Circular No. 89/1997/TT-BTC guides the management regime for loans for specialized credit programs of the Japan Overseas Economic Cooperation Fund (OECF).

CIRCULAR

Issued by the Ministry of Finance under Decision No. 89/1997/TT/BTC dated February 18, 1997 guiding the management regime for loans for the specialized credit program of the Japan Overseas Economic Cooperation Fund (OECF)

Pursuant to Decree No. 58/CP dated August 30, 1993 of the Government promulgating the Loan and Foreign Debt Repayment Regulations and Decree No. 87/CP dated August 5, 1997 of the Government promulgating the Management and Utilization Regulations for Official Development Assistance (ODA) funds.

Based on the credit agreements signed between the Government of the Socialist Republic of Vietnam and the Japan Overseas Economic Cooperation Fund (OECF).

The Ministry of Finance guides the management of the loan capital from the Japan Overseas Economic Cooperation Fund (OECF) for the specialized credit program as follows:

Chapter I. SCOPE AND OBJECTS

1.1. The specialized credit program is a program utilizing the loan capital from the Japan Overseas Economic Cooperation Fund (hereinafter referred to as OECF) to construct infrastructure projects at local levels throughout the country, including power systems, water supply, and rural roads. The official English name of the Program as stated in the Agreements signed with OECF is SECTOR PROJECT LOAN.

1.2. The loan capital of the specialized credit program is foreign debt of the Government from OECF, which is balanced in the State Budget, and the Ministry of Finance is responsible for repaying the foreign debt when due (including both principal and interest).

1.3. The Program's sponsor is the Ministry of Planning and Investment, responsible for overall coordination in implementing the program, compiling and reporting the final accounts to the Ministry of Finance annually and upon completion of the project.

1.4. The Vietnam Bank for Foreign Trade is entrusted by the Ministry of Finance to handle foreign exchange transactions, responsible for signing bank agreements with foreign countries based on the OECF loan agreement, guidance from the Program's sponsor, and investors in transaction operations.

1.5. The People's Committee of provinces-cities is responsible for the quality and construction results of projects in their respective areas, accountable to the Program's sponsor and the Ministry of Finance for annual capital usage and project final accounts upon completion. Local project management agencies established by the People's Committee are directly responsible for organizing construction according to the Program's sponsor's directives.

1.6. Local management agencies (People's Committees of provinces-cities, Departments of Planning and Investment, Departments of Finance and Prices, Investment Development Bureaus) are responsible for managing the use of allocated capital within their functions and according to the Program's sponsor's guidance, consistent with current regulations on domestic basic construction investment management and commitments in signed credit agreements with OECF.

Chapter II. SPECIFIC CONTENT

2.1. The Ministry of Planning and Investment is primarily responsible for planning the use of specialized credit funds, drafting guidelines for local management agencies regarding such planning work.

2.2. The Provincial People's Committee directs the Department of Planning and Investment to develop specific construction project plans for the Program in accordance with current regulations. This plan must fully reflect sources of funding and construction progress, usage of funds. Specifically, as follows:

2.2.1. The OECF loan portion includes:

. The allocation for hiring foreign consultants (This part is prepared and announced by the Program's sponsor for each locality). . The allocation for purchasing materials, goods, and equipment domestically and internationally for projects.

. Construction costs taken from the specialized credit funds recorded in the approved plan by the Program's sponsor and approved by OECF. . A loan fee of 0.1%, collected by OECF when withdrawing funds.

2.2.2. Domestic counterpart funds include funds for paying the following items:

. Domestic costs paid to importers: commission for agency imports, import duties on goods (if applicable), costs for receiving, supplying, and transporting goods from ports to project sites, other costs (if applicable).

. Costs for materials, labor, and project management fees outside the specialized credit fund usage plan borrowed from OECF.

. Costs allocated by the Program's sponsor to localities, implemented according to separate regulations not covered by this Circular.

. Expenses not covered by the specialized credit fund according to the signed Agreement with OECF.

Localities must ensure domestic counterpart funds. If these funds are not balanced in the local budget when it is finalized and the locality cannot allocate them, the Ministry of Planning and Investment will balance the sources to supplement the local budget with targeted funds.

2.2.3. Local project management agencies must develop plans and conduct bidding for projects in their areas according to Decree No. 43/CP issued July 16, 1996, and Decree No. 93/CP issued August 23, 1997, of the Government.

3.1. The signing and approval of contracts shall be carried out as follows:

3.1.1. The Program's sponsor leads the organization of bidding and negotiation of contracts for hiring consultants, purchasing goods, and equipment for the Program or projects (hereinafter referred to as Contracts) with eligible suppliers according to the Agreement.

The Program's sponsor selects units to entrust transactions and sign contracts for importing goods to Vietnam, while directly signing contracts for hiring consultants for the entire Program.

After signing the contract, the unit entrusted with the transaction to import goods (hereinafter referred to as the Importer) or the Program's sponsor in the case of consultant contracts, through the Program's sponsor, makes two copies of the signed Contract, one copy sent to OECF and one copy sent to the Ministry of Finance for contract approval procedures.

3.1.2. For the construction volume within the scope of receiving specialized credit funds, the Program's sponsor guides local project management agencies to organize bidding and sign contracts according to current domestic regulations on basic construction investment and the loan agreement provisions.

After signing, the project management agency shall prepare three copies of the Contract with legal effect to be sent to the Department of Planning and Investment, the Department of Finance and Prices, the Local Investment Development Agency, along with the decision approving the bid award issued by the competent authority.

The Department of Planning and Investment shall be responsible for reviewing the Contracts and compiling them to send to the Program Manager. After reviewing and approving the compiled contracts, the Program Manager shall forward them to the Ministry of Finance (Department of Foreign Financial Affairs) to process the withdrawal of funds.

3.1.3. Upon receiving the notification of approval of the contract from OECF, the Ministry of Finance (Department of Foreign Financial Affairs) will notify the Program Manager and the Importer to proceed with the implementation of the Contract and inform the Commercial Bank to process the foreign exchange payment procedures for the Goods Supplier or Overseas Contractor (if applicable).

3.1.4. With the authorization of the Ministry of Finance, the Commercial Bank opens a yen account at the Tokyo-Mitsubishi Bank. The Ministry of Finance (Department of Foreign Financial Affairs) will process the first withdrawal of funds into the aforementioned account according to the Agreement's provisions. The first withdrawal does not require accompanying documents.

3.2. The withdrawal of loan funds and contract payments shall be carried out according to the following regulations:

3.2.1. For the portion of expenditures denominated in foreign currency specified in the contract, the Letter of Commitment withdrawal method shall be applied for payment.

3.2.2. For the portion of expenditures denominated in domestic currency (VND) specified in the activity, the Transfer and Refund withdrawal method shall be applied for payment.

3.2.3. For Contracts signed to implement the procurement of equipment, construction of the Road System and Water Supply System as mentioned in items (A) and (B) of the Loan Allocation section of the Agreement, the Special Account withdrawal method shall be applied for payment.

3.2.4. The Program Manager is responsible for guiding local management agencies to prepare documents according to the models prescribed by OECF for each withdrawal method. The methods of withdrawal for payment and the specific flow of documents for each withdrawal method are stipulated in Circulars 95 TC/ĐT dated November 14, 1994, and 18 TC/ĐTPT dated March 12, 1996, issued by the Ministry of Finance.

3.2.5. The Program Manager is responsible for checking and collecting the payment request documents from localities, completing them according to the OECF withdrawal model, and sending them to the Ministry of Finance (Department of Foreign Financial Affairs) on a monthly basis. These documents must have confirmation from the Local Investment Development Agency regarding the quantity as stipulated in the signed contract.

3.2.6. After receiving the documents, the Ministry of Finance will proceed to pay the localities and process the withdrawal of funds with OECF.

4.3. Types of fees incurred

4.3.1. Banking service fees for the Commercial Bank: The Commercial Bank performs foreign exchange payment transactions: opening L/C and transferring money to repay foreign debts when due. The Commercial Bank charges fees according to the current banking service fee schedule established by the Commercial Bank's General Director.

Specific fee collection procedures are as follows:

* For transfer fees when repaying foreign debts: The Commercial Bank automatically debits the State Budget Account at the Central Treasury (opened at the Commercial Bank).

* For fees related to the opening and settlement of import L/C for goods and consulting services: The Commercial Bank collects fees from the entrusted importer or from the Interest Account on the Special Account in cases where the L/C opener is the Program Manager.

* For direct payment fees to construction contractors from the Special Account, which are included in the domestic counterpart fund for payment. The Bank charges this fee from the beneficiary from the beneficiary's deposit account opened at the Commercial Bank or deducts it from the value of the paid invoice.

4.3.2. Fees for importing units: Units entrusted with imports (Importers) are responsible for negotiating and signing purchase contracts with foreign companies selected by the Program Manager according to regulations, handling all import procedures under the supervision of the Ministry of Planning and Investment, and enjoying agency import fees and supply fees according to current state regulations. These fees are collected by the Importer from the receiving units.

Importing units are responsible for paying the Commercial Bank all fees related to the opening of import L/C, modification of L/C (if any), settlement of L/C, and other fees charged by foreign banks related to the import of these goods.

4.3.3. Fees for the central program management board: Fees paid to the central program management board (Ministry of Planning and Investment) will be settled from the domestic counterpart fund of localities according to separate regulations.

5.1. Accounting through the State Budget:

All OECF loans allocated to local projects must be fully and promptly recorded in the State Budget. The principle of accounting through the budget is to record central government revenue, and record central government subsidy expenditure for local budgets. The Department of Finance and Prices transfers OECF funds (recorded as expenditure by the Ministry of Finance) to the Investment Development Bureau for capital allocation to projects according to plans. The accounting through the budget is implemented specifically as follows: 5.1.1. For consultancy fees:

The Ministry of Finance (Department of Foreign Financial Affairs) prepares a detailed list of each withdrawal based on OECF notifications. Quarterly, the Department of Foreign Financial Affairs will submit a notice of approved budget estimates to the Department of State Budget for the purpose of recording loan receipts and subsidy expenditure for the Department of Finance and Prices of each locality. The Department of Finance and Prices will process the transfer of funds to the Local Investment Development Agency by recording income and expenditure for the allocation of consultancy fees to projects. The basis for allocating consultancy fees is the Credit Allocation Plan for projects in localities prepared by the Program Manager as outlined in item 2.1.1 above.

After the completion of the import and construction activities according to the plan, the Program Manager, the Department of Finance and Prices, and the Local Investment Development Agency will coordinate with the Department of State Budget and the Department of Foreign Financial Affairs to settle the advanced funds in accordance with actual conditions.

5.1.2. Regarding imported goods:

Each time receiving the notification from the Vietnam Bank for Foreign Trade regarding the withdrawal of funds from the Special Account of the Ministry of Finance to pay for import consignments, the Program Manager shall issue a request for allocation of capital and quantity of imported goods to localities based on the detailed list attached. The Department of Foreign Financial Affairs will send a Notice approving the budget estimate to the Department of State Budget for procedures to record foreign debt borrowing and expenditure for subsidy disbursement to the Price and Finance Departments of those localities. The Price and Finance Departments shall proceed with the procedures to record local budget revenue and expenditure for transferring funds to the Local Investment Development Bureau for accounting and disbursing capital.

The basis for temporarily advancing funds for disbursement to localities is the distribution plan for each import consignment prepared by the Ministry of Planning and Investment.

After the completion of the distribution of imported goods according to the plan, the Program Manager and the local Finance Departments shall base their final settlement on the shipping documents in coordination with the Department of State Budget and the Department of Foreign Financial Affairs to reconcile the advanced funds with actual conditions.

The recorded value of the budget in domestic currency is calculated by multiplying the foreign currency debt received from abroad in Japanese Yen by the exchange rate specified and announced by the Ministry of Finance each time accounting is conducted (the foreign currency debt includes the 0.1% withdrawal fee collected by OECF).

The Program Manager shall cooperate with the importer to submit periodic monthly or quarterly reports on the quantity of imported goods and their allocation to localities to the Ministry of Finance (Department of Foreign Financial Affairs and General Department of Investment Development) as the basis for national budget accounting.

In cases where there is a discrepancy between the planned distribution and the actual receipt of goods (including allowable losses), localities shall work with authorized supply units to confirm the discrepancy and report to the Ministry of Planning and Investment for handling according to the principle that the entity responsible for the loss at its stage must bear it, specifically as follows:

Losses exceeding the allowable limit determined during the import process shall be borne by the importer.

Losses exceeding the allowable limit during the supply process shall be borne by the authorized supply unit.

Losses exceeding the allowable limit due to delays or postponements by the locality in receiving goods shall be borne by the locality.

5.1.3. For construction contracts paid in Vietnamese Dong, the Department of Foreign Financial Affairs shall coordinate with the Department of State Budget to record expenditures for disbursement to the local Finance Departments immediately upon transfer of payment. The Price and Finance Departments shall proceed with the procedures to record local budget revenue and expenditure for transferring funds to the Local Investment Development Bureau for accounting and disbursing capital for the project.

Chapter III. INSPECTION, REPORTING, AND SETTLEMENT WORK:

6.1. Quarterly, localities (People's Committees of provinces, Departments of Planning and Investment) shall report to the Ministry of Finance and the Ministry of Planning and Investment on the progress of the Program and the situation of loan receipt and utilization.

6.2. The Ministry of Finance shall periodically and randomly inspect the management and use of loans by localities. If misuse of loans is discovered, the transferred funds will be recovered or the transfer of funds will be temporarily suspended for handling.

6.3. The Program Manager shall cooperate with the Departments of Planning and Investment, Price and Finance, and Local Investment Development Bureaus to conduct acceptance inspections and final settlements of completed projects, compiling comprehensive reports. The Prime Minister respectfully sends this to the Ministry of Finance.

6.4. By the first to fifteenth day of the first month of each quarter, the local Departments of Planning and Investment shall submit written reports on the import and delivery of materials and equipment, and the volume of construction work in the previous quarter to the Program Manager. The preparation of these reports serves as the basis for the Program Manager to allocate funds to localities for subsequent quarters. If the local authority fails to submit the report, the Program Manager shall not be permitted to continue allocating funds.

6.5. Project sponsors are responsible to local authorities and the Program Manager for the quality and progress of the project.

6.6. The Program Manager is responsible for providing information and data to inspection, audit, and review teams and is accountable for matters within their scope.

Chapter IV. EFFECTIVE DATE OF IMPLEMENTATION

This Circular shall take effect fifteen days from the date of signature. Matters not specified in this document shall be implemented in accordance with Circular No. 95TC/DT dated November 14, 1994 and Circular No. 18TC/DTPT dated March 12, 1996 of the Ministry of Finance. This Circular replaces Circular No. 39 TC/TCDN issued on July 22, 1996 by the Ministry of Finance.

In the course of implementation, if there are any difficulties, agencies are requested to report them to the Ministry of Finance.

In the course of implementation, if there are any difficulties, agencies are requested to report them to the Ministry of Finance.