Circular No. 39-TC/TCÐN guides the management of loans for the Recovery Program funded by the Japan Overseas Economic Cooperation Fund (OECF).

CIRCULAR

OF THE MINISTRY OF FINANCE NO. 39 TC/TCĐN ON JULY 22, 1996 GUIDING THE MANAGEMENT REGIME FOR LOAN FUNDS FOR THE REHABILITATION PROGRAM OF THE JAPANESE OVERSEAS ECONOMIC COOPERATION FUND (OECF)

BASED ON DECREE 58/CP OF AUGUST 30, 1993 ISSUED BY THE GOVERNMENT ON THE REGIME FOR BORROWING AND REPAYING FOREIGN DEBT AND DECREE 20/CP OF MARCH 15, 1994 ISSUED BY THE GOVERNMENT ON THE REGIME FOR MANAGING AND USING OFFICIAL DEVELOPMENT ASSISTANCE (ODA) FUNDS.

BASED ON THE CREDIT AGREEMENTS ENTERED INTO BETWEEN THE GOVERNMENT OF THE SOCIALIST REPUBLIC OF VIET NAM AND THE JAPANESE OVERSEAS ECONOMIC COOPERATION FUND (OECF).

THE MINISTRY OF FINANCE GUIDES THE MANAGEMENT REGIME FOR THE LOAN FUNDS OF THE JAPANESE OVERSEAS ECONOMIC COOPERATION FUND (OECF) FOR THE REHABILITATION PROGRAM AS FOLLOWS:

I. GENERAL PROVISIONS

1.1. THE LOAN FUNDS OF THE JAPANESE OVERSEAS ECONOMIC COOPERATION FUND FOR THE REHABILITATION PROGRAM ARE FOREIGN DEBT LOANS OF THE GOVERNMENT. THEREFORE, THE ENTIRE LOAN AMOUNT IS BALANCED INTO THE STATE BUDGET. THE MINISTRY OF FINANCE IS RESPONSIBLE FOR REPAYING THE FOREIGN DEBT TO THE FOREIGN PARTY WHEN IT IS DUE (INCLUDING BOTH PRINCIPAL AND INTEREST).

1.2. THE MINISTRY OF FINANCE SHALL CONDUCT BUDGET RECORDS FOR THE LOAN AMOUNT ACCORDING TO THE REHABILITATION PROGRAM OF OECF.

1.3. THE PROGRAM OWNER (THE MINISTRY OF PLANNING AND INVESTMENT) IS RESPONSIBLE FOR DISTRIBUTING IMPORTED GOODS FUNDED BY THE LOAN TO LOCALITIES AND SETTLING WITH THE MINISTRY OF FINANCE (INVESTMENT GENERAL DEPARTMENT) THE USE OF THE LOAN FUNDS.

LOCALITIES ARE RESPONSIBLE FOR USING THE FUNDS FOR THE INTENDED PURPOSES AND MUST BE CONSISTENT WITH THE CONDITIONS COMMITTED IN THE CREDIT AGREEMENTS SIGNED WITH OECF.

1.4. THE VIETNAM EXTERNAL TRADE BANK IS THE BANK DESIGNATED BY THE MINISTRY OF FINANCE TO SERVE THE IMPLEMENTATION OF FOREIGN EXCHANGE TRANSACTIONS.

II. SPECIFIC PROVISIONS:

1. FOREIGN AFFAIRS RESPONSIBILITIES:

2.1.1. THE MINISTRY OF PLANNING AND INVESTMENT IS RESPONSIBLE FOR ESTABLISHING THE PLAN FOR IMPORTING GOODS AND ALLOCATING GOODS AND ADVISORY FEES TO LOCALITIES, SUBMITTING THESE PLANS TO THE MINISTRY OF FINANCE (DEPARTMENT OF FOREIGN FINANCE, INVESTMENT GENERAL DEPARTMENT), AND SUBMITTING THEM TO LOCALITIES; ORGANIZING TENDERING, NEGOTIATING ADVISORY CONTRACTS, PURCHASING GOODS AND EQUIPMENT FOR PROJECTS (HEREINAFTER REFERRED TO AS CONTRACTS) WITH ELIGIBLE SUPPLIERS IN ACCORDANCE WITH THE AGREEMENTS SIGNED WITH OECF.

THE MINISTRY OF PLANNING AND INVESTMENT SELECTS UNITS TO ACT AS AGENTS FOR IMPORT TRANSACTIONS, SIGNING CONTRACTS FOR IMPORTING GOODS INTO VIETNAM, AND THE MINISTRY OF PLANNING AND INVESTMENT DIRECTLY SIGNS ADVISORY CONTRACTS.

2.1.2. TO COMPLETE THE PROCEDURE FOR APPROVING CONTRACTS, AFTER SIGNING THE CONTRACT, THE UNIT ACTING AS AGENT FOR IMPORT TRANSACTIONS (HEREINAFTER REFERRED TO AS THE IMPORTER) MAKES TWO COPIES OF THE SIGNED CONTRACT, ONE COPY TO BE SENT TO OECF AND ONE COPY TO BE SENT TO THE MINISTRY OF FINANCE FOR THE PROCEDURE TO APPROVE THE CONTRACT.

2.1.3. AFTER RECEIVING THE NOTICE OF CONTRACT APPROVAL FROM OECF, THE MINISTRY OF FINANCE (DEPARTMENT OF FOREIGN FINANCE) WILL NOTIFY THE PROJECT OWNER AND THE IMPORTER TO PROCEED WITH THE CONTRACT IMPLEMENTATION AND NOTIFY THE VIETNAM EXTERNAL TRADE BANK TO PROCESS THE OPENING OF A LETTER OF CREDIT (L/C) FOR THE IMPORTER.

2.1.4. THE VIETNAM EXTERNAL TRADE BANK WILL OPEN AND MANAGE THE SPECIAL ACCOUNT (TKĐB) AT THE REQUEST OF THE MINISTRY OF FINANCE, OPENING L/C FOR IMPORTERS TO IMPORT GOODS (PROCEDURES FOR WITHDRAWING FUNDS FOR PAYMENT ARE PROVIDED IN SECTION 6 BELOW).

2.1.5. THE MINISTRY OF FINANCE (DEPARTMENT OF FOREIGN FINANCE) WILL WITHDRAW AND MANAGE THE LOAN FUNDS, CONFIRM THE DEBT WITH FOREIGN BANKS, AND ARRANGE FUNDS TO REPAY FOREIGN DEBT WHEN DUE.

2. FUNDS FOR THE PROGRAM:

2.2.1. LOCALITIES SHALL DEVELOP THE BASIC CONSTRUCTION INVESTMENT PLAN FOR THE PROGRAM. THIS PLAN MUST FULLY REFLECT ALL FUNDS AND THE WITHDRAWAL SCHEDULE INCLUDING:

a. OECF LOAN FUNDS INCLUDE:

. THE PORTION ALLOCATED FOR HIRING FOREIGN ADVISORS (THIS PORTION IS PREPARED AND ANNOUNCED BY THE MINISTRY OF PLANNING AND INVESTMENT FOR EACH LOCALITY).

. THE PORTION ALLOCATED FOR IMPORTING MATERIALS, GOODS, AND EQUIPMENT FOR PROJECTS.

. A LOAN FEE OF 0.1% COLLECTED BY OECF WHEN WITHDRAWING FUNDS.

OECF LOAN FUNDS ARE FUNDED TO LOCALITIES THROUGH THE CENTRAL BUDGET IN THE FORM OF GOODS AND EXPENSES FOR HIRING FOREIGN ADVISORS ARE RECORDED AS BUDGET INCOME AND EXPENSES.

b. DOMESTIC MATCHING FUNDS INCLUDE FUNDS FOR PAYING THE FOLLOWING ITEMS:

. DOMESTIC COSTS TO PAY THE IMPORTER: COMMISSION FOR IMPORT AGENCY, IMPORT DUTIES ON GOODS (IF ANY), COSTS FOR RECEIVING, SUPPLYING, AND TRANSPORTING GOODS FROM THE PORT TO THE PROJECT SITE, OTHER COSTS (IF ANY).

. MATERIALS, LABOR, AND MANAGEMENT FEES FOR THE PROJECT.

. COSTS FOR THE NATIONAL PROGRAM MANAGEMENT BOARD (MINISTRY OF PLANNING AND INVESTMENT) ALLOCATED TO LOCALITIES.

LOCALITIES MUST SECURE DOMESTIC MATCHING FUNDS FROM THEIR LOCAL BUDGET.

3. BANKING SERVICES FEES FOR THE VIETNAM EXTERNAL TRADE BANK:

THE VIETNAM EXTERNAL TRADE BANK IS DESIGNATED BY THE MINISTRY OF FINANCE TO HANDLE FOREIGN EXCHANGE TRANSACTIONS. THE VIETNAM EXTERNAL TRADE BANK WILL CHARGE FEES ACCORDING TO THE CURRENT BANK SERVICE FEES SCHEDULE DETERMINED BY THE CHIEF EXECUTIVE OFFICER OF THE VIETNAM EXTERNAL TRADE BANK.

THE VIETNAM EXTERNAL TRADE BANK IS AUTHORIZED TO HANDLE THE PROCEDURE FOR OPENING L/C FOR PAYMENT AND TRANSFERRING FUNDS TO REPAY FOREIGN DEBT WHEN DUE. THE VIETNAM EXTERNAL TRADE BANK CHARGES FEES FOR SERVICES ACCORDING TO THE ABOVE DECISION.

THE COLLECTION OF FEES IS CONDUCTED AS FOLLOWS:

. FOR TRANSFER FEES WHEN REPAYING FOREIGN DEBT: THE VIETNAM EXTERNAL TRADE BANK AUTOMATICALLY CHARGES THE ACCOUNT OF THE STATE TREASURY.

. FOR FEES RELATED TO OPENING L/C FOR IMPORTING GOODS AND ADVISORY SERVICES: THE VIETNAM EXTERNAL TRADE BANK CHARGES FEES FROM THE IMPORT AGENT OR FROM THE INTEREST ACCOUNT ON THE SPECIAL ACCOUNT IF THE L/C OPENER IS THE MINISTRY OF PLANNING AND INVESTMENT.

4. FEES FOR IMPORTING UNITS:

IMPORTING UNITS (IMPORTERS) ARE RESPONSIBLE FOR NEGOTIATING AND SIGNING PURCHASE CONTRACTS WITH FOREIGN COMPANIES SELECTED BY THE PROCUREMENT COMMITTEE OF THE PROGRAM, CARRYING OUT ALL IMPORT PROCEDURES UNDER THE SUPERVISION OF THE MINISTRY OF PLANNING AND INVESTMENT, AND ENJOYING IMPORT COMMISSION FEES AND SUPPLY FEES IN ACCORDANCE WITH CURRENT GOVERNMENT REGULATIONS. THESE FEES ARE COLLECTED BY THE IMPORTER FROM THE RECEIVING UNITS.

Import units are responsible for paying to the Vietnam Bank for Foreign Trade all fees related to opening import Letter of Credit (L/C), amending L/C (if any), settling L/C, and other fees collected by foreign banks from the Vietnam Bank for Foreign Trade in connection with importing such goods.

5. Fees for the Central Management Board:

The fee paid to the Central Management Board (Ministry of Planning and Investment) will be settled from the domestic counterpart funds of localities. This fee will be allocated to each locality based on the import plan.

6. Method of withdrawing funds:

The method of withdrawing funds stipulated in the Loan Agreement is the Special Account form. This form is applied for purchasing goods and equipment from abroad in foreign currency (see Appendix 1 attached).

On behalf of the Ministry of Finance, the Vietnam Bank for Foreign Trade opens a non-resident account in Japanese Yen at the Tokyo-Misubishi Bank (Department of Foreign Finance) to process the first withdrawal into the aforementioned account according to the provisions of the Agreement. The first withdrawal does not require accompanying documents.

After the Program Owner or the Authorized Importer receives the Contract Approval Notice sent by the Ministry of Finance (Department of Foreign Finance), the Importer works with the Vietnam Bank for Foreign Trade to open a Letter of Credit (L/C).

When the supplier presents valid documents in accordance with the L/C and consistent with the payment terms of the contract, the Seller's Bank will pay the supplier and send the payment request along with the documents to the Vietnam Bank for Foreign Trade.

The Vietnam Bank for Foreign Trade proceeds with payment to the Seller's Bank while notifying and sending the documents to relevant entities as follows:

. Sending the notification of imported goods together with all documents (including confirmation of payment of the set of documents by the Vietnam Bank for Foreign Trade) to the Importer for receiving procedures.

. Sending a copy of the notification of imported goods to the Ministry of Finance (Department of Foreign Finance) for notification.

The Entrusted Importing Unit and the Project Investor are responsible for providing necessary documents (including: Import Invoice, Bill of Lading, Goods List, and Confirmation of Payment by the Vietnam Bank for Foreign Trade) to the Ministry of Finance (Department of Foreign Finance) to process additional withdrawals.

Upon receipt of the documents sent by the Project Owner, the Ministry of Finance (Department of Foreign Finance) processes the withdrawal of OECF loan to transfer money into the Special Account at the Vietnam Bank for Foreign Trade.

7. Accounting through the State Budget:

2.7.1. For consulting service fees:

Each time receiving a withdrawal notice under the Consulting Contract from OECF, the Department of Foreign Finance sends a withdrawal notice to the Department of State Budget for procedures to record loan receipts and advance payments for the Investment General Department to allocate into the budget for localities. The basis for allocating consulting fees is the Import Distribution Plan for localities calculated and allocated by the Ministry of Planning and Investment according to Section 2.1.1 above.

After the completion of the planned import distribution, the Program Owner and the Investment General Department will coordinate with the Department of State Budget and the Department of Foreign Finance to settle the advance payments accordingly.

2.7.2. For imported goods:

Each time receiving a notice from the Vietnam Bank for Foreign Trade about withdrawing money from the Ministry of Finance's Special Account to pay for imported consignments, the Program Owner (Ministry of Planning and Investment) issues a document requesting allocation of the imported consignment to localities according to the list of localities and quantities allocated. The Department of Foreign Finance will send a notice to the Department of State Budget for procedures to record foreign loan receipts and advance payments for the Investment General Department to distribute to localities.

The basis for temporarily allocating advance payments to localities is the Import Distribution Plan for each consignment approved by the Ministry of Planning and Investment.

After the completion of the planned import distribution, the Program Owner and the Investment General Department will base on delivery and receipt documents to coordinate with the Department of State Budget and the Department of Foreign Finance to settle the advance payments accordingly.

The recorded income and expenditure in the State Budget shall be the foreign currency amount received from abroad converted into Japanese Yen at the exchange rate announced by the Vietnam Bank for Foreign Trade on the day of withdrawal from the Special Account (the foreign currency amount received includes the 0.1% withdrawal fee charged by OECF).

The Program Owner (Ministry of Planning and Investment) must regularly report monthly or quarterly to the Investment General Department on the quantity of imported goods and their allocation to localities for State Budget accounting purposes. The Investment General Department is responsible for forwarding these reports to the Department of State Budget and the Department of Foreign Finance.

In case there is a discrepancy between the planned distribution and the actual received goods (including allowable losses), localities work with authorized import units to confirm this discrepancy and report to the Ministry of Planning and Investment for handling according to the principle that the entity responsible for the loss at its stage must bear it, specifically as follows:

. Losses exceeding the allowable limit determined during the import process are borne by the importer,

. Losses exceeding the allowable limit due to delays or postponements by localities in receiving goods are borne by the locality.

III. INSPECTION AND REPORTING WORK:

3.1. Every quarter, localities report to the Ministry of Finance and the Ministry of Planning and Investment on the progress of implementing the Program and the situation of borrowed capital.

3.2. The Ministry of Finance and competent agencies conduct regular and spot checks on the management and use of borrowed capital by localities. If misuse of borrowed capital is discovered, the transferred funds may be recovered or the transfer of funds may be temporarily suspended for handling.

3.3. The Program Owner (Ministry of Planning and Investment) coordinates with the Local Investment and Development Bureau to inspect and settle completed projects, report to the Prime Minister, and simultaneously send to the Ministry of Finance.

3.4. The Program Manager (Ministry of Planning and Investment) shall be responsible for providing information and data to inspection, audit, and review teams and shall be accountable for tasks within their scope.

IV. IMPLEMENTATION PROVISIONS

This Circular takes effect from the date of signature. Matters not specified in this document shall be implemented according to Circular 95TC/TCĐT dated November 14, 1994, and Circular 18TC/TCVĐT dated March 12, 1996.

Any difficulties encountered during implementation should be reported to the Ministry of Finance by relevant agencies.

ANNEX 1

METHOD OF WITHDRAWING FUNDS FROM A SPECIAL ACCOUNT FOR LETTER OF CREDIT PAYMENT

(3)

(2) (3) (2) (3) (4)

(5)

OECF

the Ministry of Finance

Financial Management and Investment Control Department

Vietnam Bank for Foreign Trade

Project Owner

Import Agent

CONTRACTOR

Serving Bank

(1)

1. Enter into an economic contract

2. Request approval of the Contract (one copy sent to OECF, one copy sent to the Ministry of Finance)

3. Notify the approved Contract to the unit and inform the Foreign Trade Bank to request opening of the Letter of Credit

4. The Import Agent proceeds with the procedures to open the Letter of Credit

5. Open the Letter of Credit

ANNEX 2

METHOD OF WITHDRAWING FUNDS FROM A SPECIAL ACCOUNT FOR PAYMENT PART

OECF

NH Tokyo

the Ministry of Finance

Financial Management and Investment Control Department

Vietnam Bank for Foreign Trade

Project Owner

Import Agent

CONTRACTOR

Serving Bank

(7) (9) (8)

(6b)

(9)

(6a)

(5a) (5b)

(1) (2)

(3)

(4)

1. Perform the signed contract

2. Notify the performance of the contract

3. Request payment of the set of documents

4. Upon receipt of valid documents, the Serving Bank proceeds with the payment

5. (a) The Serving Bank sends the set of documents and demand for payment. (b) The Foreign Trade Bank proceeds with the payment and refunds the Serving Bank.

6. (a) Transfer the set of documents for the project owner to take delivery. (b) Transfer the paid set of documents to the Ministry of Finance to process additional fund withdrawal

7. Request additional fund withdrawal and special account

8. After reviewing and agreeing, through Tokyo Bank, OECF transfers funds into the special account.

9. Notify that the funds have been transferred.