(Japanese Note)

　Kathmandu, December 26, 1989

　Dear Dr. Shah,

　I have the honour to refer to the recent discussions held between the representatives of the Government of Japan and of His Majesty's Government of Nepal 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 increase of food production in the kingdom of Nepal, the Government of Japan will extend to His Majesty's Government of Nepal, in accordance with the relevant laws and regulations of Japan, a grant up to three hundred and fifty million yen (350,000,000) (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 December 25, 1990, unless the period is extended by mutual agreement between the authorities concerned of the two Governments.

3. The Grant will be used by His Majesty's Government of Nepal properly and exclusively for the purchase of the products of Japan and the services listed below:

(a) fertilizer; and

(b) services necessary for the transportation of the products referred to in (a) above to the Kingdom of Nepal and those for transportation therein.

4. His Majesty's Government of Nepal 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. (The term Japanese nationals whenever used in the present arrangements means Japanese physical persons or Japanese juridical persons controlled by Japanese physical persons.)

5.(1) The Government of Japan will execute the Grant by making payments in Japanese yen to cover the obligations incurred by His Majesty's Government of Nepal 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 His Majesty's Government of Nepal in an authorized foreign exchange bank of Japan designated by His Majesty's Government of Nepal 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 His Majesty's Government of Nepal 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