Circular No. 45-TC/TCĐN guides the management and utilization mechanism for capital from French government aid.

CIRCULAR

OF THE MINISTRY OF FINANCE NO. 45 TC/TCĐN ON JULY 9, 1997 GUIDING THE MANAGEMENT AND USE OF CAPITAL FUNDED BY THE GOVERNMENT OF FRANCE IN 1996
LEGAL PROVISIONS OF 1996

Pursuant to Decree No. 58/CP dated August 30, 1993 of the Government promulgating the Regulations on Borrowing and Repaying Foreign Debts;

Pursuant to Decree No. 20/CP dated March 15, 1994 of the Government promulgating the Regulations on Management and Use of Official Development Assistance;

Pursuant to Decree No. 42/CP dated July 16, 1996 of the Government promulgating the Charter for Management of Investment and Construction;

Pursuant to Circular No. 18-TC/TCĐN dated March 5, 1994 of the Ministry of Finance guiding the management and use of capital borrowed from foreign sources by the Government;

Pursuant to Circular No. 1909/QHQT dated April 21, 1997 of the Government regarding financial mechanisms for projects using capital funded by the French Government under the Protocol of 1996.

The Ministry of Finance guides the mechanism for managing and using capital funded according to the Financial Protocol of 1996 signed on December 5, 1996 between the Government of the French Republic and the Government of the Socialist Republic of Vietnam as follows:

II- SUPPORT MEASURES FOR STATE-OWNED AGRICULTURAL FARMS AND FORESTRY COMPANIES IN THE FIELD OF SCIENCE AND TECHNOLOGY

1. The funding provided by the French Government under the 1996 Protocol (including a non-repayable grant, a loan from the French Treasury, and a mixed credit loan) is a source of revenue for the State Budget, which must be reflected in the State Budget and managed according to the current financial management system of the State. The Ministry of Finance is responsible for balancing it into the State Budget and repaying the French Government when due (including both principal and interest) for the loans.

2. Based on the objectives, nature of use of capital, as well as the repayment capacity of each project, in accordance with the conditions imposed by France and the annual approval of the Vietnamese Government, projects utilizing funds from the 1996 Protocol are classified as follows:

- Projects funded directly from the State Budget include those listed in Appendix I attached hereto.

- Projects that must borrow again from the French Treasury loan and mixed credit loan sources according to the borrowing conditions specified by the Vietnamese Government as detailed in Appendices II and III attached hereto.

3. The Ministry of Finance assigns the General Department of Investment and Development to directly manage the allocation and lending of funds for projects corresponding to the above categories. The Vietnam Development Bank shall handle banking transactions serving projects using funds from the mixed credit loan source.

4. Project sponsors who use the funded capital (both grants and loans) are responsible for preparing annual plans for withdrawing funds and domestic counterpart funds for each project and submitting them to the Ministry of Finance (Department of Foreign Finance and General Department of Investment and Development) and the Ministry of Planning and Investment for review, coordination, guidance, and monitoring.

5. For projects utilizing funds from the non-repayable grant, project sponsors are responsible for using the funds for their intended purposes and in compliance with the conditions stipulated in the Commercial Contracts.

For projects requiring re-lending, project sponsors are responsible for using and repaying the borrowed funds in accordance with the conditions stipulated in the Credit Agreements (Re-lending Agreements) signed with the Ministry of Finance and the regulations on the management and use of foreign loans issued by the Government as referenced above.

II. SPECIFIC PROVISIONS

1. Procedures and formalities for withdrawing loans and grants

a. The preparation, examination, and approval of feasibility study reports must comply with the provisions set forth in the Charter for Management of Investment and Construction issued together with Decree No. 42/CP dated July 16, 1996 of the Government.

b. Based on the approved project, the project sponsor is responsible for conducting tender procedures and signing Commercial Contracts with French companies to purchase goods and services. These commercial contracts must be signed before June 30, 1998. Subsequently, the project sponsor completes the formalities for approving the Commercial Contracts according to Decision No. 91/TTg dated November 13, 1992 of the Prime Minister and the guidelines of the Ministry of Trade.

c. Documents related to the approval of investment projects, signed Commercial Contracts, and the approval of Commercial Contracts need to be submitted to the Ministry of Planning and Investment, the Ministry of Finance (Department of Foreign Finance, General Department of Investment and Development) to proceed with subsequent formalities with the French side.

d. Based on the notice requesting withdrawal of funding to implement commercial contracts from the project sponsor along with the notification of approval of the commercial contract by the Vietnamese Government sent by the Ministry of Planning and Investment to the Commercial Attaché of the French Embassy in Hanoi, the Ministry of Finance will authorize the Vietnam Development Bank to handle the formalities for withdrawing the French private bank loan guaranteed by COFACE for projects in Category III using mixed French funding.

e. Based on the Credit Agreement signed between the project sponsor and the General Department of Investment and Development, the Ministry of Finance (Department of Foreign Finance) will sign and stamp the original commercial contract and related invoices and documents to transfer to the French side as payment evidence for the French supplier, or to the Vietnam Development Bank for the portion of the French bank loan to carry out the external procedures as stipulated in the Credit Facility Agreement.

f. In cases where the implementation of the project cannot proceed or is delayed due to incomplete documentation, if the project sponsor wishes to withdraw or change the project for any reason, they must promptly report to the Ministry of Planning and Investment and the Ministry of Finance.

2. Implementation of allocation and re-lending.

a. For projects requiring re-lending (Appendix II and III)

* After the competent authorities approve the Commercial Contract signed between the project sponsor (or the unit authorized by the project’s main management agency to import goods) and the French company, the project sponsor must proceed to sign a Credit Agreement with the Ministry of Finance (General Department of Investment and Development) regarding the re-lending of the funded capital from the State Budget. The Credit Agreement will serve as the basis for the project sponsor to officially recognize debt with the State Budget and fulfill their obligations according to the terms agreed upon in this agreement.

* Conditions for re-lending for projects using the French Treasury funding (Appendix II):

- On-lending period: 15 years with 4-year grace period

- Re-lending interest rate: 2.5%/year

- Currency for lending: French Franc

* Conditions for rescheduling loans for projects using mixed credit sources (Annex III):

+ French Treasury source (accounting for 74.59% of the total loan amount of the project):

- On-lending period: 15 years with 4-year grace period

- On-lending interest rate: 1% per annum

- Currency for lending: French Franc

+ Private credit source (accounting for 25.41% of the total loan amount of the project):

- On-lending period: 10 years without grace period

- Rescheduling interest rate: according to the interest rate set by the French Bank and will be fixed throughout the loan period.

- Currency for loan: French Franc.

* Fees: In addition to the rescheduling interest rate mentioned above, project sponsors must bear the following fees:

Foreign fees:

For projects rescheduled from the mixed credit sources listed in Annex III (including a portion from the French Treasury loan and a portion from private credit), project sponsors must bear the following fees:

+ Commitment fee: 0.5%/year on the undrawn amount of the private credit source.

+ Management fee of the French Bank: 0.8% paid once on the total loan amount from the private credit source.

+ Credit insurance fee of COFACE: paid at the rate announced by France based on the loan amount from the private credit source.

+ Other fees collected by foreign banks during the withdrawal process (if any).

Domestic fees: Service fee for state credit loan 0.5%/year on the outstanding balance collected by the State Investment Development General Department and foreign transaction fees collected by the Vietnam Investment and Development Bank.

Method of paying fees:

Foreign transaction fees of the Vietnam Investment and Development Bank will be directly collected by the bank from the project sponsor for each transaction according to the bank's fee schedule.

The State Investment Development General Department directly collects:

+ Domestic fees at the rate of 0.5%/year from the project sponsor together with the repayment schedule of principal and interest.

+ Foreign fees including commitment fees, management fees, and other fees (if any) mentioned above from the project sponsor upon receipt of notification from the Vietnam Investment and Development Bank so that the State Budget has funds to pay to France when due. Specifically, the credit insurance fee will be supplemented by France and added to the total loan amount that the project sponsor receives from the State Investment Development General Department.

* The State Investment Development General Department notifies the project sponsor of the State Budget repayment schedule. Project sponsors are responsible for repaying the principal, interest, and fees due according to the notice. Project sponsors may repay the debt ahead of schedule to the State Budget.

* If the project sponsor fails to repay the debt on time to the Ministry of Finance for any reason, the project sponsor will bear late payment interest penalties as stipulated by France in the applicable agreement (for the French Treasury loan, the penalty interest rate is 2.5%/year, for the private credit loan, it is PIBOR + 2.5%/year).

b. For projects funded by the State Budget (Annex I)

* The Ministry of Finance (State Investment Development General Department) implements funding for projects listed in Annex I attached in accordance with the current regulations on budget allocation and management of basic construction capital.

* For projects funded by the State Budget, foreign costs and foreign transaction fees are paid by the State Budget. The Vietnam Investment and Development Bank is responsible for promptly notifying the Ministry of Finance (Department of Foreign Finance and State Investment Development General Department) about the fees to be paid.

* For projects funded from non-reimbursable aid from the French Treasury, when using this source, they must issue an aid confirmation certificate. When receiving aid goods notification, project sponsors must go to the Ministry of Finance to complete the aid confirmation procedures. In cases where foreign parties purchase goods domestically, project sponsors must complete the aid confirmation procedures no later than 30 days after receiving the goods. Necessary documents for aid confirmation include:

+ Approval document for the program/project by the competent authority.

+ Agreement or signed formal documents with foreign partners clearly stating the ongoing project.

+ Approval document for the commercial contract.

+ Bill of Lading or Airway Bill.

+ Detailed packing lists (Packing List)

+ Commercial Invoice.

+ Insurance Certificate.

* Documents for recording receipts and payments through the State Budget are:

+ Confirmation of aid goods issued by the Ministry of Finance; or

+ Debt notification from the French Development Fund on behalf of the French Treasury and invoices for payment to French suppliers (including invoices for technical service payments) provided by the French Trade Office; or

+ Debt notification from the French Bank.

3. Other provisions

a. The Ministry of Finance authorizes the Vietnam Investment and Development Bank to handle foreign payment services with France for the portion of French bank loans guaranteed by COFACE. Immediately after withdrawing funds, the Vietnam Investment and Development Bank is responsible for submitting a withdrawal statement to the Ministry of Finance for budget accounting procedures. Each repayment period, the Vietnam Investment and Development Bank sends a copy of the repayment schedule for the loan to the Ministry of Finance to transfer funds and a copy of the payment order to the Vietnam Investment and Development Bank in a timely manner (five days before the foreign repayment deadline).

b. All goods, equipment, and services imported for projects under the 1995 Protocol using French ODA funds to serve the project are exempt from import taxes according to Circular No. 1269-TC/TCT dated April 22, 1997, of the Ministry of Finance.

c. Upon completion of the project, project sponsors are responsible for preparing final settlement reports on the acceptance and use of the project, evaluating the effectiveness of the project, and submitting them to the project management agency and the Ministry of Finance. The process and requirements for preparing the final settlement, the content of the final settlement report, and approval of the final settlement follow the guidelines in Circular No. 66-TC/ĐTPT dated November 2, 1996, of the Ministry of Finance.

III. IMPLEMENTATION:

This circular takes effect fifteen days after the date of signature. Project management agencies are responsible for guiding project sponsors to implement in accordance with the provisions of this circular. During implementation, if any issues arise, project sponsors and project management agencies need to promptly reflect them to the Ministry of Finance for consideration and resolution.

ANNEX I

LIST OF PROJECTS USING FRENCH AID FUNDS FOR THE 1996 BUDGET YEAR UNDER THE STATE BUDGET ALLOCATION REGIME

(Attached to Circular No. 45-TC/TCĐN dated July 9, 1997, of the Ministry of Finance)

Non-repayable aid

Mixed credit: Hybrid credit

Treasury loan: Loan from State Treasury

ANNEX 2

PROJECT LIST USING TREASURY LOAN FUNDS
STATE BORROWING REGIME 1996 FOR RELOANING CAPITAL

(Attached to Circular No. 45-TC/TCĐN dated July 9, 1997, of the Ministry of Finance)

ANNEX 3

PROJECT LIST USING MIXED CREDIT FUNDS UNDER THE STATE BORROWING REGIME 1996 FOR RELOANING CAPITAL

(Attached to Circular No. 45-TC/TCĐN dated July 9, 1997, of the Ministry of Finance)