Circular No. 72/2000/TT-BTC guides the financial mechanism for implementing the program to reinforce irrigation canals.

CIRCULAR

Guidelines for the Financial Mechanism to Implement the Canal and Irrigation Channel Reinforcement Program

Pursuant to Decision No. 66/2000/QĐ-TTg dated June 13, 2000 of the Government on certain policies and financial mechanisms to implement the canal and irrigation channel reinforcement program, the Ministry of Finance provides guidelines on the financial mechanism to implement the canal and irrigation channel reinforcement program as follows:

I. GENERAL PROVISIONS

- The subjects eligible to borrow preferential credit under this Circular are provinces and centrally-administered cities with projects to invest in reinforcing canals and irrigation channels types II and III managed by localities.

- Annually, investment projects for reinforcing canals and irrigation channels must be allocated funds in the local budget estimate from sources including at least 40% of agricultural land tax revenue, water resource fees, and other revenues. Particularly, for system type III canals and irrigation channels, it is necessary to ensure the principle that both the State and the people participate in the work.

- Based on the total amount of credit allocated annually for reinforcing canals and irrigation channels approved, the demand and the ability to balance local investment capital sources including contributions from the people for reinforcing canals and irrigation channels, the Ministry of Finance decides the borrowing limit for each province and centrally-administered city. The lending of capital will be carried out through the Investment Development Support Fund system.

II. SPECIFIC PROVISIONS

1. Loan Application Documents:

To have grounds for deciding the amount of preferential credit loan to implement the canal and irrigation channel reinforcement program, provinces and centrally-administered cities send the following documents to the Ministry of Finance:

- A request letter from the People's Committee of the province or city regarding the preferential credit loan to implement the canal and irrigation channel reinforcement program, which must clearly and fully specify the following bases:

+ Total capital requirement for implementing the canal and irrigation channel reinforcement.

+ Local capital mobilization: From the budget and other mobilization sources, including mobilization from the people.

+ The amount still needed, requesting central support, which should be detailed specifically by year, initially for the years 2000, 2001, and 2002.

+ Repayment plan for each year.

(A comprehensive table of loan requirements and anticipated repayments attached).

- The decision approving the overall project for reinforcing canals and irrigation channels by the People's Committee of the province or city (attached with the overall project).

The above documents must be sent to the Ministry of Finance no later than August 31, 2000, to allow the Ministry of Finance to decide specifically on the annual loan amount for each locality.

2. Loan Amount:

Based on the need for credit loans for reinforcing canals and irrigation channels of localities and the total amount of preferential credit annually for reinforcing canals and irrigation channels decided by the Government, the Ministry of Finance decides the annual loan amount for each province and centrally-administered city up to the difference between the total capital requirement for implementing the project approved by the competent authority and the amount of capital that the locality must mobilize according to Article 3 of Decision No. 66/2000/QĐ-TTg dated June 13, 2000 of the Prime Minister.

3. Basis for Transferring Loan Capital: The Investment Development Support Fund System transfers capital to provinces and centrally-administered cities based on:

- The loan decision of the Minister of Finance.

- The loan agreement between the Provincial Department of Finance and Prices (authorized by the Chairman of the People's Committee of the province or city) and the provincial branch of the Investment Development Support Fund according to the attached model.

4. Interest Rate on Loans: 0%.

5. Method of Providing Loan Funds: Based on point 3 of Part II of this Circular, the branches of the Investment Development Support Fund in provinces and centrally-administered cities transfer funds to the provincial budget according to the loan amount decided by the Minister of Finance, without providing loans directly to individual counties or specific projects. Specific handling for each county or project is decided and responsible by the province or city according to the decentralized management mechanism of investment capital and current investment capital management regulations.

6. Repayment Period for Borrowed Capital:

Repayment begins 12 months after signing the loan agreement. The repayment period is four years; for mountainous provinces and provinces where the local state budget revenue (domestic revenue) only ensures less than 30% of the local budget expenditure, the repayment period is five years.

In case a locality fails to repay the loan principal when due, the provincial branch of the Investment Development Support Fund temporarily suspends further loan transfers until the province or city repays according to the signed agreement; in special cases, approval from the Ministry of Finance is required.

7. Management of Credit Capital for Investment in Implementing the Canal and Irrigation Channel Reinforcement Program:

- When receiving loan capital transferred by the provincial branch of the Investment Development Support Fund, the Provincial Department of Finance and Prices records it as local government revenue (Chapter 160, Type 10, Item 05, Sub-item 086, Minor Item 15). When repaying the loan principal, it is recorded as local government expenditure (Chapter 160, Type 10, Item 05, Sub-item 158, Minor Item 15).

- Credit capital for reinforcing canals and irrigation channels can only be used for the purpose of reinforcing canals and irrigation channels and related water conservancy works, not for other purposes.

- Allocation to canal and irrigation channel reinforcement projects is carried out as follows:

+ For canal reinforcement projects type II, based on the decision of the competent authority, the finance department implements allocation through the State Treasury for the State Treasury to pay the investment capital to the project owners and it is settled into local government expenditure according to current regulations on construction investment capital management.

+ For the part of state funding to implement canal reinforcement projects type III, based on the support decision of the People's Committee of the province or city, the Provincial Department of Finance and Prices implements targeted subsidies to districts and districts provide targeted subsidies to communes (which may be in kind or in cash according to local regulations). Communes are responsible for using state-provided materials effectively and mobilizing people's labor.

- Costs for canal reinforcement are settled into local government expenditure (according to the decentralized management of construction investment capital of the locality).

III. IMPLEMENTATION

1. The People's Committees of provinces and centrally-administered cities are responsible:

- Establish the loan application for canal channel reinforcement and submit it to the Ministry of Finance in accordance with the provisions set out in Section 1, Part II of this Circular.

- Direct relevant sectors and levels to manage and utilize credit funds in accordance with the objectives and regulations on managing construction investment capital, and implement repayment of loans to the development support fund as stipulated in the loan commitment.

- Regularly report quarterly and annually on the implementation of canal channel reinforcement to the Prime Minister, simultaneously sending reports to the Ministry of Planning and Investment, the Ministry of Agriculture and Rural Development, and the Ministry of Finance.

2. The Ministry of Finance shall be responsible for:

- Determine the specific annual loan amount for each province and city after receiving their loan application forms in compliance with Point 3, Section II of this Circular.

- Coordinate with the Ministry of Planning and Investment to present to the Prime Minister for consideration and decision on the budget investment capital.

- Handle financial issues arising during the implementation of the canal channel reinforcement program.

3. The Development Support Fund system shall be responsible for:

- Transfer loans to provinces and cities immediately upon receipt of the signed agreement (loan contract) between the Development Support Fund system and the provinces/cities, in accordance with the decision of the Minister of Finance.

- Recover loan debts when due.

- Calculate the need for interest subsidy and fees to be provided to the Development Support Fund for submission to the Prime Minister for decision in accordance with Circular No. 43/2000/TT-BTC dated May 23, 2000 of the Ministry of Finance.

- Annually report the results of loan transfers and debt recovery situations to the Prime Minister, simultaneously sending reports to the Ministry of Planning and Investment and the Ministry of Finance.

This Circular takes effect fifteen days from the date of signature. Loan capital previously granted by the Development Support Fund to localities shall also be implemented according to this Circular. Any previous regulations conflicting with this Circular are hereby abolished. In case of difficulties during implementation, please reflect them to the Ministry of Finance for resolution.