AMENDING CERTAIN SECTIONS OF REPUBLIC ACT NUMBERED SEVENTEEN HUNDRED AND EIGHTY-NINE, AS AMENDED, OTHERWISE KNOWN AS THE REPARATIONS LAW

WHEREAS, it is the policy of the Government to utilize all
reparations payments from Japan in such manner as shall assure the
maximum possible economic benefit to the Filipino people;

WHEREAS, it has been shown that majority of reparations
end-users in the private sector have failed to properly utilize the
reparations goods and/or services received by them, and to pay the
amortizations thereon as they fall due, thus resulting in huge
arrearages to the detriment of the Philippine economy; and

WHEREAS, such failure of the end-users in the private sector
to comply with their obligations is mainly due to the very low rates of
interest being charged under the existing law;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers in me vested by the Constitution as
Commander-in-Chief of all the Armed Forces of the Philippines, and
pursuant to Proclamation No. 1081, dated September 21, 1972, and General
Order No. 1, dated September 22, 1972, as amended, and in order to
effect the desired changes and reforms in the utilization and
disposition of reparations so as to assure the maximum possible economic
benefit to the Filipino people, and in order to augment the limited
government resources available for public projects, do hereby order and
decree the amendment of Republic Act Numbered 1789, as amended, as
follows:

SECTION 1. Section two, paragraph (a) of Republic Act
Numbered 1789, as amended, is hereby amended to read as follows:

“SEC. 2. Implementation. — To implement the policy
declared in Section one hereof, the procurement, disposition and
utilization of all goods and services procured from Japan under the
terms of the Reparations Agreement shall be carried out as closely as
possible to promote the economic rehabilitation and development of the
country and in accordance with the broad program, criteria and
priorities established by the National Economic and Development
Authority, in addition to the following criteria:

“(a) Capital goods and services. — Pursuant to the
policy declared in Section one hereof, the capital goods and services
received as reparations shall be made available only after due
compliance with all the conditions specified in this Act to approved
government projects for each year included in the economic and social
development program adopted by the National Economic and Development
Authority upon application from the agency concerned and duly endorsed
by the proper department head concerned and the National Economic and
Development Authority, as well as to Filipino citizens and entities
wholly owned by Filipino citizens, whose applications must be
accompanied in each case by the requisite project study prepared in
accordance with the form prescribed for the purpose by the Commission
and approved by the National Economic and Development Authority and a
sworn statement as to whether the applicant has already been granted any
previous application and procurement order and the value of the
reparations goods and/or services involved and actually delivered, and
who will themselves utilize such goods and/or services as bona fide
producers or manufacturers: Provided, That no private person,
private company, establishment, or entity shall be granted more than one
application for reparations goods and services and in no case the
aggregate total of reparations goods and services granted to any such
private person, private company, establishment, or entity shall be more
than one and a half million dollars, except when a greater amount is
necessary for the realization of any project certified by the President
of the Philippines after consultation with the National Economic and
Development Authority to be vital to the economic development of the
country and except further that the applicant may further apply for
expanson or development purposes when so authorized by the President of
the Philippines after consultation with the National Economic and
Development Authority: Provided, further, That where there are
two applicants for the same reparations goods, all other things being
equal, the person who first applied shall be given preference: Provided,
finally, That reparations intended for electrification,
educational material, equipment and machinery, including those for
fishery and vocational schools, cottage industries, fire-fighting
equipment, telecommunications, railroad, base metal mining, steel and
cement manufacturing, logging and shipping shall be given top priority.
The list of projects shall be given the widest dissemination and
publicity possible.”

SEC. 2. Paragraphs (b) and (d) of Section 2 of the same Act
are hereby amended to read as follows:

“(b) Goods other than capital goods. — Goods other than
capital goods that may be procured from reparations shall be limited to
such goods as may not be obtainable from the normal sources of imports
and to highly essential consumer goods and construction materials not
classified as capital goods, the total value and detailed listing of
which shall be made by the Commission created in Section 5 hereof and
approved by the President upon recommendation of the National Economic
and Development Authority. Such goods shall be procured for and sold
through such agency selected by the Commission only to bona fide
retailers who are Filipino citizens or entities wholly owned by
Filipino citizens who shall resell the same directly to consumers or
end-users.”
“(d) Cash payment. — The twenty million dollars cash payment
shall accrue to a Trust Fund to be used exclusively for the benefit and
rehabilitation of veterans of the Philippines in World War II, and their
widows and orphans, as Congress may from time to time provide: Provided,
That the procurement of consumers goods intended to generate the trust
fund for veterans, their orphans and widows, of World War II, shall be
undertaken by the Commission upon the recommendation of and in
consultation with the National Economic and Development Authority and
the same shall be disposed by the agency selected by the Commission
under paragraph (b) of this Section and the proceeds thereof shall be
deposited in accordance with the provisions of this Section. There shall
be advanced from the Special Economic Development Fund created in
Section three of this Act such amounts as may be needed to complete the
scheduled cash payments of four million United States dollars every year
for a period of five years in such a manner that the total cash
payments of twenty million United States dollars shall have been
collected at the end of five years.”

SEC. 3. Paragraphs (e) and (h) of Section 2 of the same Act
are hereby repealed and paragraphs (f) and (g) of the same Section are
hereby amended to read as paragraphs (e) and (f), respectively.

SEC. 4. Section 3 of the same Act is hereby amended to read
as follows:

“SEC. 3. Special Economic Development Fund. — The
proceeds from the sale of reparations goods and utilization of services,
together with interests earned, shall be constituted into a Special
Economic Development Fund out of which the National Assembly may
appropriate by special laws, from time to time, such amounts as may be
necessary to constitute a Special Trust Fund which shall be available to
the Development Bank of the Philippines and the Philippine National
Bank for loans for economic and industrial development projects as well
as for construction, reconstruction, repair and/or improvement of public
school buildings in amounts not exceeding eighty percent of the value
of the securities and payable within a period not exceeding twenty years
depending upon the kind of loan and with interest at a rate not
exceeding four percent per annum: Provided, That the
Development Bank of the Philippines and the Philippine National Bank
shall charge for their services only the actual cost thereof and shall
not make any profit therefrom: Provided, further, That fifty
percent of such Special Trust Fund shall be available for industrial
loans, thirty percent for agricultural loans (but not more than twenty
percent of such agricultural loans may be granted on any single
agricultural crop), and the remaining twenty percent which shall be
given top priority, for public building construction, reconstruction,
repair and/or improvement, as the National Assembly may provide from
time to time. The sum of twenty million pesos shall likewise be set
aside from the said Special Economic Development Fund to constitute a
revolving fund which shall be used exclusively to aid in the
establishment of rural banks, subject to the provisions of Republic Act
Numbered Seven Hundred Twenty, otherwise known as the ‘Rural Banks Act,’
as amended, and the further sum of fifty million pesos for the purchase
of landed estates as provided for in the Land Tenure Act and such other
landed estates as provided for by other special acts.”

SEC. 5. Paragraphs (a) and (a-1) of Section 6 of the same
Act are hereby amended to read as follows:

“(a) To prepare sufficiently in advance of need, on the basis of
the previously approved reparations program and approved applications
for reparations goods and services, a tentative schedule of goods and
services clearly indicating thereon the name of the applicant end-user
and the amount allocated for each project to be procured from Japan
every year which, when approved by the President of the Philippines upon
recommendation of the National Economic and Development Authority,
shall form the basis of consultation between the Philippine and Japanese
Governments towards the formulation of the schedule called for in
Article four of the Reparations Agreement. A copy each, duly certified
by the Commission, of the approved applications and studies of the
projects included in the tentative schedule shall be transmitted to the
Mission together with the tentative schedule. No additional project, and
no change involving any item or project in a tentative or agreed
schedule, whether by addition, substitution or deletion, whether in
kind, quantity, or value, whether partial or total, shall be submitted
to the Japanese Government until the same has been endorsed by the
National Economic and Development Authority and approved by the
President in accordance with the foregoing, except in cases where the
proposed change involves only the increase or decrease in the amount
allocated for a specific item or project listed in the tentative or
agreed schedule, and does not involve any addition of, or change in, any
other item or project as provided above, and the total of such increase
or decrease, whether effected at one time or several times, does not
exceed ten percent of the amount originally allocated for the
corresponding item or project in the tentative schedule. The agreed
schedule, and any addition, substitution or deletion hereinabove
referred to, as may thereafter be made in accordance with this Act and
agreed to by the Japanese Government, shall, after its conclusion with
the Japanese Government, be immediately published in full, indicating
clearly the name of the end-users concerned, for three consecutive times
every other day in two newspapers of general circulation, one in
Tagalog and one in English by the Commission in the Philippines, and
both in English by the Philippine Reparations Mission in Japan.

“(a-1) To issue procurement orders for the acquisition of
reparations goods and/or services on the basis of the agreed schedule.
The procurement order shall specify, among others, the following: (1)
the name of the applicant end-users; (2) the item in the agreed
schedule; (3) the name of the project; (4) the amount of the procurement
order; and (5) the date of issuance of the procurement order. The
amount of each procurement order shall be strictly in accordance with
the allocation for each project as agreed upon between the Philippine
and Japanese Governments. The procurement orders for all the projects
shall be issued only after the conclusion of the agreed schedule. No
procurement order for the acquisition of goods and/or services intended
for government agencies shall be issued by the Commission until after it
shall have duly ascertained and verified that the agencies concerned
have (1) the capacity and have duly provided for the payment of the 2%
service fee and all incidental charges in connection with the
procurement and delivery of the goods and/or services, and (2) the
technical capacity to take delivery and utilize efficiently the goods
applied for, and unless all the following conditions shall have been
previously complied with: (1) the government agency concerned must have
previously prepared and submitted to the satisfaction of the Commission a
financial, economic and technological study concerning the feasibility
of the project together with the complete plans and specifications
thereof; (2) the application must have been previously approved by
resolution of the Commission; (3) the project must be among those
specifically included in the reparations schedule agreed upon and
effective between the Philippine and Japanese Governments at the time of
the issuance of the procurement order; and (4) the agreed schedule
showing the names of the applicant end-users must have been published in
accordance with this Act. No procurement order for the acquisition of
reparations goods and/or services intended for private parties shall be
issued by the Commission until after it shall have duly ascertained and
verified that the applicant concerned (1) has enough financial resources
and capacity to pay, and (2) has the technical capacity to take
delivery and utilize efficiently the goods applied for, and unless all
the following conditions shall have been previously complied with: (1)
the private applicant end-user concerned must have previously prepared
and submitted to the satisfaction of the Commission a financial,
economic and technological study of the project together with the
complete plans and specifications thereof favorably endorsed as
prescribed in Section two of this Act, and a certification from the
Securities and Exchange Commission or the Bureau of Commerce, as the
case may be, attesting that the applicant end-user concerned is
qualified under this Act; (2) the application must have been previously
approved by resolution of the Commission; (3) the project concerned must
be among those specifically included in the reparations schedule agreed
upon and effective between the Philippine and Japanese Governments at
the time of issuance of the procurement order: Provided, That
no procurement order shall be issued until after the private applicant
end-user concerned shall have made a cash down payment for the project
applied for which shall be 10 percent of the value of the project
computed at the current rate of exchange of the peso to the U.S. dollar
prevailing at the time of payment; and (4) the agreed schedule showing
the names of the applicant end-users must have been published in
accordance with this Act. The private applicant shall be required to
submit proof to substantiate that both his financial resources and
capacity to pay are commensurate with the value of the goods and/or
services applied for, and that he has had experience or has contracted
an appropriate number of experts in the particular field. He shall also
be required to put up collaterals sufficient to cover the balance of the
cost of the goods and/or services: Provided, further, That in
the case of corporations, the principal officers thereof shall be
required to sign a guarantee contract whereby they shall be jointly and
severally liable with the corporation to answer for the obligation so
contracted. Notwithstanding the foregoing, no procurement order shall
take effect until after the lapse of one week after its final
publication indicating the name and address of the applicant end-user,
the name of the project subject of the procurement order, and the
specific item in the reparations schedule agreed upon and effective
between the Philippine and Japanese Governments at the time of issuance
of the procurement order, three successive times every other day in two
newspapers of general circulation, one in Tagalog and one in English, in
the Philippines, and both in English in Japan, by the Commission and
the Mission, respectively. As required herein, the Commission shall
publish each and every procurement order within one week after its
issuance and the Mission, within one week after receipt of the
procurement order. Any procurement order which does not wholly comply
with all of the above requirements shall ipso facto be considered null
and void, if such noncompliance has been through the fault or negligence
of the applicant end-user. After the procurement order for reparations
intended for a specific end-user has been properly issued in accordance
with the foregoing, such procurement order may not be revoked or
suspended except when the end-user in whose favor the procurement order
has been issued is adjudged, after due investigation wherein he has been
given the opportunity to be heard and represented by counsel, to, be
disqualified or found guilty of fraud in connection with his application
under this Act: Provided, That pending final decision, the
procurement of the goods, except actual delivery thereof to the end-user
concerned, shall not be suspended: Provided, however, That an
end-user who has been found disqualified by the Commission may appeal to
the President within thirty days from the receipt of the Commission’s
decision. The decision of the President which must be made not later
than thirty days after the submission of the appeal to him, shall be
final, and shall become effective upon receipt thereof by the end-user
concerned. In case the end-user fails to appeal, the decision of the
Commission shall become final immediately after the lapse of the period
for appeal. A party who has been adjudged disqualified shall forfeit the
down payment without prejudice to any action, criminal or otherwise,
which may be taken against him by the proper government agency. The
Commission is hereby required to render a decision on any complaint
submitted to it regarding the qualifications of an end-user within
ninety days from the date of the formal submission of such complaint in
writing.”

SEC. 6. Section 10 of the same Act is hereby amended to
read as follows:

“SEC. 10. Operating Funds. —The funds for the
approved budget of the Commission shall be provided for in the annual
General Appropriation Acts. All the warehousing charges, other charges,
and/or expenses paid and advanced by the Commission from the Special
Economic Development Fund (reparations proceeds) as authorized in the
General Appropriation Acts for reparations goods repossessed by it shall
be considered part of the operating expenditures of the Commission in
the particular fiscal years when they were paid as authorized. Likewise,
all service fees and incidental charges collected by the Commission
pursuant to this Act shall form part of its operating funds.”

SEC. 7. Section 12 of the same Act is hereby further amended
to read as follows:

“SEC. 12. Terms of Sale. — Capital goods and
complementary services intended for government projects, irrespective of
the classification of the project, shall be transferred to the agencies
concerned without cost: Provided, That said agencies shall pay
in cash a service fee of two (2%) per cent of the cost of the goods
and/or services, and all incidental charges incurred in connection with
the procurement and delivery of such goods and/or services, computed at
the current rate of exchange of the peso to the U.S. dollar prevailing
at the time of payment. The government agencies concerned shall enter in
their books pf accounts the peso F.O.B. value of the goods and/or
services received by them computed at the current rate of exchange of
the peso to the U.S. dollar prevailing at the time of delivery, as
follows:

“(1) National government offices, agencies, institutions
and/or instrumentalities depending solely on appropriations from the
National Assembly for their operating expenses shall enter the peso
F.O.B. value as additional appropriation for them.
“(2) National government offices, agencies, institutions and/or
instrumentalities with revolving funds provided by law shall enter the
peso F.O.B. value as additional appropriation fur said revolving fund.
“(3) National government offices, agencies, institutions and/or
instrumentalities with capital stock provided by law shall enter the
peso F.O.B. value as subscription of the Government to such capital
stock.
“(4) Government-owned or -controlled corporations shall enter the peso
F.O.B. value as subscription of the Government to their capital stock.
“(5) Provincial, city and municipal governments shall enter the peso
F.O.B. value as contribution of the National Government to their
operating expenses.

“The foregoing provisions shall also apply to all government
projects, irrespective of the classification of the projects, the
reparations goods and/or services of which have already been procured
and delivered to the government end-users concerned, and the contracts
for the transfer thereof shall be modified accordingly: Provided,
That whatever amount or amounts that may have already been paid by said
government end-users for service fee, incidental charges and/or the
peso F.O.B. value of the reparations goods and/or services, including
interest thereon, if any shall not be refunded.

“Capital goods and complementary services disposed of to private
parties as provided for in subsection (a) of Section two hereof shall
be sold on cash or credit basis under rules and regulations as may be
determined by the Commission, All private end-users shall pay the peso
F.O.B. value of reparations goods and/or services received by them plus a
service fee of 2 percent of the value of such goods and/or services,
and all incidental charges in connection with the procurement and
delivery thereof, all computed at the current rate of exchange of the
peso to the U.S. dollar prevailing at time of delivery under the terms
and conditions provided herein. Sales on credit basis shall be payable
on installments: Provided, That the deposit or down payment
required to be paid under subsection (a-1) of Section 6 hereof shall be
applied as first payment without interest on the F.O.B. value on the
date of delivery of the reparations goods and/or services: Provided,
further, That in case of capital goods for the utilization of
which an initial investment before operation of not more than twenty
percent of the cost of such goods is required, the first installment
with interest shall be paid on the third month after delivery of the
goods, and in the case of capital goods for the utilization of which an
initial investment before operation of more than twenty percent of the
cost of such goods is required, and also in the case of ocean-going
vessels, the first installment with interest shall be paid on the
twelfth month after delivery of the goods, extendible when deemed to be
justified by the Commission not exceeding one year. The balance, in both
cases, shall be paid in equal annual installments within a period to be
fixed by the Commission considering the life expectancy of the goods
but in no case exceeding ten years from the date the first installment
falls due, with interest at twelve percent (12%) per annum and an
additional interest of one and one-hall percent (1 1/2%) per month for
delinquency in the payment of installments: Provided, That in
the case of vessels, the procurement cost thereof shall be paid within
the period provided for in Republic Act Numbered Fourteen Hundred and
Seven, as amended. Goods other than capital goods procured as
reparations shall be sold for cash only at prevailing prices for similar
goods.

“In all transactions involving the transfer of capital goods and
services from reparations to the authorized private parties specified
in this Act, the sale shall be directly to end-users and not through
middlemen. The contract of sale and the corresponding schedule of
payment shall be executed upon delivery of the reparations goods and/or
services pertaining to each allocation in a particular agreed schedule
irrespective of whether or not the project has been given a complete
allocation, or needs an additional allocation for completion or
expansion, or has an additional allocation in the succeeding annual
reparations schedule or schedules. All reparations machinery and
equipment in the possession of private end-users, whether utilized or
not, shall be declared ‘Completely delivered’ unless within 30 days from
date of receipt of instructions to end-users, they shall file with the
Commission their respective written proofs justifying their alleged
claims.

“The contract of sale shall bear the conditions that no capital
goods thus acquired shall be resold, leased or in any manner disposed of
except to Filipino citizens or to entities wholly owned by Filipino
citizens who shall continue the utilization thereof in the projects for
which the goods were originally intended or in similar projects included
in the economic development program of a similar priority, subject,
however, to the further condition that groups, associations and
corporations which are recipients of such goods shall not permit any
subsequent change in ownership or control as shall at any time
thereafter change the control or ownership wholly held therein by
Filipino citizens. It shall further contain a provision that any
transfer of ownership, whether by virtue of a private contract or
through court proceedings, shall be to Filipino citizens who shall begin
utilizing them in such projects as the National Economic and
Development Authority shall determine within one year from notice of the
Authority’s decision.”

SEC. 8. To Section 12 of the same Act, there are hereby
added paragraphs (a-1) and (a-2) to read as follows:

“(a-1) The foregoing provisions of this Section, insofar as it
relates to the computation of the peso F.O.B. value of the reparations
goods and/or services, the execution of the sales contract and
corresponding schedule of payments, the time of application of the
deposit or down payment as first payment without interest and the due
date of the first installment with interest on the balance, and the
imposition of interest of 12 percent per annum on the balance and an
additional 1 1/2% per month for delinquency, shall also apply to all
projects of private end-users in the current 17th year reparations
schedule and to all other projects of private end-users where the
reparations goods and/or services have already been delivered but the
contracts and corresponding schedules of payment have not as yet been
executed at the time of the issuance of this Decree, in which case, said
private end-users shall, within a period of three months from issuance
of this Decree, execute the sales contracts and corresponding schedules
of payments, otherwise the sanction provided for under paragraph (a-2)
of this Section shall be taken against them.
“(a-2) All private end-users with pending accounts with the Commission
at the time of the issuance of this Decree shall be allowed to
restructure their accounts beyond the maximum allowable period of
amortization as provided for under this Act: Provided, That
said end-users shall first be required to pay 10 percent of the total
accrued accounts at the time of the issuance of this Decree:
Provided, further. That interest at the rate of 12 percent per
annum shall be imposed on the restructured yearly amortization with an
additional monthly interest of 11/2% percent for delinquency and said
end-users shall be required to put up additional collaterals sufficient
to cover the value of the restructured account, and in the case of
corporations, the principal officers thereof shall be required to sign
the Contract of restructuring jointly and severally with the
corporation: Provided, finally, That all delinquent private
end-users of reparations goods and/or services are hereby given a period
of three (3) months within which to restructure or update their
accounts with the Commission; otherwise, the latter, with the assistance
of the Armed Forces of the Philippines, shall extrajudicially repossess
said reparations goods and attach all other assets of said private
end-users and shall sell, transfer, or otherwise dispose of the same in a
manner as provided for herein, without prejudice to such civil and/or
criminal action that may be taken against them under this Act and/or
other existing laws. All reparations goods so repossessed and/or to be
repossessed shall be sold through public bidding, or through negotiation
if the public bidding will fail, either by lot or by piece, at such
price and under such terms and conditions as may be determined
reasonable by the Commission upon the recommendation of an appraisal
committee to be constituted by the Commission and in which at least one
(1) member each must come from the office of the Commission Auditor and
the National Economic and Development Authority: Provided, That
government instrumentalities will be given the first option to acquire
the reparations goods which they may need or can utilize, in which case
said reparations goods shall be transferred to them without cost and the
appraised value thereof as determined by the Commission shall be
entered in their books of accounts in accordance with this Section. All
expenses incurred in connection with the transfer of said goods shall be
borne by the government agencies concerned.

“The Commission is hereby authorized to pay out of the Special
Economic Development Fund such amount or amounts as may be necessary for
all the expenses and/or charges in connection with the repossession of
reparations goods and attachment of other assets of private end-users
and the sale thereof through public bidding or negotiations as
hereinabove provided.”

SEC. 9. All reference to the National Economic Council in
Republic Act Numbered 1789, as amended, shall be understood to mean the
National Economic and Development Authority.

SEC. 10. All provisions of Republic Act Numbered 1789,
as amended, the rules and regulations promulgated thereunder, and all
other laws, executive orders, or parts thereof, inconsistent with this
Decree are hereby repealed, modified and/or amended accordingly.

SEC. 11. This Decree shall take effect immediately.

Done in the City of Manila, this 9th day of November, in the
year of Our Lord, nineteen hundred and seventy-three.