Circular No. 90/1998/TT-BTC on guiding the implementation of the Loan Agreement with Finland for the Tam Ky Water Supply System Improvement and Expansion Project in Quang Nam

CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 90/1998/TT-BTC DATED JUNE 27, 1998
GUIDING THE IMPLEMENTATION OF THE LOAN AGREEMENT WITH FINLAND
FOR THE PROJECT TO REHABILITATE AND EXPAND THE WATER SUPPLY SYSTEM
TAM KY, QUANG NAM PROVINCE

Pursuant to Decree No. 87/CP dated August 5, 1997 of the Government promulgating the Regulation on Management and Use of Official Development Assistance (ODA) Sources.

Pursuant to the Loan Agreement (hereinafter referred to as the Agreement) for financing the Project to Rehabilitate and Expand the Water Supply System of Tam Ky City, Quang Nam Province (hereinafter referred to as the Project) signed on May 22, 1998 between the Ministry of Finance and the Finnish Export Credit Company (FEC).

Pursuant to Circular No. 4363/QHQT dated September 1, 1997 of the Government Office approving the financial mechanism for the Project and Circular No. 500/CP-QHQT dated May 6, 1998 of the Government approving the Loan Agreement 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 concessional loan capital from the Government of Finland through FEC is a foreign government debt. 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 owner (Tam Ky Water Supply Company, Quang Nam) is responsible for using the capital for its intended purpose, in accordance with the conditions stipulated in the Loan Agreement signed with FEC, and returning it to the state budget according to the provisions of 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 owner and is entitled to charge rescheduling fees on the state credit capital according to the regulations.

1. Provisions on HIV screening tests:

1. Conditions for borrowing from Finland:

- Total loan amount: 1,736,137.66 USD (converted from 9,290,246.25 Finnish Marks at the official exchange rate of 5.3511 FIM/1 USD announced by the Central Bank of Finland on the date of signing the Agreement), including:

+ The portion of the loan for payment of 85% of the value of the commercial contract is 1,678,238.44 USD (hereinafter referred to as portion A of the loan),

+ The portion of the loan for payment of a part of the credit insurance fee equivalent to 3.45% of the value of the Commercial Contract is 57,899.22 USD (hereinafter referred to as portion B of the loan).

- Loan term: 10 years, without grace period. The first installment must be paid on June 30, 2000.

- Interest rate: 0%.

- Commitment fee: 0.5% per year calculated on the undrawn capital from the date of signing the Loan Agreement and paid every six months.

- Arrangement fee: 0.375% calculated on the total loan amount and paid once within 30 days from the date of signing the Loan Agreement.

- Penalty interest: 1.75% above the London Interbank Offered Rate (LIBOR).

2. Mechanism for rescheduling loans for the Project:

- The project owner must take on debt with the General Department of Investment and Development (in USD) the entire foreign loan amount, including the portion of the loan for paying credit insurance fees as mentioned above.

- Interest rate for rescheduling loans: 0%.

- Rescheduling fees are collected by the system of the General Department of Investment and Development according to current regulations.

- The rescheduling loan term is 15 years, including a 5-year grace period starting from the date of signing the Loan Agreement (May 22, 1998).

- The project owner directly pays in USD all foreign-related fees as stipulated in the Loan Agreement such as commitment fees, arrangement fees, agency fees, credit insurance fees (the portion not covered by the loan)... to FEC according to notifications from the Ministry of Finance (Department of Foreign Financial Affairs).

- Specifically, regarding the late payment penalty interest rate, the General Department of Investment and Development will specify this in the Rescheduling Loan Contract signed with the project owner, but it shall not be lower than the penalty interest rate stipulated in the Loan Agreement (point II.1).

3. Guidelines for withdrawing funds and repaying debts:

a. Counterpart funds: According to Decision No. 97/TTg dated February 5, 1997 of the Prime Minister and Circular No. 4363/QHQT dated September 1, 1997 of the Government Office approving the financial mechanism for the Project to Rehabilitate and Expand the Water Supply System of Tam Ky City, Quang Nam Province, the Project falls under the category of rescheduling concessional loans from Finland, with domestic counterpart funds of 16.94 billion VND. The project owner is responsible for calculating and building annual counterpart fund plans to report to the People's Committee of Quang Nam Province to mobilize funds and ensure the allocation of counterpart funds for the project according to schedule.

In the short term, based on the conditions of the signed commercial contract, the project owner is responsible for arranging the source of funds to pay the deposit amounting to 15% of the Commercial Contract (296,160 USD) to the Finnish supplier.

b. Drawing down the Finnish loan:

The project owner bases on the Loan Agreement and the progress of the signed commercial contract to build an annual plan for drawing down foreign capital and send it to the Ministry of Finance.

According to Article 1.01 of the Loan Agreement, the Ministry of Finance will designate a Finnish commercial bank to check the documents and invoices for payment to the Finnish supplier, carry out necessary procedures to draw down capital from FEC to make direct payments to the supplier according to the signed Commercial Contract, and handle the debt registration with FEC through issuing a Drawdown Certificate (Certificate of Drawdown). Based on the notification from the Ministry of Finance, the project owner must directly pay the agency fee to the bank according to the agency contract ratio of 0.1% of the value of each drawn-down capital amount.

The project owner needs to implement several points in this direct payment process as follows:

b.1. Payment of deposit:

After receiving the commercial invoice and the bank guarantee for the deposit amounting to 15% of the Commercial Contract (Down Payment Bank Guarantee), the project owner is responsible for checking the accuracy and legality of these documents and transferring the deposit payment to the Finnish supplier.

b.2. Payment for equipment supply and construction supervision for the Project:

The agency bank, based on valid delivery documents consistent with the Commercial Contract presented by the Finnish supplier to the bank, will act on behalf of the project owner to make direct payments to the Finnish supplier according to each shipment at a rate of 75% of the Commercial Contract value. For the remaining 10% of the contract value, after the supplier has delivered the final batch and supervised the installation of machinery and equipment, the project owner is responsible for reviewing and approving the Final Acceptance Certificate upon receipt of a bank guarantee (Bank Guarantee) at a rate of 5% of the contract value for the technical warranty period.

b.3. Payment for credit insurance:

The credit insurance fee of 8.79% of the total loan amount specified in Point II.1 above shall be paid to the Finnish Guarantee Agency (FGB) as follows:

- The insurance fee of 5.34% of the value of Loan Part A: The Project Owner must pay in cash according to the invoice sent by FEC within 30 days from the date of receipt of the invoice.

- The insurance fee of 8.79% of the value of Loan Part B: The Project Owner must pay in cash according to the invoice sent by FEC within 30 days from the date of receipt of the invoice.

- The insurance fee of 3.45% of the value of Loan Part A (which is the value of Loan Part B): This will be funded from this concessional loan source and transferred by FEC to FGB and recorded as a debt for Vietnam. The Project Owner must accept the debt with the State Investment Corporation for the total value of both Loan Parts A and B under the same rescheduling conditions specified in Point II.2 of this Circular.

c. Management of re-lending and repayment of loan principal:

The Project Owner is responsible for signing a Rescheduling Loan Agreement with the Ministry of Finance (State Investment Corporation) according to the rescheduling conditions specified in Point II.2 above; fully and timely repay the loan principal according to this Rescheduling Loan Agreement, and bear legal responsibility for the proper use of the loan funds.

Upon each receipt of the notice of fund withdrawal from the Agent Bank, the Ministry of Finance (State Investment Corporation) is responsible for notifying the Project Owner of the actual amount withdrawn, the repayment schedule, and requesting the Project Owner to sign a promissory note. The date of acceptance of the debt is the date when the Agent Bank records the debt for Vietnam.

The State Investment Corporation is responsible for inspecting the use of loan funds and the status of assets financed by the government loan, recovering the rescheduled loans, and reporting to the Ministry of Finance on the recovery of rescheduled loans.

d. Reporting system:

Every six months, the Project Owner is responsible for reporting to the Ministry of Finance (State Investment Corporation, Department of Foreign Financial Affairs), the Ministry of Planning and Investment, and the supervising authority on the situation regarding the receipt, use, and repayment of the loan and counterpart funds provided by the government.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect 15 days after the date of signature. During implementation, if there are any difficulties, the Tam Ky Water Supply Company, the People's Committee of Quang Nam Province, the People's Committee of Tam Ky City, and related agencies are requested to promptly reflect these issues to the Ministry of Finance for consideration and resolution.

Le Thi Bang Tam

(Signed)