Circular No. 49/TC/ĐT guiding the use of mixed grants from the Swiss Government for state projects in the fiscal year 1994-1995

CIRCULAR

Guidelines for the use of mixed aid from the Swiss Government in the fiscal year 1994-1995 for state projects

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Pursuant to the Agreement between the Government of the Socialist Republic of Vietnam and the Government of the Swiss Confederation on providing mixed aid in the fiscal year 1994-1995;

Pursuant to the Regulation on foreign borrowing and debt repayment issued together with Decree No. 58/CP dated August 30, 1993 of the Government and Circulars guiding the implementation of said decree;

After consultation with the State Planning Commission and the State Bank of Vietnam;

The Ministry of Finance hereby provides guidelines for the use of mixed aid for state projects under the above-mentioned mixed aid agreement as follows:

I. GENERAL PROVISIONS

1) The mixed aid for state projects is a government loan that must be implemented according to the Regulation on foreign borrowing and debt repayment issued together with Decree No. 58/CP dated August 30, 1993 of the Government, Circulars guiding the implementation of said regulation, and the constraints set forth in the mixed aid agreement signed between the two governments.

2) Projects eligible for this mixed aid are those requiring loans, capable of repaying principal and interest on time, and fall within the following sectors: energy, transportation and telecommunications, textile industry, agricultural product processing, and food.

3) The Vietnam Development Bank (selected by the Ministry of Finance and the State Bank of Vietnam) will receive funds from the Ministry of Finance to lend to project sponsors, collect repayments to return to the Ministry of Finance, and charge fees.

II. SPECIFIC PROVISIONS

1) Ministries managing project sponsors shall proceed with project approval as prescribed, submit project files along with letters requesting priority ranking of projects within their ministry to the Ministry of Finance, the State Planning Commission, and the Vietnam Development Bank.

2) The Ministry of Finance, in collaboration with the State Planning Commission and the Vietnam Development Bank, will organize the selection of projects.

After the project has been selected, the Ministry of Finance is responsible for sending a letter introducing a summary of the project and related documents suitable for Appendix 2 of the Agreement to the Swiss Economic Office through the Swiss Embassy for Swiss approval regarding the purpose and scale of the project.

3) After the project has been selected, project sponsors shall organize the signing of commercial contracts with Swiss companies as stipulated in the agreement (to purchase materials, equipment, services including transportation and insurance), while simultaneously completing the procedures for contract approval as currently prescribed.h.

Approved commercial contracts must be sent to the Swiss Embassy in Hanoi, copied to the Ministry of Finance, the State Planning Commission, and the Vietnam Development Bank. The Ministry of Finance authorizes the Vietnam Development Bank to perform international settlement transactions according to the Agreement signed between the State Bank of Vietnam and CREDIT SUISSE Switzerland.

The value of each contract and payment terms are specified in Point 2, Article 6 of the Agreement.

4) Interest rates for project loans are defined as follows:

- The interest rate for Swiss loans is determined:

+ 50% is commercial loan at market interest rates in Switzerland plus a net fee of 1.25%/year, which will be passed on when lending.

+ 50% is grant aid from the Swiss Government without interest.

These two parts will be combined to form an average interest rate. This rate is determined at the time of withdrawal and remains fixed throughout the loan period.

- The service fee of the Vietnam Development Bank is 0.30%/year (including transaction fees in international settlement transactions).

5) The Vietnam Development Bank will guide project sponsors through the necessary procedures for signing loan agreements, compile loan demand requirements to sign capital receipt contracts with the Ministry of Finance, lend to project sponsors, collect debts to repay the state budget to pay foreign debts.

6) Project sponsors must repay the Vietnam Development Bank no later than six months before the deadline stated in the Agreement (including grace periods). Early repayment of debts is encouraged using legitimate sources of funds.

The Vietnam Development Bank must repay the state budget no later than five days after the project sponsor repays the bank.

7) Project sponsors are responsible for using funds for their intended purposes effectively, strictly adhering to current financial management regulations of the state, government regulations on foreign borrowing and debt repayment, and the provisions of this Circular, and are responsible for timely repayment of principal and interest and bear legal responsibility if they fail to repay on time.

III. IMPLEMENTATION:

1) The Vietnam Development Bank will provide specific guidance to project sponsors for loan disbursements according to the Agreement and the provisions of this Circular.

2) Quarterly and annually, project sponsors must report to the Ministry of Finance, the State Planning Commission, the State Bank of Vietnam, the Vietnam Development Bank, and the relevant sectoral or local ministries about the situation of receiving, using, and repaying borrowed capital.

3) The Vietnam Development Bank will settle accounts annually with the Ministry of Finance regarding the situation of receiving capital, lending, collecting debts, and returning capital to the Ministry of Finance.

This Circular takes effect from the date of issuance. During its implementation, any issues should be promptly reported to the Ministry of Finance and relevant agencies for study and resolution.

                                                                                                            SIGNATURE OF THE MINISTER OF FINANCE

                                                                                                            VICE MINISTER

                                                                                                        (Signed)

                                                                                                        Nguyen Sinh Hung