THE WORLD BANK IBRD * IDA I WORLD BANKGROUP OFFICIAL MR. MATHEW A. VERGHIS Acting Country Director, South East Asia DO CUM ENTS (Brunei, Cambodia, Lao PDR, Malaysia, Myanmar, Thailand) East Asia and Pacific Region May 18, 2017 H.E. Dr. Somdy Douangdy Deputy Prime Minister and Minister of Finance Ministry of Finance 23 Singha Road P.O. Box 46 Vientiane, Lao PDR Excellency: Re: Lao PDR: Early Childhood Education Project (IDA Grant No. H910-LA & IDA Credit No. 5370-LA) Amendments to the Financing Agreement We refer to the Financing Agreement dated May 14, 2014 between the Lao People's Democratic Republic ("Recipient") and the International Development Association ("Association") for the above- referenced Project. We also refer to your letter dated April 7, 2017 and the Association's aide memoire for the January 16-25, 2017 mid-term review of the Project, concerning the understandings reached between the Recipient and Association on changes to be made in the Project's activities, allocations, and associated implementation and monitoring arrangements. In accordance with the aforementioned understandings, the Association proposes to amend the Financing Agreement as follows: 1. Schedule 1 to the Financing Agreement shall be amended by modifying Part 2. 1(a)(i) and adding new Parts 2.1(a)(iv) and 3.2 (c), to read as follows: "...2.1(a)(i) Community awareness campaign sessions on early childhood education services at the village level, including the provision of VEDC grants for the implementation of the community awareness campaign sessions; "...2.1(a)(iv) Establishment of toy libraries, including the provision of VEDC Grants for the operation of such toy libraries; and" "...3.2(c) and (c) the provision of VEDC grants for the carrying out of Project implementation support activities under Parts 1.2, 2.1 and 2.2 of the Project by the District Implementing Teams. " 30th Floor, Siam Tower, 989 Rama I Road, Pathumwan, Bangkok 10330, Thailand Telephone: (66) 0 26868300, Facsimile: (66) 0 26868301, www.worldbank.orq/th H.E. Dr. Somdy Douangdy -2- May 18, 2017 2. A new item (x) shall be added to Section I.A.2(a) of Schedule 2 to the Financing Agreement, to read as follows: "(x) a VEDC Grants Manual" 3. Section .B of Schedule 2 to the Financing Agreement shall be amended by: (a) replacing the phrase "the Community Based Contracting Operational Manual, the Community Child Development Group Manual, or the National School Meals Program Manual, as the case may be," with the phrase "the Community Based Contracting Operational Manual, the Community Child Development Group Manual, the National School Meals Program Manual, or the VEDC Grants Manual, as the case may be"; and (b) replacing the phrase "a CCDG Sub-grant Agreement, a Construction Sub- grant Agreement, or a National School Meals Program Sub-grant Agreement, as the case may be," with the phrase "a CCDG Sub-grant Agreement, a Construction Sub-grant Agreement, a National School Meals Program Sub-grant Agreement, or a VEDC Grant Agreement, as the case may be." 4. A new paragraph 8 is added to Section L.B of Schedule 2 to the Financing Agreement, to read as follows: "8. Without limitation on the foregoing, the Recipient shall ensure that: (a) all Sub-grants shall be transferred to the bank accounts of the respective Beneficiaries; (b) all Sub-grants made shall be promptly disclosed on the MoES website, specifying the type of Sub-grants made to the respective Beneficiaries, their amounts and the date(s) of their payment; and (c) the amount of eligible travel and subsistence allowances paid under the Sub-grants shall be in accordance with the applicable provisions of Project Implementation Manual." 5. The withdrawal table set forth in Section IV.A.2 of Schedule 2 to the Financing Agreement shall be amended to read as follows: Category Amount of the Grant Amount of the Credit Percentage of Allocated (expressed Allocated (expressed Expenditures to be in SDR) in SDR) Financed (inclusive of Taxes) (1) Goods, works, non- 2,050,000 5,345,000 100% consulting services, consultants' services, Training and Incremental Operating Costs for the Project (2) CCDG Grants 500,000 100,000 100% of the amount disbursed (3) National School 4,010,000 100% of the amount Meals Program Grants disbursed (4) Construction Grants 2,230,000 3,160,000 100% of the amount disbursed (5) VEDC Grants 310,000 100% of the amount disbursed (6) Unallocated 495,000 disbursed TOTAL AMOUNT 9,100,000 9,100,000 H.E. Dr. Somdy Douangdy -3- May 18, 2017 6. Paragraph I of Section IV.B of Schedule 2 to the Financing Agreement shall be amended to read as follows: "L. Notwithstanding the provisions of Part A of this Section no withdrawal shall be made for: (a) payments made prior to the date of this Agreement; and (b) VEDC Grants under Category (5), unless and until the Recipient had adopted the VEDC Grants Manual, in form and substance satisfactory to the Association." 7. Paragraphs 3, 50, 55, 56 and 57 of the Appendix to the Financing Agreement shall be amended to read as follows: "3. "Beneficiary" means: (a) for a Construction Grant: the VEDC receiving the grant from the Provincial Education and Sports Services; (b) for a CCDG Grant: the VEDC receiving the grant from the Provincial Education and Sports Services; (c) for a National School Meals Program Grant: the school receiving the grant from the Provincial Education and Sports Services; and (d) for a VEDC Grant: the VEDC receiving the grant from the Provincial Education and Sports Services." "50. "Project Implementation Manual" means the Project Implementation Manual referred to in Section 1.A.2.(a) of Schedule 2 to this Agreement which includes (a) a Community Based Contracting Operational Manual, (b) a Community Child Development Group Manual; (c) a National School Meals Program Manual; and (d) a VEDC Grants Manual." "55. "Sub-grant" means a CCDG Grant, a Construction Grant, a National School Meals Program Grant, or a VEDC Grant, as the case may be, and the term "Sub-grants" means all of the said grants." "56. "Sub-grant Agreement" means the CCDG Grant Agreement, the Construction Grant Agreement, the National School Meals Program Grant Agreement, or the VEDC Grant Agreement, as the case may be, and the term "Grant Agreements" means all of the said Grant Agreements." "57. "Sub-project" means a CCDG Sub-project, a Construction Sub-project, a National School Meals Program Sub-project, or a VEDC Sub-project, as the case may be, and the term "Sub- projects" means all of the said Sub-projects." 8. Paragraph 30 ("Incremental Operating Costs") of the Appendix to the Financing Agreement shall be amended by modifying the phrase "Project staff travel, lodging and per diems" to read "Project staff travel, lodging and per diems in accordance with the provisions of the Project Implementation Manual." 9. New paragraphs 62 through 65 shall be added to the Appendix to the Financing Agreement (with the previous paragraph 62 renumbered as paragraph 66), to read as follows: H.E. Dr. Somdy Douangdy -4- May 18, 2017 "62. "VEDC Grant" means a Village Education Development Committee Grant in Kip made or to be made available by the Recipient through the relevant Provincial Education and Sports Services out of the proceeds of the Financing to a VEDC to finance, in part, the reasonable cost of goods, works and services required for the carrying out of the corresponding VEDC Sub-project." "63. "VEDC Grant Agreement" means the agreement to be entered into between the VEDC and the Provincial Education and Sports Services for purposes of providing a VEDC grant and the carrying out of a VEDC Sub-project by a VEDC in accordance with Section I.B. of Schedule 2 to this Agreement." "64. "VEDC Sub-project" means a set of activities carried out or to be carried out by a VEDC under Parts 2.1(a)(i), 2.1(a)(iv) and 3.2(c) of the Project, using the proceeds of a VEDC Grant." "65. "VEDC Grants Manual" means the manual developed by the Recipient for the VEDC Grants to be provided under this Project and referred to in Section I.A.2 of Schedule 2 to this Agreement attached as an annex to the Project Implementation Manual, as such Manual may be revised from time to time with the prior written approval of the Association, and such term includes annexes and schedules to such Manual." Except as specifically amended by this letter, all other provisions of the Financing Agreement shall remain unchanged and in full force and effect. Please confirm your agreement with the amendments set out above by countersigning, dating and returning to us the enclosed copy of this letter. Upon receipt by the Association of the countersigned copy of this letter, the amendments shall become effective as of the date of countersignature. Very truly yours, INTERNATIONAL DEVELOPMENT ASSOCIATION Mathew A. Verghis AGREED: LAO PEOPLE'S DEMOCRATIC REPUBLIC By: Authon ed XM Id Name: ASO Title: OqU 4f Prr 3il'Sjq, ok F Date: -3 a MAY 201