Circular No. 194/2011/TT-BTC guides disbursement and financial mechanisms for the fourth credit limit of the Nordic Investment Bank

CIRCULAR

Guidelines for disbursement and financial mechanism for

 the Fourth Credit Line of the Nordic Investment Bank

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Based on the Law on Public Debt Management No. 29/2009/QH12 dated June 17, 2009;

Pursuant to Decree No. 78/2010/NĐ-CP dated July 14, 2010 issued by the Government on lending out foreign loans from the Government;

Pursuant to the Loan Agreement No. PIL 5229 signed on July 21, 2010 between the Ministry of Finance on behalf of the Government of the Socialist Republic of Vietnam and the Nordic Investment Bank (NIB) regarding the provision of a $40 million credit line (hereinafter referred to as the Credit Line);

The Ministry of Finance hereby issues guidelines for the implementation of disbursement and financial mechanisms for the Fourth Credit Line of the Nordic Investment Bank as follows:

Article 1. General Provisions

1. The NIB credit line is a foreign loan of the Government, with all borrowed funds and repayments recorded in the State budget.

2. Projects utilizing funds from the Credit Line (hereinafter referred to as the Project) must be included in the list of projects approved by the Prime Minister and comply with the criteria stipulated in the Credit Agreement, and be approved by NIB.

3. The domestic financial mechanism applicable to the Project is the rescheduling mechanism approved by the Prime Minister in Circular No. 1029/TTg-QHQT dated June 17, 2010, and according to specific conditions set forth in Part II of this Circular.

4. The Vietnam Development Bank is the Rescheduling Agency authorized by the Ministry of Finance to implement rescheduling of the loan from the Credit Line pursuant to the Delegation Contract No. 04/2011/UQ/BTC-QLN dated March 29, 2011 between the Ministry of Finance and the Vietnam Development Bank (hereinafter referred to as the Delegation Contract).

5. Project Owners are responsible for using funds for their intended purpose and effectively, in accordance with the conditions specified in the Agreement, and fulfilling repayment obligations as stipulated in the Loan Agreement signed with the Vietnam Development Bank (hereinafter referred to as the Loan Agreement).

Article 2. Specific Provisions

1. Main borrowing conditions under the Agreement

- The currency of the loan is US Dollar (USD) or Euro (EUR), depending on the proposal of each specific Project and approved by NIB.

- The total value of the Credit Line is equivalent to $40 million, where each sub-loan (Sub Loan) under the Credit Line has a minimum value equivalent to $1 million and a maximum value equivalent to $20 million, but not exceeding 50% of the total investment cost of the Project.

- Interest rate: The interest rate for rescheduling is LIBOR (if the sub-loan is disbursed in USD)/EURIBOR (if the sub-loan is disbursed in EUR) + Margin. The specific margin for each sub-loan will be determined and notified by NIB to the Ministry of Finance in the offer letter of loan conditions when approving that sub-loan.

- For sub-loans with a value of $2 million or more, after full disbursement of the sub-loan, the Ministry of Finance and NIB may agree to apply a fixed interest rate for the entire sub-loan if the Project Owner submits a written request to the Ministry of Finance no later than 30 calendar days before any payment date.

- Repayment period (principal and interest) and principal repayment period for each sub-loan will be specified in the offer letter of loan conditions corresponding to each sub-loan, based on the principle that the maximum loan term for each sub-loan is 17 years, including a grace period of up to 5 years from the date specified in the offer letter of loan conditions corresponding to each sub-loan.

- The drawdown period for the entire Credit Line is July 21, 2013, and may be extended by agreement between the Ministry of Finance and NIB.

- Arrangement Fee (front-end fee): $5,000 for the entire Credit Line, paid in advance by the Ministry of Finance to NIB before the first disbursement under this Agreement. The arrangement fee for each sub-loan is calculated based on the proportion of project capital usage to the total amount actually used from the Credit Line over the total arrangement fee for the entire Credit Line, which is prepaid by the Ministry of Finance to NIB. In case the total amount actually used from the Credit Line changes, the Ministry of Finance will notify the Project Owner to collect additional arrangement fees for each sub-loan.

- Commitment Fee: 0.25% per annum based on the undrawn balance of each sub-loan from the date the Ministry of Finance accepts the interest rate offer corresponding to that sub-loan until the actual date when the loan amount is fully disbursed or canceled. The commitment fee is paid semi-annually according to the repayment schedule applicable to that sub-loan.

- Late payment interest rate is the higher of the following two rates:

• 150% of the rescheduling interest rate stipulated in the rescheduling agreement on overdue debt, or

• The late payment interest rate stipulated in the Agreement on overdue debt (LIBOR (if the sub-loan is disbursed in USD)/EURIBOR (if the sub-loan is disbursed in EUR) + Margin + 2%).

Late payment interest is calculated from the due date until the actual date of repayment. The late payment interest rate will be notified by the Ministry of Finance to the Rescheduling Agency upon receipt of notification from NIB.

2. Conditions for Rescheduling

- The Ministry of Finance, on behalf of the Government, lends the Project Owner the funds from the Credit Line in accordance with the borrowing conditions of NIB as stated above. Additionally, the Project Owner must pay a rescheduling fee of 0.25% per annum on the outstanding principal.

- The Vietnam Development Bank is the Rescheduling Agency authorized by the Ministry of Finance to implement rescheduling of the Credit Line for the Project Owner and receives the rescheduling fee as stipulated in the Delegation Contract.

- Within 15 days from receiving the notice from the Ministry of Finance on the specific conditions of the sub-loan, the Vietnam Development Bank is responsible for signing the Loan Agreement with the Project Owner detailing the rescheduling conditions of the sub-loan for the Project.

- The Project Owner is responsible for fully and timely repaying the principal, interest, and fees to NIB and the Vietnam Development Bank as stipulated in the Agreement and Loan Agreement.

- Based on the Loan Agreement, the withdrawal notice from NIB, and the accounting records of foreign loan withdrawals through the State budget by the Ministry of Finance, the Vietnam Development Bank is responsible for notifying and signing the promissory note for each loan disbursement with the Project Owner.

3. NIB Financing Procedures

3.1 General Principles: The loan funds of NIB are tied credits, to be used solely for financing goods and services originating from Nordic countries (Finland, Denmark, Sweden, Norway, Iceland) and Baltic countries (Estonia, Lithuania, Latvia), or co-financing projects involving participation (capital, technical expertise, etc.) from these countries. Typically, the level of NIB financing for a project will depend on the share of participation from the aforementioned Nordic and Baltic countries in that project but shall not exceed 50% of the total investment cost of the project. Specific financing criteria of NIB are set forth in this letter. Respectfully submitted to: The State Bank of Vietnam Branch in the Region ... of this letter.

3.2 Application Procedure for Project Financing

a) The Project Owner submits to the Ministry of Finance a registration letter for the project and the following documents:

- A detailed project description signed by the Project Owner and its English translation;

- The Decision approving the Feasibility Study Report (original copy) and its English translation;

- An Environmental Impact Assessment report according to the model at Tel: this Circular.

b) The Ministry of Finance forwards the above project documents to request NIB's opinion on the principle of project financing. In case NIB agrees in principle to finance the project, the Project Owner proceeds with tender procedures for purchasing materials and equipment for the project in accordance with current State regulations on bidding, investment management, and construction. (The currency of payment in the Commercial Contracts providing materials and equipment for the project (hereinafter referred to as Commercial Contracts) shall be US dollars or euros to match the loan currency under the Agreement and avoid foreign exchange risks (if any)).

c) After the Project Owner has completed the project investment procedures as prescribed and obtained the tender results where a Nordic contractor wins the bid for goods meeting NIB's financing criteria, the Ministry of Finance requests the Vietnam Development Bank and the Ministry of Planning and Investment to review the project before submitting it to the Prime Minister for approval of the project list. To facilitate the review of the project, the Project Owner sends the Ministry of Finance and the Vietnam Development Bank two sets of documents as stipulated in Point a, Clause 4, Article 19 of Decree No. 78/2010/NĐ-CP dated July 14, 2010 of the Government on relending foreign loans of the Government.

d) The Project Owner sends the Ministry of Finance the following documents to complete the file to be sent to NIB and to implement the approval procedures:

- A request for Project Approval (Sub-Project Request Form) according to the model at DIRECTOR OF THE STATE BANK OF VIETNAM of this letter, bearing the seal of the Project Owner.

- The Project Drawdown Plan (maximum five tranches) signed by the Project Owner and its English translation;

- The Decision approving the Commercial Contract (original copy) and its English translation;

- Two copies of the Commercial Contract (original or certified true copy);

- Notification of the name, position, sample stamp, and signature of those authorized representatives of the Project Owner to confirm the drawdown file of the project.

e) After NIB officially approves the project, within fifteen days, the Ministry of Finance will notify in writing the Project Owner and the Vietnam Development Bank about NIB's decision to finance the project and the specific conditions of the sub-loan to serve as the basis for signing the Loan Agreement detailing the relending conditions for the project loan.

4. Guidance on Disbursement of Credit Limit

4.1 General Principles

According to the Agreement, NIB will only disburse based on the Drawdown Request submitted by the Ministry of Finance accompanied by relevant payment documents. The drawdown file must be transferred to NIB no later than fifteen days prior to the drawdown request date. At the request of the Ministry of Finance, NIB may transfer payment directly to the Seller/Supplier in the Commercial Contract or may consider other drawdown methods (advance payments, refunds) suitable for the project's payment requirements but must obtain NIB's prior approval.

Each loan under the Credit Limit can only be disbursed in a maximum of five tranches (Tranche) consistent with the project's drawdown plan.

4.2 Specific Drawdown Procedures

a) Direct Payment

Based on the project's drawdown plan and the progress of the Commercial Contract, when there is a payment request, the Project Owner sends the Ministry of Finance a drawdown application file including the following documents:

- A letter requesting drawdown, specifying the legal grounds for drawdown, along with necessary payment instructions (name, account number, and bank of the Seller/Supplier).

- Invoice or Payment Request from the Seller/Supplier, which has been reviewed and confirmed by the Project Owner agreeing to pay according to the terms of the signed Commercial Contract.

- Other documents specified in the Commercial Contract (Performance Bond, Advance Payment Guarantee, Acceptance Certificate, handover operation of machinery and equipment...) or additional explanatory documents if requested by the Ministry of Finance and NIB.

Within a maximum of five working days from receiving the complete and valid payment documents, the Ministry of Finance will examine and sign the Drawdown Request to send to NIB.

Within a maximum of fifteen working days from receiving the Ministry of Finance's Drawdown Request, NIB will examine and transfer the money directly into the Seller/Supplier's account if the payment is accepted (or will send a letter to the Ministry of Finance explaining the reasons if the payment is not accepted).

b) Advance Payment

In certain special cases, NIB may consider making advance payments to the Project Owner into a provisional account opened at the Vietnam Development Bank so that the Project Owner can proactively and conveniently settle small incidental expenses or domestic components of the project, thereby reducing the number of drawdowns from NIB.

The provisional account limit depends on the scale, characteristics, and expenditure needs of the project and will be determined by NIB for each specific project.

- First drawdown into the provisional account:

Based on the provisional account limit and the agreed usage plan with NIB, the Project Owner sends the Ministry of Finance the following documents:

• A letter requesting provisional drawdown, specifying the legal grounds for requesting provisional funds, along with necessary payment instructions (the maximum provisional amount requested equals the provisional account limit, provisional account number).

• The disbursement plan from the provisional account of the project.

• Supplementary explanatory documents if requested by NIB.

Within a maximum of five working days from receiving the complete and valid payment documents, the Ministry of Finance will examine and sign the Drawdown Request to send to NIB.

Within a maximum of fifteen working days from the date of receipt of the Withdrawal Request submitted by the Ministry of Finance, NIB will review and transfer funds to the Project's provisional account if it accepts the advance payment (or will send a letter to the Ministry of Finance clearly stating the reasons for non-acceptance if it does not accept the payment).

- Additional withdrawal from the provisional account:

To withdraw additional funds based on actual expenditures from the provisional account, the Project Owner shall submit to the Ministry of Finance the following documents:

• A letter requesting additional withdrawal from the provisional account, specifying the legal basis for the request and necessary payment instructions (the amount proposed for additional provisional account funding may be lower or equal to the amount previously advanced).

• A statement of expenditures from the provisional account prepared by the Project Owner, detailing each expenditure item (date of payment, gross amount in the original currency, exchange rate, converted amount in USD/EUR, purpose of payment, beneficiary), certified by the Vietnam Development Bank.

• A statement of the Project's provisional account, certified by the Vietnam Development Bank.

• The promissory note signed between the Project Owner and the Vietnam Development Bank, with a certified true copy stamp of the Project Owner.

Within a maximum of five working days from the date of receipt of all complete and valid payment documents, the Ministry of Finance will review and sign the Withdrawal Request to be sent to NIB.

Within a maximum of fifteen working days from the date of receipt of the Withdrawal Request submitted by the Ministry of Finance, NIB will review and transfer additional funds to the Project's provisional account if it accepts the supplementary advance payment (or will send a letter to the Ministry of Finance clearly stating the reasons for non-acceptance if it does not accept the payment).

5. Reporting Requirements

5.1 During the implementation of the Project, the Project Owner is responsible for submitting to the Ministry of Finance, the Ministry of Planning and Investment, and the Vietnam Development Bank the following reports:

- Project Report not later than six months from the Disbursement Completion Date.

- Annual audit report and provision of all other financial information about the Project Owner if requested by the Ministry of Finance and NIB.

These reports must be translated into English and simultaneously submitted to NIB in accordance with the Agreement provisions.

5.2 Quarterly, the Vietnam Development Bank is responsible for reporting to the Ministry of Finance an assessment of the implementation of projects using loaned funds and the repayment plan for the next quarter.

Article 3. Implementation Organization

This Circular takes effect from February 15, 2012.

The Vietnam Development Bank and the Project Owners are responsible for complying with the provisions of this Circular.

During the implementation of the Project and the execution of the Credit Limit, if there are any difficulties, the relevant agencies and units are advised to promptly reflect them to the Ministry of Finance for study and resolution./.