On ratification of the Loan Agreement (Ordinary Operations) (Water Resources Management and Land Restoration Project) between the Republic of Kazakhstan and the Asian Development Bank dated March 25, 1998

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On ratification of the Loan Agreement (Ordinary Operations) (Water Resources Management and Land Restoration Project) between the Republic of Kazakhstan and the Asian Development Bank dated March 25, 1998

To ratify the Loan Agreement (Ordinary Operations) (Water Resources Management and Land Restoration Project) between the Republic of Kazakhstan and the Asian Development Bank dated March 25, 1998.

President of the Republic of Kazakhstan

Loan agreement

(Normal operations)

(Water Resources Management and Land Restoration Project)

between

By the Republic of Kazakhstan and the Asian Development Bank

Loan Agreement dated 03/25/98 between the Republic of Kazakhstan (hereinafter referred to as the Borrower) and the Asian Development Bank (hereinafter referred to as the Bank). Whereas (A) The Borrower has applied to the Bank for a Loan from its normal capital resources and the resources of the special fund for the purposes of the Project (hereinafter referred to as the Project) described in Appendix 1 to this Loan Agreement (Special Operations), as defined below in (B); (C) By agreement of the specified date between the Borrower and the Bank (hereinafter referred to as the "Loan Agreement (Special Operations)"), the Bank agreed to provide the Borrower with an amount in various currencies equivalent to seven million two hundred and twenty-seven thousand Special Drawing Rights (SDR 7,227,000) for the purposes of the project (next is the "Special Operations Loan"); (C) The Borrower's Government has also applied to the Bank for technical assistance on institutional development and water management policy reforms, and for this purpose the Bank has agreed to provide a grant equivalent to six hundred thousand dollars ($600,000) (hereinafter referred to as Technical Assistance); and (D) the Bank has agreed to provide the Borrower with a loan from its of ordinary capital resources under the conditions further established; the parties have hereby reached the following agreement:

Article I Loan provisions;

Definitions

Section 1.01. All the provisions included in the Bank's Regulations on Ordinary Loan Transactions dated July 1, 1986, hereby apply to this Loan Agreement to the same extent as if they were fully set out in this document, subject, however, to the following amendment (the said Provisions on Ordinary Loan Transactions, thus modified, hereinafter referred to as the Loan Provisions): (a) Section 2.01(17) is deleted and amended as follows: "the term "dollar" or "dollars" or the "$" sign means the dollar or dollars of the United States of America"; (B) Sections 2.01(26) and 2.01(27) are omitted, and the new section 2.01(26) includes the following: "Dollar pool" means a pool of unpaid loans in dollars provided by the Bank for the purpose of financing payments or loans in dollars provided by the Bank from its normal capital resources"; (c) The last sentence of the first paragraph of section 3.02 is omitted; (d) Section 3.02(b)(ii) is deleted and amended as follows: "(ii) "qualified loans" in connection with the loan means unpaid loans from the Bank in the dollar pool used progressively after June 30, 1992"; (e) The last sentence of Section 3.06(a) and the words "on a date acceptable to the Bank" in Section 3.06 (b) is omitted; (f) Section 4.02 is omitted and replaced by the following: "Funds from the loan account must be withdrawn in dollars"; (g) Section 4.03(a) is omitted and amended, replaced as follows: "The principal amount of the loan must be reimbursed in dollars"; (h) Section 4.04 is omitted and amended as follows: "Interest on any part of the loan must be reimbursed in dollars"; (i) The phrase "and payment for any special obligation under Section 5.02" is omitted from Section 4.05.; (j) Section 4.09 is omitted and the new Section 4.09 includes the following: Regardless of any condition of these terms, except for those contrary to this agreement, funds must be withdrawn from the loan account, in the event of a loan, in the exceptional case the Bank determines that it cannot pay the amount in dollars for the purpose of making such withdrawals, in such currency or currencies as the Bank considers acceptable. The specified principal amount of the loan must be reimbursed in such currency or currencies. The interest rate applied to the principal amount of the loan paid in such currency or currencies should be based on the Bank's expenses in such currency or currencies plus the difference between the interest rates at which the Bank receives funds and at which it issues them to Borrowers, set by the Bank from time to time within reasonable limits. Section 1.02. Several terms defined in the Loan Regulations, wherever used in these Loan Regulations and in Section 1.02 of the Loan Agreement (Special Operations), have their respective meanings set forth therein, unless the content requires otherwise.

Article II Loan Section 2.01. The Bank agrees to provide the Borrower with an amount of thirty million dollars ($30,000,000 million) from its usual capital resources. Section 2.02. The Borrower must pay the Bank a percentage, the amount of which is set in accordance with Section 3.02 of the Loan Regulations. Section 2.03. (a) The borrower must pay a commission at a rate of three quarters of a percent (0.75% per annum). Such commission must accumulate on the loan amounts (less than the amounts withdrawn from the loan account from time to time) for consecutive periods that occur 60 days after the date of this Loan Agreement as follows: during the first twelve-month period - by $4,500,000, during the second twelve-month period - by $13,500,000, during the third twelve-month period - by $25,500,000 and further for the entire loan amount. (B) If any loan amount is cancelled, the amount of each part of the loan specified in paragraph (a) of this Section must be reduced in the same proportion as the entire loan amount before such cancellation. Section 2.04. Interest and other loan fees must be paid once every six months on June 15 and December 15 of each year. Section 2.05. The Borrower must repay the principal amount of the loan withdrawn from the loan account in accordance with the depreciation schedule set out in Appendix 1 to this Loan Agreement.

Article III Use of Loan funds Section 3.01. The Borrower uses the borrowed funds to finance Project costs in accordance with the provisions ocle III Use of Loan funds Section 3.01. The Borrower uses the borrowed funds to finance Project costs in accordance with the provisions of this Loan Agreement. Section 3.02. The goods and services and other items of expenditure financed from the loan and the allocation of Loan amounts among the various categories of such goods, services and other items of expenditure coThe goods and services and other items of expenditure financed from the loan and the allocation of Loan amounts among the various categories of such goods, services and other items of expenditure comply with the provisions of Annex 2 to this Loan Agreement, as such Annex may be amended from time to time by agreement between the Borrower and the Bank. Section 3.03. Except in cases where the Borrower and the Bank may agree otherwise, all goods and services financed froExcept in cases where the Borrower and the Bank may agree otherwise, all goods and services financed from borrowed funds are purchased in accordance with the provisions of Annexes 4 and 5 to the Loan Agreement (Special Operations). The Bank may refuse to finance a contract for which goods or services have not been purchased in accordance with procedures agreed between the Borrower and the Bank, or where the terms of the contract do not satisfy the Bank. Section 3.04. Except in cases where the Borrower and the Bank may agree otherwise, the Borrower takes all measures to ensure that all goods and services financed from borrowed funds are used exclusively for the implementation of the Project. Section 3.05. The final date for withdrawal from the loan account for the purposes of Section 8.03 of the Loan Regulations is June 30, 2003 or another date that may be agreed from time to time between the Borrower and the Bank.

Article IV  Article IV Special Conditions Section 4.01. (a) The Borrower shall take all measures to carry out the Project with due diligence and efficiency, and in accordance with reasonable administrative, financial, engineering, environmental and agricultural d for the purpose of acting and maintaining conditions conducive to the implementation of the Project.

Section 4.02. The Borrower provides, as necessary, funds, conditions, services, land and other resources that are necessary, in addition to the borrowed funds, for the implementation of the Project and for the purpose of acting and maintaining conditions conducive to the implementation of the Project.

Section 4.03. (a) The Borrower, during the execution of the project, will ensure the hiring of competent and qualified consultants and contractors acceptable to the Borrower and the Bank, to the extent and on terms satisfactory to the Borrower and the Bank; (b) The Borrower will ensure that the project is completed in accordance with plans, specifications, work schedules and construction methods satisfactory to the Borrower and The bank. The Borrower must submit to the Bank or facilitate the provision of such plans, specifications and work schedules immediately after their preparation, as well as any significant amendments to these documents, in as much detail as reasonably requested by the Bank.

Section 4.04. The Borrower will ensure that the activities of its offices and agencies in relation to the implementation of the Project and the operation of technical facilities The project was implemented and coordinated in accordance with sound administrative policies and procedures.

Section 4.05. (a) The Borrower will prepare arrangements to the satisfaction of the Bank to insure the equipment to the extent, against such risks and to the extent consistent with reasonable practice. (B) Without limiting the general meaning of the above, the Borrower guarantees or takes measures to insure the goods imported for the Project and financed from borrowed funds against the risks associated with their acquisition, transportation and delivery to the place of use or installation, and any amount in foreign currency is paid for such insurance, freely used to replace or repair such products.

Section 4.06. (a) The Borrower retains or takes measures to maintain records and accounts sufficient to identify goods and services and other expenditure items financed from borrowed funds and to disclose their use in the Project, to record the development of the Project (including its cost) and to reflect, in accordance with with the currently applied accounting principles, the operations and financial position of the Borrower's agencies responsible for the implementation of the Project and the operation of the Project mechanisms, or any part of them for the Project. (b) The Borrower (i) maintains or takes measures to maintain separate accounts for the Project; (ii) has at its disposal such accounts and related financial statements, which are audited annually in accordance with appropriate standards by independent auditors whose qualifications, experience and contractual terms are acceptable to the Bank; (iii) provide to the Bank as far as possible, but in any case not later than nine (9) months after the end of each relevant fiscal year, certified copies of such audited accounts and financial statements and auditors' reports on the results of the audit (including the auditors' conclusion on the use of borrowed funds and compliance with the terms of this Loan Agreement), all in English; and (iv) provide the Bank with other information regarding such accounts, financial statements and their audits that may be reasonably requested by the Bank from time to time; (c) The Borrower shall authorize the Bank, upon request, from time to time to discuss with the auditors the Borrower's financial statements for the Project and its financial activities related to the Project, and shall authorize and require any representative of such auditors to participate in any such discussion requested by the Bank, provided that Any such discussion will be conducted only in the presence of an authorized official of the Borrower, until the Borrower agrees otherwise. Section 4.07. (a) The Borrower provides or takes measures to provide the Bank with all such reports and information that the Bank reasonably requests regarding (i) the Loan and the disbursement of borrowed funds and their servicing; (ii) goods, services and other expenditure items financed from borrowed funds; (iii) (IV) the administration, operations and financial situation of the Borrower's agencies responsible for the implementation of the Project or any part thereof; (v) the financial and economic situation in the Borrower's territory and the situation of the Borrower's international balance of payments; and (vi) other matters related to objectives and objectives The project. (b) Without limiting the general meaning of the above, the Borrower provides or takes measures to provide the Bank with quarterly reports on the implementation of the Project and on the operation and management of the Project mechanisms. Such reports shall be submitted in such form, with such details and within such time as reasonably requested by the Bank, and, among other things, indicate the success achieved and the problems encountered during the period under review, the measures taken and expected to address these problems, the proposed action program and expected progress over the next quarter. (c) Shortly after the physical completion of the Project, but in any case no later than (3) three months thereafter, or at such later date as may be agreed between the Borrower and the Bank for this purpose, the Borrower shall prepare and submit to the Bank a report in such form and with such details as the Bank may reasonably request the completion and initial action of the Project, including its cost, the fulfillment by the Borrower of its obligations under the Loan Agreement and the implementation of the Project objectives.

Section 4.08. The Borrower provides an opportunity for the Bank's representatives to check the Project, the goods financed from borrowed funds, and any relevant reports and documents.

Section 4.09. The Borrower ensures that the Project mechanisms operate, are maintained and corrected in accordance with reasonable administrative, financial, engineering, environmental, agricultural practices, taking into account logistical and operational practices.

Section 4.10. (a) It is the mutual intention of the Borrower and the Bank that no other external debt to a lender other than the Bank takes precedence over the Loan by holding the Borrower's assets for debt. To this end, the Borrower shall take measures to ensure that (i) except in cases where the Bank may agree otherwise, in case of any retention of any assets of the Borrower for debts as a guarantee of any external debt, such a right, by virtue of evidence, would adequately guarantee payment of the principal amount, service fees and other loan fees; and (ii) that the Borrower, when creating or facilitating the creation of any such right, would promptly enforce such right. (b) The provisions of paragraph (a) of this Section do not apply to (i) any retention-of-title right at the time of purchase, solely as a guarantee of payment of the purchase price of such property; or (ii) any retention-of-title right arising from the normal course of banking transactions and guarantees of debt, the repayment date of which comes no more than one year after its maturity. (c) The term "Borrower's assets", as used in paragraph (a) of this Section, includes the assets of any administrative unit or any organization of the Borrower, and the assets of any organization of any such administrative unit, including the NBK and other institution acting as the central bank for the Borrower.

Article V Suspension; Cancellation; Early Termination Section 5.01. The following is defined as an additional case of suspension of the Borrower's right to withdraw an amount from the loan account for the purposes of Section 8.02(1) of the Bank's Regulations on Special Loan Operations: The Borrower has failed to fulfill any of its obligations under the Loan Agreement (Special Operations). Section 5.02. The following is defined as an additional case of early termination for the purposes of section 8.07(d) of the Bank's Regulations on Special Operations on Loans: the case defined in section 5.01. of this agreement must arise.

Article VI

Entry into Force Section 6.01. The following condition is an additional condition for the entry into force of this loan Agreement for the purposes of Section 9.01 (f) of the Loan Terms and Conditions: The Loan Agreement (Special Operations) must be duly executed and officially submitted on behalf of the Borrower, and all conditions for its entry into force (other than the conditions, which requires the entry into force of this Loan Agreement) must be fulfilled.

Section 6.02. A period of ninety (90) days after the date of this Loan Agreement is set for the entry into force of the Loan Agreement for the purposes of Section 9.04 of the Loan Regulations.

Article VII Other Matters Section 7.01. The Borrower's Ministry of Finance is appointed as the Borrower's representative for the purposes of Section 11.02 of the Loan Regulations.

Section 7.02. For the purposes of Section 11.01 of the Loan Regulations, the following addresses are indicated:

For the Borrower 97 Ablay Khan Ave., Almaty, 480091 Republic of Kazakhstan Ministry of Finance Fax N: (7-3272) 636984/622770 For The Bank Asian Development Bank N/a789 0980 Manila, Philippines Fax number: (632) 636-2444 (632) 636-2402.

In witness whereof, the parties, acting through their representatives duly authorized, have ensured the signing of this agreement. The Agreement under their respective names and its delivery to the Bank's head office on the day and year indicated above.

Appendix 1

Depreciation schedule

(Water Resources Management and Land Restoration Project) Payment term Payment of the principal amount (* in US dollars) June 15, 2005 US $ 248,300 December 15, 2005 260,800 June 15, 2006 273,800 December 15, 2006 287,500 June 15, 2007 301,900 December 15, 2007 317,000 June 15, 2008 332,800 December 15, 2008 349,400 15 June 2009 366,900 December 15, 2009 385,300 June 15, 2010 404,500 December 15, 2010 424,800 June 15, 2011 446,000 December 15, 2011 468,300 June 15, 2012 491,700 December 15, 2012 516,300 June 15, 2013 542,100 December 15, 2013 569,200 June 15, 2014 597,700 December 15, 2014 627,600 June 15, 2015 658,900 December 15, 2015 691,900 June 15, 2016 726,500 December 15, 2016 762,800 June 15, 2017 800,900 December 15, 2017 841,000 June 15, 2018 883,000 December 15, 2018 927,200 June 15, 2019 973,500 December 15, 2019 1,022,200 June 15, 2020 1,073,300 December 15, 2020 1,127,000 June 15, 2021 1,183,300 December 15, 2021 1,242,500 June 15, 2022 1,304,600 December 15, 2022 1,369,900 June 15, 2023 1,438,400 December 15, 2023 1,510,300 June 15, 2024 1,585,800 December 15, 2024 1,665,100 Total: 30,000,000 * The numbers in this column represent dollar equivalents, determined on the appropriate withdrawal dates. Payment on the relevant date is made in accordance with the Loan Regulations (Normal Transactions). Premium allowances for early payment The following interest rates are set as premiums payable before certain deadlines for the payment of any part of the principal amount of the loan in accordance with Section 3.06 (B) of the Loan Regulations. Early payment time Premium is the interest rate (expressed as a percentage per annum) applied to the remaining unpaid loan amount on the day of early payment, multiplied by: No more than 3 years earlier than term 0.11 From 3 to 6 years earlier than term 0.22 From 6 to 11 years earlier than term 0.41 From 11 to 17 years earlier than term 0.63 From 17 to 22 years earlier than term 0.81 From 22 to 25 years earlier than term 0.93 More than 25 years earlier than term 1.00

Appendix 2

Allocation and withdrawal of loan funds

The general part

1. The table attached to this Annex contains the Categories of Goods, services and other items to be financed from the Loan, and the distribution of Loan amounts for each Category (hereinafter referred to as the Table). (The reference to "Category" or "Categories" in this Appendix refers to the Category or Categories of the Table, and the reference to "Subcategory" or "Subcategories" in this Appendix refers to the Subcategory or Subcategories of the Category).

2. Local taxes No funds are withdrawn from the loan account in respect of any local taxes. Interest on bank financing

3. Except in other cases provided for in this Annex, the Items of the Categories and Subcategories listed in the Table will be financed from the loan funds based on the interest shown in the Table.

4. Notwithstanding paragraph 5 of this Annex, any contract awarded to a local supplier after international competitive bidding or international procurement in accordance with the relevant provisions of Annex 4 to the Loan Agreement (Special Operations) shall be financed from the loan funds on the following basis: (a) if the products purchased from a local supplier are locally produced, 100% of the cost of the ex-factory supplied products is financed (excluding any taxes); and (b) if the products purchased from a local supplier were fully imported, then 100% of the currency component of the contract price is financed. Local expenses

5. (a) Loan funds in the amount of USD 20,250,000 may be withdrawn from the loan account in foreign currency for the purpose of financing local expenses. (b) Unless specifically provided for in this paragraph and specifically agreed with the Bank, no amounts will be deducted from the loan account in respect of any local Project costs. Interest and commission fee

6. The amount allocated to Category 3 is intended to pay interest and commission on the loan during the Project implementation period. The Bank has the right to withdraw from the loan account and pay itself, on behalf of the Borrower, the amounts required to pay interest and commission on time. Redistribution

7. Despite the allocation of loan funds and interest withdrawals shown in the Table and in accordance with paragraph 5 of this annex, (a) if the loan amount allocated for any Category is insufficient to finance all agreed expenses for that Category. (i) the Bank may, upon notifying the Borrower, redistribute to that Category, to the extent necessary to cover a certain deficit, amounts that have been allocated to another Category but which, in the Bank's opinion, are not required for other expenses, and (ii) if such a reallocation cannot cover the established deficit, reduce the deductible percentage in relation to such expenses so that further withdrawals in this category can continue until all expenses for this category are covered. (b) if the loan amount previously allocated to any Category is higher than all agreed expenses for that Category, the Bank may, by notifying the Borrower, redistribute such excess amount to any other Category. Loan account; expense statements

8. (a) Unless otherwise agreed between the Bank and the Borrower, the Borrower must open, immediately after the effective date, a regular operations loan account in the amount of USD 500,000. A loan account for ordinary transactions must be opened, managed and liquidated in accordance with the terms and conditions acceptable to the Bank and the Bank's "Loan Repayment Guidelines" (June 1996), as well as detailed implementation agreements reached between the Bank and the Borrower. The initial amount to be deposited into the ordinary operations loan account should not exceed the equivalent of US$ 500,000. (b) The Bank's expense statements may be used to pay off mandatory expenses and eliminate advance payments received into the ordinary Operations loan account, in accordance with the Loan Repayment Guidelines and detailed agreements reached between the Borrower and the Bank. Individual payments that can be repaid or eliminated as part of the expense statements should not exceed the amount of USD50,000. (c) The Borrower must ensure that (i) the ordinary operations loan account and expenses covered under the expense statements are reviewed; and (ii) the auditors' report on the matter is included separately in the audit reports required under section 4.06(b) of this Loan Agreement. Terms of withdrawal of funds from the loan account

9. Notwithstanding any other provisions of this Agreement: (a) No withdrawals from the loan account of the loan will be made for activities in the WSSA until the Borrower enters into a written agreement(s) with the beneficiaries of the Project, representing the majority of the lands in such WSSA, in form and substance satisfactory to the Bank, according to which the beneficiaries agree with (i) the activities of the WSSA under the Project; (ii) payments of a specified percentage of the investment value of such activities under the Project in accordance with the terms of the Resolution on the Reimbursement of Funds; and (iii) the establishment of WUAs to produce the required inter-farm irrigation and drainage systems, including drainage wells; and (b) No withdrawals are made from the loan account for

in Part B of the Project, until the Borrower issues a Resolution on calculating Water Prices that has the full force of law, and the Borrower submits or ensures the submission of an opinion satisfactory to the Bank or a lawyer's opinion acceptable to the Bank, confirming the validity of such a Resolution on calculating water prices.

(Supplement to Appendix 2)

The table ______________________________________________________________________ Allocation and withdrawal of loan funds from the account (Water Resources Management and Land Restoration Project) ---------------------------------------------------------------------- Category Percentage of bank financing ---------------------------------------------------------------------- N Article Distributed amount ($) Percentage The basis for withdrawing funds from a loan account Podcast Category- Category 1 Engineering and construction works 11,972,000 1 Control over 44 percent of total expenses And water level ---- ------------------------------ and a salinity of 7,299,000 0% foreign.expenses and 44% of local 1 Improvements. 75 percent of total inter-farm expenses ---- --------------------------------- irrigation system. systems 2,047,000 1% foreign and 74% local expenses 1 Local Management of 76 percent of total water and land costs ---- ---------------------------------- resources 2,626,000 4% foreign and 72% local expenditures 2 Equipment (pumps, control, percentage of foreign expenses of spare parts) 3,750,000 100 3 Percent and fees 4,579,000 100 percent of foreign expenses 4 Undistributed 9,699,000 Total: 30,000,000 * * *

This Law establishes the rules for registering the pledge of movable property in order to realize and protect the rights of individuals and legal entities who have legitimate rights to this property.

The Law of the Republic of Kazakhstan dated June 30, 1998 No. 254.

President

Republic of Kazakhstan

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