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

CIRCULAR

Regarding guidance on implementing the Belgium Loan Agreement for the Hue Sewage Treatment Project
thoát và xử lý nước thải thành phố Huế 

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

Pursuant to the Preferential Loan Agreement (hereinafter referred to as the Agreement) financing the Project on Research, Supply of Equipment and Supervision of the Sewage 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 loan rescheduling mechanism for the Project.

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

1. These regulations guide the screening of HIV testing for blood transfusion, blood product transfusion, and the implementation of assisted reproductive techniques and organ transplantation at state-owned, private, and public health facilities (hereinafter referred to as health facilities).

1. The preferential loan capital from Belgium through Generale Bank is 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 side when due.

2. The project sponsor (People's Committee of Hue City) is responsible for using the capital for its intended purpose in accordance with the conditions stipulated in the Agreement signed with Generale Bank and returning it 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 sponsor and shall enjoy the service fee for rescheduling the state credit capital according to regulations.

II. SPECIFIC PROVISIONS:

1. Conditions for borrowing from Belgium

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

Loan period: 16 years, including 3 years of 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).

Penalty interest: 1.5% added to the Belgian Interbank Offered Rate (BIBOR).

2. Rescheduling mechanism for the Project:

The project sponsor must recognize debt with the General Department of Investment and Development (in Belgian Francs) the entire portion of foreign loan capital including the loan for paying the credit insurance fee mentioned above.

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

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

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

As for the late payment penalty interest rate, it will be specifically defined in the rescheduling loan contract signed with the project sponsor by the General Department of Investment and Development, but not lower than the 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 approved by the Prime Minister (Article 2, Decision No. 895/TTg dated October 21, 1997), the Project falls under the category of rescheduling preferential loan capital from Belgium. The domestic counterpart fund is 40.9% of the billion VND (excluding the portion of capital for tax payment) comprising central budget and local budget funds 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 sponsor is responsible for calculating and building the annual counterpart fund plan (including the capital for tax payment) to be sent 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 to arrange and balance the counterpart fund from the state budget.

b) Withdrawal of Belgian loan capital:

The project sponsor bases on the loan agreement and the progress of the commercial contract signed to build the annual foreign capital withdrawal plan to send to the Ministry of Finance. According to Clause 4.2.b of the Agreement, the Ministry of Finance has authorized Generale Bank to withdraw the entire loan amount under the Agreement to pay directly to the supplier according to the signed commercial contract and pay the credit insurance fee. To withdraw capital, the project sponsor needs to implement some points in the direct payment process according to the loan agreement as follows:

b.1. Payment of advance payment (according to Clause 4.3.a of the Agreement): The project sponsor and the entrusted import agency (Machinoimport) are responsible for checking the accuracy and validity of the advance payment bank guarantee (Down Payment Bank Guarantee) and the performance bond, then Machinoimport confirms and sends to Generale Bank to withdraw the advance payment to pay to the Belgian supplier.

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

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

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

Generale Bank will act on behalf of the project sponsor and Machinoimport to make direct payments to 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 sponsor is responsible for reviewing and approving monthly invoices within 30 days from the date of receipt of invoices sent by Generale Bank.

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

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

The project sponsor 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 loan capital according to the rescheduling loan contract signed with the General Department of Investment and Development and bearing legal responsibility for the proper use of loan capital.

Each time receiving a notice of capital withdrawal from Generale Bank, the Ministry of Finance (General Department of Investment and Development) is responsible for notifying the project sponsor of the actual withdrawn capital amount, repayment schedule, and requesting to sign a debt recognition agreement. The debt recognition date is the day Generale Bank pays 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 capital and the situation regarding assets purchased with borrowed capital from the Government, recovering the re-lent capital from the Government, and reporting to the Ministry of Finance on the recovery of re-lent capital.

d) Reporting regime: Every six months, the project investor shall be responsible for reporting to the Ministry of Finance (Investment and Development General Department, Foreign Financial Affairs Department), the Ministry of Planning and Investment, and the supervising authority on the situation of receiving, using, and repaying borrowed capital and counterpart funds from the Government.

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 them to the Ministry of Finance for consideration and resolution.