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November 21, 1996

1.1 This MEMORANDUM expresses the understandings of the Government of the Republic of the Philippines and the Government of Australia concerning the responsibilities and contributions respectively of the two Governments with regard to the implementation of the Philippine Regional Municipal Development Project (the Project).

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

1.3 The Project is concerned with permanently improving the urban infrastructure, municipal services and capability of local government units to provide, operate and maintain essential infrastructure and basic services to the eight selected provincial cities of Bacolod, Cagayan de Oro, General Santos, Iligan, Lucena, Puerto Princesa and Tagbilaran.

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 the Project and whose salaries and other costs, are funded from the contribution of the Government of Australia to the Project;

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

(d) "professional and technical material" means equipment and other goods imported by members of the Australian 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 cost of which is 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) "personnel and household effects" means equipment and other goods imported by Australian personnel and Australian institutions, firms and organizations for the personal use of Australian personnel and their dependants while engaged in the Project.

3. AUTHORITIES AND CO-ORDINATION

3.1 The Executing Authorities for this Project will be:

For the Government of the Philippines, the Department of Interior and Local Government (DILG).
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 DILG as the Chairman, the Government of the Philippines Project Manager, a representative of the seven recipient provincial cities, the AusAID Philippines Counsellor, the Australian Team Leader, and the Australian Project Director, or their nominees. The PCC will meet and discuss the Project at least twice in a year. Additional meetings of the PCC may be requested by DILG or by AusAID.

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

3.5 Coordination between the Project and the Asian Development Bank (ADB)-assisted PRMDP 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 maximising cross membership between the PCC and the ADB/PRMDP's Project Advisory Board (PAB).

4. CONTRIBUTIONS

The contributions of the Government of the Philippines and the Government of Australia, as described in Annexes 1 to 4, are estimated to value 57.856 million Philippine pesos and 14.3 million Australian dollars, respectively. The financial contribution of the Government of Australia will be subject to the normal annual Parliamentary approval of appropriations. The financial contribution of the Government of the Philippines will be subject to its annual Congressional appropriations.

5. PERSONNEL

5.1 Personnel provided by the Government of Australia to the Project will be 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 During the first three months of the Project's implementation, the Philippine and Australian project staff will examine plans for the management and implementation of the Project and will present a Project Implementation Document (PID) for the approval of the two Governments. The PID will be adopted in accordance with Article 16 of this Memorandum of Understanding and will supersede the Project Design Document as the primary reference for the Project thereafter.

6.2 An Annual Plan will be prepared by the Australian Project Team, in coordination with the Philippine Project Team, by 31 March 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 be initially 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.

6.3 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.

6.4 The Australian Team Leader will coordinate directly with the Philippine Project Manager and the City Project Managers 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 taxes 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 vehicles 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 that use without the consent of the Australian Executing Authority.

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 for 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 u 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 first 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 Republic of the Philippines will, pursuant to Section 105 G-1 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 used 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; provided, however, that the vehicle should have been registered in the country for not less that 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 re-exercised at any time during the assignment of the person concerned.

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

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 INCOME

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. Furthermore, Australian personnel and Australian firms, institutions and organizations will not be subject to these taxes on income derived from work performed outside the Philippines which income is not transferred into 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 Central Bank of the Philippines 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 damage 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 wilful 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 wilful misconduct on the part of that person or persons.

16. ENTRY INTO FORCE AND DURATION

This 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 January 2001 or on such other date as may subsequently be arranged between the two Governments.

17. AMENDMENTS

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

18. 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 the City of Pasay, this 21st day of November of the year one thousand, nine hundred and ninety six.