Circular No. 1940/1997/TT-BKHCN guides the technical assessment of investment projects during the stage of considering the issuance of investment licenses.

CIRCULAR

Guidelines for Technology Appraisal

for investment projects during the review stage for issuance of investment licenses

Pursuant to Decree No. 22/CP dated May 22, 1993 of the Government on the tasks, powers, and organizational structure of the Ministry of Science, Technology and Environment;

Pursuant to Decree No. 12/CP dated February 18, 1997 of the Government detailing the implementation of the Law on Foreign Investment in Vietnam;

Pursuant to Decree No. 29/CP dated May 12, 1995 of the Government detailing the implementation of the Law on Encouragement of Domestic Investment;

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

The Ministry of Science, Technology, and Environment promulgates this Circular to guide the technology appraisal of investment projects,

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

I.1. "Technology appraisal of investment projects" (referred to as technology appraisal hereinafter) as mentioned in this Circular means the process of examining and evaluating the suitability of the technology stated in the project compared with the contents and objectives of the investment project based on the policies of the State at the time of appraising the project to provide recommendations for issuing investment licenses for the project.

I.2. The objects of technology appraisal include:

a. Investment projects listed in Articles 1, 7, 12, and 26 of Decree No. 12/CP dated February 18, 1997 detailing the implementation of the Law on Foreign Investment in Vietnam;

b. Investment projects listed in Decree No. 42/CP dated July 16, 1996 and supplemented and amended according to Decree No. 92/CP dated August 23, 1997;

c. Investment projects under the forms listed in Article 1, Points 1, 4, and 5 of Decree No. 29/CP dated May 12, 1995 detailing the implementation of the Law on Encouragement of Domestic Investment;

d. Investment projects for expanding production, modernizing technology, etc.

I.3. The contents of technology appraisal include:

Products produced by the technology. Product market;

Selection of technology;

Equipment in the production line;

Raw materials, components, spare parts for production;

Production management organization. Labor and training;

Safety and hygiene at work. Fire prevention and explosion protection;

Efficiency of the technology;

Technology transfer;

Assessment of the impact of the technology on the environment.

II. DETAIL CONTENTS OF TECHNOLOGY APPRAISAL

II.1. Products produced by the technology. Product market.

In the project dossier, the following contents need to be appraised:

a. Forecasting market demand (both domestic and international), including similar products already and will be available, the reliability of the forecast;

b. Forecasting market share of products produced by the technology, export ratio, marketing measures;

c. Product quality standards;

d. Competitiveness of the products produced by the technology in terms of quality, design, price. Generally, these criteria must be better (or at least equal) to those of existing and future products (according to forecasts).

II.2. Selection of technology.

a. Examining the bases for selecting technology;

b. Examining the completeness of the technology. Depending on the type of product and production method, the technology flowchart may differ but must fully reflect all stages in the production line aimed at producing the anticipated products (in both quantity and quality).

c. Encouraging the selection of advanced technology compared to the general level of the international and regional levels. In some cases, suitable technology for our level and conditions can be used, but such technologies must be superior to existing domestic technologies.

d. Assessing technology based on the following points:

Origin of technology;

Time of creation of technology;

Efficiency of technology: waste ratio, raw material and energy consumption, capital investment rate, etc.;

Degree of automation, mechanization, specialization, labor conditions, employment resolution;

Characteristics of input raw materials;

Product quality standard level;

Environmental pollution level, safety at work, and fire and explosion prevention;

Capital investment efficiency, payback period, etc., for the investment project.

II.3. Equipment in the production line.

a. Evaluating the suitability of equipment:

Equipment in the production line is evaluated based on whether it has the performance and quality required by the technology to produce the expected quantity and quality of products;

The operation of the equipment must meet environmental protection and safety at work requirements according to the law; - The list of equipment must demonstrate the ability to perform the processes in the technology flowchart, meeting the requirements for the quantity and quality of semi-finished and finished products.

It is necessary to consider not having situations where essential equipment for the production line is missing or unnecessary equipment that does not ensure the technological synchronization is included in the list (this may occur when a party participating in the project contributes capital through equipment).

b. Evaluating the quality of equipment:

Based on the list of equipment in the investment project, the following should be considered:

Origin of the equipment (country of equipment manufacture);

Year of equipment manufacture, equipment serial number, model;

Technical characteristics and features (equipment capacity, revolutions per minute, product output per unit time, etc.);

Requirements of the equipment for raw materials and fuel;

Raw material and energy consumption of the equipment per unit product;

Quality standards of products produced by the equipment;

Evaluation of the degree of automation, mechanization, human resource utilization, and conditions ensuring safety at work and environmental hygiene of the equipment and production line system.

c. Evaluation of used equipment:

In addition to the common characteristics of equipment as mentioned in Point b above, for used equipment, the following should also be considered:

Current quality and technical characteristics of used equipment compared to new equipment of the same type, timing of testing these indicators;

Hours of equipment operation, working conditions of the equipment;

Number of times the equipment has been repaired or overhauled. Parts that have been replaced or guaranteed to be as good as new;

Conditions for guaranteeing and maintaining used equipment;

Price of used equipment compared to new equipment;

Considering the ratio of the total value of used equipment to the total value of equipment in the project.

d. Method of supplying equipment:

Equipment purchased through bidding or contributed by foreign parties to the project. In cases where foreign parties contribute to the project with the value of their equipment: careful consideration must be given to the quality, price, and suitability to the project's requirements.

II.4. Raw materials, components, spare parts for production.

a. Examine the types, quantities, and values of raw materials, components, spare parts, or semi-finished products imported from abroad for processing, production, and assembly of products.

b. Encourage the use of local and domestic raw materials, or those available domestically. Encourage cooperation with domestic enterprises to produce and supply semi-finished products, components, and spare parts for production and assembly of products. Encourage the use of raw materials that cause less environmental pollution.

c. Determine the ratio of the value of imported semi-finished products, components, and spare parts or those produced domestically compared to production costs, and comment on these ratios based on the country's domestication policy in specific fields.

II.5. Production management organization. Labor and training.

The following contents need to be reviewed:

a. Rationality in production organization: The organizational structure and management of production must clearly demonstrate the functions and responsibilities of each department necessary to ensure effective operation of the production facility consistent with the selected technology.

b. Rationality in labor utilization: Labor in enterprises must be recruited from domestic workers, except for special positions that may employ foreign workers. Encourage projects to create more jobs for domestic workers.

c. Consider the training of workers in enterprises according to the technical skills, job requirements, and work procedures.

II.6. Safety and hygiene at work. Fire prevention and explosion protection.

The following contents need to be reviewed:

a. Equip appropriate protective equipment, safety, and hygiene facilities suitable for the requirements of each position in the production line. The environment and working conditions must meet the requirements stipulated by law.

b. Equip fire prevention and explosion protection devices (if necessary) and emergency response equipment according to current regulations.

II.7. Efficiency of technology.

The efficiency of technology is evaluated through the following aspects:

The appropriateness of technology in relation to the project's objectives and economic-social development requirements;

Economic and social benefits brought by technology: The ability to create new production capacity, industries, products, expand markets, create employment and income for workers, tax revenues for the state budget, improve literacy, protect the environment, etc.

For investment projects in production and business, in addition to the above contents, the efficiency of technology must also be reflected in the project's efficiency and evaluated through the following indicators:

Net Present Value (NPV) of the project;

Internal Rate of Return (IRR);

Payback period of the initial investment.

II.8. Technology transfer.

If the investment project includes one or more of the following contents, the project owner must establish a technology transfer contract in accordance with the law (with separate guidance), such contents are:

a. Transfer of industrial property objects (patents, utility models, designs, trademarks).

b. Transfer of trade secrets and technical knowledge about technology in the form of technological solutions, technical solutions, technological processes, preliminary design and technical design documents, formulas, technical parameters, drawings, technological diagrams, computer software as technical trade secrets, with or without accompanying machinery and equipment.

c. Transfer of production rationalization solutions, technological improvements, and innovations.

d. Implement various forms of service support for technology transfer:

Technical support in selecting technology, guiding installation of equipment, trial operation of equipment lines;

Consulting on technology management, business management, guiding implementation of transferred technological processes;

Managing production facilities along with training and technical support;

Training, upgrading technical expertise, specialization, and management skills of workers, technical staff, and managers;

Providing information on technology and production and business operations.

e. Supplying machinery, equipment, and technical means along with one or more of the above contents.

II.9. Assessment of the impact of technology on the environment.

For investment projects, the environment is also a "product" created during the operation of the chosen technology, therefore, environmental assessment is part of the technology assessment. Environmental assessment for investment projects is carried out in accordance with Circular No. 1100/TT-MTg dated August 20, 1997, issued by the Ministry of Science, Technology, and Environment, guiding the preparation and review of environmental impact assessment reports for investment projects (Part II.1. Permit application stage).

III. IMPLEMENTATION

III.1. The Ministry of Science, Technology, and Environment organizes the assessment of technology and the environment for Group A and B investment projects (excluding Group B projects classified under decentralization). The Office of Investment Project Technology and Environment Assessment serves as the main organizer of the assessment.

III.2. Management organizations of Science and Technology and Environment of Ministries and sectors, Provincial Science, Technology, and Environment Departments organize the assessment of technology for Group B and C investment projects according to the classification specified in Article 7 of Decree No. 42/CP dated July 16, 1996 (supplemented and amended by Decree No. 92/CP dated August 23, 1997) and Decision No. 386/TTg dated June 7, 1997 of the Prime Minister on the decentralization of direct foreign investment permits.

III.3. General Corporations established pursuant to Decision No. 91/TTg dated March 7, 1994 of the Prime Minister organize the assessment of technology for Group B and C investment projects funded by commercial loans and state-owned enterprise investments.

III.4. The State-owned Enterprise Groups established pursuant to Decision No. 90/TTg dated March 7, 1994 of the Prime Minister shall organize the technical evaluation of investment projects in Group C funded by commercial loans and state-owned enterprise investments.

III.5. Industrial Park Management Boards, Export Processing Zone Management Boards, and High-Tech Zone Management Boards, which have been delegated investment permit issuance powers by the Government's decision, shall organize the technical evaluation of investment projects according to the delegated investment permit issuance decisions.

III.6. If the project proposal contains contents within the jurisdiction of specialized Ministries and sectors, the organization responsible for the evaluation shall be responsible for soliciting opinions from those Ministries and sectors.

Ministries and sectors asked for their opinions on the project, including supplementary or amended cases, shall be responsible for providing written responses within seven days from the date of receipt of the opinion request; if they fail to provide written opinions beyond this period, it will be deemed as approval of the project.

If the investment project includes technology transfer contents as stipulated in Section II.8 of this Circular, the technology transfer portion will be implemented in accordance with the laws on technology transfer.

III.7. During the preparation of the evaluation opinion, depending on the complexity of the technology, the following assessment methods may be used:

Solicit expert opinions;

Organize inter-sectoral and inter-agency meetings (experts from outside the unit in relevant fields related to the project may be invited) to clarify contents related to the project's technology.

In necessary cases, the project proponent may be required to clarify, supplement, or amend the project proposal. The project proponent has the obligation to comply with the requirements of the evaluation organization regarding clarifying, supplementing, or amending the project proposal.

III.8. The technical and environmental evaluation forms of investment projects by experts shall be prepared according to the model in Appendix 1. Based on these evaluation forms, the organization assigned to evaluate the project's technology and environment shall compile and issue conclusions on the technical and environmental evaluation of the investment project for approval by the competent authority.

Due to the different nature of investment projects, the technical and environmental evaluation form includes the most common points for all investment projects. These points can be adjusted to suit specific projects.

III.9. Evaluation fees: Implemented in accordance with the regulations of the Ministry of Finance.

IV. IMPLEMENTATION PROVISIONS

IV.1. State management organizations for Science, Technology, and Environment, and economic and business management organizations mentioned in Part III of this Circular shall undertake the task of organizing the technical evaluation of investment projects at the request of the main evaluation agency to ensure the content and time limit for evaluating the project to issue investment permits.

During the evaluation process, if there are difficulties or obstacles, it is recommended to consult with the Ministry of Science, Technology, and Environment to reach a consensus on how to resolve them.

IV.2. This Circular takes effect fifteen days from the date of issuance.

ANNEX 1

TECHNICAL AND ENVIRONMENTAL EVALUATION FORM
(DURING THE PERIOD OF INVESTMENT LICENSE ISSUANCE)

Request for evaluation number...date...month...year...of...

Investment project: - Vietnamese:

- Foreign language:

Content of technical and environmental evaluation:

Opinion Conclusion:

- On investment policy,

- On technology and equipment,

- On technology transfer,

- On the environment,

- On other supplementary, modification, or clarification requests.

Date 1997

Appraiser (Signature)

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Note:

1. The technology and environmental assessment here aims to examine the necessary and sufficient conditions for issuing an investment permit. There are some actions that can be taken after the issuance of the investment permit, therefore, regarding this content, the conclusion only needs to state the requirements for the investor to implement after obtaining the investment permit.

2. The technology and environment appraisal form is a document retained by the unit organizing the technology and environment appraisal.

CLASSIFICATION OF INVESTMENT PROJECTS

(Pursuant to Decree 92/CP dated August 23, 1997 of the Government)

Investment projects (excluding direct foreign investment projects) are divided into three groups A, B, C as follows:

Group A projects:

1. Projects within the scope of national security and defense, having national confidentiality characteristics, significant political and social importance, establishment and construction of new industrial zones (irrespective of investment scale).

2. Projects producing harmful chemicals and explosives (irrespective of investment scale).

3. Projects with large total investment amounts.

INVESTMENT PROJECTS CLASSIFIED BY INVESTMENT CAPITAL (BILLIONS OF VIETNAMESE DONG)