KP/FATA/BALOCHISTAN MDTF GRANT NUMBER TF0A3301-PK KP/FATA/Balochistan Multi-Donor Trust Fund Project Agreement (Amended and Restated Project Agreement) Governance and Policy Project for Merged Areas (formerly Governance and Policy Project for Federally Administered Tribal Areas) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION acting as administrator of the KP / FATA / Balochistan Multi-Donor Trust Fund and PROVINCE OF KHYBER PAKHTUNKHWA Dated January 18, 2017 (As Amended and Restated) KP/FATA/BALOCHISTAN MDTF GRANT NUMBER TF0A3301-PK KP/FATA/BALOCHISTAN MULTI-DONOR TRUST FUND PROJECT AGREEMENT AGREEMENT between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and INTERNATIONAL DEVELOPMENT ASSOCIATION (collectively, “World Bank”), acting as administrator of the KP / FATA / Balochistan Multi-Donor Trust Fund, and the PROVINCE OF KHYBER PAKHTUNKHWA (“Project Implementing Entity”) (“Project Agreement”) in connection with the Grant Agreement (“Grant Agreement”) dated January 18, 2017, between the ISLAMIC REPUBLIC OF PAKISTAN (“Recipient) and the World Bank, as amended. The World Bank and the Project Implementing Entity hereby agree as follows: WHEREAS the World Bank and the former project implementing Entity, namely, the “Federally Administered Tribal Areas” (“Original Project Implementing Entity”) entered into a project agreement dated January 18, 2017, (“Original Project Agreement”) for the implementation of the project described in Schedule 1 to the Grant Agreement (“Project”). WHEREAS the Recipient has requested the World Bank to restructure the Project in a letter dated January 10, 2019 from the Economic Affairs Division, including partial cancellation of the Grant and changing the Original Project Implementing Entity to the Province of Khyber Pakhtunkhwa, pursuant to the Constitution (Twenty-fifth Amendment) Act, 2018 passed by the Parliament of Pakistan and the Khyber Pakhtunkhwa Assembly in May 2018, whereby Pakistan has merged the Federally Administered Tribal Areas into the Province of Khyber Pakhtunkhwa. WHEREAS the World Bank has agreed, on the basis, inter alia, of the foregoing to amend the Original Project Agreement upon the terms and conditions set forth in this Agreement; the Grant Agreement will be amended by a separate letter of amendment to be entered into between the Recipient and the World Bank. NOW THEREFORE the World Bank and the Project Implementing Entity hereby agree to amend and restate the Original Project Agreement to read as follows: ARTICLE I — STANDARD CONDITIONS; DEFINITIONS 1.01. The Standard Conditions (as defined in the Appendix to the Grant Agreement) constitute an integral part of this Project Agreement. 1.02. Unless the context requires otherwise, the capitalized terms used in this Project Agreement have the meanings ascribed to them in the Grant Agreement or the Standard Conditions. -2- ARTICLE II — PROJECT 2.01. The Project Implementing Entity declares its commitment to the objectives of the Project. To this end, the Project Implementing Entity shall carry out the Project in accordance with the provisions of Article II of the Standard Conditions, and shall provide promptly as needed, the funds, facilities, services and other resources required for the Project. 2.02. Without limitation upon the provisions of Section 2.01 of this Project Agreement, and except as the World Bank and the Project Implementing Entity shall otherwise agree, the Project Implementing Entity shall carry out the Project in accordance with the provisions of the Schedule to this Project Agreement. ARTICLE III — REPRESENTATIVE; ADDRESSES 3.01. The Project Implementing Entity’s Representative is the Director General (Projects) of the Additional Chief Secretary, Planning and Development Department. 3.02. The World Bank’s Address is: International Bank for Reconstruction and Development International Development Association 1818 H Street, NW Washington, DC 20433 United States of America Telex: Facsimile: 248423 (MCI) or 1-202-477-6391 64145 (MCI) 3.03. The Project Implementing Entity’s Address is: Attached Department Complex Khyber Road Peshawar 25000 Khyber-Pakhtunkhwa Pakistan Facsimile: 92-91-921-0434 -3- AGREED at Islamabad, Islamic Republic of Pakistan, as of the later of the two dates written below. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INTERNATIONAL DEVELOPMENT ASSOCIATION acting as administrator of the KP / FATA / Balochistan Multi-Donor Trust Fund By _____________________________________ Authorized Representative Patchamuthu Illangovan Name: __________________________ Country Director Title: __________________________ 31-Jul-2019 Date: __________________________ PROVINCE OF KHYBER PAKHTUNKHWA By _____________________________________ Authorized Representative Shakeel Qadir Khan Name: __________________________ ACS, Khyber Pakhunkhwa Title: __________________________ 08-Jan-2020 Date: __________________________ -4- SCHEDULE Execution of the Project Section I. Implementation Arrangements A. Institutional Arrangements 1. The Project Implementing Entity shall vest the overall responsibility for the implementation of Project activities in its Planning and Development Department (“P&DD”) as set out in the Project Operations Manual. To this end, the Project Implementing Entity shall: (a) maintain throughout the period of implementation of the Project, a Project Steering Committee (“PSC”), headed by the Additional Chief Secretary of the P&DD, with composition and terms of reference satisfactory to the World Bank. The PSC shall be responsible for providing oversight of the Project activities, including periodic review of Project activities, identifying problems and corrective measures, providing policy guidance, and coordinating inter-departmental efforts. The PSC shall meet at least twice every year; and (b) maintain throughout the period of implementation (i) an Operations Support Unit (“OSU”) headed by a coordinator, and (ii) appoint, no later than three (3) months after the Effective Date, the aforementioned coordinator, two finance officers, two account assistants and two procurement assistants to the OSU, all with qualifications, experience and on terms of reference satisfactory to the World Bank. The OSU shall be responsible for, inter alia, procurement and contract management, financial management, internal audit, monitoring and evaluation, strategic communications, gender, information and communication technology, and organization of learning activities. 2. The Project Implementing Entity shall maintain throughout the implementation of the Project: (a) a grievance redress mechanism with guidelines and procedures satisfactory to the World Bank; and (b) a grievance redress committee with composition and terms of reference satisfactory to the World Bank. B. Project Operations Manual 1. The Project Implementing Entity shall: (a) implement the Project in accordance with the Project Operations Manual; provided, however, that in the event of conflict between the provisions of said manual on the one hand, and those of this Project Agreement or the -5- Grant Agreement on the other hand, the provisions of the Project Agreement and the Grant Agreement shall govern; and (b) not amend, suspend, waive, and/or void any provision of the Project Operations Manual, whether in whole or in part, without the prior written agreement of the World Bank. C. Annual Work Plans and Budget 1. The Project Implementing Entity shall, throughout Project implementation, furnish to the World Bank for approval as soon as available, but in any case no later than three (3) months before the start of each fiscal year, an annual work plan and budget for the Project for each subsequent fiscal year, of such scope and detail as the World Bank shall have reasonably requested, except for the annual work plan and budget for the first fiscal year which shall be furnished prior to the commencement of any activities under the Project. 2. The Project Implementing Entity shall, no later than one (1) month after furnishing each annual work plan and budget referred to in the preceding paragraph to the World Bank, finalize and adopt such work plan and budget, ensuring that the same is approved by the PSC, and thereafter ensure that the Project is carried out in accordance with such work plan and budget as agreed in writing with the World Bank. D. Anti-Corruption The Project Implementing Entity shall ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines. Section II. Project Monitoring, Reporting and Evaluation A. Project Reports 1. The Project Implementing Entity shall monitor and evaluate the progress of the Project and prepare Project Reports in accordance with the provisions of Section 2.06 of the Standard Conditions and on the basis of indicators acceptable to the World Bank. Each such Project Report shall cover the period of one (1) calendar quarter, and shall be furnished to the Recipient and the World Bank no later forty-five (45) days after the end of the period covered by such report. B. Financial Management, Financial Reports and Audits 1. The Project Implementing Entity shall maintain a financial management system and prepare financial statements in accordance with consistently applied accounting standards acceptable to the World Bank, both in a manner adequate to -6- reflect the operations and financial condition of the Project Implementing Entity, including the operations, resources and expenditures related to the Project. Further to this end, the Project Implementing Entity shall maintain the updated Financial Management Manual in form and substance satisfactory to the World Bank, ensuring that the same Financial Management Manual shall include, inter alia, a strong and comprehensive internal control framework for Project activities; cash and bank management; payroll processing; payment processing and service standards. 2. Without limitation on the provisions of Part A of this Section, the Project Implementing Entity shall prepare and furnish to the World Bank no later than forty-five (45) days after the end of each calendar quarter, interim unaudited financial reports for the Project covering the respective quarter, in form and substance satisfactory to the World Bank. 3. The Project Implementing Entity shall have its financial statements referred to above audited by independent auditors acceptable to the World Bank, in accordance with consistently applied auditing standards acceptable to the World Bank. Each audit of these financial statements shall cover the period of one (1) fiscal year of the Project Implementing Entity. The Project Implementing Entity shall ensure that the audited financial statements for each period shall be: (a) furnished to the Recipient and the World Bank no later than six (6) months after the end of the period; and (b) made publicly available in a timely fashion and in a manner acceptable to the World Bank. Section III. Procurement 1. All goods, non-consulting services and services required for the Project and to be financed out of the proceeds of the Grant shall be procured in accordance with the provisions of Section III of Schedule 2 to the Grant Agreement. 2. The Project Implementing Entity shall by no later than three (3) months after the Effective Date, and thereafter maintain throughout the period of Project implementation: (a) a procurement documentation and record keeping system, including a publicly accessible website, in a format agreed with the World Bank, showing, inter alia, the Project procurement plans, the status of procurement of various contracts (the summary of proposals/bid evaluations and awards disclosed proactively in accordance with protocols agreed in the Project Operations Manual), contract performance and payment delays, and a list of procurement complaints and status thereof; and -7- (b) a system for the handling of procurement complaints, in a manner and substance acceptable to the World Bank, which system shall include, inter alia, the maintenance of a complaint database, a standard protocol setting forth triggers for carrying out investigations, and a sanctions regime. Notwithstanding the foregoing, for any procurement done through International Competitive Bidding, the World Bank’s prescribed complaint redress mechanism shall apply.