CONFORMED COPY

CREDIT NUMBER 845 VN

Development Credit Agreement(Dau Tieng Irrigation Project)

between

SOCIALIST REPUBLIC OF VIET NAM

and

INTERNATIONAL DEVELOPMENT ASSOCIATION

Dated August 24, 1978

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CREDIT NUMBER 845 VN

DEVELOPMENT CREDIT AGREEMENT

AGREEMENT, dated August 24, 1978, between SOCIALIST REPUBLICOF VIET NAM (hereinafter called the Borrower) and INTERNATIONALDEVELOPMENT ASSOCIATION (hereinafter called the Association).

WHEREAS (A) the Borrower has requested the Associationto assist in the financing of part of the foreign exchange cost ofthe Project described in Schedule 2 to this Agreement by extendingthe Credit as hereinafter provided;

(B) the Borrower intends to contract from the Kingdom of the

Netherlands (hereinafter called the Netherlands) a loan (herein-after called the Netherlands Loan) in an amount equivalent toabout $10,000,000 to assist in financing Part C of the Project onthe terms and conditions set forth in an agreement (hereinaftercalled the Netherlands Loan Agreement) to be entered into betweenthe Borrower and the Netherlands;

(C) the Borrower intends to contract from the Organizationof the Petroleum Exporting Countries Special Fund (hereinaftercalled the OPEC Fund) a loan (hereinafter called the OPEC FundLoan) in an amount equivalent to about $10,000,000 to assist infinancing Part C of the Project on the terms and conditions setforth in an agreement (hereinafter called the OPEC Fund LoanAgreement) to be entered into between the Borrower and the OPECFund;

(D) the Borrower intends to contract from the Kuwait Fundfor Arab Economic Development (hereinafter called the Kuwait Fund)a loan (hereinafter called the Kuwait Fund Loan) in an amountequivalent to about $10,000,000 to assist in financing Part C ofthe Project on the terms and conditions set forth in an agreement(hereinafter called the Kuwait Fund Loan Agreement) to be enteredinto between the Borrower and the Kuwait Fund;

WHEREAS the Association has agreed, on the basis inter aliaof the foregoing, to extend the Credit to the Borrower uponthe terms and conditions hereinafter set forth;

NOW THEREFORE the parties hereto hereby agree as follows:

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ARTICLE I

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept all

the provisions of the General Conditions Applicable to DevelopmentCredit Agreements of the Association, dated March 15, 1974,with the same force and effect as if they were fully set forthherein (said General Conditions Applicable to Development CreditAgreements of the Association being hereinafter called theGeneral Conditions).

Section 1.02. Wherever used in this Agreement, unless the

context otherwise requires, the several terms defined in the

General Conditions and in the Preamble to this Agreement havethe respective meanings therein set forth.

ARTICLE 11

The Credit

Section 2.01. The Association agrees to lend to the Borrower,on the terms and conditions in the Development Credit Agreementset forth or referred to, an amount in various currencies equiva-lent to sixty million dollars ($60,000,000).

Section 2.02. The amount of the Credit may be withdrawn fromthe Credit Account in accordance with the provisions of Schedule 1

to this Agreement, as such Schedule may be amended from time totime by agreement between the Borrower and the Association,for expenditures made (or, if the Association shall so agree, tobe made) in respect of the reasonable cost of goods and servicesrequired for the Project and to be financed out of the proceedsof the Credit.

Section 2.03. Except as the Association shall otherwiseagree, procurement of the goods to be financed out of the proceedsof the Credit, shall be governed by the provisions of Schedule 3to this Agreement.

Section 2.04. The Closing Date shall be December 31, 1984or such later date as the Association shall establish. TheAssociation shall promptly notify the Borrower of such later

date.

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Section 2.05. The Borrower shall pay to the Association

a service charge at the rate of three-fourths of one per cent(3/4 of 1%) per annum on the principal amount of the Creditwithdrawn and outstanding from time to time.

Section 2.06. Service charges shall be payable semiannuallyon January 1 and July 1 in each year.

Section 2.07. The Borrower shall repay the principal amountof the Credit in semiannual installments payable on each January 1and July 1 commencing January 1, 1989, and ending July 1, 2028,each installment to and including the installment payable onJuly 1, 1998, to be one-half of one per cent (1/2 of 1%) of suchprincipal amount, and each installment thereafter to be one andone-half per cent (1-1/2%) of such principal amount.

Section 2.08. The currency of the United States of Americais hereby specified for the purposes of Section 4.02 of theGeneral Conditions.

ARTICLE III

Execution of the Project

Section 3.01. The Borrower shall carry out the Project withdue diligence and efficiency and in conformity with appropriateengineering, agricultural, administrative and financial practices,and shall provide, promptly as needed, the funds, facilities,services and other resources required for the purpose.

Sp,ction 3.02. (a) Not later than December 31, 1979, or suchother date as the Association shall agree, the Borrower shall fur-nish to the Association for its review and comments the trainingprogram related to Part D (1) of the Project.

(b) In order to assist the Borrower in carrying out Part D(2) of the Project, the Borrower shall employ training specialistsnot later than tlree months after the delivery to the Borrowerof the first lot of equipment procured under the Project.

Section 3.03. The Borrower shall ensure that the accessroad to the dam site included in Part B of the Project is upgradedfor all-weather use not later than December 31, 1978.

Section 3.04. (a) The Borrower undertakes to insure, or makeadequate provision for the insurance of, the imported goods to be

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financed out of the proceeds of the Credit against hazards inci-

dent 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 bythe Borrower to replace or repair such goods.

(b) Except as the Association shall otherwise agree,all goods and services financed out of the proceeds of the Credit

shall be used exclusively for the Project until its completion.

Section 3.05. The Borrower shall ensure that its Ministry of

Water Conservancy provide adequate facilities for the storage and

protection of the equipment, materials, supplies and spare partsprocured under the Project.

Section 3.06. The Borrower shall: (i) not later than Decem-

ber 31, 1978 or such other date as the Association shall agree,appoint a panel of experts, consisting of a geologist, a hydraulic

engineer and a dam design and construction engineer, whose quali-

fications, experience and terms and conditions of employment shall

be acceptable to the Association; (ii) cause the said panel of

experts to: (A) review construction quality and progress not less

often than every six months, (B) provide advice on the preparation

of a spillway operation manual, and (C) recommend a suitable

maintenance and safety inspection program to be carried out aftercompletion of the dam; and (iii) consult with the said panel of

experts on any problem arising in the construction of the worksincluded in the Project and on any change proposed to be made tothe design or construction schedule of such works.

Section 3.07. (a) The Borrower shall furnish to the Associa-

tion, promptly upon their preparation, the plans, specifications,reports, contract documents and construction and procurement

schedules for the Project, and any material modifications thereofor additions thereto, in such detail as the Association shallreasonably request.

(b) The Borrower: (i) shall maintain records and proceduresadequate to record and monitor the progress of the Project

(including its cost and the benefits to be derived from it), toidentify the goods and services financed out of the proceeds of

the Credit, and to disclose their use in the Project; (ii) shallenable the Association's accredited representatives to visit thefacilities and construction sites included in the Project and toexamine the goods financed out of the proceeds of the Credit and

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any relevant 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,the expenditure of the proceeds of the Credit and the goods andservices financed out of such proceeds.

(c) 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 the Borrowerand the Association, the Borrower shall prepare and furnish to theAssociation a report, of such scope and in such detail as theAssociation shall reasonably request. on the execution and initialoperation of the Project, its cost and the benefits derived and tobe derived from it, the performance by the Borrower and theAssociation of their respective obligations under the DevelopmentCredit Agreement and the accomplishment of the purposes of theCredit.

Section 3.08. The Borrower shall take all such action asshall be necessary to acquire not later than three months beforethe commencement of construction, all such land and rights inrespect of land as shall be required for the construction andoperatio, of the facilities included in the Project.

Section 3.09. The Borrower shall not later than Decem-ber 31, 1979, or such other date as the Association shall agree,prepare and furnish to the Association for its comments a detailedand comprehensive program for the provision of agriculturalsupporting services in the area to be irrigated under theProject, including a timetable for implementation of the saidprogram. The Borrower shall thereafter implement the said pro-gram and inform the Association of the progress of its imple-mentation.

Section 3.10. The Borrower shall ensure that all its agen-cies responsible for carrying out the Project are at all timesstaffed with suitably qualified and experienced personnel inadequate numbers and that a suitably qualified and experiencedProject Manager is appointed not later than March 1, 1979, or suchother date as the Association shall agree, to direct the designand construction activities of the Project. The Borrower shallpromptly inform the Association of any appointment made to theposition of Project Manager.

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ARTICLE IV

Other Covenants

Section 4.01. (a) The Borrower shall maintain or cause tobe maintained records adequate to reflect in accordance with con-sistently maintained appropriate accounting practices the opera-tions, resources and expenditures, in respect of the Project, ofthe departments or agencies of the Borrower responsible forcarrying out the Project or any part thereof.

(b) The Borrower shall: (i) have such records for eachfiscal year audited, in accordance with appropriate auditingprinciples consistently applied, by independent auditors appointedby the Borrower and acceptable to the Association; (ii) furnish tothe Association as soon as available, but in any case not laterthan six months after the end of each such year, (A) certifiedcopies of its financial statements for such year as so audited and(B) the report of such audit by said auditors, of such scope andin such detail as the Association shall have reasonably requested;and (iii) furnish to the Association such other informationconcerning the said records and the audit thereof as the Associa-tion shall from time to time reasonably request.

(c) The report of audit referred to in paragraph (b) (ii)(B), above, shall include, inter 3,lia, the auditor's commentsand opinion on the certificates of expenditure submitted to theMinistry of Water Conservancy by the agency carrying out the civilworks under the Project.

Section 4.02. (a) The Borrower shall cause all structures,canals, roads, equipment and other facilities included in theProject to be adequately operated and maintained and repairedin accordance with appropriate agricultural, engineering andfinancial policies and procedures, and shall provide the fundsfor this purpose.

(b) Without any limitation to the obligations of the Bor-rower under paragraph (a) of this Section, the Borrower shallcause the dam and appurtenant works forming Part A of the Projectto be periodically inspected in accordance with sound ingineeringpractice in order to determine whether there are any deficienciesin the condition of such structures, or in the quality or adequacyof the operation or maintenance of the said dam and works whichmay endanger their safety. To this end, the Borrower shall, not

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later than December 31, 1981, furnish to the Association for itscomments, its proposed program for such inspection together with

the proposed timetable for the implementation of such inspectionprogram.

Section 4.03. Except as the Association shall otherwise

agree, the Borrower shall establish and thereafter maintain

and collect, or cause to be established and thereafter maintainedand collected, charges on irrigable agricultural land, or on theusers of the land, serviced by the irrigation system constructedunder the Project, at levels consistent with the capabilityof the beneficiaries to pay said charges, to (i) cover the costof sound operation and maintenance necessary to provide irrigation

and drainage for such land, and (ii) recover over the useful

life of the irrigation system a reasonable portion of the capital

expenditures attributable to such system. The Borrower shall

review with the Association the adequacy of such charges at

intervals not to exceed three years.

ARTICLE V

Remedies of the Association

Section 5.01. For the purposes of Section 6.02 of the General

Conditions, the following additional events are specified pursuant

to paragraph (h) thereof, namely, that:

(a) Subject to subparagraph (b) of this paragraph:

(i) the right of the Borrower to withdraw the proceedsof any loan made to the Borrower for the financingof the Project shall have been suspended, cancelledor terminated in whole or in part, pursuant to theterms of the agreement providing therefor, or

(ii) any such loan shall have become due and payableprior to the agreed maturity thereof.

(b) Subparagraph (a) of this paragraph shall not apply if:

(i) such suspension, cancellation, termination orprematuring is not caused by the failure of theBorrower to perform any of its obligations under

such agreement, and

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(ii) adequate funds for the Project are availableto the Borrower from other sources on termsand conditions consistent with the obligationsof the Borrower under this Agreement.

Section 5.02. For the purposes of Section 7.01 of the GeneralConditions, the following additional event is specified pursuantto paragraph (d) thereof, namely, that, the event specified inparagraph (a) (ii) of Section 5.01 of this Agreement shall occur.

ARTICLE VI

Effective Date; Termination

Section 6.01. The following event is specified as an addi-tional condition to the effectiveness of the Development CreditAgreement within the meaning of Section 12.01 (b) of the GeneralConditions, namely, that, all conditions precedent to the effec-tiveness of the Netherlands Loan Agreement and the OPEC Fund LoanAgreement (save for the effectiveness of this Agreement) have beenfulfilled.

Section 6.02. The date November 22, 1978, is hereby specifiedfor the purposes of Section 12.04 of the General Conditions.

Section 6.03. The obligations of the Borrower under ArticleIV of this Agreement shall cease and determine on the date onwhich the Development Credit Agreement shall terminate or on adate twenty years after the date of this Agreement, whichevershall be the earlier.

ARTICLE VII

Representatives of the Borrower; Addresses

Section 7.01. The Director General of the State Bank 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 forthe purposes of Section 11.01 of the General Conditions:

For the Borrower:

State Bank of Viet NamHanoiSocialist Republic of Viet Nam

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Cable address:

VIETBANKHanoi

For the Association:

Internationrl 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)

IN WITNESS WHEREOF, the parties hereto, acting throughtheir representatives thereunto duly authorized, have caused

this Agreement to be signed in their respective names in the

District of Columbia, United States of America, as of the day andyear first above written.

SOCIALIST REPUBLIC OF VIET NAM

By Is/ Cu Dinh BaAuthorized Representative

INTERNATIONAL DEVELOPMENT ASSOCIATION

By Is! S. PleaseActing Regional Vice President

East Asia and Pacific

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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 Dollar Equivalent) to be Financed

(1) Vehicles and 31,000,000 100% of foreignequipment expenditures

(2) Materials and 20,000,000 50% of foreignsupplies expenditures

(3) Training 500,000 100% of foreignexpenditures

(4) Unallocated 8,500,000

TOTAL 60,000,000

2. For the purposes of this Schedule, the term "foreign expendi-tures" means expenditures in the currency of any country otherthan the Borrower and for goods or services supplied from theterritory of any country other than the Borrower.

3. The disbursement percentages have been calculated in com-pliance with the policy of the Association that no proceeds of theCredit shall be disbursed on account of payments for taxes leviedby, or in the territory of, the Borrower on goods or services, oron the importation, manufacture, procurement or supply thereof; tothat end, if the amount of any such taxes levied on or in respectof any item to be financed out of the proceeds of the Creditdecreases or increases, the Association may, by notice to theBorrower, increase or decrease the disbursement percentage thenapplicable to such item as required to be consistent with theaforementioned policy of the Association.

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4. Notwithstanding the provisions of paragraph 1 above, no

withdrawals shall be made:

(a) in respect of payments made for expenditures prior to

the date of the Development Credit Agreement; and

(b) in respect of payments made for expenditures under

Category (2) until: (i) the Kuwait Fund Loan Agreement has

become effective; or (ii) the Borrower has made arrangements,satisfactory to the Association, to provide the funds required

to make payments for the expenditures to be financed from the

proceeds of the Kuwait Fund Loan.

5. Notwithstanding the allocation of an amount of the Credit or

the disbursement percentages set forth in the table in paragraph 1

above, if the Association has reasonably estimated that the amount

of the Credit then allocated to any Category will be insufficient

to finance the agreed percentage of all expenditures in that

Category, the Association may, by notice to the Borrower: (i)

reallocate to such Category, to the extent required to meet the

estimated shortfall, peoceeds of the Credit which are then allo-

cated to another Category and which in the opinion of the Associa-

tion are not needed to meet other expenditures, and (ii) if such

reallocation cannot fully meet the estimated shortfall, reduce the

disbursement percentage then applicable to such expenditures in

order that further withdrawals under such Category may continue

until all expenditures thereunder shall have been made.

6. If the Association shall have reasonably determined that the

procurement of any item in any Category is inconsistent with the

procedures set forth or referred to in this Agreement, no expendi-

tures for such item shall be financed out of the proceeds of the

Credit and the Association may, without in any way restricting or

limiting any other right, power or remedy of the Association under

the Development Credit Agreement, by notice to the Borrower,

cancel such imount of the Credit as, in the Association's reason-

able opinioa, represents the amount of such expenditures which

would otherwise have been eligible for financing out of the

proceeds of the Credit.

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SCHEDULE 2

Description of the Project

The Project consists of the following Parts:

Part A:

Construction of an earth dam and its appurtenant works onthe Saigon River near the village of Dau Tieng to create areservoir of about one billion cubic meters usable storagecapacity.

Part B:

Construction of a gravity irrigation system to serve about42,000 ha, including an adequate drainage network, inspectionand access roads and two low-lift pump stations to serveabout 4,000 ha within the said 42,000 ha.

Part C:

Procurement of vehicles, equipment, materials and suppliesfor the construction, operation and maintenance of theProject dam, works and irrigation system.

Part D:

In-service and overseas training for: (1) planning and designengineers of the Ministry of Water Conservancy; and (2)construction engineers, heavy equipment operators and mainte-nance personnel.

The Project is expected to be completed by December 31, 1983.

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SCHEDULE 3

Procuremkent

A. International Competitive Bidding

1. Except as provided in Part B, goods shall be procured under

contracts awarded in accordance with procedures consistent with

those set forth in the "Guidelines for Procurement under World

Bank Loans and IDA Credits" published by the Bank in March 1977

(hereinafter called the Guidelines), on the basis of international

competitive bidding as described in Part A of the Guidelines.

2. For goods to be procured on the basis of international

competitive bidding, in addition to the requirements of paragraph

1.2 of the Guidelines, the Borrower shall prepare and forward to

the Association as soon as possible, and in any event not later

than 60 days prior to the date of availabil4ty to the public of

the first tender or prequalification documents relating thereto,

as the case may be, a general procurement notice, in such form and

detail and containing such information as the Association shall

reasonably request; the Association will arrange for the publica-

tion of such notice in order to provide timely notification to

prospective bidders of the opportunity to bid for the goods

in question. The Borrower shall provide the necessary information

to update such notice annually so long as any goods remain to be

procured on the basis of international competitive bidding.

3. Cement, materials for gates, hoists and sheet piles, lubri-

cants and reinforcing steel shall be procured so as to ensure an

adequate supply of such items throughout the construction period.

B. Other Procurement Procedures

1. Items of equipment and supplies expected to cost less than

the equivalent of $10,000 may be procured without resort to

international competitive bidding, provided that: (i) such items

shall be procured on a basis of reasonable and competitive pro-

curement procedures; and (ii) the total cost of items procured

pursuant to this paragraph shall not exceed the equivalent of

$3,000,000.

2. Spare parts required during the construction period shall

be procured through prudent shopping or, when prudent shopping is

not feasible, spare parts shall be procured through negotiated

purchases from the suppliers of the related equipment.

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3. Fuel shall be procured through the Borrower's normal pro-cedures on a yearly basis in accordance with the requirements of

the Project.

C. Review of Procurement Decisions by the Association

1. Review of invitations to bid and of proposed awards and

final contracts:

With respect to all contracts for goods estimated to cost the

equivalent of $100,000 or more:

(a) Before bids are invited, the Borrower shall furnish to

the Association, for its comments, the text of the invitations to

bid and the specifications and other bidding documents, togetherwith a description of the advertising procedures to be followed

for the bidding, and shall make such modifications in the said

documents or procedures as the Association shall reasonably

request. Any further modification to the bidding documents shallrequire the Association's concurrence before it is issued to the

prospective bidders.

(b) After bids have been received and evaluated, the Bor-

rower shall, before a final decision on the award is made, informthe Association of the name of the bidder to which it intends toaward the contract and shall furnish to the Association, in

sufficient time for its review, a detailed report on the evalua-tion and comparison of the bids received, and such other informa-tion as the Association shall reasonably request. The Association

shall, if it determines that the intended award would be inconsis-tent with the Guidelines or this Schedule, promptly inform the

Borrower and state the reasons for such determination.

(c) The terms and conditions of the contract shall not,

without the Association's concurrence, materially differ from

those on which bids were asked or prequalification invited.

(d) Two conformed copies of the contract shall be furnishedto the Association promptly after its execution and prior tothe submission to the Association of the first application for

withdrawal of funds from the Credit Account in respect of suchcontract.

2. With respect to each contract not governed by the precedingparagraph, the Borrower shall furnish to the Association, promptly

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after its execution and prior to the submission to the Associationof the first application for withdrawal of funds from the CreditAccount in respect of such contract, two conformed copies of suchcontract, together with the analysis of the respective bids,recommendations for award and such other information as theAssociation shall reasonably request. The Association shall, if itdetermines that the award of the contract was not consistent withthe Guidelines or this Schedule, promptly inform the Borrower andstate the reasons for such determination.

3. Before agreeing to any material modification or waiver ofthe terms and conditions of a contract, or granting an extensionof the stipulated time for performance of such contract, orissuing any change order under such contract (except in cases ofextreme urgency) which would increase the cost of the contract bymore than 10% of the original price, the Borrower shall informthe Association of the proposed modification, waiver, extension orchange order and the reasons therefor. The Association, if itdetermines that the proposal would be inconsistent with theprovisions of this Agreement, shall promptly inform the Borrowerand state the reasons for its determination.