Circular No. 96/1998/TT-BTC guides the management and use of mixed credit loans with preferential terms from Denmark.

CIRCULAR

GUIDELINES ON THE MANAGEMENT AND USE OF DENMARK'S MIXED CREDIT FACILITY GRANTS ISSUED BY THE MINISTRY OF FINANCE UNDER DECREE NO. 96/1998/TT-BTC ON JULY 10, 1998

Pursuant to Decree No. 87/CP dated August 5, 1997 of the Government on the Regulation on Management and Use of Official Development Assistance (ODA) Sources.
Pursuant to the Framework Agreement on Mixed Credit between the Governments of Denmark and Vietnam dated May 30, 1995 with a value of 50 million USD (hereinafter referred to as the Agreement).
Pursuant to the Memorandum of Understanding signed on April 12, 1998 between the Ministry of Planning and Investment and the Danish International Development Agency (DANIDA) regarding new conditions for Danish mixed credit for Vietnam (hereinafter referred to as the Memorandum).
Implementing the Prime Minister's decision on domestic financial mechanisms applicable to Danish credit projects as stipulated in Circular No. 666/CP-QHQT dated June 17, 1998 of the Government.
The Ministry of Finance hereby guides the management and use of Danish mixed credit grants according to the above documents as follows:

A. GENERAL PROVISIONS:

1. The Danish mixed credit fund is a foreign loan of the Government. Therefore, all borrowed funds will be recorded in the state budget. The Ministry of Finance is responsible for repaying the foreign debt when due (including both principal and other payable amounts).

2. Project sponsors are responsible for using the funds for their intended purposes, in accordance with the conditions specified in the agreements signed with Denmark, and repay to the State Budget (for projects eligible for rescheduling) in accordance with the Rescheduling Loan Contract signed with the General Department of Investment and Development.

3. The General Department of Investment and Development is responsible for implementing the rescheduling loan management and debt recovery from project sponsors and receives fees for rescheduling national credit loans in accordance with current regulations.

4. The Ministry of Finance will coordinate with the State Bank to designate a suitable commercial bank to handle foreign transactions for the projects.

B. SPECIFIC PROVISIONS:

I. IMPLEMENTATION STEPS FOR PROJECTS:

1. For projects approved by the Government to be included in the list of proposed Danish funding, project sponsors shall prepare feasibility studies and submit them for approval in accordance with Decree No. 42/CP dated July 16, 1996 and Decree No. 92/CP dated August 23, 1997 of the Government.

All projects approved by the Government to be included in the list of proposed funding must be reviewed and approved by DANIDA based on the feasibility study report prepared by the project sponsor regarding financial analysis, social issues, environmental issues, and other relevant matters. The final approval of the project by DANIDA will be based on the feasibility report and the trade contract approved by the Vietnamese side. The project sponsor is responsible for submitting the feasibility study report of the project to the Ministry of Planning and Investment to request DANIDA to review and approve.

2. After obtaining investment approval from the competent authority, project sponsors shall proceed with bidding in accordance with the current regulations of the Government. Based on the results of the bidding approved by the competent authority, negotiations and signing of the Trade Contract with the supplier shall be conducted.

During the negotiation and signing of the Trade Contract, project sponsors must comply with the following Danish provisions:

- For industrial projects, Denmark only provides up to 85% of the value of the Trade Contract, so the remaining 15% of the value of the Trade Contract must be arranged by the project sponsors themselves. Projects in other sectors may be funded up to 100% of the value of the Trade Contract.

- The Trade Contract must clearly specify that the supplier's bank in Denmark will issue down payment bank guarantees and performance bonds/guarantees.

The project sponsor must submit a copy of the approved Trade Contract along with the feasibility report, the report on counterpart funding preparation, and investment preparation, accompanied by a letter requesting the Ministry of Finance to officially request Denmark to fund the project.

3. The Ministry of Finance (Department of Foreign Financial Affairs) will, based on the proposal of the project sponsor, sign specific loan agreements for each project (hereinafter referred to as the Project Agreement) with the financial institution designated by the Danish Government.

4. After receiving notification from the Ministry of Finance that all procedures have been completed to withdraw funds, the designated commercial bank is responsible for guiding the project sponsor to implement the procedures for opening letters of credit (L/C) and withdrawing funds in accordance with the loan agreement signed for each project (hereinafter referred to as the Project Loan Agreement).

II. FINANCIAL MECHANISM

Based on the projects approved by the Prime Minister under the first batch (Circular No. 1443/QHQT dated March 30, 1996 of the Government) and the second batch (Circular No. 4659/QHQT dated September 18, 1997 of the Government) attached as Appendices I and II of this Circular;

The financial mechanism for projects under the above batches is implemented according to the Prime Minister's decision at Circular No. 666/CP-QHQT dated June 17, 1998, specifically as follows:

1. Projects funded by the State Budget include: The digital television center equipment project of the Radio and Television Station of Thanh Hoa; the water supply project in some mountainous towns of Nghe An Province; the water supply project in the mountainous town of Nho Quan District, Ninh Binh Province.

2. Projects eligible for rescheduling are subject to the following rescheduling conditions:

a. The rescheduling period is the same as the period Denmark lends to Vietnam (maximum 8 years for industrial projects and 10 years for infrastructure, environment, and social projects).

b. Interest rate for rescheduling: For projects in the first and second batches approved by the Prime Minister, it is carried out as follows:

- Projects are rescheduled at an interest rate of 1% per year (this rescheduling interest rate already includes the rescheduling fee of the General Department of Investment and Development at 0.2% per year and other foreign fees as stipulated in the loan agreement directly transferred by the Ministry of Finance to the foreign side) including:

+ Projects for building distant sea fishing fleets.

+ Water supply projects for the towns: Son Tay (Phase I list), Phu Ly (Ha Nam), Tan An (Long An), Vinh Yen (Vinh Phuc), Tam Diep (Ninh Binh), and the project to renovate the old water supply pipeline system in Hanoi (Phase II list).

- The projects that will borrow at an interest rate of 2% per year (this borrowing interest rate already includes the borrowing fee of the General Department of Investment Development at 0.2% per year and other foreign fees according to the Loan Agreement directly transferred by the Ministry of Finance to the foreign side) include:

+ Upgrading fish processing plants.

+ Airport lighting equipment procurement project.

+ Agricultural product processing projects, animal feed processing projects.

Interest will be paid every six months according to the specific provisions in the Credit Contract signed between the project owner and the General Department of Investment Development (on June 30 and December 31 or March 31 and September 30 each year). If payment is delayed, the project owners must bear late payment interest as stipulated in the Credit Contract, but it cannot be lower than the late payment interest rate specified in the Project Loan Agreement.

c. For projects that continue to be approved by the Prime Minister to be included in the list in the future, the Ministry of Finance will submit conditions for re-lending to the Government based on the nature and characteristics of each project and notify the project owners to implement them.

4. The documents for signing the promissory note between the project owners and the General Department of Investment Development are the corresponding invoices from the Danish suppliers and the Danish side's notice of debt.

The time when the project owners recognize the debt with the Ministry of Finance (General Department of Investment Development) is the time when the Danish side records the debt to the Ministry of Finance. The amount of debt recognized by the project owners is the amount recorded by the Danish side to the Ministry of Finance.

5. The counterpart funding allocation for the projects shall be carried out in accordance with Article 23, Section 2 of the Regulation on Management and Use of Official Development Assistance Funds issued together with Decree No. 87/CP dated August 5, 1997 of the Government, specifically as follows:

- For projects funded by the State Budget: the counterpart capital is guaranteed by the State Budget according to the annual counterpart capital plan.

- For projects borrowing Danish government funds: the project owners are responsible for arranging the counterpart funding to ensure the progress of the project implementation.

The foreign currency counterpart funding for the project (down payment, equipment purchase costs from third countries, construction and installation costs, etc.) can be borrowed from Nordic Investment Bank (NIB) funds under the Loan Agreement for the Small Projects Program signed on May 4, 1998. According to this Agreement, the specific loan period will be determined by NIB based on the proposal of Vietnam through the Ministry of Finance, but not exceeding 20 years, with an interest rate of LIBOR + Margin.

The NIB loan must meet the following requirements: the minimum loan amount equivalent to 500,000 USD, the maximum loan amount 5 million USD but not exceeding 50% of the total cost of the project. To be able to use this source of funds, the project owners need to officially propose to the Ministry of Planning and Investment (Department of Foreign Economic Relations) and the Ministry of Finance (Department of Foreign Financial Affairs) along with the content of using this loan to be included in the negotiation list for specific loans with NIB.

C. IMPLEMENTATION

1. Every six months, the project owners are responsible for reporting to the Ministry of Finance (General Department of Investment and Development, Department of Foreign Financial Affairs), the Ministry of Planning and Investment, and the competent authorities on the situation of receiving, using, and repaying the loan.

2. This Circular takes effect 15 days after the date of signature and applies uniformly to all projects using mixed Danish credit that will sign project loan agreements from now on.

Specifically, the two projects that have been implemented, namely the Bien Hoa coffee processing project and the Ca Mau seafood processing project, will still follow the guidance provided in Circular No. 34-TC/TCĐN dated June 18, 1997 of the Ministry of Finance.

During the implementation process, if there are any difficulties, units need to promptly reflect them to the Ministry of Finance for consideration and resolution.

ANNEX I

LIST OF PROJECTS USING DANISH CREDIT PHASE I

ANNEX II

LIST OF PROJECTS USING DANISH CREDIT PHASE II