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November 07, 1994
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 Japanese loans to be extended with a view to promoting the economic development and stabilization efforts of the Republic of the Philippines:
I
1. (1) A loan in Japanese yen up to the amount of seventy-five billion three hundred and five million yen (¥75,305,000,000) (hereinafter referred to as "the Loan I" ) 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 enumerated in the List A attached hereto (hereinafter referred to as "the List A"), according to the allocation for each project as specified in the List A.
(2) The Loan I will be extended in line with sub-paragraph (2) of paragraph 2 of the "Funds for Development" Initiative announced by the Government of Japan on 25 June 1993.
2. (1) The Loan I 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 I 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 3 of the List A, four (4) years with regard to the projects mentioned in 5 and 6 of the List A, five (5) years with regard to the project mentioned in 4 of the List A, six (6) years with regard to the project mentioned in 9 of the List A, seven ( 7 ) years with regard to the projects mentioned in 1, 2 and 10 of the List A and eight (8) years with regard to the projects mentioned in 7, 8 and 11 of the List A from the date of coming into force of the relevant loan agreement.
(2) Each of the loan agreements mentioned in sub-paragraph ( 1) above will be concluded after the Fund is satisfied of the feasibility, including environmental consideration, of the project to which such loan agreement relates.
3. (1) The Loan I will be made available to cover payments to be made by the 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 enumerated in the List A, 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.
(3) A part of the Loan I may be used to cover eligible local currency requirements for the implementation of the projects enumerated in the List A.
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.
II
1. (1) A loan in Japanese yen up to the amount of thirty' seven billion five hundred million yen (¥37,500,000,000 (hereinafter referred to as "the Loan II" ) will be extended in accordance with the relevant laws and regulations of Japan to the Development Bank of the Philippines (hereinafter referred to as the "DBP"), by the Overseas Economic Cooperation Fund (hereinafter referred to as "the Fund" ) to implement the programs enumerated in the List B attached hereto (hereinafter referred to as "the List B" ) , according to the allocation for each program as specified in the List B.
(2) The Loan I will be extended in line with sub-paragraph ( 2 ) of paragraph 2 of the "Funds for Development" initiative announced by the Government of Japan on 25 June 1993.
2. (1) The Loan II will be made available by loan agreements to be concluded between the Fund and the DBP to cover credits to be extended by the DBP to sub-borrowers. The terms and conditions of the Loan II 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 five (5) years from the date of coming into force of the relevant loan agreements.
(2) Each of the loan agreements mentioned in sub-paragraph (1) above will be concluded after the Fund is satisfied of the feasibility, including environmental consideration, of the program to which such loan agreement relates .
(3) The repayment of principal of the Loan II extended to the DBF mentioned in paragraph 1, as well as the payment of interest there on, shall be guaranteed by the Government of the Republic of the Philippines.
3. (1) Notwithstanding the provisions of sub-paragraph 1 of paragraph 2 , a part of the Loan II will be made available to cover payments to be made by the DBF to consultants of eligible source countries under such contracts as have been or may be entered into between them for purchases of services required for the implementation of the programs enumerated in the List B, provided that such purchases are made in such eligible source countries for 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 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.
III
1. The respective disbursement periods mentioned in sub-paragraph (1) (c) of paragraph 2 of Part I and sub-paragraph (1) (c) of paragraph 2 of Part II may be extended with the consent of the authorities concerned of the two Governments.
2. 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 of Part I and sub-paragraph (1) of paragraph 3 of Part II 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.
3. (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 I and the Loan II as well as interest accruing there from.
(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 I and the Loan II.
4. (1) With regard to the shipping of products purchased under the Loan I and the Loan II, 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 I and the Loan II, 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 .
5. (1) The Government of the Republic of the Philippines will, upon request, furnish the Government of Japan and the Fund with reports on the progress of the implementation of the projects enumerated in the List A and the programs enumerated in the List B.
(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 I and the Loan II and take, if necessary, appropriate measures to secure their smooth and effective utilization. The Fund will be invited to participate in such review.
6. The Government of the Republic of the Philippines will take necessary measures to ensure that:
(a) the Loan I and the Loan II be used properly and exclusively for the projects enumerated in the List A and programs enumerated in the List B respectively.
(b) the facilities constructed under the Loan I be maintained and used properly and effectively for the purposes prescribed in this understanding.
7. 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.) YOSHIFUMI MATSUDA
Ambassador Extraordinary and Plenipotentiary
of Japan to the Republic of the Philippines
LIST A
in million yen)1. Rehabilitation Project for Tiwi Geothermal Power Plants 2. Rehabilitation Project for Mak-Ban Geothermal Power Plants 3. Calaca II Coal-Fired Thermal Power Plant Project (II) 4. Mt. Labo Geothermal Development Project (I) 5. Substation Expansion Project 6. Environmental Measurement Equipments Improvement Project for Power Plants 7. Philippine-Japan Friendship Highway Road Rehabilitation Project (I) 8. Rehabilitation and Maintenance of Bridges along Arterial Roads Project (III) 4,616 9. Arterial Road Network Development Project (I) 10. Metro Manila LRT Line 1 Capacity Expansion Project 11. Provincial Cities Water Supply Project (III)
LIST B
in million yen)1. Industries and Supporting Service Expansion Program 2. Domestic Shipping Modernization Program
RECORD OF DISCUSSIONS
In connection with the Exchange of Notes dated 7 November 1994, concerning Japanese loans to be extended with a view to promoting the economic development and the stabilization efforts of the Republic of the Philippines (hereinafter referred to as "the Exchange of Notes" ) , the representatives of the Japanese Delegation and of the Philippine Delegation wish to record the following with respect to the loans mentioned in Part I and Part II of the Exchange of Notes (hereinafter respectively referred to as "the Loan I" and "the Loan II"):
1. With reference to sub-paragraph (3) of paragraph 3 of Part I of the Exchange of Notes concerning the financing of eligible local currency requirements for the implementation of the projects enumerated in the List A attached to the Exchange of Notes (hereinafter referred to as "the List A"), the representative of the Japanese Delegation stated that:
(1) Such requirement of local currency as general administrative expenses, interest during construction, taxes and duties, expenses concerning office, remuneration to employees of the executing agencies and housing, not directly related to the implementation of the said projects, as well as purchases of land properties, compensation and the like, however, will not be considered as eligible for financing under the Loan I.
(2) The procurement of products and/or services will be made in accordance with the procedures of competitive tendering except where such procedures are inapplicable or inappropriate.
2. With reference to sub-paragraph ( 1) of paragraph 2 of Part II of the Exchange of Notes, the two Delegations shared the following views:
(1) The part of the Loan II for the program mentioned in 1 of the List B attached to the Exchange of Notes (hereinafter referred to as " the List B" ) will be used to cover credits to be extended by the Development Bank of the Philippines (hereinafter referred to as "the DBP" ) to the enterprises as sub-borrowers through the participating financial institutions, and the other part of Loan II for the program mentioned in 2 of the List B will be used to cover credits to be extended by the DBP to sub-borrowers, for the purchases of products necessary for the implementation of the said programs. The Philippine side will furnish the Government of Japan and the Overseas Economic Cooperation Fund (hereinafter referred to as "the Fund") with reports on the said programs periodically.
{2) The representative of the Philippine Delegation will ensure that the revolving fund be used to cover the same kind of credits mentioned in sub-paragraph (1) above and will furnish the Government of Japan and the Fund with reports on the progress of the revolving fund periodically.
3. With regard to the Loan I and the Loan II, the representative of the Japanese Delegation stated that any financial requirements of the projects enumerated in the List A and the programs enumerated in the List B exceeding the amount of the Loan I and the Loan II under the loan agreements mentioned in sub-paragraph (1) of paragraph 2 of Part I and sub-paragraph (1) of paragraph 2 of Part II of the Exchange of Notes, will be duly met by the Government of the Republic of the Philippines to assure the smooth implementation of the said projects and programs.
4. The representative of the Japanese Delegation stated that the Philippine side should give such due consideration to the importation of the products required for the implementation of the projects enumerated in the List A as it has given in the course of the implementation of the projects under the successive Japanese loans for projects.
5. The representative of the Japanese Delegation stated that the Philippine side should give due consideration to the local residents' support for the projects enumerated in the List A and programs enumerated in the List B and to the environmental impact which the said projects and programs have, in order to assure the smooth implementation of the said projects and programs.
6. The representative of the Philippine Delegation stated that the Philippine side had no objection to the statements mentioned in paragraphs 1,3,4 and 5 above.
& Plenipotentiary of
Japan to the Republic
of the Philippines
Department of Foreign Affairs
Republic of the Philippines
His Excellency Roberto R. Romulo
Secretary of Foreign Affairs
Department of Foreign Affairs
Republic of the Philippines