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March 29, 1986

Excellency,

I have the honour to refer to the recent discussions held between the representatives of the Government of Japan and of the Government of the Republic of the Philippines concerning Japanese economic cooperation to be extended with a view to strengthening friendly and cooperative relations between the two countries, and to propose on behalf of the Government of Japan the following arrangements:

1. For the purpose of contributing to the increase of food production in the Republic of the Philippines, the Government of Japan will extend to the Government of the Republic of the Philippines, in accordance with the relevant laws and regulations of Japan, a grant up to Two Billion Nine Hundred Million Yen (¥2,900,000,000) (hereinafter referred to as "the Grant").

2. The Grant will be made available during the period between the date of coming into force of the present arrangements and December 28, 1987, unless the period is extended by mutual agreement between the authorities concerned of the two Governments.

3. (1) The Grant will be used by the Government of the Republic of the Philippines properly and exclusively for the purchase of the products of Japan and the services listed below:

(a) fertilizer and agricultural chemicals, and services necessary for the transportation thereof to ports in the Republic of the Philippines up to Two Billion Four Hundred Million Yen (¥2,400,000,000) for the Philippines-Japan Food Production Programme; and

(b) fertilizer and agricultural chemicals, and services necessary for the transportation thereof to ports in the Republic of the Philippines up to Five Hundred Million Yen (¥500,000,000) for the projects for which the Asian Development Bank extends financial assistance.

(2) Notwithstanding the provisions of sub-paragraph (1) above, when the two Governments deem it necessary, the Grant may be used for the purchase of the agricultural chemicals mentioned in (a) of sub-paragraph (1) above, which are products of countries other than Japan or the Philippines, and of the agricultural chemicals mentioned in (b) of sub-paragraph (1) above, which are products of countries other than Japan.

4. The Government of the Republic of the Philippines or its designated authority will enter into contracts in Japanese yen with Japanese nationals for the purchase of the products and services referred to in paragraph 3. Such contracts shall be verified by the Government of Japan to be eligible for the Grant. (The term Japanese nationals whenever used in the present arrangements means Japanese physical persons or Japanese juridical persons controlled by Japanese physical persons.)

5. (1) The Government of Japan will execute the Grant by making payments in Japanese yen to cover the obligations incurred by the Government of the Republic of the Philippines or its designated authority under the contracts verified in accordance with the provisions of paragraph 4 (hereinafter referred to as "the Verified Contracts") to an account to be opened in the name of the Government of the Republic of the Philippines in an authorized foreign exchange bank of Japan designated by the Government of the Republic of the Philippines or its designated authority (hereinafter referred to as "the Bank") .

(2) The payments referred to in sub-paragraph (1) above will be made when payment requests are presented by the Bank to the Government of Japan under an authorization to pay issued by the Government of the Republic of the Philippines or its designated authority.

(3) The sole purpose of the account referred to in sub-paragraph (1) above is to receive the payments in Japanese yen by the Government of Japan and to pay to the Japanese nationals who are parties to the Verified Contracts. The procedural details concerning the credit to and debit from the account will be agreed upon through consultation between the Bank and the Government of the Republic of the Philippines or its designated authority.

6. (1) The Government of the Republic of the Philippines will take necessary measures:

(a) to ensure prompt unloading and customs clearance at ports of disembarkation in the Republic of the Philippines and prompt internal transportation therein of the products purchased under the Grant;

(b) to exempt Japanese nationals from customs duties, internal taxes and other fiscal levies which may be imposed in the Republic of the Philippines with respect to the supply of the products and services under the Verified Contracts

(c) to ensure that the products purchased under the Grant will make effective contribution to the increase of food production and eventually to the stabilization and development of the Philippine economy; and

(d) to bear all the expenses, other than those covered by the Grant, necessary for the execution of the Grant.

(2) The products purchased under the Grant shall not be re-exported from the Republic of the Philippines.

7. (1) The Government of the Republic of the Philippines will deposit in Philippine currency an amount equivalent to the yen disbursement paid with respect to the purchase of the products referred to in (a) and (b) of sub-paragraph (1) of paragraph 3 in an account to be opened in its name in the Philippine National Bank. The deposit shall be made within the period of three years from the date of coming into force of the present arrangements, unless otherwise agreed between the authorities concerned of the two Governments.

(2) The currency thus deposited shall be utilized for agricultural development purposes, including the increase of food production, in the Republic of the Philippines.

(3) The authorities concerned of the two Governments will consult with each other about the utilization of the currency deposited.

8. Further procedural details for the implementation of the present arrangements will be agreed upon through consultation between the authorities concerned of the two Governments.

9. The two Governments will consult with each other in respect of any matter that may arise from or in connection with the present arrangements.

I have further the honour to propose that this Note and Your Excellency's Note in reply confirming on behalf of the Government of the Republic of the Philippines the foregoing arrangements shall be regarded as constituting an agreement between the two Governments, which will enter into force on the date of Your Excellency's reply.

I avail myself of this opportunity to extend to Your Excellency the assurance of my highest consideration.

(Sgd.)
  KIYOSHI SUMIYA
  Ambassador Extraordinary and Plenipotentiary
  of Japan to the Republic of the Philippines

His Excellency Jose D. Ingles
  Deputy Minister for Foreign Affairs
  Ministry of Foreign Affairs
  Republic of the Philippines

Agreed Minutes on Procedural Details

With reference to paragraph 8 of the Exchange of Notes between the Government of Japan and the Government of the Republic of the Philippines dated 29 December 1986, concerning the Japanese economic cooperation for the supply of fertilizer and agricultural chemicals (hereinafter referred to as "the Exchange of Notes"), the representatives of the Government of Japan and of the Government of the Republic of the Philippines wish to record the following procedural details which have been agreed upon between the authorities concerned of the two Governments:

1. (1) The authorization to pay referred to in sub-paragraph (2) of paragraph 5 of the Exchange of Notes shall be issued in Japanese yen for each contract.

(2) The amount of the authorization to pay shall, correspond to the amount of the contract.

(3) The authorization to pay shall no longer be valid after the day of the period during which the Grant is made available in accordance with the provisions of paragraph 2 of Notes (hereinafter referred to as "the Last Day"). However, the documents to be called for in the authorization to pay must be presented to the authorized foreign exchange bank of Japan referred to in sub-paragraph (1) of paragraph 5 of the Exchange of Notes fifteen days before the Last Day at the latest.

2. (1) With respect to sub-paragraph (1) of paragraph 7 of the Exchange of Notes, the amount equivalent to the yen disbursement shall be computed by the Government of the Republic of the Philippines at the average exchange rate of December 1986 of both countries which the I.M.F. is notified of. The amount thus computed shall be reported to the Government of Japan.

(2) The Government of the Republic of the Philippines will inform the Government of Japan of the selling price of the fertilizer and the agricultural chemicals purchased in accordance with the Exchange of Notes and the situation of the deposit.

(3) With respect to sub-paragraph (3) of paragraph 7 of the Exchange of Notes, the Government of the Republic of the Philippines will make "the Utilization Programme" of deposited fund which shall include the names of specific projects, their details and the amount of money to be allocated. "The Utilization Programme" shall be presented to the Government of Japan for consultation.