Circular No. 60-TC/DTPT guiding the management and provision of preferential credit loans from the State

MINISTRY OF FINANCE ********	SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness ********
NUMBER: 60-TC/ĐTPT	HA NOI, OCTOBER 23, 1996

 

CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 60 TC/ĐTPT OCTOBER 23, 1996 GUIDING THE MANAGEMENT OF LOANS FOR STATE-FACILITATED CREDIT

Pursuant to the State Budget Law issued on March 20, 1996;
Pursuant to Decree No. 42/CP dated July 16, 1996 of the Government on the Charter for Investment Management and Construction;
BASED ON Circular No. 04/TTLB dated September 10, 1996 of the Joint Ministry of Construction - Ministry of Planning and Investment - Ministry of Finance guiding the implementation of the Regulation on Investment Management and Construction issued together with Decree No. 42/CP dated July 16, 1996 of the Government;
The Ministry of Finance guides the management and lending of state-facilitated credit as follows:

Part 1:

 

GENERAL PROVISIONS

1- Sources of state-facilitated credit for investment development include:

- Annual budget funds allocated for investment credit construction.

- Funds raised according to the government's policy.

- Foreign loans and international aid sources designated for investment credit development of the government.

- Recovered loan principal and part of interest from previous state-facilitated credit projects that have reached maturity.

- Other sources as prescribed by the government.

2- Investment construction projects borrowing state-facilitated credit must comply with the procedures stipulated in the Regulation on Investment Management and Construction, be included in the national plan, and meet the borrowing conditions set forth in this Circular.

3- The system of the General Department of Investment Development under the Ministry of Finance (hereinafter referred to as the Investment Development Authority) shall implement management, lending, and ensure timely and full provision of loan funds according to the credit agreement, closely monitor the use of loan funds, and fully and promptly recover loan principal and interest. The Investment Development Authority shall enjoy management fees as currently regulated.

4- Ministries, agencies at the level of ministries, government agencies, provincial People's Committees, centrally governed cities, and enterprises established pursuant to Decision No. 91/TTg dated March 7, 1994 of the Prime Minister (hereinafter referred to as ministries and provincial People's Committees), and borrowers (hereinafter referred to as borrowing units) shall be responsible for implementing state regulations on investment and construction, managing and using loan funds for their intended purposes effectively. Borrowing units shall be responsible for repaying loan principal and interest according to the signed credit agreement with the Investment Development Authority and reporting final accounts of investment funds in accordance with regulations.

5- Interest rates for state-facilitated credit loans shall be determined by the Government.

6- The management of re-lending of foreign loans and international aid sources designated for investment development shall be carried out according to separate regulations. The domestic counterpart funds from state-facilitated credit shall be implemented according to the provisions of this Circular.

Part II:

 

SPECIFIC PROVISIONS

I- OBJECTS OF STATE-FACILITATED CREDIT LOANS:

1- Investment projects for economic infrastructure and production businesses capable of recovering capital.

2- Investment projects for important sectors of the state economy during each period.

3- Some investment projects in sectors capable of recovering capital identified in the national plan structure.

The allocation of investment for these projects shall be specifically decided by the Government for each object within the planning period.

II- CONDITIONS FOR BORROWING STATE-FACILITATED CREDIT:

Investment projects borrowing state-facilitated credit must satisfy the following conditions:

1- Have a feasibility study report and an investment decision by the competent authority.

2- Have a technical design approval and general estimate. For projects in groups A and B, if there is no approved technical design and general estimate, then the investment decision must specify the amount of capital for each component and must have a technical design and estimate of the starting component approved by the competent authority.

3- Be included in the state's basic construction investment plan; be economically and socially effective, and have the ability to directly recover capital.

4- Borrowers are enterprises and production businesses of all economic components with legal personality, independent economic accounting, effective production and business operations, the ability to repay loan principal and interest on time, collateral assets or legal guarantees, compliance with state regulations on investment and construction, and the provisions of this Circular; open a loan account at the direct lending Investment Development Authority.

III- PROCEDURE FOR ESTABLISHING AND ANNOUNCING THE PLAN FOR STATE-FACILITATED CREDIT FUNDS:

1- Annually, during the time of preparing the state budget draft for the next year as prescribed by the State Budget Law, based on project implementation progress and inspection reports notified by ministries and provincial People's Committees, borrowing units prepare investment plans using state-facilitated credit funds for the planning year and submit them to ministries and provincial People's Committees for consolidation, and send them to the Ministry of Planning and Investment and the Ministry of Finance (General Department of Investment Development).

2- Based on the annual and long-term socio-economic development orientation of the state and the conditions recorded in the investment management regulation, the Ministry of Finance (General Department of Investment Development) actively coordinates with the Ministry of Planning and Investment to propose to the Government the total amount of basic construction investment funded by state-facilitated credit for the planning year, the list of important state projects, and the proposed allocation of state-facilitated credit funds for ministries and provincial People's Committees.

3- After being assigned the plan for lending with state-facilitated credit funds by the Government, the Ministry of Planning and Investment assigns the state plan targets for investment credit construction to ministries and provincial People's Committees, and simultaneously sends them to the Ministry of Finance (General Department of Investment Development).

Pursuant to the State plan assigned, the Ministries and Provincial People's Committees shall be responsible for specifically allocating the project list and loan amount for each project and sending it to the Ministry of Finance (Investment Development General Department). The Investment Development General Department shall inspect the allocation plans of the Ministries and Provincial People's Committees regarding the total amount and project list, and notify the project list and loan amount for each project to the Investment Development Departments of provinces and centrally-administered cities to guide borrowing units to prepare loan application documents in accordance with regulations. In cases where the allocation plans of the Ministries and Provincial People's Committees are not consistent with the State plan assigned, the Ministry of Finance (Investment Development General Department) shall issue a document requesting the Ministries and Provincial People's Committees to adjust accordingly.

Based on the allocation plan consistent with the State plan indicators assigned, the Ministries and Provincial People's Committees shall assign the annual basic construction plan to the project sponsors.

4- After signing the credit contract, based on the project implementation progress, the borrowing units shall prepare the quarterly loan withdrawal plan and send it to the direct investment development agency providing the loan to compile the loan demand according to the borrowing units' plans, and then submit it to the Investment Development General Department. The Investment Development General Department shall compile the quarterly plan on preferential credit capital and report it to the Ministry of Finance, clearly identifying the preferential credit capital from the State budget and the raised capital along with the mobilization plan.

IV- LOAN DOCUMENTATION:

The borrowing unit shall submit to the direct investment development agency providing the loan the following documentation:

1- Feasibility study report and investment decision by the competent authority.

2- Decision approving technical design and general estimate. For projects in Groups A and B, if there is no approved technical design and general estimate, the investment decision must specify the capital for each component and have the technical design and estimate of the initial construction component approved by the competent authority. For individual equipment purchase projects, there must be an estimate and a document approving the equipment price by the competent authority.

3- Annual basic construction plan, economic contracts (if any), other relevant legal documents related to the project investment (land grant certificate, construction permit, etc.).

4- Decision establishing the enterprise or production and business facility, business license, practice permit, appointment decision for Director (General Director), Chief Accountant, and audited production and business settlement reports for the two most recent years (except for newly established enterprises).

5- Collateral or guarantee documents in accordance with current State regulations.

6- Explanation documents on the production and business situation and financial status of the borrowing unit, economic efficiency calculation of the project and loan repayment period as guided by the Investment Development General Department.

V- CREDIT CONTRACT:

1- After receiving all valid loan application documents, the lending agency shall analyze and assess the project's effectiveness, the borrowing unit's loan repayment capability, collateral or guarantee. If the project meets the loan conditions and based on the preferential credit quota notification from the Investment Development General Department for the project, the direct investment development agency providing the loan and the borrowing unit shall proceed to sign the credit contract. The borrowing unit is responsible for completing any missing documents in the loan application before signing the credit contract. If the project does not meet the loan conditions, the lending agency must issue a document to the borrowing unit and its superior agency, and simultaneously report to the Ministry of Finance.

2- Main contents of the credit contract:

- Total investment capital of the project as per the investment decision.

- Annual investment plan, including the preferential State loan amount.

- Investment content.

- Loan interest rate.

- Loan term, debt repayment term (principal and interest), starting date of debt repayment (principal and interest), repayment period and amount per period.

- Responsibilities and commitments to fulfill the contract by the borrowing unit and the lending agency.

The credit contract shall be made in three copies; the borrowing unit and the direct investment development agency providing the loan each retain one copy; one copy shall be sent to the local provincial or city legal authority.

3- Credit contract termination: After the borrowing unit has fully repaid the loan (principal and interest), the lending agency and the borrowing unit shall sign a credit contract termination record. The credit contract termination record shall be made in three copies and sent to the authorities that previously received the credit contract.

VI- LOAN AMOUNT, LOAN TERM AND DEBT REPAYMENT (PRINCIPAL AND INTEREST):

1- The preferential State credit loan amount for the investment project is determined in the annual State plan and according to investment regulations. The borrowing unit must raise the maximum self-supplementary capital and other lawful sources to invest. The investment development agency provides additional funding for the shortfall.

2- The loan term is calculated from the date the borrowing unit receives the first loan disbursement until the full repayment of the loan (principal and interest).

3- The debt repayment term (principal and interest) is calculated from the date the borrowing unit starts repaying the loan until the full repayment of the loan according to the principle:

- At the latest, six months after receiving the first loan disbursement, the borrowing unit begins monthly or quarterly principal repayment.

- The borrowing unit pays monthly interest on the outstanding loan balance.

- The borrowing unit may repay the loan (principal and interest) according to the project's production and business cycle.

- In cases where the borrowing unit implements a new investment project or the production and business situation of the borrowing unit does not ensure sufficient sources to repay the debt according to the above principle, the debt repayment term (principal and interest) may be extended but not exceeding the project completion and usage date recorded in the approved project.

- The borrowing unit may repay the loan ahead of schedule.

VII- CAPITAL TRANSFER, ISSUE AND RECOVERY OF PREFERENTIAL STATE CREDIT CAPITAL:

1- Capital transfer:

1.1- For State credit capital, based on the quarterly loan capital plan proposed by the Investment Development General Department system, the Ministry of Finance shall transfer the preferential credit capital from the State budget to the Investment Development General Department to organize the loan issuance.

With respect to raised capital, the General Department for Investment Development shall be responsible for formulating a plan to raise capital, submitting it to the Ministry of Finance for approval, and coordinating with the State Budget Department and the National Treasury to organize the timely and full raising of the required capital.

1.2- Based on the preferential credit funds transferred from the State Budget, the raised capital, debt collection, and withdrawal schedules of each investment project within the area reported by the Investment Development Bureau, the General Department for Investment Development shall transfer preferential credit funds to the Investment Development Bureaus to implement lending activities.

2- Loan disbursement:

2.1- Advance loan disbursement:

2.1.1- The borrowing entity may borrow funds for advance payments to the receiving contractor in the following cases:

- Projects that involve bidding for the entire project or parts thereof (construction, equipment, consultancy, etc.).

- Projects that purchase equipment (including imported and domestically manufactured equipment) or hire consultancy services as prescribed.

- For other expenses during the implementation phase of the project (land compensation, site clearance, etc.), in principle, the borrowing entity must use its own supplementary funds or other sources to carry out these tasks. If the borrowing entity does not have or does not have sufficient supplementary funds, it may be considered for loan disbursement.

2.1.2- Conditions for advance loan disbursement:

- For projects involving bidding for the entire project or construction works organized through bidding, advance loan disbursement to the winning bidder can only be carried out after obtaining the competent authority's decision approving the bidding results, having an economic contract between the borrowing entity and the winning bidder, and the winning bidder providing a performance bond for the contract.

- For purchasing equipment (including imported and domestically manufactured equipment), advance loan disbursement to the receiving contractor can only be carried out after:

+ Obtaining the competent authority's decision approving the bidding results (for the portion of equipment organized through bidding).

+ Having an equipment purchase contract between the borrowing entity and the equipment supplier.

+ The winning bidder providing a performance bond for the contract (for the portion of equipment organized through bidding).

- For consultancy services that require hiring, advance loan disbursement to the consultancy firm can only be carried out after obtaining the competent authority's decision approving the bidding results (for work organized through bidding to select consultants) and the consultancy service contract has been signed between the borrowing entity and the consultancy firm.

- For land compensation and site clearance work, there must be a compensation and relocation plan approved along with the budget estimate.

All contracts signed with foreign organizations must be approved by the competent investment authority regarding the contract contents, and for import equipment contracts, they must also comply with the import equipment guidelines issued by the Ministry of Commerce.

2.1.3- Amount of advance loan:

- For construction works organized through bidding:

+ For tender packages valued at 50 billion VND or more, the maximum advance payment is 20% of the annual capital plan of the tender package.

+ For tender packages valued between 10 billion VND and under 50 billion VND, the maximum advance payment is 15% of the annual capital plan of the tender package.

+ For tender packages valued under 10 billion VND, the maximum advance payment is 10% of the annual capital plan of the tender package.

- For equipment purchases, the amount of advance loan for the equipment supplier or manufacturer according to the payment schedule in the equipment purchase contract and can be implemented until the equipment is stored in the borrowing entity's warehouse (for equipment that does not require installation) or installed and accepted (for equipment that requires installation).

The borrowing entity uses the loan for:

+ Paying the deposit for equipment to the selling entity. + Depositing a guarantee to open a Letter of Credit (in cases where a guarantee is required to open a Letter of Credit).

+ Paying according to the payment schedule determined in the equipment purchase contract.

+ Paying according to the manufacturing progress schedule determined in the contract.

+ Paying transportation and storage costs, etc.

- For consultancy services, the amount of advance loan for the consultancy firm should be at least 25% of the annual capital plan but not exceed the annual capital plan allocated for the consultancy work and 50% of the contract value.

- For projects implementing bidding for the entire project, the amount of advance loan is specified as follows:

+ Advance payment for purchasing equipment, manufacturing, and producing equipment according to the payment schedule in the contract.

+ The remaining advance payment is up to 20% of the annual capital plan recorded for the remaining workload, but not exceeding the amount of the performance bond.

- For land compensation and site clearance work, the amount of advance loan should be at least 20% of the annual capital plan allocated for land compensation and site clearance work.

2.2- Loan disbursement for completed basic construction volume:

2.2.1- Loan disbursement for completed construction volume:

- Construction volume applied through direct assignment is eligible for loan disbursement upon completion and acceptance monthly, provided that all conditions are met:

- According to the construction design drawings (or construction technical drawings) approved and included in the annual investment plan assigned.

+ Detailed cost estimates are approved.

+ Included in the contract between the contracting and subcontracting parties.

+ Adheres to the national unit price norms.

+ Quality meets the design requirements.

- Construction volume applied through bidding is eligible for loan disbursement upon completion and acceptance according to the progress schedule and payment terms stipulated in the contract between the contracting and subcontracting parties, provided that all conditions are met:

+ According to the construction design drawings (or construction technical drawings) approved and included in the annual investment plan assigned.

+ Detailed cost estimates are approved and the winning bidder's bid cost estimate is established.

+ Included in the contract between the contracting and subcontracting parties.

+ Quality meets the design requirements.

The settlement price is the bid price recorded in the contract.

- To be eligible for loan disbursement, the borrowing entity must submit the following documents to the Investment Development Authority directly responsible for loan disbursement:

+ Monthly acceptance records of the volume and quality of the works.

+ Detailed calculation of materials, labor, and machinery costs attached to the summary of expenses. + Payment voucher.

2.2.2- Loan disbursement for completed equipment volume:

- The quantity of equipment eligible for loan repayment funding is the quantity of equipment that has been warehoused by the borrowing entity (for equipment not requiring installation) or has been fully installed and accepted (for equipment requiring installation), and must meet the following conditions:

+ The equipment list must be consistent with the investment decision regarding quantity, quality, type, functionality, capacity, technical standards..., and included in the assigned annual investment plan.

+ Included in the economic contract between the borrowing entity and the equipment supplier.

+ Possess transportation, storage, handling documents or contracts...

To be eligible for loan repayment funding for equipment, the borrowing entity shall submit to the direct lending investment authority the following documents:

+ Economic contract.

+ Invoice and warehouse release form (for domestically purchased equipment).

+ Import documentation set (for imported equipment).

+ Transportation, storage, handling invoices...

+ Warehouse receipt (for equipment not requiring installation) or completion acceptance certificate for installed equipment (for equipment requiring installation).

+ Equipment payment valuation invoice.

+ Insurance certificates (if applicable) and other related documents.

2.2.3- Loan repayment funding for consultancy services:

- The quantity of consultancy work eligible for loan repayment funding is the quantity that has been completed and accepted, and must meet the following conditions:

+ Included in the economic contract between the borrowing entity and the consultancy firm and included in the assigned annual investment plan.

+ Accepted in accordance with the schedule specified in the economic contract.

+ Quality of consultancy work meets the requirements stipulated in the economic contract.

To be eligible for loan repayment funding for consultancy services, the borrowing entity shall submit to the direct lending investment authority the following documents:

+ Completion acceptance certificate for consultancy work.

+ Report on the results of consultancy work implementation.

+ Payment valuation invoice.

2.2.4- Loan repayment funding for other expenses (compensation, land clearance, etc.):

- For compensation and land clearance work, there must be a compensation and land clearance plan accompanied by approved estimates and a confirmation of the compensation volume signed by the beneficiaries.

- For other expenses, valid supporting documents must be provided.

Based on the settlement documents submitted by the borrowing entity, the direct lending investment authority is responsible for reviewing and disbursing loans for the borrowing entity to settle with construction, consultancy, and equipment supply entities. The loan amount equals the capital required for completed basic construction minus any previously disbursed advance payments (if any) and within the agreed credit contract limit.

Each time receiving a loan, the borrowing entity (Director or authorized representative) must sign the loan agreement.

3- Debt recovery and interest collection:

3.1- Upon the debt repayment deadline (principal or interest) agreed upon in the credit contract, the borrowing entity must proactively repay the full debt to the direct lending investment authority.

Sources of debt repayment include the entire depreciation of assets formed with borrowed funds, a portion of post-tax profits, and other lawful sources (if any). The borrowing entity may allocate basic depreciation at a level sufficient to ensure production and business operations do not incur losses to repay the debt according to the agreed credit contract.

In case of guarantee, the guarantor entity must repay the debt on behalf of the borrowing entity according to the terms of the guarantee contract signed between the guarantor and the lending authority.

After applying the above debt recovery measures, including debt extension, if the borrowing entity still cannot repay the debt, the direct lending investment authority may sell off collateral assets according to the law to recover the debt.

3.3- In case the borrowing entity goes bankrupt without fully repaying the debt, the lending authority will recover the outstanding debt according to the Bankruptcy Law.

4- Debt Extension:

4.1- If unable to repay the debt on time according to the signed credit contract and guarantee contract (if any), the borrowing entity and guarantor must provide a written explanation along with the competent authority's recommendation to the direct lending investment authority. The direct lending investment authority will review and decide on adjusting the debt repayment schedule for the borrowing entity. Before signing the adjusted credit contract, the borrowing entity must provide a written commitment to repay the debt according to the adjusted credit contract.

4.2- The Director General of the Investment Development General Department decides the period of debt extension.

The Director of the Investment Development Department may adjust the annual debt repayment of the borrowing entity but must ensure the full disbursement of the project's annual allocated capital.

VIII- REPORTING, INSPECTION, AND VIOLATION HANDLING REGIME:

1- On the 10th day of the first month of each quarter, the borrowing entity is responsible for reporting the investment implementation status and the loan receipt and usage situation of the previous quarter to the direct lending investment authority, simultaneously sending reports to the Ministry or Provincial People's Committee. For group A projects, borrowing entities must submit monthly reports on the 25th of each month to the direct lending investment authority, the Ministry or Provincial People's Committee, the Ministry of Planning and Investment, the Ministry of Finance (Investment Development General Department), the Ministry of Construction, and the General Statistics Office for compilation and reporting to the Prime Minister.

At the end of the planning year and when the investment project (construction works or project components) is completed, the borrowing entity is responsible for preparing and submitting the final investment settlement report as prescribed.

2- Monthly, the direct lending investment authority is responsible for reporting to the Investment Development General Department on the management, loan disbursement, and debt recovery (principal and interest) of preferential credit projects in their jurisdiction.

At the end of the planning year, the direct lending investment authority is responsible for settling accounts with the Investment Development General Department regarding the received capital, the amount disbursed for settlement to reconcile with the state budget according to regulations.

3. Quarterly and at the end of each planning year, ministries and provincial people's committees shall be responsible for compiling the implementation status of investment plans, borrowing situations, and repayment of preferential credit loans of projects under their management and sending them to the Ministry of Finance, the Ministry of Planning and Investment, the Ministry of Construction, and the General Statistics Office in accordance with regulations.

4. Ministries, provincial people's committees, and lending development agencies shall be responsible for regularly and randomly inspecting borrowing units regarding the management and use of borrowed funds, compliance with regulations on collateral assets, and debt guarantee assets.

Borrowing units that violate regulations on the use of borrowed funds shall bear legal responsibility; lending development agencies have the right to temporarily suspend loan disbursements or recover previously disbursed funds, while simultaneously reporting to the Ministry of Finance and the superior authority of the borrowing unit for handling in accordance with the law.

IX. RESPONSIBILITIES AND LIMITATIONS

1. Borrowing units:

1.1. Provide complete, accurate, and timely information related to investment projects, production and business operations, and financial conditions before and during the investment process, as well as the management and use of borrowed funds until all debts are repaid.

1.2. Request loan disbursements when they meet the conditions for disbursement; use borrowed funds for their intended purposes effectively; repay loans fully and promptly according to signed credit contracts.

1.3. Implement current regulations concerning collateral assets and assets formed using borrowed funds.

1.4. Prepare and submit final accounts for investment funds in accordance with current regulations.

2. Ministries and provincial people's committees:

- Manage investments and construction in accordance with the Investment and Construction Management Regulations issued together with Decree No. 42/CP dated July 16, 1996 of the Government and the provisions of this Circular.

- Guide, supervise, and urge borrowing units under their management to manage and use borrowed funds for their intended purposes in accordance with state regulations.

3. Development investment agencies:

3.1. Request borrowing units to provide information related to borrowing projects, production and business operations, and financial conditions of the borrowing units to serve the examination and approval process for loans.

3.2. Have the right to inspect the management and use of borrowed funds, debt guarantee assets, collateral assets, production and business operations, and financial conditions of borrowing units before and during the investment process, serving the management and evaluation of investment effectiveness.

3.3. Are responsible for guiding borrowing units to prepare loan application files and disburse loans promptly and fully according to credit contracts.

3.4. Have the right to refuse loans to investment projects that do not meet the loan conditions stipulated (in Point II, Part II of this Circular), and must report to the competent authority.

3.5. Temporarily suspend loan disbursements or recover previously disbursed funds if borrowing units violate the provisions of this Circular, and must report to the competent authority.

3.6. Prepare reports and settle preferential credit funds of the State in accordance with prescribed regulations.

3.7. Propose the competent authority to auction collateral assets or self-auction collateral assets in accordance with current regulations if borrowing units cannot repay their debts.

4. Financial authorities at all levels:

4.1. Ensure the timely provision of preferential credit funds from the State budget to lending agencies.

4.2. May request lending agencies to report on the management and disbursement of preferential credit funds of the State.

Part 3:

 

IMPLEMENTING PROVISIONS

1. This Circular takes effect from the date of issuance and replaces previous guidance documents on the management of preferential credit loans issued by the Ministry of Finance.

2. The Director of the General Department of Investment Development shall be responsible for guiding the implementation and organizing the enforcement of the provisions of this Circular throughout the system.

3. During the implementation process, if there are difficulties, ministries, sectors, and localities are requested to promptly reflect them to the Ministry of Finance for research and supplementation or amendment.

Le Thi Bang Tam (Signed)