OFFICIAL DOCUMENTS CREDIT NUMBER 6318 - LA Financing Agreement (Lao PDR Competitiveness and Trade Project) between LAO PEOPLE'S DEMOCRATIC REPUBLIC and INTERNATIONAL DEVELOPMENT ASSOCIATION CREDIT NUMBER 6318 - LA FINANCING AGREEMENT AGREEMENT dated as of the Signature Date between LAO PEOPLE'S DEMOCRATIC REPUBLIC ("Recipient") and INTERNATIONAL DEVELOPMENT ASSOCIATION ("Association"). WHEREAS under an agreement ("Grant Agreement") to be entered into between the Recipient and the Association, acting as an administrator of the Lao Competitiveness and Trade Multi-Donor Trust Fund ("MDTF"), the Association intends to provide the Recipient with a grant ("Grant") in an amount specified in the Grant Agreement to assist in financing the Project; NOW THEREFORE, the Recipient and the Association hereby agree as follows: ARTICLE I - GENERAL CONDITIONS; DEFINITIONS 1.01. The General Conditions (as defined in the Appendix to this Agreement) apply to and form part of this Agreement. 1.02. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the General Conditions or in this Agreement (including the Preamble and Appendix hereto). ARTICLE II - FINANCING 2.01. The Association agrees to extend to the Recipient a credit, which is deemed as Concessional Financing for purposes of the General Conditions, in an amount equivalent to seven million two hundred thousand Special Drawing Rights (SDR 7,200,000) (variously, "Credit" and "Financing"), to assist in financing the project described in Schedule I to this Agreement ("Project"). 2.02. The Recipient may withdraw the proceeds of the Financing in accordance with Section III of Schedule 2 to this Agreement. 2.03. The Maximum Commitment Charge Rate is one-half of one percent (1/2 of 1%) per annum on the Unwithdrawn Financing Balance. 2.04. The Service Charge is three-fourths of one percent (3/4 of 1%) per annum on the Withdrawn Credit Balance. -2- 2.05. The Interest Charge is one and a quarter percent (1.25%) per annum on the Withdrawn Credit Balance 2.06. The Payment Dates are April 15and October 15 in each year. 2.07. The principal amount of the Credit shall be repaid in accordance with the repayment schedule set forth in Schedule 3 to this Agreement. 2.08. The Payment Currency is Dollar. ARTICLE III - PROJECT 3.01. The Recipient declares its commitment to the objectives of the Project. To this end, the Recipient shall carry out the Project through its MOIC in accordance with the provisions of Article V of the General Conditions and Schedule 2 to this Agreement. ARTICLE IV - REMEDIES OF THE ASSOCIATION 4.01. The Co-financing Deadline for the effectiveness of the Grant Agreement is September 30, 2019. ARTICLE V - EFFECTIVENESS; TERMINATION 5.01. The Effectiveness Deadline is the date ninety (90) days after the Signature Date. 5.02. For purposes of Section 10.05 (b) of the General Conditions, the date on which the obligations of the Recipient under this Agreement (other than those providing for payment obligations) shall terminate is twenty (20) years after the Signature Date. ARTICLE VI - REPRESENTATIVE; ADDRESSES 6.01. The Recipient's Representative is its Minister of Finance at the time responsible for finance. 6.02. For purposes of Section 11.01 of the General Conditions: (a) the Recipient's address is: Ministry of Finance 23rd Singha Road Saysettha District Vientiane Lao PDR (b) the Recipient's Electronic Address is: Facsimile: 856-21-412142 E-mail: tpphasysithisonegyahoo.com 6.03. For purposes of Section 11.01 of the General Conditions: (a) the Association's address is: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America (b) the Association's Electronic Address is: Facsimile: 1-202-477-6391 E-mail: laopdr@worldbank.org -4- AGREED as of the Signature Date. LAO PEOPLE'S DEMOCRATIC REPUBLIC By Authorized Representative Name: ThIpphakone CHANTHAVONGSA Title: PICV 9 Date: 3___ot Zo18 INTERNATIONAL DEVELOPMENT ASSOCIATION By Authorized Representative Name: Ni o 0o Ora Title: CkXabn M0Y1Q(h?,Y- Date: 3 1 OC Z18 ' -5- SCHEDULE 1 Project Description The objectives of the Project are to simplify business regulations, facilitate trade, and improve firm-level competitiveness. The Project consists of the following parts: Part A. Improving the Business Environment 1. Making it Easier to Start a Business Carrying out of a program of activities to: (a) implement reforms to ease the starting of a business, including with respect to related DERM and inter-agency processes; and (b) automate enterprise registration through developing a new online business registration system and establishing computer terminal helpdesks at DERM and selected PICOs. 2. Streamlining and Publishing Operating Licenses Carrying out of a program of activities to: (a) streamline business operating license administration; and (b) set up an online portal of business licenses as a public repository of up-to-date and relevant information concerning such licenses. 3. Supporting Broader Business Reforms Carrying out of a program of activities to: (a) support IPD in coordinating business environment reforms and providing technical support to relevant line ministries and agencies in the development and implementation of specific reform action plans; and (b) provide Challenge Facility funds to selected line ministries and departments to implement additional proposed business environment reforms. Part B. Facilitating Trade and Connecting to Markets 1. Supporting the Trade Facilitation Secretariat Carrying out of a program of activities to strengthen the capacity of TFS and other relevant line ministries and agencies to implement the Recipient's trade facilitation agenda, including carrying out stakeholder consultations, identifying, prioritizing and coordinating -6- trade facilitation initiatives, and monitoring and advancing the implementation of related reforms. 2. Trade Facilitation Agreement Challenge Facility Provision of Challenge Facility funds to selected line ministries and departments to carry out additional proposed activities related to the implementation of the Trade Facilitation Agreement. Part C. Improving Firm-Level Competitiveness Provision of: (a) technical and operational assistance for the administration of the Business Assistance Facility, including the recruitment of a BAF Management Contractor; and (b) Matching Grants to eligible Beneficiaries to obtain business development services for purposes of improving their performance and competitiveness, management and human resource capacity, and access to markets. Part D. Supporting Better and More Inclusive Policies I. Provision of technical and operational assistance for the management of Project activities, including day-to-day administration, coordination, financial management, financial audits, procurement, and monitoring and evaluation. 2. Carrying out of a program of activities to: (a) enable MOIC and other relevant ministries and departments to undertake improved economic analysis in support of evidence-based policy making; and (b) enable public access to trade-related information for the purpose of promoting a transparent and predictable policy environment. 3. Carrying out of a program of activities to facilitate public-private sector dialogue for the purpose of promoting private sector development and addressing challenges faced by the private sector. -7- SCHEDULE 2 Project Execution Section 1. Implementation Arrangements A. Institutional Arrangements The Recipient shall: 1. maintain, at all times during implementation of the Project, a Project Executive Committee chaired by a senior representative of the MOIC, with a mandate, terms of reference and composition satisfactory to the Association, which shall be responsible for: (a) providing general oversight and strategic direction in the implementation of the Project, including endorsing Annual Work Plans and Budgets and proposals under the Challenge Facility; and (b) reviewing periodic financial and progress reports prepared by the National Implementation Unit; 2. maintain, at all times during implementation of the Project, a National Implementation Unit within MOIC with a mandate, terms of reference and composition satisfactory to the Association, which includes, inter alia, a project director, a deputy director and technical and fiduciary staff, and which shall be responsible for: (a) coordinating the preparation of the Annual Work Plans and Budgets, progress reports and financial reports; (b) reviewing and proposing for endorsement proposals under the Challenge Facility; (c) coordinating the inputs of technical implementing departments and agencies into Project activities; (d) overseeing procurement and financial management arrangements; and (e) providing any other inputs to the Project Executive Committee and liaising with the Association on issues related to policy, strategy and Project implementation; and 3. within three (3) months from the Effective Date, appoint a BAF Management Contractor on terms of reference and with qualifications acceptable to the Association to support the NIU in the implementation of Part C of the Project, and thereafter maintain the said contractor for such purpose at all times during the implementation of Part C of the Project. B. Project Manuals and Guidelines The Recipient shall ensure that: (1) the Project is carried out in accordance with the arrangements and procedures set out in the Financial Management Manual; (2) Parts A.3(b) and B.2 of the Project are carried out in accordance with the arrangements and procedures set out in the Challenge Facility Guidelines; and (3) -8- Part C of the Project is carried out in accordance with the arrangements and procedures set out in the BAF Operations Manual (provided, however, that in the event of any conflict between the arrangements and procedures set out in any of the said Manuals and Guidelines and the provisions of this Agreement, the provisions of this Agreement shall prevail); and shall not amend, abrogate or waive any provision of the said Manuals and Guidelines unless the Association has provided its prior no-objection thereof in writing. C. Annual Work Plans and Budgets 1 . The Recipient shall ensure that the Association is furnished, not later than one (1) month before the beginning of each Fiscal Year during the implementation of the Project (or such later date as the Association may agree) for the Association's no-objection, a consolidated Annual Work Plan and Budget ("AWPB") containing all Project activities and Eligible Expenditures proposed to be included in the Project in the following Fiscal Year, including the Financing's and the Grant's respective shares of financing of the Eligible Expenditures. 2. The Recipient shall ensure that the Project is implemented in accordance with the AWPB as agreed with the Association (provided, however, that in the event of any conflict between the AWPB and the provisions of this Agreement, the provisions of this Agreement shall prevail) and shall provide, promptly as needed, its share of the Project financing as specified in the AWPB. 3. The Recipient shall not make or allow to be made any change to the AWPB without prior no-objection in writing by the Association. D. Challenge Facility To facilitate the carrying out Parts A.3(b) and B.2 of the Project, the Recipient shall make Challenge Facility funds available to selected line ministries and agencies in accordance with the eligibility criteria and approval and administration arrangements set out in the Challenge Facility Guidelines. E. Matching Grants 1 . To facilitate the carrying out Part C of the Project, the Recipient shall make Matching Grants available to eligible Beneficiaries in accordance with the eligibility criteria and approval and administration arrangements set out in the BAF Operations Manual. -9- 2. Without limitation upon the foregoing, the Recipient shall ensure that each Matching Grant is made under a Matching Grant Agreement between the Recipient, through the MOIC with the respective Beneficiary in accordance with the BAF Operations Manual and under terms and conditions acceptable by the Association, which shall include, inter alia: (a) A description of the eligible Sub-project activities and expenditures to be financed out of the proceeds of the respective Matching Grant, including the matching contribution from the Beneficiary, and the amount of the Matching Grant; (b) The obligations of the respective Beneficiary to: (i) carry out the Sub-project in accordance with the approved activity and financing plan in respect of such Sub-project; (ii) ensure that the Sub-project is carried out with due diligence and efficiency and in accordance with appropriate technical, economic, financial, and managerial practices, including in accordance with the provisions of the BAF Operations Manual and the Anti-Corruption Guidelines applicable to recipients of Financing proceeds other than the Recipient; (iii) provide or cause to be provided, promptly as needed, the agreed contribution required for the respective Matching Grant; (iv) ensure that the services to be financed out of the Matching Grant are procured under commercial practices acceptable to the Association in accordance with the provisions of the Procurement Regulations and as further specified in the BAF Operations Manual; (v) monitor and report in accordance with indicators acceptable to the Association, the progress of the Sub-project and the achievement of its objectives; (vi) comply with financial management requirements in accordance with the provisions of the BAF Operations Manual; (vii) enable the Recipient and the Association to inspect the Sub-project, its operation and any relevant records and documents; and (viii) prepare and furnish or cause to be prepared and furnished to the Recipient and the Association all such information as the -10- Recipient or the Association shall reasonably request relating to the foregoing; and (c) the right of the Recipient, through the MOIC, to suspend or terminate the right of the Beneficiary to use the proceeds of the Matching Grant, or obtain a refund of all or any part of the amount of the Matching Grant then withdrawn, upon the Beneficiary's failure to perform any of its obligations under the Matching Grant Agreement. 3. The Recipient shall, through the MOIC, exercise its respective rights and perform its respective obligations under each Matching Grant Agreement in such manner as to protect the interests of the Recipient and the Association and to accomplish the purposes of the Financing. Except as the Association shall otherwise agree, the Recipient shall not assign, amend, abrogate or waive any Matching Grant Agreement or any of its provisions. F. Safeguards The Recipient shall ensure that: (1) all terms of reference for any technical assistance or studies carried out under the Project are consistent with, and pay due attention to, the Association's environmental and social safeguards policies, as well as the Recipient's own laws relating to the environment and social aspects; and (2) in drafting any regulations, guidelines or procedures and carrying out capacity building activities under the Project, due attention is given to said policies and laws. Section II. Project Monitoring, Reporting and Evaluation The Recipient shall furnish to the Association each Project Report not later than forty-five (45) days after the end of each calendar semester, covering the calendar semester. Section III. Withdrawal of the Proceeds of the Financing A. General Without limitation upon the provisions of Article II of the General Conditions and in accordance with the Disbursement and Financial Information Letter, the Recipient may withdraw the proceeds of the Financing to finance Eligible Expenditures in the amount allocated and, if applicable, up to the percentage set forth against each Category of the following table: -11- Amount of the Percentage of Expenditures Category Financing Allocated to be Financed (expressed in SDR) (inclusive of Taxes) Goods, non-consulting 7,200,000 100% of the Financing's services, consulting agreed share of the cost services, Training, specified in the approved Operating Costs, and AWPB for each FY Matching Grants TOTAL AMOUNT 7,200,000 B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part A above, no withdrawal shall be made for payments made prior to the Signature Date, except that withdrawals up to an aggregate amount not to exceed SDRI,440,000 may be made for payments made prior to this date but on or after October 1, 2018, for Eligible Expenditures. 2. The Closing Date is December 31, 2022. -12- SCHEDULE 3 Repayment Schedule Principal Amount of the Credit Date Payment Due repayable (expressed as a percentage) * On each April 15 and October 15: commencing October 15, 2023 to and including 1.65% April 15, 2043 commencing October 15, 2043 to and including 3.40% April 15, 2048 * The percentages represent the percentage of the principal amount of the Credit to be repaid, except as the Association may otherwise specify pursuant to Section 3.05 (b) of the General Conditions. APPENDIX Definitions "Annual Work Plan and Budget" and the acronym "AWPB" mean each plan and budget which has been agreed with the Association in accordance with Section I.C of Schedule 2 to this Agreement; as said plan and budget may be modified from time to time with the prior written no-objection of the Association. 2. "Anti-Corruption Guidelines" means, for purposes of paragraph 5 of the Appendix to the General Conditions, the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011 and as of July 1, 2016. 3. "Beneficiary" means any private business entity selected in accordance with the eligibility criteria and procedures set forth in the BAF Operations Manual, to receive a Matching Grant for the financing of a Sub-project, and the term "Beneficiaries" means collectively all such Beneficiaries. 4. "Business Assistance Facility" and the acronym "BAF" mean the Business Assistance Facility established by the MOIC under Part C of the Project for the purposes of providing Matching Grants to Beneficiaries for the implementation of Sub-projects. 5. "BAF Management Contractor" means a contractor referred to in Section I.A.3 of Schedule 2 to this Agreement, or any successor thereto which the Association has confirmed in writing is acceptable for the purposes of implementation of Part C of the Project. 6. "BAF Operations Manual" means the Recipient's manual dated August 16, 2018 referred to in Section I.B.(3) of Schedule 2 to this Agreement, in form and substance satisfactory to the Association, containing detailed arrangements and procedures for the implementation of Part C of the Project, as said manual may be modified from time to time with the prior written no-objection of the Association; and such term includes any schedules, annexes and attachments to the BAF Operations Manual. 7. "Category" means a category set forth in the table in Section IIl.A of Schedule 2 to this Agreement. 8. "Challenge Facility" means a modality used to allocate funds to selected line ministries and departments under Parts A.3 and B.2 of the Project in accordance -14- with eligibility criteria and approval and administration arrangements set out in the Challenge Facility Guidelines. 9. "Challenge Facility Guidelines" means the Recipient's guidelines dated August 17, 2018 referred to in Section I.B.(2) of Schedule 2 to this Agreement, in form and substance satisfactory to the Association, containing detailed arrangements and procedures for the implementation of Parts A.3 and B.2 of the Project, as said guidelines may be modified from time to time with the prior written no-objection of the Association; and such term includes any schedules, annexes and attachments to the Challenge Facility Guidelines. 10. "Co-financing Deadline" means, for purposes of paragraph 16 of the Appendix to General Conditions, the deadline for the signature of the Grant Agreement referred to in the Preamble to this Agreement, and the term "Co-financier" means, for purposes of paragraph 13 of the Appendix to the General Conditions, the Association acting as administrator of the Lao Trade and Competitiveness Multi- Donor Trust Fund. I1. "DERM" means the Department of Enterprise Registration and Management in the MOIC, or any successor thereto. 12. "Fiscal Year" and the acronym "FY" mean the Recipient's fiscal year, which commences on January I and closes on December 31 of each year. 13. "Financial Management Manual" means the Recipient's manual dated August 15, 2018 referred to in Section I.B.(1) of Schedule 2 to this Agreement, in form and substance satisfactory to the Association, containing detailed arrangements and procedures for disbursement and financial management as required for the implementation of the Project, as said manual may be modified from time to time with the prior written no-objection of the Association; and such term includes any schedules, annexes and attachments to the Financial Management Manual. 14. "General Conditions" means the "International Development Association General Conditions for IDA Financing, Investment Project Financing", dated July 14, 2017. 15. "IPD" means the Investment Promotion Department in the Recipient's Ministry of Planning and Investment, or any successor thereto. 16. "Matching Grant" means a grant to be made available by the Recipient under the BAF out ofthe proceeds ofthe Financing to a Beneficiary to finance the reasonable -15- costs of services in accordance with the provisions of the respective Matching Grant Agreement; and "Matching Grants" means, collectively, all such grants. 17. "Matching Grant Agreement" means the agreement to be entered into between the Recipient, through MOIC and the respective Beneficiary for the purposes of implementing and financing a Sub-project; and "Matching Grant Agreements" means collectively, all such agreements. 18. "MOIC" means the Recipient's Ministry of Industry and Commerce, or any successor thereto which the Association has confirmed in writing is acceptable for the purposes of implementation of the Project. 19. "National Implementation Unit" and the acronym "NIU" mean the unit referred to in Section I.A.2 of Schedule 2 to this Agreement, or any successor thereto which the Association has confirmed in writing is acceptable for the purposes of implementation of the Project. 20. "Operating Costs" means reasonable costs required for the day-to-day coordination, administration, operation and supervision of Project activities, including leasing and/or routine repair and maintenance of vehicles, equipment, facilities and office premises, fuel, office supplies, utilities, consumables, communication expenses (including postage, telephone and internet costs), translation, operating costs of information campaigns including media costs; printing and photocopying expenses, bank charges, publications and advertising expenses, insurance, Project-related meeting expenses, Project-related travel, subsistence and lodging expenses, and other administrative costs and costs of contractual staff directly related to the Project, but excluding consulting fees and salaries, bonuses, fees and honoraria or equivalent payments of members of the Recipient's civil service. 21. "PICO" means a Provincial Industry and Commerce Office within each province of the Recipient, or any successor thereto. 22. "Procurement Regulations" means, for purposes of paragraph 87 of the Appendix to the General Conditions, the "World Bank Procurement Regulations for IPF Borrowers", dated July 2016, revised November 2017. 23. "Project Executive Committee" means the committee referred to in Section I.A.1 of Schedule 2 to this Agreement, or any successor thereto which the Association has confirmed in writing is acceptable for the purposes of implementation of the Project. -16- 24. "Signature Date" means the later of the two dates on which the Recipient and the Association signed this Agreement and such definition applies to all references to "the date of the Financing Agreement" in the General Conditions. 25. "Sub-project" means a set of specific activities under Part C of the Project to be carried out by a respective Beneficiary utilizing the proceeds of a Matching Grant; and the term "Sub-projects" means all such Sub-projects. 26. "Trade Facilitation Agreement" means the agreement on trade facilitation concluded at the World Trade Organization by all of its member states, which entered into force on February 22, 2017. 27. "TFS" means the Trade Facilitation Secretariat headed by the Minister of MOIC and supported by Department of Import and Export within MOIC, acting as the Recipient's inter-agency secretariat responsible for coordinating reforms in the area of trade facilitation, or any successor thereto. 28. "Training" means the reasonable costs incurred by the Recipient for training under the Project and directly attributable to seminars, workshops and study tours, along with travel and subsistence allowances for training participants, course fees, services of trainers, rental of training facilities, preparation, acquisition, distribution and reproduction of training materials, and other activities directly related to course preparation and implementation.