Circular No. 49/TC/DT GUIDELINES ON THE USE OF THE MIXED GRANT FROM THE SWISS GOVERNMENT FOR THE FISCAL YEAR 1994-1995 FOR STATE PROJECTS

CIRCULAR

GUIDELINES FOR THE USE OF THE MIXED LOAN ASSISTANCE FROM THE SWISS GOVERNMENT IN THE 1994-1995 BUDGET FOR NATIONAL PROJECTS

Pursuant to the Agreement between the Government of the Socialist Republic of Vietnam and the Swiss Federal Government on providing mixed loan assistance in the 1994-1995 budget;

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 loan assistance for national projects under the aforementioned mixed loan agreement as follows:

I. GENERAL PROVISIONS

1) The mixed loan assistance for national 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 obligations stipulated in the mixed loan agreement signed between the two Governments.

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

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 from them, and remit to the Ministry of Finance, while also earning 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 their projects 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, shall organize the selection of projects.

After the projects have been selected, the Ministry of Finance shall be 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 projects have 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 necessary approvals for these contracts according to current regulations.

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 handle international payment transactions according to the Agreement signed between the State Bank of Vietnam and CREDIT SUISSE Switzerland.

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

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

- The interest rate for the Swiss loan component is determined:

+ 50% is a commercial loan at market 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 which will be lent interest-free.

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

- The service fee for the Vietnam Development Bank is 0.30%/year (including transaction fees in international payment operations).

5) The Vietnam Development Bank shall guide project sponsors through the necessary procedures for loan agreements, compile loan requirements to sign capital receipt contracts with the Ministry of Finance, lend to project sponsors, collect repayments to the State Budget to repay foreign debts.

6) Project sponsors must repay the Vietnam Development Bank at least six months before the repayment deadline stated in the Agreement (including grace periods). Early repayment of loans is encouraged using legitimate sources of funding.

The Vietnam Development Bank must repay the State Budget within five days after receiving repayment from project sponsors.

7) Project sponsors are responsible for using the funds for their intended purposes effectively, strictly adhering to current financial management systems of the State, government regulations on 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 shall provide detailed guidance to project sponsors for loans according to the Agreement and this Circular.

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

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

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