Circular No. 02-TC/TCÐN guiding the management and use of capital from French government aid in 1995

CIRCULAR

OF THE MINISTRY OF FINANCE NO. 02 TC/TCĐN ON JANUARY 14, 1997 GUIDING THE MANAGEMENT AND USE OF LOANS FROM THE GOVERNMENT OF FRANCE IN 1995
OF THE GOVERNMENT OF FRANCE IN 1995

Pursuant to Decree No. 58/CP dated August 30, 1993 of the Government promulgating the Regulation on management of foreign borrowing and repayment;

Pursuant to Circular No. 18-TC/TCĐN dated March 5, 1994 of the Ministry of Finance guiding the management and use of foreign loans from the Government;

Pursuant to Decree No. 42/CP dated July 16, 1996 of the Government promulgating the Charter for Management of Investment and Construction;

Pursuant to Circular No. 1513/QHQT dated April 4, 1996 of the Government regarding financial regulations for projects using funds from the French Government in 1995;

The Ministry of Finance guides the mechanism for managing and using the financial support according to the Financial Protocol in 1995 signed on November 30, 1995 between the Government of the French Republic and the Government of the Socialist Republic of Vietnam as follows:

I. GENERAL PROVISIONS

1. The financial support from the French Government to the Vietnamese Government under the 1995 Protocol (including a non-repayable grant, a loan from the French Treasury, and a mixed credit loan) is a source of revenue for the state budget, which must be reflected in the state budget and managed according to the current financial management system of the State. The Ministry of Finance is responsible for balancing it into the state budget and repaying France when due (including both principal and interest) for the loans.

2. Based on the objectives, nature of capital usage, and repayment capacity of each project, in accordance with the binding conditions of the French side and the annual approval of the Vietnamese Government, projects utilizing the financial support under the 1995 Protocol are classified as follows:

- Projects funded directly from the state budget include those listed in Appendix I attached hereto.

- Projects that must be refinanced from the French Treasury loan and mixed credit sources according to the refinancing conditions stipulated by the Vietnamese Government as detailed in Appendices II and III attached hereto.

3. The Ministry of Finance directly manages the allocation and relending for projects within the specified categories through the General Department of Investment Development.

4. Project sponsors who use the financial support (both grants and loans) are responsible for preparing annual plans for withdrawing funds and domestic counterpart funds for each project and submitting them to the Ministry of Finance (Department of Foreign Finance and General Department of Investment Development) and the Ministry of Planning and Investment for coordination, guidance, and monitoring of implementation.

5. For projects utilizing funds from the non-repayable grant, project sponsors are responsible for using the funds for their intended purposes and in compliance with the conditions stipulated in the Commercial Contracts.

For projects that require relending, project sponsors are responsible for using and repaying the loan in accordance with the terms agreed upon in the Loan Agreement (Relending Agreement) signed with the Ministry of Finance and the government's regulations on the management and use of foreign loans as referenced above.

II. SPECIFIC PROVISIONS

1. Procedures and formalities for withdrawing loan and grant funds

a) The preparation, review, and approval of feasibility study reports must be carried out strictly in accordance with the provisions of the Charter for Management of Investment and Construction issued together with Decree No. 42/CP dated July 16, 1996 of the Government.

b) On the basis of the approved project, the project sponsor shall promptly carry out tender procedures and sign commercial contracts with French companies to purchase goods and services. Commercial contracts must be signed before December 31, 1997. Thereafter, the project sponsor shall complete the procedures for approving commercial contracts according to Decision No. 91/TTg dated November 13, 1992 of the Prime Minister and the guidelines of the Ministry of Trade.

c) Documents related to the approval of feasibility study reports, approved feasibility report materials, signed commercial contracts, and the approval document for commercial contracts shall be submitted to the Ministry of Planning and Investment, the Ministry of Finance (Department of Foreign Finance, General Department of Investment Development) to proceed with subsequent procedures with the French side.

d) Based on the request letter for withdrawing financial support to implement commercial contracts from the project sponsor and the notification of approval of the commercial contract from the Vietnamese Government sent by the Ministry of Planning and Investment to the Commercial Attaché at the Embassy of France in Hanoi, the Ministry of Finance will authorize the Vietnam Investment and Development Bank to handle the withdrawal procedures for projects listed in the use of French financial support.

e) Based on the authorization letter for withdrawing funds from the Ministry of Finance and a copy of the Loan Agreement signed between the project sponsor and the General Department of Investment Development, the Vietnam Investment and Development Bank will sign and stamp the original commercial contract document to transfer it to the French side as payment evidence for the French supplier and to perform the external procedures as stipulated in the Credit Opening Agreement.

f) In case the project cannot proceed or is delayed due to incomplete documentation procedures, and if the project sponsor wishes to withdraw or change the project for any reason, they must promptly report to the Ministry of Planning and Investment and the Ministry of Finance.

2. Implementation of allocation and refinancing.

a) For projects funded from the state budget (Appendix I)

- The Ministry of Finance, through the General Department of Investment Development, implements the allocation for projects according to the current system for allocating and managing construction investment funds from the state budget.

- For projects funded from the non-repayable grant of the French Treasury, when using this fund, a grant confirmation certificate must be issued. Project sponsors, upon receiving notice of receipt of grant goods, must go to the Ministry of Finance to complete the grant confirmation procedures. If the foreign party purchases goods domestically, the project sponsor must complete the grant confirmation procedures no later than 30 days after receiving the goods. Necessary documents for grant confirmation include:

Approval document for the program/project by the competent authority.

Agreement or signed formal agreements with foreign partners clearly stating the ongoing project.

Approval document for the commercial contract.

Bill of Lading or Airway Bill.

+ Detailed packing list.

Commercial Invoice.

Insurance Certificate.

- The documents for recording income and expenditure through the state budget are:

* Grant confirmation certificate from the Ministry of Finance; or

* Notice of debt from the French Development Fund representing the French Treasury and invoices for payments to the French supplier (including invoices for technical service payments) provided by the French trade office; or

* Notice of debt from the French bank.

b) For projects requiring relending (Appendices II and III).

- After the competent authorities approve the commercial contract signed between the project owner (or the unit authorized by the project management agency to import goods) and the French Company, the project owner must proceed to sign a Loan Agreement with the Ministry of Finance (General Department for Investment and Development) regarding the re-lending of the financial aid from the State Budget. The Loan Agreement will serve as the basis for the project owner to officially recognize debt with the state budget and fulfill their obligations according to the terms committed in this agreement.

- Conditions for re-lending for projects using French Treasury funds (Annex II):

+ Re-lending period: 15 years with 4-year grace period

+ Re-lending interest rate: 2.5%/year

+ Currency for lending: French Franc

- Conditions for re-lending for projects using mixed credit funds (Annex III):

+ French Treasury funds (accounting for 32.96% of the total loan capital of the project):

* Re-lending period: 15 years with 4-year grace period

* Re-lending interest rate: 0%/year (reduced by 1% compared to the French Treasury interest rate)

* Currency for lending: French Franc

+ Private credit funds (accounting for 67.04% of the total loan capital of the project):

* Re-lending period: 10 years without grace period

* Re-lending interest rate: reduced by 1%/year compared to the actual interest rate of French banks

- Fees: Project owners must bear the following fees:

* Foreign fees:

+ Private credit funds (accounting for 67.04% of the total loan capital of the project):

For projects re-lending from the mixed credit funds mentioned in Annex III (including part of the French Treasury loan and part of private credit loan), project owners must bear the following fees:

* Domestic fees:

All projects re-lending from the state budget must bear 0.3%/year calculated on the outstanding debt including the management fee of the General Department for Investment and Development and the foreign transaction fee charged by the Vietnam Development Bank.

Commitment fee: 0.5%/year on the undrawn portion of the private credit.

Management fee of the French Bank: 0.8% paid once on the total loan amount from the private credit source.

Credit insurance fee of COFACE: paid at the rate announced by France based on the loan amount from the private credit source.

+ Other fees collected by foreign banks during the withdrawal process (if any).

+ Domestic fees at the rate of 0.3%/year from the project owner together with the schedule for principal and interest repayment. The foreign transaction fee is collected by the Vietnam Development Bank according to its fee schedule for each transaction and is deducted from the 0.3% mentioned above by the General Department for Investment and Development.

+ Foreign fees include commitment fees and management fees mentioned above from the project owner upon receipt of notification from the Vietnam Development Bank to enable the state budget to pay to the French side when due. Insurance fees will be supplemented by France and added to the total loan amount that the project owner receives financial assistance for and must recognize debt with the General Department for Investment and Development.

The State Investment Development General Department directly collects:

- In cases where the project falls under state budget allocation, the foreign fees and foreign transaction fees mentioned above will be paid by the state budget. The Vietnam Development Bank is responsible for promptly notifying the Ministry of Finance (Department of Foreign Finance and General Department for Investment and Development) about the fees payable.

- The General Department for Investment and Development notifies the project owner of the repayment schedule for the state budget. The project owner is responsible for repaying the principal, interest, and fees due according to the notification. It is encouraged for project owners to repay the debt ahead of schedule to the state budget.

- In case the project owner fails to repay the debt on time to the Ministry of Finance for any reason, the project owner will have to bear late payment interest penalties as stipulated by France in the applicable Agreement (for the French Treasury loan, the penalty interest rate is 2.5%/year, for the private credit loan, it is PIBOR+2.5%/year).

a) The Ministry of Finance authorizes the Vietnam Development Bank to perform foreign payment services with France. Immediately after withdrawing funds, the Vietnam Development Bank has the responsibility to send the Ministry of Finance a statement of fund withdrawal to process accounting through the state budget.

b) All goods, equipment, and services imported for projects under the 1995 Protocol using French ODA funds to serve the project are exempted from import tax according to Circular Guidance No. 2842-TC/TCT dated August 15, 1996, issued by the Ministry of Finance.

3. Other provisions

c) Upon completion of the project, project owners are responsible for preparing final settlement reports on the acceptance and use of the project, evaluating the effectiveness of the project, and submitting them to the project management agency and the Ministry of Finance. The procedures and requirements for preparing final settlements, contents of the final settlement report, and approval of final settlements shall comply with current guidelines of the Ministry of Finance.

Project management agencies are responsible for guiding project owners to implement in accordance with the provisions of this Circular. During implementation, if any difficulties arise, project owners and project management agencies need to promptly reflect them to the Ministry of Finance for consideration and resolution.

LIST OF PROJECTS USING FRENCH FINANCIAL ASSISTANCE FOR THE 1995 BUDGET PERIOD UNDER THE STATE BUDGET ALLOCATION SYSTEM

III. IMPLEMENTATION:

(Attached to Circular No. 02-TC/TCĐN, January 14, 1997, of the Ministry of Finance)

ANNEX I

Financial Assistance (Million FF)

Source of Assistance

VTKHL: Non-Repayable Grant

TDHH: Hybrid Credit

Stage III Expansion of Danang Water Supply System

ANNEX II

Stage II Rehabilitation of Hue Power Grid

Source of Assistance

ANNEX III

Stage II Rehabilitation of Hue Power Grid
Ban Mai Hydropower Technical Design

Source of Assistance