Joint Circular No. 81/1998/TTLT/BTC-NHNN guiding the procedures, formalities, and management of withdrawing capital from official development assistance (ODA) funds.

JOINT CIRCULAR
Guidelines for the procedures, formalities, and management of withdrawing funds
from official development assistance sources

Pursuant to the State Budget Law which was adopted by the National Assembly of the Socialist Republic of Vietnam on March 20, 1996;

Pursuant to Decree No. 87/CP dated August 5, 1997 of the Government promulgating the Regulations on the Management and Utilization of Official Development Assistance Funds;

In accordance with Article 14, Clause 3, Points b and e, and Article 15, Clause 4 of Decree No. 87/CP dated August 5, 1997, the Ministry of Finance and the State Bank of Vietnam provide guidelines for the procedures, formalities, and management of withdrawing funds from official development assistance funds as follows:

I. GENERAL PROVISIONS

Official Development Assistance (ODA) funds are a source of revenue for the State Budget, must be recorded in the State Budget, and managed in accordance with the provisions of the State Budget Law and subordinate legal documents.

The Ministry of Finance is responsible for financial management regarding the withdrawal of funds, payment for projects, implementation of budgetary accounting for ODA funds, guiding and inspecting the implementation of financial management systems, finalizing project accounts, guiding and inspecting units in the transfer of assets, materials, and capital of projects upon completion.

The State Bank directs commercial banks serving projects to compile periodic reports and inform the Ministry of Finance and relevant agencies about the withdrawal and payment situations of programs and projects using ODA funds through the banking system.

The project sponsor is responsible under the law for implementing ODA programs and projects in accordance with commitments stipulated in international treaties, strictly adhering to state regulations on financial management, accounting laws, and current accounting practices. The project sponsor establishes an ODA Project/Program Management Board (hereinafter referred to as the Project Management Board) to implement the project or program. In cases where it is not necessary to establish a Project Management Board, the sponsor directly performs the tasks of the Project Management Board as specified in this Circular.

This Circular provides guidelines for the procedures, formalities, and management of withdrawing ODA funds. For domestic counterpart funds, the withdrawal and payment shall be carried out in accordance with the progress of foreign withdrawals and current domestic expenditure regulations.

II. SPECIFIC PROVISIONS GUIDING THE WITHDRAWAL PROCEDURES

A. NECESSARY CONDITIONS FOR WITHDRAWAL

1. General conditions:

To withdraw funds, projects must meet the following conditions:

Having a feasible project that has been approved (except where there is a different decision by the Prime Minister),

International treaties signed between Vietnam and foreign parties have been approved/approved according to current regulations and are effective,

For loan-refinancing projects, there must be a refinancing loan agreement signed with the Ministry of Finance or with an agency authorized by the Ministry of Finance to refinance,

There must be an economic contract (construction, procurement, consultancy) that has been signed and approved in accordance with regulations,

There must be an annual withdrawal plan established and registered in accordance with the project's approved budget estimate.

2. Commercial bank serving the project:

To withdraw funds for the project, the State Bank is responsible for designating a commercial bank to serve the project, taking into account the opinions of the Ministry of Finance, the project sponsor, and complying with the regulations of the donor. During the implementation of the project, the commercial bank serving the project enjoys fees according to the current regulations of the State Bank on bank service charges for payment transactions, while the serving bank is responsible for reporting the withdrawal situation and special account payment situations to the Ministry of Finance, the State Bank, and the project sponsor.

3. Establishing and registering the annual withdrawal plan for the project.

The withdrawal of funds for programs and projects using ODA funds must be based on international treaties and the approved annual budget estimates. The project sponsor is responsible for preparing, defending, and implementing the annual budget estimates in accordance with current regulations.

Based on the detailed annual budget estimate of the project approved by the managing authority, the Project Management Board prepares the ODA withdrawal plan. The content of the withdrawal plan must be detailed by quarter, by each category, and by each source of funding including domestic counterpart funds, and must include a separate plan for categories paid through special accounts (if the project/program applies this withdrawal method). This plan needs to be registered with the Ministry of Finance and sent to relevant agencies (serving bank, investment and development agency). The registration form is attached as Appendix 1.

B. PROCEDURES FOR WITHDRAWING ODA FUNDS

1. OPENING ACCOUNTS:

To proceed with withdrawal and payment, the Project Management Board opens appropriate transaction accounts at the commercial bank serving the project in accordance with current regulations. Specifically for projects using the special account payment method, the Project Management Board needs to open additional special accounts named after the project at the commercial bank serving the project to receive advance funds from the donor.

2. Methods of withdrawing ODA funds:

Depending on the provisions in international treaties, the withdrawal and payment of ODA funds are implemented through one or more common methods: direct payment, special accounts, letters of commitment, repayment, and money transfer procedures. The specific process is as follows:

2.1. Direct Payment:

To proceed with withdrawal through the direct payment method, the Project Management Board prepares a withdrawal application and necessary documents to send to the Ministry of Finance. The documents include: a withdrawal application form, a letter requesting withdrawal, an approved economic contract (only needs to be sent once per contract), a certificate of acceptance, and a payment request from the contractor. Specifically for the first advance payment, no supporting documents are required but a Temporary Advance Guarantee (Bank Guarantee) and Performance Guarantee (Performance Bond) from the contractor's bank are needed.

For general cases, within a maximum of five working days, based on signed international treaties and registered withdrawal plans, the Ministry of Finance reviews, signs the withdrawal application, and sends it to the donor.

For projects borrowing from the World Bank and the Asian Development Bank, within five working days from receiving complete files, the Ministry of Finance shall issue a written opinion sent to the project management board and the serving bank. Based on the written approval of the Ministry of Finance, the serving bank shall sign the withdrawal request form and send it to the sponsor within a maximum of two working days.

The sponsor's notification serves as the basis for the Ministry of Finance to process the budget accounting procedures for the project. The withdrawal process follows Appendix 2.

2.2 Payment by way of a Letter of Commitment:

This method is typically used to pay for import contracts (hereinafter referred to as import contracts). To proceed with withdrawing funds for payment under the Letter of Commitment method, the project management board sends the import contract to the Ministry of Finance. Within five working days, the Ministry of Finance reviews and approves the payment conditions and notifies the project management board. Based on the Ministry of Finance's opinion, the serving bank, within two working days, processes the opening of a Letter of Credit, signs the application for issuing the Letter of Commitment, and transfers it to the sponsor. The withdrawal process follows Appendix 3.

After issuing the Letter of Commitment, based on the signed contract, the sponsor pays the beneficiary. The sponsor's notification serves as the basis for the Ministry of Finance to process the budget accounting procedures for the project.

2.3 Payment by way of a Special Account:

Under this method, the sponsor advances a certain amount of money into the project's special account to expedite the withdrawal process.

a. Withdrawing funds into the special account:

To withdraw funds into the special account, the project management board submits necessary documents to the Ministry of Finance including: withdrawal request forms, letters requesting withdrawal. In cases of additional withdrawals to the special account, an expenditure statement prepared by the project management board, relevant payment vouchers consistent with current budget management regulations, and a statement of account balance issued by the commercial bank must also be provided.

For general cases, based on signed international agreements and approved withdrawal plans, within a maximum of five working days, the Ministry of Finance signs the withdrawal request form and sends it to the sponsor.

For projects borrowing from the World Bank and the Asian Development Bank, within five working days, the Ministry of Finance issues a written opinion and notifies the project management board and the serving bank. Based on the written approval of the Ministry of Finance, within a maximum of two working days, the serving bank signs the withdrawal request form and sends it to the sponsor.

Upon receipt of the notification that the funds have been transferred into the project's special account, the serving bank immediately informs the Ministry of Finance in writing for tracking and budget accounting purposes. The withdrawal process follows Appendix 4.

b. Using the special account:

For construction expenditures: Based on the approved plan and the completed work volume of the project, the project management board requests the serving bank to make payments from the special account (for final payments under contracts, prior confirmation from the Investment Development Department or General Department is required). Each payment from the special account must comply strictly with the foreign/local capital ratio stipulated in international agreements; if non-compliance is detected, the Ministry of Finance will suspend additional withdrawals for that expense. The withdrawal process follows Appendix 5.

For administrative expenses: Based on the approved annual budget estimate, quarterly, the project management board sends detailed quarterly estimates according to the current budget classification, which has been approved by the supervising authority, to the Ministry of Finance. Within five working days from receiving complete files, the Ministry of Finance reviews and authorizes the serving bank to withdraw funds according to the project management board's payment orders. The withdrawal process follows Appendix 6.

c. Monthly, the serving bank is responsible for notifying the Ministry of Finance about the expenditure statements from the special account to process the recording of income and expenditure in the budget. The report of the special account statement from the serving bank sent to the Ministry of Finance serves as the basis for the Ministry of Finance to record budget disbursements for the project (for projects under budget disbursement). The notification of transferred funds into the special account by the sponsor serves as the basis for the Ministry of Finance to record the budget and record debts for refinanced projects.

d. Interest generated on the special account will be handled as follows:

For projects under state budget disbursement, on the 5th day of each month, the commercial bank serving the project transfers the interest generated on the special account into the State Budget and notifies the Ministry of Finance (Department of Foreign Finance) in writing along with a copy of the payment authorization for accounting purposes.

For refinanced projects (the debt calculation date is the date of withdrawal from abroad), the interest generated on the special account is transferred into the account of the borrowing enterprise.

2.4 Repayment Procedures:

Under the repayment procedure, the project owner advances funds (from state budget sources or from their own capital) to pay the beneficiary, then applies to the sponsor for repayment.

To implement the withdrawal process under the repayment procedure, the project management board is responsible for collecting documents and preparing withdrawal applications to send to the Ministry of Finance. The documents include: acceptance certificates, payment vouchers, and proof of payment to contractors.

For general cases, within a maximum of five working days, based on signed international agreements and approved withdrawal plans, the Ministry of Finance signs the withdrawal request form and sends it to the sponsor.

For projects borrowing from the World Bank and the Asian Development Bank, within five working days, the Ministry of Finance issues a written opinion and notifies the project management board and the serving bank. Based on the written approval of the Ministry of Finance, within a maximum of two working days, the serving bank signs the withdrawal request form and sends it to the sponsor.

For withdrawals to repay funds previously spent from the state budget (or from other sources with a budget origin), the withdrawn amount must be remitted to the state budget.

For the capital withdrawal for the repayment of amounts invested by the project owner using their own funds (or raised funds, credit without budget origin), the project owner may utilize the withdrawn amount according to current financial management regulations.

The process of capital withdrawal is detailed in Appendix 7.

2.5. Procedures for transferring money:

The form of capital withdrawal is applied to pay suppliers of goods and services under contracts settled in Vietnamese Dong. Specifically as follows:

Supply contracts for goods and services can only be executed after the Ministry of Finance reviews and approves the payment conditions of the contract.

When there is a need for payment, the Project Management Board must submit the following documents to the Ministry of Finance:

Invoice for imported equipment and goods, Confirmation of work volume completed. In the case of advance payment for the first time, these documents are not required but a Bank Guarantee and Performance Bond from the bank of the contractor are necessary.

Capital withdrawal request form as prescribed.

Within seven working days, the Ministry of Finance will review and reconcile with the contract and disbursement plan or loan repayment plan, confirm the documents, sign the capital withdrawal request form, and transfer it to the sponsor. After reviewing, the sponsor will transfer the corresponding amount through the banking system:

Vietnamese Dong to the contractor if the project falls under the budget disbursement category;

Foreign currency withdrawn from abroad to the Project Management Board if the project falls under the loan repayment category. The Project Management Board will convert the foreign currency withdrawn into Vietnamese Dong to settle with the contractor.

The capital withdrawal flowchart is detailed in Appendix 8. 2.6. Handling Exchange Rate Differences:

When the contract stipulates payment in Vietnamese Dong, exchange rate differences may arise, which are resolved as follows:

a. For projects under budget disbursement, the exchange rate difference will be recorded in the budget.

b. For projects under loan repayment, the exchange rate difference will be borne by the Project Owner.

C. MANAGEMENT REGIME FOR REPORTING AND INSPECTION OF CAPITAL WITHDRAWAL FOR ODA PROGRAMS AND PROJECTS.

Quarterly, commercial banks serving the programs and projects report on the situation of capital withdrawal and payment by each project to the Ministry of Finance (Department of Foreign Financial Affairs) and the State Bank of Vietnam (Department of International Relations). Before or on the fifth working day of each month, the serving bank sends a report on the special account transactions of the project in the previous month to the Ministry of Finance (Department of Foreign Financial Affairs and General Department of Investment Development) and the Project Management Board. The Ministry of Finance compiles the situation of capital withdrawal, payment, and ODA debt repayment, informs relevant agencies, and reports to the Prime Minister. The State Bank is responsible for compiling quarterly and annually to coordinate inspections and monitor the actual situation regarding capital withdrawal, payment, etc., through accounts opened at serving banks for ODA-funded programs and projects.

Project owners using ODA funds must prepare annual investment capital accounting reports and final settlement reports for the project (completed works or sub-projects). Accounting and final settlement reports must comply with current regulations of the Ministry of Finance.

Annually, ODA-funded projects must be audited by an independent auditing company approved by the Ministry of Finance. Audit contents include the legality of project investment, audit of annual investment capital expenditure (including completed basic construction costs, equipment purchase costs, other costs, non-included construction value costs), audit of asset turnover value, creditor-debtor status and remaining materials and equipment, audit of special accounts. In special cases, the Ministry of Finance will specify additional necessary contents. The audit framework, decision on selecting the auditing company, and audit contract must comply with sponsor regulations and be approved by the Ministry of Finance. The audit report must be submitted to the Ministry of Finance within fifteen days after completion (for projects sponsored by the World Bank and Asian Development Bank, the audit report is also sent to the State Bank (Department of International Relations)).

The Ministry of Finance will conduct regular or surprise financial inspections of organizations and units using ODA funds, particularly inspecting the use of special accounts.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect fifteen days after signing and serves as general guidance applicable to all ODA-funded projects and programs. For projects and programs with specific characteristics, the Ministry of Finance and the State Bank of Vietnam will provide specific guidance.

Previous guidelines that conflict with this Joint Circular are no longer valid.

During implementation, if any issues arise, units are advised to promptly reflect them to the Ministry of Finance and the State Bank for study and amendment.

ANNEX 1

ODA CAPITAL WITHDRAWAL PLAN YEAR...

Project:

Unit:

Managing Authority:

Project Category...Disbursement...Loan Repayment...

CONFIRMATION BY THE MANAGING AUTHORITY OF THE PROJECT DIRECTOR OF THE PROJECT MANAGEMENT BOARD

* The source of funds should clearly indicate the counterpart funds and foreign funds (which may include multiple sources of foreign funds).

ANNEX 2

DIRECT PAYMENT

(2)

1. The Project Management Board signs a contract with the contractor. The contractor implements the contract and requests payment.

2. The Project Management Board reviews and approves payment to the contractor and prepares capital withdrawal forms and supporting documents to submit to the Ministry of Finance for review.

3. The Ministry of Finance (Department of Foreign Financial Affairs) reviews and signs the capital withdrawal form to send to the sponsor. In the case of projects financed by the World Bank or Asian Development Bank, the Ministry of Finance reviews and agrees for the commercial bank serving the project to sign the capital withdrawal form to send to the sponsor.

4. The sponsor reviews the capital withdrawal form and pays the beneficiary.

ANNEX 3

PAYMENT THROUGH LETTER OF GUARANTEE PROCEDURE

(1) The Project Management Board signs a contract with the contractor.

(2) The Project Management Board submits the contract to the Ministry of Finance (Department of Foreign Financial Affairs) for approval. The Ministry of Finance (Department of Foreign Financial Affairs) reviews and approves the contract.

(3) Based on the approved contract, the Project Management Board requests the serving bank to open a Letter of Credit and sign a commitment letter.

(4) The bank serving to open the L/C and sign the commitment request form.

(5) The financier examines and issues the commitment letter and notifies the Ministry of Finance, the Project Management Board, the Seller's Bank, and the L/C opening bank.

(6) The financier transfers funds to the service bank for payment to the seller according to the contract conditions.

ANNEX 4

WITHDRAWAL OF INITIAL FUNDS AND SUPPLEMENTATION OF THE SPECIAL ACCOUNT

1. The Project Management Board compiles the documents for capital withdrawal and sends them to the Ministry of Finance (Department of Foreign Financial Affairs) for deposit into a special account.

2. The Ministry of Finance examines and signs the capital withdrawal form and sends it to the financier. In cases where projects borrow from the World Bank (WB) or Asian Development Bank (ADB), the Ministry of Finance provides comments to the service bank so that the service bank can sign and send the form to the financier.

3. The financier examines and transfers funds into the special account (at the service bank).

 ANNEX 5

PAYMENT FROM THE SPECIAL ACCOUNT FOR CONSTRUCTION AND DEVELOPMENT PROJECTS

(a) The Project Management Board prepares a detailed quarterly budget based on the completed work volume plan and the ratio of foreign and domestic funding for each component and submits it to the primary financial authority (project sponsor).

(b) The project sponsor approves the quarterly budget, registers with the Ministry of Finance (Investment Development General Department or Local Investment Development Department), and sends it to the service bank.

(1) The contractor performs the contract and requests payment.

(2) The Project Management Board, based on the approved quarterly budget by the Ministry of Finance, issues a payment order to the service bank.

(3) The service bank pays the contractor according to the Project Management Board's request.

ANNEX 6

PAYMENT FROM THE SPECIAL ACCOUNT FOR
OPERATIONAL EXPENSES

(a) The Project Management Board prepares a detailed quarterly budget according to the current budget classification and submits it to the primary financial authority (project sponsor).

(b) The project sponsor approves the quarterly budget and sends it to the Ministry of Finance (Administrative and Public Services Department) for approval.

(c) The Ministry of Finance (Administrative and Public Services Department) examines and provides comments to the Project Management Board and the service bank.

(1) The contractor performs the contract and requests payment.

(2) The Project Management Board, based on the approved quarterly budget by the Ministry of Finance, issues a payment order to the service bank.

(3) The service bank pays the contractor according to the Project Management Board's request.

ANNEX 7

PAYMENT PROCEDURE FOR CAPITAL REIMBURSEMENT

(a) The Ministry of Finance transfers funds according to the plan to the Investment Development General Department.

1. The Project Management Board signs a contract with the contractor. The contractor implements the contract and requests payment.

2. The Project Management Board reviews, approves, and requests the Investment Development General Department to pay the contractor using domestic funds.

3. The Investment Development General Department makes the payment according to the Project Management Board's request.

4. The Project Management Board compiles the documents for capital reimbursement and sends them to the Ministry of Finance (Department of Foreign Financial Affairs).

5. The Ministry of Finance (Department of Foreign Financial Affairs) examines and signs the capital withdrawal form and sends it to the financier. In cases where projects borrow from the World Bank (WB) or Asian Development Bank (ADB), the Ministry of Finance (Department of Foreign Financial Affairs) provides comments to the service bank so that the service bank can sign and send the form to the financier.

6. The financier disburses funds to reimburse the state budget account.

Note: For projects receiving loan repayments, the project owner must balance the funds to prepay the contractor. Afterward, they follow the capital reimbursement procedure, and once the financier disburses funds, the amount prepaid by the project owner will be refunded.

ANNEX 8

PROCEDURE FOR WITHDRAWING FUNDS AND TRANSFERRING MONEY

(1) The contractor performs the contract and requests payment.

(2) The Project Management Board examines, approves, and requests the Ministry of Finance to sign the capital withdrawal form and send it to the financier.

(3) The Ministry of Finance signs the capital withdrawal form and sends it to the financier.

(4) The financier examines and pays the contractor through the service bank system.