Circular No. 48-TC/TCÐN guides the management and use of Chinese ODA funds for small hydropower projects in mountainous provinces.

CIRCULAR

DIRECTIVE NO. 48 TC/TCĐN OF AUGUST 22, 1996, ISSUED BY THE MINISTRY OF FINANCE ON GUIDELINES FOR THE MANAGEMENT AND USE OF CHINESE ODA FUNDS FOR SMALL HYDROPOWER PLANTS IN MOUNTAINOUS PROVINCES

BASED ON THE LOAN AGREEMENT SIGNED ON DECEMBER 2, 1992 BETWEEN THE GOVERNMENT OF THE SOCIALIST REPUBLIC OF VIET NAM AND THE GOVERNMENT OF THE PEOPLE'S REPUBLIC OF CHINA.
BASED ON THE OFFICE OF THE GOVERNMENT'S LETTER NO. 6237/QHQT OF NOVEMBER 8, 1994 REGARDING THE USE OF THE 80 MILLION NDT LOAN FROM CHINA.
AFTER CONSULTATION WITH RELEVANT AUTHORITIES, THE MINISTRY OF FINANCE GUIDES THE MECHANISM FOR THE MANAGEMENT AND USE OF CHINESE ODA FUNDS FOR SMALL HYDROPOWER PLANTS AS FOLLOWS:

I. GENERAL PROVISIONS

1. 15 MILLION NDT OF THE CHINESE ODA LOAN SHALL BE USED TO PROVIDE FUNDS FOR SMALL HYDROPOWER PLANTS IN MOUNTAINOUS PROVINCES IN THE NORTH AS DECIDED BY THE GOVERNMENT.

2. ELIGIBLE USERS: THE PROVINCES OF LAO CAI, LAI CHAU, CAO BANG, AND HAA GIANG.

3. THE MINISTRY OF FINANCE DELEGATES THE VIETNAM FOREIGN TRADE BANK TO ACT AS THE IMPLEMENTING BANK FOR WITHDRAWAL OF THE LOAN AND FOREIGN EXCHANGE SERVICES FOR THIS LOAN.

4. THE MINISTRY OF FINANCE WILL RECORD THE LOAN IN THE STATE BUDGET, ISSUE FUNDS FOR PROJECTS, MANAGE THE LOAN, AND ARRANGE FUNDS FOR TIMELY DEBT REPAYMENTS IN ACCORDANCE WITH THE REPAYMENT SCHEDULE SET OUT IN THE AGREEMENT.

II. SPECIFIC PROVISIONS

1. RESPONSIBILITIES OF THE AUTHORITIES.

a) PROJECT SPONSORS:

+ DEVELOP THE INVESTMENT PROJECT AND SUBMIT IT TO THE AUTHORIZED BODY FOR APPROVAL IN ACCORDANCE WITH GOVERNMENT DECREE NO. 42/CP OF JULY 16, 1996, AND BE RESPONSIBLE FOR PREPARING AND MANAGING THE DOMESTIC MATCHING FUNDS IN THE LOCAL PLAN FOR SMALL HYDROPOWER PLANTS IN LINE WITH THE LOCAL BUDGET SUPPORT PLAN OF THE MINISTRY OF PLANNING AND INVESTMENT.

+ SIGN A CONSULTANCY CONTRACT WITH THE SMALL HYDROPOWER CENTER UNDER THE INSTITUTE OF WATER RESOURCES SCIENCE AND ECONOMICS, SPECIFYING THE CONTENT OF CONSULTANCY ACTIVITIES, METHODS OF CONSULTANCY FEE PAYMENT, IMPORT COMMISSION FEE, AND OTHER RELATED FEES (SUCH AS BANK FEES, RECEIVING AND TRANSPORTING FEES AT THE PROJECT SITE...).

+ COMPLETE PROJECT SETTLEMENT AND PARTIAL PROJECT SETTLEMENT IN ACCORDANCE WITH CURRENT REGULATIONS.

b) SMALL HYDROPOWER CENTER UNDER THE INSTITUTE OF WATER RESOURCES SCIENCE AND ECONOMICS (MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT):

+ SERVE AS THE TECHNICAL CONSULTANT TO PREPARE FEASIBILITY REPORTS, TECHNICAL DESIGN, AND EQUIPMENT INSTALLATION FOR EACH PROVINCE WITH SMALL HYDROPOWER PLANTS.

+ THE SMALL HYDROPOWER CENTER IS THE DESIGNATED ENTITY TO SIGN CONSULTANCY CONTRACTS WITH PROJECT SPONSORS. CONSULTANCY FEES AND IMPORT COMMISSION FEES ARE INCLUDED IN THE PROJECT COST AND PAID TO PROJECT SPONSORS BASED ON THE CONSULTANCY CONTRACT.

+ REPRESENT PROJECT SPONSORS IN SIGNING IMPORT COMMISSION CONTRACTS WITH TECHNOIMPORT COMPANY, SPECIFYING THE RIGHTS, OBLIGATIONS, AND BENEFITS OF THE CONTRACTING PARTIES.

+ EACH TIME GOODS ARE DELIVERED, THE SMALL HYDROPOWER CENTER MUST PREPARE A DETAILED DISTRIBUTION LIST FOR EACH PROJECT SPONSOR AND NOTIFY THE VIETNAM INVESTMENT AND DEVELOPMENT GENERAL DEPARTMENT (HEREINAFTER REFERRED TO AS THE IMPORT DISTRIBUTION LIST).

c) MINISTRY OF PLANNING AND INVESTMENT: ANNUALLY ALLOCATE THE BASIC CONSTRUCTION INVESTMENT PLAN IN ACCORDANCE WITH THE APPROVED PROJECT SCHEDULE INCLUDING BOTH DOMESTIC AND FOREIGN FUNDS.

d) MINISTRY OF FINANCE:

+ THE FOREIGN FINANCE DEPARTMENT IS RESPONSIBLE FOR REVIEWING AND APPROVING TRADE CONTRACTS, MONITORING THE WITHDRAWAL PROCESS, AND NOTIFYING THE STATE BUDGET DEPARTMENT AND THE INVESTMENT GENERAL DEPARTMENT TO PROCESS BUDGET RECORDS THROUGH THE LOCAL BUDGET.

+ THE INVESTMENT GENERAL DEPARTMENT IS RESPONSIBLE FOR ISSUING INVESTMENT FUNDS TO PROJECT SPONSORS FROM THE CHINESE LOAN AND DOMESTIC MATCHING FUNDS IN ACCORDANCE WITH REGULATIONS, MONITORING AND REPORTING TO THE MINISTRY OF FINANCE ON PROJECT IMPLEMENTATION, AND CONFIRMING THE COMPLETED WORK VOLUME.

e) TECHNOIMPORT COMPANY:

+ ASSIGNED TO HANDLE IMPORT COMMISSION FOR EQUIPMENT FOR SMALL HYDROPOWER PROJECTS IN MOUNTAINOUS PROVINCES IN THE NORTH: THE COMPANY IS RESPONSIBLE FOR NEGOTIATING, SIGNING IMPORT CONTRACTS, AND PAYING ALL DOMESTIC BANK TRANSACTION FEES.

+ SIGN IMPORT COMMISSION CONTRACTS WITH THE SMALL HYDROPOWER CENTER, SPECIFYING THE RIGHTS, OBLIGATIONS, AND BENEFITS OF THE CONTRACTING PARTIES.

+ IMPORT TAXES AND FEES SUCH AS IMPORT TAX (IF ANY), BANK TRANSACTION FEES, AND RECEIVING AND TRANSPORTING FEES WILL BE PAID IN ACCORDANCE WITH THE IMPORT COMMISSION CONTRACT. ADJUSTMENT AND MODIFICATION FEES WILL BE BORNE BY THE PARTY REQUESTING THE CHANGE.

+ AFTER SIGNING, THE COMPANY SENDS A COPY OF THE CONTRACT TO THE MINISTRY OF FINANCE (FOREIGN FINANCE DEPARTMENT) FOR APPROVAL PROCEDURES.

+ RECEIVE A COMMISSION FEE OF 1% OF THE ACTUAL IMPORT VALUE IN FOREIGN CURRENCY (DAF PRICE) FROM THE SMALL HYDROPOWER CENTER BASED ON PURCHASE DOCUMENTS AFTER COMPLETING THE DELIVERY OBLIGATION AS PER THE IMPORT COMMISSION CONTRACT.

f) VIETNAM FOREIGN TRADE BANK: PROVIDE FOREIGN EXCHANGE SERVICES FOR SMALL HYDROPOWER PROJECTS IN ACCORDANCE WITH THE BANK AGREEMENT (SIGNED BETWEEN THE VIETNAM FOREIGN TRADE BANK AND THE CHINESE BANK ON FEBRUARY 17, 1994 AND ANY AMENDMENTS THEREOF) AFTER RECEIVING THE MINISTRY OF FINANCE'S CONTRACT APPROVAL NOTICE. BANK SERVICE FEES ARE PAID BY THE IMPORT COMMISSION UNIT (TECHNOIMPORT COMPANY) ACCORDING TO THE FOREIGN TRADE BANK'S SERVICE FEE SCHEDULE AT THE TIME OF EXPENSE INCURRENCE.

2. FUNDS SOURCE:

- FOREIGN FUNDS: FUNDS PROVIDED FROM THE CHINESE LOAN FOR SMALL HYDROPOWER PLANTS.

- DOMESTIC MATCHING FUNDS: INCLUDE CONSULTANCY FEES, IMPORT COMMISSION FEES, IMPORT TAX (IF ANY), BANK FEES, RECEIVING AND TRANSPORTING FEES TO THE PROJECT SITE, CONSTRUCTION AND INSTALLATION COSTS, MANAGEMENT FEES, AND TRAINING FEES FOR OPERATORS, WHICH ARE FUNDED AND MANAGED BY PROJECT SPONSORS BASED ON THE LOCAL BUDGET PLAN, WHERE THE CENTRAL BUDGET SUPPORT TO LOCAL BUDGETS IS IN LINE WITH THE BUDGET ALLOCATION PLAN APPROVED BY THE NATIONAL ASSEMBLY.

3. BUDGET RECORDING PROCEDURE:

+ THE VIETNAM FOREIGN TRADE BANK SHALL IMMEDIATELY FORWARD TO THE MINISTRY OF FINANCE (FOREIGN FINANCE DEPARTMENT AND INVESTMENT GENERAL DEPARTMENT) AFTER RECEIVING THE NOTIFICATION FROM THE CHINESE BANK.

+ On the basis of the debt notice, the Department of Foreign Financial Affairs of the Ministry of Finance will notify the Department of State Budget to process the recording of state budget revenue and expenditure for capital disbursement (the portion of foreign debt) through the General Department of Investment. The General Department of Investment shall base on the import goods allocation list and compare it with the capital allocation plan of the Ministry of Planning and Investment to record the capital disbursement for localities receiving equipment through the local budget.

+ The value of imported goods for recording in the state budget shall be equivalent to the foreign currency amount recorded by the Central Bank (equal to the value of goods in the Contract plus the withdrawal fee of the Central Bank), converted to Vietnamese Dong using the indirect conversion method via USD according to the selling exchange rate published by the Eximbank at the time of withdrawal.

+ In case there is a change in the allocation of imported goods, the Small Hydropower Center must consult with the Ministry of Planning and Investment and inform the General Department of Investment about the adjustment content.

III. WORK OF ACCEPTANCE AND REPORTING:

- Within the first 15 days of each quarter, the Project Owner is responsible for reporting the progress of project implementation to the Local Investment Department and the General Department of Investment, and settling accounts for completed works in accordance with current regulations.

- The Project Owner is responsible for the quantity and quality of the works.

- During the loan drawdown process as well as during the project implementation, if there are any difficulties, they should be reported promptly so that the Ministry of Finance (Department of Foreign Financial Affairs - General Department of Investment) can study and resolve them in a timely manner.