ORTIAL TPOI'4113 iCUMEWTSt The World Bank 1818 H Street N.W. (202) 477-1234 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS 1,2013 Mr. Karma Chief Executive Officer South Asian Association for Regional Cooperation Development Fund 3rd Floor, BDBL Building Norzin Lam, Post Box 928 Thimphu, Kingdom of Bhutan Re: Regional Trust Fund: IDF Grant for SAARC Development Fund for Capacity and Institutional Strengthening - IDF Trust Fund No. TFO 14113 Dear Sir: In response to the request for financial assistance made on behalf of the South Asian Association for Regional Cooperation Development Fund (SDF) (the "Recipient"), I am pleased to inform you that the International Bank for Reconstruction and Development ("World Bank") proposes to extend to the Recipient, for the benefit of Afghanistan, Bangladesh, Bhutan, India, Sri Lanka, Maldives, Nepal and Pakistan (each a "Member Country" and collectively "Member Countries"), a grant from the World Bank's Institutional Development Fund ("IDF") an amount not to exceed three hundred forty-nine thousand five hundred ninety-five United States Dollars (U.S.$349,595) ("Grant") on the terms and conditions set forth or referred to in this letter agreement ("Agreement"), which includes the attached Annex, to assist in the financing of the project described in the Annex ("Project"). The Recipient represents, by confirming its agreement below, that it is authorized to enter into this Agreement and to carry out the Project in accordance with the terms and conditions set forth or referred to in this Agreement. Please confirm the Recipient's agreement to the foregoing by having an authorized official of the Recipient sign and date the enclosed copy of this Agreement, and returning it to the World Bank. Upon receipt by the World Bank of this countersigned copy, this Agreement shall become effective as of the date of the countersignature; provided, however, that the offer of this Agreement shall be deemed withdrawn if the World Bank has not received the countersigned copy of this Agreement within 90 days after the date of signature of this Agreement by the World Bank, unless the World Bank shall have established a later date for such purpose. Very truly yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By alman Zaheer Program Director Regional Integration South Asia Region AGREED: SOUTH ASIAN SSOC ON FOR REGIONAL COOPERATION DEVELOPMENT FUND Authe ed Re ive 4U Name: 4t Title: -t ier f"t'C4;(liv Enclosures: (1) Standard Conditions for Grants Made by the World Bank Out of Various Funds, dated February 15, 2012 (2) Disbursement Letter of the same date as this Agreement, together with World Bank Disbursement Guidelines for Projects, dated May 1, 2006 2 IDF Grant No. TF014113 ANNEX Article I Standard Conditions; Definitions 1.01. Standard Conditions. The Standard Conditions for Grants Made by the World Bank Out of Various Funds dated February 15, 2012 ("Standard Conditions"), with the modifications set forth in the Appendix to this Agreement, constitute an integral part of this Agreement. 1.02. Definitions. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the Standard Conditions or in this Agreement. Article II Project Execution 2.01. Project Objectives and Description. The objective of the Project is to improve SDF's capacity to meet its organizational objectives by strengthening its capacity to plan, implement, supervise, monitor and evaluate its activities. The Project consists of the following parts: Part A: Development of Monitoring and Evaluation (M&E) Framework, Systems and Capacity Provision of technical assistance in setting the M&E system that will help in allocating and managing the financial and human resources of SDF, keeping track of all interventions and their impact, and ensuring transparency and accountability, by: (i) developing an M&E framework for SDF that will be aligned with project results framework; (ii) developing an integrated monitoring plan and systems designed to facilitate regular reporting of the indicators; and (iii) building capacity within SDF to implement, monitor and evaluate the activities under the project. Part B: Operationalize Infrastructure and Economic Windows Provision of technical assistance in developing the structure, institutional arrangements, operational and investment guidelines and procedures for the Economic and Infrastructure windows. Part C: Institutional Development Support and Implementation Provision of technical assistance in strengthening the capacity of the SDF Secretariat by developing an Operations Manual and implementing the recommendations from Capacity Review/Skills Gap Analysis. 2.02. Project Execution Generally. The Recipient declares its commitment to the objectives of the Project. To this end, the Recipient shall carry out the Project in accordance with the provisions of: (a) Article II of the Standard Conditions; (b) 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 ("Anti-Corruption Guidelines"); and (c) this Article II. I 3 ( 2.03. Institutional and Other Arrangements. The Recipient shall provide funds for: (i) office facilities; (ii) training facilities; (iii) administrative support; and (iv) counterpart staff time. 2.04. Project Monitoring, Reporting and Evaluation. (a) The Recipient shall monitor and evaluate the progress of the Project and, upon the World Bank's request, prepare Project Reports, in accordance with the provisions of Section 2.06 of the Standard Conditions and on the basis of indicators set forth below in paragraph (b) of this Section. Each Project Report shall cover such period as shall be indicated in the World Bank's request and shall be furnished to the World Bank not later than one month after the date of such request. (b) The performance indicators referred to above in paragraph (a) consist of the following: (i) M&E framework developed and approved by the SDF Board. (ii) Regular reporting of SDF project progress and results developed. (iii) Economic and infrastructure windows established and operational with institutional structure in place and required staff hired. (c) The Recipient shall, upon the World Bank's request, prepare the Completion Report in accordance with the provisions of Section 2.06 of the Standard Conditions. The Completion Report shall be furnished to the World Bank not later than five months after the Closing Date. 2.05. Financial Management. (a) The Recipient shall ensure that a financial management system is maintained in accordance with the provisions of Section 2.07 of the Standard Conditions. (b) The Recipient shall ensure that interim unaudited financial reports for the Project are prepared and furnished to the World Bank as part of the Project Report not later than forty- five days after the end of each half year, covering six months, in form and substance satisfactory to the World Bank. (c) The Recipient shall have its Financial Statements audited in accordance with the provisions of Section 2.07 (b) of the Standard Conditions. Each such audit of the Financial Statements shall cover the period of one fiscal year of the Recipient. The audited Financial Statements for each such period shall be furnished to the World Bank not later than six months after the end of such period. (d) Not later than December 31, 2013, the Recipient shall submit its entity's audit report to the World Bank covering the period from 2010 to 2012, reflecting its operations, resources and expenditures. 4 2.06. Procurement (a) General. All consultants' services required for the Project and to be financed out of the proceeds of the Grant shall be procured in accordance with the requirements set forth or referred to in: (i) Sections I and IV of the "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011 ("Consultant Guidelines"); and (ii) the provisions of this Section, as the same shall be elaborated in the procurement plan prepared and updated from time to time by the Recipient for the Project in accordance with paragraph 1.25 of the Consultant Guidelines ("Procurement Plan"). (b) Definitions. The capitalized terms used in the following paragraphs of this Section to describe particular procurement methods or methods of review by the World Bank of particular contracts, refer to the corresponding method described in Sections II, III, IV and V of the Consultant Guidelines. (c) Particular Methods of Procurement of Consultants' Services (i) Except as otherwise provided in item (ii) below, consultants' services shall be procured under contracts awarded on the basis of Quality- and Cost-based Selection. (ii) The following methods may be used for the procurement of consultants' services for those assignments which are specified in the Procurement Plan: (A) Quality-based Selection; (B) Selection under a Fixed Budget; (C) Least Cost Selection; and (D) Selection of Individual Consultants. (d) Review by the World Bank of Procurement Decisions. The Procurement Plan shall set forth those contracts which shall be subject to the World Bank's Prior Review. All other contracts shall be subject to Post Review by the World Bank. Article I Withdrawal of Grant Proceeds 3.01. Eligible Expenditures. The Recipient may withdraw the proceeds of the Grant in accordance with the provisions of: (a) Article III of the Standard Conditions; (b) this Section; and (c) such additional instructions as the World Bank may specify by notice to the Recipient (including the "World Bank Disbursement Guidelines for Projects" dated May 2006, as revised from time to time by the World Bank and as made applicable to this Agreement pursuant to such instructions), to finance Eligible Expenditures as set forth in the following table. The table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Grant ("Category"), the allocations of the amounts of the Grant to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category: Category Amount of the Grant Percentage of Allocated Expenditures to be (expressed in USD) Financed (inclusive of Taxes) (1) Consultants' Services, 248,585 100% including Audit (2) Training and Workshops 101,010 100% TOTAL AMOUNT 349,595 For the purposes of this Section, the term "Training and Workshops" means the cost of training financed under the Project, attributable to courses, seminars, study tours, and workshops, along with the cost of travel and subsistence for training participants, services of trainers, rental of training facilities, preparation and reproduction of training materials, and other activities directly related to training preparation and implementation. 3.02. Withdrawal Conditions. Notwithstanding the provisions of Section 3.01 of this Agreement, no withdrawal shall be made for payments made prior to the date of countersignature of this Agreement by the Recipient. 3.03. Withdrawal Period. The Closing Date referred to in Section 3.06 (c) of the Standard Conditions is three years after the date of countersignature of this Agreement by the Recipient. Article IV Recipient's Representative; Addresses 4.01. Recipient's Representative. The Recipient's Representative referred to in Section 7.02 of the Standard Conditions is the Chief Executive Officer. 4.02. Recipient's Address. The Recipient's Address referred to in Section 7.01 of the Standard Conditions is: South Asian Association for Regional Cooperation Development Fund 3rd Floor, BDFC Building Norzin Lain, Post Box 928 Thimphu 11001, Kingdom of Bhutan Telephone: +975-2-321152/53 Facsimile: +975-2-321150/321203 Email: ceo@sdfsec.org 6 4.03. World Bank's Address. The World Bank's Address referred to in Section 7.01 of the Standard Conditions is: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable: Telex: Facsimile: INTBAFRAD 248423 (MCI) or 1-202-477-6391 Washington, D.C. 64145 (MCI) 7 APPENDIX Modifications to the Standard Conditions The term "Member Country" in the Standard Conditions means, individually, each of Afghanistan, Bangladesh, Bhutan, India, Sri Lanka, Maldives, Nepal and Pakistan, or any of their political or administrative subdivisions. The reference to "Member Countries" in this Letter Agreement shall be interpreted as referring to all said countries collectively. 8