Joint Circular No. 02/2003/TTLT-BKH-BTC guides the preparation of financial plans for programs and projects using Official Development Assistance (ODA) funds.

I. GENERAL PROVISIONS

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The preparation of financial plans for ODA programs and projects must ensure:

- Compliance with current Vietnamese laws and commitments between the Vietnamese Government and foreign donors in implementing ODA programs and projects.

- Efficient mobilization and allocation of ODA funds and counterpart funds, avoiding waste, and being consistent with the actual progress and capacity to implement ODA programs and projects.

3. Content of the financial plan for ODA programs and projects:

It includes the ODA capital plan (debt financing, non-reimbursable aid, categorized by donor country or organization); domestic capital (central government budget, local government budget, domestic credit, own capital of the project sponsor, contributions from project beneficiaries, and other sources of capital as prescribed by Vietnamese law).

4. Methods for preparing financial plans for ODA programs and projects:

4.1. In line with the domestic financial mechanism, ODA programs and projects are divided into the following types:

- ODA programs and projects funded directly from the State Budget.

- ODA programs and projects rescheduled by the State.

- ODA programs and projects partially funded from the State Budget and partially rescheduled by the State.

4.2. The preparation of financial plans for all or part of ODA programs and projects funded directly from the State Budget shall be carried out in the following forms:

a) Projects involving construction investment expenditures must prepare financial plans according to the construction investment capital.

b) Projects involving administrative and public service expenditures must prepare financial plans according to the administrative and public service capital, specifically according to each expenditure category.

c) For ODA programs and projects that include both construction investment and administrative and public service components (hereinafter referred to as mixed projects), the preparation and implementation of financial plans shall follow the principle that construction investment components shall be planned, managed, and settled according to construction investment projects, while administrative and public service components shall be planned, managed, and settled according to administrative and public service projects.

In special cases where one component of a mixed project is very small and the project sponsor or managing agency requests a unified financial plan according to either construction investment or administrative and public service projects, the Ministry of Planning and Investment will take the lead in coordinating with the Ministry of Finance to examine and decide.

4.3. In the decision to invest in ODA programs and projects, it must clearly specify whether the ODA program or project falls under construction investment, administrative and public service expenditures, or mixed projects as stipulated in Section 4.2 above.

5. Counterpart Funds:

Counterpart funds are allocated according to the provisions set forth in Clause 12, Article 5 of the Management and Use Regulations for Official Development Assistance issued together with Decree No. 17/2001/NĐ-CP dated May 4, 2001 of the Government. Specifically, as follows:

5.1. All ODA programs and projects requiring annual counterpart funds must prepare a counterpart fund plan. Managing agencies are responsible for compiling requirements and preparing plans for counterpart funds for ODA programs and projects they directly manage.

5.2. Counterpart funds do not apply to ODA programs and projects where international agreements do not specifically require Vietnam to contribute, including contributions in cash, in kind, or through other responsibilities.

5.3. For ODA programs and projects that are partially funded by state budget loans or partially funded and partially loaned, the project sponsor must arrange all counterpart funds themselves and provide full explanations during the project planning and approval process regarding their ability to secure counterpart funds.

For such projects, sponsors are prioritized to borrow counterpart funds from state credit sources and have the responsibility to repay the borrowed funds (principal and interest) according to the credit agreement.

5.4. For ODA programs and projects fully funded by the state budget, counterpart funds are guaranteed by the state budget and allocated in the state budget estimate annually according to construction investment or administrative and public service capital, and specifically allocated as follows:

- The central government budget guarantees counterpart funds for ODA programs and projects managed and implemented directly by central ministries and agencies.

- Local government budgets guarantee counterpart funds for projects managed and implemented directly by localities (including component or sub-projects within ODA programs and projects managed by central ministries and agencies).

5.5. Counterpart funds are allocated in the annual plan for projects meeting the following conditions:

- The international agreement on the project has taken effect.

- Domestic investment procedures have been completed.

- The international treaty on the project is in effect.

- Domestic investment procedures have been completed.

5.6. For ODA programs and projects where international agreements on the projects have been signed but are not yet effective, or are already effective but have not completed domestic investment procedures, the project management agencies shall report to the Ministry of Planning and Investment and the Ministry of Finance (during the budget preparation period) to allocate within the contingency reserve for construction investment or specific areas of administrative and public service expenses (according to the nature of counterpart funds), and submit to the competent authority for decision-making (if the central government budget is responsible for allocating counterpart funds). If the local government budget is responsible for allocating counterpart funds, the project managers shall report to the project management agencies (during the budget preparation period) to allocate within the local government budget contingency reserve and submit to the competent authority for decision-making.

5.7. Management agencies must prioritize the allocation of sufficient counterpart funds in the annual budget to fulfill commitments under signed international agreements on ODA and be consistent with the actual disbursement capacity of ODA programs and projects annually.

Project managers are responsible for using counterpart funds for their intended purposes and effectively.

II. SPECIFIC PROVISIONS

1. Forecasting sources of funding and financial mechanisms for programs and projects during the ODA mobilization phase:

1.1. When drafting the program and project framework for ODA, management agencies must clearly propose financial recommendations including anticipated levels of ODA funding (debt financing and non-refundable aid), counterpart funds, and proposed domestic financial mechanisms (details of the program and project framework template are provided in Appendix 3 of Circular No. 06/2001/TT-BKH dated September 20, 2001 issued by the Ministry of Planning and Investment guiding the implementation of the regulations on the management and use of official development assistance).

1.2. The list of ODA programs and projects approved by the Prime Minister and the consent of foreign donors serves as the basis for preparing feasibility studies for ODA programs and projects and domestic financial mechanisms.

1.3. Funding for program and project preparation:

Based on the list of ODA programs and projects announced by the Ministry of Planning and Investment, the management agency shall develop a plan for preparatory funding for ODA programs and projects according to the same process for establishing and approving financial plans as stipulated in Sections 3 and 4 below, specifying the portion of funding provided by donors, self-arranged funding, and requested budget support, and send it to the Ministry of Planning and Investment and the Ministry of Finance.

For ODA programs and projects provided individually by donors outside the plan (or priority mobilization list for ODA) and without signing a framework international agreement on ODA, after being approved by the Prime Minister for acceptance, the management agency shall develop a plan for preparatory funding for the programs and projects and send it to the Ministry of Planning and Investment and the Ministry of Finance.

2. Forecasting investment funding and financial mechanisms for programs and projects during the construction, review, and approval phases of project documents:

Based on the written notification from the Ministry of Planning and Investment regarding ODA programs and projects that have been agreed by donors to consider funding in each period, management agencies shall direct project managers to prepare preliminary feasibility reports and feasibility reports or project documents for submission to the competent authority for approval.

2.1. Contents of the Preliminary Feasibility Report for ODA Programs and Projects:

In the preliminary feasibility report for ODA programs and projects prepared in accordance with Decree No. 52/1999/NĐ-CP dated July 8, 1999 of the Government on Investment Management and Construction and Decree No. 17/2001/NĐ-CP dated May 4, 2001 of the Government on the Regulations on the Management and Use of ODA, the following contents must be clearly reflected:

- Anticipated structure and form of financing or co-financing by specific donors for components of the ODA program and project.

- Ability to ensure counterpart funds from sources such as the project manager's own balance, credit funds, contributions from beneficiaries, and other sources.

In cases where the loan repayment mechanism is applied, project managers must base on the conditions for loan repayment frameworks stipulated in the Government's Regulation on Loan Repayment of Foreign Loans issued pursuant to Decision No. 02/2000/QĐ-BTC dated January 6, 2000 of the Minister of Finance to prepare a preliminary project repayment plan.

2.2. Feasibility Study Report for ODA Programs and Projects:

In the feasibility study report for ODA programs and projects prepared in accordance with Decree No. 52/1999/NĐ-CP dated July 8, 1999 of the Government on Investment Management and Construction and Decree No. 17/2001/NĐ-CP dated May 4, 2001 of the Government on the Regulations on the Management and Use of ODA, the following contents must be clearly reflected:

- Specific conditions for domestic and foreign funding sources for the program and project (such as loan terms, grace periods, interest rates, loan fees, and other conditions...).

- Domestic financial mechanisms applicable to the program and project (grant or loan repayment).

In cases where the loan repayment mechanism is applied, the project manager must have a detailed repayment plan (by debt repayment period, revenue sources...) based on the conditions for loan repayment frameworks stipulated in the Government's Regulation on Loan Repayment of Foreign Loans issued pursuant to Decision No. 02/2000/QĐ-BTC dated January 6, 2000 of the Minister of Finance. If the project cannot be implemented according to these framework conditions, specific reasons must be explained, and appropriate loan repayment conditions suitable for each type of project and source of funding must be proposed for consideration by the Ministry of Finance together with relevant agencies and submitted to the Prime Minister for decision.

2.3. In the decision approving the feasibility report, all specific contents mentioned above in Section 2.2 must be clearly recorded, specifying the domestic financial mechanism for the program and project, including the form and method of capital transfer between related parties for the program and project; detailing each component of construction investment, administrative and public service expenses, and clearly defining the responsibilities for arranging counterpart funds among different levels of the budget.

2.4. Based on the feasibility study report and project documents that have been approved by the competent authority, the project owner shall prepare and submit to the supervising agency, the Ministry of Planning and Investment, and the Ministry of Finance a capital utilization plan according to the project implementation schedule, detailing from the first year to the final year of the project's completion and put into operation, specifying ODA funds (by each donor), counterpart funds; state budget disbursements (construction investment, administrative and public services), loan refinancing, and other forms (in accordance with the form attached as Appendix No. 1 of this Circular).

3. The process of establishing, approving, and allocating annual financial plans for programs and projects using ODA funds:

3.1. The process of establishing, approving, and allocating capital for preparing programs and projects, implementing programs and projects, and ODA funds shall be carried out strictly in accordance with the procedures for establishing and approving the State Budget as stipulated in the Law on State Budget and other legal documents governing investment management and construction.

3.2. Basis for establishing financial plans for ODA programs and projects:

- International agreements signed with foreign sponsors;

- Regulations on budget planning and estimates, current financial expenditure systems and standards;

- Project implementation progress and actual capacity;

Annually, in line with the time for preparing the State Budget estimate, based on the above regulations and circumstances, the project owner shall establish the financial plan for ODA programs and projects and submit it to the higher supervising agency for consolidation. If the project uses loan refinancing funds, these plans must also be submitted to the refinancing agency.

Financial plans must be established in accordance with the prescribed forms in Appendix No. 2 of this Circular, accompanied by detailed explanatory reports clearly stating the basis, calculation methods, analysis, assessment of implementation status, specific issues and difficulties encountered, and recommendations for solutions; and they must be submitted within the time frame specified by the supervising agency to ensure the timely consolidation of the annual State Budget estimate.

3.3. Supervising agencies shall consolidate the implementation status throughout the year and forecast the next year's financial plan for ODA and counterpart funds for ODA programs and projects under their jurisdiction and submit them to the Ministry of Planning and Investment and the Ministry of Finance (in accordance with the form attached as Appendix No. 3 of this Circular).

3.4. Based on the financial plans for ODA programs and projects submitted by supervising agencies, the Ministry of Planning and Investment and the Ministry of Finance shall take the lead in reviewing and consolidating the annual financial plans for ODA programs and projects, incorporating them into the annual State Budget estimate according to the following division of responsibilities:

- The Ministry of Planning and Investment shall take the lead for construction investment projects or construction investment components in mixed projects.

- The Ministry of Finance shall take the lead for administrative and public service projects or administrative and public service components in mixed projects.

After the State Budget estimate has been decided by the competent authority, the Ministry of Planning and Investment and the Ministry of Finance shall allocate the State Budget estimate to supervising agencies in accordance with current regulations, clearly indicating the external funds of ODA programs and projects.

Based on the State Budget estimate assigned or decided by the competent authority, supervising agencies shall allocate detailed funding plans (including both ODA and counterpart funds) to ODA programs and projects, while simultaneously notifying the financial agency and the treasury at the same level.

3.5. Based on the notification of funds from the competent authority, the State Treasury shall control and settle counterpart funds according to the current state budget disbursement system (investment construction funds controlled and settled according to the investment construction system, administrative and public service funds controlled and settled according to the administrative and public service expenditure system).

4. Adjusting financial plans, reallocating counterpart funds, and handling unexpected cases outside the plan:

4.1. Supervising agencies shall adjust or request the competent authority to adjust the annual financial plans for ODA programs and projects based on their implementation status, in accordance with current regulations. On this basis, they shall reallocate the counterpart funds allocated from the state budget from programs and projects that cannot fully implement to other ODA programs and projects that have complete procedures and can exceed the plan in the year, and notify the financial agency and the treasury at the same level. Based on the notification of adjusted funds from the competent authority, the State Treasury shall handle the settlement procedures. In case of sudden difficulties with counterpart funds, the project owner must report to the supervising agency to find solutions.

The reallocation of counterpart funds from surplus projects to deficit projects can only be done within the same spending category. Counterpart funds from projects in the construction investment category cannot be reallocated to projects in the recurrent expenditure category and vice versa; funds from the health sector cannot be reallocated to the education-training sector and vice versa...

4.2. For ODA programs and projects that cannot allocate counterpart funds in the annual budget plan or have urgent needs for counterpart funds (projects guaranteed by the State Budget), supervising agencies must arrange within the allocated budget. If they cannot arrange themselves, they may use the reserve fund mentioned in Point 5.6, Part I of this Circular.

5. Using and repaying advance funds (as provided for in Article 27 of Decree No. 17/2001/NĐ-CP dated May 4, 2001 of the Government):

5.1. Advance funds are state budget funds advanced annually according to the plan for ODA programs and projects eligible for state budget disbursement to implement certain components of the program and project that have been committed to be funded from ODA sources but have not yet withdrawn ODA funds, so the project owner does not have the necessary funds to proceed with the work. The budget level responsible for arranging counterpart funds (mentioned in Point 5.4, Part I) shall also be responsible for arranging this advance fund.

5.2. Advance capital shall only be applied to projects or project components that adopt the "reimbursement" disbursement method as specifically provided for in international agreements on Official Development Assistance (ODA).

Starting from the planning year when this disbursement method is implemented, based on the level of expenditure and the time required to withdraw funds from the sponsor, the project must determine and record advance capital in the corresponding financial plan of that year to be allocated a portion of advance capital from the State Budget.

5.3. Financial agencies at all levels shall coordinate with planning and investment agencies at the same level to examine and decide on allocating capital for programs and projects requiring advance capital.

Annual settlement of advance capital repayment must be conducted, and Treasury agencies at all levels shall be responsible for recovering it for the State Budget (depending on which level of the State Budget has allocated corresponding capital for the project) at the end of the planning year. Financial agencies at all levels shall be responsible for arranging subsequent advance capital according to the next year's plan (if necessary) to ensure the continuity of project implementation.

6. Reporting on the Implementation of Financial Plans:

The project owner and the managing agency are responsible for periodically reporting on the implementation of financial plans in accordance with Circular No. 06/2001/TT-BKH dated September 30, 2001, issued by the Ministry of Planning and Investment guiding the Implementation Regulation on the Management and Use of Official Development Assistance (ODA) accompanying Decree No. 17/2001/NĐ-CP dated May 4, 2001, of the Government. Periodic reports on the implementation of financial plans for ODA programs and projects serve as the basis for mobilizing ODA funds and preparing financial plans for these programs and projects.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect fifteen days from its date of issuance and replaces Joint Circular No. 6/1998/TTLT-BKH-BTC dated August 14, 1998, of the Ministry of Planning and Investment and the Ministry of Finance on Guidelines for the Management Mechanism of Corresponding Capital for ODA Programs and Projects. Previous provisions contrary to this Circular are no longer in effect. In the course of implementation, any issues arising should be reported to the Ministry of Planning and Investment and the Ministry of Finance for study and amendment.