AN ACT PRESCRIBING THE NATIONAL POLICY IN THE PROCUREMENT AND UTILIZATION OF REPARATIONS AND DEVELOPMENT LOANS FROM JAPAN

Case Overview and Summary

Summary of Republic Act No. 1789

National Policy on Procurement and Utilization of Reparations and Development Loans from Japan

- Policy: Utilize reparations payments from Japan to maximize economic benefit for Filipinos in an equitable and widespread manner. (Section 1)

- Implementation:
    • Capital goods and services from reparations shall be made available to approved government projects and Filipino citizens/entities for production or manufacturing purposes, prioritizing electrification, firefighting equipment, telecommunications, railroad, base metal mining, steel and cement manufacturing, logging and shipping. (Section 2a)
    • Non-capital goods from reparations shall be limited to goods not obtainable from normal imports and essential consumer goods/construction materials, to be sold to Filipino retailers for resale to consumers/end-users. (Section 2b)
    • No goods/services shall be procured if domestic supply is adequate. Only brand new and latest model goods shall be procured. (Section 2c)
    • $20 million cash payment shall be used for the benefit and rehabilitation of World War II veterans, widows and orphans. (Section 2d)
    • Preference shall be given to private productive projects, with government projects prioritized only for essential services or projects private sector cannot undertake. (Section 2e)
    • Proceeds from sale of reparations goods/services shall be placed in a Special Economic Development Fund. (Section 2f)

- Special Economic Development Fund:
    • Shall be used for loans for economic/industrial development projects, public school building construction/repair, and establishment of rural banks. (Section 3)
    • 50% for industrial loans, 30% for agricultural loans (max 20% for a single crop), 20% for public school buildings. (Section 3)
    • ₱20 million for rural bank establishment, ₱50 million for purchase of landed estates. (Section 3)

- Procurement of Services:
    • Limited to Japanese technicians needed for installation/operation of capital goods and specialized fields in industry/agriculture. (Section 4)
    • Technicians must be utilized within 1 month of arrival and shall not be allowed if qualified Filipinos are available. (Section 4)
    • Entry of technicians subject to immigration laws. (Section 4)

- Implementing Machinery:
    • Reparations Commission created to implement the policy, headed by a Chairman and two members appointed by the President. (Section 5a)
    • Mission in Japan created as the sole agent for procurement, headed by a Chief of Mission and senior officials appointed by the President. (Section 5b)
    • Commission and Mission officials/employees shall be properly bonded and file asset/liability schedules. (Section 5d)
    • Officials shall not have financial interests in reparations goods/services/loans. (Section 5f)

- Powers and Duties of the Commission and Mission: (Sections 6 and 7)
    • Prepare reparations program, procurement conditions, rules and regulations.
    • Verify and approve contracts and bids.
    • Accept goods, services and cash payments.
    • Collect payments and deposit proceeds.
    • Publish lists of disposed goods/services.
    • Decide controversies regarding rules and regulations.
    • Negotiate and conclude annual schedules with Japan.
    • Conclude contracts with Japanese entities for procurement.
    • Supervise selection, inspection and shipment of goods.
    • Conduct public bidding or direct procurement.
    • Fix details of cash payment and enter into payment agreements.
    • Negotiate for survey and salvage of sunken vessels.

- Technical Personnel: Commission and Mission shall have competent technical staff. (Section 8)

- Annual Budget: Commission shall prepare and submit annual budget and plantilla. (Section 9)

- Operating Funds: 2% service fee on transactions, except for government end-users. Initial ₱1,000,000 advance from Central Bank. (Section 10)

- Procurement Terms:
    • Generally on f.o.b. Japanese port basis, but may be c.&f. or c.i.f. Philippine port. (Section 11)
    • Insurance from domestic companies or foreign companies with domestic reinsurance agreement. (Section 11)
    • Inspection and testing by designated Philippine agencies. (Section 11)
    • Preference for Philippine registry carriers. (Section 11)

- Sale Terms:
    • Non-revenue government projects: no cost. Revenue projects: at cost. (Section 12)
    • Private parties: cash or credit basis, with installments over 10 years at max 3% interest. (Section 12)
    • Non-capital goods: cash only at prevailing market prices. (Section 12)
    • Direct sale to end-users, no resale within 5 years except to Filipino citizens/entities. (Section 12)

- Contract Award: Based on Japanese export prices, world market prices, delivery dates, spare parts availability. (Section 13)

- Tax Exemption: Government: all duties/fees/taxes. Private parties: customs duties, consular fees, special import tax. (Section 14)

- Relation to Foreign Exchange Budget: Reparations part of foreign exchange resources. Deficiency may lead to reduced allocation for Japanese imports. (Section 15)

- Japanese Foreign Exchange Banks: Mission shall designate official depositories in Japan. (Section 16)

- End-Use Checks: Commission shall conduct field examinations and submit annual reports. (Section 17)

- Economic Development Loans:
    • No loans for capital goods procurable through reparations. (Section 18)
    • Commission shall determine investment fields and publish conditions for loan facilitation. (Section 18)
    • Priority for private financial institutions/industries liquidated by Japanese occupation. (Section 18)

- Violations and Penalties: (Section 19)
    • Failure to utilize capital goods: 5% fine per year, confiscation.
    • Failure to utilize technician services: ₱5,000-₱10,000 fine, deportation.
    • Divulging trade secrets: dismissal, subject to aggrieved party's action.
    • Exacting fees: ₱10,000-₱30,000 fine, 5-15 years imprisonment.
    • Government officials intervening in transactions: penalties in subsection (c).
    • Other violations: ₱4,000-₱8,000 fine, 4-8 years imprisonment, dismissal.
    • Disqualification from applying/utilizing reparations/loans.

- Anti-Dummy: 5-15 years imprisonment, fine of at least value of privilege/goods enjoyed, extended to Commonwealth Act No. 108 and related laws. (Section 20)

- Effective Date: Upon approval. (Section 21)