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July 01, 1998

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 one billion five hundred fifty million yen (¥1,550,000,000) (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 March 31, 1999, 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) for the Philippine-Japan Food Production Programme, up to one billion three hundred twenty million yen (Y1,320,000,000):

(i) fertilizer, agricultural machinery and equipment, and services relating to the procurement thereof; and

(ii) services necessary for the transportation of the products referred to in (i) above to ports in the Republic of the Philippines; and

(b) for the projects for which the Asian Development Bank extends financial assistance, up to two hundred thirty million yen (Y230,000,000):

(i) fertilizer and services relating to the procurement thereof; and

(ii) services necessary for the transportation of the products referred to in (i) above to ports in the Republic of the Philippines.

(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 products of the kind mentioned in (a)(i) and (b)(i) of sub-paragraph (1) above, which are products of eligible source 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 a 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.

(1) The Government of the Republic of the Philippines wilt take necessary measures:

(a) to ensure prompt unloading and customs clearance at ports of disembarkation in the Republic of the Philippines and 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) With regard to the shipping and marine insurance of the products purchased under the Grant, the Government of the Republic of the Philippines will refrain from imposing any restrictions that may hinder fair and free competition among the shipping and marine insurance companies.

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

6. (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)(i) and (b)(i) of sub-paragraph (1) of paragraph 3 in an account to be opened in its name in the Bangko Sentral ng Pilipinas. The deposit shall be made within the period of four 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 the purposes of economic and social development, including agricultural, forestry and/or fisheries development, and 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 renew to Your Excellency the assurance of my highest considerattion.

(Sgd.) HIROYUKI YUSHITA

Ambassador Extraordinary and Plenipotentiary
of Japan to the Republic of the Philippines

AGREED MINUTES ON PROCEDURAL DETAILS

With reference to paragraph 3 and 8 of the Exchange of Notes between the Government of Japan and the Government of the Republic of the Philippines dated July 1, 1998, concerning the Japanese economic cooperation for the supply of fertilizer and agricultural machinery and equipment (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) With respect to paragraph 3 of the Exchange of Notes, the Government of Japan designates the Japan International Cooperation Agency (JICA), an official agency established by Japanese law for the purpose of implementing Japanese economic cooperation, as an organ responsible for necessary works aiming at expediting the proper execution of the Japanese grant aid.

(2) The Government of the Republic of the Philippines will ensure the following:

(a) Products and/or services necessary for transportation mentioned in sub-paragraph (1) of paragraph 3 of the Exchange of Notes will be procured in accordance with "Guidelines for Procurement Procedures under Japan's Grant Aid for Increase of Food Production" of JICA, which set forth, inter alia, the procedures of tendering to be followed except where such procedures are inapplicable or inappropriate.

(b) Tender documents prepared by the Government of the Republic of the Philippines will be reviewed by JICA before tender advertising.

(c) Detailed evaluation reports of tender prepared by the Government of the Republic of the Philippines will be reviewed by JICA before the award of the contract.

(d) The Government of the Republic of the Philippines shall conclude an employment contract referred to in paragraph 4 of the Exchange of Notes, in principle within two months after the date of coming into force of the Exchange of Notes, with an independent and competent agent recommended by JICA (hereinafter referred to as "the Agent"), for the services relating to the procurement mentioned in (a) of sub-paragraph (1) of paragraph 3 of the Exchange of Notes, in accordance with "Guidelines for Procurement Management Services under Japan's Grant Aid for Increase of Food Production" of JICA.

2. The eligible source countries referred to in sub-paragraph (2) of paragraph 3 of the Exchange of Notes are as follows:

all countries and areas except, in the case of the purchase of the products of the kind mentioned in (a)(i) of sub-paragraph (1) of the said paragraph, the Republic of the Philippines.

3. (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 last day of the period during which the grant referred to in paragraph 1 of the Exchange of Notes (hereinafter referred to as "the Grant”) is made available in accordance with the provisions of paragraph 2 of the Exchange 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 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.

4. (1) With respect to sub-paragraph (1) of paragraph 7 of the Exchange of Notes, the Government of the Republic of the Philippines shall open an account exclusively for the deposit referred to therein.

(2) The Agent will compute the amount required to be deposited in Philippine currency by the Government of the Republic of the Philippines. The said amount shall be equivalent to the F.O.B. price of the products purchased under the Grant, and shall be calculated based on the average exchange rate of July 1998 which the I.M.F. is notified of.

(3) The Government of the Republic of the Philippines shall ensure that the Agent will receive quarterly statements of the account referred to in sub-paragraph (1) above.

(4) Unless otherwise agreed upon between the two Governments, the Agent shall, for a period of five years from the date of coming into force of the Exchange of Notes, make quarterly reports for the two Governments concerning the amount required to be deposited and the amount actually deposited in Philippine currency.

(5) The Government of the Republic of the Philippines shall directly inform the Government of Japan of the situation of the deposit referred to in sub-paragraph (1) above upon request by the Government of Japan.

(6) 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 the 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.

His Excellency DOMINGO L. SIAZON, JR.
Secretary of Foreign Affairs
Department of Foreign Affairs
Republic of the Philippines