Socialist Republic of Vietnam

GOVERNMENT

No. 90-1998-ND-CP Hanoi, 7 November 1998


DECREE ON CONTROL OF FOREIGN LOANS AND LOAN REPAYMENTS

Issuing Regulations on Control of Foreign Loans and Loan Repayments


The Government

Pursuant to the Law on the Organization of the Government dated 30 September 1992;

Pursuant to the Law on the State Budget dated 20 March 1996 and the Law on Amendment of and Addition to a Number of Articles of the Law on the State Budget 06-1998-QH10 dated 20 May 1998;

Pursuant to the Law on the State Bank dated 12 December 1997;

Pursuant to the Law on Credit Institutions dated 12 December 1997;

Following the proposals of the Minister of Finance, the Governor of the State Bank of Vietnam, the Minister of Planning and Investment, the Minister of Justice and the Minister-Chairman of the Office of Government;

Decrees:


Article 1

To issue with this Decree the Regulations on Control of Foreign Loans and Loan Repayments.

Article 2

This Decree shall be of full force and effect after fifteen (15) days from the date of its signing and shall replace Decree 58-CP of the Government dated 30 August 1993.

Article 3

The Minister of Finance, the Governor of the State Bank of Vietnam, the Minister of Planning and Investment, and heads of relevant bodies shall be responsible for the implementation, guidance and examination of the implementation of the Regulations on Control of Foreign Loans and Loan Repayments issued with this Decree.

Article 4

Ministers, heads of ministerial equivalent bodies and Government bodies, chairmen of people's committees of provinces and cities under central authority, and heads of relevant bodies shall be responsible for the implementation of this Decree.


On behalf of the Government
Prime Minister


PHAN VAN KHAI


GOVERNMENT SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom - Happiness


REGULATIONS
ON
CONTROL OF FOREIGN LOANS
AND LOAN REPAYMENTS

(Issued with Decree 90-1998-ND-CP of the Government
dated 7 November 1998)


CHAPTER I

General Provisions

Article 1

In these Regulations, the following terms shall have the meanings ascribed to them hereunder:

1. Foreign loans means short, medium, or long term loans (interest or non-interest bearing) obtained by the State of Vietnam, the Government of Vietnam or enterprises being Vietnamese legal entities (including foreign invested enterprises) from international financial organizations, governments or banks of foreign countries or from other foreign organizations and individuals (hereinafter referred to as foreign lenders).

2. Short term loans means loans having a term of up to one year.

3. Medium or long term loans means loans having a term of more than one year.

4. Foreign loans of the Government means loans obtained from foreign lenders by a body in the capacity of the State or the Government of the Socialist Republic of Vietnam as authorized by the State or the Government of Vietnam.

Foreign loans of the Government shall include preferential loans in the form of Official Development Aid ("ODA"), commercial loans or export credits and loans obtained from the international capital market by way of issue of bonds in the capacity of the State or the Government in foreign countries (including bonds issued for the purpose of debt conversion).

5. Foreign loans of enterprises means loans directly obtained by enterprises which are established and operate pursuant to the current laws of Vietnam (including foreign invested enterprises) from foreign lenders by the method of independent borrowing and repayment or obtained by way of issue of bonds in foreign countries (such as corporate bonds, bank bonds, and so forth).

Foreign loans of enterprises shall include the following:

· Loans guaranteed by the Government;
· Loans guaranteed by banks or secured in other forms as stipulated in article 23 of these Regulations;
· Unguaranteed or unsecured loans.

6. Guarantee for a foreign loan means an undertaking of the guarantor body with respect to the full and timely repayment of the debt by the borrower (namely, an enterprise) to the foreign lender. Where the borrower fails to repay, or repay in full, the due debt, the guarantor body shall be responsible to make full payment of the debt on behalf of the borrower.

Guarantees for foreign loans shall include the following two types:

· Government guarantees which are provided by the Ministry of Finance or the State Bank of Vietnam as authorized by the Government in accordance with the regulations on Government guarantees for foreign loans.
Loans guaranteed by the Government shall be controlled as in the case of loans of the Government.

· Bank guarantees which are provided by banks of Vietnam in accordance with the Regulations on Guarantees and Cross-Guarantees issued by the Governor of the State Bank of Vietnam. These guarantees shall not be considered as Government guarantees.

7. Re-lending agreements means re-lending contracts or re-lending subordinate treaties between a body or organization to which the Government assigns the duty of re-lending foreign loans of the Government and the domestic organizations or entities using such capital source. The terms and conditions of borrowing and repayment under a re-lending agreement may be different from the terms and conditions of borrowing and repayment under the foreign loan treaty signed with foreign lenders.

9. Domestic contributed capital in projects financed by foreign loans (hereinafter referred to as domestic contributed capital) is the domestic contributed capital required from the Vietnamese party for the implementation of a project funded by a foreign loan.

Domestic contributed capital may be in foreign currency (such as security deposits, payments for import of machinery and equipment not financed by loans, and so forth) or in Vietnamese dong (such as payments for surveys, design, compensation for site clearance, construction, installation, tax payments, insurance premiums, and so forth).

Article 3

The Government shall exercise unified control of the borrowing and repayment of foreign loans throughout the whole country and shall delegate to ministries the following responsibilities:

1. The Ministry of Planning and Investment shall be responsible for the following:

· Preparing a national strategy for borrowing and repayment of foreign loans and formulating a national long term plan for borrowing and repayment of foreign loans in accordance with the national strategy for socio-economic development from time to time and the national strategy for borrowing and repayment of foreign loans;
· Co-ordinating with the Ministry of Finance and the State Bank of Vietnam to control foreign loans at the macro-level;
· Carrying out the duties delegated by the Government in article 13 of the Regulations on Control and Use of ODA issued with Decree 87-CP dated 5 August 1997 of the Government.

2. The Ministry of Finance shall be responsible for the following:

· Co-ordinating with the State Bank of Vietnam and relevant bodies in the preparation of State policies and regulations on control of foreign debts in accordance with the national strategy for borrowing and repayment of foreign loans and the national financial policy;
· Co-ordinating with the Ministry of Planning and Investment and the State Bank of Vietnam in the formulation of annual plans for borrowing and repayment of foreign loans of the Government to submit to the Prime Minister of the Government for approval. Submitting annual general reports on the status of borrowing and repayment of foreign loans of the Government and co-ordinating with the State Bank of Vietnam in the preparation and submission of annual general national reports on the status of borrowing and repayment of foreign loans to the Prime Minister of the Government;
· Exercising financial management in respect of foreign loans of the Government (including preferential loans in the form of ODA, commercial loans of the Government and loans obtained by way of issue of Government bonds) and providing Government guarantees for enterprises (except for credit institutions) to borrow foreign loans in accordance with the decision of the Prime Minister of the Government;
· Organizing the repayment of foreign loans of the State and the Government from the State Budget;
· Carrying out the duties delegated by the Government in article 14 of the Regulations on Control and Use of ODA issued with Decree 87-CP dated 5 August 1997 of the Government.

3. The State Bank of Vietnam shall be responsible for the following:

· Controlling the borrowing and repayment of foreign loans of enterprises in all economic sectors, providing Government guarantees for credit institutions to borrow foreign loans in accordance with the decision of the Prime Minister of the Government, providing guidelines for and checking the provision of guarantees by commercial banks;
· Co-ordinating with the Ministry of Planning and Investment and the Ministry of Finance in the formulation of plans for the annual total level of commercial loans of enterprises for submission to the Prime Minister of the Government for approval;
Preparing and submitting annual general reports on the borrowing and repayment of foreign loans of enterprises to the Prime Minister of the Government and the Ministry of Finance for the purpose of inclusion in the annual general report on the national status of borrowing and repayment of foreign loans;

· Co-ordinating plans for the annual total level of commercial loans of enterprises; organizing the registration of foreign loans of enterprises;

· Carrying out the duties delegated by the Government in article 15 of the Regulations on Control and Use of ODA issued with Decree 87-CP dated 5 August 1997 of the Government.

4. The Ministry of Justice shall be responsible for the following:

· Providing opinions relating to legal issues in agreements for foreign loans of the Government and of enterprises to be guaranteed by the Government prior to their submission to the Prime Minister of the Government for consideration and decision;
· Providing opinions relating to issues of inconsistency between agreements for foreign loans of the Government and domestic laws; monitoring the resolution of these issues during the performance of undertakings in relation to borrowing and repayment of foreign loans;
· Providing legal opinions where it is deemed necessary in respect of agreements for foreign loans of the Government and of enterprises to be guaranteed by the Government or providing opinions relating to other relevant legal issues at the request of a State body or enterprise.

Article 3

Based on the actual requirements of control of foreign debts, the Prime Minister of the Government may establish a proper inter-ministerial mechanism for control of foreign debts. In the immediate future, the Prime Minister of the Government may delegate to the State Financial and Monetary Council (established under Decision 23-1998-QD-TTg of the Government dated 31 January 1998) the function of advising on a number of important issues relating to foreign debts, such as the national strategy for borrowing and repayment of foreign loans, and significant proposals for obtaining foreign loans and dealing with foreign loans.

Article 4

In cases where a draft of any treaty, loan agreement or guarantee for a foreign loan contains terms and conditions raised by the foreign lender which are inconsistent with the laws of Vietnam, the body responsible for negotiation of such treaty or agreement shall co-ordinate with relevant bodies (namely, the Ministry of Finance, the Ministry of Planning and Investment, the State Bank of Vietnam, the Ministry of Foreign Affairs and the Ministry of Justice) to reach an agreement which shall be submitted to the Prime Minister of the Government for consideration and decision, or submitted by the Prime Minister of the Government to the State President for consideration of and decision on the terms and conditions which are inconsistent with the laws and ordinances.


CHAPTER II

Control of Borrowing and Repayment of Foreign Loans
of the Government

Article 5

Control of the borrowing and repayment of foreign loans of the Government shall satisfy the following basic requirements:

1. To ensure that the borrowing and repayment of foreign loans shall be uniformly made in accordance with the national strategy for borrowing and repayment of foreign loans in order to attract by the optimum means all appropriate foreign capital sources to finance plans for national socio-economic development from time to time.

2. To structure appropriate loans in accordance with the list of priority projects and the capital recovery capacity and domestic capacity (namely, domestic contributed capital and human resources) of each project in order to facilitate the implementation of projects on schedule and the efficient use of loans, to create sources of foreign currency and locally accumulated capital to serve development targets and, at the same time, to guarantee the repayment of loans to foreign lenders.

Article 6

The control of borrowing and repayment of foreign loans of the Government shall be carried out on the basis of the following basic principles:

1. The Government shall exercise unified control of the borrowing and repayment of foreign loans on the basis of the national strategy for borrowing and repayment of foreign loans, shall monitor and supervise the borrowing and repayment of foreign loans on the basis of levels and annual and long term plans, and shall implement policies and financial instruments in order to ensure appropriate structures, terms and total amounts of loans for satisfaction of the requirements of macro-economic balancing and national development from time to time.

2. Bodies of local authorities, mass organizations and administrative bodies at all levels shall not be permitted to obtain foreign loans directly.

3. State bodies, organizations or entities receiving and using foreign loans of the Government shall use such loans for approved projects and shall be responsible for recovering in full and in a timely manner loans borrowed from loans of the Government in order that the Government may strictly perform the obligations undertaken with foreign lenders.

Article 7

The control and utilization of foreign loans of the Government shall be carried out in accordance with the Law on the State Budget and the following financial mechanisms:

1. In the case of loans for investment and development projects:

(a) The Government shall allocate foreign loans in accordance with the regulations on allocation of capital from the State Budget for infrastructure investment projects, social welfare projects and projects in other spheres which are not capable of direct loan recovery, such as systems of bridges and national or inter-provincial transportation routes, urban public transportation networks, transportation in mountainous and rural areas, infrastructure for railway or air transportation and sea ports, safe water distribution systems in rural and mountainous areas, drainage facilities in urban areas and domestic waste treatment, construction investment projects in the fields of health care, education, scientific research, basic surveys, environment, broadcasting and television, projects for planting protective forests and upstream forests, and projects for irrigation and flood prevention.

The Ministry of Planning and Investment shall co-ordinate with the Ministry of Finance to submit to the Prime Minister of the Government a detailed list of projects to be allocated with capital from foreign loans of the Government prior to the signing of international heads of treaties or agreements on lists of projects with foreign lenders.

(b) In the case of other investment and development projects which are capable of loan recovery (including infrastructure investment projects): the Government shall re-lend to such projects, recover and transfer into the accumulated fund for loan repayments controlled by the Ministry of Finance in order to repay foreign loans when they become due.

The Ministry of Finance shall provide guidelines for and organize re-lending of foreign loans of the Government to investment and development projects through the network of the General Department of Investment and Development. The General Department of Investment and Development shall be responsible for controlling and recovering loans from investors for repayment to the State Budget and shall be entitled to a re-lending fee as stipulated by the Prime Minister of the Government.

On the basis of the terms and conditions of borrowing and repayment of a loan signed with a foreign country and the loan repayment capacity of the investment and development project using the foreign loan, the Ministry of Finance shall provide for the re-lending conditions for each particular loan on the basis of the following main principles:

· Re-lending term shall be in accordance with the period of repayment of the loan stated in the approved feasibility study.
· Re-lending interest rate:
- In the case of commercial loans of the Government: the re-lending interest rate shall be calculated in foreign currency at the interest rate and fee of the foreign loan plus the domestic re-lending fee;

- In the case of loans in the form of ODA: the re-lending interest rate shall be calculated in foreign currency or Vietnamese dong at the interest rate applicable to State investment credit (in the respective currencies) as determined by the Prime Minister of the Government. This interest rate shall include the domestic re-lending fee.

· In special cases where the re-lending conditions should be stipulated on the basis of principles other than the above principles, the Ministry of Finance shall report the matter to the Prime Minister of the Government for decision.

2. In respect of loans under credit programs:

The Ministry of Finance shall sign re-lending contracts with appropriate banks for further lending or re-lending service to loan end-users (namely, enterprises, individuals, and so forth) in accordance with the re-lending conditions approved by the Prime Minister of the Government.

Unless the Prime Minister of the Government specifies end-borrowers, banks re-lending foreign loans of the Government for the implementation of lending policies shall be entitled to select borrowers in accordance with the credit programs agreed with foreign lenders and shall assume all risks arising during the process of re-lending to such borrowers.

3. In respect of foreign currency loans or commodity loans not directly attached to projects:

(a) Foreign currency loaned from foreign countries, including by way of issue of bonds, shall be transferred to the consolidated foreign currency fund controlled by the Ministry of Finance. Loans supporting international balance of payments shall be transferred to the foreign currency reserve fund controlled by the State Bank of Vietnam. All foreign currency loaned from foreign countries shall be used in accordance with the particular decision of the Prime Minister of the Government.

(b) Foreign commodity loans:

· In the case of commodity loans for which domestic loan users have been specified, the Ministry of Finance shall convert such loans into Vietnamese dong for the purpose of calculating revenue of the State Budget and amounts allocated or re-lent to loan users.
· In the case of commodity loans for which domestic loan users have not yet been specified, the Ministry of Finance shall import and sell commodities by auction and pay all proceeds to the State Budget.
Article 8

Investment and development programs or projects using foreign loans of the Government shall satisfy the following conditions:

(a) Programs or projects shall be included in the list in annual investment and development plans of the State as well as those of ministries, branches and local authorities.

(b) Programs or projects shall be approved by a competent authority in accordance with applicable regulations.

The body appointed to conduct negotiations in respect of a loan treaty shall be responsible for checking the above conditions prior to signing the loan treaty with a foreign lender.

Where a foreign lender requires to evaluate and approve the financed program or project, the investor shall discuss with the foreign lender and report on the results of evaluation by the foreign lender to the body responsible for negotiations prior to the conclusion of the particular agreement.

Article 9

Investors or banks using foreign loans of the Government in the form of re-borrowing shall be responsible for repaying the loans to the State Budget in accordance with re-lending agreements. Sources used to repay a loan shall be capital depreciation and after-tax profits as stipulated by law. Where such sources of income are insufficient for repayment of the loan when it becomes due, funds of the enterprise and other legitimate sources of capital shall be used to repay the loan.

Bodies and organizations which are authorized by the Ministry of Finance to re-lend shall have the right to take necessary measures in accordance with applicable regulations on credit and law in order to ensure debt recovery and full and timely repayment to the State Budget.

Article 10

Based on annual plans for repayment of loans from the State Budget approved by the Government, the Ministry of Finance shall make repayments of loans strictly in accordance with the undertakings of the Government to foreign lenders. Where necessary, the Ministry of Finance shall, together with relevant ministries, negotiate with foreign lenders in respect of the appropriate levels, terms and forms of repayment of loans (such as, in cash or commodities, export services, conversion of loans into investment, and so forth).

In order to create sources of capital for repayment of loans on time and to limit risks from borrowing and repayment of foreign loans for the State Budget, an accumulated fund for loan repayment of the State Budget shall be established and controlled by the Ministry of Finance on the basis of loan repayments by projects re-borrowing foreign loans and foreign aid of the Government, guarantee fees of the Government and other sources of income provided for by the Prime Minister of the Government. The Minister of Finance shall prepare and submit regulations on management of the accumulated fund for loan repayment to the Prime Minister of the Government for approval.

Article 11

Domestic contributed capital for all programs and projects using foreign loans of the Government shall be allocated in full and in a timely manner.

Domestic contributed capital for projects funded by the State Budget shall be included in the annual State Budget plan. Preparation of the plan, approval and allocation of domestic contributed capital for projects funded by the State Budget shall comply with the Law on the State Budget and other relevant subsidiary guidelines and shall be in accordance with the schedule for implementation of each project.

In respect of projects re-borrowing foreign loans of the Government, investors shall procure the domestic contributed capital independently and shall be given priority in obtaining loans from State credit sources or the National Fund for Investment Support.

The Ministry of Planning and Investment and the Ministry of Finance shall be responsible for allocating domestic contributed capital from the annual State Budget in full and on schedule for projects funded by the State Budget and providing investors with guidelines for registration of borrowing of domestic contributed capital from State credit sources or the National Fund for Investment Support.

The detailed foreign loan agreement for a project shall only be signed after the investor has determined the sources of sufficient domestic contributed capital.

Article 12

Upon preparation of an investment project, for the purpose of obtaining foreign loans, the investor shall calculate in full taxes of all kinds payable in accordance with law.

Where sources of capital are insufficient for payment of all taxes as stipulated, the investor shall record the shortfall of tax as a debt to the State Budget together with loans and shall be responsible for repaying such debt to the State Budget upon commissioning of the project in accordance with the guidelines of the Ministry of Finance.

Article 13

The issue of bonds in the capacity of the State or the Government for the purpose of obtaining loans from the international capital market shall be carried out in accordance with applicable regulations on issue of international bonds of the Government. The Prime Minister of the Government shall decide on the use of loans obtained by way of issues of international bonds.


CHAPTER III

Government Guarantees

Article 14

The Government shall provide guarantees on the basis of the following principles:

Foreign loans of enterprises which are independently borrowed and repaid for the purpose of development of production or business shall comply with Chapter IV of these Regulations. Where a foreign lender requests a guarantee of a bank, the Regulations on Guarantees and Cross-Guarantees issued by the Governor of the State Bank shall be applicable.

Where foreign commercial loans exceed the capacity of banks to provide guarantees and the foreign lenders officially request the Government of Vietnam to provide guarantees, the Government may consider and provide guarantees for commercial loans in the following special circumstances:

(a) Projects being of a high importance in the plan for national economic development;

(b) Projects importing high technology equipment or producing goods for export to which priority is given;

(c) Commercial loans accompanied by aid or loans in the form of ODA to create a source of financing in the form of mixed credit.

Article 15

Guarantees shall be provided for the following:

Entities to be guaranteed by the Government shall be State owned enterprises or State owned credit institutions which are permitted by the Government to obtain directly foreign loans on the basis of the principle of independent borrowing and repayment for the purpose of implementing investment and development projects, contributing capital to joint ventures with foreign parties, or expanding credit activities.

In special cases, according to the actual requirements and at the request of the guarantor, the Prime Minister of the Government may decide to provide a Government guarantee for particular entities other than the above entities.

Article 16

Conditions for provision of Government guarantees shall be the following:

· Having a feasibility study approved by the competent authority in accordance with applicable regulations which specifies a plan for repayment of loans;
· Having a signed loan agreement and/or commercial contract approved by the competent authority in accordance with applicable regulations;
· In the case of guaranteed organizations and entities currently operating, having normal business production and financial standing.
Article 17

Bodies providing Government guarantees:

The Ministry of Finance shall, on behalf of the Government, consider and provide guarantees for enterprises (except for credit institutions) pursuant to a decision of the Prime Minister of the Government.

In the case of guarantees for commercial loans accompanied by aid or loans in the form of ODA to create a source of financing in the form of mixed credit, the Prime Minister of the Government shall authorize the Ministry of Finance to consider and to decide on the provision of guarantees for enterprises on the basis of investment projects approved by the Government.

The State Bank of Vietnam shall, on behalf of the Government, provide guarantees for credit institutions pursuant to the decision of the Prime Minister of the Government. After providing a guarantee, the State Bank of Vietnam shall send a set of the guarantee file to the Ministry of Finance for the purpose of general monitoring of the provision of Government guarantees.

Article 18

Level of guarantees:

The total level of Government guarantees provided in each year, comprising guarantees of the Ministry of Finance and guarantees of the State Bank of Vietnam, shall not exceed ten (10) per cent of the revenue of the State Budget in that year. Where the annual requirement for guarantees exceeds the above maximum rate, the Ministry of Finance shall submit the matter to the Prime Minister for decision.

The Government shall provide guarantees for foreign loans on a case-by-case basis. In the case of enterprises obtaining loans from different sources, the maximum limit of total loans of an enterprise to be guaranteed by the Government shall be provided for as follows (except in special cases as decided by the Prime Minister of the Government):

· In the case of enterprises in the industries of energy, oil, gas, transportation, urban construction, steel or information technology, the maximum total sum guaranteed for an enterprise shall be equal to twelve (12) times the existing capital of the owner of such enterprise at the time of the request for a guarantee (including the capital of the enterprise allocated from the State Budget in the case of State owned enterprises, funds of the enterprise and capital supplemented from its profits).
· In the case of enterprises in other material manufacturing industries, the maximum total sum guaranteed for an enterprise shall be equal to six times the existing capital of the owner of such enterprise.
· In the case of credit institutions, the maximum total sum guaranteed for a credit institution shall be equal to six times the self-supplemented capital of such credit institution.
The total sums guaranteed referred to above shall exclude the outstanding amount of unpaid foreign loans of any such enterprise or credit institution as at the time when the guarantee is provided.

· In the case of investment projects for establishment of new enterprises, the Prime Minister of the Government shall consider and decide on the sum guaranteed on a case-by-case basis.
Article 19

The guaranteed enterprise shall pay a guarantee fee not exceeding one and half of one (1.5) per cent per annum of the amount of the guarantee in each year to the body providing the Government guarantee. The collected fees shall be transferred to the accumulated fund for foreign loan repayment referred to in article 10 of these Regulations, including in the case where the guarantor body is the State Bank of Vietnam. Specific fee rates and payment periods shall be specified by the guarantor body on the basis of loan repayment capacity and priority of each project.

In addition to the above guarantee fee, guaranteed enterprises shall pay a fixed fee for consideration and provision of guarantees to the guarantor body in order to cover expenses arising during the course of consideration and issuance of guarantees. The rate and period of payment of this fee shall be uniformly provided for by the Ministry of Finance.

Article 20

The body providing the Government guarantee shall be the organization making the final evaluation of the application file for guarantee and reporting thereon to the Prime Minister of the Government for approval and shall be the body performing all responsibilities of the guarantor to foreign lenders. Where a guaranteed enterprise fails to make repayment when a loan becomes due, the body providing the Government guarantee shall be responsible for implementing measures and financial and credit instruments in accordance with applicable laws for the purpose of obtaining sources of capital for debt repayment. In cases where, notwithstanding the implementation of all measures or instruments referred to above, sources of capital are still insufficient or cannot be obtained for debt repayment, the accumulated fund for foreign loan repayment may be used.

All issues arising between a guaranteed enterprise and a guarantor body shall be dealt with in accordance with the regulations on Government guarantees, the applicable laws of the State of Vietnam and international practices.

Article 21

The Ministry of Finance shall co-ordinate with the State Bank of Vietnam to prepare and submit the regulations on Government guarantees for promulgation for the purpose of concretizing the principles and stipulations relating to the provision of Government guarantees referred to in this Chapter.


CHAPTER IV

Control of Borrowing and Repayment of Foreign Loans
of Enterprises

Article 22

Borrowing and repayment of foreign loans of enterprises shall be made on the basis of the following principles:

1. Enterprises in all economic sectors established and operating pursuant to the laws of Vietnam shall have the right to obtain directly foreign loans on the basis of independent borrowing from and repayment to foreign lenders in accordance with agreed terms and conditions. The debt of an enterprise shall not, in any case, be converted into a debt of the Government, except in the case of loans guaranteed by the Government referred to in Chapter III of these Regulations.

2. Any foreign long or medium term loans (including loans obtained by way of issue of international bonds) of enterprises shall be included in the annual plan for the total level of loans approved by the Prime Minister of the Government and shall satisfy all conditions for long and medium term loans stipulated by the State Bank of Vietnam from time to time; shall be registered with the State Bank of Vietnam and confirmed by the State Bank of Vietnam; periodical reports on drawdowns and repayments thereof shall be submitted to the State Bank of Vietnam in accordance with the regulations on reporting stipulated by the State Bank of Vietnam.

In respect of State owned enterprises, the State Bank of Vietnam must be consulted prior to the signing of agreements for foreign loans which are guaranteed by the Government in accordance with Chapter III of these Regulations.

3. Foreign short term loans of enterprises shall satisfy all conditions for short term loans stipulated by the State Bank of Vietnam from time to time. The Governor of the State Bank of Vietnam shall submit to the Prime Minister of the Government for approval the annual outstanding balance of short term loans, including the level of letters of credit with deferred payments for banks.

4. Drawdowns and transfers of money for repayment of foreign loans by enterprises shall be made through banks operating in the territory of Vietnam which are authorized to conduct foreign exchange transactions. In cases where any drawdown or loan repayment in the form of goods or assets (whether such assets are tangible or intangible) is not made through a bank, the enterprise shall submit a report thereon in accordance with the stipulations of the State Bank of Vietnam and, where necessary, the opinion of the body responsible for State administration of the relevant branch or field shall be required.

5. Enterprises obtaining foreign loans shall be responsible for using loans for proper purposes, shall not be permitted to use short term loans for investment in long or medium term projects, shall make repayments (of both principal and interest) in accordance with the undertakings in loan agreements signed with foreign lenders, and shall assume all risks and responsibilities under the laws of the State during the course of loan drawdown and repayment.

6. In the case of long and medium term loans of enterprises which are subject to these Regulations, banks shall only be permitted to make disbursements and transfers of money for loan repayment to foreign lenders at the request of enterprises where such loans have been registered with and confirmed by the State Bank of Vietnam in writing.

The State Bank of Vietnam shall provide detailed guidelines on procedures, files and conditions for foreign loans of enterprises in order to implement the above principles.

Article 23

Forms of guarantees for loans:

1. Where a foreign lender requests a bank guarantee for a loan of an enterprise, the guarantee shall be provided in accordance with the Regulations on Guarantees and Cross-Guarantees issued by the Governor of the State Bank.

Enterprises obtaining foreign loans may seek a guarantee from non-residents (namely, foreign banks, financial or credit institutions, companies, and so forth) provided that the conditions of the guarantee are not contrary to the applicable laws of Vietnam. In the case of State owned enterprises, the opinion of the State Bank of Vietnam on the contents of the guarantee letter shall be required.

2. Where a loan of an enterprise requires a Government guarantee, the Ministry of Finance or the State Bank of Vietnam shall provide the guarantee in accordance with Chapter III of these Regulations.

3. Guarantor banks shall make the final decision and shall be responsible for guarantees of foreign loans of enterprises. Where a bank considers that the conditions for a guarantee in accordance with the Regulations on Guarantee and Cross-Guarantees are not satisfied, it shall notify the enterprise of the matter in a timely manner. The guarantor bank shall be permitted to choose and take one or more securities for loan repayment in accordance with law, such as escrow deposits, mortgages or pledges, depending on each particular project or loan.

4. Where a guaranteed enterprise fails to make repayments to foreign lenders when a loan becomes due, the guarantor body shall be responsible for repayment of such loan on behalf of the enterprise and, at the same time, shall take all necessary measures in accordance with the credit regulations and other laws of Vietnam in order to recover the amount paid on behalf of the enterprise.

5. Enterprises may use assets formed from loans or other forms of security in accordance with the laws of Vietnam to secure foreign loans.

6. In the case of unsecured or unguaranteed foreign loans, the parties to the loan agreement shall agree between themselves on the responsibilities for all risks.

Article 24

Within a period of thirty (30) days from the date of official signing of long or medium term loan agreements (whether such loans are guaranteed by banks or not), enterprises and credit institutions obtaining loans shall provide a notarized copy of the documents signed between them and foreign lenders to the State Bank of Vietnam and the guarantor body.


CHAPTER VI

Reporting, Examination and Inspection

Article 25

Ministers, heads of ministerial equivalent bodies and Government bodies, chairmen of people's committees of provinces and cities under central authority, and heads of central bodies of mass organizations shall be responsible to the Prime Minister of the Government for examining and supervising the receipt and utilization of foreign loans of the Government or loans guaranteed by the Government for projects or programs under the management of the respective bodies or local authorities.

Article 26

The Ministry of Finance, the State Bank, the Ministry of Planning and Investment, and the Office of Government shall be responsible for providing guidelines and assistance to ministries, branches and local authorities for the purpose of examination and supervision and, at the same time, shall, depending on their respective functions, directly examine and supervise the management of utilization of foreign loans of the Government and the performance of obligations by enterprises using foreign loans as provided for in foreign loan agreements or re-lending agreements.

Examination and supervision of investment projects or construction works for which foreign loans are used shall be carried out in accordance with applicable regulations on management of investment and construction.

Article 27

Periodical reports on the implementation of programs or projects financed by foreign loans of the Government (including loans guaranteed by the Government) shall be made in accordance with articles 28 and 29 of the Regulations on Management and Utilization of ODA issued with the Decree 87-CP dated 5 August 1997 of the Government.

Article 28

Every quarter and year, or when necessary, enterprises which directly obtain foreign loans shall submit reports on the implementation of loan agreements (drawdowns, utilization of loans and loan repayments) to the State Bank of Vietnam, the guarantor body and the body directly responsible for management (in respect of State owned enterprises) and shall be subject to examination and inspection in accordance with the regulations of the Governor of the State Bank of Vietnam.

Article 29

Every year, the Ministry of Finance shall be responsible for preparation and submission of a general report on the status of borrowing and repayment of foreign loans of the Government and in the country and on the status of re-lending and recovery of loans of the Government to the Prime Minister of the Government and, at same time, shall send such report to the State Bank of Vietnam and the Ministry of Planning and Investment.

The State Bank of Vietnam shall be responsible for submitting reports on the status of borrowing and repayment of foreign loans of enterprises and credit institutions to the Prime Minister of the Government.


CHAPTER VI

Dealing with Breaches

Article 30

Heads of bodies directly responsible for management of State owned enterprises and credit institutions obtaining foreign loans shall be responsible to the Government for the efficiency of the loan projects approved or proposed by them to the authority for approval.

In the case where the incorrect implementation of the applicable regulations on approval or appraisal of a proposal for investment loans or an improper decision on investment policy results in an economic loss, the person who prepared and the person who approved the proposal shall, depending on the seriousness of the loss, be liable before the law.

Investors using foreign loans, including loans obtained from loans of the Government, and becoming insolvent due to subjective reasons, such as inefficient utilization of capital, waste or loss of capital, which adversely affects the standing of the Government and causes losses to the State Budget, shall be liable before the law.

Any organization or individual breaching these Regulations and relevant legal instruments shall, depending on the seriousness of the breach, be subject to administrative penalties or compensation for damage in accordance with law. Serious breaches shall be subject to prosecution for criminal liability.


On behalf of the Government
Prime Minister


PHAN VAN KHAI