Circular No. 144/1998/TT-BTC guides the mechanism for using and managing financial funds from French government aid in 1997.

 CIRCULAR

Guidelines for the mechanism of using and managing financial resources from official development assistance provided by the French Government in 1997

Pursuant to Decree No. 58/CP dated August 30, 1993 of the Government promulgating the Regulation on borrowing and repaying foreign debts and Circular No. 18-TC/TCĐN dated March 5, 1994 of the Ministry of Finance guiding the management and use of foreign loans borrowed by the Government

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) Resources

Pursuant to Decree No. 42/CP dated July 16, 1996 and Decree No. 92/CP dated August 23, 1997 of the Government promulgating the Charter on Investment and Construction Management

Pursuant to Decree No. 43/CP dated July 16, 1996 and Decree No. 93/CP dated August 23, 1997 of the Government promulgating the Bidding Regulation

Pursuant to Circular No. 81/1998/TTLT-BTC-NHNN guiding the procedures, formalities, and management of withdrawing funds from official development assistance resources issued by the Ministry of Finance and the State Bank of Vietnam on June 17, 1998

Pursuant to Circular No. 06/1998/TTLT-BKH-BTC guiding the mechanism of managing counterpart funds for programs and projects utilizing official development assistance resources issued by the Ministry of Planning and Investment and the Ministry of Finance on August 14, 1998

Pursuant to Circular No. 1047/CP-QHQT dated September 3, 1998 of the Government regarding the financial mechanism for projects utilizing financial assistance from the French Government under the 1997 Protocol

Pursuant to the Agreement applicable to the loan from the French Treasury and the Agreement establishing private credit with guarantees for the 1997 Vietnam-France Protocol signed on September 9, 1998 between the Ministry of Finance of the Socialist Republic of Vietnam and the authorized agencies of the French Government

The Ministry of Finance guides the mechanism of using and managing financial resources from the 1997 financial protocol signed on November 12, 1997 between the Government of the French Republic and the Government of the Socialist Republic of Vietnam as follows:

I. GENERAL PROVISIONS

1. The financial assistance provided by the French Government to the Vietnamese Government under the 1997 Protocol (a mixed loan partly from the French Treasury and partly from commercial banks with guarantees) constitutes revenue of the State Budget, recorded in the State Budget and managed in accordance with the provisions of the State Budget Law and other guiding documents thereunder. The Ministry of Finance is responsible for repaying principal and interest to the French Government when due for the loans.

2. Based on the objectives, nature of use, and repayment capacity, projects utilizing financial assistance under the 1997 Protocol are classified as follows:

- Projects funded by the State Budget for basic construction investment from the mixed loan according to the list attached as Appendix I.

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

3. Project sponsors shall proceed with the necessary procedures to implement projects utilizing financial assistance from the 1997 Vietnam-France Financial Protocol in accordance with the guidance of the Ministry of Planning and Investment in Circular No. 6229-BKH/KTĐN dated September 9, 1998 on the implementation of the 1997 Vietnam-France Protocol.

4. The preparation, review, and approval of feasibility reports must be carried out in accordance with the provisions of the Charter on Investment and Construction Management issued together with Decree No. 42/CP dated July 16, 1996 and Decree No. 92/CP dated August 23, 1997 of the Government.

5. On the basis of approved projects, project sponsors are responsible for conducting bidding procedures and signing commercial contracts for purchasing goods and services from French companies in accordance with the provisions of the Bidding Regulation issued together with Decree No. 43/CP dated July 16, 1996 and Decree No. 93/CP dated August 23, 1997 of the Government. Commercial contracts must be signed before June 30, 1999 (except in cases where an extension is agreed upon by the French Government).

6. The agency responsible for disbursing and rescheduling the loan:

* For projects subject to disbursement, the Ministry of Finance assigns the General Department of Investment and Development to manage and disburse the funds.

* For projects implementing the rescheduling regime from the State Budget: The Ministry of Finance entrusts the General Department of Investment and Development to directly manage and reschedule the loans.

7. The Ministry of Finance authorizes the Vietnam Investment and Development Bank to perform foreign payment services with French Banks to execute the withdrawal of privately guaranteed loans and to charge service fees in accordance with the current regulations of the State Bank of Vietnam on bank service fees. Immediately after the withdrawal of funds, the Vietnam Investment and Development Bank is responsible for submitting to the Ministry of Finance a statement of fund withdrawal for accounting purposes. At each maturity date for repayment, the Vietnam Investment and Development Bank sends the Ministry of Finance a copy of the notice of debt maturity for the loan so that the Ministry of Finance can transfer the repayment amount to the French Banks on time.

8. French organizations and individuals implementing projects within the framework of the 1997 Vietnam-France Protocol are exempt from corporate income tax, personal income tax, and other direct taxes. Exemption from taxes and fees levied on the repayment of principal and interest under the 1997 Vietnam-France Protocol. Goods, equipment, and services imported for projects under the 1997 Protocol from France's ODA are exempt from import duties according to Circular No. 852/CP-QHQT dated July 25, 1998 of the Government and the implementation guidelines of the General Department of Taxation - Ministry of Finance.

9. The planning, allocation, and disbursement of counterpart funds for projects are carried out in accordance with Circular No. 81/1998/TTLT-BTC-NHNN guiding the procedures, formalities, and management of withdrawing funds from official development assistance resources issued by the Ministry of Finance and the State Bank of Vietnam on June 17, 1998 and Circular No. 06/1998/TTLT-BKH-BTC guiding the mechanism of managing counterpart funds for programs and projects utilizing official development assistance resources issued by the Ministry of Planning and Investment and the Ministry of Finance on August 14, 1998.

10. Project sponsors are legally responsible for the proper use of funds in accordance with the commitments and regulations stipulated in the Agreements signed, approved commercial contracts, and strictly comply with state regulations on financial management, accounting statistics, and accounting records in accordance with current state regulations.

II. SPECIFIC PROVISIONS

1. Procedure and formalities for withdrawing loan funds

a) The project sponsors must submit the Feasibility Study Report along with the Investment Decision, signed trade contracts, and the approval document for the import goods list to the Ministry of Finance (Department of Foreign Finance) to carry out procedures for withdrawing foreign loans.

b) Project sponsors who utilize responsible funding sources shall prepare annual plans for withdrawing foreign funds and domestic matching funds for their projects and submit them to the superior supervisory agencies, the Ministry of Finance (Department of Foreign Finance and General Department of Investment Development), and the Ministry of Planning and Investment as prescribed.

c) The basis for the Ministry of Finance to process withdrawal procedures for project sponsors is the letter requesting the withdrawal of sponsored funds to implement trade contracts from the project sponsor, and the notification of approval of trade contracts by the Government of Vietnam sent by the Ministry of Planning and Investment to the French Commercial Office in Hanoi.

- For projects funded by the State Budget (listed in Appendix I of this Circular): The Ministry of Finance will proceed with the authorization procedures for the Vietnam Investment and Development Bank to handle withdrawal procedures for private French bank loans guaranteed immediately upon receipt of the aforementioned documents. Simultaneously, the Ministry of Finance (Department of Foreign Finance) will proceed with the authorization procedures for direct withdrawal from the French Development Agency (AFD) to withdraw the portion of the loan from the French Treasury.

- For projects that borrow on-lent Official Development Assistance (ODA) funds (listed in Appendix II of this Circular): The Ministry of Finance will proceed with the authorization procedures for the Vietnam Investment and Development Bank to handle withdrawal procedures for private French bank loans guaranteed after the project sponsor has signed a credit agreement with the Local Investment Development Bureau under the conditions for on-lending set forth in point 2 below. Simultaneously, the Ministry of Finance (Department of Foreign Finance) will proceed with the authorization procedures for direct withdrawal from the French Development Agency (AFD) to withdraw the portion of the loan from the French Treasury.

d) The Ministry of Finance will sign and confirm the original trade contract document and related withdrawal invoices when they are sent by the French Commercial Office in Hanoi to withdraw loans for payment to French suppliers.

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

f) The final deadline for withdrawing funds for all projects is December 31, 2001 (except in cases where France's government agrees to extend the deadline subsequently).

2. Implementation of Allocation and On-lending

a) For projects allocated capital from the State Budget (Appendix I)

* The Ministry of Finance will record revenue in the State Budget and allocate capital to projects listed in Appendix I attached, according to the current regulations on allocation and management of construction capital from the State Budget:

- Record expenditure for allocating capital to projects through the General Department of Investment Development for those projects in category Ia (projects under central management);

- Record expenditure for allocating capital to projects through Provincial Financial Departments for those projects in category Ib (projects under local management). The Provincial Financial Departments will notify the Local Investment Development Bureau to monitor and manage allocations.

* The documents for the Ministry of Finance to record revenue and expenditure through the State Budget are:

- A debt notice from the French Development Agency representing the French Treasury and/or

- A debt notice from the French bank providing the loan.

* For projects allocated capital as mentioned above, foreign expenses and transaction fees will be settled by the State Budget. The Vietnam Investment and Development Bank is responsible for promptly informing the Ministry of Finance (Department of Foreign Finance and General Department of Investment Development) about these payable fees so that the Ministry of Finance can settle them with the French side on time.

b) For on-lent projects (Appendix II)

* After the competent authorities approve the trade contract signed between the project sponsor (or the unit authorized by the project supervisory agency to import goods) and the French company, the project sponsor must proceed to sign a credit agreement with the Local Investment Development Bureau pursuant to the delegation of the General Department of Investment Development regarding the on-lending of the sponsored capital 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 signing the Promissory Note between the project sponsor and the investment development agency is the revenue and expenditure records of the foreign fund withdrawals through the State Budget (the approval notice of the Department of Foreign Finance, the State Budget expenditure order, and the Treasury notice) to allow the General Department of Investment Development to on-lend to 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 on-lending for projects using mixed credit funds (Appendix II):

+ French Treasury source (accounting for 80% of the total project loan amount):

- On-lending period: 15 years with 4-year grace period

- On-lending interest rate: 1% per annum

- Currency for lending: French Franc

- Late payment penalty interest: as stipulated in the credit agreement signed with the Local Investment Development Bureau (not less than the French late payment penalty rate of 5% per annum)

+ Private credit source (accounting for 20% of the total project loan amount):

- On-lending period: 10 years without grace period

- On-lending interest rate: at the prevailing export credit rate in France on the date of signing the contract, specified in each Loan Approval Request Form and fixed throughout the loan period.

- Currency for lending: French Franc

- Late payment penalty interest: as stipulated in the credit agreement signed with the Local Investment Development Bureau (not less than the French late payment penalty rate of PIBOR + 2.5% per annum).

* Fees: In addition to the on-lending interest rates mentioned above, project sponsors must also bear the following fees:

Foreign fees:

Project sponsors must bear the following fees for the portion of privately guaranteed credit loans:

+ Commitment fee: 0.5% per annum on the undrawn portion of each Loan Approval Request Form.

+ Management fee: 0.8% paid once on the total loan amount according to each Loan Approval Request Form.

+ COFACE credit insurance fee: paid at the rate notified by France based on the loan amount from the privately guaranteed credit source.

+ Other fees collected by foreign banks during the withdrawal process (if any).

Domestic fees: Service fee for on-lending of government loan 0.2% per annum on the outstanding principal balance collected by the General Department of Investment Development system.

Method of paying fees:

- The foreign transaction fees of the Vietnam Development Bank shall be transferred to the Vietnam Development Bank by the Ministry of Finance.

- The State General Investment Corporation directly collects the fee at a rate of 0.2%/year from the project owner together with the schedule for principal and interest repayment. After collecting from the project owner, the State General Investment Corporation is responsible for transferring 25% of the aforementioned fee to the State Budget according to Circular No. 2983-TC/TCĐN dated August 8, 1998 of the Ministry of Finance so that the Ministry of Finance has funds to pay the foreign transaction fees for the Vietnam Development Bank.

- The project owner will directly pay the overseas fees of the private credit portion guaranteed, including commitment fees, management fees, and other fees (if any), to the French side through the Vietnam Development Bank upon receipt of notification from the Bank.

The project owner receives from the State General Investment Corporation the credit insurance premium funded additionally by France and added to the amount of the private credit loan guaranteed.

III. INSPECTION REGIME, REPORTING AND SETTLEMENT

a) Every six months, the project owners are responsible for reporting to the Ministry of Finance (Department of Foreign Finance, State General Investment Corporation), the Ministry of Planning and Investment, and the supervising authority on the situation of receiving, using, and repaying the loan.

b) Upon completion of the project, the project owners are responsible for preparing a final account report on investment capital to be submitted to the supervising authority of the project and the Ministry of Finance. The final account of investment capital mentioned above shall be carried out in accordance with the guidelines set forth in Circular No. 66-TC/ĐTPT dated November 2, 1996 of the Ministry of Finance.

IV. IMPLEMENTATION

This Circular takes effect fifteen days after the date of signature. The supervising authorities of the projects are responsible for guiding the project owners to implement in accordance with the provisions of this Circular. In the course of implementation, if any difficulties arise, the project owners and the supervising authorities need to promptly reflect them to the Ministry of Finance for consideration and resolution./.

 

ANNEX I

LIST OF PROJECTS USING MIXED CREDIT FUNDS FROM FRANCE FOR THE 1997 BUDGET YEAR UNDER THE STATE LOAN REFINANCING REGIME
(Attached to Circular No. 144/1998/TT-BTC, dated November 3, 1998 of the Ministry of Finance)

Ia. Projects under Central Management:

Ib. Projects under Local Management:

 

ANNEX II

LIST OF PROJECTS USING PORTIONS OF MIXED CREDIT LOANS FOR THE 1997 BUDGET YEAR UNDER THE STATE LOAN REFINANCING REGIME
(Attached to Circular No. 144/1998/TT-BTC, dated November 3, 1998 of the Ministry of Finance)