the benefits to be derivedfrom it), to identify the goods and services financed out of theproceeds of the Credit or the Fund Loan, and to disclose theiruse in the Project; (ii) shall enable the Association's and theFund's representatives to visit the facilities and constructionsites included in the Project and to examine the goods financedout of the proceeds of the Credit or the Fund Loan and any rele-vant records and documents; and (iii) shall furnish to theAssociation at regular intervals all such information as theAssociation shall reasonably request concerning the Project, itscost and, where appropriate, the benefits to be derived from it,

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the expenditure of the proceeds of the Credit and the Fund Loanand the goods and services financed out of such proceeds.

(c) Upon the award by STO of any contract for goods, worksor services to be financed out of the proceeds of the Credit, theAssociation may publish a description thereof, the name andnationality of the party to whom the contract was awarded and the

contract price.

(d) Promptly after completion of the Project, but in anyevent not later than six months after the Closing Date or suchlater date as may be agreed for this purpose between STO and theAssociation, STO shall prepare and furnish to the Association andthe Fund a report, of such scope and in such detail as the Asso-ciation shall reasonably request, on the execution and initialoperation of the Project, its cost and the benefits derived andto be derived from it, the performance by STO and the Associationof their respective obligations under the Project Agreement andthe accomplishment of the purposes of the Credit and the FundLoan.

(e) STO shall enable the Association's and the Fund's

representatives to examine all plants, installations, sites,works, buildings, property and equipment of STO and any relevantrecords and documents.

Section 2.11. STO shall duly perform all its obligations

under the Subsidiary Loan Agreement. Except as the Associationshall otherwise agree, STO shall not take or concur in any actionwhich would have the effect of amending, abrogating, assigning orwaiving the Subsidiary Loan Agreement or any provision thereof.

Section 2.12. (a) STO shall at the request of the Associa-tion, exchange views with the Association with regard to theprogress of the Project, the performance of its obligations underthis Agreement and under the Subsidiary Loan Agreement, and othermatters relating to the purposes of the Credit and the Fund Loan.

(b) STO shall promptly inform the Association of any con-dition which interferes or threatens to interfere with theprogress of the Project, the accomplishment of the purposes ofthe Credit or the Fund Loan, or the performance by STO of itsobligations under this Agreement and under the Subsidiary LoanAgreement.

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ARTICLE III

Management and Operations of STO

Section 3.01. STO shall carry on its operations and conductits affairs in accordance with sound administrative, financial,engineering and fisheries practices under the supervision ofqualified and experienced management assisted by competent staffin adequate numbers.

Section 3.02. STO shall at .all times operate and maintainits plant, machinery, equipment and other property, and from timeto time, promptly as needed, make all necessary repairs andrenewals thereof, all in accordance with sound engineering andfisheries practices.

Section 3.03. (a) STO shall take out and maintain withresponsible insurers, or make other provisions satisfactory tothe Association for, insurance against such risks and in suchamounts as shall be consistent with appropriate practice.

(b) Without limitation to the foregoing, STO shall insureor cause private operators to insure vessels provided under theProject against hazards incident to their operation.

ARTICLE IV

Financial Covenants

Section 4.01. (a) STO shall maintain records adequate toreflect in accordance with consistently maintained appropriateaccounting practices its operations and financial condition,including, without limitation to the foregoing, separate accountsreflecting all expenditures on account of which withdrawals arerequested from the Credit Account or the Fund Loan Account on thebasis of statements of expenditure.

(b) STO shall retain, until one year after the ClosingDate, all records (contracts, orders, invoices, bills, receiptsand other documents) evidencing the expenditures on account ofwhich withdrawals are requested from the Credit Account or theFund Loan Account on the basis of statements of expenditure, andshall enable the Association's and the Fund's representatives toexamine such records.

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Section 4.02. STO shall:

(a) have its accounts and financial statements (balance

sheets, statements of income and expenses and related statements)

for each fiscal year audited, in accordance with appropriate

auditing principles consistently applied, by independent auditors

acceptable to the Association;

(b) furnish to the Association and the Fund as soon as

available, but in any case not later than six months after the

end of each such year, (i) certified copies of its financial

statements for such year as so audited, and (ii) the report of

such audit by said auditors, of such scope and in such detail as

the Association shall have reasonably requested, including, with-

out limitation to the foregoing, separate opinions by said audi-

tors: (A) on the separate accounts referred to in Section 4.01

(a) of this Agreement; and (B) in respect of the expenditures and

records referred to in Section 4.01 (b) of this Agreement, as to

whether the proceeds of the Credit and the Fund Loan made avail-

able to it and withdrawn from the Credit Account and the Fund

Loan Account respectively on the basis of statements of expendi-

ture have been used for the purpose for which they were provided;

and

(c) furnish to the Association such other information con-

cerning said accounts, financial statements, records and expendi-

tures, as well as the audit thereof, as the Association shall

from time to time reasonably request.

ARTICLE V

Effective Date; Termination;

Cancellation and Suspension

Section 5.01. This Agreement shall come into force and

effect on the date upon which either the Development Credit

Agreement or the Fund Loan Agreement becomes effective, whichever

shall be the earlier.

Section 5.02. (a) This Agreement and all obligations of the

Association and of STO thereunder shall terminate on the earlier

of the following two dates:

(i) the earliest date on which both the Development

Credit Agreement and the Fund Loan Agreement shall

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have terminated in accordance with their respec-tive terms; or

(ii) a date 15 years after the date of this Agreement.

(b) If the Development Credit Agreement terminates inaccordance with its terms before the date specified in paragraph(a) (ii) of this Section, the Association shall promptly notifySTO of this event.

(c) If either the Development Credit Agrement, or the FundLoan Agreement, terminates in accordance with its terms beforetht date specified in paragraph (a) (ii) of this Section and theother Agreement remains in force, all obligations under this Pro-ject Agreement of STO and of the lender under that other Agree-ment shall remain in force.

(d) If the Association shall notify STO that its appoint-ment as Cooperating Institution under the Fund Loan Agreement hasterminated, all references in this Agreement to the Fund, to theFund Loan and to the Fund Loan Agreement shall, with respect tothe responsibilities of the Association as such CooperatingInstitution, be deemed to be deleted.

Section 5.03. All the provisions of this Agreement shallcontinue in full force and effect notwithstanding any cancella-tion or suspension under the General Conditions.

ARTICLE VI

Miscellaneous Provisions

Section 6.01. Any notice or request required or permitted tobe given or made under this Agreement and any agreement betweenthe parties contemplated by this Agreement shall be in writing.Such notice or request shall be deemed to have been duly given ormade when it shall be delivered by hand or by mail, telegram,cable, telex or radiogram to the party to which it is required orpermitted to be given or made at such party's address hereinafterspecified or at such other address as such party shall havedesignated by notice to the party giving such notice or makingsuch request. The addresses so specified are:

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For the Association:

International Development Association1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address: Telex:

INDEVAS 440098 (ITT)Washington, D.C. 248423 (RCA) or

64145 (WUI)

For STO:

State Trading OrganizationMale 20-01Maldives

Cable address: Telex:

STO-MALE 66006 STO-MF77014 STO-MF

Section 6.02. Any action required or permitted to be taken,and any document required or permitted to be executed, under thisAgreement on behalf of STO may be taken or executed by itsManaging Director or such other person or persons as he shalldesignate in writing, and STO shall furnish to the Associationsufficient evidence of the authority and the authenticated speci-men signature of each such person.

Section 6.03. This Agreement may be executed in severalcounterparts, each of which shall be an original, and allcollectively but one instrument.

IN WITNESS WHEREOF, the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused thisAgreement to be signed in their respective names in the District

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of Columbia, United States of America, as of the day and yearfirst above written.

INTERNATIONAL DEVELOPMENT ASSOCIATION

By A Regional Vice President

South Asia

STATE TRADING ORGANIZATION

By

Authorized Representative

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SCHEDULE 1

Consultants

The following consultants shall be employed by the dates

specified below:

(a) training consultant to assist STO in training project

staff by June, 1983;

(b) a team of management consultants to help STO operate

the Fish Marketing Division by August 31, 1983;

(c) a fuel distribution specialist to help STO operate the

Fuel Distribution Division by August 31, 1983.

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 / tF day of

198.

FOR SECRETARY