EAsian Devel

Southeast Asia Department

opment Bank

3 October 2016

H.E. Mr. Somdy DouangdyDeputy Prime Minister and Minister of FinanceMinistry of FinanceLao People's Democratic Republic -

Dear Somdy:

Subject: Amendments to Loan Agreements (Special Operations) andFinancing Agreements (Special Operations)

1. On 29 April 2015, the Board of Governors of the Asian Development Bank ("ADB")unanimously approved: (a) the termination of the loan operations of ADB's Asian DevelopmentFund ("ADF"); (b) the continuation of ADF operations as grant-only operdtions; and (c) thetransfer of the ADF loans and related assets to ADB's ordinary capital resources ("OCR"),effective 1 January 201V. With effect from such date, ADB's ADF loan operations areterminated, and all ADF loans (outstanding and undisbursed balances) as of 31 December2016 are designated as concessional OCR loans but with no changes to either the loan termsand conditions or the projects financed under these loans.

2. To implement the designation of such ADF loans as concessional OCR loans, it isnecessary to amend the Loan Agreements (Special Operations) and Financing Agreements(Special Operations) (collectively, the "Legal Agreements") pursuant to which the ADF loanswere provided. This letter agreement applies to the ADF loans ("Loans") made by ADB to LaoPeople's Democratic Republic ("Borrower") for which the Legal Agreements incorporate byreference the following ADB Special Operations Loan Regulations: Special Operations LoanRegulations, dated 17 February 1977 ("1977 Loan Regulations"); Special Operations LoanRegulations, dated 7 December 1982 (1982 Loan Regulations"); and Special Operations LoanRegulations, dated 1 January 2006 ("2006 Loan Regulations"). The Loans are listed below:

(a) Loans for which the Legal Agreements incorporate the 1977 Loan Regulations:

(i) Loan No. 0361-LAO(SF): Forestry Development Project;(ii) Loan No. 0453-LAO(SF): Agricultural Support Facilities Project;(iii) Loan No. 0501-LAO(SF): Vientiane Plain Rural Electrification Project ll;

(b) Loans for which the Legal Agreements incorporate the 1982 Loan Regulations:

(i) Loan No. 0642-LAO(SF): Vientiane Plain Rural Electrification Project - ll;(ii) Loan No. 0643-LAO(SF): Vientiane Plain Road lmprovement Project;(iii) Loan No. 0716-LAO(SF): Second Forestry Development Project;(iv) Loan No. 0788-LAO(SF): Second Road lmprovement Prolect;(v) Loan No. 0846-LAO(SF): Xeset Hydropower Project,(vi) Loan No. 0866-LAO(SF): Third Road lmprovement Project;

James A. NugentDirector General

No. 6 ADB Avenue, Mandaluyong City1550 Metro Manila, Philippines'lvr.r.lr.. adb.ors

Tel. +63 26326700Fax +63 2 636 2232jnugent@adb.org

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(vii) Loan No. 0928-LAO(SF): Nam Ngum-Luang Prabang PowerTransmission Project;

(viii) Loan No. 0965-LAO(SF): Agnicultural Program;(ix) Loan No. 1009-LAO(SF): Fourth Road lmprovement Project;(x) Loan No. 1061-LAO(SF): Financial Sector Prograrn;(xi) Loan No. 1063-LAO(SF): Xeset Hydropower Project - Supplementary;(xii) Loan No. 1103-LAO(SF): Education Quality lmprovement Project;(xiii) Loan No. 1108-LAO(SF): Fifth Road lmprovement Project;(xiv) Loan No. 1122-LAO(SF): Southern Provincial Towns Water Supply

Project;(xv) Loan No. 1180-LAO(SF): Second Agriculture Program(xvi) Loan No. 1190-LAO(SF): Rehabilitation and Upgrading of Vientiane

Water Supply Project;(xvii) Loan No. 1214-LAO(SF): Nam Song Hydropower Development Project;(xviii) Loan No. 1234-LAO(SF): Sixth Road lmprovement Project;(xix) Loan No. 1266-LAO(SF): Airports lmprovements Project;(xx) Loan No. 1267-LAO(SF): Northern Provincial Towns Water Supply and

Sanitation Project;(xxi) Loan No. 1295-LAO(SF): IndustrialTree Plantation Project;(xxii) Loan No. 1308-LAO(SF): Nam Ngum-Luang Prabang Power

Transmission Project - Supplementary;(xxiii) Lo'an No. 1329-LAO(SF): Theun-Hinboun Hydropower Project;(xxiv) Loan No. 1348-LAO(SF): Primary Health Care Project;(xxv) Loan No. 1362-LAO(SF): Vientiane Integrated Urban Development

Project;(xxvi) Loan No. 1369-LAO(SF): Champassak Road lmprovement Project;(xxvii) Loan No. 1374-LAO(SF): Postsecondary Education Rationalization

Project;(xxviii) Loan No. 1456-LAO(SF): Nam Leuk Hydropower Project;(xxix) Loan No. 1458-LAO(SF): Second Financial Sector Program;(xxx) Loan No. 1488-LAO(SF): Community-Managed lrrigation Sector Project;xxxi) Loan No. 1525-LAO(SF): Secondary Towns Urban Development Project;xxxii) Loan No. 1533-LAO(SF): Xieng Khouang Road lmprovement Project;xxxiii) Loan No. 1558-LAO(SF): PowerTransmission and Distribution Project;xxxiv) Loan No. 1621-LAO(SF): Basic Education (Girls) Project;xxxv) Loan No. 1688-LAO(SF): Shifting Cultivation Stabilization Pilot Project;xxxvi) Loan No. 171O-LAO(SF): Water Supply and Sanitation Sector Project;

(xxxvii) Loan No. 1727-LAO(SF): Greater Mekong Subregion: East-WestCorridor Project (Lao Component);

(xxxviii) Loan No. 1749-LAO(SF): Primary Health Care Expansion Project;(xxxix) Loan No. 1788-LAO(SF): Decentralized lrrigation Development and

Management Sector Project;(xl) Loan No. 1795-LAO(SF): Rural Access Roads Project;(xli) Loan No. 1834-LAO(SF): Vientiane Urban Infrastructure and Services

Project;(xlii) Loan No. 1844-LAO(SF): Second Edgcation Quality lmprovement

Project;(xliii) Loan No. 1867-LAO(SF): Environment and Social Program;(xliv) Loan No. 1931-LAO(SF): Banking Sector Reform Project;(xlv) Loan No. 1933-LAO(SF): Nam Ngum River Basin Development Sector

Project;

(c)

(xlvi) Loan No. 1946-LAO(SF): Banking Sector Reform Program;(xlvii) Loan No. 1949-LAO(SF): Smallholder Development Project;(xlviii) Loan No. 1970-LAO(SF): Greldter Mekong Subregion Mekong Tourism

Development Project (Lao PDR Component);(xlix) Loan No. 1989-LAO(SF): GMS: Northern Economic Corridor Project;(l) Loan No. 1994-LAO(SF): Small Towns Development Sector Project;(li) Loan No. 2005-LAO(SF): Northern Area Rural Power Distribution Project;(lii) Loan No. 2085-LAO(SF): Roads for Rural Development Project;(liii) Loan No. 2086-LAO(SF): Northern Community-Managed lrrigation Sector

Project;

Loans for which the Legal Agreements incorporate the 2006 Loan Regulations:

(i) Loan No. 2252-LAO(SF): Rural Finance Sector Development Program;(ii) Loan No. 2253-LAO(SF): Rural Finance Sector Development Project;(iii) Loan No. 2259-LAO(SF): Northern Region Sustainable Livelihoods

through Livestock Development Project;(iv) Loan No. 2306-LAO(SF): Basic Education Sector Development Project;(v) Loan No. 2777-LAO(SF): Secondary Education Sector Development

Program;(vi) Loan No. 2780-LAO(SF): Nam Ngum River Basin Development Sector

Project - Additional Financing;(vii) Loan No. 2791-LAO(SF): Second Private Sector and SME Development

Program Cluster - Subprogram 1;(viii) Loan No. 2809-LAO(SF): Smallholder Development Project - Additional

Financing;(ix) Loan No. 287 -LAO(SF): Trade Facilitation: lmproved Sanitary and

Phytosanitary Handling in Greater Mekong Subregion Trade project;(x) Loan No.2876-LAO(SF): Pakse Urban Environmental lmprovement

Project;(xi) Loan No. 2905-LAO(SF): Governance and Capacity Development in

Public Sector Management Program - Subprogram 1;

(xii) Loan No. 2931-LAO(SF): Greater Mekong Subregion EasfWestEconomic Corridor Towns Development Project;

(xiii) Loan No. 2936-LAO(SF): Greater Mekong Subregion - Flood andDrought Risk Management and Mitigation Project (Lao PDR Component);

(xiv) Loan No. 3024-LAO(SF): Greater Mekong Subregion - East WestEconom ic Corridor Ag ricultu re I nfrastructure Sector Project;

(xv) Loan No. 3036-LAO(SF): Second Private Sector and SME DevelopmentProgram - Subprogram 2;

(xvi) Loan No. 3037-LAO(SF): Second Private Sector and SME DevelopmentProgram - Subprogram 2;

(xvii) Loan No. 3041-LAO(SF): Water Supply and Sanitation Sector Project;(xviii) Loan No. 3156-LAO(SF): GMS Tourism Infrastructure for Inclusive

GroMh Project;(xix) Loan No. 3198-LAO(SF): Northern Smallholder Livestock

Com mercialization Project;(xx) Loan No. 3205-LAO(SF): Governance and Capacity Development in

Public Sector Management Program - Subprogram 2;(xxi) Loan No. 3250-LAO(SF): Vientiane Sustainable Urban Transport Project;

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(xxii) Loan No. 3279-LAO(SF): Health Sector Governance Program -Subprogram '1;' (xxiii) Loan No. 3280-LAO(SF): HeaKh Sector Governance Program -Subprogram 1;

(xxiv) Loan No. 3315-LAO(SF): Second Greater Mekong Subregion ConidorTowns Development Project;

(xxv) Loan No. 3368-LAO(SF): Road Sector Governance and MaintenanceProject; and

(xxvi) all other Loans to be approved by ADB's Board of Directors up to 31December 2016.

3. For the purpose of the designation of the Loans as concessional OCR loans referred toin paragraph 2 of this letter agreement, the Legal Agreement in relation to each of the Loansand the relevant Special Operations Loan Regulations incorporated therein:

(a) which is listed under subparagraph 2(a) above, is amended in accordance withthe provisions of Appendix 1 attached hereto;

(b) which is listed under subparagraph 2(b) above, is amended in accordance withthe provisions of Appendix 2 attached hereto; and

(c) which is listed under subparagraph 2(c) above, is amended in accordance withthe provisions of Appendix 3 attached hereto.

4. Save and except to the extent set out in paragraph 3 of this letter agreement andAppendices 1-3, these LegalAgreements remain unchanged.

5. Pursuant to ADB's Public Communications Policy on disclosure and exchange ofinformation, the amendments to the Legal Agreements which have been entered into on or after1 September 2005 will be posted on ADB's website within 2 weeks from the date that theamendments become effective.

6. Please countersign each of the two originals of this letter agreement in the spaceindicated below. Please retain one signed original of this letter agreement for your records andreturn the other to ADB. The amendments will become effective as of 1 January 2017. lf youhave any questions, please contact Mr. Andrew J. Head at +632 632-4104 or atahead@adb.org.

Yours sincerely,

ent

east Asia Department

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Accepted and agreed.

For and on behalf of 4

Lao People's Democratic Republic ,, .r-_)Name: Somdy Douangdy \_ /.t'\ . :Vr 1 /,7L/

Designation: Deputy Prime Minister and Minister of Finance u I

Date: '', 1

cc: Steven Schipani, Officer-in-Charge, LRM

Appendix 1

Legal Agreements that incorporate the 1977 Loan Regulations4

Each L6gal Agreement entered into between the Borrower and ADB, which incorporates byreference the 1977 Loan Regulations, is amended as follows:

1. Loan Aoreement (Special Operations)

(a) Cover paqe (Loan number): The reference to "(SF)" shall be deleted andreplaced by "(COL)";

(b) Cover paqe: The reference to "Loan Agreement (Special Operations)" shall bedeleted and replaced by "Loan Agreement (Ordinary OperationsIConcessional])";

(c) Title: The reference to "Loan Agreement (Special Operations)" shall be deletedand replaced by "Loan Agreement (Ordinary Operations [Concessional])";

(d) Recitals: The reference to "special Funds resources" and "Special OperationsLoan Regulations", as applicable, shall be deleted and replaced by "ordinarycapital resources" and "Ordinary Operations (Concessional) Loan Regulations",respectively;

(e) Section 1.01: The reference to "Special Operations Loan Regulations" shall bedeleted and replaced by "Ordinary Operations (Concessional) Loan Regulations";and

(f) Section 2.01: The reference to "Special Funds resources" shall be deleted andreplaced by "ordinary capital resources".

2. Special Operations Loan Requlations (1977)

(a) Cover page: The reference to "Special Operations Loan Regulations" shall bedeleted and replaced by "Ordinary Operations (Concessional) Loan Regulations";

(b) Cover paqe: The reference to "Loans Made by the Bank from its Special FundsResources" shall be deleted and replaced by "Concessional Loans Made by theBank from its Ordinary Capital Resources";

(c) Title (Above table of contents and Article l\: The reference to "special OperationsLoan Regulations" shall be deleted and replaced by "Ordinary Operations(Concessional) Loan Regulations";

(d) Section 1.01 (Purpose): The reference to "loans" and "Special Funds resources"shall be deleted and replaced by "concessional loans" and "ordinary capitalresources", respectively;

(e) Section 1.02 (Application of Regulations): The reference to "loan" and "SpecialFunds resources" shall be deleted and replaced by "concessional loan" and"ordinary capital resources", respectively; and

IAppendix 1

It( (0 Section 2.01(25) shall be deleted and replaced by the following:f

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""ordinary capital resources" has the same meaning as the expression "ordinarycapital resources" of ADB as defined in Article 7 of the Agreement Establishing

. the Asian Development Bank;".

Appendix 2

Leqal Aqreements that incorporate the 1982 Loan Regulations4

Each Lbgal Agreement entered into between the Borrower and ADB, which incorporates byreference the 1982 Loan Regulations, is amended as follows:

1. Loan Agreement (Special Operations)

(a) Cover paqe (Loan number): The reference to "(SF)" shall be deleted andreplaced by "(COL)";

(b) Cover paoe: The reference to "Loan Agreement (Special Operations)" shall bedeleted and replaced by "Loan Agreement (Ordinary Operations[Concessional])";

(c) Title: The reference to "Loan Agreement (Special Operations)" shall be deletedand replaced by "Loan Agreement (Ordinary Operations [Concessional])";

(d) Recitals: The reference to "Special Funds resources" and "Special OperationsLoan Regulations", as applicable, shall be deleted and replaced by "ordinarycapital resources" and "Ordinary Operations (Concessional) Loan Regulations",respectively;

(e) Section 1.01:The reference to "Special Operations Loan Regulations" shall bedeleted and replaced by "Ordinary Operations (Concessional) Loan Regulations";

(f) Section 2.01: The reference to "Special Funds resources" shall be deleted andreplaced by "ordinary capital resources"; and

(g) Section 2.04: The reference to "Special Funds resources" shall be deleted andreplaced by "ordinary capital resources".'

2. Special Operations Loan Requlations (1982)

(a) Cover paqe: The reference to "Special Operations Loan Regulations" shall bedeleted and replaced by "Ordinary Operations (Concessional) Loan Regulations";

(b) Cover paqe: The reference to "Loans Made by the Bank from its Special FundsResources" shall be deleted and replaced by "Concessional Loans Made by theBank from its Ordinary Capital Resources";

(c) Title (Above table of contents and Article l): The reference to "Special OperationsLoan Regulations" shall be deleted and replaced by "Ordinary Operations(Concessional) Loan Regulations";

(d) Section 1.01 (Purpose): The reference to "loans" and "Special Funds resources"shall be deleted and replaced by "concessional loans" and "ordinary capitalresources", respectively;

' Applicable only to those Loans approved after 1 1 August 1999.

(e)v

{f)

Appendix 2

Section 1.02 (Application of Requlations): The references to "loan" and "SpecialFunds resources" shall be deleted,6nd replaced by "concessional loan" and"ordinary capital resources", respectively; and

Section 2.01(26) shall be deleted and replaced by the following:

""ordinary capital resources" has the same meaning as the expression "ordinarycapital resources" of ADB as defined in Article 7 of the Agreement Establishingthe Asian Development Bank;".

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10Appendix 3

Leqal Agreements that incorporate the 2006 Loan Requlations

Each Legal Agreement entered into between the Borrower and ADB, which incorporates byreference the 2006 Loan Regulations, is amended as follows:

1. Loan Aqreement (Special Operations)

(a) Cover paqe (Loan number): The reference to "(SF)" shall be deleted andreplaced by "(COL)";

Cover paqe: The reference to "Loan Agreement (special operations)" shail bedeleted and replaced by "Loan Agreement (Ordinary Operations[Concessional])";

(c) Title: The reference to "Loan Agreement (Special Operations)" shall be deletedand replaced by "Loan Agreement (Ordinary Operations [Concessional])";

(d) Recitals: The reference to "Special Funds resources" and "Special OperationsLoan Regulations", as applicable, shall be deleted and replaced by "ordinarycapital resources" and "Ordinary Operations (Concessional) Loan Regulations",respectively;

(e) Section 1.01: The reference to "Special Operations Loan Regulations" shall bedeleted and replaced by "Ordinary Operations (Concessional) Loan Regulations";and

(f) Section 2.01: The reference to "special Funds resources" shall be deleted andreplaced by "ordinary capital resources".

2. Financinq Aqreement (Special Operations)

(a) Cover paqe (Loan number): The reference to "(SF)" shall be deleted andreplaced by "(COL)";

(b) Cover paqe: The reference to "Financing Agreement (Special Operations)" shallbe deleted and replaced by "Financing Agreement (Ordinary Operations[Concessional] and Special Operations)";

(c) Title: The reference to "Financing Agreement (Special Operations)" shall bedeleted and replaced by "Financing Agreement (Ordinary Operations[Concessional] and Special Operations)";

(d) Recitals: The reference to "Special Funds resources" and "Special OperationsLoan Regulations", as applicable, shall be Qeleted and replaced by "ordinarycapital resources and Special Funds resources, respectively" and "OrdinaryOperations (Concessional) Loan Regulations", respectively;

(b)

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APPendix 3

(e) Section 1.01: The reference to "Spepial Operations Loan Regulations" shall bedeleted and replaced by "Ordinary Operations (Concessional) Loan Regulations";'' and

(0 Section 2.01: The reference to "Special Funds resources" shall be. deleted andreplaced by "ordinary capital resources and Special Funds resources,respectively".

Special Operations Loan Requlations (2006)

(a) Cover paqe: The reference to "Special Operations Loan Regulations" shall bedeleted and replaced by "Ordinary Operations (Concessional) Loan Regulations";

(b) Cover paqe: The reference to "Loans Made by ADB from its Special FundsResources" shall be deleted and replaced by "Concessional Loans Made by ADBfrom its Ordinary Capital Resources";

(c) Title (Above table of contents and Article l): The reference to ''special OperationsLoan Regulations" shall be deleted and replaced by "Ordinary Operations(Concessional) Loan Regulations";

(d) Section 1.01 (Purpose): The reference to "loans" and "Special Funds resources"shall be deleted and replaced by "concessional loans" and "ordinary capitalresou rces", respectively;

(e) Section 1.02 (Application of Requlations): The reference to "loan" and "specialFunds resources" shall be deleted and replaced by "concessional loan" and"ordinary capital resources", respectively;

(f) Section 2.01(28) shall be deleted and replaced by the following:

""ordinary capital resources" has the same meaning as the expression "ordinarycapital resources" of ADB as defined in Article 7 of the Agreement Establishingthe Asian Development Bank;"; and

(g) Section 3.05(a) shall be deleted and replaced by the following:

"lf ADB shall determine, afte.r due consideration by its Board of Directors, that: (i)the Borrower's gross national product per capita (per capita GNP) has exceededADB's per capita GNP operational cutoff in respect of concessional loans fromADB's ordinary capital resources for five consecutive years; and (ii) the Borrowerhas achieved the capacity for regular loans from ADB's ordinary capitalresources, ADB may, by notice to the Borrower, modify the terms of repaymentof the Loan by increasing by 100 percent the amount of each maturity duethereafter until the principal amount of the Loan shall have been fully repaid.However, at the request of the Borrower, ADB may, in lieu of so increasing anysuch maturity amounts, charge interest, at an annual rate to be agreed betweenthe Borrower and ADB, on the principal amount of the Loan withdrawn andoutstanding from time to time in such a manner and to such extent as to yield the

J.

12APPendix 3

same grant element as would be obtained under the above-stated increase ofmaturity amounts." 4