l",

LOAN NUMBER 2427-MLD(SF)

LOAN AGREEMENT(Special Operations)

(Private Sector Development Project)

between

. .THE REPUBLIC OF MALDIVES

and

ASIAN DEVELOPMENT BANK

DATED 13 January 2009

LAS:MLD 41149

LOAN AGREEMENT'(Special Operations)

, ' LOAN AGREEMENT dated 13 January 2009between THE REPUBLIC OFMALDIVES (hereinafter called the Borrower) and ASIAN DEVELOPMENT BANK (hereinaftercalled ADB).

WHEREAS

(A) the Borrower has applied to ADB for a loan for' the purposes of theProject described in Schedule 1 to this Loan Agreement;

(B) subcomponent 1 of Component B of the Project will be carried out bythe Bank of Maldives (hereinafter called BML), and for this purpose the Borrower will makeavailable to BML a portion of the proceeds of the Loan provided for herein upon terms andconditions set forth herein; ,

'(C) subcomponent 2 of Component B of the Project will be carried out bythe Maldives Monetary Authority (hereinafter called MMA), and for this purpose the Borrowerwill make available to MMA a portion of the proceeds of the Loan provided for herein uponterms and conditions set forth herein; and' '

(D) , ADB has agreed to make a loan to the Bor~ower from ADB's Special'Funds resourcesupdn the terms and conditions set forth herein and in the ProjectAgreements of even date herewith between (i) ADS and BML; and (ii) ADB and MMA;

NOW THEREFORE the parties agree as follows: ,

ARTICLE I

. " " . . " .

Loan Regulations; Definitions

Section 1.01. All provisions ot' the Speci al Operations LoanRegulations of ADB, dated 1 January 2006 (the "Loan Regulations"), are hereby madeapplicable to this Loan Agreement with the same force and effect as if they were fully setforth herein.

Section 1.02. The definitions set forth in the Loan Regulations areapplicable to this Loan Agreement unless the context requires otherwise. In addition, thefollowing terms have the following meanings:

, ' '

(a), "ADB's Loan Disbursement Handbook" means ADB's LoanDisbursement Handbook dated January 2007, as amended from time to time;

, .

.~

(b)amended to date);

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"Anticorruption Policy" means ADB's Anticorruption Policy (1998, as'

(c), "BDSC" means the Business Development Services Center asreferred to in paragraph 8 of Schedule 5 to this Loan Agreement;

(d) "BDSC Operation Desk" means any of BDSe Operation Desks asdescribed in paragraphs 8 and 9 of Schedule 5 to this Loan Agreement;

(e) "BML" means the Bank of Maldives or any successor theretoacceptable to ADB;

(f) "CIS" means the Credit Information Bureau' to be established inaccordance with paragraph 16 of Schedule 5 to this Loan Agreement;

(g) "CMA registry" means the Central Moveable Asset registry;

(h) "Component" means any of Component A, Component B, orComponent C, as described in Schedule 1 to this Loan Agreement;

(i) "Consulting Guidelines" means ADB's Guidelines on the Use ofConsultants by Asian Development Bank, and its Borrowers dated February 2007, asamended from time to time; ,

, .U) "CSF" means Cost Sharing Facility as described in, paragraph '2 of

Schedule 1 and paragraph 14 of Schedule 5 to this Loan Agreement;

(If)'~"

(I)

(m)

"CSFMU" means the Cost Sharing Facility Management Unit;

"EDU" means the Enterprise Development Unit of MEDT;

"EDU MSME database" means the database of MSME at EDU;

(n) "Goods" means equipment and 'materials to be financed out ofthe proceeds' of the Loan; and including related services such as transportation, insurance,installation, 'commissioning, training, and initial maintenance,but excluding consulting'services;

(0) "Implementing Agencies" means BML, MEDT, and MMA, and"Implementing Agency" refers to anyone of them;

(p) "imprest accounts" means the imprest account and LCF imprestaccount as described in paragraph 6 of Schedule 3 to this Loan Agreement;

(q) "LCF" means the Line of Credit Facility as described in paragraph 2 ofSchedule 1 to this Loan Agreement;

(r) "LCF Desk" means the Line of Credit Facility Desk as described inparagraph 11 of Schedule 5 to this Loan Agreement; ,

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(s) "LCF imprest account" means an imprest account for LCF asdescribed in paragraph 6(b) of Schedule 3 to this Loan Agreement;

(t) "MEDT" means the Borrower's Ministry of Economic Development andTrade or any successor thereto;

(u) "MMA" means the Maldives Monetary Authority or any successorthereto;

(v) "MNCCI" means the Maldives National Cham ber of Commerce and. Industry or any successor thereto;

(w) "MOFT" means the Borrower's Ministry of Finance and Treasury orany successor thereto; .

(x) "MSME" means micro-, small and medium-sized enterprise;

(y) "Onlending .Agreement" means an agreement to be signed between a. Qualified Enterprise and BML for a subloan;

(z) "PDF" means the, Project Development Fund as referred to inparagraph 2 ofSchedule '1 to this Loan Agreement; ..

. .

(aa)· "PMU" means a Project Management Unit· to be' established withinEDU, MEDT as referred to in Section 6.01 and· paragraph 4 of Schedule 5 to this Loan·Agreement; . . ..

. .

. . tOO) "PPF" means the Proj~ct Preparation Fund as ,refenoed to in paragraph2 of Schedule 1to this Loan Agreement; . .

(cc) "PPMS" means the Project Performance and Monitoring System asdescribed in paragraph 20 of Schedule 5 to this Loan Agreement;

(dd) "PPP" means public-private partnership;

(ee) "PPP Cell" means the Public-Private Partnership CelIIn EDU;

(ff) .. "Procurement Guidelines" means ADB's. Procurement Guidelines.dated February 2007; as amended from time to time;

(gg) "Procurement Plan" means the procurement plan for the Project dated23 April 2008 and agreed between the Borrower and ADB, as updated from time to time inaccordance with Procurement Guidelines, Consulting Guidelines, and other arrangements·agreed with ADB;

(hh) "Project Coordinator" means the Project Coordinator referred to in.. paragraph 4 of SchedUle 5 to this Loan Agreement;

. (ii) "Project Director" means the Project Director referred to in paragraph 4of Schedule 5 to this. Loan Agreement;

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OJ) "Project ExecLiting Agency" for the purposes of, and within themeaning of, the Loan Regulations means MOFT which is responsible for the carrying out ofthe Project;

(kk) "Project facilities" means the facilities and equipment to be providedunder the Project;

(II) "Project Steering Committee" means the Project Steering Committeefor the Project .as described in paragraph 3 of Schedule 5 to this Loan Agreement;

(mm) "Qualified Enterprise" means an MSME to which BML proposes tomake or has made a subloan;

(nn) "Qualified Project" means a specific project to be carried out by aQualified Enterprise utilizing the proceeds of a subloan;

(00) "Rufiyaa" means Rufiyaa in the currencyofthe Borrower;

. . (pp) "Sub-Committee" means a CSF Sub-Committee as described inparagraph 15 of Schedule 5 to this Loan Agreement;

(qq) "subcomponent" means .. any subcomponent· of Component B asdescribed in Schedule 1to this Loan Agreement;

(rr) "subloan" means a loan made, or proposed to be .made, by BML out ofthe proceeds ofthe Loan toa Qualified Enterprise for aQualified Project;

(S8) "Subsidiary Loan Agreement" means any of the subsidiary loanagreements to be signed between MOFT and BML in relation of LCF, and between MOFTand MMA' . .

. ,

(tt) "targeted sectors" means handicrafts, fisheries processing, agriculturalcommercialization, and tourism-related activities;

. (uu) "WEC" means the Women Entrepreneurs Councilor any successorthereto; and

(vv) "Works" means construction or civil works to be financed out of theproceeds of the Loan, including services such as drilling or mapping, and project relatedservices that are provided as part of a single responsibility or turnkey contract, but excludingconsulting services.

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ARTICLE II

The Loan

Section 2.01. ADB agrees to lend to the Borrower from ADB's Special.Funds resources an amount in various currencies eqLiivalent to four' million five hundredseventy three thousand Special Drawing Rights (SDR 4,573,000).

Section 2.02. (a) The Borrower shall pay to ADB an interestcharge at the rate of one percent (1 %) per annum during the grC)ce period, and one andone-half percent (1.5%) per annum thereafter, on the amount of the Loan withdrawn from theLoan Account and outstanding from time to time.

(b) The term "grace period'i as used in paragraph (a) of this Sectionmeans the period prior to payment of the first principal amount of the Loan on the paymentdate in accordance with the amortization schedule set forth in SChedule 2 to this Loan.Agreement.

Section 2.03. The interest charge and any other charge on the Loanshall be payable semiannually on 15 May and 15 Nov~mber in each year.

Section 2.04. The Borrower shall repay the principal amount of theLoan withdrawn from the Loan .Accountinaccordance with the amortization schedule setforth in Schedule 2 to this Loan Agreement.

Section 2.05. The' currency of repayment of the principal of the Loanand the currency of payment ofthe interest charge for the purposes ofSections 4.03(a) and4.04 of the Loan Regulations shall be Dollar.' .

ARTICLE III'

Use of Proceeds of the Loan

Section 3.01. (a) The Borrower shall make available to MMA anamount equivalent to four hundred thirty nine thousand Special Drawing Rights(SDR 439,000) under a Subsidiary Loan Agreement upon terms and conditions satisfactoryto ADB and shall cause MMA to apply such proceeds to the financing of expenditures on theProject in accordance with the provisions of this Loan Agreement and the Project Agreement;

(b) The Borrower shall make available to BML an amount equivalent toone million eight hundred twenty nine thousand Special Drawing Rights (SDR 1,829,000)under a Subsidiary Loan Agreement upon terms and conditions satisfactory to ADB and shallcause BML to apply such proceeds to the financing of expenditu res on the Project inaccordance with the provisions of this Loan Agreement and the Project Agreement; and

6

(c;) The Borrower shall apply, and cause MMA and BML to apply, theproceeds of the Loan to the financing of expenditures on the Project in accordance with theprovisions Of this Loan Agreement.

Section 3.02. The Goods, Works, consulting services and other itemsof expenditure to be financed out of the proceeds of the Loan and the allocation of amountsof the Loan among .different categories of such Goods, Works, consulting services and otheritems of expenditure shall be in accordance with the provisions of Schedule 3 to this LoanAgreement, as such Schedule may be amended from time to time by agreement between theBorrower and ADB.

Section 3.03. Except as ADB may otherwise agree, all Goods, Works;and consulting services to be financed out of the proceeds of the Loan shall be procured inaccordance with the provisions of Schedule 4to this Loan Agreement. .

Section 3.04. Withdrawals from the Loan Account in respect ofGoods, Works, and consulting services shall be made only on accoiJntof expendituresrelating to

(a) Goods which are produced in and supplied from and consultingservices which are supplied from such member countries of ADB asshall have been specified by ADB from time to time as' eligible sourcesfor procuremeht, and

(b) Goods, Works, and consulting services which meet such othereligibility requirements as shall have been specified by ADB from timetotime..

Section 3.05. The Loan Closing Date forthe purposes of Section 8.02of the Loan Regulations shall be 31 August 2011 or such other date as may from time to timebe agreed between the Borrower and ADB.

ARTICLE IV

Particular Covenants

Section 4.01. In the carrying out of the Project and operation of theProject facilities, the Borrower shall perform, or cause to be performed, all obligations setforth in Schedule 5to this Loan Agreement.

Section 4.02. (a) The Borrower shall (i) maintain, or cause to bemaintained, separate accounts for the Project; (ii) have such accounts and related financialstatements audited annually, in accordance with appropriate auditing standards consistentlyapplied, by independent auditors whose qualifications, experience and terms of reference areacceptable to ADS; (iii) furnish to ADS, as soon as available but in any event not later than 6months after the end of each related fiscal year, certified copies of such audited accountsand 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 financial covenants of this

't/(irtk'

7

Loan Agreement as well as on the use of the procedures for imprest account/statement ofexpenditures), all in the English language; and (iv) furnish to ADB such other informationconcerning such accounts and financial statements and the audit thereof as ADB shall fromtime to time reasonably request.

(b) The Borrower shall enable ADB, upon' ADB's request, to discuss theBorrower's financial statements for the Project and its financial affairs related to the Projectfrom time to time with the. auditors appointed by the Borrower pursuant to Section 4.02(a)hereabove, and shall authorize and require any representative ofsuch auditors·to participatein any such discussions requested by ADB, provided that any such discussion shall beconducted only in the presence of an authorized officer of the Borrower unless the Borrower.shall otherwise agree.

Section 4.03. The Borrower shall enable ADS's representatives toinspect the Project, the Goods and Works financed out of th~ proceeds of the Loan, and anyrelevant records and documents.

ARTICLE V

Suspension; Acceleration of Maturity

Section 5.01. The following is specified as an additional event forsuspension of the right of the Borrower to make withdrawals from the Loan Account for the

. purposes of Section 8.01(m) of the Loan Regulations: any of the Borrowerbr BML shall havefaiied to perform any of its obligations under the SUbsidiary Loan Agreement

Section 5.02. The following is specified as an additional foracceleration of maturity for the purposes of Section 8.07(d) of the Loan Regulations: theevent specified in Section 5~01of this Loan Agreement shall have occurred.

ARTICLE VI

Effectiveness

Section 6.01. The following is specified as an additional condition tothe effectiveness of this Loan Agreement for the purposes of Se'ctian 9.01 (f) of the LoC\nRegulations: the PMU shall have been established in EDU, MEDT and the Project Dir.ector

. shall have been appointed.

Section 6.02. A date ninety (90) days after the date of this LoanAgreement is specified for the effectiveness of the Loan Agreement for the purposes ofSection 9.04 of the Loan Regulations.

ARTICLE VII

Miscellaneous·

Section 7.01. The Minister of Finance and Treasury of the Borrower isdesignate(:l as representative of the Borrower for the purposes of Section 11.02 of the LoanRegulations.

Section 7.02. The following addresses are specified for the purposesof Section 11.01 of the LoariHegulations:

For the Borrower

Ministry of Finance and TreasuryAmeenee MaguMale,20379The RepubJlic of Maldives

Facsimile Number:

(960) 3324-432.

For ADB

Asian Development BankP.O. Box 7890980 Manila, Philippines

Cable Address:

ASIANBANKMANILA

Telex Numbers:

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

Facsimile Numbers:

(632) 636-2444(632) 636-2337.

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By

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IN WITNESS WHEREOF the parties hereto, acting thr.ough their representativesthereunto duly authorized, have caused this Loan Agreement to be signed in their respectivenames and to be. delivered at the principal office of ADB, as of the day and year first abovewritten.

THE REPUBLIC OF MALDIVESI"-

~rJ..V---fl. ALI HASHIM

Authorized Representative

ASIAN DEVELOPMENT BANK

". By~·~£t.....;'.".~.-,J.....~"-'-..... ..a..·5£.;.·...J=::····~···.:......4·.·~~e~c=·~.HARUHIKO ·KURODA

President. .

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SCHEDULE 1 .

Description of the Project

1. The Project is expected to develop and expand the MSME sector, leading toaccelerated· and inclusive growth of the private sector for broad-based and sustainabledevelopment of the local economies in the Borrower's Northern and Southern regions andother targeted sectors. The expected outcomes of the Project are (i) bolstered capacity of theMSMEs by creating the BDSCand GSF; (ii) enhanced access to finance by the MSMEs inthe Borrower's Northern and Southern regions; and (iii) promotion of market-driven processand increased private sector investment through PPP.

2. The Project scope is as follow·s:

Component A: MSME Promotion

(i) . Establishment of and support to BDSC (central BDSC in Male and two BDSCOperation Desks in Kulhudhuffushi and Hithadhoo);

(ii) Establishment ofand support toCSF; and(iii) Capacity development of EDU, MNCCI and WECo

Component B: Enhancing Access to Finance·

SUbcomponent 1: LCF Operation flnd Capacity Devefopment

(i) Provision ofcredit line for extension of subloans to MSME via BML; and. (ii) Institutional strengthening and capacity development support to BML.

SUbcomponent 2: CIB and CMA Reg;·stry.

(i) Establishment and implementation of a CIB; and(ii) Preparation of a feasibility study, drafting necessary legal and regulatory

framework, and master plan for CMA registry ensuring the integration betweenCIB and CMA registry.

Component C: Capacity Building for PPP

(i) Development of enabling frameworks for PPP; .(ii) Capacity building of government agencies in formulating PPP strategies,

projects and managing PPP process;(iii) Review and development of improved policies supporting PPP projects and

private sector participation;(iv) Development of PDF and PPF; and(v) Conceptualization and structuring of 2 pilot infrastructure projects on PPP

basis.

3. The Project includes the provision of consulting services. The Project isexpected to be completed by 28 February 2011.

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SCHEDULE 2

Amortization Schedule(Private Sector Development Project)

Date Payment Due

15-Nov-201615-May-201715-Nov-201715-May-201815-Nov-201815-May-201915.;Nov-201915':'May-202015-Nov-202015-May-202115-Nov-202115-May-202215-Nov-202215-May-202315·Nov-202315-May-2d2415-Nov-202415-May-202515-Nov-2025 .15-May-202615-Nov-202615-May-202715-Nov-202715-May-202815-Nov":2028 ..15-May-202915-Nov-202915-May-203015-Nov-203015-May-203115-Nov-203115-May-203215-Nov-203215-May-203315-Nov-203315-May-2034

Payment of Principal(expressed in Special

Drawing Rights)*

95,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.00 .95,271.00·95,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.0095,271.00 '95,271.0095,271.0095,271.0095,271.0095,271.0095;271.0095,271.0095,271.0095,271.00

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

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Schedule 2

Date Payment Due

15-Nov-2034·15-May-203515-Nov-203515-May..;203615-Nov-203615-May-203715-Nov-203715-May-203815-Nov-203815-May-203915-Nov-203915-May-2040

Totar

Payment of Principal(expressed in Special

Drawing Rights)*

95,271,0095,271,0095,271,0095,271,0095,271 :0095,271.0095,271.0095,271.0095,27.1.0095,271.0095,271.0095,263.00

4.573.000.00

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

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SCHEDULE 3

Allocation and Withdrawal of Loan Proceeds

General

1. The table attached to this Schedule sets forth the Categories of Goods,Works, services and other items to be financed out of the proceeds of the Loan and theallocation of amounts of the Loan to each such Category (hereinafter called th.e Table).(Reference to "Category" or "Categories" in this Schedule is to a Category or Categories ofthe Table.)

Percentages of ADB Financing

2. Except as ADB may otherwise agree, the items of the Categocies listed in theTable shall be financed out of the proceeds of the Loan on the basis of the percentages setforth in the Table.

Interest Charge

3. , The amount allocated to Category 7 is for financing the intere~t charge on the.Loan during the implementation period of the Project. ..

Reallocation

4. Notwithstanding the allocation of Loan proceeds and the withdrawalpercentages-set fOith in the Table,

(a) if the amount of the Loan allocated to any Category appears to be'insufficient to finance aHagreed expenditures in that Category, ADB maY,by notice. to theBorrower, (i) reallocate to such Category, to the extent· required to meet the estimatedshortfall, amounts of the Loan which have been allocated to another Category but, in theopinion of ADB, are not needed to meet other expenditures, and (ii) if such reallocationcannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable tosuch expenditures in order that further withdrawals under such Category may continue until .'all expenditures thereunder shall have been made; and .

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

Disbursement Procedures

. 5. Except as ADB may otherwise agree, the Loan proceeds forfinancing Goods,Works, and consulting services and other items shall be disbursed in accordance withADB'sLoan Disbursement Handbook. .

.~. /[y~ ...

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Schedule 3

Imprest Accounts; Statement of Expenditures.

6. (a) Except asADB may otherwise agree, the Borrower shall establishimmediately after the Effective Date, two imprest accounts at MMA. Th.e first imprest account(First Imprest Account) shall be used for financing of all activities under Component A,.subcomponent 2 of Component B and Component C. The initial amount to be deposited intothe First Imprest Account shall not exceed the lower of (i) the estimated expenditure for thefirst six months of Project implementation, or (ii) the equivalent of $380,000.

(b) The second imprest account (Second Imprest Account) shall be usedfor financing of the LCF-related activities under subcomponent 1 of Component B. The initialamount to be deposited into the Second Imprest account shall not exceed the lower of (i) theestimated expenditure for the first six months of Project implementation, ·or (ii) the equivalentof $300,000. .

(c) The First Imprest Account and the Second Imprest Account shall beestablished, managed, replenished and liquidated in accordance with ADB's LoanDisbursement Handbook and detailed arrangements agreed upon between the Borrower andADB. The currency of both of these imprestaccounts shall be Dollar.

(d) Except as ADB may otherwise agree, the Borrower shall cause BML to.establish a second-gen~ration imprest account (Second-Generationlmprest Account) atBML with respect to the LCF to be financed through the Second Imprest Account. Thecurrency of the Second-Generation Imprest Account shall be Rufiyaa. The initial amount to'be deposited into the Second-Generation Imprest account shall not exceed the lower of(I) the estimated expenditure for the first six months of Project implementation, or (H) theequivalent of $300,000. .

(e). The statement of expenditures (SOE) procedure may be used ·forreimbursement of eligible expenditures and to liquidate advances provided into the imprestaccounts, in accordance with ADB's Loan. Disbursement Handbook and detailedarrangements agreed upon between the Borrower and ADB. Any individual payment to bereimbursed or liquidated under the SOE procedure shall' not exceed the equivalent of$50,000. .

Condition of Withdrawals from Loan Account

7. Notwithstanding any other provision of this Loan Agreement, no withdrawalsshall be made from the Loan Account (i) for Category 6, until a Subsidiary Loan Agreement,in form and substance satisfactory to ADB, shall have been executed by the Borrower andBML; (ii) for Category 2, until a Subsidiary Loan Agreement, in form and substancesatisfactory to ADB, shall have been executed by the Borrower and MMA; and (iii) for'Category 6, until the first two of the OnlendingAgreements shall have been executed byBM~ and a Qualified Enterprise and submitted to ADB for review.

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TABLE

Attachment to Schedule 3

ALLOCATION AND WITHDRAWAL OF LOAN PROCEEDS(Private Sector Development Project)

CATEGORY ADS FINANCING

Amount Allocated Percentage and Basis forNumber Item SDR Withdrawal

CategorY ' from the Loan Accol:lnt

1 Consulting Services 1;338,000 100 percent of total expenditure*

2 CIBTurnkey Package 329,000 100 percent of total expenditure*

3 Equipment .6,000 90 percent of total expenditure

4 Training 110,000 100 percent of total expenditure*

5 Cost Sharing Facility .610,000 10b percent of total expenditure*

6 . Line of Credit Facility 1,829,000 100 percent of total expenditure* .

7 Interest Charge..

92,000 100 percent of amount due

8 Unallocated 259,000

Total 4,573,000

* Exclusive of taxes and duties imposed within the territory of the Borrower.

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SCHEDULE 4

Procurement of Goods and Works, and Consulting Services

A. General

1. All Goods, Works and consulting services to be financed out of the proceedsof the Loan shall be subject to and' governed by the Procurement Guidelines, and theConsulting Guidelines; respectively.

2. All terms used and not otherwise defined in this Loan Agreement have themeanings provided in the Procurement Guidelines and/or the Consulting Guidelines, asapplicable.

B. Procurement for Goods and Works

3. Except as ADB may otherwise agree, Goods and Works shall only beprocured on the basis of the methods of procurement set forth below:

etitive Biddin

The methods of procurement are SUbject to, among other things, the detailed arrahgementsand threshold values set forth in the Procurement Plan. The Borrower may only modify themethods of procurement or threshold values with the prior agreement ofADB, andmodifications must be set out in updates to the Procurement Plan.

4. Domestic Preference. The Borrower may grant a margin of preferencein the evaluation of bids under international competitive bidding, in accordance withparagraphs 2.55(a) and 2.56 of the Procurement Guidelines for domestically manufacturedGoods.

5. . Procurement under LCF. The Borrower shall cause BML to ensure thatQualified Eriterprises procure Goods, Works and consulting' services in accordance with

'procurement procedures acceptable to 'ADB. To be acceptable such procurementprocedures shall be (a) in accordance with established private sector or commercialpractices; (b) appropriate under the circumstances; and (c) comply with the provisions ofADB's Anticorruption Policy.

C. Selection of ConSUlting Services

6. Quality~ and Cost-Based Selection. Except asADB may otherwiseagree, the Borrower shall apply quality- and cost":based selection for selecting and engagingconsulting services.

7. The Borrower shall recruit the individual consultants for LCF and CMA underComponent B in accordance with procedures acceptable to ADB for recruiting individualconsultants.

i·

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Schedule 4

.D. Industrial or Intellectual Property Rights

8. (a) The Borrower shall ensure that all Goods and Works procured(including without limitation all computer hardware, software and systems, whether~eparately procured or incorporated within other goods and services procured) do not violateor infringe any industrial property or intellectual property right or claim of any third party.

(b) The Borrower shall ensure that all contracts for the procurement ofGoods and Works contain appropriate representations, warranties and, if appropriate,indemnities from the contractor· or supplier wi.th respect to the matters referred to insubparagraph (a) of this paragraph. .

9. The Borrower shall ensure that all ADB-financed contracts with consultantscontain appropriate representations, warranties and, if approp.riate, indemnities from theconsultants to ensure that the consulting services provided do not violate or infringe anyindustrialproperty or intellectual property right or claim of any third party. . .

E. ADS's Review ofProcurement Decisions

10. All contraCts procured under international competitive bidding procedures andcontracts for consulting services shall be SUbject to prior review by ADB,unless otherwise

.agreed between the Borrower and ADB and set forth in the Pr6curementPlan~ .

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SCHEDULE 5

Execution of Project and Operation ofProject Facilities; Financial Matters

Implementation Arrangements

1. MOFT, as the Project Executing Agency, shall be responsible for carrying outof the Project and coordination of activities of all Implementing Agencies. MOFTshali alsoliaise with ADB on all Project administra~ion matters.

2. The following shall be the Implementing Agencies:

MEDT shall be the Implementing Agency for Component A; .BMLsha11 be the Implementing Agency for sUbcomponent 1 of Component B;MMAshall be the Implementing Agency for subcomponent 2 of Component B; andMEDT through PPP Cell shall be the Implementing Agency for Component C.

Each Implementing Agency shall be responsible for the day~to~day operation and.implementation of the Project activities under the subcomponents and/or Components withinits mandate: .

3. Within' 3 months of the Effective Date, the Borrower shall set up a ProjectSteering Committee chaired by the Deputy Minister of Economic Development and Tradeand composed of the· Executive Directors of MOFT, MEDT, Ministry of Atolls Development,Ministry of Planning and National Development,· a Senior Executive Director of MMA, an.Assistant General Manager of BML, Project Director, and Executive Directors from otherministries an<;j agencies, as appropriate. Each member of the Project Steering CommitteeShall have an alternative to stand in case such member is otherwise engaged. The ProjectCoordinator under the EDU shall serve as the secretary to the Project Steering Committee.The Project Steering Committee shall be responsible for monitoring, evaluation andcoordination of the Project activities and shall meet every quarter, or as often as needed. TheBorrower shall ensure that (i) ADB is·entitled to receive all reports and minutes of the ProjectSteering Committee upon request and may attend meetings of the Project SteeringCommittee as an observer; and (ii) the Implementing Agencies prepare annual work plansand bUdgets to be presented to the Project Steering Committee for its endorsement.

4. The Project Director, heading the. PMU established by the Borrower, shall beresponsible for (i) coordinating the Project activities; (ii) ·overseeing logistical arrangements,including but not limited to, preparation of workshops; (iii) preparing quarterly progressreports for submission to ADB and the .Project Steering Committee; and (iv) performing otherassignments necessary for successful implementation of the Project. The PMU shall alsocomprise a Project Coordinator who shall be an international consultant. The ProjectCoordinator shall report to the Project Director.

5. The Borrower shall ensure that, throughout the implementation period of theProject, adequate budgetary allocations of the required counterpart funds are madeavailable, .approved and released in a timely manner,

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Schedule 5

6. The Borrower shall ensure that adequate office and other facilities for theProject are made available, and ensure that all such facilities are properly maintained duringthe Project implementation period.

7., The Borrower shall ensure that each of the Implementing Agencies isadequately staffed and provided, in a timely manner, with the necessary financial, technical,and other resources, including but not limited to the required eq uipment, to effectivelyperform their functions under the Project.

Central BDCS and BDSC Operation Desks

8. The Borrower shall ensure that within 3 months of th e .Effective Date, EDUestablishes (i) the Central BDSC, to facilitate coordination between different ministries andother government agencies involved; ,and (ii) the BDSC Operation Desks in Kulhudhuffushiand Hithadhoo. The Borrower shall ensure that the Central BDSe and BDSC OperationDesks are made operational within 6 months of the Effective Date.

9. . Each BDSC Operation Desk shall submit an annual progress report on thesupported enterprises to the Project Coordinator. The cost of monitori ng and evaluation fieldvisits shall be covered by fees charged by BDSC with any deficits being covered by CSFupon prior approval of the CSFMU.

10. . The Borrower shall ensure that EDU in cooperati9n with MNCCI and WECconducts information dissemination on BDSC and LCF, on a regular basis..

11. The Borrower shall ensure that (i) BML establishes an LCF Desk within 2. months of the Effective Date; and (ii) LCF is made operational within 6 months of the

Effective Date. .

12. The Borrower shall ensure that within 3 months of the Effective Date, BML .finalizes the detailed operation mechanism for LCF.

Selection of Subloan Proposals

13. The Borrower shall ensure that all subloan proposals are selected inaccordance with the following criteria: .

(i) the number of employees of Qualified Enterprise shall be up to 50;

(ii) Qualified Enterprise shall have' been registered at the EDU MSMEdatabase;

(iii) Activities of Qualified Enterprise shall be focused· on target clusters(agricultural commercialization, fishery processing, tourism relatedactivities, and handcrafts);

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Schedule 5

(iv) Operations of Qualified Enterprise shall be based on the Northern andSouthern regions;

(v) Qualified Enterprise with 20 or less employees shall have enterprisebudget and those with more than .20 employees shall have adequatecash flow and collateral based on an independent default riskassessment criteria agreed between the Borrower, BML and ADB; and

(vi) Qualified Project shall be in compliance with the Borrower's applicableenvironmental laws and regulations.

14. ' The Borrower shall ensure that CSF is' made operational on a pilot basiswithin 6 months of the Effective Date. An overall evaluation of CSF shall take place duringthe mid-term review and atthe end of the Project implementation period.

15. The Central BDSC shall act as the CSFMU, with the respective'Sub-Committee carrying out the initial screening of the proposals tObefinanced by the CSFand making the associated recommendations to the Project Steering Committee for its finalapproval. The BDSC shall be accountable to the Project Steering Committee. TheSub-Committee shall be chaired ·by the BDSC coordinator and shall consist ofrepresentatives from MNCCI, WEC and EDU. The decisions of the Sub-Committee shall betaken by a majority vote. .

CIS'

16,. The Borrower shall ensure that MMA cOlT1pletes installation of the CIBwithin 10 months of the award of the contract for CIB hardware and software except as maybeotherwise agreed between the Borrower and ADB.

PPP Cell

17. The Borrower shall ensure that, within 3 months of the Effective Date,notification on establishment of the PPP Cell in EDU is issued by MEDT and adequatenumber of staff is recruited or seconded to the PPP Cell.

Ehvironment

18. The Borrower shall ensure that' all subprojects comply with the Borrower'sapplicable environmental laws and regulations.

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Schedule 5

Governance and Anticorruption

19. The Borrower, the Project Executing Agency, the Implementing Agencies andPMU shall comply with ADB's Anticorruption Policy. Consistent with its commitment to goodgovernance, accountability, and transparencY,ADB reserves the right to investigate, directlyor through its agents, any allegedly corrupt, fraudulent, collusive, or coercive practicesrelating to the Project. To support these efforts, all contracts financed by ADB in connectionwith the Project shall include provisions specifying the right of ADB to audit and examine therecords and accounts of the Project Executing Agency, the Implementing Agencies, PMUand all contractors, suppliers, consultants, and other service providers as they relate to theProject. Specific measures to increase transparency under the Project include random andindependent spot checks by ADB review missions on procurement and financial projectaccounts.

PPMS

20. The Borrower shall ensure that the PMU,drawing on data from theImplementing Agencies, establishes and maintains a PPMS that will generate semi-annualand annual reports. The PPMS shall be established, as agreed between the Borrower andADB, to. ensure that (i) the Project is managed efficiently; (ii) benefits are maximized; and(iii) social impacts are monitored. .

Project Review

21. The Borrower shall,in collaboration with ADB, review Project implementationat'least'three times a year. A cOD1pr~'hensive'midterm .revievi~hall be undertaken to evalu~te

progress approximately 18 months after the Effective Date. The Project Executing Agencyand the Implementing Agencies shall partiCipate in the mid:-term review. These reviews shallinclude an evaluation of the Project scope,implementation arrangements, and progressaccording to the Project agenda. .