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

CONFORMED
COPY
October 30, 2001

Mr. Mihail Manoli
Minister of Finance
Ministry of Finance
Chisinau
Republic of Moldova

Re:
MOLDOVA: Grant for Preparation of Agricultural Pollution Control Project

GEF-PPG Number TF 050093
Excellency:

I am writing on behalf of the International Bank for Reconstruction and Development
(the Bank) acting as an Implementing Agency of the GEF to indicate the Bank's agreement to
grant to the Republic of Moldova (the Recipient) a Grant in an amount not exceeding three
hundred thousand United States Dollars US$300,000 (the Grant). The Grant is made in response
to the Recipient's request for financial assistance and for the purposes and on the terms and
conditions set forth in the Annex to this Letter Agreement. The Recipient represents, by
confirming its agreement below, that it is authorized to contract and withdraw the Grant for the
said purposes and on the said terms and conditions.

The award of the Grant does not constitute or imply any commitment on the part of the
Bank, either as a GEF Implementing Agency, or in its own capacity, or the International
Development Association, to assist in financing any Project which will result from the activities
financed by the Grant.

Please confirm your agreement with the foregoing, on behalf of the Recipient, by
signing, dating, and returning to us the enclosed copy of this Letter Agreement. Upon receipt by
the Bank of the copy of this Letter Agreement countersigned by you, this Letter Agreement will
become effective as of the date of the countersignature.

Very truly yours,

INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT
acting as an Implementing Agency
of the Global Environment Facility

By /s/ Roger Grawe
Country Director
Czech Republic, Hungary, Moldova, Slovak Republic, and Slovenia
Europe and Central Asia Region

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AGREED:
REPUBLIC OF MOLDOVA

By: /s/ Mr. Mihail Manoli
Minister of Finance

Date: November 6, 2001

Attachment

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ANNEX
Purposes, Terms, and Conditions of the Grant

1.
Purposes and Activities
1.1.
The purpose of the Grant is to assist the Recipient in the preparation of the Agricultural
Pollution Control Project, which has as its main objectives to reduce nutrient pollution from
agricultural sources in Moldova to the Danube River and Black Sea (the Project). The Project
will assist the Recipient to: (i) promote the adoption of environmentally-friendly practices in
crop and livestock production and in rural agro-industries that contribute to nutrient pollution,
including wetland and integrated watershed management; (ii) strengthen national policy,
regulatory and institutional capacity for agricultural nutrient pollution control; and (iii) promote
a broad public awareness program and replication strategy. The activities (the Activities) for
which the Grant is given are as follows:

(a) Baseline/Socio-economic
Surveys

Provision of technical assistance to: collect and analyze baseline information including:
(i) soil and water analyses, verifying current types of farm enterprises and farming systems;
land-use patterns; livestock production systems, assessment of farms and land that could benefit
from Project interventions; soliciting beneficiaries' inputs; identifying communities for
demonstration purposes; (ii) institutional arrangements, farming practices and costs, existing
services and inputs (machinery, seeds, fertilizers and weed/pest control chemicals), farm product
prices and markets, flora and fauna of the different land-use types (bio-diversity status),
agricultural practices, environmental conditions, incentives for adopting alternate land use
practices, and potential for off-farm incomes; and (iii) conduct consultative meetings, to ensure
stakeholder participation, with farmers, non-governmental organizations (NGO's) and local
officials to obtain their inputs and incorporate them into the design of the Project and its
implementation including identifying specific activities supported by the Project, investment
needs and drawing up terms of reference (TORs) for major contracts.

(b)
Capacity building and Participatory Approach to Development
of Detailed Project Design and Project Implementation Plan

Provision of technical assistance to: (i) develop the Project components and detailed
implementation plan with involvement of the Moldova preparatory team together with local
officials, service providers and farmers; (ii) develop financial management plans, including
financial capacity assessment, undertake social assessment and environmental assessment,
including the development of an environmental management plan; develop an operational
manual as well as incremental cost analysis; (iii) organize training of personnel at both the local
and national level to implement the Project; (iv) provide initial training in public awareness
techniques and other areas identified by the Project preparation team; and (v) set up a Project
preparation unit (PPU) for the Project and provision of basic equipment and vehicle to enable the
PPU to prepare the Project in a manner satisfactory to the Bank.

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2. Implementation
Generally
2.1.
The Recipient shall: (a) carry out the Activities with due diligence and efficiency; (b)
promptly provide the funds, facilities, services and other resources required for that purpose; (c)
furnish all information covering the Activities and the use of the proceeds of the Grant as the
Bank shall reasonably request; (d) from time to time exchange views with the Bank's
representatives on the progress and results of the Activities and (e) take all necessary measures
required to enable the Bank to visit the territory of the Recipient for the purposes related to the
Grant. Without limitation on the foregoing, the Recipient shall, if the Bank shall so request,
prepare and furnish to the Bank promptly upon completion of the Activities a report, in form and
substance satisfactory to the Bank, on the results and impact of the Activities.

3. Procurement
3.1.
Except as the Bank shall otherwise agree, procurement of the consultants' services and
goods required for the carrying out of the Activities and to be financed out of the proceeds of the
Grant shall be governed by the provisions of Attachment I to this Annex.

3.2.
The Recipient shall ensure that all imported goods to be financed out of the proceeds of
the Grant shall be insured against hazards incident to the acquisition, transportation and delivery
thereof to the place of use or installation, and that any indemnity for such insurance is payable in
a freely usable currency to replace or repair such goods. The Recipient shall ensure that any
facilities relevant to the Activities are at all times operated and maintained in accordance with
appropriate practices and that any repairs or renewals of such facilities are promptly made as
needed.

4.
Withdrawal of Grant Proceeds
4.1.
The amount of the Grant shall be credited to an account opened by the Bank on its books
in the name of the Recipient (the Grant Account), and may be withdrawn therefrom by the
Recipient in accordance with the provisions of this Section 4, for expenditures in respect of the
reasonable cost of goods and services required for the Activities and to be financed out of the
proceeds of the Grant.

4.2.
The expenditures for the following items may be financed out of the proceeds of the
Grant and shall be used exclusively in the carrying out of the Activities:

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Amount of the


% of

Grant Allocated


Expenditures to
Item
(in U.S. Dollars)
be Financed
(1)
Consultants'

services
and
training
185,000
100%

(2)
Goods
51,000


100% of foreign

expenditures, 100% of

local expenditures (ex-

factory cost) and 85%
of local expenditures
for other items
procured locally

(3)
Operating costs
64,000
85%

TOTAL 300,000
For purposes of this paragraph, the term:

(a)
"foreign expenditures" means expenditures in the currency of any country other
than that of the Recipient for goods or services supplied from the territory of any country other
than that of the Recipient;

(b)
"local expenditures" means any expenditures that are not foreign expenditures,
provided, however, that if the currency of the Recipient is also that of another country from the
territory of which goods or services are supplied, expenditures in such currency for such goods
and services shall be deemed to be foreign expenditures; and

(c)
"operating costs" means recurrent expenditures incurred by the PPU to
coordinate Project preparation activities, including travel to Project sites, per diem expenses,
fuel, services of driver, vehicle maintenance, translations, communications, utilities, services of a
Project assistant, but excluding salaries of civil servants, office refurbishment and office
supplies, and cost of audit of the expenditures made under the Grant.

4.3.
Notwithstanding the provisions of paragraph 4.2 above no withdrawals shall be made:
(a) (i) for payments made for expenditures prior to the date of this Letter Agreement; (ii) on
account of payments for any taxes levied by or in the territory of the Recipient; (iii) on account
of expenditures in the territories of any country which is not a member of the Bank or for goods
produced in or services supplied from such territories; (iv) for the purpose of any payment to
persons or entities, or for any import of goods, if such payment or import, to the Bank's
knowledge, is prohibited by a decision of the United Nations Security Council taken under
Chapter VII of the Charter of the United Nations; or (v) after December 31,2003 or such later
date as the Bank shall establish by written notice to the Recipient (the Closing Date), except that
withdrawals may be made for expenditures incurred prior to the Closing Date and received by
the Bank within four months after the Closing Date, after which time any amount of the Grant
remaining unwithdrawn from the Grant Account shall be canceled; and (b) if, in the Bank's
opinion, an amount of the Grant allocated to any of the items in the table in paragraph 4.2 above
will be insufficient to finance the expenditures for such item, it may, by written notice to the

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Recipient, reallocate to such item an amount of the Grant then allocated to another item which in
its opinion will not be necessary to meet other expenditures.

4.4.
When the Recipient shall desire to withdraw any amount from the Grant Account, it
shall deliver to the Bank a written application for withdrawal of such amount in the form
specified by the Bank. Withdrawal applications shall be: (a) signed on behalf of the Recipient
by the Minister of Finance of the Recipient or such other person as he or she shall have
authorized in writing; and (b) be accompanied by such evidence in support of the application as
the Bank shall reasonably request. Authenticated specimen signatures of the person authorized
to sign withdrawal applications shall be provided with the first application bearing his or her
signature. Each withdrawal application for an amount of the Grant is supporting evidence must
be sufficient in form and substance to satisfy the Bank that the Recipient is entitled to withdraw
such amount from the Grant Account and that such amount is to be used in the carrying out of
the Activities. The Bank shall pay the amounts withdrawn by the Recipient from the Grant
Account only to or on the order of the Recipient.

4.5.
The Bank may require withdrawals from the Grant Account to be made on the basis of
statements of expenditure for expenditures under contracts for: (a) services of individual
consultants costing less than US$10,000 equivalent each; (b) goods; and (c) operating costs, all
under such terms and conditions as the Bank shall specify by notice to the Recipient.

4.6.
Withdrawals of the proceeds of the Grant shall be made in the currency of the Grant.
The Bank, at the Recipient's request and acting as an agent of the Recipient, shall purchase with
the currency of the Grant withdrawn from the Grant Account such currencies as shall be required
to pay for expenditures to be financed out of the proceeds of the Grant. Whenever it shall be
necessary, for the purposes of this Letter Agreement, to determine the value of one currency in
terms of another, such value shall be as reasonably determined by the Bank.

4.7.
To facilitate the carrying out of the Activities, the Recipient may open and maintain in
U.S. Dollars a special deposit account (the Special Account) in the Central Bank of the Recipient
on terms and conditions satisfactory to the Bank, including appropriate protection against set-off,
seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in
accordance with the provisions of the Attachment II to this Annex.

5.
Accounts and Audits
5.1.
(a)
The Recipient shall maintain or cause to be maintained a financial management
system, including records and accounts, and prepare financial statements in a format acceptable
to the Bank, adequate to reflect in accordance with sound accounting practices the operations,
resources and expenditures related to the Activities.

(b)
The Recipient shall: (i) have the records, accounts and financial statements
referred to in subparagraph (a) above and the records and accounts for the Special Account for
each fiscal year audited, in accordance with auditing standards acceptable to the Bank,
consistently applied, by independent auditors with qualifications, experience and terms of
reference acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not
later than six months after the end of each such year, (A) certified copies of the financial
statements referred to in paragraph (a) of this Section for such year as so audited, and (B) an
opinion on such statements, records and accounts and the report of such audit by said auditors, of
such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the

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Bank such other information concerning said records and accounts and the audit thereof, and
concerning said auditors, as the Bank shall from time to time reasonably request.

(c)
For all expenditures with respect to which withdrawals from the Grant Account
were made on the basis of statements of expenditure, the Recipient shall: (i) maintain or cause to
be maintained, in accordance with subparagraph (a) above, records and accounts reflecting such
expenditures; (ii) retain, until at least after one year after the Bank has received the audit report
for the fiscal year in which the last withdrawal from the Grant Account was made, all records
(contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures;
(iii) enable the Bank's representatives to examine such records; and (iv) ensure that such records
and accounts are included in the annual audit referred to in subparagraph (b) above and that the
report of such audit contains a separate opinion by said auditors as to whether the statements of
expenditure submitted during such fiscal year, together with the procedures and internal controls
involved in their preparation, can be relied upon to support the related withdrawals.
6. Suspension
and
Cancellation
6.1.
The Bank may at any time, by notice to the Recipient, suspend the right of the Recipient
to make further withdrawals from the Grant Account if any of the following events has occurred
and is continuing: (a) the Recipient has failed to comply with any of its obligations therein
specified; or (b) the right of the Recipient, or any other entity to which the Bank has made a loan
with the guarantee of the Recipient, to make withdrawals under any loan agreement with the
Bank or any development credit agreement with the International Development Association
shall have been suspended.
6.2.
The Bank may, by written notice to the Recipient, terminate the right of the Recipient to
make further withdrawals from the Grant Account: (a) at any time after the right of the
Recipient to make withdrawals from the Grant Account shall have been suspended pursuant to
the provisions of paragraph 6.1 above; or (b) if the Recipient shall have failed to take action,
satisfactory to the Bank, within ninety (90) days after the effective date hereof, to carry out the
Activities; or (c) if the Bank has decided, at any time after consultation with the Recipient, to
withdraw its support to the Project; or (d) if the Recipient has withdrawn its request for the
Bank's assistance in financing the Project.

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Attachment I

Procurement

Section I. Consultants' Services
Part A: General
Consultants' services shall be procured in accordance with the provisions of the
Introduction and Section IV of the "Guidelines: Selection and Employment of Consultants by
World Bank Borrowers", published by the Bank in January 1997 and revised in September 1997
and January 1999 (the Consultant Guidelines), and the following provisions of this Section I.

Part B: Other Procedures for the Selection of Consultants
Individual Consultants
Services for technical experts and local technical assistance under paragraph 1.1 (a) and
(b) of the Annex shall be procured under contracts awarded to individual consultants in
accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines.

Part C: Review by the Bank of the Selection of Consultants
1. Selection
Planning
Prior to the issuance to consultants of any requests for proposals, the proposed plan for
the selection of consultants under the Activities shall be furnished to the Bank for its review and
approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Consultant
Guidelines. Selection of all consultants' services shall be undertaken in accordance with such
selection plan as shall have been approved by the Bank, and with the provisions of said
paragraph 1.

2. Prior
Review
With respect to: (i) each contract for the employment of individual consultants estimated
to cost the equivalent of US$10,000 or more, the qualifications, experience, terms of reference
and terms of employment of the consultants; and (ii) all contracts for employment of individual
consultants the terms of reference for the employment of consultants shall be furnished to the
Bank for its prior review and approval. The contract shall be awarded only after said approval
shall have been given.

3. Post
Review
With respect to each contract not governed by paragraph 2 of this Part, the procedures
set forth in paragraph 4 of Appendix 1 to the Consultant Guidelines shall apply.

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Section II. Procurement of Goods
Goods shall be procured: (a) in accordance with the provisions of the "Guidelines for
Procurement under IBRD Loans and IDA Credits" published by the Bank in January 1995 and
revised in January and August 1996, September 1997 and January 1999 (the Guidelines); and (b)
under contracts awarded on the basis of shopping procedures in accordance with the provisions
of paragraphs 3.5 and 3.6 of the Guidelines. The review procedures set forth in paragraph 4 of
Appendix 1 to the Guidelines shall apply to such contracts, provided that the word "bids", in
such paragraph 4, shall be read as "quotations".

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Attachment II
Special Account

1.
For the purposes of this Attachment:

(a)
The term "eligible items" means the items set forth in the table in paragraph 4.2
of the Annex to this Letter Agreement;

(b)
the term "eligible expenditures" means expenditures in respect of the reasonable
cost of goods and services required for the Activities and to be financed out of the proceeds of
the Grant; and

(c)
the term "Authorized Allocation" means an amount equivalent to US$75,000.00
to be withdrawn from the Grant Account and deposited into the Special Account pursuant to
paragraph 3 (a) of this Attachment.

2.
Payments out of the Special Account shall be made exclusively for eligible expenditures
in accordance with the provisions of this Attachment.

3.
After the Bank has received evidence satisfactory to it that the Special Account has been
duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish
the Special Account shall be made as follows:

(a)
the Recipient shall furnish to the Bank a request or requests for a deposit into the
Special Account of an amount or amounts which do not exceed the aggregate amount of the
Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the
Recipient, withdraw from the Grant Account and deposit into the Special Account such amount
or amounts as the Recipient shall have requested.

(b)
(i)
For replenishment of the Special Account, the Recipient shall furnish to
the Bank requests for deposits into the Special Account at such intervals
as the Bank shall specify.

(ii)
Prior to or at the time of each such request, the Recipient shall furnish to
the Bank the documents and other evidence required pursuant to
paragraph 4 of this Attachment for the payment or payments in respect
of which replenishment is requested. All such deposits shall be
withdrawn by the Bank from the Grant Account under the eligible
item(s), and in the respective equivalent amounts, as shall have been
justified by said documents and other evidence.

4.
For each payment made by the Recipient out of the Special Account, the Recipient shall,
at such time as the Bank shall reasonably request, furnish to the Bank such documents and other
evidence showing that such payment was made exclusively for eligible expenditures.

5.
Notwithstanding the provisions of paragraph 3 of this Attachment, the Bank shall not be
required to make further deposits into the Special Account.

(a)
if, at any time, the Bank shall have determined that all further withdrawals
should be made by the Recipient directly from the Grant;

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(b)
if the Recipient shall have failed to furnish to the Bank, within the period of time
specified in paragraph 5.1 (b) (ii) of the Annex of this Letter Agreement, any of the audit reports
required to be furnished to the Bank pursuant to said paragraph in respect of the audit of the
records and accounts for the Special Account:

(c)
if, at any time, the Bank shall have notified the Recipient of its intention to
suspend in whole or in part the right of the Recipient to make withdrawals from the Grant
Account pursuant to the provisions of paragraph 6.1 of the Annex to this Letter Agreement; or

(d)
Once the total withdrawn amount of the Grant shall equal the equivalent of
twice the amount of the Authorized Allocation.

Thereafter, withdrawals from the Grant Account of the remaining unwithdrawn amount
of the Grant shall follow such procedures as the Bank shall specify by notice to the Recipient.
Such further withdrawals shall be made only after and to the extent that the Bank shall have been
satisfied that all such amounts remaining on deposit in the Special Account as of the date of such
notice will be utilized in making payments for eligible expenditures.

6.
(a)
If the Bank shall have determined at any time that any payment out of the
Special Account: (i) was made for an expenditure or an amount not eligible pursuant to
paragraph 2 of this Attachment; or (ii) was not justified by the evidence furnished to the Bank,
the Recipient shall, promptly upon notice from the Bank: (A) provide such additional evidence
as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so
request, refund to the Bank) an amount equal to the amount of such payment or the portion
thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by
the Bank into the Special Account shall be made until the Recipient has provided such evidence
or made such deposit or refund, as the case may be.

(b)
If the Bank shall have determined at any time that any amount outstanding in the
Special Account will not be required to cover further payments for eligible expenditures, the
Recipient shall, promptly upon notice from the Bank, refund to the Bank such outstanding
amount.

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