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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 a view to promoting the economic development efforts of the Republic of the Philippines:

1. A loan in Japanese Yen up to the amount of fifty five billion four hundred and fifty million yen (¥55, 450,000,000) (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 projects listed in the List attached hereto (hereinafter referred to as "the List") according to the allocation for each project as specified in the List.

2. (1) The Loan will be made available by loan agreements 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 agreements 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 will be three (3) per cent per annum.

(c) The disbursement period will be three (3) years with regard to the project mentioned in 9 of the List, five (5) years with regard to the projects mentioned in 1, 2, 3, 4, 5, 7 and 8 of the List, and six (6) years with regard to the project mentioned in 6 of the List from the date of the signing of the relevant loan agreement.

(2) The loan agreements mentioned in sub-paragraph (1) above will be concluded after the Fund is satisfied of the feasibility of the project to which such loan agreement relates.

(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. (1) The Loan will be made available to cover payments to be made by Philippine executing agencies to suppliers, contractors and/or consultants of eligible source countries under such contracts as have been or may be entered into between them for purchases of products and/or services required for the implementation of the projects mentioned in paragraph 1, provided that such purchases are made in such eligible source countries for products produced in and/or services supplied from those countries.

(2) The scope of eligible source countries mentioned in sub-paragraph (1) above will be agreed upon between the authorities concerned of the two Governments.

4. The Government of the Republic of the Philippines will ensure that products and/or services mentioned in sub-paragraph (1) of paragraph 3 are procured in accordance with the guidelines for procurement of the Fund, which set forth, inter alia, the procedures of international tendering to be followed except where such procedures are inapplicable or inappropriate.

5. (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 and/or services to be provided under the Loan.

6. (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.

7. Japanese nationals whose services may be required in the Republic of the Philippines in connection with the supply of products and/or services to be provided under the contracts referred to in sub-paragraph (1) of paragraph 3 will be accorded such facilities as may be necessary for their entry into the Republic of the Philippines and stay therein for the performance of their work.

8. 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 projects or the equipment supplies enumerated in the List, and

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

9. (1) The Government of the Republic of the Philippines will, upon request, furnish the Government of Japan with reports on the progress of the projects mentioned in paragraph 1.

(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.

10.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 my 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

List

                                                                                         

	Maximum amount   in million yen
1. Leyte Geothermal Development Project (II)	16,370
2. Extra High Voltage Transmission Line Project (Stage II)	9,900
3. Integrated Steel Mill Construction Project (the whole portion of the port and a part of material-handling facilities)	7,000
4. West Leyte Road and Northwest Leyte Roads Improvement Project	6,300
5. Metro Manila Radial Road No. 10 and Related Roads Project (Stage I)	5,400
6. Bohol Irrigation Project (Stage I)	4,600
7. Railcar Maintenance Depot Construction Project	4,500
8. Nationwide Flood Control Dredging Project (Telemetering Portion)	1,140
9. Port Irene Development Project (Engineering Services)	240
Total	55,450