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July 18, 1983

Excellency

I have the honour to confirm the following understanding recently reached between the representatives of the Government of Japan and of the Government of the Republic of the Philippines concerning a Japanese loan to be extended with & view to promoting the economic development efforts of the Republic of the Philippines:

1. A loan in Japanese Yen up to the amount of nine billion six. hundred million yen (Y9,600,000,000) (hereinafter referred to as "the Loan") will be extended, in accordance with the relevant laws and regulations of Japan, to the Government of the Republic of the Philippines by the Overseas Economic Cooperation Fund (hereinafter referred to as "the fund") to implement the Power Plant Barge Project (hereinafter referred to as "the Project").

2. (1) The Loan will be made available by a loan agreement to be concluded between the Government of the Republic of the Philippines and the Fund. The terms and conditions of the Loan as well as the procedures for its utilization will be governed by the said loan agreement which will contain, inter alia, the following; principles:

(a) The repayment period will be twenty (20) years after the grace period of ten (10) years.

(b) The rate of interest of the Loan will be four (4) per cent per annum.

(c) The disbursement period of the Loan will be five (5) years from the date of the signing of the loan agreement.

(2) The loan agreement mentioned in sub-paragraph (1) above will be concluded after the Fund is satisfied of the feasibility of the Project.

(3) The disbursement period mentioned in sub-paragraph (1) (c) above may be extended with the consent of the authorities concerned of the two Governments.

3. The Loan will be made available to cover payments to be made by the Philippine executing agency to Japanese suppliers, contractors and/or consultants under such contracts as may be entered into between them in Japanese yen for purchases of products of Japan and services of Japanese nationals required for the implementation of the Project.

4. (1) The Government of the Republic of the Philippines will exempt the Fund from all fiscal levies or taxes imposed in the Republic of the Philippines on and/or in connection with the Loan as well as interest accruing therefrom.

(2) The Government of the Republic of the Philippines will, itself or through its executing agencies or instrumentalities, assume all fiscal levies or taxes imposed in the Republic of the Philippines on Japanese firms and nationals operating as suppliers, contractors or consultants on and/or in connection with any income that may accrue from the supply of products of Japan and services of Japanese nationals to be provided under the Loan.

5. (1) With regard to the shipping of products purchased under the Loan, the two Governments will promote mutual cooperation for the development of shipping, under the Treaty of Amity, Commerce and Navigation between Japan and the Republic of the Philippines signed at Manila on 10 May, 1979.

(2) With regard to the marine insurance of products purchased under the Loan, the two Governments will refrain, within the scope of the relevant laws and regulations of their respective countries, from imposing any restrictions that may hinder fair and free competition between the marine insurance companies of the two countries.

6. Japanese nationals whose services may be required in the Republic of the Philippines in connection with the supply of products of Japan and services of Japanese nationals to be provided under the contracts referred to in paragraph 3 above will be accorded such facilities as nay be necessary for their entry into the Republic of the Philippines and stay therein for the performance of their work.

7. The Government of the Republic of the Philippines will take necessary measures to ensure that:

(a) The Loan be used properly and exclusively for the Project, and

(b) the facilities constructed under the Loan be maintained and used properly and effectively for the purposes prescribed in this understanding.

8. (1) The Government of the Republic of the Philippines will, upon request, furnish the Government of Japan with reports on the progress of the Project.

(2) The two Governments will jointly review from time to time, on the basis of the reports mentioned in sub-paragraph (1) above, the progress of the implementation of the Loan and take, if necessary, appropriate measures to secure smooth and effective utilization of the Loan. The Fund will be invited to participate in such review.

9. The two Governments will consult with each other with respect to any matter that may arise from or in connection with this understanding.

I should be grateful if Your Excellency would confirm the foregoing understanding on behalf of the Government of the Republic of the Philippines.

I avail myself of this opportunity to renew to Your Excellency the assurance of may highest consideration.

(Sgd.) YOSHIO OKAWA
Ambassador Extraordinary and Plenipotentiary
of Japan to the Republic of the Philippines

His Excellency Carlos P. Romulo
  Minister for Foreign Affairs
  Ministry of Foreign Affairs