Exchange of Notes concerning Yen Loans and Grant Aid to the Philippines
November 14, 2017
1. On November 13 (same day local time), Mr. Koji Haneda, Ambassador of Japan to the Republic of the Philippines, and H.E. Mr. Alan Peter S. Cayetano, Secretary of Foreign Affairs of the Republic of the Philippines, signed and exchanged notes concerning the provision of yen loans for the Metro Manila Subway Project (Phase 1) (I) and another project (total loan provision of up to 113.929 billion yen) and of grant aid for the Economic and Social Development Programme (grant amount of 2.5 billion yen) in the presence of Mr. Shinzo Abe, Prime Minister of Japan, and H.E. Mr. Rodrigo R Duterte, President of the Republic of the Philippines in Manila.
2. Overview of the projects
(1) Financing for building the first subway ever in the Philippines This project finances the Government of the Republic of the Philippines for building a subway line in Metro Manila. This project will contribute to relieving serious traffic congestion in Metro Manila by meeting growing transportation demand, as well as easing atmospheric pollution and climate change. The new subway is estimated to transport approximately 500,000 passengers per day in 2027 (two years after the completion of the project), and to reduce the time required for moving from Mindanao Avenue Station to FTI Station to 30 minutes by express train, where it currently takes approximately two hours by car. This project is thus expected to contribute to sustainable economic growth through the promotion of investment in the Philippines. (Yen loan “Metro Manila Subway Project (Phase 1) (I),” provision of loan of up to 104.53 billion yen)
(2) Financing for the bypass road construction project for Plaridel City in the northern part of Metro Manila This project finances the Government of the Republic of the Philippines for constructing a bypass road along the Philippine-Japan Friendship Highway, an important general arterial highway that directly connects Metro Manila with Central Luzon in the vicinity of the Plaridel City, a major urban area in the suburbs of northern Metro Manila. This project will contribute to relieving traffic congestion and improving transportation capacity and efficiency in the vicinity of Plaridel City by constructing the bypass road. It is expected that traffic capacity per day will double by 2023 (two years after the completion of the project) compared to its level at the commencement of the project in 2000. In addition, the congestion in which vehicles are moving forward at no faster than 20 km per hour will be eliminated. This project is expected to contribute to sustainable growth by promoting investment in the Philippines. (Yen loan “Arterial Road Bypass Project (Phase III),” provision of loan of up to 9.399 billion yen)
(3) Support for counter-terrorism in the vicinity of Mindanao Island and reconstruction support for Marawi City This project provides funds for the procurement of equipment and materials for counter-terrorism and reconstruction of Marawi City, which are manufactured in Japan. This project aims to enhance capacity in the counter-terrorism field and to promote the reconstruction of Marawi City and hence is expected to contribute to the economic and social development of the Philippines. (Grant aid “Economic and Social Development Programme,” grant amount of 2.5 billion yen)
3. Loan terms of the yen loan
(1) Target project: (1) in 2. above
(1) Rate of Interest: 0.1% per annum (0.01% per annum for consulting services)
(2) Repayment period: 28 years after the grace period of 12 years
(3) Procurement terms: Japan tied
(2) Target project: (2) in 2. above
(1) Rate of Interest: 1.5% per annum (0.01% per annum for consulting services)
(2) Repayment period: 20 years after the grace period of 10 years
(3) Procurement terms: General untied
These three projects are part of the financial support of one trillion yen over the next five years, including ODA and private-sector investment, announced by Prime Minister Abe at the Japan-Philippines Summit Meeting in January 2017.
[Reference] The Republic of the Philippines covers an area of approximately 300,000 square kilometers (roughly 80% the size of Japan). It has a population of approximately 100.98 million (Philippines national census, 2015) and a gross national income (GNI) per capita of 3,580 U.S. dollars (World Bank, 2016).