JOINT CIRCULAR No. 46-TTLB/NHNN GUIDING THE MANAGEMENT OF WORKING CAPITAL OF STATE ENTERPRISES PURSUANT TO DECISION No. 76-HÐBT dated June 26, 1986 OF THE COUNCIL OF MINISTERS

CIRCULAR

JOINT MINISTRY OF FINANCE - STATE BANK

NO. 46-TTLB/TC/NHNN DATE 6-12-1986

GUIDELINES FOR THE MANAGEMENT OF WORKING CAPITAL OF STATE ENTERPRISES ACCORDING TO DECISION NO. 76-HĐBT

OF THE COUNCIL OF MINISTERS ON JUNE 26, 1986
IMPLEMENTING DECISION NO. 76-HĐBT OF JUNE 26, 1986 OF THE COUNCIL OF MINISTERS, IN ORDER TO ENHANCE THE AUTONOMY OF ENTERPRISES IN MANAGING WORKING CAPITAL, MEETING THE REQUIREMENTS OF PRODUCTION AND BUSINESS EFFECTIVELY, ENSURING THAT ENTERPRISES USE CAPITAL ECONOMICALLY, FOR THE RIGHT PURPOSES, AND ACHIEVE HIGH ECONOMIC EFFICIENCY, THE JOINT MINISTRY OF FINANCE - STATE BANK PROVIDES SPECIFIC GUIDELINES ON THE MANAGEMENT OF WORKING CAPITAL OF STATE ENTERPRISES AS FOLLOWS:

1. THE WORKING CAPITAL OF ENTERPRISES IS MET BY TWO SOURCES:

a) OWN WORKING CAPITAL AND THAT CONSIDERED AS OWN INCLUDES:

- INITIAL CAPITAL PROVIDED BY THE STATE BUDGET WHEN THE ENTERPRISE BEGINS PRODUCTION;

- CAPITAL DRAWN FROM THE PROMOTION FUND FOR DEVELOPMENT OF PRODUCTION AND BUSINESS TO SUPPLEMENT ANNUAL WORKING CAPITAL;

- FIXED DEBT AMOUNTS (LEGAL REGULAR OCCUPATION CAPITAL) SUCH AS TAXES DUE BUT NOT YET DUE, WAGES DUE TO EMPLOYEES BUT NOT YET PAID, ADVANCED EXPENSES;

- OTHER WORKING CAPITAL SUCH AS CONTRIBUTIONS WITH OWN CAPITAL IN JOINT VENTURES AND ASSOCIATIONS; ADDITIONAL WORKING CAPITAL PROVIDED BY SUPERIOR AUTHORITIES; THE VALUE OF FIXED ASSETS BELONGING TO THE STATE BUDGET CAPITAL, PURCHASED WITH OWN CAPITAL OR LOANED FROM THE BANK BUT ALREADY REPAID AND TRANSFERRED TO CURRENT ASSETS DUE TO CHANGES IN FIXED ASSET STANDARDS; A PORTION OF THE UNUSED BALANCES OF ENTERPRISE FUNDS (SUCH AS MAJOR REPAIR FUNDS, PROMOTION FUNDS FOR PRODUCTION AND BUSINESS, INCENTIVE FUNDS, WELFARE FUNDS) MAY TEMPORARILY BE MOBILIZED INTO RAW MATERIAL RESERVES.

b) WORKING CAPITAL LOANED FROM THE STATE BANK.

2. WHEN ENTERPRISES BEGIN PRODUCTION AND BUSINESS, THEY ARE PROVIDED WITH A PORTION OF THE APPROVED WORKING CAPITAL LIMIT (IRRESPECTIVE OF WHETHER THE WORKING CAPITAL LIMIT IS FOR GOODS OR NOT) ACCORDING TO EACH INDUSTRY TO ENSURE THAT THE STATE BUDGET CAPITAL AND FIXED DEBT PLANS ACCOUNT FOR:

- 10% (TEN PERCENT) FOR SERVICE ENTERPRISES; PUBLIC CATERING ENTERPRISES.

- 20% (TWENTY PERCENT) FOR TRANSPORT ENTERPRISES; POST AND TELEGRAPH ENTERPRISES.

- 30% (THIRTY PERCENT) FOR COMMERCE ENTERPRISES; FOREIGN TRADE COMPANIES.

- 50% (FIFTY PERCENT) FOR INDUSTRIAL ENTERPRISES; AGRICULTURAL ENTERPRISES; FOREST PRODUCT HARVESTING ENTERPRISES; GEOLOGICAL EXPLORATION ENTERPRISES; FISHERY ENTERPRISES; SALT ENTERPRISES; CONSTRUCTION ENTERPRISES; CONTRACTING ENTERPRISES; SUPPLY ORGANIZATIONS AND OTHER ENTERPRISES.

FOR ENTERPRISES THAT ARE PUT INTO OPERATION IN STAGES BASED ON TECHNICAL AND ECONOMIC JUSTIFICATIONS, THE ENTERPRISE WILL BE REVIEWED AGAIN FOR THE WORKING CAPITAL LIMIT TO SUIT THE INCREASED NEEDS IN EACH STAGE. BASED ON THE RATIO OF STATE BUDGET CAPITAL REQUIRED IN THE WORKING CAPITAL LIMIT, THE STATE BUDGET WILL PROVIDE ADDITIONAL INITIAL CAPITAL TO THE ENTERPRISE UNTIL IT IS FORMED.

IN CASES WHERE PRODUCTION IS REORGANIZED AND THE PRODUCTION AND BUSINESS TASKS OF SOME ENTERPRISES ARE REDEFINED, RESULTING IN THE ESTABLISHMENT OF NEW ENTERPRISES, SUPERIOR AUTHORITIES, FINANCE DEPARTMENTS, AND BANKS MUST NOT ONLY REVIEW THE WORKING CAPITAL LIMIT FOR THE NEWLY ESTABLISHED ENTERPRISES BUT ALSO REVIEW THE WORKING CAPITAL LIMIT FOR THE OLD ENTERPRISES DUE TO CHANGES IN THEIR PRODUCTION AND BUSINESS TASKS. IF THE OLD ENTERPRISES REDUCE THEIR PRODUCTION AND BUSINESS TASKS AND HAVE EXCESS OWN WORKING CAPITAL, THESE ENTERPRISES MUST TRANSFER THE EXCESS CAPITAL TO THE NEWLY ESTABLISHED ENTERPRISES ACCORDING TO THE SUPERIOR AUTHORITY'S ORDER. THE STATE BUDGET WILL PROVIDE THE INITIAL WORKING CAPITAL LIMIT (BASED ON THE ABOVE RATIO) FOR THE NEWLY ESTABLISHED ENTERPRISES AFTER SUBTRACTING THE EXCESS WORKING CAPITAL TRANSFERRED FROM THE OLD ENTERPRISES.

3. THE METHOD OF DETERMINING THE WORKING CAPITAL LIMIT FOR ENTERPRISES IS CONDUCTED IN ACCORDANCE WITH THE REGULATIONS ALREADY ISSUED ACCORDING TO DECREE NO. 302-TTg OF JULY 7, 1976 OF THE PRIME MINISTER.

THE MAIN DEPARTMENT COOPERATES WITH THE MINISTRY OF FINANCE AND THE STATE BANK TO REVIEW THE WORKING CAPITAL LIMIT FOR CENTRAL STATE ENTERPRISES.

THE LOCAL DEPARTMENT COOPERATES WITH THE LOCAL FINANCE DEPARTMENT AND THE BRANCH OF THE STATE BANK IN PROVINCES, CITIES, AND SPECIAL ZONES UNDER THE CENTRAL GOVERNMENT TO REVIEW THE WORKING CAPITAL LIMIT FOR STATE ENTERPRISES MANAGED BY PROVINCES.

THE DISTRICT DEPARTMENT COOPERATES WITH THE DISTRICT FINANCE DEPARTMENT AND THE BRANCH OF THE STATE BANK IN COUNTIES AND DISTRICTS TO REVIEW THE WORKING CAPITAL LIMIT FOR STATE ENTERPRISES MANAGED BY COUNTIES AND DISTRICTS.

4. ENTERPRISES OPERATING BEFORE JULY 1, 1986, RETAIN ALL STATE BUDGET CAPITAL DIRECTLY PROVIDED AS WELL AS THE STATE BANK CAPITAL PROVIDED IN PLACE OF THE BUDGET ACCORDING TO DIRECTIVE NO. 301-CT OF DECEMBER 1, 1982 OF THE CHAIRMAN OF THE COUNCIL OF MINISTERS AND THE CAPITAL DISTRIBUTED FROM THE PRICE DIFFERENTIAL OF REMAINING MATERIALS AND GOODS TO SUPPLEMENT OWN WORKING CAPITAL, TO BE USED AS OWN WORKING CAPITAL.

ANNUALLY, ENTERPRISES REVIEW THE WORKING CAPITAL LIMIT AND, IF NECESSARY, REQUEST A REVIEW OF THE WORKING CAPITAL LIMIT TO DETERMINE THE SHORTAGE OF OWN WORKING CAPITAL THAT THE ENTERPRISE MUST SELF-SUPPLEMENT.

5. OUTSIDE THE CAPITAL PROVIDED BY THE STATE BUDGET, ENTERPRISES MUST PRIORITY USE THE PROMOTION FUND FOR DEVELOPMENT OF PRODUCTION AND BUSINESS TO SUPPLEMENT OWN WORKING CAPITAL. THE SPECIFIC AMOUNT DRAWN FROM THE PROMOTION FUND FOR DEVELOPMENT OF PRODUCTION AND BUSINESS TO SUPPLEMENT OWN WORKING CAPITAL IS DETERMINED BY THE ENTERPRISE DIRECTOR TO ENSURE THE OWN WORKING CAPITAL RATIO AS STATED IN POINT 2 OF THIS CIRCULAR. IF THE ENTERPRISE FAILS TO MEET THE PLAN FOR SELF-SUPPLEMENTATION OF CAPITAL DURING THE YEAR, IT CAN BORROW FROM THE BANK TO SUPPLEMENT.

6. OUTSIDE THE OWN WORKING CAPITAL AND THAT CONSIDERED AS OWN, ENTERPRISES CAN BORROW FROM THE BANK TO ENSURE THE ACTIVITY OF PRODUCTION AND BUSINESS, BASED ON THE AGREED CREDIT PLAN, ENTERPRISES SIGN A CREDIT CONTRACT WITH THE BANK.

IN SPECIAL CASES, IF WORKING CAPITAL IS LOST OR DAMAGED DUE TO NATURAL DISASTERS, FIRES, OR ENEMY ACTIONS, ENTERPRISES ARE ELIGIBLE FOR RESTORATION OF WORKING CAPITAL BY THE FINANCE DEPARTMENT FOR EACH SPECIFIC CASE.

In exceptional cases, if working capital is lost or damaged due to natural disasters, fire, or enemy action, the enterprise shall be eligible for the financial authority to consider granting the restoration of working capital on a case-by-case basis.

7. For the materials that have been stockpiled and circulated slowly, which were previously allocated from the budget and lent by the bank, when they are released, the enterprise shall be responsible for repaying the State Bank and replenishing its own working capital correspondingly to the structure of the budget funds and bank funds in the stockpiled and slowly circulating materials.

8. This Circular takes effect from July 1, 1986. All previous regulations contrary to this Circular are hereby abolished.