Circular No. 117/2013/TT-BTC guiding the financial mechanism and disbursement for the European Investment Bank's credit funds for two pilot urban railway projects in Hanoi (Nhon - Hanoi Railway Station, Line 3) and Ho Chi Minh City Metro Line 2.

CIRCULAR

Guidelines for the financial mechanism and disbursement of credit funds from the European Investment Bank for the Urban Rail Transit Construction Project

pilot in Hanoi City, section Nhon - Hanoi Railway Station (Line 3) and the Underground Line 2 Construction Project in Ho Chi Minh City

pilot project in Hanoi City, section from Nhon to Hanoi Railway Station (Line No. 3) and Project

Construction of Line No. 2 Metro in Ho Chi Minh City

________________________

BASED ON THE GOVERNMENTAL DECREE NO. 79/2010/NĐ-CP DATED JULY 14, 2010 ON PUBLIC DEBT MANAGEMENT OPERATIONS;

Pursuant to Decree No. 78/2010/NĐ-CP dated July 14, 2010 of the Government on lending out foreign loans borrowed by the Government;

FI N° 25.946 SIGNED ON DECEMBER 6, 2010 BETWEEN THE MINISTRY OF FINANCE ON BEHALF OF THE GOVERNMENT OF THE SOCIALIST REPUBLIC OF VIETNAM AND THE EUROPEAN INVESTMENT BANK (EIB) FOR THE HO CHI MINH CITY METRO PROJECT WITH A VALUE OF 150 MILLION EUR AND THE LOAN AGREEMENT

Pursuant to the Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Circular No. 108/2007/TT-BTC dated September 7, 2007 guiding the financial management mechanism for official development assistance (ODA) programs and projects; Circular No. 40/2011/TT-BTC dated March 22, 2011 and Circular No. 107/2011/TT-BTC dated July 20, 2011 of the Ministry of Finance amending and supplementing Circular No. 108/2007/TT-BTC dated September 7, 2007.

Pursuant to the Loan Agreement No. FI N⁰ 25.946 signed on December 6, 2010 between the Ministry of Finance representing the Government of the Socialist Republic of Vietnam and the European Investment Bank (EIB) financing the "Construction of Underground Line 2 in Ho Chi Minh City" project with a value of 150 million EUR and the Loan Agreement No.⁰ 25.758 signed on October 4, 2010 between the Ministry of Finance representing the Government of the Socialist Republic of Vietnam and the European Investment Bank (EIB) financing the "Construction of the Urban Rail Transit Pilot Project in Hanoi City, section Nhon-Hanoi Railway Station" project with a value of 73 million EUR (hereinafter referred to as the Agreement);

Pursuant to Decision No. 2211/TTg-QHQT dated December 3, 2010 of the Prime Minister approving the Agreement "Construction of Underground Line 2 in Ho Chi Minh City" and Decision No. 1772/TTg-QHQT dated September 30, 2010 of the Prime Minister approving the Agreement "Construction of the Urban Rail Transit Pilot Project in Hanoi City, section Nhon-Hanoi Railway Station" with the European Investment Bank (EIB);

Pursuant to Document No. 2152/VPCP-KTTH dated April 3, 2012 and No. 908/VPCP-KTTH dated February 17, 2012 of the Prime Minister on the financial mechanism and organization of implementation of the agreements to finance the construction of underground railway projects in Vietnam;

This Circular takes effect from February 15, 2025.

The Minister of Finance issues this Circular guiding the financial mechanism and disbursement of credit funds from the European Investment Bank for the Urban Rail Transit Construction Project pilot in Hanoi City, section Nhon - Hanoi Railway Station (Line 3) and the Underground Line 2 Construction Project in Ho Chi Minh City,

Section 1

||| GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular stipulates the financial mechanism and disbursement procedures applicable to the credit funds of the European Investment Bank (hereinafter referred to as “EIB”) for the Urban Rail Transit Construction Project pilot in Hanoi City, section Nhon - Hanoi Railway Station (Line 3) and the Underground Line 2 Construction Project in Ho Chi Minh City (hereinafter referred to as “Project”).

Article 2. Applicability

This Circular applies to the Project managers, the Project supervisory agencies, and other agencies, organizations, and units related to the use of EIB credit funds to implement the Project.

Article 3. Definitions

1. Project supervisory agency: is the People's Committee of Hanoi City (for the Urban Rail Transit Construction Project pilot in Hanoi City, section Nhon - Hanoi Railway Station (Line 3)) and the People's Committee of Ho Chi Minh City (for the Underground Line 2 Construction Project in Ho Chi Minh City) (hereinafter referred to as “People's Committee of the city”).

2. Project manager: is the Hanoi Urban Rail Management Board (pursuant to Decision No. 1970/QĐ-UBND dated April 27, 2009 on approving the feasibility study report of the investment project for constructing the Urban Rail Transit Pilot Project in Hanoi City, section Nhon - Hanoi Railway Station and Decision No. 925/QĐ-UBND dated February 22, 2012 of the Hanoi People's Committee) and the Ho Chi Minh City Urban Rail Management Board (pursuant to Decision No. 4474/QĐ-UBND dated October 11, 2010 on approving the investment project for constructing Underground Line 2 in Ho Chi Minh City, line Ben Thanh - Tham Luong).

In addition to the functions and tasks specified in the two decisions above, the Project Manager is responsible for preparing the annual withdrawal plan for the Project, signing the loan application documents sent to the Ministry of Finance, and being the account holder receiving the EIB credit funds transferred from the Special Account to the Project Account to pay contractors.

3. Fund recipient: The People's Committees of Hanoi City and Ho Chi Minh City are the fund recipients (for the allocated portion), sign the rescheduling loan contracts, receive and repay loans when due to the Ministry of Finance (for the rescheduled loan portion).

Article 4. Principles of Management

1. The credit under the Agreement is a foreign loan of the Vietnamese Government. All loan proceeds and repayments are recorded in the State Budget.

2. The domestic financial mechanism applied to the Project is the mechanism approved by the Prime Minister in Document No. 2152/VPCP-KTTH dated April 3, 2012 and No. 908/VPCP-KTTH dated February 17, 2012.

3. The Ministry of Finance shall provide rescheduling loans and sign Rescheduling Loan Contracts with the People's Committees of the cities for the contents of investment within the scope of rescheduling loans. The People's Committees of the cities are responsible for allocating sources of repayment in the annual State Budget Estimate and implementing timely and full repayment of the State Treasury.

4. The People's Committees of the cities and the Project Managers are responsible for using the EIB loan funds for their intended purposes and effectively, in accordance with the conditions stipulated in the loan agreements signed with the EIB and relevant current laws of Vietnam.

Section 2

SPECIFIC PROVISIONS

Article 5. Financial Mechanism Applied to the Project

1. For the EIB loan portion: The central budget shall transfer funds to the Project Owner for the Project Owner to implement the Project according to the following financial mechanism:

a) Allocate funds for payment of construction items of railway infrastructure as stipulated in the Law on Railways 2005 and other expenses as currently prescribed.

b) Refinance the portion of funds for payment of procurement items, including equipment, transport means, operation of stations, and depots;

c) Contingency costs: The financial mechanism (allocation or refinancing) will be determined based on the content of fund usage as specified in points a and b of this Clause, subject to approval by the competent authority.

d) The Project Owner shall base on Circular No. 3155/BGTVT-KHĐT dated April 24, 2012 of the Ministry of Transport guiding related items concerning operation and business of urban rail transport projects eligible for refinancing, and submit to the Project Management Authority a document clearly defining the content of each tender package eligible for allocation, refinancing, or a combination thereof (allocation and refinancing), and send it to the Ministry of Finance and the local State Treasury for monitoring, accounting, and controlling expenditures from the EIB loan for the Project.

đ) The Ministry of Finance shall refinance the loan from the Agreement according to the Rescheduling Contract signed with the People's Committee of the city in accordance with specific conditions set out in Appendix 1 (for the Construction of Line 2 Metro Project in Ho Chi Minh City) and Appendix 2 (Construction of the Urban Railway Pilot Project in Hanoi, Section Nhon - Hanoi Railway Station (Line 3)) of this Circular.

- Refinancing conditions (time and interest rate for refinancing) shall be equal to the borrowing conditions stated in the Agreement.

- Refinancing fee: The Ministry of Finance shall not charge a refinancing fee for the refinanced amount as stipulated in point b, Clause 1, Article 10 of Decree No. 78/2010/NĐ-CP.

- During the loan drawdown process of the Project, the Ministry of Finance shall advance payment of all related fees as prescribed in the Agreement, including the portion corresponding to the refinanced amount. After the Project has completed its drawdown, the People's Committee of the city shall immediately repay the Ministry of Finance all related fees advanced by the Ministry during implementation, corresponding to the refinanced amount.

- The Project Owner shall directly pay to the domestic bank serving the Project all service fees collected by that bank (including L/C opening fees, international payment fees, etc., if applicable).

2. For the counterpart funds: The People's Committee of the city shall be responsible for self-balancing according to Article 14 of Decree No. 79/2010/NĐ-CP to pay indirect taxes, compensation costs, land clearance costs, and other counterpart requirements (if any), ensuring timely and appropriate allocation of counterpart funds in compliance with state budget laws and the Agreement.

Article 6. Procedures for Disbursing EIB Loan Funds

1. Provisions on disbursement currency, debt currency, EIB loan account, accrued interest, and date of debt recording

a) The Ministry of Finance shall open an account at a commercial bank to receive disbursements from the EIB (hereinafter referred to as Special Account (SA)). The maximum number of disbursement tranches from the EIB to the SA shall not exceed ten tranches, with each tranche having a minimum value of 5,000,000 EUR (Five million euros).

b) The Project Owner shall open a Project Account (PA) at a commercial bank serving the Project (referred to as Project Account (PA)) to receive transferred funds from the Ministry of Finance via the SA for Project expenditure.

c) The disbursement currency and debt currency of the Project from the EIB to the SA and from the SA to the PA shall be EUR, USD, or GBP, as requested by the Project Owner and in accordance with the loan agreement provisions.

d) The EIB shall disburse funds based on the Ministry of Finance’s Disbursement Request Form accompanied by the Project Owner’s Disbursement Request Letter (in Vietnamese and English) along with relevant payment documents as detailed below.

e) For the refinanced portion, the date the Ministry of Finance records debt for the People's Committee of the city (or the Department of Finance of Hanoi City and Ho Chi Minh City, where authorized by the People's Committee of the city) is the date the EIB records debt for Vietnam. For the allocated portion, the receipt date is the date the Ministry of Finance transfers money from the SA to the PA.

f) The balance on the SA and PA shall earn interest rates as stipulated by the serving bank or agreed between the serving bank and the account holder. Interest accrued on the PA belongs to the local state budget revenue. Interest accrued on the SA belongs to the central state budget revenue.

The tracking and utilization of accrued interest shall be carried out in accordance with Circular No. 108/2007/TT-BTC of the Ministry of Finance dated September 7, 2007, guiding the financial management mechanism for Official Development Assistance (ODA) programs and projects, and subsequent amendments and supplements thereto.

g) The disbursement of EIB loans for payment to the Project’s contractors shall be made according to the contract progress and specific conditions regarding content, payment ratio, and payment documents stipulated in the contract. During the Project implementation, if disputes arise related to these commercial contracts, the Project Owner must resolve them directly with the contractor while simultaneously notifying the Project Management Authority, the Ministry of Finance, and relevant agencies about the dispute and resolution measures for coordination and monitoring.

2. Disbursement Procedures

a) Disbursement Process to the SA:

- At least 20 working days before the planned disbursement date, the Project Owner shall submit to the Ministry of Finance a disbursement request letter (in Vietnamese and English) according to the model at Appendix 3-1 and 3-2 (specifying legal bases, the value of the loan installment requested for disbursement, the plan for using the loan installment consistent with the project implementation and payment progress under the commercial contracts, relevant documents (if any)... and additional explanatory documents if required.

- Within a maximum of five working days from receiving the complete and valid documents from the Project Owner, the Ministry of Finance shall submit the Disbursement Request Form (according to the model in Appendix C of the Agreement) to the EIB to transfer funds into the SA.

- Within a maximum period of fifteen working days from the date of receipt of the Request for Disbursement submitted by the Ministry of Finance, the EIB shall examine and transfer funds to the Dedicated Account if it accepts payment (or shall send a letter to the Ministry of Finance clearly stating the reasons if it does not accept payment).

b) First disbursement request to the Dedicated Account:

In addition to the documents listed in Article 1.04 of the Agreement (Disbursement Conditions), before the first disbursement, the Project must submit to the Ministry of Finance the following documents:

- Decision approving the project.

- Decision approving the tender results (original) and an English translation thereof.

- Two copies of the Contract (original or certified true copy).

- A document from the Project Leader introducing the signature of the authorized person to sign documents, disbursement requests, and payments (name, position, and signature of the introduced individual).

- Copies of the Performance Guarantee and Advance Payment Guarantee.

- The Project's annual financial plan (including the drawdown plan).

The Project Leader only needs to submit the above documents once for the entire project, except in cases where there are amendments or adjustments to these documents. As for the financial plan, it only needs to be submitted annually as prescribed in Circular No. 108/2007/TT-BTC, and Circular No. 40/2011/TT-BTC dated March 22, 2011, amending and supplementing certain points of Circular No. 108/2007/TT-BTC dated September 7, 2007.

c) Additional disbursement to the Dedicated Account:

When the balance in the Dedicated Account remains at 1,000,000 EUR, the Ministry of Finance sends a notification letter to the Project Leader to prepare the documents requesting additional disbursement from the EIB. The disbursement request includes:

- A letter from the Project Leader to the Ministry of Finance requesting additional disbursement to the Dedicated Account, specifying the legal basis for determining the value of the requested disbursement amount (disbursement plan approved, contract...);

- A list of disbursements from the Dedicated Account to the Project Account up to the time of the additional disbursement request, prepared by the Project Leader, detailing the payments made from those disbursements according to the model provided; Number of Agents of this Circular

- A bank statement of the project account up to the time of the disbursement request, confirmed by the servicing bank.

Within a maximum period of five working days from the date of receipt of all complete and valid payment documents, the Ministry of Finance will review and sign the Disbursement Request Form to be sent to the EIB.

d) Disbursement to the Project from the Dedicated Account:

- When there is a payment request to the contractor/supplier for goods/services for the project, the Project Leader submits a letter to the Ministry of Finance requesting disbursement of EIB funds to the Project Account according to Model 3-3, accompanied by a Payment Request Form with the expenditure control stamp of the State Treasury.

- The Project Leader is responsible for accurately calculating the amount requested for disbursement from EIB funds in accordance with the content and payment ratio stipulated in the Financing Agreement. In cases of payment to contractors/suppliers in VND, the Project Leader is responsible for converting the amount to the equivalent foreign currency value based on the buying rate of the servicing bank at the time of the letter sent to the Ministry of Finance requesting disbursement of EIB funds from the Dedicated Account to the Project Account.

- Within a maximum period of two working days from the date of receipt of all complete and valid payment documents, the Ministry of Finance will review and transfer the payment amount to the Project Account.

- Within a maximum period of two working days, the Project Leader is responsible for transferring the payment amount to the contractor/supplier according to the amounts requested and disbursed by the Ministry of Finance from the Dedicated Account.

Article 7. Procedures for expenditure control

Expenditure from the Dedicated Account (TKĐB) and the Disbursement Account (TKDA) shall be subject to expenditure control in accordance with the guidance provided in Circular No. 108/2007/TT-BTC and Circular No. 40/2011/TT-BTC on the financial management mechanism for official development assistance (ODA) programs and projects, as well as any subsequent amendments, supplements, or replacements thereof.

The State Treasury at the local level shall be responsible for expenditure control over all disbursement activities of the Project, including both the allocation portion and the loan portion of the Project.

Article 8. Government budget accounting

On a monthly basis, based on statements of expenditures disbursed from the Dedicated Account to the Disbursement Account, the Ministry of Finance shall record revenue for the central government budget and record expenditure for the local government budget (for the allocated loan portion) or record expenditure for relending to the People's Committee of the city (for the relending portion).

Article 9. Reporting System

The Project proponent shall be responsible for implementing the reporting system as follows:

a) Quarterly and annually, prepare reports on the use of European Investment Bank (EIB) funds for the Project and submit them to the Ministry of Finance as a basis for monitoring and supervision.

b) Submit to the Ministry of Finance the annual audited financial report of the Project, the annual report on the implementation of the Project, and other reports as stipulated in the Agreement.

c) Retain all disbursement documentation and records of fund usage to facilitate accounting, handover, and state asset management after the completion of the Project.

Section 3

IMPLEMENTING PROVISIONS

Article 10. Effective Date

This Circular takes effect from October 8, 2013.

Article 11. Implementation Organization

The relevant ministries, the People's Committee of Hanoi City, the People's Committee of Ho Chi Minh City, and related agencies shall be responsible for organizing the implementation of this Circular. In the course of implementation, if there are any difficulties, the relevant agencies and units are requested to promptly reflect them to the Ministry of Finance for study and resolution./.