Decision No. 135/2005/QĐ-TTg Approving the Orientation for Foreign Debt Management until 2010

Pursuant to …;

Approving the orientation for foreign debt management until 2010

__________________

PRIME MINISTER

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the conclusions of the Politburo in Notification No. 147-TB/TW dated July 16, 2004 on the Project of the Strategy for Borrowing and Repaying Foreign Debts until 2010;

Considering the proposal of the Minister of Planning and Investment in Reports No. 5811 BKH/TCTT dated September 15, 2004 and No. 1696 BKH/TCTT dated March 21, 2005,

DECISION:

Article 1. Approves the orientation for borrowing and repaying foreign debts of Vietnam until 2010 with the main contents as follows:

A. GENERAL OBJECTIVE:

Determining the main direction in attracting and utilizing foreign loans to effectively supplement capital for economic and social development, while absorbing technological transfer and advanced management experience, contributing to accelerating growth, enhancing efficiency and competitiveness of the economy during the period from now until 2010, serving the industrialization and modernization process and national development; ensuring the ability to repay debts and the independence and self-reliance of the economy in the context of intensifying regional and international integration.

B. SPECIFIC OBJECTIVES:

1. Mobilizing foreign loans must aim at supplementing, exploiting and enhancing existing domestic potential for investment and development. The mobilization, allocation, and utilization of foreign loan sources must be consistent with the national socio-economic development plan and that of each sector and locality, and the capacity to balance foreign exchange and repay debts of the economy in each period.

2. The effectiveness of projects using foreign loans is the most important criterion in deciding to borrow foreign loans. Continuing to reform and improve foreign debt management policies and mechanisms, improving the foreign debt management system suitable for each period, and strengthening coordination and close integration between foreign debt management work and the construction and implementation of macroeconomic policy balances are necessary conditions to enhance the quality of management and the efficiency of capital use, guiding and encouraging the proper use of funds, thrift, and eliminating subsidies in the management and use of foreign loans.

C. MAJOR GROUPS OF SOLUTIONS:

1. Management of foreign debt of the Government

a) Official Development Assistance (ODA) loan sources

It is necessary to take advantage of ODA loan sources in accordance with the investment and development needs and absorption capacity of the economy in general and of each sector and locality in particular. ODA loans must be prioritized for investment in specific sectors and fields appropriate to each development period. For infrastructure construction projects without direct revenue recovery conditions, the use of funds must be based on economic and social benefits. For production and business investment projects, financial performance should be the primary measure.

From now until 2010, the following areas are directed to prioritize the use of ODA loan sources:

- Developing agriculture and rural areas (including agriculture, irrigation, forestry, fisheries), combining poverty reduction and job creation, settlement, clean water and rural environmental sanitation, building infrastructure for mountainous, remote, and difficult regions.

- Building a modern synchronized economic infrastructure.

- Developing social infrastructure (healthcare, education and training, population and development).

- Science, technology, environment, focusing on building information technology infrastructure, especially applications for each economic sector, and investing in environmental protection and natural resource conservation, ensuring sustainable development.

Increasing the attraction of ODA loan sources requires correspondingly increasing the capacity to effectively utilize investment funds. ODA loan sources should not be allocated or limitedly allocated to sectors, fields, and localities with slow disbursement, ineffective use of foreign loans, while increasing the allocation of ODA loan sources to sectors, fields, and localities with effective use of funds and ensuring project implementation progress.

b) Commercial foreign loans of the Government

- Limiting government commercial borrowing, applying this form only in special cases where other more effective funding sources cannot be immediately mobilized.

- Preparing necessary conditions and conducting pilot issuance of government bonds abroad to gradually penetrate the international financial market and raise additional funds for development investment.

- Studying and applying modern debt management solutions such as debt restructuring, debt conversion, debt buyback, debt swap, etc., to ensure a reasonable debt structure and reduce the government's foreign debt repayment obligations.

2. Management of foreign debt of enterprises

- Strictly supervising borrowing and repayment activities in the enterprise sector, particularly state-owned enterprises and short-term borrowing.

The issuance of state-owned enterprise bonds abroad must be strictly managed: in the future, large-scale, stable, and efficient state-owned enterprises such as oil and gas, postal telecommunications, and power may issue bonds abroad to raise capital at certain ratios after successfully issuing domestically and after the government issues bonds abroad.

- Promoting other indirect capital raising methods such as enterprises issuing stocks and bonds sold to foreign investors to supplement investment capital, moving towards reducing the proportion of borrowed capital in total foreign capital; creating conditions and encouraging the issuance of shares of state-owned enterprises that have been equitized, joint-stock companies, and equitizing some enterprises with foreign investment.

3. Regarding the borrowing limit: continue to implement foreign borrowing schemes in the Foreign Borrowing and Repayment Strategy 2001-2010. In the actual management of economic plans generally and borrowing policies specifically, it is necessary to implement comprehensive policy measures to adjust the investment capital structure towards enhancing internal resource mobilization, gradually reducing the proportion of borrowed capital in total foreign capital sources, while expanding other indirect capital mobilization methods; ensuring balance between borrowing, repayment, and the international balance of payments.

The above orientation, combined with forecasts on domestic and international situations during each period, will be detailed into foreign borrowing and repayment plans in five-year and annual socio-economic development plans.

4. Continue to reform and improve foreign debt management policies and mechanisms based on perfecting the procedures for building and reviewing projects using foreign loans.

Ministries and sectors, when issuing regulations and policies related to foreign borrowing, must ensure consistency with the current legal principles governing foreign borrowing and repayment management.

5. Continue to reform and improve the organizational structure of foreign debt management at ministries, sectors, and localities, including clearly defining functions, tasks, authorities, and strengthening coordination mechanisms in researching, formulating policies, strategies, plans, and managing foreign debts. First, reorganize the foreign debt management machinery at central agencies such as the Ministry of Finance, the Ministry of Planning and Investment, and the State Bank of Vietnam.

Train and retrain to enhance the professional expertise of foreign debt managers both in state agencies and project managers using foreign loans to meet immediate and long-term requirements.

Organize a foreign debt information network from central to local levels and loan-using units, ensuring timely and accurate information to meet state management requirements and business investment activities of enterprises.

Article 2. Implementation

The orientation for foreign debt management until 2010 will be implemented according to the following specific program:

1. The Ministry of Planning and Investment shall take the lead and coordinate with relevant agencies:

a) Continue to implement the Foreign Borrowing and Repayment Strategy 2001-2010; detail into tasks, targets, and foreign loan financing balances in annual and five-year socio-economic development plans.

b) Coordinate with the Ministry of Finance, the State Bank of Vietnam, relevant ministries, sectors, and localities to organize propaganda and implementation of foreign borrowing and repayment orientations until 2010, serving as a basis for ministries, sectors, localities, and economic units to formulate and implement foreign loan mobilization plans consistent with national and local socio-economic development plans during the same period.

c) Guide, inspect, supervise, and report

d) Implement tasks related to foreign debt management as prescribed by current laws.

2. The Ministry of Finance shall take the lead and coordinate with relevant agencies:

a) Develop a medium-term 2-3 year government debt management program, submit for approval

b) Develop procedures for collecting, compiling, reporting, sharing, and publishing foreign debt information, submit for approval

c) Implement tasks related to foreign debt management as prescribed by current laws.

3. The State Bank of Vietnam:

a) Develop a corporate debt management program and early warning indicators for borrowing risks in the enterprise sector, submit for approval

b) Implement other related tasks as prescribed by current laws.

Article 3. This Decision takes effect fifteen days from the date of publication in the Official Gazette.

Ministers, heads of ministerial-level agencies, heads of government-affiliated agencies, Chairpersons of provincial and centrally-administered city People's Committees are responsible for implementing this Decision.