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December 27, 1973

Note: The Agreement entered into force, December 27, 1973.

Reference: This Agreement is also published in XII DFA TS No. 1, p. 114.

December 27, 1973

Excellency,

I have the honour to confirm the following understanding recently reached between the representatives of the Government of Japan and the Government of the Republic of the Philippines concerning Japanese assistance 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 four billion seven hundred and twenty-nine million yen (Y4,729,000,000)(hereinafter referred to as "the Loan") will be extended 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 Project List attached hereto in accordance with the relevant laws and regulations of Japan.

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 eighteen (18) years after seven (7) years' grace.

(b) The rate of interest will be three and a quarter (3.25) per cent per annum.

(c) The closing date for disbursements of the Loan will be December 20, 1978.

(2) The loan agreement for each of the projects mentioned in paragraph 1, above will be concluded between the Government of the Republic of the Philippines and the Fund only when the two Governments and the Fund are satisfied of its feasibility.

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 may be entered into between them for purchases of goods and services required for the implementation of the projects mentioned in paragraph 1 above, provided that such purchases are made in such eligible source countries for goods produced in the 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 goods and services mentioned in paragraph 3. (1) above 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 shall 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 shall 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 goods and services to be provided under the Loan.

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

7. (I) 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, above,

(2) The two Governments will jointly review from time to time, on basis of the reports mentioned in subparagraph (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.

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

27 December 1978

Excellency,

I have the honour to acknowledge the receipt of Your Excellency's Note of today's date, which reads as follows:

"Excellency,

I have the honour to confirm the following understanding recently reached between the representatives of the Government of Japan and the Government of the Republic of the Philippines concerning Japanese Assistance 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 four billion seven hundred and twenty-nine million yen (Y4,729,000,000) (hereinafter refer red to as "the Loan") will be extended 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 Project List attached hereto in accordance with the relevant laws and regulations of Japan.

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 eighteen (18) years after years' grace.

(b) The rate of interest will be three and a quarter (3.25) per cent per annum.

(c) The closing date for disbursements of the Loan will be December 20, 1978.

(2) The loan agreement for each of the projects mentioned in paragraph 1, above will be concluded between the Government of the Republic of the Philippines and the Fund only when the two Governments and the Fund are satisfied of its feasibility.

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 may be entered into between them for purchases of goods and services required for the implementation of the projects mentioned in paragraph 1, above, provided that such purchases are made in such eligible source countries for goods produced in and services supplied from those countries.

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.) TOSHIO URABE

Ambassador of Japan to the
Republic of the Philippines

His Excellency
CARLOS P. ROMULO
Secretary of Foreign Affairs
Republic of the Philippines
Manila

PROJECT LIST

1. Philippine National Railways Commuter Service Project, Phase II.

2. Regional Depots Projects in Tuguegarao, Legaspi, Tacloban and Davao.

3. Cubao, Shaw and Manila South Diversion Road Grade Separators Project.

(2) The scope of eligible source countries mentioned in sub- Paragraph (l) 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 goods and services mentioned in paragraph 3. (1) above 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 shall 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 shall 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 goods and services to be provided under the Loan.

6. With regard to the shipping and marine insurance of goods purchased under the Loan, the two Governments shall refrain, within the Scope of relevant laws and regulations that may hinder fair and free competition between the shipping and marine insurance companies of the Two countries.

7. (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. above.

(2) The two Governments will jointly review from time to time, on the basis of the reports mentioned in subparagraph (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.

8. 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.

I have further the honour to confirm on behalf of the Government of the Republic of the Philippines the understanding set forth in Your Excellency's Note.

I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration.

(Sgd.) CARLOS P. ROMULO

Secretary of Foreign Affairs

Project List

1. Philippine National Railways Commuter Service Project, Phase II

2. Regional Depots projects in Tuguegarao, Legaspi, Tacloban and Davao.

3. Cubao, Shaw and Manila South Diversion Road Grade Separators Project.

RECORD OF DISCUSSIONS

Manila, December 27, 1973

In connection with the Notes exchanged today between the two Governments concerning Japanese assistance to be extended to the Government of the Philippines to implement the projects listed in the Project List attached thereto, the representatives of the Governments of Japan and the Republic of the Philippines have wished to record the following:

1. With reference to paragraph 1 of the above-mentioned Notes the representatives of both Governments confirmed that the breakdown of the total amount of the Loan for each project would be as follows:

2. With reference to paragraph 4 of the above-mentioned Notes, the representatives of both Governments confirmed that when procedures for international tendering were applied:

(a) A tender would be called on the part of a project which had been classified as "foreign portion' of the total requirements and

(b) The proceeds of the Loan would cover the part of a project specified in sub-paragraph (a) above.

3. As for the financing of goods which contain components originating from a non-eligible source country or countries, the representatives of both Governments confirmed that:

(a) The total cost of components imported into the country of production from other than the eligible source countries would be less than 30 per cent of the price per unit of such goods and that

(b) In applying the above formula, following definition would be Used:

(a) "The total cost of components imported into the country of production from other than the eligible source countries" means the price C.I.F. of the imported components plus import duties levied thereon in the country of production.

(b) "Price per unit of such goods" means, (i) in case the country of production is not the Philippines, the price F.O.B. of such goods and (ii) in case the country of production in the Philippines, the price ex-factory of such goods.

(Sgd.) TOSHIRO URABE	(Sgd.) CARLOS P. ROMULO
Ambassador Extraordinary	Secretary of Foreign Affairs
and Plenipotentiary of Japan	Republic of the Philippines
to the Republic
of the Philippines

Manila, 27 December 1973
Embassy of Japan
Manila

No. 446-73

The Embassy of Japan presents its compliments to the Department of Foreign Affairs and has the honour to refer to paragraph 3 of the Exchange of Notes dated December 27, 1973, regarding Japanese assistance to the Philippine for the implementation of the projects listed in the Project List attached thereto.

The Embassy has further the honour to propose that the scope of eligible source countries mentioned in the said paragraph of the Exchange of Notes will be as follows:

(1) All the developing countries listed in the Development Assistance Committee (DAC) Statistical Questionnaire, as amended periodically by the DAC. . ;

(2) Japan.

The Embassy of Japan avails itself of this opportunity to renew to the Department of Foreign Affairs the assurance of its highest consideration.

Manila, December 27, 1973

No. 73-3619

The Department of Foreign Affairs presents its compliments to the Embassy's Note No. 446-73 dated 27 December 1973.

The Department has further the honour to inform the Embassy that the proposal set forth in the said Embassy's Note is acceptable to the Government of the Republic of the Philippines.

The Department of Foreign Affairs avails itself of this opportunity to renew to the Embassy of Japan the assurances of its highest consideration.