Circular No. 45/TC-TCĐN guiding the management and use of capital from non-refundable aid and loans from the French Treasury and mixed credit provided by the Government of France.

CIRCULAR

Guidelines for the management and use of financial aid from the French Government in 1996

Pursuant to Decree No. 58/CP dated August 30, 1993 of the Government promulgating the Regulations on foreign borrowing and debt repayment;
Pursuant to Decree No. 20/CP dated March 15, 1994 of the Government promulgating the Regulations on the management and use of Official Development Assistance;
Pursuant to Decree No. 42/CP dated July 16, 1996 of the Government promulgating the Charter on Investment Management and Construction;
Pursuant to Circular No. 18-TC/TCĐN dated March 5, 1994 of the Ministry of Finance guiding the management and use of foreign loans provided by the Government;
Pursuant to Circular No. 1909/QHQT dated April 21, 1997 of the Government regarding the financial mechanism for projects using financial aid from the French Government under the Protocol of 1996.
The Ministry of Finance guides the management and use of financial aid according to the Financial Protocol signed on December 5, 1996 between the Government of the French Republic and the Government of the Socialist Republic of Vietnam as follows:

I. GENERAL PROVISIONS

1. The financial aid provided by the French Government to the Vietnamese 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 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 capital usage, and repayment capacity of each project, in accordance with the binding conditions set by France and the annual approval of the Vietnamese Government, projects utilizing financial aid under 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 be refinanced from the French Treasury loan and mixed credit sources according to the refinancing conditions stipulated 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 refinancing of funds for projects corresponding to the above categories. The Vietnam Investment and Development Bank implements banking transactions serving projects using funds from the mixed credit source.

4. Project sponsors who use financial aid (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 non-repayable grant funds, project sponsors are responsible for using the funds for their intended purposes and in compliance with the terms agreed upon in the Commercial Contracts. For projects requiring refinancing, project sponsors are responsible for using and repaying the loan funds in accordance with the terms agreed upon in the Credit Agreements (Refinancing 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 loan and grant funds

a. The preparation, examination, and approval of feasibility study reports must be carried out strictly in accordance with the Charter on Investment Management 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 implementing 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 should 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 project sponsor's request for withdrawal of financial aid to implement commercial contracts and 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 Investment and Development Bank to handle the procedures for withdrawing the French private bank loan guaranteed by COFACE for projects in Category III using mixed French aid funds.

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 documentation for the French supplier, or to the Vietnam Investment and Development Bank for the portion of the French bank loan to implement 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 procedural documentation, and if the project sponsor wishes to withdraw or convert the project for any reason, the project sponsor must promptly report to the Ministry of Planning and Investment and the Ministry of Finance.

2. Implementation of allocation and refinancing.

a. For projects requiring refinancing (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 supervisory agency to import goods) and the French company, the project sponsor must sign a Credit Agreement with the Ministry of Finance (General Department of Investment and Development) regarding the refinancing of the financial aid from the State Budget. The Credit Agreement will serve as the basis for the project sponsor to officially recognize the debt with the State Budget and fulfill its obligations according to the terms committed in this agreement.

* Refinancing conditions for projects using French Treasury funds (Appendix II):

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

||| Interest rate for refinancing: 2.5%/year

||| Currency for refinancing: French Franc

||| The conditions for refinancing for projects using mixed credit sources (Annex III):

||| - French Treasury funds (accounting for 74.59% of the total loan amount of the project):

||| Time for refinancing: 15 years with a 4-year grace period

||| Interest rate for refinancing: 1%/year

- Currency for lending: French Franc

||| - Private credit (accounting for 25.41% of the total loan amount of the project):

- On-lending period: 10 years without grace period

||| Interest rate for refinancing: according to the interest rate set by the French Bank and will be fixed throughout the loan period.

||| Currency for refinancing: French Franc.

||| Fees: In addition to the refinancing interest rates mentioned above, the project owners must bear the following fees:

Foreign fees:

For projects refinancing from the mixed credit sources specified in Annex III (including part of the French Treasury loan and part of private credit), the project owners must bear the following fees:

Commitment fee: 0.5%/year on the undrawn portion of the private credit.

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 loans 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 from the project owner for each transaction according to the bank's fee schedule.

The State Investment Development General Department directly collects:

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

Foreign fees including commitment fees, management fees, and other fees (if any) mentioned above from the project owner 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 owner receives from the State Investment Development General Department.

The State Investment Development General Department notifies the project owner of the State Budget repayment schedule. The project owner is responsible for repaying the principal, interest, and fees due according to the notice. Project owners may repay ahead of schedule to the State Budget.

If the project owner fails to repay the debt on time to the Ministry of Finance for any reason, the project owner will bear late payment interest penalties as stipulated by France in the applicable agreement (for the 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 state budget allocation and management of basic construction capital.

For projects funded by the State Budget, all 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 owners must go to the Ministry of Finance to complete the aid confirmation procedures. In cases where foreign parties purchase goods domestically, project owners must complete the aid confirmation procedures within 30 days of receiving the goods. Necessary documents for aid confirmation include:

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

Agreement or signed formal agreements 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 notice from the French Development Fund on behalf of the French Treasury and invoices for payments to French suppliers (including invoices for technical service payments) provided by the French Trade Office; or

Debt notice 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 COPACE. Immediately after withdrawing funds, the Vietnam Investment and Development Bank is responsible for sending the Ministry of Finance a withdrawal statement for accounting purposes. Each repayment period, the Vietnam Investment and Development Bank sends the Ministry of Finance a copy of the loan repayment schedule to facilitate timely transfer of funds (five days before the foreign repayment deadline).

b. All goods, equipment, and services imported under French ODA projects covered by Protocol 1995 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 owners are responsible for preparing final settlement reports on acceptance and use, 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 final settlements, contents of the final settlement report, and approval of final settlements 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 its signing date. Project management agencies are responsible for guiding project owners to implement in accordance with the provisions of this circular. Any issues arising during implementation should be reported promptly to the Ministry of Finance for consideration and resolution.

ANNEX I

LIST OF PROJECTS USING FRENCH FINANCIAL ASSISTANCE FUNDS FOR THE 1996 BUDGET PERIOD UNDER STATE BUDGET ALLOCATION REGULATIONS
(Attached to Circular No. 45-TC/TCĐN dated July 9, 1997, of the Ministry of Finance)

VTKHL: Non-Repayable Grant

TDHH: Hybrid Credit

VAYKB: Treasury Loan.

ANNEX II

LIST OF PROJECTS USING TREASURY LOAN FUNDS UNDER THE 1996 FINANCIAL REGIME FOR REFINANCE BY THE STATE
(Attached to Circular No. 45-TC/TCĐN dated July 9, 1997, of the Ministry of Finance)

ANNEX 3

LIST OF PROJECTS USING HYBRID CREDIT FUNDS UNDER THE 1996 FINANCIAL REGIME FOR REFINANCE BY THE STATE
(Attached to Circular No. 45-TC/TCĐN dated July 9, 1997, of the Ministry of Finance)