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

 

CIRCULAR

Guidelines for the management and use of capital

funded by the French Government in 1995

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

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

Pursuant to Decree No. 42/CP dated July 16, 1996 of the Government promulgating the Charter on investment and construction management;

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

The Ministry of Finance guides the mechanism for managing and utilizing the funding 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 funding provided by 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) constitutes state budget revenue and must be reflected in the state budget and managed according to the current state financial management system. The Ministry of Finance is responsible for balancing 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 conditions imposed by France and the annual approval of the Vietnamese Government, projects utilizing funding 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 of capital for projects within the specified categories through the General Department of Investment Development.

4. Project sponsors who use the funding (both grants and loans) are responsible for preparing annual plans for withdrawing funds and matching domestic capital requirements 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.

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 loaned capital in accordance with the terms agreed upon in the Credit Contract (Relending Agreement) signed with the Ministry of Finance and the regulations governing the management and use of foreign loans issued by the Government 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 comply with the provisions set forth in the Charter on Investment and Construction Management 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 promptly conducts tender procedures and signs commercial contracts with French companies to purchase goods and services. These commercial contracts must be signed before December 31, 1997. Subsequently, the project sponsor completes the necessary procedures to approve the commercial contracts according to Decision No. 91/TTg dated November 13, 1992 of the Prime Minister and the guidelines of the Ministry of Trade.

Relevant documents concerning the approval of feasibility study reports, approved feasibility study documents, signed commercial contracts, and the approval documents for commercial contracts need to 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.

Based on the request letter for withdrawing funding to implement commercial contracts from the project sponsor and the notification of approval of the commercial contract by 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 funding.

e) Based on the authorization letter for withdrawing funds from the Ministry of Finance and a copy of the Credit Contract 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 documentation for suppliers and to carry out the required external procedures as stipulated in the Credit Facility Agreement.

f) In cases where the implementation of the project cannot proceed or is delayed due to incomplete procedural documentation, and if the project needs to be withdrawn or converted for any reason, the project sponsor 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 by the state budget (Appendix I)

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

- For projects funded from the non-repayable grant of the French Treasury, when using this funding, confirmation of aid must be made. Project sponsors must submit to the Ministry of Finance for confirmation of aid upon receipt of the aid delivery notice. If the foreign side purchases goods domestically, the project sponsor must complete the confirmation of aid procedures no later than 30 days after receiving the goods. Necessary documents for confirming aid 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 accounting records for receipts and payments through the state budget are:

* Confirmation of aid goods from the Ministry of Finance; or

* Debt notice from the French Development Fund representing the French Treasury and invoices for payment to French suppliers (including invoices for technical service payments) provided by the French trade office; or

* Debt notice 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-loan 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 contract.

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

+ Re-loan period: 15 years with 4 years grace period

+ Re-loan interest rate: 2.5%/year

+ Currency for loan: French Franc

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

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

* Re-loan period: 15 years with 4 years grace period

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

* Currency for loan: French Franc

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

* Re-loan period: 10 years without grace period

* Re-loan 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 project loan amount):

For projects re-borrowing 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-borrowing from the state budget must bear 0.3%/year calculated on the outstanding balance 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 the commitment fee and management fee mentioned above from the project owner upon receipt of notification from the Vietnam Development Bank to enable the state budget to pay to France when due. The insurance premium 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.

- If 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 the late payment penalty interest as stipulated in the Agreement (for the French Treasury loan, the penalty interest 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 implement 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 Protocol 1995 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 of the Ministry of Finance.

3. Other provisions

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

The project management agencies are responsible for guiding the project owners to comply with the provisions of this Circular. During implementation, if any issues arise, the project owners and the project management agencies need to promptly reflect them to the Ministry of Finance for consideration and resolution./.

LIST OF PROJECTS USING FRENCH GRANT FUNDS FOR THE 1995 FINANCIAL YEAR UNDER THE STATE BUDGET ALLOCATION REGIME

III. IMPLEMENTATION:

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

 

ANNEX I

Grant Fund (Million FF)

Source of funding

VTKHL: Non-Repayable Grant

TDHH: Hybrid Credit

Expansion of Danang Water Supply System Phase III

ANNEX II

Restoration of Hue Power Grid Phase II

Source of funding

ANNEX III

Anthracite Coal Washing Equipment

Source of funding