Decision No. 233/1999/QD-TTg Issuing the Government Guarantee Regulation for Foreign Loans of Enterprises and Credit Institutions.

Pursuant to …;

Issuing the Guarantee Regulation of the Government for

 foreign loans of enterprises and credit institutions

______________________

PRIME MINISTER

Pursuant to the Government Organization Law dated September 30, 1992;

Pursuant to Decree No. 90/1998/NĐ-CP dated November 7, 1998 of the Government on the Management Regulation for Foreign Borrowing and Repayment;

At the proposal of the Minister of Finance and the Governor of the State Bank of Vietnam,

DECISION:

Article 1. This Decision promulgates the Guarantee Regulation of the Government for foreign loans of enterprises and credit institutions.

Article 2. This Decision takes effect 15 days from the date of signature. All previous regulations contrary to the Regulation promulgated herein are abolished.

Article 3. The Minister of Finance, the Governor of the State Bank of Vietnam shall be responsible for leading and coordinating with the Minister, Head of the Government Office, the Minister of Planning and Investment, the Minister of Justice, and Heads of relevant agencies to implement and guide, supervise the enforcement of the Government's Guarantee Regulation for foreign loans of enterprises and credit institutions issued herein.

Article 4. Ministers, Heads of ministerial-level agencies, Heads of agencies under the Government, Chairpersons of provincial People's Committees directly under the Central Government are responsible for enforcing this Decision.

REGULATIONS

THE GOVERNMENT'S GUARANTEE FOR FOREIGN LOANS OF ENTERPRISES AND CREDIT INSTITUTIONS

(Issued together with Decision No.: 233/1999/QĐ-TTg dated December 20, 1999 of the Prime Minister)

PART I

GENERAL PROVISIONS

Article 1. In this Regulation, the following terms are understood as follows:

Guarantor is the Government of Vietnam through the Guarantee Issuing Agency which is (1) the Ministry of Finance examining and issuing guarantees for foreign loans of enterprises; or (2) the State Bank of Vietnam examining and issuing guarantees for foreign loans of credit institutions.

Guaranteed Party is the enterprise or credit institution borrowing abroad (the Borrower) guaranteed by the Government. The Guaranteed Party includes (any) Assignees, Transferees, and Legal Substitutes of the Borrower approved by the Guarantor.

Beneficiary is the person owning part or all of the guaranteed loan. The Beneficiary is the Lender and (any) Assignees, Transferees, and Legal Substitutes of the Lender and is understood as the Lender in Loan Agreements.

Assignee of the Guaranteed Party or the Beneficiary is the person recognizing wholly or partially the rights and obligations of the Guaranteed Party or the Beneficiary (including ownership rights) as their own rights and obligations in the assignment.

Transferee of the Guaranteed Party or the Beneficiary is the person recognizing wholly or partially the rights and obligations of the Guaranteed Party or the Beneficiary (excluding ownership rights) as their own rights and obligations in the transfer.

Substitute of the Guaranteed Party or the Beneficiary is the person receiving back part or all of the assets along with the obligations of the Guaranteed Party or the Beneficiary.

Payment Obligation includes principal, interest due according to the contract, late payment interest, fees and expenses, and compensation for losses (if any) as stipulated in the specific Loan Agreement and consistent with the Guarantee Letter.

Margin Rate is a component of the loan interest rate and is the difference between the loan interest rate and the floating interest rate at an international interbank market.

The Government's guarantee for foreign loans of enterprises or credit institutions (hereinafter referred to as "Government Guarantee") is the Guarantor's commitment to (any) Foreign Lenders to ensure the fulfillment of the payment obligations committed in the Borrower's Loan Agreement when due; in case the Borrower fails to fully and timely fulfill the payment obligations committed in the Loan Agreement, the Guarantor will perform those payment obligations on behalf of the Borrower according to the provisions of the Guarantee Letter, and the Borrower must have the obligation to reimburse the Guarantor for the amounts paid on its behalf, together with interest and all actual related costs incurred in connection with the amount paid on its behalf.

Article 2. The Government Guarantee is the highest legal guarantee in Vietnam, the guarantee commitment document of the Government is implemented in the form of a Guarantee Letter.

The Government only issues guarantees, not re-guarantees.

Article 3. The Government Guarantee does not require the Guaranteed Party to be a state-owned enterprise or state-owned credit institution to mortgage assets. Other cases are referred to the Guarantee Issuing Agency for decision by the Prime Minister.

Article 4. Any other matters related to the Government's guarantee for foreign loans of enterprises and credit institutions not specified in this Regulation shall be carried out in accordance with the provisions of Decree No. 90/1998/NĐ-CP dated November 7, 1998 of the Government on the Management Regulation for Foreign Borrowing and Repayment.

Chapter II

OBJECTS, SCOPE, AND CONDITIONS FOR CONSIDERING ISSUANCE OF THE GOVERNMENT'S GUARANTEE

Article 5. The objects considered for issuance of the Government's guarantee for foreign loans include:

1. State-owned enterprises or state-owned credit institutions permitted by the Government to borrow foreign funds directly on a self-borrowing, self-repayment basis to implement investment development projects, joint ventures with foreign countries, or expand credit activities.

2. Other special objects outside those mentioned above decided by the Prime Minister based on actual needs and proposals of the Guarantee Issuing Agency.

Article 6. The Government issues guarantees for enterprises to borrow foreign funds to implement:

1. Major investment projects important in the national economic development plan, mainly infrastructure construction projects with capital recovery.

2. Projects importing high-tech equipment or export production projects.

3. Projects using commercial loans accompanied by non-refundable aid or official development assistance (ODA) from abroad to form mixed financing sources.

Article 7. A credit institution that the Government considers for issuance of a Government guarantee is a credit institution borrowing foreign capital to implement credit investment plans or to supplement credit capital in all fields with the ability to recover the capital.

Article 8. The issuing agency shall only consider issuing a Government guarantee for objects and projects specified in Articles 5, 6, and 7 of this Regulation and which satisfy the following conditions:

1. For enterprises: Investment projects of enterprises must meet the following requirements:

a) They must be feasible projects approved by competent authorities or investment decisions made according to current regulations, clearly stating the loan and repayment plan ensuring debt repayment upon maturity, and fall within the scope of projects eligible for consideration of Government guarantees for foreign loans.

b) There must be approval documents from competent authorities regarding the bidding results for the project and drafts of commercial contracts (consultancy contracts, equipment supply contracts, construction tender contracts, etc.) according to current regulations.

Commercial contracts, loan contracts, and other documents of the project must be consistent with each other in relevant conditions.

For credit institutions: The loan amount must be approved by the Prime Minister for guarantee issuance according to the procedures stipulated in point (b), Clause 1, Article 14 of this Regulation.

2. The principal amount of a guaranteed loan must not be less than an equivalent amount of US$10 million, except for projects specified in Clause 3, Article 6 of this Regulation. The lender must be international financial and credit organizations, governments, foreign commercial banks, or large foreign economic organizations or conglomerates.

3. The loan contract must satisfy the following conditions:

a) It must have a minimum term of five years or more (excluding grace periods).

b) The currency borrowed must be freely convertible.

c) The interest rate, commitment fee, and other charges must be appropriate to current market conditions both internationally and domestically, and specific to the project.

d) The terms and conditions in the loan contract must comply with Vietnamese laws and international practices.

đ) It must be approved by the issuing agency and submitted to the Prime Minister for approval.

4. There must be a request from the lender for the Government of Vietnam to provide a guarantee.

5. Enterprises and credit institutions applying for guarantees must be operating normally without prolonged losses or overdue debts that cannot be repaid.

6. The guarantee amount requested must not exceed the guarantee limit prescribed for the enterprise or credit institution.

Article 9. Guarantee Limit

The guarantee limit for each enterprise and credit institution is specified in Article 18 of Decree No. 90/1998/NĐ-CP dated November 7, 1998, issued by the Government on the Management of Foreign Borrowing and Repayment.

Chapter III

THE ISSUING AND MANAGEMENT OF GOVERNMENT GUARANTEES

Article 10. The Government's issuing agency is the agency specified in Article 17 of Decree No. 90/1998/NĐ-CP dated November 7, 1998, issued by the Government on the Management of Foreign Borrowing and Repayment.

Article 11. Responsibilities of the Issuing Agency and Related Agencies.

1. The Ministry of Finance acts on behalf of the Government to consider issuing guarantees for enterprises borrowing abroad according to the Prime Minister's decision, performing state management functions over all Government guarantees for foreign loans as it does for government foreign loans, including guiding enterprises receiving government-guaranteed foreign loans to pay guarantee fees.

2. The State Bank of Vietnam acts on behalf of the Government to consider issuing guarantees for credit institutions borrowing abroad according to the Prime Minister's decision; it is responsible for providing full and timely information about guarantees implemented by the State Bank of Vietnam to the Ministry of Finance for overall management of Government guarantees, including guiding credit institutions receiving government-guaranteed foreign loans to pay guarantee fees.

The Ministry of Finance and the State Bank of Vietnam will coordinate specifically in issuing Government guarantees, exchanging information, and handling issues arising during the guarantee process, monitoring and supervising the implementation of loans, and providing support when necessary to guaranteed enterprises and credit institutions, and reporting quarterly to the Prime Minister on overdue loans on guaranteed loans.

For Government guarantees issued by the State Bank of Vietnam before the issuance of Decree No. 90/1998/NĐ-CP dated November 7, 1998, by the Government, the State Bank of Vietnam continues to manage according to its issuing agency functions and is responsible for transferring copies of all files of these guarantees to the Ministry of Finance for overall management. All guarantee fees collected from the effective date of this Regulation will be transferred into the "Debt Repayment Reserve Fund" according to the guidance of the Ministry of Finance.

3. The Ministry of Justice is responsible for reviewing legal issues in agreements to be signed with lenders and providing legal opinions for the guaranteed party and guarantor.

Article 12. The issuing agency may be invited by the "Bid Inviter" to participate in evaluating financial bids for projects requiring Government guarantees for foreign loans.

Chapter IV

PROCEDURES FOR ISSUING GOVERNMENT GUARANTEES

Article 13. The contents of the Government Guarantee Letter will be agreed between the issuing agency and the beneficiary, including the following details:

a) Guarantor and issuing agency;

b) Beneficiary;

ưc) Guaranteed party;

d) References to related commercial contracts, loan contracts;

đ) Guarantee amount required, type of currency borrowed;

e) Guarantor's commitments to the beneficiary regarding the obligations of the guaranteed party and guarantor;

g) Rights and responsibilities of the beneficiary;

h) Validity period and recovery of the Guarantee Letter;

i) Governing law and jurisdiction, venue, language used in dispute resolution;

k) Place, date, month, year of issuance of the Guarantee Letter.

Article 14. Procedures and formalities for considering issuance of guarantees

ư1. Approval of Government guarantees:

a) For enterprises, the approval of government guarantees is provided for in Clause 1, Article 8 of this Regulation.

b) For credit institutions: Upon the request of the credit institution, the State Bank of Vietnam shall be responsible for submitting to the Prime Minister a proposal to approve the issuance of government guarantees for loans, specifying the lender, the value of the loan requiring guarantee, preliminary borrowing and repayment conditions proposed by the lender, the guarantor agency's opinion on the loan, accompanied by a document from the lender requesting a government guarantee.

2. Application materials for issuing guarantees:

Based on the investment decision (for enterprises) or the Prime Minister's approval (for credit institutions), the borrower shall be responsible for providing application materials to the guarantor agency, including:

a) Draft Loan Agreement;

b) Draft Guarantee Letter;

c) Relevant commercial contracts;

d) Feasibility study report of the project using foreign loans that has been approved by the competent authority or decided upon investment;

đ) Financial statements of the borrower audited or confirmed by the state asset management agency at the enterprise within the last two years (for enterprises or operating credit institutions);

e) Document from the lender requesting a government guarantee.

3. Review of application materials for issuing guarantees:

Upon receipt of the application materials for issuing guarantees, the guarantor agency shall be responsible for reviewing the materials within five working days, and if necessary, may request enterprises or credit institutions to provide additional or clarify related documents. If the guarantee application is complete, the guarantor agency shall notify the borrower to proceed with the tasks stipulated in Clauses 4, 5, and 6 of this Article.

ư4. Negotiation of Loan Agreements and Related Documents:

a) After receiving notification from the guarantor agency, the borrower shall negotiate with the lender regarding the specific contents of the Loan Agreement, with the participation of the guarantor agency and other relevant agencies.

b) The guarantor agency shall negotiate with the lender regarding the contents of the Guarantee Letter.

ưc) The Ministry of Justice shall negotiate with the lender regarding the legal opinion content.

5. Approval of Loan Agreements and Guarantee Letters:

Within thirty days from the end of negotiations on the Loan Agreement and related documents:

a) At the request of the borrower or the higher-level state management agency of the borrower (if any), the guarantor agency shall be responsible for submitting to the Prime Minister for approval of the contents of the Loan Agreement and the Guarantee Letter.

b) The Prime Minister shall approve the contents of the Loan Agreement and the Guarantee Letter simultaneously.

ư6. Issuance of Guarantee Letters and Legal Opinions. After receiving the Prime Minister's approval document on the contents of the Loan Agreement and the Guarantee Letter:

a) The borrower shall officially sign the Loan Agreement with the lender and sign the commitment document according to the model prescribed in Appendix 1 attached to this Regulation, with confirmation from the higher-level state management agency of the borrower (if any) and transfer it to the guarantor agency.

b) The guarantor agency shall issue three original copies of the Guarantee Letter, each copy to be retained by the lender, the borrower, and the guarantor agency. The copy retained by the lender shall be transferred through the borrower.

c) The borrower shall process registration of the guaranteed loan according to the regulations of the State Bank of Vietnam.

d) The Ministry of Justice shall issue four original copies of the legal opinion in case the lender requests, each copy to be retained by the lender, the guarantor, the guaranteed party, and the Ministry of Justice. The copy retained by the lender shall be transferred through the borrower.

Article 15. In cases where guarantees accompany commercial loans along with non-repayable aid or ODA loans to form mixed credit financing sources, the procedures for examining guarantees shall be carried out according to the provisions of Clauses 2, 3, 4, and 6 of Article 14 of this Regulation.

Article 16. Recovery of Government Guarantees.

The guarantor will recover the Guarantee Letter when all payment obligations covered by the guarantee have been fully fulfilled, or when the lender unilaterally cancels the Loan Agreement, or when the guarantee is replaced by another security measure. The guarantor agency shall promptly notify all relevant parties of such recovery.

In cases requiring recovery of guarantees other than those mentioned above, the guarantor agency shall seek the opinion of the Ministry of Justice and submit to the Prime Minister for consideration and decision in accordance with current laws and international practices.

Article 17. In cases where the guarantor must pay on behalf of the guaranteed party, the guarantor agency shall make payments on behalf of the guaranteed party according to the regulations of the Decision on Establishment, Use, and Management of the Foreign Debt Repayment Reserve Fund issued together with Decision No. 72/1999/QĐ-BTC dated July 9, 1999, of the Minister of Finance. The amount recovered from the guaranteed party according to Clause 1, Article 20 of this Regulation shall be transferred by the guarantor agency into the "Foreign Debt Repayment Reserve Fund" and recorded as a source of income for the Fund.

Chapter V

DUTIES OF THE GUARANTEED PARTY

Article 18. The guaranteed party shall be obligated to:

1. Provide the guarantor agency with the following information:

a) Report according to the model prescribed in Appendix 2 attached to this Regulation, including the following contents: date and value of each withdrawal of funds under the guaranteed loan; progress of fund withdrawals and periodic repayments quarterly of the guaranteed loan;

b) Annual report on the implementation of the project;

c) Financial reports audited or confirmed by the higher-level state management agency of the guaranteed party (if any), including the balance sheet, profit and loss statement, cash flow statement, and financial statement notes;

d) Special situations that may affect the implementation of the project and the ability to fulfill the payment obligations under the Loan Agreement.

2. Facilitate the guarantor agency's inspection of the project's implementation when necessary.

3. Timely and fully pay the guarantee fee as stipulated in this Regulation.

4. Strictly and fully perform all obligations committed to the guarantor agency in the commitment document according to the model prescribed in Appendix 1 attached to this Regulation.

Article 19. Levels of guarantee fees and application fees for reviewing applications for guarantees

1. The beneficiary of the guarantee must pay the guarantee fee to the issuing authority, which is calculated based on the outstanding balance of the guaranteed loan and is specified as follows:

a) 0.5% per annum on the outstanding balance of the loan guaranteed by the Government for implementing investment projects to build infrastructure with capital recovery.

b) 1.0% per annum on the outstanding balance of the loan guaranteed by the Government for implementing projects outside the scope of the projects mentioned in point (a) above.

c) No guarantee fee shall be charged for projects stipulated in Article 5, Clause 3 of this Regulation.

When it is necessary to adjust the level of guarantee fees, the Ministry of Finance, in coordination with the State Bank of Vietnam, shall submit to the Prime Minister for approval and publication at least 90 days before the implementation of the new guarantee fee level. In all cases, the guarantee fee shall not exceed 1.5% per annum on the outstanding balance of the loan guaranteed by the Government.

2. Payment of guarantee fees.

The guarantee fee is calculated in the currency of the loan agreement and is paid concurrently with the interest payment date of the foreign currency loan, or in another convertible foreign currency, or in Vietnamese Dong at the official exchange rate published by the State Bank of Vietnam or notified to the Ministry of Finance at that time. The issuing authority shall guide the beneficiary to directly transfer this guarantee fee into the "Debt Repayment Reserve Fund" in accordance with the regulations of the Ministry of Finance.

3. Application review fees for guarantee issuance.

The beneficiary of the guarantee must pay a fixed application review fee to the issuing authority for reviewing the application for guarantee issuance to cover the costs incurred during the review and issuance process. The specific amount of the application review fee and the deadline for payment are prescribed uniformly by the Ministry of Finance.

Article 20. Other obligations

1. In the event that the guarantor has to pay on behalf of the beneficiary, the issuing authority has the right to enforce legal sanctions against the beneficiary, compelling the beneficiary to recognize the debt owed to the guarantor and having the obligation to compensate the guarantor for the amounts paid on behalf within a certain period, plus all actual related expenses incurred due to the payment on behalf at one of the following higher interest rates:

a) The interest rate stipulated in the Loan Agreement, or,

b) The six-month LIBOR rate for the loan currency under the Loan Agreement plus 1% per annum from the date the guarantor pays on behalf of the beneficiary until the date the guarantor recovers the amount paid.

2. In the case where the beneficiary cannot repay the debt due to subjective reasons such as inefficient use of funds, waste, loss of capital affecting the Government's reputation and causing damage to the state budget, the beneficiary will be dealt with according to the provisions of the law.

Article 21. The transferee, assignee, or substitute of the beneficiary shall have obligations towards the issuing authority corresponding to the scope of the transfer, assignment, or substitution from the beneficiary.

Chapter VI

HANDLING VIOLATIONS

Article 22. Organizations and individuals violating the provisions of this Regulation shall be administratively sanctioned or criminally prosecuted and required to compensate for damages according to current regulations depending on the nature and degree of violation.