(Japanese Note)

　Kathmandu, July 14, 1995

　Dear Mr. Bhattarai,

　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 nine hundred million yen (900,000,000) (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, 1996, unless the period is extended by mutual agreement between the authorities concerned of the two Governments.

3.(1) 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 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 eligible source countries other than Japan.

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 the Bank and His Majesty's Government of Nepal or its designated authority.

6.(1) His Majesty's Government of Nepal will take necessary measures:

(a) to ensure prompt customs clearance and internal transportation in the Kingdom of Nepal 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 Kingdom of Nepal with respect to the supply of the products and services under the Verified Contracts;

(c) to ensure that the products purchased under the Grant will make effective contribution to the increase of food production and eventually to the stabilization and development of the Nepalese economy; and

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

(2) With regard to the shipping and marine insurance of products purchased under the Grant, His Majesty's Government of Nepal 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 Kingdom of Nepal.

7.(1) His Majesty's Government of Nepal will deposit in Nepalese currency at least an amount equivalent to two-thirds of the yen disbursement paid with respect to the purchase of the products referred to in (a) of sub-paragraph (1) of paragraph 3 in an account to be opened in its name in Nepal Rastra Bank. The deposit shall be made within the period of four years from the date of coming into force of the present arrangements, unless otherwise agreed between the authorities concerned of the two Governments.

(2) The currency thus deposited shall be utilized for the purposes of economic and social development, including agricultural, forestry and/or fisheries development, and the increase of food production in the Kingdom of Nepal.

(3) The authorities concerned of the two Governments will consult with each other about the utilization of the currency deposited.

8. Further procedural details for the implementation of the present arrangements will be agreed upon through consultation between the authorities concerned of the two Governments.

9. 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 Note in reply confirming on behalf of His Majesty's Government of Nepal the foregoing arrangements shall be regarded as constituting an agreement between the two Governments, which will enter into force on the date of this reply.

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

　(Signed) Mr. Shigenobu Yoshida
Ambassador Extraordinary and Plenipotentiary of Japan to the Kingdom of Nepal

　Ram Binod Bhattarai
Acting Secretary Ministry of Finance of the Kingdom of Nepal

(Nepalese Note)

　Kathmandu, July 14, 1995

　Excellency,

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

"(Japanese Note)"

　I have further the honour to confirm on behalf of His Majesty's Government of Nepal the foregoing arrangements and to agree that Your Excellency's Note and this Note shall be regarded as constituting an agreement between the two Governments, which will enter into force on the date of this reply.

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

　(Signed) Ram Binod Bhattarai
Acting Secretary Ministry of Finance of the Kingdom of Nepal

　His Excellency Mr. Shigenobu Yoshida
Ambassador Extraordinary and Plenipotentiary of Japan to the Kingdom of Nepal