Circular No. 39/TC-TCĐN guiding the management regime for loans from the Japan Overseas Economic Cooperation Fund (OECF) for the Recovery Program

CIRCULAR

Guidelines for managing loan capital for the recovery program of the Japan Overseas Economic Cooperation Fund (OECF)

Based on Decree No. 58/CP dated August 30, 1993 of the Government promulgating the Borrowing and Repayment Regulations for Foreign Debts and Decree No. 20/CP dated March 15, 1994 of the Government promulgating the Management and Utilization Regulations for Official Development Assistance (ODA) sources.

____________________

Based on the credit agreements signed between the Government of the Socialist Republic of Vietnam and the Japan Overseas Economic Cooperation Fund (OECF).

The Ministry of Finance issues guidelines for managing the loan capital of the Japan Overseas Economic Cooperation Fund (OECF) for the Recovery Program as follows:

1.1. The loan capital of the Japan Overseas Economic Cooperation Fund (OECF) for the Recovery Program is foreign debt of the Government. Therefore, the entire loan amount is budgeted into the State Budget. The Ministry of Finance is responsible for repaying the foreign side when the repayment deadline arrives (including both principal and interest).

I. GENERAL PROVISIONS

1.2. The Ministry of Finance records income and expenditure in the State Budget for the loan under the OECF Recovery Program.

1.3. The Program Owner (Ministry of Planning and Investment) is responsible for distributing goods imported with loan funds to localities and settling accounts with the Ministry of Finance (Investment General Department) regarding the use of these loan funds.

Localities are responsible for using the funds for their intended purposes and must comply with the conditions stipulated in the credit agreements signed with OECF.

1.4. The Viet Nam Bank for Foreign Trade is designated by the Ministry of Finance as the bank to handle foreign exchange settlement transactions.

1. Responsibilities in terms of external affairs:

II. SPECIFIC PROVISIONS

2.1.1. The Ministry of Planning and Investment is primarily responsible for planning the import of goods, allocating goods, and allocating consulting fees to localities, sending plans to the Ministry of Finance (Department of Foreign Financial Affairs, Investment General Department), and sending plans to localities; organizing bidding, negotiating consulting service contracts, purchasing goods and equipment for projects (hereinafter referred to as Contracts) with eligible suppliers according to the signed Agreement with OECF.

The Ministry of Planning and Investment selects units to delegate transactions, sign import contracts for goods arriving in Vietnam, and directly signs consulting service Contracts.

2.1.2. To complete the approval procedures for Contracts, after signing the Contract, the unit delegated to import transactions (hereinafter referred to as the Importer) makes two copies of the signed Contract, one copy sent to OECF and one copy sent to the Ministry of Finance for Contract approval procedures.

2.1.3. After receiving the Contract approval notice from OECF, the Ministry of Finance (Department of Foreign Financial Affairs) will notify the Project Owner and the Importer to proceed with implementing the Contract and notify the Viet Nam Bank for Foreign Trade to process the Letter of Credit (L/C) payment for the Importer.

2.1.4. The Viet Nam Bank for Foreign Trade proceeds to open and manage the Deposit Account (TKĐB) at the request of the Ministry of Finance, opens L/C payments for Importers to import goods (the procedures for withdrawing payment funds are specified in Section 6 below).

2.1.5. The Ministry of Finance (Department of Foreign Financial Affairs) implements the withdrawal and management of loan capital, verifies and confirms debts with foreign banks, and arranges funds for foreign debt repayment when due.

2. Sources of funding for the Program:

2.2.1. Localities develop investment construction plans for the Program. This plan must fully reflect all sources of capital and the schedule for withdrawing funds, including:

a. OECF loan capital includes:

a. The borrowed capital of OECF includes:

Part on allocation for hiring foreign consultancy services (this part is established and announced by the Ministry of Planning and Investment with the allocation amount for each locality).

Part on allocation for importing materials, goods, and equipment for projects.

Loan handling fee at 0.1% collected by OECF when withdrawing funds.

The OECF loan capital provided by the Central State Budget to localities in kind and the cost of hiring foreign consultancy services shall be accounted for according to the revenue and expenditure recording method.

b. Domestic counterpart funds include funds for paying the following items:

Domestic costs paid to the Importer: agency fees for import commission, import duties on goods (if applicable), receiving and supplying costs, transportation costs from the port to the project site, and other costs (if applicable).

Material costs, labor costs, and management fees for the project.

Costs allocated by the Central Program Management Board (Ministry of Planning and Investment) to localities.

Localities must ensure domestic counterpart funds from their own local budgets.

3. Service Fees for the Foreign Trade Bank:

The Foreign Trade Bank, designated by the Ministry of Finance, is responsible for executing foreign exchange transactions. The Foreign Trade Bank will charge service fees according to the current banking service fee schedule established by the General Director of the Foreign Trade Bank.

The Foreign Trade Bank is authorized to handle procedures for opening Letters of Credit (L/C) for payment under the L/C drawdown method and transferring payments to repay foreign debts when due. The Foreign Trade Bank will collect service fees as stipulated in the Decision above.

The collection of fees will proceed as follows:

For transfer fees related to repaying foreign debts: The Foreign Trade Bank will automatically debit the National Treasury's account.

For fees related to opening L/Cs for importing goods and consulting services: The Foreign Trade Bank will collect fees from the importer or from the Special Account Interest Revenue Account if the L/C opener is the Ministry of Planning and Investment.

4. Fees for Importing Units:

Units entrusted with imports (Importers) have the responsibility to negotiate and sign purchase contracts with foreign companies selected by the Program's Bid Evaluation Committee, complete all import procedures under the supervision of the Ministry of Planning and Investment, and enjoy agency import fees and supply fees as prescribed by current regulations. These fees are collected from the units receiving the goods.

Importing units are responsible for paying the Foreign Trade Bank the fees associated with opening L/Cs for importing goods, amending L/Cs (if applicable), settling L/Cs, and other fees charged by foreign banks related to the importation of goods.

5. Fees for the Central Program Management Board:

Fees for the Central Program Management Board (Ministry of Planning and Investment) will be paid from the localities' domestic counterpart funds. These fees will be allocated to each locality based on the import plan.

6. Drawdown Method:

The drawdown method specified in the Loan Agreement is a Special Account. This method is applied for purchasing goods and equipment from abroad in foreign currency (see Appendix 1 attached).

On behalf of the Ministry of Finance, the Foreign Trade Bank opens a non-resident account in Yen at the Tokyo-Misubishi Bank (Department of Foreign Finance). The first drawdown into this account is processed according to the Loan Agreement without accompanying documents.

After the Program Manager or the authorized importer receives the Contract Approval Notice from the Ministry of Finance (Department of Foreign Finance), the importer works with the Foreign Trade Bank to open a Letter of Credit (L/C).

When the supplier presents valid documents as per the L/C and in accordance with the contract payment terms, the seller's bank will pay the supplier and send the payment request along with the documents to the Foreign Trade Bank.

The Foreign Trade Bank proceeds to pay the seller's bank while notifying and sending the documents to relevant units as follows:

Sending the import notification paper and all documents (including the confirmation of payment of the document set by the Foreign Trade Bank) to the importer for receiving the goods.

Sending a copy of the import notification paper to the Ministry of Finance (Department of Foreign Finance) for notification.

The entrusted importer and the Project Owner are responsible for providing necessary documents (including: import invoices, marine bills of lading, cargo lists, and confirmation of payment by the Foreign Trade Bank) to the Ministry of Finance (Department of Foreign Finance) for supplementary drawdown procedures.

Upon receipt of the documents sent by the Project Owner, the Ministry of Finance (Department of Foreign Finance) will process the drawdown of OECF loans to transfer funds into the Special Account at the Foreign Trade Bank.

7. Accounting through the Budget:

2.7.1. For consultancy fees:

Each time the Department of Foreign Finance receives a drawdown notice from OECF regarding the consultancy contract, it will issue a drawdown notice to the Department of State Budget for recording the loan and expenditure advance for the Investment General Department to allocate to the localities' budget. The basis for allocating consultancy fees is the import distribution plan calculated by the Ministry of Planning and Investment, as stated in Section 2.1.1 above.

After the completion of the import distribution plan, the Program Manager and the Investment General Department will coordinate with the State Budget Department and the Department of Foreign Finance to settle the advance expenditures in accordance with actual conditions.

2.7.2. For imported goods:

Each time the Foreign Trade Bank notifies the drawdown of funds from the Ministry of Finance's Special Account to pay for imported goods shipments, the Program Manager (Ministry of Planning and Investment) will issue a dispatch notice for the shipment allocation to localities according to the list of localities and quantities allocated. The Department of Foreign Finance will issue a notice to the State Budget Department for recording the foreign loan and expenditure advance for the Investment General Department to distribute to the localities.

The basis for recording provisional advances allocated to localities is the import distribution plan for each shipment approved by the Ministry of Planning and Investment.

After the completion of the import distribution according to the plan, the Program Director, the Investment General Department will base on the delivery and receipt documents to coordinate with the State Budget Department and the Foreign Financial Affairs Department to settle the provisional funds in accordance with reality.

The budget revenue and expenditure value is recorded at the value of foreign currency debt received from abroad calculated in Japanese yen multiplied by the exchange rate announced by the Commercial Bank on the day of withdrawing money from the Special Account (The foreign currency debt value includes the 0.1% withdrawal fee collected by OECF).

The Program Director (Ministry of Planning and Investment) must regularly report monthly or quarterly on the quantity of imported goods and their allocation to localities to the Investment General Department for state budget accounting purposes. The Investment General Department is responsible for sending copies of these reports to the State Budget Department and the Foreign Financial Affairs Department.

In cases where there is a discrepancy between the distributed plan and the actual amount received (including allowable losses), localities must 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 losses at the stage under the responsibility of which entity shall be borne by that entity, specifically as follows:

Losses exceeding the allowable limit determined during the import process shall be borne by the importer.

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

III. MONITORING AND REPORTING SETTLEMENT WORK

3.1. Quarterly, localities report to the Ministry of Finance and the Ministry of Planning and Investment on the progress of the Program and the situation regarding loan capital reception.

3.2. The Ministry of Finance and relevant agencies will periodically and randomly inspect the management and use of loan capital by localities. If misuse of loan capital is discovered, the transferred funds may be recovered or the transfer of funds suspended for resolution.

3.3. The Program Director (Ministry of Planning and Investment) coordinates with the Local Investment and Development Bureau to conduct acceptance and settlement of completed projects, reporting to the Prime Minister and simultaneously sending to the Ministry of Finance.

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

IV. IMPLEMENTATION PROVISIONS

This Circular takes effect from the date of signing. Matters not covered 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

WITHDRAWAL OF FUNDS FROM THE SPECIAL ACCOUNT THROUGH LETTER OF CREDIT PAYMENT

(3)

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

(5)

(1)

1. Signing of economic contracts

2. Submitting the contract for approval (one copy sent to OECF, one copy sent to the Ministry of Finance)

3. Notifying the approved contract to the unit and informing the Commercial Bank to request opening of the Letter of Credit

4. The import agent proceeds with the procedures to open the Letter of Credit

5. Opening of the Letter of Credit

ANNEX 2

WITHDRAWAL OF FUNDS FROM THE SPECIAL ACCOUNT FOR PAYMENT

(7) (9) (8)

(6b)

(9)

(6a)

(5a) (5b)

(1) (2)

(3)

(4)

1. Implementation of signed contracts

2. Notification of contract implementation

3. Request for payment of documents

4. Valid documents, the serving bank proceeds with payment

5. (a) The serving bank sends the documents and demand note. (b) The Commercial Bank proceeds with payment and refunds to the serving bank.

6. (a) Transfer the documents to the project owner for goods receipt. (b) Transfer the paid documents to the Ministry of Finance for additional fund withdrawal procedures.

7. Request for additional fund withdrawal and special account

8. After review and agreement, through the Tokyo Bank, OECF transfers funds into the special account.

9. Notification of funds transferred.