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January 15, 1997

With a view to strengthening the ties of friendship and cooperation which bind them, the Government of the Republic of the Philippines and the Government of the French Republic have agreed to conclude the present protocol to foster the economic development of Philippines.

The French Government grants the Government of the Republic of the Philippines financial support designed for the execution of projects included in the economic development priorities of the Republic of the Philippines. The said support shall not exceed 191.25 MF (one hundred ninety one million two hundred fifty thousand French Francs) and shall be used to finance the purchase in France of French goods and services related to the implementation of the projects referred to in the appendices A and B to the present protocol.

The financial support provided for in Article 1 shall comprise :

a grant from the French Treasury of a total amount not exceeding 2.85 MF (two million eight hundred fifty thousand French Francs);

a loan from the French Treasury of a total amount not exceeding 113.04 MF (one hundred thirteen million forty thousand French Francs);

credits guaranteed by the French credit insurance company (COFACE) of a total amount not exceeding 75.36 MF (seventy five million three hundred sixty thousand French Francs).

A) The financing of the project referred to in appendix A shall be provided by the French Treasury grant. The first downpayment of the contract related to this project shall be comprised between 10% and 20% of the value of the contract financed, after deduction of the amount of freight and insurance.

B) The financing of the projects referred to in appendix B shall be provided jointly by the French Treasury loan and the guaranteed credits. The COFACE premium is paid by the borrower. For each contract related to these projects, drawing rights on the French Treasury loan and the guaranteed credits shall be opened up to, respectively, 60 % and 40 % of the amount of the contract financed by the present protocol. The French Treasury loan shall be used to finance the first downpayment of each contract relating to these projects. This first downpayment shall be comprised between 10 % and 20 % of the value of the contract financed, after deduction of the amount of freight and insurance. The remainder of this contract shall be financed by joint and simultaneous utilization of the French Treasury loan and the guaranteed credits.

A) The French Treasury loan shall be granted for a period of 25 years, including a grace period of 6 years. The interest rate shall be 1.5 % per year. Said loan shall be repaid in 38 equal consecutive six-monthly installments, the first installment falling due 78 months after the end of the calendar quarter during which the drawings are made. Interest shall be payable on the total amount outstanding ; it shall be applicable as of the date of each drawing on the French Treasury loan and shall be paid at six-monthly intervals.

The date of payment of a maturity of principal or interest is, when it falls due on a non-working day in France, postponed to the working day which follows. Any maturity of principal or interest not paid on due date shall give rise to interest on overdue payment from the date of maturity up to the effective date of payment. The rate of interest on overdue payment is 7.5 % per year. Interest on overdue payment shall itself bear interest at the rate above mentioned if it is due for a full year.

For each project, an implementation agreement between Credit National, acting in name and on behalf of the Government of the French Republic, and either the governmental agency or corporation designated by the Government of the Republic of the Philippines to receive the French financial support and guaranteed by the Government of the Republic of the Philippines or the Department of Finance of the Philippines acting in name and on behalf of the Government of the Republic of the Philippines shall define the mechanisms of utilization of the French Treasury grant and the mechanisms of utilization and of repayment of the French Treasury loan.

B) The guaranteed credits shall be granted for a period of 10 years and shall be repaid in 20 equal consecutive six-monthly installments, the first installment falling due six months after delivery of the equipment or completion of the project. Interest shall be payable on the total amount outstanding. It shall be applicable as of the date of each drawing on the guaranteed credits and is paid at six-monthly intervals.

For each project listed in appendix B, an implementation agreement between the credit institutions approved in France or authorized to practice on the French territory, under the care of AFB Export, and either the governmental agency or corporation designated by the Government of the Republic of the Philippines to receive the French financial support and guaranteed by the Government of the Republic of the Philippines or the Department of Finance of the Philippines acting in name and on behalf of the Government of the Republic of the Philippines, shall define the mechanisms of utilisation and of repayment of the said credits as well as the relating bank conditions, in particular those relating to interest on overdue payment. The said agreement shall stipulate that the interest rate applicable shall be fixed according to the rules established by the participants to the OECD consensus for export credits benefiting of the public supports, prevailing at the time of signature of the contract.

The currency of account and payment under the terms of the present protocol shall be the French Franc,

For each contract relating to the projects referred to in the appendices A and B, its registration as specified hereafter is subject to :

the conformity of the contract with the recommendations formulated by the pre-evaluation of the project corresponding to such contract;

- the verification of the conformity of the project with the rules established by the participants to the OECD consensus for exports credits benefiting of a public support;

- the fact that there exists no arrears concerning amounts due and not paid on due date by the Government of the Republic of the Philippines relating to debt consolidation agreements and French Treasury Loans;

- the examination of the state of amounts due and not paid on due date concerning exports credits guaranteed by COFACE and granted to the Government of the Republic of the Philippines or with the guarantee of the Government of the Republic of the Philippines.

For each contract relating to the project referred to in the appendix A, after the French competent authorities have verified that these conditions are fulfilled, the contract will be registered on the protocol by exchange of letters between the Economic and Commercial Counsellor to the French Embassy in Philippines, acting with the authorisation of the competent French authorities, and the National Economic and Development Authority of the Philippines.

For each contract relating to the projects referred to in the appendix B, after the French competent authorities have verified that these conditions are fulfilled, the contract will be registered on the protocol by exchange of letters between the Economic and Commercial Counsellor to the French Embassy in Philippines, acting with the authorisation of the competent French authorities, and the Department of Finance of the Philippines.

In order to qualify for the financial support provided for in Article 1 hereof, contracts between French suppliers and Philippine buyers must be registered by June 30, 1998 at the latest.

No drawing on the French Treasury financing provided by the present protocol shall be made after June 30, 2001.

The financial support from the French Treasury shall not be used to finance any taxation in Philippines.

The reimbursement of principal and the payment of interest, the banking commissions, fees and accessories linked to the execution of the present Protocol shall be paid net of any taxation in Philippines.

The Government of the French Republic may proceed at its own cost to undertake post evaluation of the projects financed under this protocol on the economic, financial and accounting levels in order to appraise their impact on the economic development of Philippines. The Government of the Republic of the Philippines shall participate in this evaluation, according to modalities to be defined, in order to benefit directly from the findings. The Government of the Republic of the Philippines agrees to welcome the post evaluation mission sent by the Government of the French Republic and to facilitate the access to relevant information about the projects.

The present protocol shall come into force at the date of its signature.

IN WITNESS THEREOF, the undersigned, authorized for this purpose by their respective Governments, have affixed thereto their seals.

Done in Manila the 15th January 1997 (in four originals, two in the French and two in the English language, the two texts being equally authoritative).