Circular No. 74/1998/TT-BTC guides the implementation of the Loan Agreement with Belgium for the Hue City Wastewater Treatment Project.

CIRCULAR

ISSUED BY THE MINISTRY OF FINANCE DECREE NO. 74-1998/TT/BTC ON MAY 30, 1998
REGARDING GUIDELINES FOR IMPLEMENTATION OF THE LOAN AGREEMENT FROM BELGIUM FOR THE PROJECT
WASTEWATER TREATMENT SYSTEM IN HUE CITY

Pursuant to Decree No. 87/CP dated August 5, 1997 of the Government on the Management and Utilization of Official Development Assistance (ODA).

Pursuant to the Loan Agreement (hereinafter referred to as the Agreement) for financing the Project on Research, Supply of Equipment and Supervision of the Wastewater Treatment System in Hue City (hereinafter referred to as the Project) signed on April 6, 1998 between the Ministry of Finance and Generale Bank - Belgium.

Pursuant to Circular No. 353/CP-QHQT dated March 30, 1998 of the Government approving the Agreement and the rescheduling mechanism for the Project.

The Ministry of Finance guides the implementation of the Agreement as follows:

I. GENERAL PROVISIONS:

1. The concessional loan from Belgium through Generale Bank is a foreign debt of the Government. Therefore, the entire loan amount will be recorded in the State Budget. The Ministry of Finance is responsible for repaying the debt to the foreign party when due.

2. The project owner (People's Committee of Hue City) is responsible for using the funds for their intended purpose in accordance with the conditions stipulated in the Agreement signed with Generale Bank and returning them to the State Budget in accordance with the rescheduling loan contract signed with the General Department of Investment and Development - Ministry of Finance.

3. The General Department of Investment and Development is responsible for implementing the rescheduling loan and recovering the debt from the project owner and shall benefit from the service fee for rescheduling the state credit according to regulations.

II. SPECIFIC PROVISIONS:

1. Conditions for Belgian loans

- Total loan amount: 322,018,410 BEF (equivalent to 8.7 million USD), including the loan amount for payment of the full value of the commercial contract at 299,618,900 BEF and the loan amount for insurance premium at 22,399,510 BEF. Thus, the insurance premium rate is 7.47% of the value of the commercial contract and is also borrowed from the above concessional credit source.

- Loan period: 16 years, including 3 years grace period starting from the date the Agreement becomes effective.

- Interest rate: fixed at 2.45% per annum.

- Commitment fee: 0.2% per annum paid quarterly from the date of signing the loan agreement on the undrawn loan amount.

- Front-end fee: 1% paid once 30 days after signing the loan agreement on the total loan amount (3,220,184 BEF).

- Late payment penalty interest: 1.5% added to the Belgian Interbank Offered Rate (BIBOR).

2. Rescheduling loan mechanism for the project:

- The project owner must take on debt with the General Department of Investment and Development (in Belgian francs) the entire foreign loan amount including the loan for paying the insurance premium mentioned above.

- Interest rate and service fee for rescheduling loan: 2.65% per annum (of which the service fee for rescheduling loan is 0.2% per annum).

- Loan period: 16 years including 3 years grace period starting from the date the Agreement becomes effective.

- The project owner directly pays commitment fees, front-end fees... to Generale Bank according to the notification of the Ministry of Finance (Department of Foreign Finance) in compliance with the provisions of the loan agreement in Belgian francs.

- Specifically, the late payment penalty interest rate will be determined by the General Department of Investment and Development in the rescheduling loan contract signed with the project owner, but not lower than the late payment penalty interest rate stipulated in the loan agreement.

3. Guidelines for withdrawing funds and repaying debts:

a) Counterpart funds:

According to the Decision on the Project Investment Plan approved by the Prime Minister (Article 2, Decision No. 895/TTg dated October 21, 1997), the project falls under the category of rescheduling of concessional loans from Belgium. The domestic counterpart fund is 40.9% of the total amount (excluding the portion for tax payment) comprising central government budget and local government budget, which will be balanced according to annual planning capacity. Therefore, according to Decree No. 87/CP dated August 5, 1997 of the Government, the project owner is responsible for calculating and preparing the annual counterpart fund plan (including the portion for tax payment) to be submitted to the Ministry of Planning and Investment, Ministry of Finance (General Department of Investment and Development) and People's Committee of Thua Thien-Hue Province for allocation and balancing of the counterpart fund from the state budget.

b) Withdrawal of Belgian loan:

The project owner bases on the loan agreement and the progress of the commercial contract signed to prepare the annual plan for withdrawing foreign capital to be sent to the Ministry of Finance.

According to Article 4.2.b of the Agreement, the Ministry of Finance has authorized Generale Bank without revocation to withdraw the entire loan amount according to the Agreement to pay directly to the supplier based on the signed commercial contract and pay the insurance premium. To withdraw the loan, the project owner needs to implement certain points in the direct payment process as follows:

b.1. Payment of deposit (according to Article 4.3.a of the Agreement):

The project owner and the entrusted importer (Machinoimport) are responsible for verifying the accuracy and validity of the deposit guarantee (Down Payment Bank Guarantee) and the performance bond, then Machinoimport confirms and sends to Generale Bank to withdraw the deposit and pay it to the Belgian supplier.

b.2. Payment of research costs (according to Article 4.3.b.1 of the Agreement):

After receiving the topographic map and drainage system map prepared by the supplier, the project owner checks and issues a confirmation letter for Generale Bank to make payments to the supplier according to Appendix IV of the Agreement.

b.3. Payment for equipment supply and construction supervision for the project (according to Article 4.3.b.2 of the Agreement):

Generale Bank will act on behalf of the project owner and Machinoimport to directly pay the Belgian supplier based on valid delivery documents presented by the Belgian supplier to Generale Bank. For the payment of construction supervision fees to the contractor, the project owner is responsible for reviewing and approving monthly invoices within 30 days from the date of receipt of the invoice sent by Generale Bank.

The withdrawal documents for payment follow the International Rules for the Uniform Practice for Documentary Credits (1993 version published by the International Chamber of Commerce).

c) Management of rescheduling loans and repayment of loan principal:

The project owner is responsible for signing a rescheduling loan contract with the Ministry of Finance (General Department of Investment and Development) according to the rescheduling loan conditions stated in point II.2 above; implementing full and timely repayment of the loan principal according to the rescheduling loan contract signed with the General Department of Investment and Development and bearing legal responsibility for the proper use of the loan funds.

Each time receiving the notice of capital withdrawal from Generale Bank, the Ministry of Finance (Investment Development General Department) shall be responsible for notifying the Project Investor of the amount of capital actually withdrawn, the repayment schedule, and requesting to sign a promissory note for debt. The date of debt acceptance is the day when Generale Bank pays for the project and is recorded on the capital withdrawal notice sent by Generale Bank.

The Investment Development General Department is responsible for inspecting the use of borrowed funds and the situation of using assets financed by the Government's loan, recovering the Government's loan repayments, and reporting to the Ministry of Finance on the situation of recovering the Government's loan repayments.

d) Reporting regime: Every six months, the Project Investor is responsible for reporting to the Ministry of Finance (Investment Development General Department, Foreign Financial Affairs Department), the Ministry of Planning and Investment, and the managing authority on the situation of receiving, using, and repaying borrowed funds and the Government's counterpart funds.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect fifteen days after the date of signature. During implementation, if there are any difficulties, the People's Committee of Thua Thien-Hue Province, the People's Committee of Hue City, and related agencies are requested to promptly reflect these issues to the Ministry of Finance for consideration and resolution.