Circular No. 86/1999/TT-BTC guides the disbursement and refinancing mechanism for the Polish credit program aimed at developing Vietnam's shipbuilding industry.

CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 86/1999/TT-BTC ON JULY 8, 1999
GUIDELINES FOR DISBURSEMENT AND MECHANISMS FOR RELOANING IN CONNECTION WITH
THE POLISH LOAN PROGRAM TO DEVELOP THE VIETNAMESE SHIPBUILDING INDUSTRY
THE VIETNAMESE SHIPBUILDING INDUSTRY

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

Pursuant to Decree No. 90/1998/NĐ-CP dated November 7, 1998 of the Government on the Regulations on Borrowing and Repaying Foreign Debts,

Pursuant to the Agreement signed on June 6, 1998 between the Government of the Socialist Republic of Vietnam and the Government of Poland on the provision of credit (hereinafter referred to as the "Agreement"),

Pursuant to Circular No. 1510/CP-QHQT dated December 12, 1998 of the Government on the financial mechanism to implement Polish loan projects,

I. GENERAL PROVISIONS

1. The credit provided by the Polish Government for implementing the Program to develop the Vietnamese Shipbuilding Industry is a foreign government loan. Therefore, the entire loan amount will be recorded in the State Budget, and the Ministry of Finance shall be responsible for repaying the foreign debt when due.

2. The Project Owner of the Program to develop the Vietnamese Shipbuilding Industry is the Vietnam Shipbuilding Industry Corporation (hereinafter referred to as "VINASHIN"), which is responsible for using the funds for their intended purpose, effectively, and in accordance with the conditions stipulated in the Agreement. VINASHIN shall be responsible for receiving the debt and repaying it to the State Budget according to the reloan contract signed with the General Department of Investment and Development and the provisions of this Circular.

3. The General Department of Investment and Development shall be responsible for implementing the reloaning, managing, and recovering debts from the Project Owner and shall benefit from the fees for reloaning state credit capital as prescribed.

II. SPECIFIC PROVISIONS

1. Main borrowing conditions under the Agreement:

- The total value of the committed loan under the Agreement is 70 million USD, used to pay 90% of the value of commercial contracts signed between VINASHIN and Polish partners for shipbuilding or providing machinery and equipment to modernize shipyards in Vietnam. A deposit of 10% of the value of the commercial contracts shall be arranged and paid by VINASHIN to the Polish partner via bank transfer within 30 days from the date the commercial contract becomes effective.

- Loan period and interest rate:

+ For the credit to modernize shipyards: 15.5 years, including 5 years of grace period for principal repayment, with an interest rate of 4.75% per annum.

+ For the credit to purchase ships built in Poland or materials and equipment to build ships in Vietnam: 13.5 years, including 3 years of grace period for principal repayment, with an interest rate of 5% per annum.

In line with the above loan periods, the principal repayment will be made in 21 consecutive semi-annual installments. The first principal repayment installment will be carried out as follows:

+ For the credit to modernize shipyards: 5 years after the issuance of the Certificate of Receipt.

+ For the credit to purchase ships built in Poland: 3 years after the issuance of the Certificate of Receipt for each phase of the shipbuilding process.

+ For the credit to purchase materials and equipment to build ships in Vietnam: 3 years after the issuance of relevant transport documents (Bill of Lading, Airway Bill).

- Late payment penalty interest: Equal to the interest rate mentioned above plus an additional 1.5% per annum.

- The credit under the Agreement can be utilized before December 31, 2000, and may be extended upon agreement between the two Governments.

2. Mechanism for reloaning the Polish Government's credit:

The Government, through the Ministry of Finance, will reloan the full 70 million USD borrowed from the Polish Government to VINASHIN. The Ministry of Finance entrusts the system of the General Department of Investment and Development to carry out the reloaning, management, and recovery of the loan from VINASHIN.

The interest rate and term for reloaning to VINASHIN shall comply with the borrowing conditions of Poland as specified in point 1 of Section II above.

The late payment penalty interest shall be equal to the late payment penalty interest rate in the credit agreement mentioned in point 1 of Section II above.

The General Department of Investment and Development shall be responsible for monitoring the use of the loan, and recovering the reloaned capital from VINASHIN. The General Department of Investment and Development shall collect the reloan fee directly from VINASHIN at a rate of 0.2% per annum on the outstanding principal balance.

After the commercial contract between VINASHIN and the Polish partner has been approved as prescribed, VINASHIN must proceed to sign the foreign loan credit contract with the General Department of Investment and Development regarding the reloaning of the Polish loan according to each commercial contract or project. The signed credit contract and promissory notes are the basis for VINASHIN to officially recognize the debt with the State Budget and fulfill its repayment obligations according to the terms of the foreign loan credit contract.

The documents for signing specific promissory notes between VINASHIN and the General Department of Investment and Development are the records of receipts and payments of foreign loans through the State Budget. The time VINASHIN recognizes the debt with the State Budget is the time when the Polish Bank records the debt for the Government of Vietnam.

3. Organization and implementation of the Polish Government's credit program under the credit agreement:

Chapter I sets forth the Vietnam Shipbuilding Industry Development Program utilizing Polish Government Credit Funds (hereinafter referred to as the "Program"), which is a comprehensive program with specific objectives, comprising numerous detailed projects (hereinafter referred to as the "Projects"), such as upgrading shipyards, installing model testing tanks, shipbuilding assembly lines, and building various specialized vessels...

VINASHIN is responsible for organizing and managing the entire Program, with the following main responsibilities:

- Establishing a Program Management Board consisting of VINASHIN and representatives from Projects under the Program. VINASHIN must develop the operational regulations of the Program Management Board, clearly defining responsibilities for developing plans (investment, disbursing loan funds, counterpart funds), organizing production work, accounting operations, and determining relationships between VINASHIN and Projects to effectively implement the Program.

- Organizing the appraisal and approval of Projects within the Program, involving relevant Ministries and sectors, ensuring compliance with current regulations on investment management and construction.

- Organizing bidding, signing, and processing approvals for commercial contracts with Polish partners to implement the Program according to current regulations.

4. Guidelines for disbursement of Polish loan funds:

a) The VietinBank is designated as the Bank serving transactions for the disbursement of Polish credit funds, responsible for guiding VINASHIN and related units to implement according to the provisions of the Bank Agreement signed between VietinBank and the Polish Bank Handlowy w Warszawie S.A.

VINASHIN is responsible for paying fees collected by VietinBank or by the Polish Bank (if applicable) related to foreign exchange services through banks.

b) Based on the letter requesting withdrawal of credit funds for payment of commercial contracts submitted by VINASHIN, accompanied by decisions approving each Project and each commercial contract by the competent authority, the Ministry of Finance issues a letter authorizing VietinBank to process the withdrawal of credit funds for payment of each commercial contract.

c) Commercial contracts using Polish credit funds signed with Polish Sellers or Manufacturers shall be paid in US Dollars. The component of goods, machinery, equipment, and services originating from Poland in these commercial contracts under this Credit Agreement shall not be less than 70%.

d) Commercial contracts shall be settled according to the following specific conditions:

+ 10% of the contract value as a deposit, to be made by VINASHIN by transferring money into the account of the Seller or Manufacturer in Poland opened at the Polish Bank Handlowy w Warszawie S.A., with the notation "Under the Credit Agreement of 70 million USD signed on June 6, 1998," to be completed within 30 working days from the date of effectiveness of each signed and approved commercial contract.

The payment deposit documentation includes the invoice for the deposit issued by the Seller or Manufacturer, accompanied by a Letter of Guarantee for the Deposit issued by the Polish Bank Handlowy w Warszawie S.A., valid until the Seller or Manufacturer fulfills all obligations under the signed commercial contract. Such a guarantee letter must be notified to the Beneficiary, VINASHIN, through VietinBank.

+ 90% of the contract value will be paid from the Polish Government credit fund based on the presentation of the following documents by the Seller or Manufacturer at VietinBank:

* Five copies of the commercial invoice.

* Power of Attorney for signing documents by VINASHIN (specifying the name, position, signature of the authorized person).

* Certificate of Receipt of Goods (Certificate of Teceipt) signed by the person authorized by VINASHIN in the case of receiving materials and equipment for modernizing shipyards in Vietnam.

Or Certificate of Receipt for Each Phase of the Shipbuilding Process (Certificate of Receipt for each phase of the shipbuilding process) signed by the person authorized by VINASHIN in the case of shipbuilding in Poland.

Or transport documents related (Bill of Lading, Airway Bill) in the case of providing machinery and equipment for shipbuilding in Vietnam.

* Insurance Document (Insuranse Document) in cases where the contract is signed under CIF terms.

* Request for withdrawal of funds by VINASHIN and the approval opinion of the Ministry of Finance sent to VietinBank.

f) All types of marine machinery, equipment, imported goods under commercial contracts paid by Polish credit funds must be certified by an international classification society before being loaded onto ships. The certificate issued by the international classification society confirming that the goods delivered comply with international technical standards is necessary documentation for VietinBank to process the withdrawal of credit funds for payment to the Seller or Manufacturer in Poland.

g) The procedure for planning and managing the disbursement of Polish loan funds is carried out according to specific guidelines set forth in Circular Joint Circular No. 81/1998/TTLT-BTC-NHNN dated June 17, 1998, of the Ministry of Finance and the State Bank of Vietnam, and Decision No. 1860a/1998/QĐ/BTC dated December 16, 1998, of the Minister of Finance.

5. Counterpart funds for the Program:

5. Counterpart Capital for the Program:

VINASHIN shall be responsible for establishing a counterpart capital plan for the Polish Credit Program, including the portion of capital allocated for payment of deposits, other domestic costs not funded from credit sources, and taxes... as prescribed by current regulations. The counterpart capital will be balanced by VINASHIN using its own capital, state budget investment funds (if approved), preferential state credit, and preferential loans from the National Investment Support Fund. Borrowing of counterpart capital shall be carried out in accordance with the current provisions set forth in the Law on Encouraging Domestic Investment and Decisions of the Prime Minister regarding investment credit work.

6. Responsibilities of the Vietnam Bank for Foreign Trade:

Immediately after the Polish Bank records the debt for the Government of Vietnam on the "Credit to Vietnam" account, the Vietnam Bank for Foreign Trade shall be responsible for sending withdrawal notices to the Ministry of Finance (Department of Foreign Financial Affairs, Investment Development General Department) to monitor the withdrawal process regularly.

Monthly, the Vietnam Bank for Foreign Trade transfers the Account Statement sent by the Polish Bank to VINASHIN. VINASHIN shall be responsible for reviewing and confirming the Account Statement and returning it to the Vietnam Bank for Foreign Trade within twenty-five days from the date indicated on the Account Statement so that the Vietnam Bank for Foreign Trade can officially confirm it with the Polish Bank. The Vietnam Bank for Foreign Trade sends a copy of the confirmed monthly Account Statement to the Ministry of Finance (Department of Foreign Financial Affairs) to process the recording of income and expenditure in the state budget.

Prior to each due date for repayment to Poland, the Vietnam Bank for Foreign Trade shall coordinate with the Polish Bank to send a notice of debt to the Ministry of Finance to ensure timely transfer of repayment funds to the Polish side.

7. Reporting System:

Quarterly, VINASHIN shall be responsible for reporting to the Ministry of Finance (Investment Development General Department, Department of Foreign Financial Affairs) and the Ministry of Planning and Investment on the situation of receiving, utilizing, and repaying Polish loans and the situation of allocating and utilizing domestic counterpart capital to implement the program.

VINASHIN shall be responsible for preparing and submitting a consolidated report on the implementation status and final audit reports of each Project and the entire Program to the Ministry of Finance (Investment Development General Department, Department of Foreign Financial Affairs) no later than three months after completion.

III. IMPLEMENTATION PROVISIONS

This Circular shall take effect fifteen days after the date of signature. During the implementation period, if there are any difficulties, the Vietnam Shipbuilding Industry Corporation, the Management Boards, and the main management units of Projects under the Program, and relevant agencies are requested to promptly reflect them to the Ministry of Finance for consideration and resolution.