.FFICIA& DOCUMENTS LOAN NUMBER 1835 IND

Loan Agreement

(Nucleus Estate and Smallholders IV Project)

between

REPUBLIC OF INDONESIA

and

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

Dated , 1980

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LOAN NUMBER 1835 IND

LOAN AGREEMENT

AGREEMENT, dated , 1980, betweenREPUBLIC OF INDONESIA (he inafter called the Borrower) andINTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinaftercalled the Bank).

ARTICLE 1

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept allthe provisions of the General Conditions Applicable to Loanand Guarantee Agreements of the Bank, dated March 15, 1974,with the same force and effect as if they were fully set forthherein (said General Conditions Applicable to Loan and GuaranteeAgreements of the Bank being hereinafter called the GeneralConditions).

Section 1.02. Wherever used in this Agreement unless thecontext otherwise requires, the several terms defined in theGeneral. Conditions have the respective meanings therein setforth and the following additional terms have the followingmeanings:

(a) "APBD" means ANGGARAN PENDAPATAN DAN BELANJA DAERAH,the Provincial/Kabupaten Revenues and Expenditures budget;

(b) "APBN" means ANGGARAN PENDAPATAN DAN BELANJA NEGARA,the State Revenues and Expenditures budget;

(c) "BAPPENAS" means the Borrower's National DevelopmentPlanning Agency;

(d) "Basic Agrarian Law" means Law No. 5/1960 of the Bor-rower (UNDANG-UNDANG POKOK AGRARIA), as the same may be amendedfrom time to time;

(e) "Betung Settlement Area" means an area of about 16,000ha located about 75 km west of Palembang in the Kabupaten MusiBanyuasin in the Borrower's Province of South Sumatra;

(f) "BI" means Bank Indonesia, established by and operatingunder Law No. 13/1968 of the Borrower;

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(g) "BRI" means the BANK RAKYAT INDONESIA, established by

and operating under Law No. 21/1968 of the Borrower;

(h) "Credit Expenditures" means expenditures for Part A

of the Project which are intended to be recovered from Partici-

pating Settlers as provided in the Smallholder Financing Arrange-

me!ats, including, inter alia, expenditures for oil palm develop-

ment, machinery and equipment, primary and secondary village roads

and collection tracks, settler housing, the subsistence package

and overheads for oil palm development;

(i) "DGE" means the Directorate General of Estates of

the Borrower's Ministry of Agriculture;

(j) 'DPD" means DINAS PERKEBUNAN DAERAH, the Provincial

Estates Crop Services;

(k) "Governing Regulation" means any of (i) Presidential

Decrees Nos. 44 and 45 of 1974, or (ii) the Decrees/Regulations/

Instructions referred to in subsections (p), (s), (t), (u), and

(y) of this Section 1.02;

(1) "Hak Milik" means the right of ownership in respect

of land, as provided under the Basic Agrarian Law;

(m) "INPRES" means INSTRUKSI PRESIDEN, the Borrower's

program for funding Provincial and Kabupaten high priority

community projects;

(n) "Non-Credit Expenditures" means expenditures for Part

A of the Project which are to be financed from (i) the annual

budget sources of the Borrower (APBN) and the Provincial Govern-

ment of South Sumatra (INPRES and APBD) and (ii) the proceeds of

the Loan which are not intended to be recovered from Participating

Settlers. Non-credit expenditures will include, inter alia,

expenditures for water supply and sanitation, health facilities,

schools, village infrastructure and management fees payable to the

nucleus estate;

(o) "Participating Settler" means a settler and his family

settled in the Settlement Area;

(p) ."PNP" means a PERUSARAAN NEGARA PERKEBUNAN, a state-

owned enterprise of the Borrower established and so designated

under Government Regulation No. 14/1968;

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(q) "PNP X" means PERUSAHAAN NEGARA PERKEBUNAN, and anysuccessor thereto;

(r) "Provincial Coordinating Committee" means the commit-tee established at the Provincial level in South Sumatra tocoordinate the implementation of Part A of the Project, as morefully set forth in paragraph 1 (d) of. Schedule 5 to this Agree-ment;

(s) "PTP" means a PERSEROAN TERBATAS PERKEBUNAN, which is apublic sector agricultural estate of the Borrower establishedpursuant to Law No. 9/1969 of the Borrower;

(t) "PTP XI" means PERSEROAN TERBATAS PERKEBUNAN XI estab-lished and so designated under Govertment Regulation No. 34/1971,pursuant to Law No. 9/1969 of the Borrower, and any successorthereto;

(u) "PTP XIII" means PERSEROAN TERBATAS PERKEBUNAN XIIIestablished and so designated under Government Regulation No.24/1971, pursuant to Law No. 9/1969 of the Borrower and any suc-cessor thereto;

(v) "Rupiah" and "Rp" mean the currency of the Borrower;

(w) "Smallholder Development Agreement" means the agreementto be entered into between DGE and PNP X for the purposes of PartA of the Project, pursuant to Section 3.03 of this Agreement;

(x) "Subsidiary Loan Agreement" means the subsidiary loanagreement to be entered into between the Borrower or BI on behalfof the Borrower and PNP X for the purposes of Part B of theProject, pursuant to Section 3.05 of this Agreement; and

(y) "Team Khusus". means TEAM KHUSUS PROYEK KERJASAMA LUARNEGERI the team created by decree No. 695/1979 of the Borrower'sMinister of Agriculture to assist the DGE in externally financedprojects.

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrower,on the terms and conditions in the Loan Agreement set forth

or referred to, an amount in various currencies equivalent to

forty-two million dollars ($42,000,000).

Section 2.02. The amount of the Loan may be withdrawn

from the Loan Account in accordance with the provisions of

Schedule 1 to this Agreement, as such Schedule may be amended fromtime to time by agreement between the Borrower and the Bank, for

expenditures made (or, if the Bank shall so agree, to be made) inrespect of the reasonable cost of goods and services required forthe Project and to be financed out of the proceeds of the Loan.

Section 2.03. Except as the Bank shall otherwise agree,procurement of the goods and civil works required for the Projectand to be financed out of the proceeds of the Loan, shall be

governed by the provisions of Schedule 4 to this Agreement.

Section 2.04. The Closing Date shall be December 31, 1986,or such later date as the Bank shall establish. The Bank shallpromptly notify the Borrower of such later date.

Section 2.05. The Borrower shall pay to the Bank a commitment

charge at the rate of three-fourths of one per cent (3/4 of

1%) per annum on the principal amount of the Loan not withdrawnfrom time to time.

Section 2.06. The Borrower shall pay interest at the rate

of eight and one-fourth per cent (8.25%) per annum on the prin-

cipal amount of the Loan withdrawn and outstanding from time totime.

Section 2.07. Interest and other charges shall be payable

semiannually on May 1 and November 1 in each year.

Section 2.08. The Borrower shall repay the principal amountof the Loan in accordance with the amortization schedule set

forth in Schedule 3 to this Agreement.

ARTICLE III

Execution of the Project

Section 3.01. (a) The Borrower shall carry out the Project,or cause the Project to be carried out, with due diligence andefficiency and in conformity with appropriate administrative,

agricultural, engineering, environmental and financial practices,

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and shall provide, in a timely manner, as needed, the funds,facilities, services and other resources required for the purpose.

(b) Without limitation on subsection (a) above, the Borrowershall prefinance from accounts in the Ministry of Finance expendi-tures of PTP XI and PTP XIII necessary to carry out Part C.2 ofthe Project.

(c) The Project shall be carried out in accordance with theorganization and mahagement arrangements set forth in Schedule 5to this Agreement.

(d) Without limitation on subsection (a) above, the fundsfor Part A of the Project shall be provided in accordance with theprovisions of Schedule 7 to this Agreement.

Section 3.02. Except as the Borrower and the Bank shallotherwise agree, the Borrower shall employ or cause to be employedconsultants and specialists whose qualifications, experience andterms and conditions of employment shall be satisfactory to theBorrower and the Bank, as follows:

(a) to assist in carrying out Part B of the Project an oilpalm engineer, a mechanical/civil engineer and a financialadvisor at PNP X for a period of 108 man-months; and

(b) to assist in carrying out field and factory inspectionservices for PNP X consultants or specialists for a period of60 man-months.

Section 3.03. Except as the Borrower ant the Bank mayotherwise agree, the Borrower shall, for purposes of Part A of theProject, cause DGE and PNP X to enter into a Smallholder Develop-ment Agreement in form and substance satisfactory to the Bank;said Smallholder Development Agreement to include, inter alia, theprovisions set forth in Schedule 6 to this Agreement.

Section 3.04. Without limitation or restriction upon theprovisions of Section 3.01 (a) hereof, the Borrower shall causethe parties to the agreement referred to in Section 3.03 aboveto perform in a timely manner their respective obligations there-under.

Section 3.05. (a) The Borrower shall relend the proceedsof the Loan allocated for Part B of the Project to PNP X under asubsidiary loan agreement in form and substance satisfactory to

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the Bank, which agreement shall include, inter alia, the terms andconditions set forth in Schedule 8 to this Agreement.

(b) The Borrower shall exercise its rights under the Subsid-iary Loan Agreement in such manner as to protect the interestsof the Borrower and the Bank and to accomplish the purposes ofthe Loan, and except as the Bank shall otherwise agree, theBorrower shall not assign, amend, abrogate or waive the SubsidiaryLoan Agreement or any provision thereof.

Section 3.06. (a) The Borrower undertakes to insure, ormake adeqiate provision for the insurance of, the imported goodsto be financed out of the proceeds of the Loan against hazardsincident to the acquisition, transportation and delivery thereofto the place of use or installation, and for such insurance anyindemnity shall be payable in a currency freely usable by theBorrower to r-Dlace or repair such goods.

(b) Except as the Bank shall otherwise agree, all goodsand services financed out of the proceeds of the Loan shallbe used exclusively for the Project until its completion.

Section 3.07. (a) The Borrower shall furnish to the Bank,promptly upon their preparation, the plans, specifications,reports, contract documents and work and procurement schedules forthe Project, and any material modifications thereof or additionsthereto, in such detail as the Bank shall reasonably request.

(b) The Borrower: (i) shall maintain records and proceduresadequate to record and monitor the progress of the Project (in-cluding its cost and the benefits to be derived from it), to

identify the goods and services financed out of the proceeds ofthe Loan, and to disclose their use in the Project; (ii) shall

enable the Bank's accredited representatives to visit the facili-ties and construction sites included in the Project and to examine

the goods financed out of the proceeds of the Loan and any rele-vant records and documents; and (iii) shall furnish to the Bank at

regular intervals all such information as the Bank shall reason-ably request concerning the Project, its cost and, where appro-priate, the benefits to be derived from it, the expenditureof the proceeds of the Loan and the goods and services financedout of such proceeds.

(c) Promptly after completion of the Project, but in any

event not later than six months af.er the Closing Date or such

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later date as may be _greed for this purpose between the Borrowerand the Bank, the Borvjwer shall prepare and furnish to the Bank areport, of such scope ind in such detail as the Bank shall reason-ably request, on the execution and initial operation of theProject, its cost and the benefits derived and to be derived fromit, the performance by the Borrower and the Bank of their respec-tive obligations undec the Loan Agreement and the accomplishmentof the purposes of the Loan.

Section 3.08. The Borrower shall take or cause to be takenall such action as shall be necessary to acquire as and whenneeded all such land and rights in respect of land as shall berequired for carrying out the Project and shall furnish to theBank, promptly after such acquisition, evidence satisfactoryto the Bank that such land and rights in respect of land areavailable for purposes related to the Project.

Section 3.09. Except as the Borrower and the Bank shallotherwise agree, the Borrower shall cause PNP X to purchasefrom Participating Settlers all oil palm (FFB) offered for sale(including quantities required to be delivered to amortizeParticipating Settler debt obligations) at a price equivalent toabout 50% of the prevailing f.o.b. price for palm oil, subject,however to adjustment from time to time, for: (a) significantchanges in the oil content of the FFB received or in such f.o.b.price from those prevailing at the date of this Agreement; or (b)significant changes in the collection, processing or marketingcosts of the nucleus estate processor, from those prevailing atthe date of this Agreement.

Section 3.10. (a) Except as the Borrower and the Bank shallotherwise agree, the Borrower shall ensure, subject to the provi-sion of paragraph (b) of this Section 3.10, that each Partici-pating Settler:

(i) upon arrival, through an agreement with the ProjectManager, obtains the right to use 1 ha for foodcrops and agrees to work for about 3 years as alaborer for the nucleus estate; and

(ii) receives within three years after settlement HakMilik to 3 ha of land, subject, however, to reten-tion by BRI of the Hak Milik certificate as secur-ity for Participating Settler debt; and

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(b) the Borrower, through the Project Manager, shall peri-

odically review the performance of Participating Settlers, and

after consultation with the Provincial Coordinating Committee,shall take appropriate action in the case of any settler found to

have been deficient in his work in the oil palm area being devel-

oped by PNP X or in the husbandry of his land. Without limiting

the generality of the foregoing, the Borrower shall not, exceptas otherwise mutually agreed between the Borrower and the Bank,issue any certificate evidencing Hak Milik in respect of land toany settler who has so been found deficient.

Section 3.11. Except as the Borrower and the Bank shall

otherwise agree, the Borrower shall cause the Project Manager,assisted by Team Khusus, to prepare by October 31, 1980 andthereafter by October 31 of each year, a proposed annual budget

and work program showing in detail the program of work for theProject to be undertaken by the nucleus estate and the ProvincialGovernment during the following year.

Section 3.12. Except as the Borrower and the Bank shall

otherwise agree, the Borrower shall require the Project Manager

assisted by the Provincial Coordinating Committee: (a) to prepare

and send to DGE for the Borrower's approval at least 6 monthsprior to the start of each fiscal year, an annual budget for

Non-Credit Expenditures; and (b) to maintain appropriate cost

accounts acceptable to the Borrower and the Bank in respect ofsuch expenditures.

ARTICLE IV

Other Covenants

Section 4.01. (a) It is the policy of the Bank, in makingloans to, or with the guarantee of, its members not to seek,in normal circumstances, special security from the member con-

cerned but to ensure that no other external debt shall havepriority over its loans in the allocation, realization or dis-

tribution of foreign exchange held under the control or for the

benefit of such member. To that end, if any lien shall be created

on any public assets (as hereinafter defined), as security for

any external debt, which will or might result in a priority for

the benefit of the creditor of such external debt in the alloca-

tion, realization or distribution of foreign exchange, such lien

shall, unless the Bank shall otherwise agree, ipso facto and at no

cost to the Bank, equally and ratably secure the principal of,

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and interest and other charges on, the Loan, and the Borrower,in creating or permitting the creation of such lien, shall makeexpress provision to that effect; provided, however, that, if forany constitutional or other legal reason such provision cannotbe made with respect to any lien created on assets of any ofits administrative subdivisions, the Borrower shall promptly andat no cost to the Bank secure the principal of, and interest andother charges on, the Loan by an equivalent lien on other publicassets satisfactory to the Bank.

(b) The foregoing undertaking shall not apply to: (i)any lien created on property, at the time of purchase thereof,solely as security for payment of the purchase price of suchproperty; and (ii) any lien arising in the ordinary course ofbanking transactions and securing a debt maturing not more thanone year after its date.

(c) As used in this Section, the term "public assets"means assets of the Borrower, of any administrative subdivisionthereof and of any entity owned or controlled by, or operating forthe account or benefit of, the Borrower or any such subdivision,including gold and foreign exchange assets held by any institutionperforming the functions of a central bank or exchange stabiliza-tion fund, or similar functions, for the Borrower.

Section 4.02. (a) The Borrower shall maintain or cause tobe maintained records adequate to reflect in accordance withconsistently maintained sound accounting practices the operations,resources and expenditures, in respect of the Project, of thedepartments or agencies of the Borrower responsible for carryingout the Project or any part thereof, including without limitationto the foregoing, separate accounts reflecting all expendituresdescribed in Categories (1) and (2) of the table in paragraph 1 ofSchedule 1 to this Agreement on account of which withdrawals arerequested from the Loan Account on the basis of certificates ofexpenditure.

(b) The Borrower shall retain, until one year after theClosing Date, all records (orders, invoices, bills, receipts andother documents) evidencing the expenditures on account of whichwithdrawals are requested from the Loan Account on the basis ofcertificates of expenditure and shall enable the Bank's accreditedrepresentatives to examine such records.

(c) Without limitation or restriction upon the provisionsof Section 4.02 (a), the Borrower shall cause PNP X to main'ain

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separate accounts in respect of expenditures for Part B of theProject.

(d) The accounts of all agencies of the Borrower participat-ing in the implementation of the Project or any part thereof,relating to the Project, which are to be kept pursuant to theprovisions of subsections (a), (b) and c) of this Section 4.02,shall be audited each fiscal year in accordance with appropriateauditing principles consistently applied by independent auditorsacceptable to the Bank, and as soon as available, but in any casenot later than four months after the end of each such year, theBank shall be furnished with certified copies of such accounts forsuch year as so audited and the report of such audit by suchauditors of such scope and in such detail as the Bank shall havereasonably requested.

Section 4.03. (a) The Borrower shall cause PNP X to maintainrecords adequate to reflect in accordance with consistentlymaintained appropriate accounting practices its respectiveoperations and financial conditions.

(b) In addition to the audits envisaged under Section4.02 (d) of this Agreement the Porrower shall cause PNP X to: (i)have its accounts and financial statements (balance sheets,statements of income and expenses and related statements) for eachfiscal year audited, in accordAnce with appropriate auditingprinciples consistently applied, by independent auditors accept-able to the Bank; (ii) furnish to the Bank as soon as available,but in any case not later than four months after the end of eachsuch year, (A) certified copies of its financial statements forsuch year as so audited and (B) the reports of such audit by saidauditors, of such scope and in such detail as the Bank shall havereasonably requested inclading, without limitation to the fore-going, a separate opinion by said auditors in respect of theexpenditures and records referred to in Section 4.01 (b) of thisAgreement as to whether the proceeds of the Loan withdrawn fromthe Loan Account on the basis of certificates of expenditure havebeen used for the purpose for which they were provided; and (iii)furnish to the Bank such other information concerning the accountsand financial statements and the audits thereof as the Bank shallfrom time to time reasonably request.

Section 4.04. The Borrower shall cause PNP X to take out andmaintain with responsible insurers, or to make other provisionsatisfactory to the Bank for, insuran,'e against such risks and insuch amounts as shall be consistent with appropriate practice.

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Section 4.05. The Borrower shall cause PNP X at all times tomanage its affairs, maintain its financial position, plan itsfuture expansion and carry on its operations, all in accord-ance with sound agricultural, business, engineering, environmentaland financial practices and under the supervision of experiencedand competent management and supervisors, if any, assisted byqualified staff in adequate numbers.

Section 4.06. The Borrower shall cause PNP X:

(a) to take all steps necessary to acquire, maintain andrenew all such rights and interests in land and all such otherrights,. powers, privileges and franchises as are necessary oruseful in the conduct of its business; and

(b) at all times to operate and maintain its installationsand oil palm plantings, including, inter alia, the areas developedunder the Project, equipment and other property, and promptly asrequired to make all necessary repairs and renewals thereof, allin accordance with sound agricultural, business, and engineeringpractices.

Section 4.07. The Borrower shall cause the roads included inthe Project to be maintained in accordance with sound engineeringand financial practices and shall make available, or cause to bemade available, sufficient funds and facilities for the purpose.

ARTICLE V

Remedies of the Bank

Section 5.01. For the purposes of Section 6.02 of the GeneralConditions, the following additional events are specified pursuantto paragraph (k) thereof:

(a)' the Borrower or any other authority having jurisdictionshall have taken any action for the dissolution or disestablish-ment of PNP X or for the suspension of all or part of its opera-tions;

(b) PNP X shall have been unable to pay its debts as theymature or any action or proceeding shall have been taken by PNP Xor by others whereby any of the property of PNP X shall or may bedistributed among its creditors;

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(c) the Governing Regulation or any provision thereofshall have been repealed, amended, suspended, varied or waived, soas to affect adversely: (i) the carrying out of the Project; (ii)the performance by the Borrower of any other of its obligationsunder this Agreement; or (iii) the performance by any party to anyof the agreements referred to in Section 3.03 or in Section3.05 of this Agreement, of its respective obligations under suchagreement; and

(d) any of the agreements referred to in Section 3.03or Section 3.05 of this Agreement shall have been terminated orabrogated without the concurrence of the Bank, or any party toany such agreement shall have failed to perform any of its obli-gations thereunder so as to affect adversely the objectives of theProject or any part thereof.

Section 5.02. For the purposes of Section 7.01 of the GeneralConditions, the following additional events are specified pursuantto paragraph (h) thereof;

(a) any of the events specified in paragraphs (c) and(d) of Section 5.01 of this Agreement shall occur and shallcontinue for a period of 60 days after notice thereof shall havebeen given by the Bank to the Borrower; and

(b) any of the events specified in paragraphs (a) and(b) of Section 5.01 of this Agreement shall occur.

ARTICLE VI

Termination

Section 6.01. The date 0 , is herebyspecified for the purposes of Sectuon 12.04 of the General Condi-tions.

ARTICLE VII

Representative of the Borrower; Adaresses

Section 7.01. The Minister of Finance of the Borrower isdesignated as representative of the Borrower for the purposesof Section 11.03 of the General Conditions.

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Section 7.02. The following addresses are specified forthe purposes of Section 11.01 of the General Conditions:

For the Borrower:

Ministry of Financec/o Director General for International

Monetary AffairsJalan Lapangan Banteng Timur 4Jakarta, Indonesia

Cable address: Telex:

MINISTRY FINANCE DITJMON JKT 46415Jakarta DEPKEU JKT 44319

For the Bank:

International Bank forReconstruction and Development

1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address: Telex:

INTBAFRAD 440098 (ITT)Washington, D.C. 248423 (RCA) or

64145 (WUI)

IN WITNESS WHEREOF, the parties hereto, acting throughtheir representatives thereunto duly authorized, have causedthis Agreement to be signed in their respective names in theDistrict of Columbia, United States of America, as of the day andyear first above written.

REPUBLIC OF INDONESIA

ByAuthorized Representative

INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

By /S/ &VU"Regional Vice President

East Asia and Pacific

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SCHEDULE 1

Withdrawal of the Proceeds of the Loan

1. The table below sets forth the Categories of items to be

financed out of the proceeds of the Loan, the allocation of the

amounts of the Loan to each Category and the percentage of

expenditures for items so to be financed in eazh Category:

Amount of theLoan Allocated % of

(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(1) Estate civil works 2,600,000 50%

(2) Expenditures for oil 9,800,000 60%

palm developmentincluding overheads,land clearing for food

crop areas, initialcash payments and

seeds

(3) Agrochemicals 4,500,000

(a) Urea 100%

(b) Other 100% of for-eign expendi-tures

(4) Equipment and 14,300,000

machinery

(a) directly imported 100% of for-eign expendi-tures

(b) locally manu- 95% of local

factured expenditures(ex-factory)

(c) imported 60% of local

procured locally expenditures

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Amount of theLoan Allocated % of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(5) Consultants' services; 8,500,000 100%

and support forPart C of the Project

(6) Unallocated 2,300,000

TOTAL 42,000,000

2. For the purposes of this Schedule:

(a) the term "foreign expenditures" means expendituresin the currency of any country other than the Borrower and forgoods or services supplied from the territory of any country otherthan the Borrower; and

(b) the term "local expenditures" means expenditures inthe currency of the Borrower and for goods or services suppliedfrom the territory of the Borrower.

3. The disbursement percentages have been calculated in com-pliance with the policy of the Bank that no proceeds of theLoan shall be disbursed on account of payments for taxes leviedby, or in the territory of, the Borrower on goods or services,or on the importation, manufacture, procurement or supply thereof;to that end, if the amount of any such taxes levied on or in

respect of any item to be financed out of the proceeds of the Loandecreases or increases, the Bank may, by notice to the Borrower,increase or decrease the disbursement percentage then applicableto such item as required to be consistent with the aforementionedpolicy of the Bank.

4. Notwithstanding the provisions of paragraph 1 above, nowithdrawals shall be made in respect of payments made for expen-ditures:

(a) prior to the date of this Agreement;

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(b) under Part A of the Project unless and until evidencesatisfactory to the Bank shall have been furnished to the Bankthat DGE and PNP X have entered into the agreement referred to inSection 3.03 of the Loan Agreement in accordance with the provi-sions thereof; and

(c) under Part B of the Project unless and until evidencesatisfactory to the Bank shall have been furnished to the Bank:(i) that BI and PNP X have entered into the Subsidiary LoanAgreement referred to in Section 3.05 (a) of the Loan Agreement inaccordance with the provisions thereof; and (ii) that PNP X shallhave been converted into PTP X.

5. Notwithstanding the allocation of an amount of the Loanor the disbursement percentages set forth in the. table in para-graph 1 above, if the Bank has reasonably estimated that theamount of the Loan then allocated to any Category will be insuf-ficient to finance the agreed percentage of all expendituresin that Category, the Bank may, by notice to the Borrower: (i)reallocate to such Category, to the extent required to meet theestimated shortfall, proceeds of the Loan which are then allocatedto another Category and which in the opinion of the Bank arenot needed to meet other expenditures; and (ii) if such realloca-tion cannot fully meet the estimated shortfall, reduce the dis-bursement percentage then applicable to such expenditures in orderthat further withdrawals under such Category may continue untilall expenditures thereunder shall have been made.

6. If the Bank shall have reasonably determined that theprocurement of any item in any Category is inconsistent withthe procedures set forth or referred to in this Agreement, noexpenditures for such item shall be financed out of the proceedsof the Loan and the Bank may, without in any way restrictingor limiting any other right, power or remedy of the Bank underthe Loan Agreement, by notice to the Borrower, cancel such amountof the Loan as, in the Bank's reasonable opinion, representsthe amount of such expenditures which would otherwise have beeneligible for financing out of the proceeds of the Loan.

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SCHEDULE 2

Description of the Project

The Project is part of the Borrower's program to assistsmallholder tree crop development in its territories throughsmallholder settlement of new areas and support for previouslysettled smallholders, by means of (i) the development and alloca-tion of land and the delivery of a package of services and inputsto smallholders through the Borrower's public sector estates(herein sometimes referred to as "nucleus estates"), the DGE, theBRI, the DPD, and other agencies and authorities of the Borrowerat the national and provincial levels, and (ii) the strengtheningof the Borrower's public sector estates so as to enable them toparticipate as nucleus estates for smallholder development in thefuture, and of other governmental agencies and authorities havingresponsibility in relation to the smallholder and public estatesectors.

The Project consists of the following Parts:

Part A: Smallholder Settlement with Development of New Landthrough the PNP X Nucleus Estate

1. New Settlement at Betung, South Sumatra, with PNP X asthe nucleus estate, including:

(a) construction in the Betung Settlement Area of abouttwenty-one new villages, with a total of about4,000 settler houses and the settlement of about4,000 Participating Settlers, each village shallhave without limitation, access to the followingiew or existing facilities, village offices,primary school, mosque, market buildings, communitycenter and health center, all such facilities toserve the said Participating Settlers, and equip-ping and staffing of school facilities and healthfacilities for all villages;

(b) establishment and staffing of agricultural credit,extension and cooperative services for Participat-ing Settlers;

(c) construction and upgrading .of about 46 km ofall-weather primary village roads, about 48 km

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of secondary village roads and about 105 km of farm

access tracks to serve the said Participating

Settlers;

(d) block planting of about 8,000 ha of oil palm and

the maintenance to maturity by PNP X and by Parti-

cipating Settlers thereafter;

(e) land clearing and establishment of food crops on

about 4,000 ha, including supply and distribution

of seeds and fertilizer to Participating Settlers

commencing in the first year of settlement to

support food crop production on an area of about

one ha per settler family; and

(f) provision of adequate water supply and sanitation

facilities in each village.

Part B: Nucleus Estate - Processing and Other Facilities

1. Construction and placing into service of a new palm

oil mill with a capacity of thirty mt FFB/hr, and

construction of related facilities.

2. Construction and placing into service of a new crumb

rubber factory at Tebenen with a capacity of 40 mt/day,

to be built in 2 twenty-ton stages.

3. Construction of estate garages, workshops, divisional

offices, and about 180 staff and workmen's houses.

4. Stengthening PNP X by providing about sixty man-months

of short-term consultant and inspection services, and

108 man-months of technical assistance for oil palm

engineering, mechanical/civil engineering and financial

management.

Part C: Program Support

1. The continuation of the program of technical assistance

to DGE including about two hundred man-months to assist

with inspection services, village planning, land survey-

ing, and present and future smallholder project studies.

- 19 -

2. Assistance to PTP XI and PTP XIII for construction ofhousing, buildings, road construction, nursery and fielddevelopment, and procurement of essential machinery andequipment, and the provision of two man-years of tech-nical assistance for the next nucleus estate and small-holder project as would be agreed between the Borrowerand the Bank.

The Project is expected to be completed by June 30, 1986.

- 20 -

SCHEDULE 3

Amortization Schedule

Payment of Principal

Date Payment Due (expressed in dollars)*

On each May 1 and November 1

beginning November 1, 1985

through May 1, 2000 1,400,000

* To the extent that any portion of the Loan is repayable in

a currency other than dollars (see General Conditions,Section 4.02), the figures in this column represent dollar

equivalents determined as for purposes of withdrawal.

- 21 -

Premiums on Prepayment

The following percentages are specified as the premiumspayable on repayment in advance of maturity of any portion ofthe principal amount of the Loan pursuant to Section 3.05 (b)of the General Conditions:

Time of Prepayment Premium

Not more than three years' 1.25%before maturity

More than three years but notmore than six years beforematurity 2.50%

More than six years but notmore than eleven yearsbefore maturity 4.55%

More than eleven years but notmore than sixteen yearsbefore maturity 6.60%

More than sixteen years but not.more than eighteen yearsbefore maturity 7.40%

More than eighteen yearsbefore maturity 8.25%

- 22 -

SCHEDULE 4

Procurement

A. International Competitive Bidding

1. Except as provided in Part C of this Schedule, 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 BaHk 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 Bank as soon as possible, and in any event not later than 60

days prior to the date of availability 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 Bank shall reasonably request;

the Bank -.ill arrange for the publication 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 inter-

national competitive bidding.

3. For the purpose of evaluation and comparison of bids for

the supply of goods to be procured on the basis of international

competitive bidding: (i) bidders shall be required to state

in their bid the c.i.f. (port of entry) price for the importedgoods, or the ex-factory price or off-the-shelf price of other

goods, offered in such bid; and (ii) customs duties and other

import taxes levied in connection with 'the importation, or the

sales and similar taxes levied in connection with the sale or

delivery, pursuant to the bid, of the goods shall not be takeninto account in the evaluation of the bids.

B. Preference for Domestic Manufacturers

In the procurement of goods in accordance with the procedures

described in Part A of this Schedule, goods manufactured in

Indonesia may be granted a margin of preference in accordance

with, and subject to, the following provisions:

- 23 -

1. All bidding documents for the procurement of goodsshall clearly indicate any preference which will be granted,the information required to establish the eligibility of a bidfor such preference and the following methods and stages that willbe followed in the evaluation and comparison of bids.

2. After evaluation, responsive bids will be classifiedin one of the following three groups:

(1) Group A: bids offering goods manufactured inIndonesia if the bidder shall have established tothe satisfaction of the Borrower and the Bank thatthe manufacturing cost of such goods includes avalue added in Indonesia equal to at least 20%of the ex-factory bid price of such goods.

(2) Group B: all other domestic bids.

(3) Group C: bids offering any other goods.

3. In order to determine the lowest evaluated bid of eachgroup, all evaluated bids in each group shall first be comparedamong themselves, without taking into account customs duties andother import taxes levied in connection with the importation, andsales and similar taxes levied in connection with the sale ordelivery, pursuant to the bids, of the goods. Such lowest eval-uated bids shall then be compared with each other, and if, as aresult of this comparison, a bid from group A or group B is thelowest, it shall be selected for the award.

4. If, as a result of the comparison under paragraph 3above, the lowest bid is a bid from group C, all group C bidsshall be further compared with the lowest evaluated bid fromgroup A after adding*to the evaluated bid price of the importedgoods offered in each group C bid, for the purpose of this furthercomparison only, an amount equal to: (i) the amount of customsduties and other import taxes which a non-exempt importer wouldhave to pay for the importation of the goods offered in suchgroup C bid; or (ii) 15% of the c.i.f. bid price of such goodsif said customs duties and taxes exceed 15% of such price. Ifthe group A bid in such further comparison is the lowest, itshall be selected for the award; if not, the bid from group Cwhich as a result of the comparison under paragraph 3 is thelowest evaluated bid shall be selected.

-24 -

C. Other Procurement Procedures

1. Individual items of equipment expected to cost less than

$30,000 equivalent may be procured through prudent shopping after

soliciting at least three price quotations, provided that the cost

of equipment so procured shall not exceed in the aggregate$1,500,000 equivalent.

2. Up to $200,000 equivalent in value of fertilizers

(excluding-urea) and agrochemicals may be procured annually on the

basis of prudent shopping after soliciting at least three price

quotations.

3. Urea may be procured from PT. PUSRI's designated

distributors in accordance with the Borrower's procedures.

4. Civil works (housing, project and processing plant

buildings and settlement infrastructure) may be carried out

through contracts awarded after competitive bidding advertised

locally.

5. Land clearing for oil palm development and-one ha food

crop developm.ent, and construction and upgrading of primary and

secondary village roads and farm tracks may be carried out by

PNP X.

D. Review of Procurement Decisions by the Bank

1. Review of prequalification. The Borrower shall, with respect

to all contracts estimated to cost the equivalent of $300,000 or

more, before qualification is invited, inform the Bank in detail

of the procedure to be followed, and shall introduce such modifi-

cations in said procedure as the Bank shall reasonably request.

The list of prequalified bidders, together with a statement of

their qualifications and, where applicable, of their eligibility

for domestic preference and of the reasons for the exclusion of

any applicant for prequalification and for such eligibility shall

be furnished by the Borrower to.the Bank for its comments before

the applicants are notified of the Borrower's decision, and the

Borrower shall make such additions to, deletions from, or modifi-

cations in, the said list as the Bank shall reasonably request.

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

final contracts:

- 25 -

With respect to all contracts estimated to cost the equiva-lent of $300,000 or more:

(a) Before bids are invited, the Borrower shall furnishto the Bank, for its comments, the text of the invitations tobid and the specifications and other bidding documents, togetherwith a description of the advertising procedures to be followedfor the bidding, and shall make such modifications in the saiddocuments or procedures as the Bank shall reasonably request.Any further modification to the bidding documents shall requirethe Bank's concurrence before it is issued to the prospectivebidders.

(b) After bids have been received and evaluated, the Bor-rower shall, before a final decision on the award is made, informthe Bank of the name of the bidder to which it intends to awardthe contract and shall furnish to the Bank, in sufficient time forits review, a detailed report on the evaluation and comparisonof the bids received, together with the recommendations foraward and such other information as the Bank shall reasonablyrequest. The Bank shall, if it determines that the intended awardwould be inconsistent with the Guidelines or this Schedule,promptly inform the Borrower and state the reasons for suchdetermination.

(c) The terms and conditions of the contract shall not,without the Bank's concurrence, materially differ from thoseon which bids were asked or prequalification invited.

(d) Two conformed copies of the contract shall be furnishedto the Bank promptly after its execution and prior to the submis-sion to the Bank of the first application for withdrawal offunds from the Loan Account in respect of such contract.

3. With respect to each contract not governed by the precedingparagraph, the Borrower shall furnish to the Bank, promptly afterits execution and prior to the submission to the Bank of thefirst application for withdrawal of funds from the Loan Accountin respect of such contract, two conformed copies of such con-tract, together with the analysis of the respective bids, recom-mendations for award and such other information as the Bank shallreasonably request. The Bank shall, if it determines that theaward of the contract was not consistent with the Guidelines orthis Schedule, promptly inform the Borrower and state the reasonsfor such determination.

- 26 -

4. Before agreeing to any material modification or waiverof the terms and conditions of a contract, or granting an exten-sion of 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 15% of the original price, the Borrower shall informthe Bank of the proposed modification, waiver, extension orchange order and the reasons therefor. The Bank, if it determinesthat the proposal would be inconsistent with the provisions ofthis Agreement, shall promptly inform the Borrower and statethe reasons for its determination.

- 27 -

SCHEDULE 5

Organization and Management

1. Smallholder Settlement

(a) Director General of Estates

Overall direction and coordination of the implementation ofthe Project will be the responsibility of the Director General ofEstates. DGE will be assisted by, among others, the Team Khusus.

The DGE will be responsible, inter alia, for:

(i) approval of project and village master planningand work programs as prepared by PNP X;

(ii) overall guidance to the Project Manager and theProvincial Coordinating Committee for projectimplementation;

(iii) obtaining the Borrower's approval of projectbudgets and coordinating project financing arrange-ments;

(iv) advising on project procurement; and

(v) preparation and execution of the contract betweenthe DGE and PNP X for smallholder development,and at a later date for extension, processing,and marketing services.

(b) The Project Manager

The person delegated as Project Manager with appropriate

qualifications and experience to serve as manager for Part A ofthe Project would be the First Director of PNP X. The ProjectManager will be responsible to the Director General of Estates,and will be appointed by the Minister of Agriculture, and will beresponsible for the implementation of those functions under Part A

of the Project which are within the jurisdiction and respon-

sibility of DGE. For this purpose, the Project Manager and a

nucleus estate site manager, appointed by the Project Manager,

will be responsible, inter alia, for:

- 28 -

(i) preparation of village master plans includingsiting of villages, houses and water supply;

(ii) preparation of annual budgets and work programsfor all functions under Part A of the Project;

(iii) supervision and'coordination of the implementationof that part of the Project carried out by Provin-cial Government agencies, primarily schools andhealth services;

(iv) design and supervision of smallholder participa-tion agreements, land transfers, and allocationof house, food crop and oil palm areas;

(v) acceptance of prospective settlers as estatelaborers and. later, appraisal of performanceof these laborers to be proposed as ParticipatingSettlers; and

(vi) monitoring and reporting on project progressto the DGE, the Provincial Government, and theBank.

(c) PNP X Nucleus Estate

The Nucleus Estate PNP X will develop oil palm areas forParticipating Settlers and be responsible, inter alia, for:

(i) During the Oil Palm Immature Period

Clearing land, for oil palm (2 ha) and food cropareas and house and garden lots (1 ha), planting ofoil palm and provision of seeds and fertilizers forfood crop land for the first year of settler entry,initial cash payments to settlers, siting andconstruction of settler housing or the provision ofmaterials for construction of settler's own hous-ing, siting and provision of water supply, plantingand maintenance of oil palm to maturity, siting andconstruction of primary village roads and oil palmand farm access tracks, planning of locations forvillage development and construction of villageoffices, community halls, and market buildings, andprovision of training; and

- 29 -

(ii) During the Production Period

Smallholder training in oil palm harvesting,procurement of inputs for oil palm maintenance,provision of extension services, collection ofFFB for processing and loan repayments, and pro-vision of marketing services.

(d) Provincial Coordinating Committee

The Provincial Coordinating Committee for South Sumatraestablished under Loan 1499-IND shall be responsible for coordi-nating the implementation of those functions under Pait A of theProject which are within the jurisdiction and responsibility ofthe Provincial Government, including, inter alia, construction offacilities for schools and health, granting of land title andconstruction of some village infrastructure. For these purposesthe PCC will, inter alia:

(i) secure and provide INPRES projects required forthe settlers within the settlement area of theProject;

(ii) arrange for recruitment of prospective settlers forthe project to be accepted by the Project Manageras suitable estate laborers;

(iii) coordinate and supervise participating settlersin non-technical aspects of the project includingcommunity government, cooperative development, andother social activities; and

(iv) expedite the granting of Hak Milik for the settler.

(e) BRI will: (i) enter into smallholder credit agreements,on behalf of the Borrower, with Participating Settlers three yearsafter settlement; (ii) maintain smallholder accounts; and (iii)receive repayments for these credits, on behalf of the Borrower,from the Project Manager.

2. Estate Development - PNP X

The Executive Manager (Direksi) of PNP X will be responsiblefor implementation of Part B of the ProjecL, subject to theoverall responsibility for management and coordination by theDirector General of Estates and the Minister of Agriculture.

- 30 -

3. Program Support

The Director General of Estates will be responsible for

establishing and administering its own monitoring and evaluation

system for the Project and the provision of consultant servicesfor field inspection, village planning, land surveying, and

special project studies for Part C.1 of the Project; PTP XI andPTP XIII will be responsible for all aspects of Part C.2 of theProject for start-up activities of proposed NES V in West Java, as

supervised.by the Director General of Estates and the Minister of

Agriculture.

4. Participating Ministries/Agencies

Ministry/Agency primarilyProject Component responsible for implementation

Part A - DGE

- PNP X

- PCC

Part B - Minister of Agricul-ture

- DGE

- PNP X

Part C.1 - DGE

Part C.2 - DGE

- PTP XI

- PTP XIII

- 31 -

SCHEDULE 6

Provisions to be included in theSmallholder Development Agreement

The Smallholder Development Agreement to be entered intobetween DGE and PNP X shall require the nucleus estate to under-take, inter alia, as follows:

(1) to clear land, site and construct settler housing orsupply materials for settlers' own construction of houses, sitingand provision of water supply, plant and maintain oil palm tomaturity, site and construct primary and secondary villageroads and oil palm and farm access tracks, plan locations forvillages and construct village offices and other project buildingsall in accordance with PNP X's specifications agreed with DGE;

(2) to procure and apply oil palm area inputs in accordancewith the relevant procurement procedures specified in Schedule 4to the Loan Agreement;

(3) to provide initial cash payments to new settlers;

(4) to provide food crop inputs to Participating Settlersin accordance with criteria agreed with DGE;

(5) to maintain village roads, oil palm and farm accesstracks to appropriate standards during the project disbursementperiod;

(6) to provide training in oil palm husbandry and har-vesting;

(7) to provide processing and marketing services;

(8) to employ at least one member of each ParticipatingSettler's family during the first three years after planting,and additional casual labor where required, in accordance withnormal estate practices and procedures;

(9) to employ adequate staff, as agreed between DGE andthe nucleus estate;

(10) to maintain proper accounts of all expenditures forParts A and B of the Project;

- 32 -

(11) to prepare annual budgets;

(12) to facilitate inspection of all works under Parts A andB of the Project by DGE and the Bank; and

(13) to collect oil palm from Participating Settlers inpayment of Participating Settler debt obligations in accordancewith the provisions of Schedule 7 to the Loan Agreement, and topurchase all oil palm (FFB) offered for sale by ParticipatingSettlers..

- 33 -

SCHEDULE 7

Provisons governing theSmallholders Financing Arrangements

1. The Borrower shall make available to the Project Managerthe proceeds of the Loan withdrawn for Part A of the Project. TheBorrower's contribution to meet the total requirements for Part Aof the Project shall be provided from sources in the Ministry ofFinance on the basis of approved annual budgets under the Bor-rower's budgetary system.

2. The arrangement referred to in paragraph 1 shall requirethe Borrower to make available to the Project Manager the proceedsof the Loan withdrawn for Part A of the Project (presently esti-mated at about $17,000,000 equivalent), and all such additionalfunds as are allocated by the Borrower (presently estimated atabout Rupiah 10.7 billion through FY 1985, and estimated at Rupiah520 million for FY 80-81).

The items to be financed under these arrangements include,inter alia, the following:

(a) land clearing;

(b) fertilizers and chemicals (including pesticides);

(c) labor costs for oil palm development, road constructionand other project infrastructure;

(d) machinery and equipment;

(e) settler housing;

(f) a subsistence package including first year seed andfertilizer and cash payments to Participating Settler families;

(g) primary and secondary village roads and oil palm andfarm access tracks;

(h) estate overhead costs and management fees as approvedby DGE totalling 15% of the direct costs of oil palm establishment(excluding related machinery and equipment);

(i) provision of village infrastructure excluding health andeducation facilities; and

- 34 -

(j) provision of water supply.

3. The Ministry of Finance shall, under the arrangement referredto in paragraph 1, make available to the Project Manager theamounts required for Part A of the Project (including both theamounts to be provided by the Borrower and those to be providedfrom the proceeds of the Loan). Such amounts shall be determinedon the basis of annual budgets to be submitted not later than theend of October and to be approved by BAPPENAS and the Ministry ofFinance not later than the last week of January of the followingyear. Specifically, the disbursement procedure under this arrange-ment shall be as follows:

(a) the Project Manager shall prepare and propose throughDGE the annual budget for each fiscal year to be approved byBAPPENAS and the Ministry of Finance;

(b) the budget, duly approved by BAPPENAS and the Ministryof Finance, will be issued to the Project Manager, with copiesfurnished to and retained by BAPPENAS, the Ministry of Finance,the Ministry of Agriculture, DGE and the Bank;

(c) based on the approved budget, the Ministry of Financeshall disburse the funds by instructing BI to transfer the amountsrequired into an account designated by the Project Manager;

(d) the disbursements of the funds for the 1st and 2ndquarter of each fiscal year by the Ministry of Finance to theProject Manager shall be without pre-requisites and disbursementsfor the 3rd and 4th quarters shall be made in a similar manner, atwhich times the Ministry of Finance shall have received an expend-iture report for the 1st and 2nd quarters, respectively;

(e) should the Project Manager consider that for any parti-cular quarter, project implementation can be carried out morerapidly than planned, the Ministry of Finance shall, upon receiptof the Project Manager's request to that effect, disburse therequested amounts of funds even exceeding the scheduled quarterlyrequirements; and

(f) annual expenditures shall be audited on the basis ofthe Borrower's post-audit procedures.

4. The Project Manager shall be required to establish andmaintain appropriate accounts to record all expenditures from the

- 35 -

proceeds of the Financing Arrangements described in this Schedule.After the third year of settlement, BRI shall establish andmaintain separate records for each Participating Settler, to whichshall be charged each Participating Settler's share of CreditExpenditures, in accordance with criteria and procedures to beagreed between the Borrower and the Bank.

5. BRI with the assistance of the Project Manager shall requireParticipating Settlers to enter into Credit Agreements under whicheach Participating Settler will agree, inter alia, to repay hisshare of Credit Expenditures charged to his individual small-holders' account, in kind, on the following basis:

(a) the Participating Settler's debt obligation shallbear no interest during the first three years and shall bearinterest thereafter at the rate of 10.5% per annum on the amountsoutstanding, said interest to be capitalized and added to prin-cipal during the following two years, and payable thereafterstarting in the sixth year until the principal amount is fullyrepaid;

(b) principal shall be amortized over 17 years includinga grace period of 2 years;

(c) Participating Settlers shall be required to deliverperiodically (on a weekly basis) to the nucleus estate their totaloil palm production, expressed in FFB, including that amount forpayment of debt obligations; the amount deductible for debtservice shall not exceed 30% of such yields per annum;

(d) Participating Settlers shall be credited for all oilpalm so delivered including that amount in payment of debt obli-gations at the prices determined from time to time in accordancewith the provisions of Section 3.09 of the Loan Agreement (esti-mated at 50% of the prevailing f.o.b. price for palm oil); and

(e) grace and repayment periods shall be counted from theend of year 3 for each area of oil palm planting.

6. The funds to be made available by the Ministry of Finance tothe Project Manager, as set forth in paragraph 2 above, shall berisk free to BRI and the Project Manager, that is, such fundsshall be repayable: (i) through the Project Manager to BRI, onlyfrom the proceeds of oil palm (FFB) received from ParticipatingSettlers, in accordance with the Provisions set forth in para-grsDh 5 above; and (ii) by BRI to the Ministry of Finance, only

- 36 -

from repayments icceived by BRI from the Project Manager pursuantto (i) above.

7. BRI shall be paid a handling fee at a rate to be agreedbetween the Borrower and BRI on the aggregate amounts outstandingunder Participating Settlers Credit Agreements with BRI. Saidhandling fee shall not be included as a part of expenditures tobe recovered from Participating Settlers, and shall be payablesemiannually by the Borrower directly to BRI.

- 37 -

SCHEDULE 8

Provisions to be included inSubsidiary Loan Agreement

1. Principal Amount: The equivalent in Rupiahs of the amountwithdrawn from the Loan Account on account of expendituresfor Part B of the Project, estimated at about $18,000,000equivalent.

2. Interest and Amortization: Interest will be payable fromthe date of signing of the Subsidiary Loan Agreement at therate of 13.5% per annum on the amounts withdrawn and out-standing. The Loan will be repayable in 12 approximatelyequal semiannual payments including both principal andinterest, with the first payment to be made January 1,1987.

3. Other: Performance covenants of PNP X under the SubsidiaryLoan Agreement satisfactory to the Bank.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

CERTIFICATE

I hereby certify that the foregoing is a true

copy of the original in the archives of the Interna-

tional Bank for Reconstruction and Develop-

ment.

In witness whereof I have signed this Certifi-

cate and affixed the Seal of the Bank thereunto

this 12 day of, 198 0.

FOR SECRETARY