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July 07, 1997

1. GENERAL

1.1. THIS MEMORANDUM expresses the understandings of the Government of the Philippines and the Government of Australia concerning the responsibilities and contributions respectively of the two Governments with regard to the Philippines/Australia Mindanao Community Health Project (the Project).

1.2 The Project and its objectives and the responsibilities and contributions of the two Governments are described further in Annexures 1-4 of this Memorandum.

1.3 The Project is intended to strengthen the delivery of provincial and municipal health services through the development of key health subsystems in six provinces over six years. The subsystems will be suitable for widespread replication in other provinces. The Project is a component of the Government of the Philippines' Integrated Community Health Services Project (ICHSP).

2. DEFINITIONS

For the purposes of this Memorandum:

(a) "Australian institutions, firms and organizations" means Australian institutions, firms and organizations engaged in the Project;

(b) "Australian Project personnel" means Australian nationals or permanent residents or other persons who are not nationals or permanent residents of the Philippines who are working in the Philippines on an activity under this Memorandum and whose salaries or other costs are funded from the contribution of the Government of Australia to the activity;

(c) "dependant" means the spouse or unmarried minor children of a member of the Australian Project personnel or any person recognized by the two Governments as a dependent of a member of the Australian Project personnel;

(d) "professional and technical material" means equipment and other goods imported by members of the Australian Project personnel or Australian institutions, firms and organizations for their professional use in carrying out their assigned duties under the Project and paid for from funds provided by the Government of Australia;

(e) "Australian Project supplies" means equipment, material and other goods supplied for the execution of the Project, the costs of which are funded from the contribution of the Government of Australia to the Project;

(f) "motor vehicles" means motor vehicles supplied for the execution of the Project, the cost of which is funded from the contribution of the Government of Australia to the Project;

(g) "services" means services performed by individuals or by general professional partnerships registered in the Philippines as detailed in Annex 1;

(h) "Australian Team Leader" means the designated representative in the Philippines of the consultant contracted by AusAID on behalf of the Government of Australia to implement the Project; and

(i) "personal and household effects" means equipment and other goods imported by Australian Project personnel or Australian institutions, firms and organizations for the personal use of Australian Project personnel and their dependants while engaged in the Project.

3. AUTHORITIES AND COORDINATION

3.1 The Executing Authorities for this Project will be:

For the Government of the Philippines, the Department of Health (DOH).

For the Government of Australia, the Australian Agency for International Development (AusAID) of the Department of Foreign Affairs and Trade, and

The Executing Authorities, however, may nominate suitably qualified agents to undertake any part of their functions on their behalf.

3.2 A management structure comprising a Project Coordinating Committee (PCC) and a Project Management Office (PMO) will be established to oversee and manage Project activities and ensure timely and effective coordination and utilization of inputs.

3.3 Project implementation will be facilitated through the Project Coordinating Committee (PCC). This Committee will assess progress and provide policy and planning direction to the Project. The members of the PCC will include the Secretary of the Department of Health, the Government of the Philippines Project Manager, the Governors of Surigao del Norte and South Cotabato, the AusAID Philippines Counsellor, the Australian Project Director, the Australian Team Leader, or their nominees. The PCC will meet to discuss the Project at least twice a year. Additional meetings of the PCC may be requested by DOH or AusAID.

3.4 The Project Management Office (PMO), representing all major stakeholders, will be responsible for the day-to-day implementation of the Project.

3.5 Coordination between the Project and the Asian Development Bank (ADB)-assisted ICHSP will be the day-to-day responsibility of the Australian Team Leader and the Government of the Philippines Project Manager, and will be encouraged by maximizing cross membership between the PCC and the ICHSP's Project Steering Committee (PSC).

4. CONTRIBUTIONS

The contributions of the Government of the Philippines and the Government of Australia, as described in Annex 1, are estimated to value 56,494,000 Philippine Pesos and $23,371,800 Australian Dollars, respectively. The financial contribution of the Government of the Philippines will be subject to its annual Congressional appropriations. The financial contribution of the Government of Australia will be subject to the normal annual Parliamentary approval of appropriations.

5. PERSONNEL

5.1 Personnel provided by the Government of Australia to be the Project will be responsible for ensuring the effectiveness of the contribution to the Project and will have an advisory and consultative role.

5.2 The Australian Team Leader will have administrative control with respect to duties, discipline, leave and other administrative issues concerning personnel funded by the Government of Australia (including Philippine nationals employed as consultants) to achieve Project objectives and subject to the laws and regulations of the Republic of the Philippines.

6. IMPLEMENTATION. MONITORING AND REVIEW

6.1 An Annual Plan will be prepared by the Australian Project Team, in coordination with the Philippine Project Team, by 31 March of each year and will be submitted to AusAID and the Government of the Philippines for consideration. The Plan will contain an assessment of progress to date, a detailed schedule of tasks as well as resource and budget proposals. The Plan will initially be drafted by the Australian Team Leader in coordination with the Philippine Project Manager. The Plan will cover the period July 1 to June 30 of the following year. The first Annual Plan will be prepared during the first months of Project implementation, and will cover that period from the Annual Plan's approval by AusAID, to the 30 June of the first year of the Project.

6.2 A major review of progress of the project may be made at times arranged between, and mutually convenient to, the two Governments, to be communicated through diplomatic channels. Such a review would be undertaken by a joint investigation team appointed by the two Governments and independent staff involved in the Project.

6.3 The Australian Team Leader will coordinate directly with the Philippine Project Manager and the Provincial Coordinators in matters concerning the execution of Project plans.

7. PROJECT SUPPLIES. MOTOR VEHICLES AND PROFESSIONAL AND TECHNICAL MATERIAL AND SERVICES

7.1 In respect of project supplies, motor vehicles and professional and technical material and services whether to be imported into and/or procured within the Philippines, the Government of the Philippines will:

(a) be responsible for the payment of import duties, Value Added Tax (VAT) and other duties and imposed in the Philippines, and be responsible for inspection fees, storage charges and all other levies, fees and charges levied in the Philippines.

(b) facilitate the expeditious clearance and release of imported project supplies and motor vehicle including the provision of appropriate customs and wharfage facilities in the port of entry closest to the site of the Project; and

(c) unless provided otherwise, provide expeditious internal transport to the site of the Project.

7.2 Project supplies and motor vehicles provided by the Government of Australia for the Project will be available for the unrestricted use of the Project and will not be withdrawn from such use without the consent of the Australian Executing Authority. The Australian Team Leader will exercise administrative control over such supplies for the duration of the Project or such other time as mutually arranged between the Governments.

7.3 Motor vehicles provided by the Government of Australia will be registered and insured jointly in the names of the Australian Embassy, representing AusAID and, the Project, and will be under the administrative control of the Australian Team Leader for the duration of the Project. At the completion of the Project, all motor vehicles will be handed over to the Philippine Executing Authority in furtherance of the objectives of the Project,

8. IMPORTATION OF PERSONAL AND HOUSEHOLD EFFECTS

In respect of the importation into the Philippines of bona fide personal and household effects for the personal use of Australian personnel or their dependents/dependants, which accompany such persons or arrive within six months from the date of their arrival in the Philippines, the Government of the Philippines will;

(a) be responsible for the payment of all customs duties, other duties, taxes, levies and other charges of similar nature; and

(b) expedite their clearance through Customs.

9. MOTOR VEHICLES FOR PERSONAL USE

9.1 Subject to sub-paragraph 9.3 below, the Government of the Philippines will, pursuant to Section 105 G-l of the Tariff and Customs Code, allow the entry of one motor vehicle imported into the Philippines or purchased locally by Australian personnel for their personal use once during the project period provided that:

(a) the expected assignment of Australian personnel on the Project is for a minimum period of twelve (12) months;

(b) such imported motor vehicle has been use by the person concerned in the country of his or her last posting or such motor vehicle is purchased locally or from a third country within the period of six (6) months from the date of his or her arrival in the Philippines;

(c) no transfer of ownership shall be made within a period of three (3) years from the time such motor vehicle was registered, unless the member of the Australian personnel is posted to another country or his or her contract in the Philippines has expired, however, that the vehicle should have been registered in the country for not less than twelve (12) months;

(d) the motor vehicle conforms with existing Government of the Philippines regulations on the allowable imported motor vehicles; and

(e) if the motor vehicle is sold or otherwise disposed of to non-exempt entities or personnel it will be subject to the normal duties and other charges at the rate in force on the date the exemption was given and on its entered value at the time of disposal.

9.2 In respect of sub-paragraph 9.1 above, the Government of the Philippines will expedite the clearance through Customs of motor vehicles imported by Australian personnel for their personal use.

9.3 In the event of fire, theft, substantial damage or destruction, the provisions under this clause may be exercised at any time during the assignment of the person concerned.

10. EXPORT OF PROFESSIONAL AND TECHNICAL MATERIAL AND PERSONAL AND HOUSEHOLD EFFECTS

10.1 In respect of the export from the Philippines at the end of the assignment of Australian personnel, of professional and technical material, personal and household effects and motor vehicles for personal use, the Government of the Philippines will:

(a) be responsible for the payment of all customs duties, other duties, taxes, levies and other charges of similar nature; and

(b) expedite clearance through customs and other export controls.

11. TAXES ON TNCOME

The Government of the Philippines will be responsible for the payment of income taxes and other similar taxes on fees, salaries, wages and other similar remuneration paid for by the Government of Australia and incurred by Australian personnel, firms, institutions and organizations derived from work performed under this Memorandum in the Philippines.

12. REMITTANCE OF FUNDS

The Government of the Philippines will facilitate repatriation by Australian personnel, firms, institutions and organizations of their funds in accordance with the rules and procedures laid down by the Bangko Sentral ng Pilipinas and consistent with the rights and obligations of the Philippines as a member of the International Monetary Fund.

13. LOCAL LAWS AND REGULATIONS

The Philippine Executing Authority will exert its best efforts to inform and keep advised Australian personnel and Australian firms, institutions and organizations of local laws and regulations which may be pertinent to the performance of their duties in the Project.

14. CLAIMS

14.1 The Government of the Philippines will release the Government of Australia, its representatives and its Australian Project Personnel from all actions, suits, proceedings, claims and demands whatsoever which the Government of the Philippines may now have or may in the future have against them or any of them in relation to loss or damages resulting from, or consequent upon, the Project.

14.2 The Government of the Philippines will indemnify the Government of Australia, its representatives and its Australian Project Personnel from any liability against:

(a) all actions, suits, proceedings, claims and demands whatsoever, which any party may now have or may in the future have against them or any of them in relation to loss or damages resulting from, or consequent upon, the Project; and

(b) any claim for contributions which any party may have in the future against any of them in respect of any actions, suits, proceedings, claims and demands.

14.3 Sub-paragraphs 14.1 and 14.2 above will not apply where it has been mutually decided by the two Governments that a claim results from a criminal act, gross negligence or willful misconduct of the Government of Australia, its representatives or its Australian Project Personnel.

15. CLAIMS ARISING FROM ATTACHMENTS IN AUSTRALIA

15.1 The Government of Australia undertakes to assume full responsibility for the claims arising out of the conduct of the persons undertaking training in Australia for the purposes of this Project, while they are in Australia.

15.2 In return for the Government of Australia's undertaking in sub-paragraph 15.1 above, the Government of the Philippines undertakes to indemnify the Government of Australia against all payments made and all costs, damages and expenses incurred by it as a result of any claims which may be brought against the persons undertaking training in Australia for the purposes of this Project, or the Government of Australia, its officers or servants by any third party arising from the conduct of the persons undertaking training in Australia for the purposes of this Project, pursuant to this Memorandum of Understanding.

15.3 Sub-paragraphs 15.1 and 15.2 above will not apply where it has been mutually decided by the two Governments that a claim results from a criminal act, gross negligence or willful misconduct on the part of that person or persons.

16. WARRANTIES

Following testing of the equipment supplied pursuant to this Memorandum, the GOP will bear all risks associated with the installation and maintenance of the equipment, subject to any express warranties held by the GOA in relation to the suppliers of this equipment. In return for this undertaking, the GOA, on behalf of the GOP, will exercise any rights it may have against the suppliers of such equipment should such equipment be found defective in any manner.

17. INTELLECTUAL PROPERTY

Any intellectual property issue arising under this Memorandum will be subject of a separate agreement.

18. SETTLEMENT OF DIFFERENCES

Both parties undertake to settle amicably by consultation any differences arising under or in relation to this Memorandum.

19. ENTRY INTO FORCE AND DURATION

The Memorandum will take effect from the date of its signature, and the Project will be deemed to have commenced from that date. The contribution of the Government of Australia to the project and all undertakings given herein will cease on 30 June 2003 or on such date as may subsequently be arranged between the two Governments.

20. AMENDMENTS

Amendments to this Memorandum may be made at any time by written arrangement between the parties.

21. ANNEXURES AND ATTACHED DOCUMENTS

Annexures and attached documents referred to in and attached to this Memorandum form an integral part of it, subject to sub- paragraph 1.2.

SIGNED at Manila, in duplicate, this 7th day of July 1997.

ANNEX ONE

PROJECT DESCRIPTION

1. The description of this Project is contained in the final Project Design Document (February 1997) which forms an integral part of this Memorandum. For a more detailed description of the Project, see Attachment A - Project Design Document (PDD).

2. The goal of the Project is to improve the health of communities in all project provinces through health-related initiatives developed and implemented by participating communities; and to improve the health communities in Surigao del Norte and South Cotobato through the strengthening of LGU capacities to deliver government health services to communities. The six provinces included in the Project are Kalinga, Apayao, Palawan, Guimaras, South Cotobato and Surigao del Norte.

3. The Project will achieve its goal through the implementation of the following four components:

a. LGU Health Management System

To assist participating LGUs in Surigao del Norte and South Cotobato Provinces to strengthen and further develop health management systems which will:

(i) enhance LGU capacity to involve NGOs and communities in their own health developments; and

(ii) enhance LGU capacity to deliver basic health care services to communities in their areas.

b. Health Referral and Delivery

To assist participating LGUs in Surigao del Norte and South Cotobato to further develop and strengthen their health referral and priority health systems and therefore to strengthen health care delivery.

c. Community and NGO Mobilization in Health in Kalinga, Apayao, Palawan and Guimaras

To identify and mobilize selected NGOs and communities in all six provinces to participate in the development and implementation of their own health and health related initiatives through a program of identified and resourced grant funded projects.

d. Community and NGO Mobilisation in Health in South Cotabato and Surigao del Norte

To identify and mobilise selected NGOs and communities in the two AusAID provinces to participate in the development and implementation of their own health related initiatives through a program of identified and resourced grant funded projects.

e. Project Management

To efficiently and effectively manage the project for the achievement of its objectives, and to ensure cost-effective and timely procurement of project equipment and delivery of inputs.

ANNEX TWO

GENERAL RESPONSIBILITIES OF THE GOVERNMENT OF AUSTRALIA

1. Where applicable, the contributions of the Government of Australia to the Project will be generally as follows:

a. the cost of professional and other services required for the execution of the Project, including the following costs related to Australian personnel;

i) their salaries, fees, travel expenses between Australia and the Project area, accommodation and living expenses and any other allowances; and

ii) the cost of shipping their personal and household effects, including professional and technical materials between their normal place of residence and the port of entry and departure in the Philippines.

b. the cost of providing Project supplies or commodities and the cost of their transportation to the port of entry in the Philippines; and

c. contributions related to Filipino Scholarship holders outside the Philippines up to levels set for all holders of Australian Development Training Awards such as:

i) registration and tuition fees;

ii) book and equipment allowance;

iii) a living allowance including provision for accommodation costs and a clothing allowance; iv) medical and hospital expenses; v) economy-class fares for international and domestic travel outside the Philippines by air or any other approved means of transportation, in compliance with the requirements of the fellowship program; and vi) cost of shipping a reasonable quantity of their personal effects outside the Philippines.

2. Contracts for the purchase of Australian-funded project supplies and recruitment of services required to execute project activities will be signed in accordance with existing regulations of the Government of Australia.

3. The Australian Team Leader will provide the Philippine Executing Authority the names of Australian personnel and their dependants entitled to the rights and privileges set forth in this Memorandum of Understanding, prior to their arrival in the Philippines.

ANNEX THREE

GENERAL RESPONSIBILITIES OF THE GOVERNMENT OF THE PHILIPPINES

Where applicable, the contributions of the Government of the Philippines will be generally as follows:

1. All agreed counterpart costs in support of activities included in the Project;

2. Transport or Project supplies within the Philippines in accordance with the execution requirements of the Project;

3. Facilitation of travel within the Philippines of Australian personnel in the performance of their duties;

4. Permission to use means of communication in the Philippines appropriate to the needs of the Project;

5. Permits, licenses and other documents necessary to enable Australian personnel and organizations to perform their duties in the Philippines;

6. Appropriate visas for Australian personnel and their dependants, and import and export permits for personal, professional and technical material, and the personal and household effects of Australian personnel;

7. Provision of furnished office premises and office service, from existing resources whenever possible, where such premises and services are needed by Australian personnel in carrying out their duties, provided the same do not consist of confidential and security information;

8. Reports, records, statistics and other information related to the Project and directly required by Australian personnel in carrying out their duties provided the same do not consist of confidential and security information;

9. Provision of security arrangements for Australian and Philippine personnel and property on Project sites and elsewhere when they are involved in official activities in accordance with the present Memorandum. The nature of such security arrangements will be mutually determined by the two Governments; and

10. Maintenance of the salaries of public sector holders of Australian Development Training Awards.

ANNEX FOUR

COST SUMMARY

Estimated Contribution of the Government of Australia

Estimated Contribution of the Government of the Philippines