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February 19, 1997

The Government of the Republic of the Philippines (hereinafter called the "PHILIPPINES"), and the Government of Canada (hereinafter called "CANADA") desiring to record an understanding concerning Canadian development assistance in the Philippines have agreed as follows:

SECTION 1.01

This Memorandum of Understanding does not constitute an international treaty. It is a subsidiary arrangement made pursuant to the General Agreement on Development Cooperation between the PHILIPPINES and CANADA dated the 13th day of November 1987 and is intended to set out the responsibilities of the two Governments in relation to the Project that is described under Article III.

SECTION 2.01

CANADA designates the Canadian International Development Agency (hereinafter called "CIDA") as the agency responsible for the implementation of its obligations under this Memorandum of Understanding. CIDA will make a contribution to a Canadian Organization (hereinafter called "Canadian Executing Agency" or "CEA") upon the condition that it will be responsible for assisting in the implementation of the Project.

SECTION 2.02

The PHILIPPINES designates its Department of Trade and Industry (hereinafter called "DTI") as the Agency responsible for the implementation of its obligations under this Memorandum of Understanding. DTI will work with the Board of Investments (hereinafter called "BOI") which will be responsible for assisting DTI in the implementation of the Project.

SECTION 3.01

The PHILIPPINES and CANADA will participate in the Private Enterprise Accelerated Resource Linkages Project in the Philippines (hereinafter called the "Project"). The goal of the Project is to promote Philippine economic development by enhancing the role of small and medium enterprises (SMEs) and establishing long term business collaboration with Canadian counterparts.

The objectives of the Project are:

to foster an environment conducive to the development of dynamic Philippine SMEs; and

to promote the development of linkages between Canadian and Philippine SMEs to effect technology transfers and enhance the development of Philippine SMEs.

The Project is described in detail in Annex "A" of this Memorandum of Understanding.

SECTION 4.01

For the implementation of the Project, the PHILIPPINES and CANADA will develop a Management Plan which will constitute an operational document between DTI and CIDA. The Management Plan will be completed and signed within ninety (90) days from the date of this Memorandum of Understanding, and when duly signed on behalf of the PHILIPPINES and CANADA, will be attached hereto as Annex "D" and will contain, inter alia, the following:

a detailed description of the Project; an outline of management strategy, process, methods and means to be used to carry out the Project;

a schedule for the implementation of the project activities, including a milestone chart;

the budget and duration of the Project; the reporting requirements for the Project;

the nature, timing and responsibilities for project monitoring and evaluations and the means by which they will be made;

the project organization including resources required for the Project; and

a statement of obligations, duties and responsibilities of the PHILIPPINES and CANADA together with their contributions.

SECTION 4.02

The Management Plan can be amended, from time to time, with the agreement of both Parties and without formal modification to this Memorandum of Understanding.

SECTION 5.01

The contribution of CANADA will consist in providing professional and technical services as well as monitoring and evaluating the Project, all as more particularly set forth in Annex "B" of this Memorandum of Understanding. The total value of CANADA'S contribution will not exceed four million five hundred thousand dollars Canadian (4,500,000$CA).

SECTION 5.02

The proceeds of the Canadian contribution will not be used by the PHILIPPINES to pay any taxes, fees, customs duties or any other levies or charges imposed directly or indirectly by the PHILIPPINES on any goods, materials, equipment, vehicles and services purchased or acquired for, or related to, the execution of the Project.

SECTION 6.01

The contribution of the PHILIPPINES will consist in providing the project requirements all as more particularly set forth in Annex "C" of this Memorandum of Understanding.

SECTION 7.01

The PHILIPPINES and CANADA will ensure that this Memorandum of Understanding is carried out with due diligence and efficiency and each will furnish to the other all such information relating to the Project as will reasonably be requested.

SECTION 8.01

Any communications or documents given, made or sent by either the PHILIPPINES or CANADA pursuant to this Memorandum of Understanding, will be in writing and will be deemed to have been duly given, made or sent to the Party to which it is addressed at the time of its delivery by hand, mail, facsimile or the X400 telecommunication system at its respective address, namely:

For the PHILIPPINES:

Undersecretary Melito S. Salazar, Jr.
Industry and Investments Group
Industry and Investments Building
385 Sen. Gil Puyat Avenue
Makati Avenue

Telephone: 896-8484; 896-3638

Fax: 895-3512

For CANADA:

The President
Canadian International Development Agency
200 Place du Portage
Hull, Quebec
K1AOG4

Telex: 053-4140 CIDA Hull

Fax: (819) 953-5469

SECTION 8.02

Either Party hereto may, by written notice to the other Party hereto, change the address to which any notice or request intended for the Party so giving such notice will be addressed.

SECTION 8.03

All communications and documents submitted to CANADA will be in either the English or the French language, and those submitted to the PHILIPPINES will be in the English or the Filipino language.

SECTION 9.01

Differences which may arise in the interpretation or application of the provisions of this Memorandum of Understanding will be settled by means of negotiations between the PHILIPPINES and CANADA or by any other manner mutually agreed upon by the PHILIPPINES and CANADA.

SECTION 10.01

This Memorandum of Understanding together with Annexes "A", "B", "C" and " D" which form an integral part hereof, constitute the entire understanding between the Parties with respect to the Project. Annex "D" will be completed and signed within ninety (90) days from the date of this Memorandum of Understanding.

SECTION 11.01

The PHILIPPINES and CANADA will endeavour to consult each other in respect of any matter that may from time to time arise in connection with this Memorandum of Understanding.

SECTION 12.01

This Memorandum of Understanding will come into force and effect on the date of signature and will expire on completion of the Project. This Memorandum of Understanding may be amended from time to time, as deemed necessary, by mutual agreement by an exchange of letters.

IN WITNESS WHEREOF, the undersigned have signed this Memorandum of Understanding in duplicate, in the English language, in Manila on the 19th day of February, 1997.

I. PROJECT DESCRIPTION

1. The Private Enterprise Accelerated Resource Linkages Project is designed:

1.1 to foster an environment conducive to the development of dynamic Philippine SMEs; and

1.2 to promote the development of linkages between Philippine and Canadian SMEs to effect technology transfers and enhance the development of Philippine SMEs.

2. The proposed elements of the Project are: a Partnership Development Facility; and an Investment Promotion and Technology Transfer Mechanism.

2.1 Partnership Development Facility

The Partnership Development Facility (hereinafter called the "Facility") will be a responsive mechanism which will fund initiatives important for SME development. The Facility will work with groups in the Philippines to support the development of more dynamic Philippine SMEs and their graduation into medium sized enterprises in the short and medium term. The intention is to contribute to the development of key support systems or networks to help the progressive SMEs to overcome some of their immediate hurdles. The focus will be on funding sub-projects proposed by Philippine organizations that facilitate the coordination of existing services, strengthen associations such as industry associations to allow more integrated packages of services for members, or identify gaps in the current support network. The Facility will strengthen partnerships within the country between public, private and non-governmental groups.

2.2 Investment Promotion and Technology Transfer Mechanism

The Investment Promotion and Technology Transfer Mechanism (hereinafter called the "Investment Mechanism") will work with Philippine SMEs which are currently capable of entering into international alliances to link them to Canadian SMEs and allow them to undertake more rapid expansion. The Investment Mechanism will foster these alliances by placing an Advisory unit at the Board of Investments (BOI) in Manila. The BOI Advisor will work closely with the BOI and the Department of Trade and Industry's Bureau of Small and Medium Business Development (BSMBD) to identify opportunities for linkages and methods for building alliances which benefit both the Philippine and Canadian SMEs. It will be decided in the early stages of the Project whether regional advisors are necessary to work in specific locations such as Cebu and Davao. These advisors would be located in regional Investment Promotion Centres or Chambers of Commerce and would undertake parallel work to the BOI Advisor.

II. EXPECTED PROJECT RESULTS

The expected Project results include the following:

Emergence of strong Philippine SMEs resulting in increased competitiveness, income, innovative products, and long term business collaboration with Canadian counterparts;

Improved environment developed for the promotion of Philippine SMEs in the PHILIPPINES including increased coordination between agencies;

Improved services by industry associations and government agencies to SMEs;

Strengthening of associations and networks providing support to Philippine SMEs to make them competitive;

Incorporation by industry associations and government agencies of gender and environmental concerns into the process of planning and implementing SME programs;

Improved coordination of current SME programs;

Additional on-going Philippine SME development programs implemented by industry associations and government agencies; and

Long term linkages between PHILIPPINES and CANADA established.

III. PROJECT IMPLEMENTATION

The Project implementation will involve the following organizations and management structures.

1. CIDA will make a contribution to a Canadian organization (hereinafter called the "Canadian Executing Agency" or "CEA") upon the condition that it will be responsible for assisting in the implementation of the Project. The CEA will be responsible for the on-going planning, organization, implementation and control of the Project. The Facility will be implemented in conjunction with a series of Philippine organizations which sponsor the proposals. The Investment Mechanism will be implemented in conjunction with the Board of Investments.

2. A three layer decision making structure has been established including a Project Steering Committee, a Facility Approval Committee and an Investment Review Committee.

(a) The Project Steering Committee will be responsible for coordination between the Canadian and Philippine governments. It will set Project policy and direction. This Committee will be comprised of members of DTI as the Government of the Philippines representative, and members of CIDA as the Government of Canada representative who will act as co-chairs. In addition, it will include members from the National Economic and Development Authority (NEDA), Philippine Chamber of Commerce and Industry (PCCI), Canadian Chamber of Commerce of the Philippines (CCCP), and the CEA.

(b) The Facility Approval Committee will be formed to approve the proposals for funding under the Facility. The Approval Committee will review proposals which have been pre-screened by the CEA against specific criteria and will approve or reject selected proposals.

The Committee will be chaired by CIDA and include DTI and the CEA.

(c) The Investment Review Committee will be responsible for reviewing the performance of the Canadian Desk at the BOI. The Investment Review Committee will be comprised of CIDA (chair), BOI and the CEA.

(d) In accordance with Philippine and Canadian policies, the Project will integrate gender considerations into all aspects of Project planning and implementation.

(e) CIDA may recruit an independent Monitor and Operation Review team to assess the Project's efficiency and effectiveness.

CANADA, through CIDA, will:

1. Enter into a Contribution Agreement with the CEA to manage CIDA's input to the Project. As a condition for obtaining a Canadian contribution, CIDA will require that the CEA be responsible for the overall financial, administrative and technical management of the Project and be accountable to CIDA for Project outputs and Project results;

2. Provide a representative for the Project Steering Committee as Co-Chair with DTI, and the Facility Approval Committee and Investment Review Committee as Chair; and

3. Provide the services of a Project Monitor and an Operation Review team.

Details of the responsibilities of CANADA will be as established and agreed to in the Management Plan referred to in Article IV of this Memorandum of Understanding.

The PHILIPPINES, through the DTI, will:

1. Provide a representative for the Project Steering Committee as co-chair, and participate in the Facility Approval Committee and Investment Review Committee;

2. Provide administrative assistance to the Project as needed including access to required information; and

3. Ensure the Canadian Project staff are provided with necessary documentation to facilitate their stay in the Philippines and arrange for customs clearance for eligible and documented PEARL Project shipments entering the PHILIPPINES.

Details of the responsibilities of the PHILIPPINES will be as established and agreed to in the Management Plan referred to in Article IV of this Memorandum of Understanding.

(to be signed within ninety (90) days of the execution of this Memorandum of Understanding)