CIRCULAR 131/1999/TT-BTC GUIDELINES FOR THE MECHANISM OF USING AND MANAGING FINANCIAL FUNDS OF GOVERNMENT ASSISTANCE FROM FRANCE IN 1998

CIRCULAR

Circular No. 131/1999/TT-BTC dated November 11, 1999 of the Ministry of Finance guiding the mechanism for using and managing financial resources from official development assistance (ODA) provided by the French Government in 1998

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Pursuant to Decree No. 90/1998/NĐ-CP dated November 7, 1998 of the Government promulgating the Regulation on Management of Foreign Borrowing and Repayment;
Pursuant to Decree No. 87/CP dated August 5, 1997 of the Government promulgating the Regulation on management and use of official development assistance (ODA) sources;
Pursuant to the Vietnam-France Agreement in 1998 signed on December 22, 1998 between the Ministry of Planning and Investment representing the Government of Vietnam and the French Ministry of Economy and Finance;
Pursuant to the Implementing Agreement for the Vietnam-France Agreement in 1998 signed on September 3, 1999 between the Ministry of Finance representing the Government of Vietnam and the French Development Agency;
Pursuant to Circular No. 627/CP-QHQT dated June 18, 1999 of the Government regarding the financial mechanism for projects using funds from the French Government under the 1998 Agreement;
Pursuant to Circular No. 75/CP-QHQT dated January 23, 1999 of the Government regarding tax policy for projects using funds from the French Government under the 1998 Agreement;
The Ministry of Finance guides the mechanism for using and managing financial resources from the French Government's ODA in 1998 as follows:

I. GENERAL PROVISIONS

1. The source of funds according to the 1998 Agreement of the French Government loaned to the Government of Vietnam (from the French Treasury) is revenue of the State Budget, recorded in the State Budget and managed in accordance with the provisions of the State Budget Law and sub-law guiding documents. The Ministry of Finance is responsible for repaying principal and interest to the French Government when due for the loans.

2. Based on the purpose, nature of fund usage, and repayment capacity, projects utilizing funds under the 1998 Agreement are classified as follows:

- Projects funded from the State Budget according to the list attached as Appendix I (mapping project).

- Projects implementing a rescheduling regime from the French Treasury loan according to the specific list attached as Appendix II.

3. Procedures for implementing projects shall be carried out in accordance with the guidance of the Ministry of Planning and Investment in Circular No. 1425-BKH/KTĐN dated March 9, 1999 on the implementation of the Vietnam-France Agreement in 1998.

4. The preparation, review, and approval of feasibility study reports for projects shall be conducted in accordance with the provisions set forth in the Investment Management and Construction Regulations issued together with Decree No. 52/1999/NĐ-CP dated July 8, 1999 of the Government.

5. On the basis of approved projects, the project owner is responsible for conducting tender procedures and signing commercial contracts for purchasing goods and services from French companies in accordance with the provisions of the Tendering Regulations issued together with Decree No. 88/1999/NĐ-CP dated September 1, 1999 of the Government and the regulations of the French Government concerning these funds. Commercial contracts must be signed before June 30, 2000 (except in cases where the French Government agrees to extend the deadline later).

6. The agency managing allocated funds and rescheduling loans:

- For mapping projects funded from the State Budget, the Ministry of Finance directly manages the allocated funds.

- For projects implementing a rescheduling regime from the State Budget: The Ministry of Finance delegates the Rescheduling Agency (currently the General Department of Investment and Development) to directly manage and reschedule loans.

7. French organizations and individuals implementing projects within the framework of the Vietnam-France Agreement in 1998 are exempt from corporate income tax, individual income tax, and other direct taxes in Vietnam. Exemption from taxes and fees levied on the repayment of principal and interest under the Vietnam-France Agreement in 1998. Goods, equipment, and services of projects using French loan funds under the 1998 Agreement to serve the project are exempt from import duties according to Circular No. 852/CP-QHQT dated July 25, 1998 of the Government and implemented according to Circular No. 3670-TC/TCT dated July 28, 1999 of the General Department of Taxation - Ministry of Finance.

8. The planning, allocation, and rescheduling of foreign loan funds and counterpart funds for projects are carried out in accordance with Joint Circular No. 81/1998/TTLT-BTC-NHNN of the Ministry of Finance and the State Bank of Vietnam dated June 17, 1998 guiding the procedures, formalities, and management of withdrawal of funds for official development assistance and Joint Circular No. 06/1998/TTLT-BKH-BTC of the Ministry of Planning and Investment and the Ministry of Finance dated August 14, 1998 guiding the management mechanism for counterpart funds for programs and projects using official development assistance.

9. Project owners are legally responsible for using funds in accordance with their commitments and regulations stipulated in the Agreements signed, approved commercial contracts, strictly adhering to state regulations on financial management, accounting statistics, and bookkeeping in accordance with current state regulations.

II. SPECIFIC PROVISIONS

1. Procedure and formalities for withdrawing loan funds

a) Basis for the Ministry of Finance to process loan withdrawals for projects:

Project owners need to submit the following documents to the Ministry of Finance (Department of Foreign Financial Affairs) to process the withdrawal of foreign loan funds:

- Feasibility Study Report accompanied by the Investment Decision,

- Approved commercial contract,

- Permit for importing goods under the signed commercial contract issued by the Ministry of Trade,

- Request from the project owner to withdraw funding to pay for commercial contracts

b) After receiving all the above-mentioned project documents and the letter from the Ministry of Planning and Investment to the French Trade Office in Hanoi requesting allocation of funds for the project:

- For projects funded from the State Budget: The Ministry of Finance (Department of Foreign Financial Affairs) will sign off on the commercial contract of the project and process authorization to send the French Development Agency (AFD) in Hanoi to directly withdraw funds for the project.

- For projects rescheduling ODA funds from the State Budget: After the project owner has signed a credit agreement with the rescheduling agency according to the conditions for rescheduling set out below at point 2, the Ministry of Finance (Department of Foreign Financial Affairs) will sign off on the commercial contract of the project and process authorization for AFD in Hanoi to directly withdraw funds for the project.

c) For each subsequent withdrawal, the Ministry of Finance shall sign to confirm the relevant invoices and documents that have been signed and accepted for payment by the project owner, which are sent by the French Trade Office in Hanoi to the AFD in Hanoi to proceed with the payment to the French partner.

d) The final withdrawal deadline for projects is December 31, 2002 (except in cases where the French Government agrees to extend it later).

e) In cases where the implementation of the project cannot proceed or is delayed due to incomplete procedures, if the project owner wishes to withdraw or convert the project for any reason, they must promptly report to the Ministry of Planning and Investment and the Ministry of Finance.

2. Implementation of disbursement management and loan rescheduling

a) For projects funded from the State Budget.

The Ministry of Finance shall record revenue in the State Budget and record expenditure for disbursement to the Land Administration General Department the loan amount for the Mapping Project as listed in Appendix I according to the current regulations on managing and disbursing economic public funds from the State Budget.

The vouchers for the Ministry of Finance to record revenue and expenditure through the State Budget are the AFD's Notice of Debt.

b) For rescheduled loan projects.

After the competent authorities approve the commercial contract signed between the project owner (or the unit authorized by the project management agency to import goods) and the French partner, the project owner must sign a Credit Agreement with the Rescheduling Agency regarding the rescheduling of the funding from the State Budget.

The Credit Agreement will serve as the basis for the project owner to officially recognize debt with the State Budget and fulfill their obligations as stipulated in this agreement.

The basis for calculating the Promissory Note between the Project Owner and the Rescheduling Agency is the vouchers recording foreign withdrawals through the State Budget (the Approval Notice of the Foreign Financial Department, the State Budget Disbursement Order, and the Treasury Notice of Receipt) and the expenditure recorded for the Rescheduling Agency to reschedule the projects.

The time when the project owner recognizes debt with the State Budget is the time when France records debt for the Vietnamese Government.

Conditions for rescheduling loans for projects using French Treasury funds:

* For projects listed under Section II.a of Appendix II

- Rescheduling period: 15 years including 3.5 years grace period

- Rescheduling interest rate: 1.4% per year

- Currency for rescheduling and repayment: Euro

- Late payment penalty interest: as stipulated in the Credit Agreement signed with the Rescheduling Agency (but not less than the late payment penalty interest rate of France at 5% per year).

* For projects listed under Section II.b of Appendix II

- Rescheduling period: 15 years including 3.5 years grace period

- Rescheduling interest rate: 2.5% per year

- Currency for rescheduling and repayment: Euro

- Late payment penalty interest: as stipulated in the Credit Agreement signed with the Rescheduling Agency (but not less than the late payment penalty interest rate of France at 5% per year).

In cases where enterprises pay in Vietnamese Dong, the exchange rate between Vietnamese Dong and Euro is the average inter-bank market rate for 26 foreign currencies published by the State Bank of Vietnam at the time of payment.

Fees: In addition to the above rescheduling interest rates, project owners must also pay service fees for rescheduling government loans collected by the Rescheduling Agency at the approved fee levels in Circular No. 853/CP-QHQT dated July 25, 1998.

Payment method for fees:

The Rescheduling Agency directly collects fees from the project owners according to the above fee levels along with the schedule for principal and interest recovery. After collecting from the project owners, the Rescheduling Agency is responsible for transferring 25% of the aforementioned fees to the State Budget according to Circular No. 2983-TC/TCĐN dated August 8, 1998 issued by the Ministry of Finance.

III. INSPECTION REGIME, REPORTING AND SETTLEMENT

a) Every six months, the project owner is responsible for reporting to the Ministry of Finance (Department of Foreign Finance, Rescheduling Agency), the Ministry of Planning and Investment, and the project management agency about the situation of receiving, using, and repaying the loan.

b) Upon completion of the project, project owners who have received rescheduled foreign loans from the State Budget are responsible for preparing a final settlement report to be submitted to the project management agency and the Ministry of Finance.

c) Reporting and settlement for the Mapping Project shall be carried out in accordance with Circular No. 113/1999/TTLT-BTC-TCĐC dated September 23, 1999 issued by the Ministry of Finance and the Land Administration General Department guiding the delegation, management, disbursement, and settlement of mapping and land management expenses.

IV. IMPLEMENTATION

This Circular takes effect fifteen days after its signing date. The project management agencies are responsible for guiding project owners to implement in accordance with the provisions of this Circular. During the implementation process, if any issues arise, project owners and project management agencies need to promptly reflect them to the Ministry of Finance for consideration and resolution.

ANNEX I

LIST OF PROJECTS USING FRENCH GRANT FUNDS FOR THE 1998 BUDGET PERIOD UNDER THE STATE BUDGET DISBURSEMENT REGIME
(Attached to Circular No. 131/1999/TT/BTC dated November 11, 1999 of the Ministry of Finance)

ANNEX II

LIST OF PROJECTS USING FRENCH TREASURY LOANS FOR THE 1998 BUDGET PERIOD UNDER THE STATE BUDGET RESCHEDULING REGIME
(Attached to Circular No. 131/1999/TT/BTC dated November 11, 1999 of the Ministry of Finance)

II.a

II.b