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Excellency,

I have the honour to refer to
the recent discussions held between the representatives of the
Government of Japan and of the Government of the Republic of the
Philippines concerning Japanese economic cooperation to be extended with
a view to strengthening friendly and cooperative relations between the
two countries, and to propose on behalf of the Government of Japan the
following arrangements:

1. For the purpose of contributing to the
execution of the project for Malaria Control (hereinafter referred to
as “the Project”) by the Government of the Republic of the Philippines,
the Government of Japan will extend to the Government of the Republic of
the Philippines, in accordance with the relevant laws and regulations
of Japan, a grant up to Four Hundred Sixty Nine Million yen (Y
469,000,000) (hereinafter referred to as “the Grant”).

2. The
Grant will be made available during the period between the date of
coming into force of the present arrangements and March 31, 1999, unless
the period is extended by mutual agreement between the authorities
concerned of the two Governments.

3. (1) The Grant will be used
by the Government of the Republic of the Philippines properly and
exclusively for the purchase of the products of Japan or the Republic of
the Philippines and the services of Japanese or Philippine nationals
listed below: (The term “nationals” whenever used in the present
arrangements means Japanese physical persons or Japanese juridical
persons controlled by Japanese physical persons in the case of Japanese
nationals, and Philippine physical or juridical persons in the case of
Philippine nationals.)

(a) vehicles,
equipment, medicine, and insecticide necessary for the execution of the
Project and services necessary for the procurement thereof; and

(b)
Services necessary for the transportation of the products referred to
in (a) above to ports in the Republic of the Philippines, and those for
internal transportation therein.

(2)
Notwithstanding the provisions of sub-paragraph (1) above, when the two
Governments deem it necessary, the Grant may be used for the purchase of
the products of the kind mentioned in (a) of sub-paragraph (1) above,
which are products of countries other than Japan or the Republic of the
Philippines and the services of the kind mentioned in (a) and (b) of
sub-paragraph (1) above, which are services of nationals of countries
other than Japan or the Republic of the Philippines.

4.
The Government of the Republic of the Philippines or its designated
authority will enter into contracts in Japanese yen with Japanese
nationals for the purchase of the products and services referred to in
paragraph 3. Such contracts shall be verified by the Government of Japan
to be eligible for the Grant.

5. (1) The Government of Japan
will execute the Grant by making payments in Japanese yen to cover the
obligations incurred by the Government of the Republic of the
Philippines or its designated authority under the contracts verified in
accordance with the provisions of paragraph 4 (hereinafter referred to
as “the Verified Contracts”) to an account to be opened in the name of
the Government of the Republic of the Philippines in a bank of Japan
designated by the Government of the Republic of the Philippines or its
designated authority (hereinafter referred to as “the Bank”).

(2)
The payments referred to in sub-paragraph (1) above will be made when
payment requests are presented by the Bank to the Government of Japan
under an authorization to pay issued by the Government of the Republic
of the Philippines or its designated authority.

(3) The sole
purpose of the account referred to in sub-paragraph (1) above is to
receive the payments in Japanese yen by the Government of Japan and to
pay to the Japanese nationals who are parties to the Verified Contracts.
The procedural details concerning the credit to and debit from the
account will be agreed upon through consultation between the Bank and
the Government of the Republic of the Philippines or its designated
authority.

6. (1) The Government of the Republic of the Philippines will take necessary measures:

(a)
to ensure prompt unloading and customs clearance at ports of
disembarkation in the Republic of the Philippines and internal
transportation therein of the products purchased under the Grant;

(b)
to exempt Japanese nationals from customs duties, internal taxes and
other fiscal levies which may be imposed in the Republic of the
Philippines with respect to the supply of the products and services
under the Verified Contracts;

(c) to accord Japanese nationals
whose services may be required in connection with the supply of the
products and services under the Verified Contracts such facilities as
may be necessary for their entry into the Republic of the Philippines
and stay therein for the performance of their work;

(d) to ensure
that the products purchased under the Grant be maintained and used
properly and effectively for the execution of the Project; and

(e) to bear all the expenses, other than those covered by the Grant, necessary for the execution of the Project.

(2)
With regard to the shipping and marine insurance of the products
purchased under the Grant, the Government of the Republic of the
Philippines will refrain from imposing any restrictions that may hinder
fair and free competition among the shipping and marine insurance
companies.

(3) The products purchased under the Grant shall not be re-exported from the Republic of the Philippines.

7.
The two Governments will consult with each other in respect of any
matter that may arise from or in connection with the present
arrangements.

I have further the honour to propose that this Note
and Your Excellency’s Note in reply confirming on behalf of the
Government of the Republic of the Philippines the foregoing arrangements
shall be regarded as constituting an agreement between the two
Governments, which will enter into force on the date of Your
Excellency’s reply.

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

(Sgd.) HIROYUKI YUSHITA

Ambassador Extraordinary and Plenipotentiary
of Japan to the Republic of the Philippines

AGREED MINUTES ON PROCEDURAL DETAILS

With
reference to paragraph 3 of the Exchange of Notes between the
Government of Japan and the Government of the Republic of the
Philippines dated May 08, 1998, concerning Japanese economic cooperation
to be extended with a view to strengthening friendly and cooperative
relations between Japan and the Republic of the Philippines, the
representatives of the Government of Japan and of the Government of the
Republic of the Philippines wish to record the following procedural
details which have been agreed upon between the authorities concerned of
the two Governments:

1. The Government of Japan designates the
Japan International Cooperation Agency (JICA), an official agency
established by Japanese law for the purpose of implementing Japanese
economic cooperation, as an organ responsible for necessary works aiming
at expediting the proper execution of the Japanese grant aid.

2. The Government of the Republic of the Philippines will ensure the following:

(1)
Products and/or services mentioned in sub-paragraph (1) of paragraph 3
of the above-mentioned Exchange of Notes will be procured in accordance
with “Guidelines for Procurement under the Japanese Grant” of JICA,
which set forth, inter alia, the procedures of tendering to be followed
except where such procedures are inapplicable or inappropriate.

(2)
Tender documents prepared by the Government of the Republic of the
Philippines will be reviewed by JICA before tender advertising.

(3)
Detailed evaluation reports of tender prepared by the Government of the
Republic of the Philippines will be reviewed by JICA before the award
of the contract.

His Excellency 

DOMINGO L., SIAZON, JR.
Secretary of Foreign Affairs
Department of Foreign Affairs
Republic of the Philippines