Circular No. 1574TC/DTPT on the issuance and recovery of preferential credit capital for 1996

LETTER

DECISION NO. 1574 TC/ĐTPT OF THE MINISTRY OF FINANCE ON MAY 14, 1996, REGARDING THE ISSUANCE AND RECOVERY OF FAVORABLE CREDIT CAPITAL IN 1996

RESPECTFULLY SUBMITTED TO:

           - Ministries, agencies equivalent to ministries,

           - Government-affiliated agencies,

Central

           - People's Committees, People's Councils of Provinces and centrally governed cities.

The management and lending of favorable credit capital has been guided by Circular No. 106 TC/ĐT dated December 8, 1994. To promptly implement the plan for lending favorable credit capital in 1996 as directed by the Prime Minister in Document No. 1730/KTTH dated April 13, 1996, the Ministry of Finance hereby guides the management, issuance, and recovery of favorable credit capital under the 1996 plan managed by the General Department of Investment and Development as follows:

1. The implementation of the 1996 favorable credit plan must comply with the following principles:

a. Projects eligible to borrow favorable credit capital under the State's 1996 plan;

The State's favorable credit capital managed by the General Department of Investment and Development according to the State's 1996 plan shall be used to lend support to projects capable of directly recovering capital from the following entities:

- Projects related to electricity, oil and gas, coal, iron and steel, cement, bricks and stones, infrastructure of export processing zones, industrial parks.

- Projects related to fertilizers, chemicals, distant-sea fishing vessels, long-term plantation areas, raw material paper regions.

- Projects related to agricultural product processing and preservation, food, forestry products, and aquatic and marine products.

- Projects related to crop and livestock breeding and animal feed production.

- Projects related to mechanical manufacturing and pharmaceutical processing.

- Projects related to textiles, leather, garments, ceramics, paper, and printing industry.

- Equipment for some small water conservancy works, water supply facilities, and construction equipment (special large types requiring international bidding).

- Public passenger transport vehicles in major cities, inland waterway transportation means, port cargo handling equipment.

- Key tourism projects, trading centers at national border gates.

b. Borrowing units are responsible for preparing loan application files, signing credit contracts with the General Department of Investment and Development system, using borrowed funds for their intended purpose effectively, and repaying the loan (principal + interest) in accordance with the signed credit contract.

c. The interest rate for borrowing favorable credit capital in 1996 is 1.1% per month.

d. Borrowed projects must have collateral assets. In cases where there is no collateral or insufficient collateral, approval from the Prime Minister is required.

e. The General Department of Investment and Development system shall open deposit accounts at the State Treasury system to receive funding sources, lend, and recover loans (principal + interest).

2. Conditions for projects to borrow favorable credit capital for investment:

- Having approved plans.

- Having investment projects approved by competent authorities.

- Having collateral assets.

3. Loan amount:

- Borrowing units must fully utilize their own capital to participate in investment, with favorable credit capital only supporting the shortfall. The loan amount under the State's 1996 plan is used for construction and installation works and purchasing machinery and equipment. Borrowing units must use their own capital or other legitimate sources to cover survey, design, market research, feasibility study preparation and submission, and other pre-investment phase costs.

4. Loan application documents and signing of credit contracts:

a. Borrowing units must submit the following documents to the lending authority:

- Investment project and decision approving the investment project by the competent authority.

- Decision on establishment of enterprise, business registration, and practice registration.

- Decision appointing the General Director and Chief Accountant of the enterprise.

- Approved technical design and total budget estimate.

- Explanation of the business and financial situation of the enterprise and the borrowing project.

- Land allocation decision and valid construction permit.

- Collateral asset documentation.

Provincial and municipal Investment Development Departments will review loan application documents. If the borrowing unit has the ability to repay, they will prepare a report along with the loan application documents to submit to the General Department of Investment and Development.

The General Department of Investment and Development will review and inspect. If the project meets the borrowing conditions, it will notify the credit indicators to the Provincial Investment Development Departments so that they can sign credit contracts with the borrowing units.

b. Signing of credit contracts based on Circular No. 106 TC/ĐT dated December 8, 1994 of the Ministry of Finance and this document, the Provincial Investment Development Departments will proceed to sign credit contracts with the borrowing units.

5. Issuance of loan capital:

a. The basis for issuing loan capital is:

- Signed credit contract.

- Loan limit received by the Provincial Investment Development Department.

- Approved design and budget estimate.

- Construction and installation work contracting and supply of materials and equipment contract between the borrowing unit and the lawful contractor.

- Acceptance record, payment invoice, and other relevant documents.

b. Issuance of loan capital:

- Form of loan capital issuance.

+ If the project is implemented through bidding and tendering, the borrowing unit may temporarily advance capital to the receiving agencies according to the prescribed regulations.

When there is completed volume and sufficient conditions for payment, the borrowing unit will recover the advance by gradually deducting it from the payment for completed volume.

+ If the project is implemented through direct assignment, the borrowing unit will issue capital to the receiving unit based on the contracting agreement, and valid payment documents as mentioned in point 5.a above, according to the prescribed regulations.

6. Debt repayment and interest collection.

- Borrowing units are responsible for repaying the loan (principal + interest) in accordance with the signed credit contract, and may repay ahead of schedule.

- Upon maturity, if the borrowing unit fails to repay, the Provincial Investment Development Department will transfer the overdue debt and calculate interest at 150% of the normal rate.

When the principal and interest have not been fully repaid, the borrowing unit wishing to sell off assets or materials belonging to the loan must obtain prior written consent from the Investment Development Department and must repay the full loan amount (principal plus interest) with the proceeds from selling such assets or materials belonging to the loan of the Investment Development Department.

In cases where the borrowing unit is merged, dissolved, joint ventured, or privatized..., the unit must fully repay the loan to the Investment Development Department. If the borrowing unit cannot repay the loan, the person making the decision on merger, dissolution, joint venture, or privatization... shall be responsible for repayment.

7. Liquidation of the contract.

After the borrowing unit has fully repaid the loan (principal plus interest), the Investment Development Department and the borrowing unit shall sign a liquidation certificate for the credit contract.

8. Inspection and handling of violations.

- The system of the General Department of Investment and Planning is responsible for inspecting before, during, and after the loan disbursement until the borrowing unit has fully repaid the loan (principal plus interest). In cases where it is found that the project is ineffective or the borrowing unit misuses the loan funds, the Investment Development Department has the right to suspend the loan, notify the borrowing unit of the reasons, and report to the Ministry of Finance (General Department of Investment and Planning) for handling.

- The borrowing unit is responsible for presenting complete legal documents and relevant materials related to the use of loan funds and the business operations of the borrowing unit when requested by the lending unit.

- All violations concerning the use of loan funds must be handled in accordance with the law.

9. To implement the preferential credit plan for 1996 promptly, the Ministry of Finance requests all Ministries, agencies at the level of Ministries, agencies under the Government, People's Councils, and People's Committees of provinces and centrally-administered cities to direct borrowing units to cooperate with the General Department of Investment and Planning in effectively implementing the preferential credit work for 1996.

During the implementation process, any difficulties should be reported promptly to the Ministry of Finance for research and resolution.