Joint Circular No. 06/1998/TTLT/BKH-BTC guiding the mechanism for managing counterpart funds for programs and projects using official development assistance (ODA) sources.

JOINT CIRCULAR

Guidelines for the management mechanism of counterpart funds for programs and projects using official development assistance (ODA) sources
sử dụng nguồn hỗ trợ phát triển chính thức (ODA)

Pursuant to Article 13 and Article 14 of Chapter 3 of Decree No. 87/CP dated August 5, 1997 of the Government on the issuance of regulations on the management and utilization of official development assistance (ODA) funds;

Pursuant to the State Budget Law and the guiding documents of the State Budget Law;

I. GENERAL PROVISIONS

1. The purpose of managing and developing plans for counterpart funds for programs and projects using ODA sources (hereinafter referred to as ODA programs and projects) is to fulfill the commitments made between the Government of Vietnam (hereinafter referred to as the Vietnamese side) and the governments of other countries, international organizations, and intergovernmental organizations (hereinafter referred to as the foreign side) in implementing ODA programs and projects.

2. Counterpart funds are the domestic capital participating in each ODA program and project committed between the Vietnamese side and the foreign side based on agreements, project documents, and investment decisions of competent authorities.

Counterpart funds do not apply to loans and non-reimbursable grants where the agreements signed do not specifically require Vietnam's contribution. In these cases, the maximum external capital will be utilized to implement the projects. Some projects requiring domestic investment capital as stipulated in the investment decision will be balanced according to the annual state budget plan allocated to ministries and localities.

3. All ODA programs and projects requiring counterpart funds as mentioned in Point 2 of Section I must annually prepare plans for counterpart funds. Ministries, government agencies, provincial people's committees under the central government are responsible for consolidating the requirements for counterpart funds of programs and projects directly managed by them.

To fulfill the commitments of signed agreements, sufficient counterpart funds must be arranged in the annual local budget estimates.

For ministries and sectors, counterpart funds are balanced within their annual state budget estimates.

In principle, the counterpart funds of a program or project at a certain level shall be handled within that level's budget. In cases where some localities face excessively large counterpart funds beyond their balancing capacity, they shall report to the Prime Minister for partial support.

4. Sources for allocating counterpart funds for ODA programs and projects include:

State budget disbursements, including expenditure on public services and centralized construction investment funds as specified in the investment decision. Based on the investment decision, part or all of the counterpart funds for ODA programs and projects can be sourced from state budget disbursements (as mentioned above).

Credit sources: The State prioritizes allocating a portion of investment credit according to the national plan for investors to borrow to serve as counterpart funds for ODA programs and projects based on loan rescheduling contracts between the investor and the Ministry of Finance. Investors borrowing credit funds must have the responsibility to repay the loan (principal and interest) according to the loan agreement. The Ministry of Finance will only allocate funds to cover the interest rate differential (between the deposit rate and the lending rate).

Self-raised capital of state enterprises includes basic depreciation of fixed assets originating from the state budget, post-tax profits, commercial loans, public fundraising... to allocate counterpart funds for ODA programs and projects as stipulated in the investment decision that the investor must self-balance the counterpart funds.

Capital raised from various social strata, including contributions through labor, to balance counterpart funds for ODA programs and projects (programs and projects implemented under the model of joint efforts by the state and the people).

II. SPECIFIC PROVISIONS

1. ODA programs and projects with balanced counterpart funds are part of the annual plans established by ministries, government agencies, and provincial people's committees under the central government.

The counterpart fund plan must be developed concurrently with the disbursement plan for foreign funds of ODA programs and projects. By July each year, ministries, government agencies, and provinces evaluate the ability to disburse foreign funds, implement counterpart funds throughout the year, and develop the counterpart fund plan for each ODA program and project for the following year, reporting to the Ministry of Planning and Investment and the Ministry of Finance.

The counterpart fund plan must ensure the progress committed to the foreign side while also being consistent with the actual implementation situation and capacity.

All demands for counterpart funds from the state budget must be scheduled in the budget estimate according to the procedures prescribed in the State Budget Law and related guiding documents.

2. Conditions for considering the allocation of counterpart funds from centralized construction investment funds of the state budget:

ODA programs and projects signed and effective before July of the current year will be included in the list of projects for the next planning year.

The volume and progress of work recorded in signed programs and projects or adjusted volumes and progress agreed upon with the foreign side are among the bases for considering the allocation of counterpart funds from centralized construction investment funds of the state budget.

ODA programs and projects allocated counterpart funds as centralized construction investment funds must ensure all necessary procedures in accordance with the provisions of Decree No. 42/CP and 43/CP dated July 16, 1996, and Decree No. 92/CP and 93/CP dated August 23, 1997 of the Government, as well as other guiding documents issued together with these decrees.

3. The counterpart fund plan must be detailed according to each type of source: state budget expenditure on public services, centralized construction investment funds disbursed from the budget, credit funds according to the national plan, self-raised capital of state enterprises, loans from other sources, and contributions from various social strata (including labor mobilization). The counterpart fund plan is prepared according to the form attached to this circular.

4. Counterpart funds must be reflected in the annual centralized construction investment plan provided by the budget for each ODA program and project in accordance with the approved investment decision and budget estimate.

5. The counterpart fund plan is assigned together with other annual targets and forms part of the annual state budget estimate of ministries, government agencies, provincial people's committees, and centrally governed city people's committees. Based on the assigned plan, ministries, government agencies, and provincial people's committees assign plans to project sponsors.

To ensure the commitment to counterpart funds, it is necessary to prioritize and allocate sufficient and timely counterpart funds in the annual budget plan for programs and projects eligible to use state budget funds before allocating them to other spending tasks.

6. State management of counterpart funds shall be carried out according to the current financial mechanism. Project sponsors are responsible for using counterpart funds for their intended purposes and effectively.

When assigning plans to subordinate units, ministries, government agencies, and provincial people's committees must assign them by name of the program or project and in accordance with the State Budget Law.

7. After receiving the plan, ministries, government agencies, and provincial people's committees implement and register the plan with relevant financial and planning agencies.

Depending on the nature of the counterpart funds (construction investment capital or operational capital), the Department of Finance and Price Control or the Investment Development Bureau will notify the disbursement plan for project sponsors.

8. The disbursement of counterpart funds shall be carried out according to the current disbursement system (investment capital under the investment disbursement system, operational capital under the operational expenditure disbursement system).

- The disbursement of counterpart funds for both construction and administrative and operational expenses must be based on the disbursement progress of each project, and payment of counterpart funds shall be made based on the volume completed and the disbursement progress of the project. In cases of advance payment, it must be based on specific provisions in the contract between the project sponsor and the contractor.

- Monthly, quarterly, six-monthly, nine-monthly, and annually, project sponsors are responsible for reporting comprehensively on the implementation status of the project; ministries, provinces, and centrally governed cities must aggregate and report to the Ministry of Planning and Investment, the Ministry of Finance, and the General Statistics Office.

9. Regarding final accounts: The counterpart funds of programs and projects are consolidated into the annual final accounts of central and local agencies according to current regulations.

Upon completion of the program or project, the counterpart funds are consolidated into the final accounts of each program or project.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect fifteen days from the date of issuance. Previous regulations that conflict with this Circular are no longer in effect. Any issues arising during implementation should be reported to the Ministry of Planning and Investment and the Ministry of Finance for study and supplementation./.