Circular No. 144/1998/TT-BTC guides the mechanism for using and managing financial resources from French government funding in the 1997 fiscal year.

 

CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 144/1998/TT-BTC OF NOVEMBER 3, 1998 GUIDING THE MECHANISM FOR USING AND MANAGING THE FINANCIAL CAPITAL OF GOVERNMENT LOANS FROM FRANCE IN 1997

Pursuant to Decree No. 58/CP dated August 30, 1993 of the Government promulgating the Regulation on Management of Foreign Borrowing and Repayment and Circular No. 18-TC/TCĐN dated March 5, 1994 of the Ministry of Finance guiding the management and use of foreign government loans;

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);

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 for Investment and Construction Management;

Pursuant to Decree No. 42/CP dated July 16, 1996 and Decree No. 93/CP dated August 23, 1997 of the Government promulgating the Regulation on Tendering;

Pursuant to Circular No. 81/1998/TTLT-BTC-NHNN guiding the procedures, formalities, and management of withdrawal of funds from official development assistance sources 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 for managing counterpart funds for programs and projects using official development assistance sources issued by the Ministry of Planning and Investment and the Ministry of Finance on August 14, 1998;

Pursuant to the letter No. 1047/CP-QHQT dated September 3, 1998 of the Government regarding the financial mechanism for projects using capital from French government aid under the 1997 Agreement;

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 Agreement signed on September 9, 1998 between the Ministry of Finance of Vietnam and the authorized agencies of the French Government;

The Ministry of Finance guides the mechanism for using and managing the financial capital according to the Financial Agreement of 1997 signed between the Government of the French Republic and the Government of the Socialist Republic of Vietnam on November 12, 1997 as follows:

I. GENERAL PROVISIONS

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

2. Based on the objectives, nature of use of the capital, and repayment capacity, projects using the financial aid under the 1997 Agreement are classified as follows:

- Projects funded by the State Budget for basic construction investment from the mixed loan as listed in Appendix I attached hereto.

- Projects implementing the rescheduling system from the mixed loan as specified in Appendix II attached hereto.

3. Project sponsors shall proceed with the necessary procedures to implement projects using financial aid under the 1997 Vietnam-France Financial Agreement in accordance with the guidance of the Ministry of Planning and Investment in the letter No. 6229-BKH/KTĐN dated September 9, 1998 on the implementation of the 1997 Vietnam-France Agreement.

4. The preparation, review, and approval of feasibility reports must be carried out in accordance with the provisions of the Charter for 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 tendering procedures and signing commercial contracts for purchasing goods and services from French companies in accordance with the provisions of the Tendering 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 the French Government agrees to extend the deadline later).

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

* For projects subject to allocation, the Ministry of Finance assigns the General Department of Investment and Development to manage and allocate the capital.

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

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 according to the current regulations of the State Bank of Vietnam on bank service fees. Immediately after withdrawing the funds, the Vietnam Investment and Development Bank is responsible for submitting a statement of withdrawal to the Ministry of Finance for budget accounting purposes. At each maturity date for repayment, the Vietnam Investment and Development Bank sends a copy of the maturity notice of the loan to the Ministry of Finance so that the Ministry can timely repay the French banks.

8. French organizations and individuals implementing projects within the framework of the 1997 Vietnam-France Agreement 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 Agreement. Goods, equipment, and services imported by projects using French ODA under the 1997 Agreement to serve the projects are exempt from import duties according to the letter No. 852/CP-QHQT dated July 25, 1998 of the Government and the guidance of the General Department of Taxation - Ministry of Finance.

9. The planning, allocation, and scheduling 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 withdrawal of funds from official development assistance sources 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 for managing counterpart funds for programs and projects using official development assistance sources issued by the Ministry of Planning and Investment and the Ministry of Finance on August 14, 1998.

10. The project sponsors shall be responsible under the law for using funds for their intended purposes in accordance with the commitments and provisions set forth in the signed Memorandums of Understanding, approved commercial contracts, and strictly comply with state regulations on financial management, accounting statistics, and bookkeeping according to current state regulations.

II. SPECIFIC PROVISIONS 

1. Procedure and formalities for withdrawing loan funds

a) Project sponsors must submit the Feasibility Study Report along with the Investment Decision, signed commercial contracts, and approval documents 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 may utilize the funded resources and are required to prepare annual plans for withdrawing foreign funds and domestic counterpart funds for the 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 commercial contracts from the project sponsor, and the notification approving the commercial contract issued by the Government of Vietnam through the Ministry of Planning and Investment sent 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 for the Vietnam Investment and Development Bank to handle the withdrawal procedures for private bank loans guaranteed by France immediately upon receipt of the aforementioned documents. Simultaneously, the Ministry of Finance (Department of Foreign Finance) will proceed with the authorization 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-Budget Official Development Assistance (ODA) funds (listed in Appendix II of this Circular); the Ministry of Finance will proceed with the authorization for the Vietnam Investment and Development Bank to handle the withdrawal procedures for private bank loans guaranteed by France after the project sponsor has signed a credit agreement with the Local Investment Development Bureau based on the conditions for re-lending specified below. Simultaneously, the Ministry of Finance (Department of Foreign Finance) will proceed with the authorization for direct withdrawal from the French Development Agency (AFD) to withdraw the portion of the loan from the French Treasury. For projects funded by the State Budget (Appendix I)

* The Ministry of Finance will record revenue into the State Budget and allocate funds to the projects listed in Appendix I attached in accordance with the current system for allocating and managing construction capital from the State Budget.

d) The Ministry of Finance will sign and certify the original commercial contract and related invoices and documents for withdrawing loan funds when they are sent by the French Commercial Office in Hanoi to pay suppliers in France.

e) In cases where the implementation of the project cannot proceed or is delayed due to incomplete procedures, if the project sponsor wishes to withdraw or change the project for any reason, they 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 agrees to extend the deadline later).

2. Implementation of allocation and re-lending

a) For projects funded by the State Budget (Appendix I)

* The Ministry of Finance will record revenue into the State Budget and allocate funds to the projects listed in Appendix I attached in accordance with the current system for allocating and managing construction capital from the State Budget:

- Record disbursement for allocation of funds for projects through the General Department of Investment Development for those projects in Category Ia (projects under central management);

- Record disbursement for allocation of funds for projects through the Provincial Departments of Finance and Prices for those projects in Category Ib (projects under local management). The Provincial Departments of Finance and Prices will notify the Local Investment Development Bureau to monitor and manage the allocation.

* The vouchers 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 funded by the State Budget mentioned above, foreign costs and transaction fees will be settled by the State Budget. The Vietnam Investment and Development Bank is responsible for promptly notifying the Ministry of Finance (Department of Foreign Finance and General Department of Investment Development) about these fees so that the Ministry of Finance can settle them to the French side on time.

b) For re-lending projects (Appendix II)

* After the competent authorities approve the commercial contracts signed between the project sponsor (or the unit authorized by the project sponsor's 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 based on the delegation from the General Department of Investment Development regarding the re-lending of the sponsored funds 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 vouchers recording revenue and expenditure for the withdrawal of foreign funds through the State Budget (the approval notice of the Department of Foreign Finance, the State Budget Disbursement Order, and the Treasury Notice) to allow the General Department of Investment Development to re-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.

* The conditions for re-lending for projects using mixed credit funds (Appendix II):

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

- Re-lending period: 15 years with 4 years grace period

- Re-lending interest rate: 1%/year

- Currency for lending: French Francs

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

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

- Re-lending period: 10 years without grace period

- Re-lending interest rate: according to the current export credit interest rate in France on the date of signing the contract, specifically recorded in each Credit Approval Application and will be fixed throughout the loan period.

- Currency for lending: French Francs

- Late payment interest: as stipulated in the Credit Contract signed with the Investment Development Department (not less than the French penalty rate of PIBOR + 2.5%/year).

* Fees: In addition to the above loan interest rates, project sponsors must also bear the following fees:

Foreign fees:

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

+ Commitment fee: 0.5%/year on the undrawn capital of each credit approval request.

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

+ COFACE credit insurance fee: paid at the rate announced by France based on the amount borrowed from the guaranteed private credit source.

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

Domestic fees: Service fee for relending of government loan capital at 0.2%/year on the outstanding principal balance collected by the Investment Development General Department system.

Payment of fees:

- The State Bank of Vietnam's foreign transaction fees will be transferred and paid to the State Bank of Vietnam by the Ministry of Finance.

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

- Project sponsors will directly pay the foreign fees for the portion of guaranteed private credit including commitment fees, management fees, and other fees (if any) through the State Bank of Vietnam upon receipt of notification from the bank.

Project sponsors accept debt with the Investment Development General Department for the additional credit insurance premium funded by France, which is added to the amount of the guaranteed private credit loan.

III. INSPECTION REGIME, REPORTING AND SETTLEMENT

a) Every six months, project sponsors are responsible for reporting to the Ministry of Finance (Department of Foreign Finance, Investment Development General Department), the Ministry of Planning and Investment, and the managing authority regarding the situation of receiving, using, and repaying the loan capital.

b) Upon completion of the project, project sponsors are responsible for preparing a final settlement report on investment capital to be submitted to the project managing authority and the Ministry of Finance. The aforementioned final settlement of investment capital 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. Managing authorities of the projects are responsible for guiding project sponsors to implement in accordance with the provisions of this Circular. During implementation, if any issues arise, project sponsors and managing authorities need to promptly reflect them to the Ministry of Finance for consideration and resolution.

ANNEX I

LIST OF PROJECTS USING COMBINED CREDIT FUNDS FROM FRANCE FOR THE 1997 FINANCIAL YEAR UNDER THE STATE CAPITAL LOAN REGIME
(Attached to Circular No. 144/1998/TT-BTC dated November 3, 1998 of the Ministry of Finance)
STATE CAPITAL INJECTION REGIME
Ia. Projects under Central Management:

 

Financing Amount (million FF)

 

 

Ib. Projects under Local Management:

 

 

 

 

 

 

 

ANNEX II

LIST OF PROJECTS USING COMBINED CREDIT LOANS FOR THE 1997 FINANCIAL YEAR UNDER THE STATE CAPITAL LOAN REGIME FOR RELENDING OF CAPITAL
 MIXED ECONOMIC SECTOR 1997 UNDER STATE CAPITAL INJECTION REGIME
Modernization of Ha Giang Water Supply System
Ia. Projects under Central Management: