Decree No. 106/2004/ND-CP on State Investment Credit for Development

DECREE

Regarding state investment development credit

THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated December 25, 2001;
Pursuant to the Law on Encouraging Domestic Investment (amended) dated May 20, 1998;
WHEREAS, the Law on the State Budget dated December 16, 2002;
Considering the proposal of the Minister of Finance,

DECREE

PART I

GENERAL PROVISIONS

Article 1. The purpose of state investment development credit

The purpose of state investment development credit is to support investment projects for economic sectors and important programs that have a direct impact on the restructuring of the economy and sustainable economic growth.

Article 2. Scope of application

This Decree stipulates the policy on state investment development credit, including:

1. Investment loans and loans for projects under government agreements.

2. Post-investment interest rate support.

3. Investment credit guarantees.

Article 3. Principles of state investment development credit

1. Support for investment projects with the ability to directly recover capital within certain key industries, large economic programs that are economically and socially effective, ensuring repayment of the loan.

2. A project may simultaneously be supported through partial investment loans and post-investment interest rate support; or partially through investment loans and investment credit guarantees.

3. The total amount of support provided under the forms specified in Clause 2 of this Article for a project shall not exceed 85% of the project's investment capital.

4. Projects borrowing investment capital or receiving investment credit guarantees must be reviewed by the Development Support Fund regarding financial plans and debt repayment plans before making investment decisions.

5. Project sponsors must use borrowed funds for their intended purposes; repay principal and interest according to the signed credit agreement.

Article 4. The Development Support Fund is responsible for implementing the state's investment development credit policy.

Article 5. State investment development credit plan

1. The state investment development credit plan is part of the national investment development plan aimed at achieving strategic goals for economic and social development during each period.

The state investment development credit plan is announced annually and includes the following main indicators:

a) Total national investment development credit including: investment loan amounts, project loans under government agreements, post-investment interest rate support, and investment loan guarantees.

b) Sources of capital to implement the total level of state investment credit.

c) Total level of interest rate differential subsidies from the state budget.

2. The Development Support Fund is responsible for reporting to the Ministry of Planning and Investment and the Ministry of Finance about the proposed state investment development credit plan for the planning year. The Ministry of Planning and Investment will coordinate with the Ministry of Finance to base on the requirements for state investment development credit and the state budget's balancing capacity to submit to the Prime Minister for allocation of the state investment development credit plan to the Development Support Fund before December of the previous year.

3. The Development Support Fund implements lending in accordance with each type of recipient within the total level allocated by the Prime Minister.

4. In cases where the demand for state investment development credit in a year exceeds the announced plan or the planned level of interest rate differential subsidies, the Development Support Fund reports to the Ministry of Planning and Investment and the Ministry of Finance to submit to the Prime Minister for decision.

Article 6. Definitions

In this Decree, the following terms shall be understood as follows:

1. Loan term is the period from the first withdrawal of funds until the full repayment of the loan according to the credit agreement.

2. Grace period is the time when no principal repayment is required, calculated from the first withdrawal of funds until the start of principal repayment, maximum equal to the implementation period of the project.

3. Repayment period is the period from the first repayment of the loan until the full repayment of the loan according to the credit agreement.

4. Repayment installment period is the time specified for each repayment within the repayment period.

5. Investment loan is the provision of funds by the Development Support Fund to project sponsors for project investment.

6. Post-investment interest rate support is the provision by the Development Support Fund of partial interest rate support to sponsors who borrow from financial institutions for project investment, after the project has been completed and put into use and can repay the loan.

7. Investment credit guarantee is the commitment of the Development Support Fund to lending organizations regarding the full and timely repayment of the borrower. In case the borrower cannot repay the debt or repay insufficiently when due, the Development Support Fund will repay on behalf of the borrower.

8. Government Agreement-based loan projects are foreign projects funded by the Government of Vietnam (or authorized agencies) under agreements signed between the Government of Vietnam and the Government of the borrowing country (or authorized agencies).

Chapter II

STATE INVESTMENT DEVELOPMENT CREDIT

A. INVESTMENT LOANS

Article 7. Forms of state investment development loans

1. Investment loans;

2. Loans for projects under Government Agreements.

PART I

INVESTMENT LOANS

Article 8. Recipients of investment loans

1. Recipients of investment loans are projects with the ability to directly recover capital within the list of projects and programs decided by the Government for each period.

The preferential terms for projects specified in Section I of the List of Projects and Programs for Investment Loans attached to this Decree are valid until December 31, 2005.

2. The list of projects and programs is detailed by category, application period, and preferential terms, and is jointly prepared by the Ministry of Finance and relevant ministries and agencies for submission to the Government for approval.

Article 9. Conditions for investment loans

1. Belongs to the objects prescribed in Article 8 of this Decree;

2. Has completed investment procedures in accordance with state regulations;

3. The investor is an organization or individual with full capacity for civil conduct;

4. For expansion projects, technological equipment renewal projects, the investor must have financial conditions ensuring the ability to repay;

5. Have a production and business plan with profit;

6. The Development Fund must appraise the financial plan, repayment plan and approve the loan before making the investment decision.

7. Implement provisions on securing loan funds as stipulated in Article 16 of this Decree. For assets formed from borrowed capital that fall under mandatory insurance, the investor must commit to purchasing asset insurance throughout the borrowing period at a legally operating insurance company in Vietnam.

Article 10. Amount of investment loan capital

1. The amount of investment loan capital for each project is decided by the Development Fund, not exceeding 70% of the total investment capital of the project. The remaining capital, the investor must identify the source and specific financial conditions, ensuring the feasibility of the project.

2. During the disbursement process, the Development Fund implements according to the structure of sources of capital already determined in Clause 1 of this Article.

Article 11. Loan term for investment

1. The loan term is determined based on the ability to recover capital in line with the production and business characteristics of the project and the investor's ability to repay, but not exceeding 12 years at maximum.

2. Certain special projects such as forest planting, which have a longer capital recovery period, the maximum loan term does not exceed 15 years.

Article 12. Interest rate for investment loans

1. The interest rate for investment loans is set equivalent to 70% of the average interest rate for medium and long-term loans of state commercial banks. The Minister of Finance stipulates the interest rate for investment loans during each period.

2. When market interest rates fluctuate by 15% or more, the Minister of Finance decides to adjust the loan interest rate. The number of interest rate adjustments per year is limited to a maximum of two times.

3. For a project, the loan interest rate is determined at the time of signing the first credit agreement and remains unchanged throughout the loan period.

4. The overdue interest rate is 150% of the interest rate for on-time loans recorded in the credit agreement.

5. During the grace period, investors do not need to repay the principal but must pay interest.

PART II

LOAN FOR PROJECTS UNDER THE GOVERNMENT AGREEMENT

Article 13. Objectives for loan projects under the Government Agreement

Investment projects funded by Vietnam's government aid to countries with signed agreements.

Article 14. Conditions for loan projects under the Government Agreement

1. Projects borrowing capital under the Government Agreement must purchase products or equipment produced in Vietnam, use Vietnamese experts or labor to implement the project.

2. Other loan conditions are implemented according to specific provisions in the agreement signed between the Government of Vietnam (or its authorized representative) and the Government (or its authorized representative) of the recipient country.

Article 15. Implementation of disbursement

Annually, the Ministry of Finance transfers capital to the Development Fund. Based on the Government Agreement and project files received, the Development Fund makes payments to suppliers of Vietnamese equipment and goods and related costs for implementing the project as required by the beneficiary.

SECTION III

SECURING LOAN FUNDS, REPAYING LOANS AND HANDLING RISKS

Article 16. Collateral applicable for investment loans and investment credit guarantees

1. Investors when borrowing investment capital or receiving investment credit guarantees may use assets formed from borrowed capital to secure the loan.

2. During the period of unpaid debt, investors may not transfer, sell, or mortgage or pledge such assets to borrow elsewhere. If the investor or borrowing entity cannot repay the debt, or is dissolved or bankrupt, the Development Fund can handle the assets formed by borrowed capital as collateral according to the legal provisions for financial institutions to recover debts.

Article 17. Repayment of loans

1. Investors are responsible for repaying the loan capital to the lending organization according to the signed credit agreement.

2. During the grace period, investors do not need to repay the principal but must pay interest.

3. If within ten working days from the due date for repayment of the loan installment, the investor fails to repay the loan and the repayment period is not adjusted or extended, the Development Fund will transfer the overdue principal and interest to overdue debt and the investor must bear the overdue interest rate as stipulated in Clause 4, Article 12 of this Decree.

Article 18. Adjustment of grace periods, repayment deadlines, and repayment amounts for each period

In cases where the project investor cannot repay debts according to the agreement stipulated in the credit contract due to objective reasons, they must submit a written request to the Development Support Fund to consider adjusting the grace period; the repayment deadline, term, and amount for each term as prescribed in Article 21 of this Decree (hereinafter referred to as debt extension). The maximum debt extension period shall be one-third of the repayment period recorded in the credit contract.

Article 19. Risk and risk management

1. Project investors may be considered for debt extension, write-off, or interest reduction on loans due to force majeure causes such as natural disasters, fires, unexpected accidents causing property damage; or changes in state policies.

2. Cases involving ownership transfers and financial difficulties for enterprises using state investment credit shall be handled according to government regulations applicable to commercial bank debts.

Article 20. Establishment of a Risk Reserve Fund

Annually, the Development Support Fund establishes a Risk Reserve Fund to address risks arising from project investors' inability to repay debts as stipulated in the credit contracts. The establishment of the Risk Reserve Fund shall be carried out as follows:

1. The annual Risk Reserve Fund shall be established at a maximum rate of 0.2% of the average outstanding loan balance for investment and guarantee obligations under investment credit. The Ministry of Finance shall provide guidance on the establishment of the Risk Reserve Fund.

2. The annual establishment of the Risk Reserve Fund shall be accounted for as part of the operational expenses of the Development Support Fund.

Article 21. Authority to handle risks:

1. The General Director of the Development Support Fund decides on adjustments to grace periods; repayment deadlines, terms, and amounts for each term.

2. The Minister of Finance shall submit to the Prime Minister for decision on debt write-offs, interest reductions, and loan interest rate reductions based on the proposal of the General Director of the Development Support Fund.

3. The handling of risks for projects financed under Government Agreements shall be decided by the Prime Minister.

4. If the Risk Reserve Fund of the Development Support Fund is insufficient to cover losses, the General Director of the Development Support Fund shall report to the Minister of Finance for submission to the Prime Minister for consideration and decision.

B. INTEREST SUPPORT AFTER INVESTMENT

Article 22. Eligible recipients for post-investment interest support include:

1. Projects eligible for investment loans as provided in this Decree but have only partially received or have not yet obtained state investment credit.

2. Projects in industries and regions eligible for investment incentives under current government guidelines implementing the amended Law on Encouragement of Domestic Investment, which are not eligible for investment loans and do not receive investment credit guarantees from the Development Support Fund.

Article 23. Conditions for Post-Investment Interest Support

1. The project must fall within the scope of post-investment interest support as specified in Article 22 of this Decree.

2. The investment project must be completed and put into operation, and the borrowed capital must have been repaid.

Article 24. Principles of Post-Investment Interest Support

Project investors can only receive post-investment interest support for the amount of credit from financial institutions invested in fixed assets, within the total investment amount for fixed assets of the project. The period for calculating post-investment interest support is the actual borrowing period within the project's term.

Article 25. Level of Post-Investment Interest Support

1. For loans denominated in Vietnamese Dong, the level of post-investment interest support for the project is determined by multiplying the actual principal repayment by 50% of the state's investment credit interest rate, then by the actual borrowing period (converted to years) of the principal repayment.

2. For foreign currency loans, the level of post-investment interest support for the project is determined by multiplying the actual principal repayment in the original currency by 35% of the foreign currency loan interest rate under the loan contract with the financial institution, then by the actual borrowing period (converted to years) of the principal repayment.

3. The Development Support Fund shall provide post-investment interest support to project investors once or twice a year.

c. Investment Credit Guarantee

Article 26. Eligible Recipients for Guarantee

1. Projects eligible for investment loans as provided in this Decree but have only partially received or have not yet obtained state investment credit.

2. Projects in industries and regions eligible for investment incentives under current government guidelines implementing the amended Law on Encouragement of Domestic Investment, which are not eligible for investment loans and do not receive post-investment interest support from the Development Support Fund.

Article 27. Conditions for Guarantee

1. Belongs to the borrowing object for investment loans as stipulated in Article 26 of this Decree.

2. Project conditions for guarantee as prescribed in Clauses 2, 3, 4, 5, and 7 of Article 9 of this Decree.

3. To be appraised by the Development Support Fund on the financial plan and debt repayment plan.

Article 28. Guarantee Period

Shall be determined in accordance with the loan period agreed between the project investor and the lending credit institution.

Article 29. Guarantee Amount

1. The guarantee amount for a project shall not exceed 70% of the approved total fixed asset investment capital of the project.

2. The total guarantee amount for projects in a year by the Development Support Fund shall not exceed the total investment loan capital for that year.

Article 30. Guarantee Fee

The project investor receiving guarantee shall not pay a guarantee fee to the Development Support Fund..

Article 31. Financial Liability when Investor Cannot Repay Debt

In case the project investor cannot repay the loan according to the signed credit contract, then:

1. The Development Support Fund shall be responsible for repaying the debt to the lending credit institution on behalf of the investor for the guaranteed loan amount received.

2. The project investor must accept compulsory debt with the Development Support Fund for the amount the Fund repays on their behalf at an interest rate penalty of 150% of the current interest rate of the lending credit institution.

3. When there is a source of repayment, the project investor must repay the compulsory debt (including interest) to the Development Support Fund.

Article 32. Risk Management in Guarantee

In case the project investors receiving guarantee cannot repay the compulsory debt to the Development Support Fund, it will be handled according to the provisions of Articles 19 and 21 of this Decree.

Chapter III

STATE INVESTMENT DEVELOPMENT CREDIT CAPITAL

Article 33. State Investment Development Credit Capital

1. State budget capital:

a) The charter capital of the Development Support Fund.

b) Annual supplementary state budget capital allocated to implement various forms of state investment development credit.

c) Capital from projects and programs entrusted by the Government to the Development Support Fund to implement.

d) Capital from the Government of Vietnam for foreign loans under government agreements.

2. Capital raised by the Development Support Fund:

a) Capital from issuing government bonds.

b) Loans from domestic and foreign economic organizations.

c) Other mobilization as prescribed by law.

3. ODA capital, foreign government loans used for re-lending.

Chapter IV

DEVELOPMENT SUPPORT FUND

Article 34. Tasks of the Development Support Fund

1. Mobilizing capital, accepting and managing state sources of capital for state investment development credit as prescribed.

2. Implementing state investment development credit activities as prescribed in this Decree.

3. Receiving disbursement and lending from sources of capital entrusted by localities, domestic and foreign organizations; performing other tasks assigned by the Prime Minister.

4. Organizing payment for customers with direct relationships and participating in the payment system as prescribed by law.

5. Submitting quarterly or ad hoc reports to the Prime Minister, Ministry of Finance, and Ministry of Planning and Investment upon request.

Article 35. Financial Mechanism of the Development Support Fund

1. The Development Support Fund's operations are not for profit, with the state ensuring its payment capacity; exempted from taxes and other payments to the state budget.

2. The state budget implements annual subsidies for interest rate differences, post-investment interest rate support, and operational fees for the Development Support Fund based on actual implementation of state investment development credit.

Chapter V

RESPONSIBILITIES OF STATE MANAGEMENT ORGANIZATIONS AND ORGANIZATIONS AND INDIVIDUALS PROVIDING SERVICES IN IMPLEMENTING SERVICE PRICES

Article 36. the Ministry of Finance

1. Managing state finances for state investment development credit activities and the Development Support Fund;

2. The Minister of Finance, representing the Prime Minister, directs the activities of the Development Support Fund, decides the interest rate for capital mobilization by the Development Support Fund; sets and adjusts the lending interest rate according to Clause 1 and 2 of Article 12 of this Decree; handles state investment development credit risks within authority.

3. Initiates and coordinates with relevant ministries to submit to the Government for decision on the list of borrowing objects and the application period for preferential terms in each period.

4. Coordinates with the Ministry of Planning and Investment to allocate annual state budget capital for the Development Support Fund to implement various forms of state investment development credit.

5. Inspects and supervises the Development Support Fund in borrowing, accepting and repaying debts from mobilized capital sources; using state investment development credit capital for lending, providing post-investment interest rate support, and repaying debts on behalf of guarantees; implementing disbursements according to agreements signed by the Government of Vietnam with foreign countries.

6. Proposes or issues policies and financial mechanisms; policies for mobilizing and utilizing state investment development credit capital; monitors the financial activities of the Development Support Fund.

Article 37. Ministry of Planning and Investment

1. Compiles the annual state investment development credit plan within the overall socio-economic development plan and submits to the Prime Minister for announcement of the annual state investment development credit plan.

2. Leads and coordinates with the Ministry of Finance to prepare the state budget estimate for annual interest rate subsidies and post-investment interest rate support for state investment development credit activities as prescribed.

3. Leads and submits to the Prime Minister for assignment of the annual state investment development credit plan and the interest subsidy estimate for the Development Support Fund.

4. Coordinates with the Ministry of Finance to inspect the Development Support Fund's activities in borrowing, accepting and repaying debts from mobilized capital sources; using state investment development credit capital for lending, providing post-investment interest rate support, repaying debts on behalf of guarantees, and implementing disbursements according to agreements signed by the Government of Vietnam with foreign countries.

5. Widely publicizes and updates information on planning, strategy, and development orientation for industries, regions, products, and state policies encouraging investment and export.

Article 38. State Bank of Vietnam

1. Performs state management functions related to currency, foreign exchange, and credit concerning state investment development credit;

2. Guides the Development Support Fund to participate in the payment system as prescribed in Clause 4 of Article 34 of this Decree;

3. Direct the Vietnam Bank for Social Policies, commercial banks, and credit organizations to cooperate with the Development Support Fund to implement entrusted loan, guarantee, and post-investment interest rate support services in accordance with this Decree and the operational regulations of credit organizations.

Article 39. Ministries, ministerial-level agencies, agencies under the Government, and People's Committees of provinces and centrally governed cities

1. Publicize widely the planning, development orientation plans, and industry, sector, product, territorial technical standards, economic norms, and technical quotas, as well as other necessary information during each period, serving as the basis for evaluating projects supported by state investment.

2. In accordance with their functions and tasks, direct and inspect project investors to implement investments in compliance with state regulations on investment, ensuring progress and timely repayment of loans in accordance with the commitments made in the credit contracts.

3. Coordinate with the Development Support Fund to address consequences arising from projects that have been suspended or unable to repay loans within their scope of responsibility as stipulated by law.

Chapter VI

REPORTING, INSPECTION, AUDIT AND VIOLATION HANDLING

Article 40. Inspection, audit, reporting

1. All state development investment credit activities as prescribed by this Decree must be subject to inspection and audit by competent state agencies in accordance with the law.

2. In specific cases, inspections and audits may be conducted at individual stages or throughout the entire process of investment construction, production, business operations, and loan repayment.

3. Heads of ministries, ministerial-level agencies, agencies under the Government, Chairpersons of provincial and centrally governed city People's Committees shall carry out supervision over the implementation of state development investment credit policies within their jurisdiction.

4. Quarterly or at any time, the Development Support Fund shall compile and report to the Prime Minister on the implementation of the development investment credit plan, simultaneously sending reports to the Ministry of Planning and Investment, the Ministry of Finance, and the General Statistics Office.

Article 41. Handling Violations

1. Organizations and individuals benefiting from state development investment credit who violate the provisions of this Decree may be subject to administrative penalties depending on the severity of the violation, and if damage to property occurs, they must compensate and be dealt with according to the law.

2. Individuals responsible for making incorrect investment decisions leading to serious economic, social, and environmental consequences must bear legal responsibility.

The Development Support Fund and credit organizations that breach credit contracts, interest rate support contracts, guarantee contracts, and insurance contracts shall be dealt with according to the law.

Chapter VII

IMPLEMENTING PROVISIONS

Article 42. Effectiveness

This Decree takes effect fifteen days after its publication in the Official Gazette. The Government Decree No. 43/1999/NĐ-CP dated June 29, 1999, on state development investment credit, and other related provisions contrary to this Decree are hereby repealed.

Article 43. Projects that have signed credit contracts

For projects borrowing development credit, receiving development credit guarantees, and post-development interest rate support that have signed contracts with the Development Support Fund before this Decree takes effect, such projects shall continue to be implemented in accordance with the terms of the signed credit contracts.

Article 44. Responsibility for guiding implementation

The Minister of Finance, Governor of the State Bank of Vietnam, and Management Council of the Development Support Fund are responsible for guiding the implementation of this Decree in accordance with their functions and authority.

Article 45. Ministers, heads of ministerial-level agencies, heads of agencies under the Government, Chairpersons of provincial and centrally governed city People's Committees, and Chairpersons of the Management Council of the Development Support Fund are responsible for enforcing this Decree.