Circular No. 108/2003/TT-BTC guides the financial mechanism applicable to environmental sanitation projects funded by Official Development Assistance (ODA).

CIRCULAR

Guidelines for financial mechanisms applicable to environmental sanitation projects

using official development assistance (ODA) funds

Pursuant to Decree No. 90/1998/NĐ-CP dated November 7, 1998, promulgating the Borrowing and Repayment Regulations for Foreign Debts;

Pursuant to Decree No. 17/2001/NĐ-CP dated May 4, 2001, promulgating the Management and Utilization Regulations for Official Development Assistance Funds;

Pursuant to Decree No. 77/2003/NĐ-CP dated July 1, 2003, stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decision No. 02/2000/QĐ-BTC dated January 6, 2000, issued by the Minister of Finance, promulgating the Rescheduling Regulations for Loans from Foreign Loans/Grants;

Pursuant to Circular No. 1073/CP-QHQT dated August 12, 2003, approving the principles for adjusting financial mechanisms for environmental sanitation projects using ODA funds;
The Ministry of Finance hereby provides guidance as follows:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

A. ENVIRONMENTAL SANITATION PROJECTS

USING ODA FUNDS INCLUDE:

Sewage and wastewater treatment for cities, towns, and residential areas;

Solid waste management and urban solid waste treatment;

Medical waste treatment and hospital environmental sanitation;

Industrial wastewater, solid waste, and gas emissions treatment at industrial zones, export processing zones, and high-tech parks;

Such projects may be independent or part of an environmental sanitation component within a mixed investment project. The financial mechanism for the environmental sanitation component in a mixed project shall be applied according to the provisions of this Circular.

B. DOMESTIC FINANCIAL MECHANISMS APPLICABLE TO

ENVIRONMENTAL SANITATION PROJECTS USING ODA FUNDS

Based on the specific nature and conditions of each project and locality, combined with the requirements of the donor regarding the financial mechanism for the project, the Ministry of Finance will guide the specific financial mechanism for each type of environmental sanitation project using ODA loan funds as follows:

1. For sewage and urban wastewater treatment projects: apply the State Budget (SB) mechanism to fully allocate ODA funds for the Project. The counterpart fund for the Project shall be arranged by the local budget.

2. For household waste and urban solid waste treatment projects: apply the State Budget (SB) mechanism to reschedule a portion of the ODA loan funds according to the foreign loan conditions and allocate a portion of the ODA loan funds according to a ratio suitable for each project's debt repayment capacity. The counterpart fund for the project shall be arranged by the local budget and the Project Owner.

The Ministry of Finance shall coordinate with the Ministry of Planning and Investment to review each specific project and submit to the Prime Minister for decision on the allocation/rescheduling ratio of ODA funds mentioned above.

In cases where household waste and urban solid waste treatment projects use non-reimbursable ODA grants, the State Budget (SB) mechanism shall fully allocate the grant funds for the Project. The counterpart fund for the project shall be arranged by the local budget and the Project Owner.

3. For medical waste and hospital environmental sanitation projects: apply the State Budget (SB) mechanism to fully allocate ODA funds for the Project. For projects where central ministries and sectors are the owners, the counterpart fund for the project shall be allocated from the State Budget (SB) according to the annual approved construction investment plan for the responsible ministry or sector. For projects where localities are the owners, the counterpart fund shall be arranged by the local budget.

4. For industrial wastewater, solid waste, and gas emissions treatment projects in industrial zones, export processing zones, and high-tech parks: apply the State Budget (SB) mechanism to reschedule all ODA loan funds for the Project Owners according to the foreign loan conditions (interest rate, term). The Project Owner shall repay the loan to the State Budget (SB) according to the rescheduling agreement and pay domestic rescheduling fees to the agency authorized by the Ministry of Finance to implement the rescheduling (Rescheduling Agency) according to current regulations. The counterpart fund for the project shall be arranged by the Project Owner.

For environmental sanitation projects in industrial zones, export processing zones, and high-tech parks using non-reimbursable ODA grants: apply the State Budget (SB) mechanism to reschedule all grant funds (principal) for the Project. The Project Owner does not have to pay interest but must repay the principal and domestic rescheduling fees to the State Budget (SB) according to regulations. The rescheduling period (including grace period) shall be determined in accordance with the project's feasibility report. The counterpart fund for the project shall be arranged by the Project Owner.

The currency for rescheduling shall be the foreign currency borrowed under the Agreement with the donor. Projects can repay in Vietnamese dong at the exchange rate prevailing at the time of repayment according to current regulations of the Ministry of Finance.

6. In cases where international agreements on ODA signed with donors provide different domestic financial mechanisms for environmental sanitation projects than those stipulated in Section I.B of this Circular, such agreements shall be applied according to the terms of the signed international agreements on ODA.

II. SPECIFIC PROVISIONS

A. SCOPE OF APPLICATION AND ADJUSTMENT OF FINANCIAL MECHANISMS

FOR ENVIRONMENTAL SANITATION PROJECTS

1. For new projects included in the foreign aid list or which have signed agreements with foreign donors but have not yet determined specific financial mechanisms, they shall be applied according to the provisions of Section I.B above.

2. For projects already included in the aid list or which have signed agreements with foreign donors and previously approved by the Government with different financial mechanisms from those stipulated in Section I.B, currently being implemented under the previous mechanism, shall be adjusted to the new mechanism according to the following handling principle:

a. For projects that previously applied the loan rescheduling mechanism and now switch to the state budget fully allocating ODA funds (Point 1, Point 2 for projects using non-refundable aid funds and Point 3 of Section I.B): The Ministry of Finance will record the allocation of the unpaid principal portion to the Project Owner, while canceling all accrued but unpaid interest and fees debts. The paid-off principal, interest, and fees will not be refunded to the rescheduling agency.

b. For projects that previously applied the full loan rescheduling mechanism for ODA funds and now switch to partial state budget allocation and partial loan rescheduling (Point 2 of Section I.B): the Project Owner needs to recalculate the project's repayment plan according to the correct rescheduling conditions equivalent to favorable foreign loans (specifically determining the ratio of allocation/rescheduling) and submit it to the Ministry of Finance and the Ministry of Planning and Investment. The Ministry of Finance will lead the coordination with the Ministry of Planning and Investment to study and report to the Prime Minister for consideration and decision.

c. Projects that have already been implemented under the partial allocation and partial rescheduling mechanism for foreign capital will not be adjusted again on the approved allocation/rescheduling ratio.

B. PROCEDURES FOR ADJUSTMENT

1. For projects that previously applied the ODA loan rescheduling mechanism and now switch to full state budget allocation or partial allocation:

- Rescheduling agencies shall complete the procedures to terminate the Loan Rescheduling Contract with the Project Owner and send a copy of the Termination Record to the Ministry of Finance, specifying the amount of disbursed foreign loans and the project's debt (principal). Based on this Termination Record, the Ministry of Finance will process the adjustment from loan rescheduling to supplementary targeted allocation for local management agencies or extra-budgetary allocation for central management agencies through the state budget the corresponding ODA funds.

- Based on the funding allocation documents from the Ministry of Finance (Approval Notice, Payment Order), the local Department of Finance will increase the state budget funds for the Project Owner; Ministries and sectors will continue to account for the state budget funds allocated directly to the Project Owners using ODA funds.

2. For projects adjusting the rescheduling conditions (from full ODA loan rescheduling to partial allocation and partial rescheduling or adjusting the rescheduling conditions): Rescheduling agencies are responsible for reviewing environmental sanitation projects and reporting to the Ministry of Finance for examination and financial mechanism adjustment for each project.

III. IMPLEMENTATION:

This Circular takes effect fifteen days after its publication in the Official Gazette. Projects transitioning from full ODA loan rescheduling to partial allocation and partial ODA loan rescheduling must submit a new letter and financial plan to the rescheduling agency for review and report to the Ministry of Finance and the Ministry of Planning and Investment for consideration and decision before June 30, 2004. After this deadline, if the Project Owner does not submit a new financial plan, it will be considered as having no request for adjustment and will proceed according to the previously approved mechanism.

Management Ministries and People's Committees of localities responsible for projects have the responsibility to inform ODA users in the environmental sanitation sector about this Circular and coordinate with the Ministry of Finance to implement it accordingly.

During the implementation of this Circular, if there are any difficulties, they should immediately reflect them to the Ministry of Finance and the Ministry of Planning and Investment for consideration and resolution.