Circular No. 06/2003/TT-BKH guiding the implementation of the specialized credit program under the Japanese International Cooperation Bank (JBIC) loan fund.

CIRCULAR

Guidelines for implementing the Special Credit Program from the source of

loans from the Japan Bank for International Cooperation (JBIC)

Pursuant to the Government Decree No. 61/2003/NĐ-CP dated June 6, 2003 stipulating the functions, tasks, powers, and organizational structure of the Ministry of Planning and Investment;

Pursuant to Decree No. 17/2001/NĐ-CP dated May 4, 2001 of the Government on the issuance of the Regulations on management and use of official development assistance;

Pursuant to Decree No. 52/1999/NĐ-CP dated July 8, 1999 of the Government on the issuance of the Regulations on investment management and construction, Decree No. 12/2000/NĐ-CP dated May 5, 2000 of the Government on amending and supplementing certain articles of the Regulations on investment management and construction, and Decree No. 07/2003/NĐ-CP dated January 30, 2003 of the Government on amending and supplementing certain articles of the Regulations on investment management and construction issued together with Decree No. 52/1999/NĐ-CP dated July 8, 1999 and Decree No. 12/2000/NĐ-CP dated May 5, 2000 of the Government;

Pursuant to Decree No. 88/1999/NĐ-CP dated September 1, 1999 of the Government on the issuance of the Bidding Regulations, Decree No. 14/2000/NĐ-CP dated May 5, 2000 of the Government on amending and supplementing certain articles of the Bidding Regulations, and Decree No. 66/2003/NĐ-CP dated June 12, 2003 of the Government on amending and supplementing certain articles of the Bidding Regulations issued together with Decree No. 88/1999/NĐ-CP dated September 1, 1999 and Decree No. 14/2000/NĐ-CP dated May 5, 2000 of the Government;

Pursuant to the terms of the Special Credit Agreement signed between the Government of Vietnam Male and JBIC;

The Ministry of Planning and Investment guides the implementation of projects under the Special Credit Program as follows:

I - CHARACTERISTICS AND PRINCIPLES OF THE USE OF FUNDS FOR THE SPECIAL CREDIT PROGRAM

A - CHARACTERISTICS:

1. The Rural Infrastructure Development Program (referred to as the Special Credit Program) is a program using JBIC loan funds to construct infrastructure projects in rural poor areas nationwide within the fields specified in the Special Credit Agreement signed between the Government of Vietnam and JBIC.

The JBIC credit fund can cover 100% of the construction value of the project.

2. Payment for projects will be made according to the progress of implementation based on the volume of work completed, accepted, and confirmed by the provincial State Treasury without depending on the annual budget allocation.

3. The implementation process must comply with current regulations of the Government of Vietnam and the regulations of JBIC. Acting on behalf of the Government, the Ministry of Planning and Investment informs the People's Committee of provinces/cities about the list of projects and the JBIC funding level for each project. Male B - PRINCIPLES OF FUNDS USE

1. JBIC loan funds shall be used for:

a. Paying the value of construction works and purchasing domestic materials and equipment for the project.

b. Importing materials and equipment that cannot be produced domestically for the projects.

c. Consulting fees for the Program.

d. Foreign bank fees and JBIC fees when withdrawing funds.

At the end of the Program, the Program Management Board will notify items (c) and (d) so that the Project Owner/Project Management Board can prepare the final account settlement.

2. JBIC loan funds shall not be used for:

a. Taxes payable.

b. Land acquisition and clearance costs.

c. Management costs.

d. Costs of land purchase and fixed assets.

e. Other indirect costs.

For costs that cannot be covered by JBIC funds, the People's Committee of provinces/cities is responsible for arranging from local counterpart funds to implement them.

II - RESPONSIBILITIES OF AUTHORITIES

1. Establishing Project Management Boards at all levels

To implement the Program, starting from Special Credit Program IV, JBIC requires the establishment of a Program Management Board from central to local levels including:

a. The Steering Committee of the Program (SCCP), established by Decision of the Minister of Planning and Investment. Members of the SCCP include representatives of relevant ministries/departments.

b. The Program Management Board (PMB) (under the Ministry of Planning and Investment), established by Decision of the Minister of Planning and Investment. Members of the PMB are designated by the Minister of Planning and Investment.

c. The Provincial Project Management Board (PPMB) (under the Department of Planning and Investment of the province/city), established by the competent authority of the province/city. Members of the PPMB are designated by the competent authority of the province/city.

d. The Project Management Board of each project (PMB) established by the competent authority of the province/city. Members of the PMB are designated by the competent authority of the province/city.

For provinces that have not established a PPMB, the organizational structure for implementing the Program remains unchanged as it currently exists.

2. Responsibilities of Management Boards at all levels are as follows:

Responsibilities of the Steering Committee

a. Members of the Steering Committee are responsible for providing information such as industry planning and regulatory documents under their responsibility to ensure the Program is implemented in a coordinated manner.

b. Members, in their respective fields, propose solutions regarding the organization of implementation, mobilization of capital sources to ensure synchronized investment for each project to achieve high efficiency upon use.

c. Monitor and direct the implementation of the Program in accordance with the approved objectives and plans.

d. Periodically, or when necessary, the Chairman of the Steering Committee convenes meetings to review the implementation of the Program and resolve existing issues.

Responsibilities of the Program Management Board

a. Summarize and report to the SCCP issues related to the Program implementation process and propose solutions.

b. Inspect and urge the implementation of projects under the Program signed with JBIC to ensure timely progress, quality, and effectiveness.

c. Serve as the point of contact with the Department of Planning and Investment/PPMB, PMB, consulting companies, and JBIC on matters related to the Program.

d. Guide localities in implementing projects in accordance with current regulations of the Government of Vietnam and JBIC.

e. Organize bidding to select consultants and import materials and equipment for the entire Program according to the approved bidding plan.

f. Review documents and process disbursement for projects under the Program.

f. Review the files and process disbursement procedures for projects under the Program.

g. To be responsible for compiling progress reports on the implementation and final reports on the Program to be submitted to the Government of Vietnam and JBIC.

Tasks of the Department of Planning and Investment/Project Management Board of the Province

a. Report to the People's Committee of the province/city to allocate sufficient counterpart funds for projects within the province/city.

b. Serve as the lead agency in managing and implementing projects under the Program at the local level.

c. Coordinate with relevant local management agencies to guide project sponsors/Project Management Boards in implementing the projects.

d. Direct and coordinate with specialized departments to monitor and supervise the implementation of projects using JBIC funds.

e. Provide project sponsors/Project Management Boards with guidance on necessary procedures related to the implementation of JBIC projects.

f. Review and approve contracts signed between contractors and project sponsors/Project Management Boards (if required).

g. Inspect compliance with current regulations of the Government of Vietnam regarding investment management and construction, and tendering rules.

h. Guide, inspect, and supervise the organization of tenders, signing of procurement contracts for goods, materials, and equipment (if applicable), and construction works between project sponsors/Project Management Boards and contractors.

i. Quarterly, no later than the 10th day of the following month, the Department of Planning and Investment/Project Management Board of the Province is responsible for compiling and reporting the progress of projects within the province/city to the Project Management Board.

j. Serve as the focal point for compiling requests for fund disbursements for projects utilizing JBIC funds within the province/city and be responsible for managing this fund before the Project Management Board.

k. No later than 15 days after receiving the final account report from the project sponsor/Project Management Board, the Department of Planning and Investment/Project Management Board of the Province will compile and submit the final account report to the Project Management Board.

In the final account report, in addition to tables of data, there must be an explanatory note on:

- Favorable conditions, difficulties, and obstacles encountered during the project implementation process (guidance documents, disbursement procedures, receipt of materials and equipment (if applicable), etc.)

- Economic and social outcomes assessment and recommendations (if any).

- Additional capacity of the entire project or individual components resulting from the investment.

Responsibilities of the Project Sponsor/Project Management Board

a. Be legally responsible for managing and using the allocated JBIC funds for their intended purposes.

b. Organize the implementation of the project in accordance with current regulations of the Government of Vietnam on investment management and construction, and tendering rules.

c. No later than 15 days after the contract is approved, the project sponsor/Project Management Board shall submit once all documents from a. to f. as specified in Part IV-2 (Payment Request Documents and Requirements for the Set of Documents) to the Department of Planning and Investment/Project Management Board of the Province, while documents from g. to j. shall be submitted in batches according to payment schedules.

d. Receive materials and equipment (if applicable) based on notifications from the Project Management Board and install them according to the plan. No later than 15 days after completing each batch of receipt, a written report on the receipt situation must be submitted to the Department of Planning and Investment/Project Management Board of the Province and the local basic construction capital management agency.

e. Pay service fees to suppliers of materials and equipment based on notifications from the Project Management Board.

f. Be responsible for organizing quality supervision of the project to ensure economic and technical standards of the project.

g. Organize acceptance inspections, determine the volume of completed basic construction work eligible for payment according to current regulations, and send these to the local State Treasury and the Department of Planning and Investment/Project Management Board of the Province as per the attached model forms, serving the purpose of withdrawing JBIC funds.

h. Be responsible for submitting project progress reports to the Department of Planning and Investment/Project Management Board of the Province as per the quarterly report model attached to this Circular.

i. No later than three months after acceptance and handover of the project, the project sponsor/Project Management Board must submit a report to the Department of Planning and Investment/Project Management Board of the Province.

j. Be responsible for finalizing the project accounts in accordance with current regulations of the Government on investment management and construction.

III. Implementation Procedures of the Program.

1. Allocation of Program Funds

The dedicated credit program funds are allocated to projects in various localities. Upon authorization by the Prime Minister, the Ministry of Planning and Investment notifies the People's Committees of provinces/cities of the list and amount of funds for each specific project.

In cases where it is necessary to change a previously announced project, the Department of Planning and Investment/Project Management Board of the Province selects a project of equivalent scale to replace it and compiles annually (before September each year, according to the attached form) to be submitted to the People's Committee of the province/city for the People's Committee of the province/city to issue a request to the Ministry of Planning and Investment for consideration and resolution.

2. Examination of Projects, Tendering, and Implementation

Before implementing projects in localities, Program consultants will conduct examinations and site visits to assess the investment preparation status of each project.

Domestic bidding for construction works and procurement of materials and equipment shall be conducted by localities in accordance with the provisions of Decree No. 88/1999/ND-CP dated September 1, 1999, Decree No. 14/2000/ND-CP dated May 5, 2000, amending and supplementing certain articles of the Government's Tendering Regulations, and Decree No. 66/2003/ND-CP dated June 12, 2003, amending and supplementing certain articles of the Tendering Regulations issued together with Decree No. 88/1999/ND-CP dated September 1, 1999, and Decree No. 14/2000/ND-CP dated May 5, 2000 of the Government.

For domestic construction works and procurement packages using JBIC funds valued at 0.3 billion yen (equivalent to 30 billion VND) or more, in addition to complying with the aforementioned regulations of the Vietnamese Government, they must also comply with JBIC regulations.

JBIC regulations for packages valued at over 0.3 billion yen (equivalent to 30 billion VND) are as follows:

a. If broad international bidding is not applied, the project sponsor/Project Management Board must submit a request for approval of the tendering method to JBIC.

b. Prior to announcing/advertising the prequalification, the Project Owner/Project Management Board must submit to JBIC the prequalification invitation documentation and a request for approval of the prequalification documentation for JBIC's review and approval. After reviewing the documentation, JBIC will notify the Project Owner/Project Management Board in writing. Once approved, if there are any changes in the aforementioned documentation, the Project Owner/Project Management Board must inform JBIC for its review and approval.

c. After selecting the companies that have passed the prequalification, the Project Owner/Project Management Board must submit to JBIC the prequalification results including: a list of companies that have passed the prequalification, the evaluation method for prequalification for JBIC's review and approval. If necessary, JBIC may request additional documents related to the prequalification process. After reviewing the aforementioned documentation, JBIC will notify the Project Owner/Project Management Board in writing about the prequalification results and JBIC's opinion.

d. Before issuing a tender, the Project Owner/Project Management Board must submit to JBIC tendering documents such as: guidelines for bidders, bidding forms, draft contracts, technical standards, and other documents related to the tendering process for JBIC's review and approval. After reviewing the tendering documentation, JBIC will notify the Project Owner/Project Management Board in writing.

e. Before announcing the winning bidder, the Project Owner/Project Management Board must submit to JBIC the tender evaluation results including: tender evaluation results, analysis of the tendering process, and the anticipated winning bidder along with a request for approval of the tender evaluation results for JBIC's review and approval. After reviewing the aforementioned documentation, JBIC will notify the Project Owner/Project Management Board in writing about JBIC's opinion. If necessary, JBIC may request the Project Owner/Project Management Board to provide additional documents related to the tendering process.

f. In accordance with Clause 5.10 of the JBIC Tendering Guidelines, if the Project Owner/Project Management Board wishes to reject all bidders or negotiate contracts with one or two lowest bidders to achieve a desired contract, the Project Owner/Project Management Board must inform JBIC for its review and approval beforehand. After reviewing, JBIC will notify the Project Owner/Project Management Board in writing about JBIC's opinion. If the Project Owner/Project Management Board conducts a new tender, all procedures must comply with points (a) through (f) above.

g. After completing contract negotiations, the Project Owner/Project Management Board must submit to JBIC: a copy of the contract, a request for approval of the contract for JBIC's review and approval. After reviewing the aforementioned documentation, JBIC will notify the Project Owner/Project Management Board in writing about JBIC's opinion.

h. If there is a contract amendment, the Project Owner/Project Management Board must seek JBIC's approval. If the change does not alter the content or value of the contract, JBIC's approval is not required.

In cases of centralized procurement of materials and goods through tendering, the Project Management Board will conduct the tendering according to the approved tendering plan and implement in accordance with current Vietnamese Government and JBIC tendering regulations. The Project Management Board will delegate a company with business functions and technical experience to assist in negotiating contracts and receiving materials and goods.

The commencement and quality management of projects under the specialized credit program must comply fully with current regulations on investment and construction management for projects using state budget funds.

3. Repayment of Payment Funds.

The repayment of payment funds for projects under the specialized credit program shall be carried out in accordance with this Circular and the Circular guiding the mechanism for managing loan funds for the specialized credit program of the Japan Bank for International Cooperation (JBIC), issued by the Ministry of Finance.

4. Monitoring Implementation.

During implementation, the Steering Committee and the Program Management Board organize regular or spot checks on the management and implementation of projects. If non-compliance with funding regulations is discovered, the transferred funds will be recovered or the transfer of funds will be temporarily suspended to take appropriate measures.

5. Reporting on Project Progress and Final Accounts.

The Project Owner/Project Management Board is responsible for implementing the reporting and final accounting system for projects in accordance with current regulations on investment and construction management and submitting periodic progress reports (or ad hoc reports as requested by the Program Management Board) as per the attached model.

iV- REPAYMENT OF PAYMENT FUNDS

The repayment of payment funds for consultancy fees and the importation of materials and equipment for the entire program (if applicable) shall be conducted by the Program Management Board in accordance with the Circular guiding the mechanism for managing loan funds for the specialized credit program of the Japan Bank for International Cooperation (JBIC), issued by the Ministry of Finance.

Payment in Vietnamese Dong to domestic construction contractors, suppliers of goods and services shall be carried out as follows:

1. Principles of Payment:

a. Payments shall only be made for projects utilizing JBIC funds listed in the project portfolio announced by the Ministry of Planning and Investment, acting on behalf of the Prime Minister, to each locality.

b. Payments shall only be made within the JBIC fund limit announced for each project.

c. Payments shall only be made for completed work volumes confirmed by the Project Owner/Project Management Board and the local State Treasury.

d. Payments shall only be made to contractors listed in the tender award decision or tender designation decision in compliance with current tendering regulations.

e. Payments shall only be made for contracts notified to the Program Management Board and the Ministry of Finance.

f. Payments shall only be made for projects that have submitted progress reports in accordance with Part III-5 of this Circular.

2. Documentation for Payment Requests and Requirements for Documentation:

The documentation for requesting JBIC payment shall be prepared in accordance with current Vietnamese basic construction payment procedures and JBIC regulations, including:

a. Decision approving the investment project by the competent authority (original or certified copy).

b. Decision approving the design and total estimate (original or certified copy).

c. Decision announcing the plan by the provincial/municipal People's Committee (original or certified copy).

d. Decision on the successful bidder/designated bidder (original).

e. Contract signed between the Project Owner/Project Management Board and the contractor clearly stating the JBIC portion (original).

f. Decision approving the contract (for contracts requiring approval under current Vietnamese tendering regulations and JBIC regulations) (original or certified copy).

g. The completion quantity acceptance record, accompanied by a valuation calculation based on the accepted quantity (original or certified copy).

h. Payment voucher for the completed basic construction quantity (two original copies).

i. Contractor's payment request, confirmed by the Project Owner/Project Management Board (two original copies).

j. Letter requesting disbursement from the Provincial Department of Planning and Investment/Project Management Board, attached with the annex as per the model provided in this Circular (two original copies).

Documents (a), (b), (c), (d), (e), (f) and (g) according to the current prescribed forms.

Documents (h), (i), (j) shall be prepared according to the forms set out in this guiding Circular.

For advance payment withdrawal, in addition to the aforementioned documents, a bank guarantee for the advance payment from a state commercial bank or a reputable joint venture bank (as per the attached model) is required.

3. Procedures and Timeframe for Payment

a. Regarding the advance payment under the contract:

The contractor may receive advance payments at levels stipulated in the current Government regulations on investment and construction management, subject to the following conditions:

- The advance payment must be specified in each contract.

- The local State Treasury must confirm the advance payment.

b. Regarding the payment for completed construction quantities:

- After the completion quantity has been accepted and confirmed by the local State Treasury, the Project Owner/Project Management Board shall prepare and submit a payment request to the Provincial Department of Planning and Investment/Project Management Board.

- The Provincial Department of Planning and Investment/Project Management Board shall compile and issue a letter requesting disbursement to the BQLCT.

- BQLCT will review and verify the validity of the file. Any documents not conforming to regulations will be returned to the Provincial Department of Planning and Investment/Project Management Board for correction and supplementation.

- Every two weeks, BQLCT will issue a letter requesting the Ministry of Finance to process disbursement for projects with valid files.

- The repayment of advance payments will be made by gradually deducting from subsequent payments for completed quantities in accordance with the advance payment ratio, if the contractor requests full repayment of the advance payment, or at a higher ratio than the advance payment ratio as requested by the contractor.

V- IMPLEMENTATION PROVISIONS

1- This Circular replaces Circular No. 01/2001/TT-BKH issued on 30/03/2001 and takes effect fifteen days after its publication in the Official Gazette.

2- In the course of implementation, any difficulties should be reported to the BQLCT under the Ministry of Planning and Investment for timely research and resolution./.