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FAO and the Bank 1 have for many years been co-operating on an ad hoc basis on matters of common concern. Now that the Bank intends to put more emphasis than hitherto on schemes for improvement of agricultural production, which are of equal concern to FAO, this co-operation will have to be intensified. It accordingly appears desirable both to FAO and the Bank that working arrangements be agreed upon setting forth the principles to govern such co-operation.

These working arrangements, as agreed upon by the Director-General of FAO and the President of the Bank, subject to the approvals specified in paragraph 7 hereof, are as follows:

1 All references in this memorandum to the Bank shall be taken to include both the Bank and the International Development Association.

1. The Co-operative Program

FAO and the Bank will co-operate together in the following fields:

  1. Assisting countries of common membership in the identification and preparation of agricultural projects of types which fall within the framework of the economic development objectives and general policies of the Bank and FAO and which the Bank is willing to consider for financing (including projects for agricultural education falling within FAO's field of responsibility).

  2. Appraising projects of the foregoing types.

  3. Providing end-use supervision of the execution and operation of Bank-financed projects.

  4. Arranging for technical assistance required for the implementation of Bank-financed projects.

Assistance to Member Governments in agricultural planning is recognized as an important foundation for investment programs in the long term. Insofar as this type of activity is carried out by FAO as part of its Regular or other programs, it is the sole responsibility of FAO. However, in cases agreed with the Bank where FAO carries out this type of activity at the request of the Bank or in co-operation with the Bank, the activity will be part of the Co-operative Program.

2. Allocation of functions within the Co-operative Program

  1. Assistance to Governments in identification and preparation of projects

    1. At FAO initiative

      FAO will bring to the notice of the Bank projects which appear suitable for Bank financing arising from FAO's activities, whether under its Regular or other programs. The Bank will advise FAO whether such projects are prima facie suitable for consideration for financing, and if so, what further action, if any, needs to be taken in order to prepare such projects for appraisal. Moreover, where, in the course of its own activities, FAO wishes the assistance of the Bank in determining whether a project is likely to qualify for Bank or other external financing, or what further steps are necessary to prepare it for appraisal, the Bank will provide such assistance, assuming staff resources permit, either by way of review of the project at Bank headquarters or by participating in the field work.

    2. At Bank initiative

      The general survey missions organized by the Bank may include among their functions the identification of promising projects in various sectors. The Bank will normally look to FAO to provide, as part of the Co-operative Program, staff members or consultants to serve as advisers to such missions. These advisers will participate in defining priority fields and major projects for investment in agriculture in the framework of over-all development objectives. Missions of this type will be briefed by both the Bank and FAO and both organizations will review and comment upon the draft reports of such missions. In addition to these general survey missions, the Bank periodically sends smaller missions to a member country to review the country's economic situation and to assess the possibilities for Bank financing. Such economic missions usually make a preliminary selection among projects submitted by the government, and may sometimes suggest that the government work up a specific project for Bank consideration. The Bank will advise FAO of all such missions on which it is proposed to include an agricultural member, and will normally arrange for such missions to consult with FAO with regard to agricultural investment priorities and possible projects. In agreed cases, FAO will provide, as part of the Co-operative Program, a staff member or consultant to serve as agricultural adviser to such a mission. Where, in the opinion of the Bank, a project not yet ready for appraisal is sufficiently promising to warrant further preparation, and the government in question has requested assistance in such preparation, FAO will normally provide such assistance as part of the Co-operative Program.

    3. General

      In all work connected with the identification and preparation of projects falling under the Co-operative Program, FAO and the Bank will maintain continuing consultation in order that they may agree on a work program and on the priorities to be assigned to different projects, and in order to minimize the possibilities of substantive disagreement. The support of headquarters facilities will at all times be given to Bank and FAO staff and consultants engaged in work under the Co-operative Program.

  2. Appraisal of projects

    The Bank will be responsible for the appraisal of projects, upon the basis of which its financing decisions are made. However, at the request of the Bank, FAO will provide, as part of the Co-operative Program, staff members or consultants to serve as agricultural advisers on Bank appraisal missions.

  3. End-use supervision of Bank-financed projects

    The Bank will be responsible for the disbursement of funds and the end-use supervision of the construction and maintenance of physical facilities, and to this end will be responsible for such review as may be appropriate of the specifications, bids and awards of contracts, and for whatever inspections of the project are necessary in this connection. FAO will, in cases agreed with the Bank, assume responsibility as part of the Co-operative Program, to ascertain, both through field inspections and through review of periodic reports and to advise the Bank whether the agricultural objectives of the project are being achieved, and in particular whether the obligations undertaken by the borrower in this regard are being fulfilled. The results of FAO's end-use work on the agricultural aspects of Bank-financed projects will be made available to the Bank and, in the event that representations to the borrower should be necessary on agricultural matters, FAO and the Bank will consult together on how they might best be made.

  4. Technical assistance in project implementation

    In cases agreed with the Bank, FAO will provide or arrange for, and will exercise appropriate supervision over, technical assistance required for the direct implementation of a Bank-financed project.

3. Personnel

It is agreed that the Co-operative Program requires a team of specialized personnel of high caliber within the FAO secretariat which can devote itself continuously to this work (hereafter referred to for purpose of this Memorandum as “FAO team”). The Director-General of FAO will therefore make provision for such a team to be established as an identifiable group within the FAO secretariat. FAO and the Bank will agree from time to time on the appropriate size of the FAO team and on the types and classifications of positions to be included within the team, and the Director-General of FAO will consult with the Bank on the appointment of professional staff to the team.

The FAO team, although it will be devoted full time to work in connection with the Co-operative Program, will be an integral part of the FAO secretariat and will operate under the exclusive authority of the Director-General of FAO. Both FAO and the Bank agree that it is desirable that the hard core of the team should to the greatest possible extent be composed of existing FAO staff members. However, it is recognized that for a variety of reasons new staff and ad hoc consultants will be necessary, both in the initial phases of co-operation and as the Program expands, although generally maximum care will be taken to secure continuity in employment. It is also recognized that it will be necessary and desirable from time to time to use FAO staff members outside the team for purposes of the Co-operative Program.

In cases where FAO intends to appoint an outside consultant to serve as agricultural adviser to a Bank mission, or to provide technical assistance in the implementation of a Bank-financed project, it will consult with the Bank as to the person to be appointed.

4. Financial arrangements

  1. Subject to the qualifications set forth below, the direct costs of FAO in connection with agreed work under the Program, including salaries, allowances and other benefits and travel costs of the FAO team, of outside consultants and of other FAO staff members assigned to such work, will be shared equally by FAO and the Bank up to a ceiling figure to be fixed from time to time by agreement between the two organizations.

  2. The travel and subsistence expenses of FAO staff members and consultants, while serving as members of Bank appraisal, general survey or other missions, will be borne or provided for by the Bank.

  3. FAO will pay for invisible overhead costs, including space, and for identifiable indirect costs (except as provided in subparagraphs (d) and (e) involved in its participation in the Co-operative Program.

  4. The Bank will bear the cost of document reproduction and translation undertaken by FAO in agreement with the Bank.

  5. The cost of technical assistance directly required for the implementation of Bank-financed projects, including an amount for FAO's estimated administrative costs in arranging for such technical assistance in cases agreed with the Bank, will be paid for out of the proceeds of the financing or will be otherwise met by the Bank. The amount for estimated administrative costs will be 12 percent of the direct cost of such technical assistance, except where technical assistance is provided under contract between FAO and some outside entity, in which event the amount will be fixed by agreement between FAO and the Bank.

  6. It is recognized that the calendar years 1964 and 1965, which comprise FAO's present budgetary biennium, are a transitional period during which FAO's contribution is limited by its existing Budget. For those years, the agreed ceiling figure for purposes of subparagraph (a) above, to be shared equally by the two organizations, will be $400,000 for the biennium. FAO's costs in excess of this amount will be met by the Bank, provided that FAO will not incur or commit itself to incur costs in excess of $800,000 (the presently estimated cost of the Co-operative Program) during the biennium without the prior approval of the Bank.

  7. Continuation of the Program beyond December 31, 1965, will be subject to mutual agreement in the light of experience and to the decision of FAO's 1965 Conference. It is intended, however, that if the Program is continued, the ceiling figure to be agreed upon for purposes of subparagraph (a) above for periods after December 31, 1965, will be an amount reflecting the principle of cost-sharing set forth in said subparagraph (a).

  8. The Bank and FAO will agree on the procedures for payment of funds from the Bank to FAO, and for accounting to the Bank by FAO, in connection with the Co-operative Program, including if possible provision for a working fund out of which the expenses of the Program can be met.

5. Relations with other agencies

Where the Bank looks to any outside agency for assistance in connection with agricultural projects, that agency will normally be FAO. However, there may be cases where, because of the type of project involved or because of special circumstances, it would be appropriate and desirable for the Bank to look to some other agency, public or private, to perform some or all of the functions which FAO would ordinarily perform under these working arrangements. It is agreed that in all such cases the Bank will consult FAO on the action it proposes to take. It is also agreed that the Bank will not subject FAO's advice on agricultural matters within its competence and covered by the Co-operative Program to review by any outside agency.

6. Modification and termination

These working arrangements may be modified or supplemented at any time by mutual agreement between the two organizations. Each organization may, after reasonable notice, terminate the arrangements, provided that, if they are terminated by the Bank, the Bank will reimburse FAO for the financial consequences of cancelling personnel commitments entered into for purposes of the Co-operative Program.

7. Effectuation of the arrangements

The working arrangements will become operative on an interim basis when this Memorandum of Understanding is signed by the Director-General of FAO and the President of the Bank, but the continuation thereof will be subject to the approval of the Boards of Governors in the case of the Bank and IDA, and of the Council in the case of FAO. It is contemplated that the necessary approvals will authorize payment by the Bank to FAO retroactively to 1 March 1964 of expenses incurred for purposes of the Co-operative Program which would have been eligible for payment if these working arrangements had been effective on that date.

30 March 1964 (signed) George D. Woods
  President, International Bank for Reconstruction and Development and International Development Association
2 April 1964 (signed) B.R. Sen
  Director-General, Food and Agriculture Organization of the United Nations

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