QuestionsQuestions (Republic Act No. 1789)
RA 1789 declares that the Government shall utilize all reparations payments procured from Japan in a manner that assures the maximum possible economic benefit to the Filipino people and distributes the benefits as equitably and widely as possible.
Approved government projects per year under the National Economic Rehabilitation and Development Program may apply through the concerned agency endorsed by the proper department head and by the National Economic Council. Filipino citizens and entities wholly owned by Filipino citizens may also apply, provided they will themselves utilize the goods/services as bona fide producers or manufacturers.
The Government shall not procure or utilize reparations goods for the purpose of entering into business in competition with private industries when such industries have shown capacity and readiness to serve the public fairly and adequately.
RA 1789 mandates top priority for electrification, firefighting equipment, telecommunications, railroad, base metal mining, steel and cement manufacturing, logging, and shipping.
Goods other than capital goods may be procured only if (1) they cannot be obtained from normal sources of imports, and (2) they are highly essential consumer goods and construction materials not classified as capital goods; the Commission must prepare a total value and detailed listing for approval by the President upon recommendation of the National Economic Council.
No goods or services may be procured if domestic supply is adequate. No goods may be procured except those that are brand new and of the latest model.
The $20 million cash payment accrues to a Trust Fund used exclusively for the benefit and rehabilitation of veterans of the Philippines in World War II and their widows and orphans, as Congress may from time to time provide.
Preference is generally given to private productive projects, but during the first year all reparations goods/services are earmarked exclusively for government projects. Thereafter, government projects are preferred only for electrification, firefighting equipment, telecommunications, railroad; or to foster private productive capacity; or needed for essential public services; or for productive projects private enterprise is not yet capable/desirous of developing but which are urgently necessary for overall national economic growth.
Not more than 60% of the total reparations to be paid by Japan during the 20-year period may be allocated to the private sector. If the private sector does not or cannot make full use of its allocation, the unused portion is made available to the government.
Where goods are procurable under the Agreement in sufficient quantities, no dollar allocation shall be made, and no bond, debenture, or bond issues shall be floated to import those goods for use in government projects.
Proceeds from the sale of reparations goods or utilization of services (excluding the $20 million trust fund portion) plus interests are constituted into a Special Economic Development Fund. Congress may appropriate amounts from it to constitute a Special Trust Fund available to the Rehabilitation Finance Corporation and the Philippine National Bank for specified loans (industrial/agricultural and public school building construction/repair/improvement), under specified maturity and interest limits.
Loans may be payable within a period not exceeding 20 years depending on the kind of loan, with interest at a rate not exceeding 4% per annum. The Rehabilitation Finance Corporation and the Philippine National Bank must charge only actual service costs and shall not earn profit.
The Reparations Commission administers acquisition, utilization, and distribution of reparations goods/services and prepares/approves a five-year reparations program for presidential approval. The Mission in Japan is the sole and exclusive agent in Japan for implementing the Agreement, acting as the procurement branch under the Commission’s direct supervision and control.
The Commission prepares yearly tentative schedules for consultation, verifies/alter/approves proposed contracts and bids between the Mission and Japanese firms before bids are accepted or contracts concluded, and provides for care/custody/protection/delivery to end-users. It also accepts goods/services/cash, deposits moneys due with the Central Bank, and may hear and decide controversies regarding its rules and regulations.
Japanese technicians may be procured only to the extent needed for installation of capital goods and initial operation, and in specialized fields. They must be utilized within one month after arrival. Entry is not allowed if any qualified and equally competent Filipino citizen is available for the work. Entry is subject to immigration laws.
As a general rule, reparations goods are procured on an FOB basis from a Japanese port. The Mission may procure on C&F Philippine port or CIF Philippine port basis if circumstances warrant, with freight quoted separately. Insurance must be obtained from domestic insurance companies qualified for that purpose without dollar remittance; if unavailable, foreign insurers may be used if they have reinsurance with domestic qualified insurers with Filipino ownership participation requirements.
Capital goods for non-revenue producing government projects are transferred without cost; for revenue-producing government projects at cost. For private parties, sales may be cash or credit, and capital goods must be sold directly to end-users and not through middlemen. The goods cannot be resold, leased, or otherwise disposed of within five years from acquisition, except for dispositions to Filipino citizens/entities wholly owned by Filipino citizens for continuing utilization in original or similar priority projects, subject to Commission approval.
Failure to utilize capital goods acquired for the intended purpose within 24 months after complete physical delivery, or failure to continue utilization without reasonable cause while serviceable, results in a fine of 5% of the value of the goods for every year of default (or fraction). Additionally, the goods and payments already made are subject to confiscation and forfeiture.
They are prohibited from being financially/interested directly or indirectly in any business/transaction relating to reparations goods/services, and also prohibited from being involved in loans under the exchange of notes. Relatives within the third degree of consanguinity/affinity are similarly prohibited. RA 1789 also prohibits charging or demanding any fee/charge/commission for obtaining reparations unless authorized by the Act, with specified penalties.