2. Activities and Expenditures Financed by the Contribution

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1 Mr. Nils Haugstveit Director General Multilateral Affairs Department Royal Ministry of Foreign Affairs Oslo, Norway August 30, 2005 Trust Fund Administration Agreement between The Ministry of Foreign Affairs of the Kingdom of Norway and the International Bank for Reconstruction and Development, and the International Development Association, and the International Finance Corporation concerning the Norwegian Trust Fund for Private Sector and Infrastructure (TF No ) Dear Mr. Haugstveit, 1.1 We refer to the Norwegian Trust Fund for Private Sector and Infrastructure Agreement between the Ministry of Foreign Affairs of the Kingdom of Norway (the Donor ) and the International Bank for Reconstruction and Development ( IBRD ), the International Development Asociation ( IDA ) and the International Finance Corporation ( IFC ) (colectively, the World Bank Group )signed by the IFC on July 24, 2002, by the IBRD and IDA on July 29, 2002 confirmed and agreed by the Ministry of Foreign Affairs of the Kingdom of Norway on August 22, 2002 (the 2002 Agreement ). 1.2 We are pleased to acknowledge on behalf of the World Bank Group, the intention of the Donor to continue making available to the World Bank Group financial support (the Contribution ) to the Norwegian Trust Fund for Private Sector and Infrastructure (NTF-PSI) (TF ) as a grant for the purpose of financing the global emerging strategies for private sector development and infrastructure to be administered by the World Bank Group in accordance with the terms and conditions set forth below. 2. Activities and Expenditures Financed by the Contribution 2.1 The Contribution shall be used for projects and activities which fall within one of the following three windows: (1) Investment Climate and Governance; (2) Infrastructure Service Delivery to the Poor; and (3) Existing global/regional programs or multi-donor trust funds as described in Annex I Framework for Operation of the Norwegian Trust Fund for Private Sector and Infrastructure atached hereto. Annex I forms an integral part of this Agreement. The first two windows include activities in which the Donor is the sole contributor of funds (hereinafter Freestanding Activities ). Except for administrative cost recovery set forth in paragraph 6.1, terms and conditions governing each Freestanding Activity shall be agreed between the Donor and the World Bank Group.

2 2 2.2 The Contribution may be used to finance the following categories of expenditure for Freestanding Activities within the first two windows identified above: associated overheads, consultant fees, extended term consultants salaries and benefits, contractual services, equipment, grants, media and workshop costs and travel expenses. 2.3 The Contribution may be used to finance any activity conducted as part of an existing global/regional program or multi-donor trust fund. Contributions to global/regional programs and multi donor trust funds are subject to the respective provision of each global/regional program or multi-donor trust fund, including but not limited to each respective administrative cost recovery provision. 2.4 The Contribution shall also be used to support the Secretariat within the Infrastructure Vice Presidency of the IBRD (the Secretariat ) that coordinates: (i) discussions with the Donor on priorities among the three windows described in paragraph 2.1; (ii) seeking of proposals from individual units through the IBRD and IDA Sector Boards or the IFC Corporate Review Committee; (iii) ranking of proposals in the context of the priorities agreed with the Donor; (iv) communicating the allocation decisions made by the relevant World Bank Group Vice Presidencies to the Donor and confirmation of them by the Donor; and (v) monitoring the activities during implementation. 3. Administration of the Contribution The Contribution shall be administered by the World Bank Group on behalf of the Donor in accordance with the terms and conditions of this Agreement. The World Bank Group shall be responsible only for performing those functions specifically set forth in this Agreement and shall not be subject to any other duties or responsibilities to the Donor, including, without limitation, any duties or obligations that might otherwise apply to a fiduciary or trustee under general principles of trust or fiduciary law. Nothing in this Agreement shall be considered a waiver of any privileges or immunities of the IBRD, IDA and IFC, under their Articles of Agreement or any applicable law, all of which are expressly reserved. 4. Deposit of the Contribution 4.1 All Contributions by the Donor to the NTF-PSI shall be communicated with the Notice of Contributionatached hereto as Annex I ( Notice of Contribution ). 4.2 The Donor shall deposit the Contribution into the International Bank for Reconstruction and Development s Cash Account T No , Internal Route Code: XIANNO, Swift Code: XIANNOKXXXX maintained with Nordea Bank Norge Asa, Oslo, Norway in accordance with the Notice of Contribution and upon submission of a payment request by the World Bank Group When making such deposit(s), the Donor shall instruct Nordea Bank to include in their payment details information (remittance advice) field of their SWIFT payment

3 3 message, information indicating: the amount paid, that the payment is by the Donor for the Norwegian Trust Fund for Private Sector and Infrastructure (TF050187), and the date of such deposit. In addition, the Donor shall arrange to send a copy of the information in the remittance advice to the Bank s Trust Funds Division by addressed to tfremitadvice@worldbank.org or by fax to (202) Immediately upon receipt of the Contribution funds, the IBRD shall convert such funds into United States Dollars. 5. Commingling, Exchange and Investment of the Contribution 5.1. The Contribution funds may be commingled with other trust fund assets maintained by the IBRD on behalf of the World Bank Group, but shall be kept separate and apart from the funds of IBRD, IDA and IFC The Contribution funds may be freely exchanged by the IBRD on behalf of the World Bank Group into other currencies as may facilitate their disbursement The IBRD shall invest and reinvest the Contribution funds pending their disbursement in accordance with the IBRD policies and procedures for the investment of trust funds administered by the World Bank Group. The IBRD shall credit all income from such investment to a separate, single trust fund (the Norway Balance Account ) (TF ) which the IBRD may also invest. 6. Administrative Cost Recovery 6.1 In order to assist in the defrayment of the costs of administration and other expenses incurred by the World Bank Group for the purpose of financing Freestanding Activities under this Agreement, the IBRD may before allocating the Contribution to the relevant World Bank Group entity, deduct from the Norway Balance Account and retain for its own account an amount equal to five percent (5%) of the amount of the Contribution funds designated for such Freestanding Activities. 6.2 Treatment of investment income and defrayment of administrative costs and other expenses incurred by the relevant World Bank Group entities for Contribution funds designated for existing global/regional programs or multi-donor trust funds will be in accordance with the approved administrative arrangements governing each respective global/regional program or multi-donor trust fund. 7. Employment of Consultants The employment and supervision of consultants financed by the Contribution shall be the responsibility solely of the relevant World Bank Group entity administering the Contribution and shall be carried out in accordance with its applicable policies and procedures.

4 4 8. Accounting and Financial Reporting 8.1 The IBRD on behalf of the World Bank Group shall maintain separate records and ledger accounts in respect of the Contribution funds deposited in the trust fund account and disbursements made therefrom Within ninety (90) days of each March 31, June 30, September 30 and December 31, the IBRD, on behalf of the World Bank Group, shall furnish to the Donor an un-audited cash-based statement of receipts, disbursements and fund balance in United States Dollars with respect to the Contribution funds. 8.3 The IBRD on behalf of each relevant World Bank Group entity shall provide to the Donor within six (6) months following the end of each World Bank Group fiscal year, a management assertion together with an attestation from the IBRD s external auditors concerning the adequacy of internal control over cash-based financial reporting for trust funds as a whole. The cost of such attestations shall be borne by the IBRD. 8.4 If the Donor wishes to request, on an exceptional basis, a financial statement audit by the IBRD s external auditors of the trust fund established under this Agreement, the Donor and the relevant World Bank Group entity shall first consult as to whether such an external audit is necessary. The relevant World Bank Group entity and the Donor shall agree on the most appropriate scope and terms of reference of such audit. Following agreement on the scope and terms of reference, the Bank shall arrange for such external audit. The costs of any such audit, including the internal costs of the World Bank Group with respect to such audit, shall be deducted from the Norway Balance Account or met by the Donor. 8.5 The Donor reserves the right to review or evaluate activities financed by the Trust Fund. The Donor and the Bank shall agree on the scope and conduct of such review or evaluation, and the Bank shall provide all relevant information within the limits of its policies and procedures. All associated costs will be borne by the Donor, unless otherwise agreed. It is understood that any such review or evaluation will not constitute a financial, compliance or other audit of the Trust Fund, and that any financial reporting will be performed solely in accordance with paragraphs 8.1 to 8.4 of this Agreement. 9. Coordination and Project Reporting 9.1. The World Bank Group and the Donor shall consult with each other twice a year, or at the request of either party, on all matters arising out of this Agreement, and the Secretariat shall keep the Donor informed of the progress and results of the Program through biannual reporting. In addition, the Secretariat will provide the Donor with (i) semi-annual program reviews as of September 30 and March 31; (ii) copies of any relevant donor progress reports from global/regional programs and multi-donor activities

5 5 funded through the NTF-PSI; and (iii) preparatory material for and minutes of consultations between the World Bank Group and the Donor Within six (6) months of the final cancellation date the Secretariat shall furnish to the Donor a final report on the NTF-PSI activities. 10. Cancellation; Refund 10.1 It is expected that the Contribution funds will be fully disbursed by the IBRD on behalf of the World Bank Group in accordance with the provisions of this Agreement by December 31, The IBRD shall only disburse Contribution funds for the purposes of this Agreement after such date with the written approval of the Donor Either party may, upon three (3) months prior writen notice, cancel al or part of any remaining balance of the Contribution funds that is not committed pursuant to any agreements entered into between the relevant World Bank Group entities and any consultants and/or other third parties for the purposes of this Agreement prior to the receipt of such notice Balances from closed or cancelled Freestanding Activities shall be returned to the NTF-PSI (TF50187) Upon the final disbursement date specified in paragraph 10.1, or upon the date of cancellation of uncommitted Contribution funds in accordance with paragraph 10.2, as the case may be, the IBRD shall return any remaining or cancelled balance of the Contribution funds, as the case may be, to the Norway Balance Account referred to in paragraph Communications and Addresses The offices responsible for coordination of all matters related to the implementation of this Agreement are: For the IBRD/IDA Mr. Anwar Ravat Program Manager, INFCS 1818 H Street, NW Washington, DC U.S.A. Tel: Fax:

6 6 For the IFC Mr. Mwaghazi W. Mwachofi Director International Finance Corporation 2121 Pennsylvania Avenue NW Washington, DC U.S.A. Tel: Fax: For the Donor: Mr. Torgeir Fyhri Advisor Ministry of Foreign Affairs 7.juni plass 1 N 0251 Oslo Tel: Fax: Amendment This Agreement may be amended only by written agreement between the World Bank Group and the Donor. 13. Disclosure The IBRD and IDA may disclose this Agreement and information on this trust fund in accordance with IBRD and IDA s policy on disclosure of information and IFC may disclose the Agreement and information on this trust fund in accordancewith IFC s policy on disclosure of information. This Agreement shall supersede the 2002 Agreement. Please confirm your agreement with the foregoing, on behalf of the Donor, by signing, dating, and returning to us the enclosed copy of this Agreement. Upon receipt by the World Bank Group of the copy of this Agreement countersigned by you, this Agreement will become effective as of the date of the countersignature. Sincerely,

7 7 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Katherine Sierra Vice President & Head Infrastructure Network INTERNATIONAL FINANCE CORPORATION Assaad J. Jabre Vice President Operations CONFIRMED AND AGREED: MINISTRY OF FOREIGN AFFAIRS of the KINGDOM OF NORWAY By: Nils Haugstveit Director General Date:

8 8 ANNEX I FRAMEWORK FOR OPERATION NORWEGIAN TRUST FUND FOR PRIVATE SECTOR AND INFRASTRUCTURE (NTF-PSI) Purpose The overall objective of the Norwegian Trust Fund for Private Sector and Infrastructure (NTF-PSI) is to act as a catalyst for and consolidate Norwegian Contribution funds towards private sector development and infrastructure within the World Bank Group s operations, both at headquarters and in the field. The flexible funding structure of the NTF-PSI will provide a more effective, transparent and efficient way of utilizing Norwegian Contribution funds, thereby encouraging and improving dialogue with Norwegian agencies, research institutions, NGOs, and other interested parties. Focus of Activities to be Supported Themes, activities or programs proposed for support will be prioritized by the World Bank Group, and agreed between the World Bank Group and the Donor during semi-annual discussions every year. Major areas of importance to the Donor include but are not limited to the following: o Cross cutting initiatives which support private sector development across all sectors o Assistance to the poorest countries especially Africa o Activities which further poverty reduction o Activities which have a positive environmental impact o Projects which engage Norway s special expertise and knowledge (the energy sector broadly, and oil and gas in particular) o Activities which can be mainstreamed efectively into the Bank Group s country, sector and thematic work programs o Activities which improve the World Bank Group s dialogue with Norwegian companies, agencies, research institutions, and NGOs o All aspects of governance related to private sector development such as corporate governance, public sector role in sustainable systems, institutional development and capacity building, and the enabling environment

9 9 o Private sector development in rural areas o Institutional and capacity building, including legal and regulatory frameworks o Innovative, catalytic assistance efforts emphasizing strategic partnership, including collaboration with UN agencies Contribution funds shall be primarily targeted to the poorest countries comprising the bottom three categories of the Development Assistance Committee List of Aid Recipients (Least Developed, Other Low-Income Countries, and Lower Middle-Income Countries) with approximately 50% of the funds allocated for Africa. In general IDA countries will be given funding preference. Where country assistance is proposed, or in-country pilots are planned, these activities should be based on a strong interest from the recipient government, as evidenced by support from the respective World Bank Group country director. A key objective is to enhance the capacity in developing countries and all activities proposed for support will be assessed against this objective. Framework for Operation of the NTF-PSI Within the World Bank Group, the NTF-PSI will finance both new programs and existing programs of the Private Sector Development and the Infrastructure anchors including their joint departments with IFC, the Bank s regional vice presidencies, the World Bank Institute (WBI) and IFC s regional and sector departments. The IFC s Technical Assistance Trust Fund (TATF Program),the Bank s Consultant Trust Fund Program (CTF) and NORAD supported programs are not included under the NTF-PSI. Activities of the NTF-PSI may be broadly grouped into three strategic windows: o o o Investment Climate and Governance Infrastructure Services for the Poor Existing Global/Regional Programs or Multi-Donor Trust Funds The first two windows will primarily include funding for Freestanding Activities. Contribution funds for Freestanding Activities shall not be used for regular project preparation activities including Bank staff and travel costs unless explicitly authorized by the Donor. The third window includes activities currently supported by the Government of Norway. Governance and Administration The NTF-PSI is managed jointly by the Vice Presidents for Infrastructure, Private Sector Development and the Vice President for Operations, IFC. The Sector Boards in the Infrastructure Network and the Sector Board for Private Sector Development and the corresponding relevant IFC operations, with due reference to other relevant boards involved in implementing the activities, will through their Vice Presidents be responsible

10 10 for management of the Trust Fund. In addition, the Secretariat housed in the Infrastructure Vice Presidency will provide administrative support to the three Vice Presidents and the Bank Group Screening Committee (BGSC). A staff member will be hired under the trust fund to assist in these efforts. Proposal Process Calls for proposals are issued once a year by the Secretariat on behalf of the three Vice Presidents and in close consultations with the Donor. All proposals must show synergy with World Bank Group activities, potential for influence on the World Bank Group s portfolio and training and learning activities. The specific areas for support wil be prioritized by the World Bank Group according to the relevant corporate and regional sectors strategies. Proposals should include the indicative amounts of funding along with any limitations on the use of the funds. All proposals will be assessed in accordance with the following criteria: Innovative, providing new knowledge, and pilot/demonstration impact Targeting to poor and promoting poverty reduction Promoting cross-sector cooperation Cross-country, cross-regional comparisons and lessons Increasing cooperation between units within the World Bank Group and between the World Bank Group and other donors or the UN Increasing South-South cooperation Building networks and promoting information exchange The submitted proposals should have a built-in/on-going evaluation methodology to support the evaluation of the impact of the activities. They should be short but include a description of goals, objectives, and outputs of the project along with key performance indicators, monitoring and evaluation criteria, as well as critical assumptions. The proposals should also demonstrate the relevance to the objectives of the program and details of key aspects such as partners, country ownership, innovation, deliverables and development impact. The proposals will need clearance/support from the management of the submitting unit. In addition, Bank proposals will need clearance by the respective sector board while IFC proposals need to be cleared by the IFC Corporate Review Committee before being submitted to the BGSC. The BGSC will review and prioritize the proposals against the priorities agreed between the World Bank Group and the Donor before making its project recommendations and annual allocations to the three Vice Presidents who will in turn submit the proposals and the proposed allocation of funds to Norway prior to the annual meeting at which Norway will present the amount of total funding for the following fiscal year and/or how such funds shall be allocated. The annual meeting, usually held in May or June, is the key event in the administrative governance process.

11 11 In connection with the semi-annual and annual meetings a seminar will be arranged to discuss some of the work being finalized. Bank Group Screening Committee The BGSC will be chaired by two senior managers, one from the Bank and one from IFC. Representatives would include the following: o One IBRD and one IFC regional manager (representing Africa since 50% of the funding will go to Africa) to convey to the joint management of the trust fund a strong sense of regional priorities and selectivity in relation to the proposals for funding o Three senior managers from the IFC and IBRD to represent each window o A representative of the WBI There would be no other permanent representatives on the BGSC. However, if any proposal for funding were clearly relevant to the concerns of another Bank network or IFC department, the BGSC would request an additional review of that proposal from the groups concerned. Sector Boards The IBRD ssector boards will review existing programs, suggest priority areas within their sectors for new, catalytic activities, evaluate funding requests in their sectors, and rank existing and potential new programs. IFC Corporate Review Committee (3-4 persons) The Committee will consist of representatives from the IFC Strategy Group, the Trust Funds Department and an Investment Department (probably Africa and possibly other units). The Committee will carry out its own internal review of existing trust funded programs and new programs which might be proposed for Norwegian funding. New programs for Norwegian funding involving the IFC are expected to be generated primarily in the sectors now handled jointly between IFC and the Bank (oil and gas, mining, small medium enterprise development, and private sector development).

12 12 NOTICE OF CONTRIBUTION ANNEX II Mr. Anwar Ravat and Mr. Mwaghazi Mwachofi International Bank for Reconstruction and Development International Finance Corporation 1818 H Street, N.W. Washington, D.C Norwegian Trust Fund for Private Sector and Infrastructure (TF No ) Dear : I refer to the Norwegian Trust Fund for Private Sector and Infrastructure Agreement dated, 200 between the Ministry of Foreign Affairs of the Kingdom of Norway and the International Bank for Reconstruction and Development, the International Development Association and the International Finance Corporation (the Agreement ). Terms used in this notice shal have the meanings set forth in the Agreement. Pursuant to paragraph 1 of the Agreement, I am pleased to inform you that the Ministry of Foreign Affairs of the Kingdom of Norway agrees to make a Contribution to the Norwegian Trust Fund for Private Sector Development and Infrastructure (NTF-PSI) for the World Bank Group s FY in the amount of Norwegian Kroner. The World Bank Group shall credit the unutilized amount of the Contribution made by the Donor in the World Bank Group s preceding fiscal year toward the amount of the Contribution referred to in the preceding sentence. The Contribution shall be used for activities submitted by the World Bank Group and approved by the Donor. The Contribution shall be administered in accordance with, and subject to the terms and conditions of the Agreement.

13 13 Please confirm your acceptance of the Contribution by signing and returning a copy of this notice. Sincerely, MINISTRY OF FOREIGN AFFAIRS OF THE KINGDOM OF NORWAY [Name] [Title] ACCEPTED AND AGREED: INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION By: Anwar Ravat Program Manager Date: INTERNATIONAL FINANCE CORPORATION By: Mwaghazi W. Mwachofi Director Date: