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January 21, 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 execution of the project for Flood Mitigation in Ormoc City (Phase II) (hereinafter referred to as "the Project") by the Government of 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 sixty-six million yen (Y 66,000,000) (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 20 January 1999, unless the period is extended by mutual agreement between the authorities concerned of the two Governments.

3. The Grant will be used by the Government of the Republic of the Philippines properly and exclusively for the purchase of the services of Japanese nationals listed below (The term Japanese nationals whenever used in the present arrangements means Japanese physical persons or Japanese juridical persons controlled by Japanese physical persons.); services necessary for the detailed design for the execution of the Project.

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 services referred to in paragraph 3. Such contracts shall be verified by the Government of Japan to be eligible for the Grant.

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. The Government of the Republic of the Philippines will take necessary measures:

(a) 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 services under the Verified Contracts;

(b) to accord Japanese nationals whose services may be required in connection with the supply of the services under the Verified Contracts such facilities as may be necessary for their entry into the Republic of the Philippines and stay therein for the performance of their work; and

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

7. 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 consideration.

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

(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 of the Exchange of Notes between the Government of Japan and the Government of the Republic of the Philippines dated 21 January 1998, concerning Japanese economic cooperation to be extended with a view to strengthening friendly and cooperative relations between Japan and the Government of the Republic of the Philippines, 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:

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.