CIRCULAR

Guidelines on the issuance of local government bonds in the domestic market

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Based on the State Budget Law dated December 16, 2002; Based on Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government on the functions, tasks, and organizational structure of the Ministry of Finance;

Pursuant to the Law on Public Debt Management dated June 17, 2009;

Pursuant to the Securities Law dated June 29, 2006, and the Law Amending and Supplementing Certain Provisions of the Securities Law dated November 24, 2010;

Based on Decree No. 01/2011/NĐ-CP dated January 5, 2011 of the Government on the issuance of government bonds, government-guaranteed bonds, and local government bonds;

These Circulars provide guidelines for the issuance of local government bonds in the domestic market.

Considering the proposal of the Director of the Department of Financial Institutions and Financial Organizations;

The Minister of Finance issues this Circular guiding the issuance of local government bonds in the domestic market.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

The subject issuing local government bonds is the People's Committee of provinces and centrally governed cities (hereinafter referred to as the Provincial People's Committee).

Article 2. Issuing Subjects

Local government bonds are issued to invest in programs and projects specified in Clause 3, Article 4 of Decree No. 01/2011/NĐ-CP dated January 5, 2011 of the Government on the issuance of government bonds, government-guaranteed bonds, and local government bonds (hereinafter referred to as Decree No. 01/2011/NĐ-CP).

Article 3. Purpose of Issuance

bond

Article 5. Conditions for Issuance The Provincial People's Committee must meet all conditions for issuing local government bonds as stipulated in Article 39 of the Public Debt Management Law and Article 24 of Decree No. 01/2011/NĐ-CP.

Local government bonds have a term of one year or more. The specific term is decided by the Provincial People's Committee, in accordance with the capital usage needs and market conditions.

Article 5. Terms of Bonds

In addition to the terms and conditions of bonds prescribed in Article 6 of Decree No. 01/2011/NĐ-CP, the issuing subject must comply with the following provisions:

Point 1. Term of Issuance

The volume of each issuance is determined by the issuer based on the local capital usage needs, the ability to raise funds in the market, and must be within the issuance limit approved by the competent authorities as provided for in this Circular.

Point 2. Face Value of Bonds

Local government bonds have a face value of one hundred thousand (100,000) VND. Other face values of local government bonds are multiples of one hundred thousand (100,000) VND.

Point 3. Volume of Issuance

The interest rate for issuing local government bonds is determined by the issuer for each issuance but shall not exceed the ceiling set by the Ministry of Finance as provided for in this Circular.

Point 4. Interest Rate of Issuance

Article 6. Repurchasing Bonds

1. The issuer of local government bonds may repurchase bonds before maturity to reduce debt obligations or to restructure debt according to the project approved by the competent authority. The approving authority of the bond issuance project under this Circular is also the approving authority of the bond repurchase plan.

2. The issuer applies the procedures and formalities for repurchasing government bonds to implement the repurchase of local government bonds.

3. The issuer is responsible for the effectiveness of the bond repurchase and reports to the Ministry of Finance on the results of the bond repurchase as stipulated in Article 18 of this Circular.

APPROVAL OF THE BOND ISSUANCE PROJECT

Chapter II

LOCAL GOVERNMENT

Construction and Approval of the Bond Issuance Project

Article 7. 1. When there is a need to raise capital through the issuance of local government bonds to invest in economic and social development projects within the local budget expenditure responsibilities or projects with the potential for repayment at the local level, the Provincial People's Committee must develop a bond issuance project to submit to the Provincial People's Council for approval.

a) Purpose of issuing bonds, information about the projects expected to use the proceeds from bond issuance, the situation and implementation plans for these projects;

Point 2. The bond issuance proposal mentioned in Clause 1 of this Article includes the following basic contents:

b) Capital investment structure of the project and the capital requirement from bond issuance;

c) Estimated volume, term, interest rate, method, and issuance plan for bonds;

d) Financial plan, assessment of the project's efficiency and repayment capability (for projects with the potential for repayment at the local level);

đ) Plan for using the raised capital from bonds, plan for allocating sources of funds to pay interest and principal of bonds annually and at maturity;

e) Total maximum allowable debt limit that the local budget can raise at the time of developing the project as stipulated in the State Budget Law and guiding documents;

f) The local budget's debt situation over the three (03) years immediately preceding the time of developing the project and the projected local budget debt after issuing bonds.

3. After receiving the local government bond issuance project submitted by the Provincial People's Committee as stipulated in Clause 2 of this Article, the Provincial People's Council will review and approve the bond issuance project.

3. After receiving the local government bond issuance project proposed by the Provincial People's Committee pursuant to Clause 2 of this Article, the Provincial People's Council shall examine and approve the bond issuance project.

Article 8. Approval of the bond issuance project of the Ministry of Finance

1. After the People's Council of the province approves the bond issuance project as stipulated in Clause 3, Article 7 of this Circular, the People's Committee of the province shall submit the application dossier for local government bond issuance to the Ministry of Finance for review and comment before organizing the issuance. The dossier includes:

a) A request for issuing local government bonds in the format attached as Appendix 1 to this Circular;

b) The local government bond issuance project that has been approved by the People's Council of the province;

c) The resolution approving the local government bond issuance project of the People's Council of the province as prescribed in Clause 3, Article 7 of this Circular;

d) Documents proving compliance with the conditions for bond issuance as stipulated in Article 4 of this Circular;

2. Upon receiving the complete dossier as prescribed in Clause 1 of this Article within thirty (30) working days, the Ministry of Finance shall examine and provide comments on the local government bond issuance project. The examination contents include:

a) Conditions for issuing bonds;

b) The issuance plan for bonds;

c) The permissible debt ceiling of the provincial budget according to the State Budget Law and guiding documents;

d) The maximum permissible amount of bonds to be issued (for projects capable of being repaid locally).

3. The Ministry of Finance shall notify in writing its comments on the local government bond issuance project for the People's Committee of the province to organize the issuance of bonds in accordance with this Circular. In cases where the conditions for issuance are not met, the Ministry of Finance shall notify in writing and specify the reasons.

Chapter III

ORGANIZATION OF LOCAL GOVERNMENT BOND ISSUANCE

Article 9. Issuance Interest Rate for local government bonds

1. At least fifteen (15) working days before the date of organizing the issuance of local government bonds, the People's Committee of the province shall send a written notice of the issuance plan to the Ministry of Finance to announce the issuance interest rate range for local government bonds. The issuance plan notification must clearly state the following contents:

a) The expected time to organize the issuance;

b) The expected volume, term, form, and method of issuing bonds.

2. Within seven (07) working days from the date of receipt of the issuance plan notification as stipulated in Clause 1 of this Article, the Ministry of Finance shall specifically announce the issuance interest rate range for local government bonds for the People's Committee of the province to organize the issuance in accordance with this Circular.

3. Based on the issuance interest rate range specified by the Ministry of Finance in Clause 2 of this Article and the market situation at the time of issuance, the People's Committee of the province shall determine the issuance interest rate.

Article 10. Methods of issuing local government bonds

The method of issuing local government bonds shall be carried out according to the approved bond issuance project, including the following methods:

1. Auction issuance through the Hanoi Stock Exchange;

2. Guarantee issuance;

3. Agency issuance.

Article 11. Organization of Local Government Bond Issuance

1. Issuance through auction and guarantee issuance methods.

Provincial People's Committee may apply the procedures and processes for issuing government bonds through auctions via the Hanoi Stock Exchange and guarantee issuance to issue local government bonds.

2. Issuance through agency issuance method.

a) The Provincial People's Committee selects organizations meeting the conditions to act as agents for issuing bonds or agencies for issuing and settling local government bonds.

b) Organizations acting as agents for issuing local government bonds are commercial banks, securities companies, and local development investment funds established and operating legally in Vietnam.

c) The Provincial People's Committee may apply the conditions, procedures, and processes for selecting agents and organizing the issuance of government bonds through the agency issuance method to implement the organization and execution.

Article 12. Registration, custody, and listing of bonds

1. Local government bonds shall be centrally registered, custodied, and settled at the Vietnam Securities Depository and listed and traded centrally at the Stock Exchange upon the request of the issuing entity.

2. The process for registration, custody, and listing of local government bonds shall be applied in accordance with the process for registration, custody, and listing of government bonds.

Chapter IV

PAYMENT OF INTEREST AND PRINCIPAL ON BONDS, ACCOUNTING REGIME, ISSUE FEES, AND PAYMENT FEES FOR BONDS

Article 13. Payment of interest and principal on bonds

1. The issuer subject shall be responsible for paying interest and principal on bonds when due from its own legitimate sources of funds.

2. For economic and social development programs and projects under the local budget expenditure responsibilities, the source of payment for bond interest and principal shall be guaranteed from the provincial budget.

3. For investment programs and projects with the ability to repay locally, the source of payment for bond interest and principal shall come from the lawful revenue of these programs and projects. In cases where a project lacks the ability to pay bond interest and principal, the provincial budget shall be responsible for arranging funds for repayment.

Article 14. Fees for issuing bonds and fees for paying interest and principal on bonds

1. Issuing fees

The auction issuance fee, issuance guarantee fee, and issuance agency fee for local government bonds shall be agreed upon between the issuing entity and the auction organizer, guarantor, and issuance agent. The maximum issuance fees for local government bonds shall not exceed the issuance fees applicable to government bonds issued in the domestic market according to current regulations.

2. Payment Fees for Principal and Interest on Bonds

Payment fees for principal and interest on local government bonds shall be set at the same level as those for central government bonds according to current regulations.

3. The source of payment for issue fees and payment fees for principal and interest on local government bonds shall be guaranteed from the provincial budget.

Article 15. Accounting System

The issuing entity and related units shall be responsible for organizing accounting work in accordance with the Accounting Law, State Budget Law, and other relevant legal documents governing the current accounting regime.

Chapter V

INFORMATION AND REPORTING REGIME

Article 16. Rapid report on the results of each issuance round

Within seven (07) working days from the end of each issuance round of local government bonds, the People's Committee of the province must report in detail to the Ministry of Finance the results of the issuance for consolidation and monitoring. The content of the report follows the form attached in Appendix 2 of this Circular.

Article 17. Periodic reports six (06) months, annually, and ad hoc reports

1. Within ten (10) working days after the end of the second quarter of each year and thirty (30) working days after the end of the fiscal year, the People's Committee of the province has the responsibility to submit a written report on the situation of capital mobilization and utilization, and the situation of debt repayment of interest and principal of local government bonds to the Ministry of Finance for monitoring according to the form attached in Appendix 3 of this Circular.

2. In addition to the periodic reporting contents stipulated in Clause 1 of this Article, the People's Committee of the province shall be responsible for submitting reports as required by the Ministry of Finance in certain unusual circumstances.

Article 18. Report on the completion of bond repurchase rounds

After completing the bond repurchase round as stipulated in this Circular and related provisions, the issuing entity must report to the Ministry of Finance on the following contents:

1. Bond code repurchased.

2. Quantity of bonds actually repurchased for each bond code.

3. Repurchase interest rate corresponding to each bond code.

4. Remaining local budget debt and remaining local government bond debt after the repurchase is completed.

Chapter VI

HANDLING VIOLATIONS DURING THE BOND ISSUANCE PROCESS

Article 19. Suspension of bond issuance by local governments

1. The Ministry of Finance shall implement the suspension of local government bond issuance in the following cases:

a) The Provincial People's Committee does not implement the bond issuance according to the approved issuance plan as stipulated in this Circular.

b) The interest rate of issued local government bonds exceeds the interest rate range announced by the Ministry of Finance.

c) The issuance volume exceeds the permitted issuance volume as stipulated in Clause 3, Article 5 of this Circular.

2. The suspension of issuance applies to the issuance round that has been carried out with violations as specified in Clause 1 of this Article and subsequent issuance rounds (if any) within the issuance volume approved by the competent authority for the People's Committee of the province.

3. Upon receiving notification from the Ministry of Finance, the People's Committee of the province must immediately implement the suspension of bond issuance.

Article 20. Handling Violations

Organizations and individuals involved in the process of issuing local government bonds who violate the provisions of this Circular shall be subject to examination and handling according to the current laws depending on the nature and level of violation.

Chapter VII

RESPONSIBILITIES OF RELATED AUTHORITIES

Article 21. Responsibilities of the Ministry of Finance

1. Implement the tasks prescribed in Articles 8, 9, and 19 of this Circular.

2. Consolidate and monitor the implementation of the information and reporting system on the situation of bond issuance, usage, and repayment of principal and interest of local government bonds by the People's Committee of the province as stipulated in this Circular.

Article 22. Responsibilities of the Provincial People's Council

1. Approve the plan for issuing local government bonds in accordance with this Circular.

2. Approve the investment program and project list for the five-year plan in accordance with the State Budget Law and related regulations.

3. Approve the early redemption plan for local government bonds submitted by the Provincial People's Committee in accordance with Clause 6 of this Circular.

4. Supervise the raising, management, and use of funds from local government bonds, repayment of principal and interest on bonds when due, and monitor the early redemption of bonds (if applicable).

Article 23. Responsibilities of the Provincial People's Committee

1. Develop the plan for issuing local government bonds and the repayment plan for loans to be submitted to the Provincial People's Council for approval, and complete the bond issuance documentation to be sent to the Ministry of Finance for comments in accordance with this Circular.

2. Develop the early redemption plan for local government bonds to be submitted to the competent authorities for approval and implement it in accordance with this Circular.

3. Bear full responsibility for evaluating the feasibility and profitability of investment projects (for projects that can generate revenue locally) and the ability of the local budget to repay principal and interest on bonds.

4. Organize the issuance of local government bonds according to the plan approved by the Ministry of Finance and in accordance with this Circular.

5. Use funds raised from bond issuance for their intended purposes effectively in compliance with the State Budget Law and the Public Debt Management Law, and bear full responsibility for the use of bond issuance funds in accordance with the law.

6. Balance the provincial budget to ensure sufficient funds for paying interest and principal on local government bonds when due for cases where local government bonds are issued for investment in projects within the provincial budget expenditure responsibilities, and for cases where projects have the potential to generate revenue but the income from these programs and projects is insufficient to pay interest and principal on bonds as stipulated in this Circular.

7. Monitor the use of funds for their intended purposes effectively, recover funds to repay debt for investment projects with the potential to generate revenue locally.

8. Bear full responsibility for the results of evaluating the feasibility of generating revenue for projects with the potential to generate revenue locally and the ability of the local budget to repay debt for projects within the provincial budget expenditure responsibilities.

Chapter VIII

IMPLEMENTATION

Article 24. Implementation Provisions

1. This Circular takes effect from July 10, 2012.

2. This Circular replaces the following guiding documents:

a) The contents regarding the issuance of local government bonds specified in Circular No. 21/2004/TT-BTC dated March 24, 2004, of the Ministry of Finance guiding the auction of government bonds, government-guaranteed bonds, and local government bonds through the centralized securities trading market;

b) The contents regarding the issuance of local government bonds specified in Circular No. 29/2004/TT-BTC dated April 6, 2004, of the Ministry of Finance guiding the guarantee and agency issuance of government bonds, government-guaranteed bonds, and local government bonds;

c) The contents regarding the issuance of local government bonds in Decision No. 66/2004/QĐ-BTC dated August 11, 2004, of the Minister of Finance promulgating the guidelines on procedures and formalities for the issuance of government bonds, government-guaranteed bonds, and local government bonds.

3. During the implementation process, if there are difficulties or obstacles, the Provincial People's Committee and relevant units shall promptly report to the Ministry of Finance for specific guidance./.