RP to once again receive Japanese grants
By Felipe F. Salvosa II Sub-Editor
(Business World – August 1, 2007)

THE PHILIPPINES AND JAPAN have set aside a dispute over tax refunds owed by the former to Japanese contractors, with Tokyo yesterday formally resuming grants to Manila in a bilateral meeting at the sidelines of an ASEAN gathering in Manila.

Japan also revealed its intention to release $160 million in soft loans for two infrastructure projects under its 27th yen loan package to the Philippines and expressed optimism that a free-trade deal between the two countries would be approved by the Philippine Senate.

An exchange of notes between Japanese Foreign Minister Taro Aso and Philippine Foreign Affairs Secretary Alberto G. Romulo sealed Y1.4 billion (P55 million) for two grant-aid projects: a flood forecasting and warning system for the Pampanga and Agno river basins to be handled by the weather bureau and communications equipment for the Philippine Coast Guard.

The flood warning project worth, worth P312 million, will improve a radio network to prevent disasters. P244 million has been earmarked to put up 11 satellite communications systems linking the coast guard headquarters in Manila to its field offices. Radio systems will be installed in Manila, Cebu and Zamboanga.

Japan stopped grant-aids in 2004 because of delays in refunding P1 billion in value-added taxes (VAT) advanced by contractors in Japanese funded projects.

Foreign Affairs department spokesman Claro S. Cristobal noted that grants wouldn’t have resumed without the VAT issue being settled.

Mitsui Sakaba, Japanese foreign ministry spokesman, said Tokyo expressed intent yesterday to loan $60 million dollar for disaster emergency restoration in Mt. Pinatubo and $100 million for farm irrigation and marketing support, which means the 27th loan package is about to start.

The new package of concessional, 30 year loans had been held up because of problems in implementing remaining projects in the 26th package- the Agno river irrigation and improvements in the Pasig-Marikina river channel.

Japan is the Philippines’ top donor having released a total of Y2 trillion in official development assistance. The Philippines is the fourth biggest recipient of Japanese economic assistance after Indonesia, China and India.

Mr. Sakaba also told reporters that Tokyo expects the Philippine Senate to approve the Japan-Philippines Economic Partnership Agreement (JPEPA) which has been ratified by the Japanese Diet.

Asked what kind of assurances the Philippines gave to Japan, Mr. Cristobal admitted will still have to work for the Senate approval. Some lawmakers have vowed to scrutinize the treaty which has been criticized for removing tariffs on hazardous waste.

The Executive will not implement the deal on its own by using powers to modify tariffs, Mr. Cristobal said.

President Gloria Macapagal-Arroyo has said she wanted to have the prerogative of issuing executive orders to slash tariffs for Japan, while still committed to work for the JPEPA’s Senate approval for “as long as it takes”.

Mr. Cristobal said the JPEPA needs to come into force so that Japan is also bound to implement the treaty. “We’re not going to do it unilaterally,” he said.