(Japanese Note)

　Phnom Penh, December 24, 1998

　Excellency,I have the honour to refer to the recent discussions held between the representatives of the Government of Japan and of the Royal Government of Cambodia 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 Rehabilitation and Upgrading of Electricity Supply Facilities in Phnom Penh (Phase II) (hereinafter referred to as "the Project") by the Royal Government of Cambodia, the Government of Japan will extend to the Royal Government of Cambodia, in accordance with the relevant laws and regulations of Japan, a grant up to eighty-four million yen (84,000,000) (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 23, 1999, unless the period is extended by mutual agreement between the authorities concerned of the two Governments.

3. The Grant will be used by the Royal Government of Cambodia properly and exclusively for the purchase of the services of Japanese nationals listed below (The term "Japanese nationals" whenever used in the present arrangements means Japanese physical persons or Japanese juridical persons controlled by Japanese physical persons.):

　services necessary for the detailed design for the execution of the Project.

4. The Royal Government of Cambodia or its designated authority will enter into contracts in Japanese yen with Japanese nationals for the purchase of the 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 Royal Government of Cambodia 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 Royal Government of Cambodia in a bank of Japan designated by the Royal Government of Cambodia 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 Royal Government of Cambodia 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 Royal Government of Cambodia or its designated authority.

6. The Royal Government of Cambodia will take necessary measures:

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

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

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

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.