Circular No. 03/2017/TT-BTNMT dated March 21, 2017 of the Ministry of Natural Resources and Environment providing guidance on preferential loans and post-investment interest rate incentives granted by the Vietnam Environment Protection Fund

THE MINISTRY OF NATURAL RESOURCES AND ENVIRONMENT 

Circular No. 03/2017/TT-BTNMT dated March 21, 2017 of the Ministry of Natural Resources and Environment providing guidance on preferential loans and post-investment interest rate incentives granted by the Vietnam Environment Protection Fund

Pursuant to the Law on Environment Protection dated June 23, 2014;

Pursuant to the Government s Decree No. 21/2013/ND-CP defining the functions, tasks, powers and organizational structure of the Ministry of Natural Resources and Environment;

Pursuant to the Government s Decree No. 19/2015/ND-CP dated February 14, 2015 specifying implementation of certain articles of the Law on Environment Protection;

Pursuant to the Prime Minister’s Decision No. 78/2014/QD-TTg dated December 26, 2014 on organization and operation of the Vietnam Environment Protection Fund

In light of the request of the Director of Department of Finance and the Director of the Department of Legislation;

The Minister of Natural Resources and Environment hereby issues the Circular providing guidance on preferential loans and post-investment interest rate incentives granted by the Vietnam Environment Protection Fund.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of application

This Circular provides guidance on preferential loans extended, and post-investment interest rate incentives granted, by the Vietnam Environment Protection Fund (hereinafter referred to as VEPF).

Article 2. Subjects of application

1. Project owners referred to in Clause 1 Article 42 of the Government s Decree No. 19/2015/ND-CP dated February 14, 2015 specifying implementation of certain articles of the Law on Environment Protection (hereinafter referred to as Decree No. 19/2015/ND-CP).

2. The VEPF and organizations or individuals involved in grant of loans and post-investment interest rate incentives by the VEPF.  

Article 3. Definition

For the purposes of this Circular, terms used herein shall be construed as follows:

1. Project owner is any organization or individual owning funds or authorized to directly manage and use funds for carrying out environmental protection projects.

2. Grant of a preferential loan refers to a financial support given by the Government through the VEPF that lends a project owner a fund charged at the preferential lending interest rate in order for the project owner to carry out environmental protection projects within the territory of Vietnam.

3. Post-investment interest rate incentive (lending interest rate incentive) refers to a non-refundable financial aid given by the Government through the VEPF with the aim of partially reducing the interest rate on a project owner’s borrowed fund for carrying out an environmental protection project which is granted by a credit institution authorized to operate within the territory of Vietnam.

4. Loan term refers to a period of time that begins on the date of a project owner’s receipt of the first loan and ends on the date of full repayment of the borrowed fund which is agreed upon in the terms and conditions of a credit agreement on environmental protection investment.

5. Debt maturity refers to an agreed-upon component time period of the loan term at the end of which a project owner offered a loan must repay principal and interest in part or in full to the VEPF.

6. Grace period refers to a period of time from the date of initial fund withdrawal to the beginning date of loan principal repayment which is defined to match the project completion duration.  During a grace period, a project owner shall not be required to repay principal but shall be obliged to make interest payment.

7. Overdue debt refers to a part or the whole of loan principal and/or loan interest which is due and the project owner has not yet been repaid in time to the VEPF. 

8. Debt maturity adjustment refers to an agreement between the VEPF and the project owner on a change to the loan term predetermined in the credit agreement on environmental protection investment.

9. Debt rescheduling refers to the VEPF’s granting its approval of an extended period of loan principal and/or loan interest payment coming after the loan term which has been specified in a credit agreement on environmental protection investment.

10. Debt relief refers to the VEPF’s decision to defer collection of an amount of debt owed by a project owner and not to charge the interest on the offered loan arising during the period of grant of debt relief.

11. Debt (principal and/or interest) cancellation refers to the VEPF’s decision not to collect a part or the whole of loan principal and/or interest owed by a project owner to the VEPF.

12. Risk hedge or provision refers to an amount of money recorded as the VEPF’s expenses which is set aside to reduce any possible losses that may happen due to its customer’s failure to discharge his/her agreed-upon debt obligations. Risk hedge shall include specific and general hedge.

Article 4. Principles of preferential loans and post-investment interest rate incentives

1. Use the borrowed fund for the right purposes specified in the credit agreement on environmental protection investment.

2. Repay a amount of the borrowed fund in full and in time as stated in the credit agreement on environmental protection investment.

3. The project owner shall be offered a one-time payment of post-investment interest rate incentive amount only if the amount of borrowed investment capital (exclusive of overdue debts) falling within the range of investment outlay in an investment project is approved by the competent authority.

Article 5. Currency unit assigned for lending, debt repayment and post-investment interest rate incentive

The currency unit assigned for use in the process of extension of a preferential loan, debt repayment and offer of the post-investment interest rate incentive amount shall be Vietnamese dong.

Chapter II

EXTENSION OF A PREFERENTIAL LOAN

Article 6. Loan amount and loan purpose

1. The project owner carrying out the environmental protection investment project may take out a preferential loan on which the maximum interest rate is stipulated by Clause 1 Article 42 of the Decree No. 19/2015/ND-CP.

2. The maximum loan amount shall be restricted to 5% of the realized charter capital of the VEPF determined at the loan approval date.

3. The maximum loan amount extended to the project owner shall not be allowed to exceed 10% of the realized charter capital of the VEPF determined at the loan approval date, except for loans derived from the entrusted or authorized funding sources of the Government, organizations or individuals.    

4. The borrowed fund shall be used for investing in integral components of the project financed by that borrowed fund with construction, equipment installation and technological application works preferred.

Article 7. Loan amount proportionate to the value of the asset mortgaged or pledged to secure, or put up as security for a loan

The VEPF shall take into consideration the value of mortgaged, pledged or collateral asset which has been valued in order to determine the approved loan amount. The maximum loan amount shall equal to 70% of the value of mortgaged, pledged or collateral asset which has been determined and specified on the credit agreement on environmental protection investment. Where the project owner uses a bank guarantee to secure its loan, the allowable maximum loan amount shall be equal to 100% of the guarantee value. 

Article 8. Loan term and grace period

1. Loan term shall be defined on the basis of capital recovery capability, relevant to the operating cycle and debt repayment capability of the project owner, but shall be 10 years at the maximum and not exceed the borrowing enterprise’s lifespan.

2. The maximum grace period for a loan offered to a project shall be 02 years.

Article 9. Interest rate

1. The lending interest rate determined by the VEPF shall not exceed 50% of the State-controlled investment credit interest rate quoted by the competent authority at the loan approval date.

2. The lending interest rate applied to a particular project shall be determined at the date of entry into the credit agreement on environmental protection investment and shall be fixed during the loan term.

3. The interest rate on an overdue debt shall be as much as 150% of the interest rate on an unmatured debt specified in the credit agreement on environmental protection investment, and shall be calculated as per the loan principal and late repayment interest.

Article 10. Loan security

1. The VEPF shall use any kind of security for a loan, which is defined by the State Bank of Vietnam.

2. A loan may be secured by a wide variety of assets.

Article 11. Loan application documentation

1. Documents required by laws

a) 01 original copy of the loan application form using the Form No. 01 hereto attached;

b) 01 duplicate copy of the Business Registration Certificate or the Investment Certificate; 

c) 01 duplicate or original copy of the Appointment Decision and personal documents of the legal representative or the Chief Accountant;

d) 01 duplicate copy of the Statutes of the borrowing enterprise (where available);

dd) 01 duplicate copy of the Establishment Decision (where available);

e) Other relevant documents (if necessary).

2. Financial documents

a) 01 duplicate copy of the financial statement prepared for the last 03 years. With regard to the project financed by the borrowed fund worth at least VND 05 billion, an audited financial statement shall be required;

b) 01 original copy of the project owner’s Plan for business operations performed during the loan term;

c) Other relevant documents (if necessary).

3. Project-related documents

a) 01 original copy of the text of the environmental protection project as referred to in Point a Clause 1 Article 42 of the Decree No. 19/2015/ND-CP;

b) A notarized copy of the Decision on approval of the environmental impact assessment report or the environmental protection plan, or the detailed or simplified environmental protection scheme, of the competent authority.

c) 01 original copy of the Decision on approval of the investment outlay;

d) 01 duplicate copy of the Building Permit (where available);

dd) Other relevant documents regarding the project (where available).

4. Loan security documents

a) Documents relating to assets pledged as security for a loan, enclosing the checklist of these assets (including the proof of ownership of and title to these assets, etc.);

b) Written confirmation of the third-party guarantor.

Article 12. Receipt and processing of loan application

1. The project owner shall submit 01 set of all documents referred to in Article 11 hereof in a direct manner, by post, or via the online public service (where applicable), to the VEPF.

2. Upon receipt of the loan application, the VEPF shall promptly verify whether a full amount of required documents are provided.  After the duration of 07 business days, the VEPF shall notify the project owner in writing of the verification result.

Article 13. Assessment of the loan application

The VEPF shall carry out assessment of the loan application within the duration of 40 business days of receipt of all required and valid documents.  With regard to the complicated investment project, the duration of assessment may be extended but shall not exceed 55 business days.

1. Assessment of submitted project-related documents:

a) Check and evaluate whether contents and data included in documents and materials regarding the project and the project owner is complete, valid, legal and accurate;  

b) Check completion of investment procedures in accordance with applicable laws and regulations on project investment and development management;

c) Give comments or assessment opinions on the project execution process, authority to issue kinds of project-related documents or materials in accordance with applicable laws and regulations.

2. Assessment of the project owner’s capability

a) Capability and previous performance in its conduct of business and production operations as well as management of the project;

b) Financial competence and capability of repaying debts by the maturity date which are specified in the loan application;

c) The project owner’s creditworthiness in the credit relationship with the VEPF and other credit institutions.

3. Assessment of the financial plan and loan repayment plan

a) Give comments on and assessment of markets where input resources or factors and finished products produced by the project are traded;

b) Analyze and evaluate necessary conditions for measurement of economic and financial effectiveness;

c) Assess the investment location, scale and designed capacity – production quantity, technology of currently available equipment and investment approaches;

d) Assess the investment outlay, progress of use of borrowed fund and factors affecting the investment outlay;

dd) Assess the feasibility of funding sources used for financing the investment project;

e)Assess the project owner’s equity participation in the project which accounts for at least 20% of the investment outlay;

g) Assess incomes and expenses arising from the project. 

4. Assessment of other related factors affecting the process of making investment, managing and operating the project.

5. Assessment of performance indicators and loan repayment plans

a) Assess key indicators showing economic and financial efficiency of the project (Net present value – NPV, internal rate of return – IRR and discounted payback period);

b) Assess the capital recovery;

c) Assess the loan debt repayment capability and plan: The capital that can be used for debt repayment purposes must be commensurate with each borrowed fund and feasibility of the debt repayment plan;

d) Give comments and assessment opinions on the significance, economic, social and environmental effectiveness of the project.

6. Analysis of risk factors affecting the feasibility of the proposed plans.

7. Assessment of the project owner’s implementation of the loan security procedures in accordance with applicable laws and regulations on secured transactions and other relevant legislation.

8. Field inspection carried out at the project site

a) Compare the submitted loan application with original records and documents deposited at the project owner’s office;

b) Discuss issues relating to the loan application;

c) Evaluate conformance of the project site.

9. In light of the results of overall assessment of the project, within the maximum duration of 10 business days, the VEPF shall decide whether a loan is approved and notify the project owner in writing of its decision.  In case of rejection, the VEPF shall send a written notification to the VEPF in which clear reasons for such rejection should be given, and simultaneously forward such notification to the Ministry of Natural Resources and Environment for reporting purposes.

Article 14. Credit agreement on environmental protection investment

The credit agreement on environmental protection investment shall be entered into between the VEPF and the project owner. Rights and obligations of contracting parties together with other commitments agreed by contracting parties in accordance with applicable laws and regulations must be expressed under terms and conditions of the credit agreement on environmental protection investment.

Article 15. Advance loan disbursement

1. Loan disbursement shall be subject to terms and conditions of the credit agreement on environmental protection investment which has been signed and shall match the progress of use of borrowed fund and demand for the borrowed fund of the project owner.   The project owner shall send the VEPF in a direct manner, by post or via the online public service (where available) the application form for advance disbursement by using the Form No. 02 hereto attached, together with the loan application documents specified in Clause 4 and 5 of this Article in order to request the advance loan disbursement.

2. The project owner may be offered a loan disbursement for advance payment purposes under the following circumstances:

a) The project is carried out in the form of procurement (or appointment) under terms and conditions of the agreement between the project owner and the contractor;

b) Such disbursement is used for purchase of equipment or technology (including both imported and domestic equipment).

3. The maximum amount of advance loan disbursement shall be subject to the following regulations: 

a) With regard to construction contracts, such amount shall be as much as 20% of the approved loan limit;

b) With regard to the technological equipment procurement contract, the engineering and construction (EC) contract, the engineering and procurement (EP) contract, the contra technological equipment procurement and construction (PC), the engineering, technological equipment procurement and construction (EPC) contract, the turnkey contract and other construction contract, such amount shall be as much as 10% of the approved loan limit;

c) With regard to equipment purchases, the amount of advance loan disbursement shall be equal to the project owner’s amount payable to the supplier or the carrier (if any) of purchased equipment under terms and condition of the economic agreement, but shall not exceed 30% of the approved loan limit.

4. Documents submitted to apply for an advance loan disbursement for the project carried out in the form of procurement (or appointment) shall be subject to the contract signed between the project owner and the contractor

a) 01 duplicate copy of the written approval of the procurement (or appointment) results granted by the competent authority; 

b) 01 duplicate copy of the economic agreement between the project owner and the contractor;

c) 01 duplicate copy of the written contract performance bond held by the winning contractor.

5. Documents submitted to apply for the advance loan disbursement for purchase of equipment (including both imported and domestic equipment) shall be composed of the followings:

a) 01 duplicate copy of the economic agreement between the project owner and the supplier or toll manufacturer of purchased equipment;

b) 01 duplicate copy of the written approval of the contract in accordance with applicable laws and regulations (if any);

c) 01 duplicate copy of the import and export license of the project owner (if the project owner directly performs import transactions);

d) 01 duplicate copy of the contract for entrustment of import and the export and import license of the entrusted importer (in case of the import entrustment);

dd) 01 duplicate copy of the written guarantee on the down payment for purchased equipment issued by the importer (in case of the advance loan disbursement used for making down payment for purchased equipment).

Article 16. Disbursement of borrowed fund for payment purposes

Loan disbursement shall be subject to terms and conditions of the credit agreement on environmental protection investment which has been signed and shall match the progress of use of borrowed fund and demand for the borrowed fund of the project owner.   The project owner shall send the VEPF in a direct manner, by post or via the online public service (where available), an application form for disbursement of borrowed fund for payment purposes by using the Form No. 03 hereto attached, together with the loan application documents specified in Clauses 1, 2 and 3 of this Article in order to request the disbursement of borrowed fund for payment purposes.

1. Documents submitted to apply for the disbursement of borrowed fund for payment for construction workloads

a) 01 duplicate copy of the legitimate decision on the contractor appointment issued by the competent authority (where applicable); 

b) 01 duplicate copy of the written approval of the bidding result, the contract-winning estimate and the report of modification of data specified in the bid consideration contract (where available);

c) 01 duplicate copy of the detailed bill of quantities;

d) 01 duplicate copy of the written approval of design - estimate;

dd) 01 duplicate copy of the economic agreement between the project owner and the contractor;

e) 01 duplicate copy of the report of commissioning of completed construction works enclosing the spreadsheet of total value of construction works going through the commissioning process;

g) 01 duplicate copy of the sales invoice;

h) 01 duplicate copy of other lawful document evidencing payments required by laws and regulations;

i) With respect to additional workloads arising out of the bid quote, 01 duplicate copy of the written approval of the revised bidding results (in case of the bidding on such additional workloads) or the approved modified price estimate (in case of the appointment of the contractor for such additional workloads).

2. Documents submitted to apply for the disbursement of borrowed fund for payment for quantities of equipment

a) 01 duplicate copy of the legitimate decision on the contractor appointment issued by the competent authority (where applicable); 

b) 01 duplicate copy of the written approval of the bidding result, the contract-winning estimate and the report of modification of data specified in the bid consideration contract (where available);

c) 01 duplicate copy of the economic agreement between the project owner and the supplier;

d) 01 duplicate copy of the sales invoice (with respect to domestically-purchased equipment);

e) 01 duplicate copy of a set of import documents (with respect to imported equipment), including import contract, commercial invoice, bill of lading, insurance certificate, packing list, quality certificate, origin certificate and import customs declaration form, tax notice, or dispatch invoice, of the entrusted importer;

g) 01 duplicate copy of the receipt note or the test report of completely installed equipment;

h) 01 duplicate copy submitted together with the original copies of documents related to equipment-related costs (transportation, storage, insurance, tax and warehousing cost, etc.);

i) 01 duplicate copy of other lawful document evidencing payments required by laws and regulations.

3. Documents submitted to apply for the disbursement of borrowed fund for payment for consultancy workloads

a) 01 duplicate copy of the consultancy contract between the project owner and the consultant;

b) 01 original copy of the test report of completed consultancy workloads;

c) 01 duplicate copy of other lawful document evidencing payments required by applicable laws and regulations on consultancy services.

Article 17. Loan disbursement process

1. Upon receipt of all required documents from the project owner, which are referred to in Article 15 and 16 hereof, the VEPF shall be responsible for carrying out inspection and disbursing the borrowed fund to the project owner not later than 30 business days.

2. In each time the loan disbursement is received, the project owner shall enter into an indebtedness contract and debt repayment commitment. The only original copy of the indebtedness contract shall be deposited with the VEPF.

3. The process for disbursement of the loan for the foreign-invested investment project or the contract awarded under the international bidding procedure wherein the donor and/or the co-donor on one side and the Government of Vietnam on the other side have made a particular agreement on the disbursement of the borrowed fund for payment purposes, shall be subject to that agreement.

Article 18. Debt recovery

1. The borrowing project owner shall be allowed to make early repayment to the VEPF.

2. The VEPF shall move the principal that the project owner fails to repay by the agreed due date to the delinquency status unless the project owner has obtained the VEPF’s approval of debt rescheduling, and notify the project owner of such move to the delinquency status.  The notification of delinquency should specify the outstanding principal balance becoming delinquent, the delinquency date and the interest rate applied to the delinquent debt. 

3. The VEPF and the project owner shall enter into an agreement on the order of collection of loan principal and interest.  With respect to an overdue loan, the VEPF shall collect loan principal first and loan interest later.

4. The VEPF shall be entitled to deal with assets pledged as security for a loan to recover its debt in accordance with applicable legislation.

Article 19. Debt classification

On a quarterly basis, the VEPF shall classify debts in accordance with regulations issued by the State Bank of Vietnam.

Article 20. Creation of hedges

1. Specific hedge refers to a monetary amount created on the basis of classification of specific debts as a contingency fund or provision for any loss that may arise.

Specific project owners shall be required to set aside a specific amount of money as a provision for any risk which is calculated according to the following formula:

R  =  max {0, (A - C)} x r

Where:

R: specific hedge

A: debt value

C: collateral value (deductible value of collateral)

r: rate of specific hedge for any credit risk to the debt.

2. The rates of specific hedge (r) against any risk to specific debt groups shall be specified as follows:

a) 1^stdebt group: 0%;

b) 2^nddebt group: 5%;

c) 3^rddebt group: 20%;

d) 4^thdebt group: 50%;

dd) 5^thdebt group: 100%.

3. Collateral used as a deduction for the purpose of calculation of the specific hedge (R), referred to in Clause 1 of this Article, must fully meet the following requirements:

a) The VEPF shall have the right to deal with collateral in accordance with laws if the project owner fails to fulfill specified obligations;

b) The collateral must fully meet requirements set out by applicable laws on secured transactions;

c) The collateral of which value is at least VND 200 billion as provided by Point c Clause 5 of this Article must be valued by the accredited valuing entity in accordance with applicable legislation;

Where the accredited valuing entity is not competent to carry out valuation or there is none of the valuing entity gaining competence in valuing collateral as required by this Clause, the VEPF shall, on its own, carry out valuation of the collateral in accordance with applicable laws on collateral in order to determine value of the collateral recorded as a deduction during the process of calculating the specific hedge. Unless the collateral fully meets requirements specified by Point a, b, c, and d of this Clause, deductible value of that collateral shall be equal to zero.

4. The deductible value of the collateral shall be calculated as multiplying value of the collateral referred to in Clause 5 of this Article by the deductible rate relative to a particular collateral in accordance with Clause 6 of this Article.

The VEPF will determine the rate of deduction relative to specific kinds of collateral on the basis of assessment of collateral recovery likelihood during the process of dealing with such collateral but that rate will not allowed to exceed the minimum deductible rate relative to specific types of collateral in accordance with applicable laws and regulations.

5. The collateral shall be valued according to the followings:

a) The guarantee amount specified on the commercial bank’s guarantee certificate;

b) The Government bond listed at the Stock Exchange. The reference price quoted at the Stock Exchange, whether at the end of the date preceding the date of creation of specific hedge or the latest point of time prior to the date of creation of specific hedge (if the former is not available), shall be used for calculation of value of the collateral;

c) The company’s stock listed on the Stock Exchange. The reference price quoted at the Stock Exchange, whether at the end of the date preceding the date of creation of specific hedge or at the latest point of time prior to the date of creation of specific hedge (if the former is not available), shall be used for calculation of value of the collateral.

Face value of the stock which has not yet been listed at the Stock Exchange or other valuable paper issued by the company (including the credit institution) shall be used for calculation of value of the collateral;

d) The movable property, real property and other types of collateral: Value of the collateral shall be determined by the accredited valuing entity referred to in Point d Clause 3 of this Article or according to regulations issued by the VEPF.  In the absence of the written document on valuation of the collateral, value of the collateral shall be calculated as zero;

dd) The asset leased under a finance lease (value of the leased asset under a finance lease minus the rental payable): value of the collateral shall be determined according to the residual amount of rental specified in the finance lease at the date of creation of specific hedge or value determined by the accredited valuing entity in accordance with applicable laws;

6. The maximum deductible percentage of the collateral shall be calculated as follows:

a) If the gold bullion, except for the gold bullion specified in Point i of this Clause, and the project owner’s deposit denominated in a foreign currency, are put up as collateral, that rate shall be equal to 95%;

b) If the Government bonds, negotiable instruments or valuable papers issued by credit institutions; savings cards, deposit certificates, promissory notes, or treasury bills issued by credit institutions or foreign bank branches, are put up as collateral of which 

the residual term to maturity is below 01 year, the rate shall be equal to 95%;

the residual term to maturity ranges from 01 year to 05 years, the rate shall be equal to 85%;

the residual term to maturity is below 05 year, the rate shall be equal to 80%;

c) If the other credit institutions’ stocks listed at the Stock Exchange are put up as collateral, the rate shall be equal to 70%;

d) If the guarantee issued by the commercial bank is put up as collateral, the rate shall be equal to 70%;

dd) If the other company’s stocks listed on the Stock Exchange are put up as collateral, the rate shall be equal to 65%;

e) If stocks which have not yet been listed at the Stock Exchange and valuable papers, except for those stipulated by Point c of this Clause, which have been issued by the listed credit institutions, are put up as collateral, the rate shall be equal to 50%;

If stocks which have not yet been listed at the Stock Exchange and valuable papers, except for those stipulated by Point c of this Clause, which have been issued by the unlisted credit institutions, are put up as collateral, the rate shall be equal to 30%;

g) If stocks which have not yet been listed at the Stock Exchange and valuable papers, except for those stipulated by Point c of this Clause, which have been issued by the listed companies, are put up as collateral, the rate shall be equal to 30%;

If stocks which have not yet been listed at the Stock Exchange and valuable papers which have been issued by the unlisted companies are put up as collateral, the rate shall be equal to 10%;

h) If the real property is put up as collateral, the rate shall be equal to 50%;

i) If unlisted gold bullion, other gold forms and assets put up as collateral, the rate shall be equal to 30%;

7. General hedge refers to a monetary amount used for protecting against any unspecified loss that may arise from the process of debt classification and specific hedge creation, or in case of financial problems that the VEPF faces when the debt quality is reduced.

8. The amount of money that must be set aside to create a general hedge shall be calculated as 0.5% of total balance of debts classified into the 1^stto 4^thdebt group referred to in Clause 2 of this Article.

a) If the residual amount of specific hedge and general hedge that has not been used off from the previous quarter is less than the amount that must be set aside to create the specific hedge and general hedge during the quarter of creation of such hedge, the VEPF is required to set aside an amount of money to make up for the deficiency;

b) If the residual amount of specific hedge and general hedge that has not been used off from the previous quarter is greater than the amount of specific hedge and general hedge created during the quarter of creation of such hedges, the VEPF is required to reverse the excess.

Article 21. Risk treatment

1. Risk treatment approaches

Where the owner of environmental protection project is incapable of repaying principal and interest by the due date specified in the credit agreement on environmental protection investment, the VEPF shall take risk treatment actions such as debt maturity adjustment, debt rescheduling, debt relief and debt cancellation.

a) Debt maturity adjustment: If the project owner is not capable of repaying loan principal and/or interest by the agreed due date and is judged by the VEPF to be capable of repaying its debt in the succeeding period, the VEPF shall consider adjusting the period of repayment of loan principal and/or interest;

b) Debt rescheduling: If the project owner is not capable of repaying loan principal and/or interest in full and by the agreed due date and is judged by the VEPF to be capable of repaying its debt in the specified period after the predetermined loan term, the VEPF shall consider approval of debt rescheduling. Within the extended period of debt repayment, the project owner shall remain liable for its loan interest. The maximum extended period of debt repayment shall not be a half as much as the loan term;

c) Debt relief: The project owner shall be entitled to consider granting the debt relief if:

The borrowing project owner has faced risks due to natural disasters, rivals, conflagrations or epidemics that may directly result in adverse impacts on capital and assets of the customer or the project; the Government’s change to regulatory policies that may directly result in negative impacts on business operations of the project owner (e.g. unavailability of supplies of raw materials, prohibited goods used for production or commercial purposes. etc.).  The maximum duration of debt relief shall be 03 years from the date of the project owner’s exposure to such risks;

If, upon expiration of the period of debt relief, the project owner s operating difficulty or incapability of repaying debts persists, the debt relief may be extended to the period of time which is not in excess of the preceding period of debt relief as required by the decision granted by the competent authority;

d) Debt cancellation: The project owner may be allowed debt cancellation if:

- the borrowing project owner has faced risks due to causes referred to in Point c, Clause 1 of this Article and its incapability of repaying debts persists upon expiration of the period of debt relief (even when the supplementary debt relief has been offered). To such extent, the VEPF has already applied measures to obtain all possible payment sources;

- The borrowing project owner makes a closure or bankruptcy decision under laws, which entails termination of its legal entity, unavailability of capital or assets for repayment of debts to the VEPF and the fund has already take necessary measures to obtain all possible payment resources;

- The borrowing individual has died or gone missing.

2. Documentation submitted to request application of the approach to treating risks in the form of the debt maturity adjustment. The project owner shall send, whether directly or by post, the request form for the debt maturity adjustment to the VEPF which clearly specifies causes of incapability of repaying debts due, debt repayment capability and adjusted period of time. 

3. Documentation submitted to request application of the approach to treating risks in the form of the debt rescheduling or debt relief

The project owner shall send, whether directly or by post, the VEPF a set of documents, including:

a) 01 copy of the request form for permission for debt rescheduling or debt relief in which causes of losses must be specified; level of losses on capital and assets; debt repayment capability; outstanding principal and interest balance amounts payable to the VEPF; debt amounts proposed to be adjusted using the debt rescheduling and relief approach;

b) 01 copy of the report on determination of degree of loss on capital and assets, issued by the project owner and verified by competent individuals and entities;

c) 01 copy of the last 02 years’ financial statement (if the applicant is the legal entity);

d) 01 copy of the plan for recovery of business operations.

4. Documentation submitted to request application of the approach to treating risks in the form of the debt cancellation

The project owner shall send, whether directly or by post, the VEPF a set of documents, including:

a) 01 copy of the request form for access to debt cancellation in which causes of risks resulting in debt repayment incapability must be specified; level of losses on capital and assets; debt repayment capability; outstanding principal and interest balance amounts payable to the VEPF; principal and interest amounts proposed to be cancelled.

b) 01 copy of the competent state authority’s decision or the Court’s judgment and relevant documents relating to the liquidation of assets if the borrower is a legal entity or an economic organization which has already been bankrupt or dissolved;

c) 01 authenticated copy of death certificate, recognition or decision on declaration of missing person in accordance with applicable laws if the project owner is a dead or missing individual;

d) Other relevant documents (if necessary).

5. Authority over and responsibility for risk treatment

a) The VEPF’s Director shall be vested authority to make a decision on adjustment of debt repayment period and debt rescheduling; 

b) The Chair of the VEPF’s Management Board shall be accorded authority to make a decision on debt relief, loan interest exemption or reduction.

c) The Chair of the VEPF’s Management Board shall be responsible for requesting the Minister of Natural Resources and Environment to consider granting a decision on loan principal cancellation if the amount of debt to be cancelled does not exceed the available budget of the VEPF’s Contingency Fund;

d) The Chair of the VEPF’s Management Board shall be responsible for submitting a report to the Minister of Natural Resources and Environment that then considers requesting other regulatory state authorities to cancel loan principal owed by the project owner if the amount of loan principal to be cancelled exceeds the available budget of the VEPF s Contingency Fund in accordance with applicable laws.

Article 22. Use of the Contingency Fund for risk mitigation and treatment purposes

1. Subjects of the Contingency Fund

a) The owner of the project that is affected by natural disasters, hostilities, fires or epidemics that directly lead to any loss on capital or assets in the project; 

b) The Government’s changes to its regulatory policies that directly result in any adverse impact on business operations of the project owner;

c) The project owner that is either an liquidated or bankrupt entity prescribed by laws, or a dead or missing person;

d) The debt that is classified into the 5^thdebt group as provided by Clause 2 Article 20 hereof.

2. Principles of using the Contingency Fund

a) Use the amount of specific hedge which has been created to deal with risks arising from debts;

b) Implement the procedures for foreclosing on the collateral as agreed upon with the project owner and prescribed by laws in order to recover debts;

c) Request the bank issuing the guarantee to discharge the agreed obligation to repay debts secured by such guarantee;

d) If there is a shortfall in the amount of specific hedge, proceeds obtained from foreclosure on assets or the guaranteed sum to compensate for risks arising from debts, the general hedge shall be used for treatment of such risks. 

3. Decision to use the Contingency Fund

Where it is compulsory that the contingency fund is used, the VEPF shall establish the Board vested with authority to make a decision on use of the contingency fund (hereinafter referred to as Contingency Fund Deciding Board). The Board shall be composed of the Chair who is the Chair of the VEPF s Management Board and members including the VEPF’s Director, Head of the Control Board, the Chief Accountant, the head of credit department and other members appointed by the Chair of the VEPF s Management Board.

4. Responsibilities of the Contingency Fund Deciding Board concerning risk treatment

a) Grant approval of the consolidated report on results of recovery of debts which have been treated by using the contingency fund, including results of treatment of the collateral, and clearly define grounds for such approval;

b) Decide or approve debt classification, off-balance sheet commitments, creation of hedges and use of hedges against risks;

c) Decide or approve approaches to recovering debts treated by using hedges, including treatment of the collateral.

5. Responsibilities of the VEPF concerning risk treatment

a) Observe the rule that recording related debts into appropriate off-balance sheet accounts by using the Contingency Fund, monitoring, expediting debt collection or recovering debts are the VEPF’s internal activities, do not lead to any change to the project owner’s obligations to repay debts from which risks have been treated. Upon completion of the risk treatment process, the VEPF is required to take necessary actions to fully and completely recover debts, continue to monitor and recover debts from which risks have been treated under terms and conditions of the credit agreement or commitments agreed upon with the project owner; 

b) At least 05 years after the date of use of the contingency fund for treatment of risks and after the Risk Treatment Board’s completion of all necessary debt recovery actions, if debts have not been recovered yet, the VEPF may grant a decision to charge off debts of which risks have been treated from the balance sheet upon submission of a report and receipt of the written consent from the Ministry of Natural Resources and Environment;

Charging off debts of which risks have been treated from the balance sheet shall be allowed when there are a sufficient amount of documents or materials evidencing failure to recover these debts despite application of all necessary actions to recover such debts;

Records and documents evidencing such debt charge-off must be deposited in accordance with applicable laws, including those on risk treatment and all documents evidencing the VEPF s failure to recover debts even though all of the necessary actions have already been taken.

6. Handling of sums obtained from recovery of debts of which risks have been treated

Proceeds obtained from recovery of debts of which risks have been treated, including the monetary amount gained from the treatment of the collateral, shall be deemed as other income reported during the VEPF’s tax period.

Chapter III

POST-INVESTMENT INTEREST RATE INCENTIVE

Article 23. Incentive rate

1. The VEPF shall approve the rate of post-investment preferential interest rate incentive in a particular year and ensure that the maximum rate does not exceed the positive-value difference between the interest rate on a state-controlled investment credit loan and the interest rate on a preferential loan applied by the VEPF in that year.

2. Principles of determining a post-investment interest rate incentive to a single project

a) The incentive rate must match specific projects and be offered to the project owner;

b) The incentive rate must be calculated on the basis of total principal amount which has been actually repaid in accordance with the credit agreement with the credit institution and must be restricted to 70% of total investment in fixed assets according to the settlement report of the approved investments in the project;

c) The post-investment preferential rate incentive shall only be applied to the amount of capital borrowed by the project owner to pay the credit institution upon receipt of the written approval of the settlement report of investments in the project, issued by the state regulatory authorities;

d) The post-investment incentive shall only be applied to the project which has been completely commissioned and brought into operation, and for which the fund borrowed from legal credit institutions operating within the territory of Vietnam has been repaid in part or in full to these credit institutions;

dd) The post-investment incentive shall only be applied to the project which has not yet had access to preferential loans, financing or co-financing derived from the VEPF’s operating capital;

e) The post-investment preferential interest rate incentive shall only be applied to the project which have not yet had access to the state credit subsidy policy.  

g) As for a loan under which the project owner makes early repayment, the post-investment incentive rate shall be calculated on the basis of the actual duration of such loan as agreed upon in the signed credit agreement;

h) As for the project having access to debt relief, the debt relief period shall not be included in the actual borrowing period as a basis for calculation of the interest rate incentive;

i) The maximum post-investment incentive duration shall be equal to the loan term specified in the primary credit agreement; 

k) The post-investment incentive shall not be applied to late repayments or repayments made within the debt rescheduling period;

l) The post-investment incentive shall not be applied to loans used for paying loan interest to the credit institution, repaying working capital loan debts, paying VAT, investing in items or workloads which have not been specified in the approved project;

m) The post-investment incentive shall not be applied to the project of which the owner is changed.

3. Method of determining the rate of post-investment incentive to a single project:

a) The rate of post-investment incentive to the entire project

Total rate of post-investment incentive to the entire project shall be equal to total annual rate of post-investment incentive to the project which is equal to total rate of post-investment incentive applied to each debt repayment made within one year in the project;

b) The post-investment incentive rate applied to a single debt repayment made within a specified year shall be calculated as follows:

The actual amount of principal repayment in each debt repayment installment to which the post-investment incentive is applied shall be determined on the basis of the actual amount of principal repayment as agreed upon in the credit agreement which is eligible for the post-investment incentive.

The actual borrowing period as the basis for calculation of the post-investment incentive denotes the period of time (converted into years) from the date (dd/mm/yyyy) of receipt of loan disbursement to the date (dd/mm/yyyy) of unmatured principal paid to the credit institution under the primary credit agreement.   The actual borrowing period shall be expressed as 1 month equivalent to 30 days and 1 year equivalent to 360 days.

The post-investment preferential interest rate shall be calculated on the basis of the annual preferential lending interest rate approved by the VEPF;

c) The actual borrowing period shall be determined based on the date of indebtedness specified on the Statement of disbursed capital amounts of the credit institution and the date of repayment of principal specified on the Statement of debt repayments to the credit institution (converted into years) which have been signed by the borrowing project owner and the lending credit institution.  The number of actual borrowing days shall represent the interval between the date of initial disbursement of borrowed fund and the date of first repayment of unmatured principal according to which the actual number of borrowing days of the principal amount repaid in the following installments.

The rate of post-investment incentive to projects financed by foreign currency loans shall be calculated in the original currency unit. Upon the date of grant of the post-investment subsidy, the rate of post-investment incentive denominated in the Vietnamese dong to a single project shall be calculated based on the interbank foreign currency exchange rate between USD and VND or the cross exchange rate between foreign currencies and VND which are quoted by the State Bank of Vietnam.

Article 25. Application for the post-investment interest rate incentive

1. Documents required by laws shall include the followings:

a) 01 duplicate copy of the Business Registration Certificate or the Establishment Decision; 

b) 01 duplicate copy of the Statutes of the borrowing enterprise;

c) 01 duplicate copy of the Decision on Appointment of Director and Chief Accountant;.

2. Financial documents shall be composed of the followings:

a) 01 duplicate copy of the Credit Agreement;

b) 01 original copy of the Report on Settlement of investments in the project;

c) 01 original copy of the Statement of capital disbursements made by the credit institution;

d) 01 original copy of the written Receipt of repayments made by the lending credit institution, which is required in case of application for access to the post-investment preferential interest rate incentive;

dd) 01 duplicate copy of documents evidencing loan disbursement and debt repayment in the credit agreement related to the project to which application for the post-investment incentive is submitted.

2. Project-related documents shall be constituted by the followings

a) 01 original copy of the loan application form for the post-investment incentive by using the Form No. 04 hereto attached;

b) 01 duplicate copy of the approved Investment Project;

c) 01 original copy of the Decision on approval of the investment project;

d) 01 original copy of the Decision on approval of technical design, detailed estimate of total costs paid for project items;

dd) 01 duplicate copy of the Contract for execution of the project, including construction contract, equipment procurement contract, etc.;

e) 01 duplicate copy of the certificate of fulfillment of environmental protection requirements required by laws (where available);

g) 01 duplicate copy of the legal Invoice; the duplicate set of import documents in case of equipment imported or acquired by the entrusted import by the project owner;

h) 01 duplicate copy of the Dossiers of commissioning of project constituents;

i) 01 duplicate copy of the approved Documentation on Settlement of project-related costs.

Article 26. Acceptance and processing of the application for the post-investment interest rate incentive

1. The project owner eligible for access to the post-investment incentive shall submit one set of all required documents referred to in Article 25 hereof in a direct manner, by post, or via the online public service (where available), to the VEPF.

2. Upon receipt of such application, the VEPF shall promptly verify whether all required documents have been submitted.  After the duration of 07 business days, the VEPF shall notify the project owner in writing of the verification result.

Article 27. Assessment of the application for the post-investment interest rate incentive

The VEPF shall carry out assessment of the application for the post-investment incentive within the duration of 25 business days of receipt of all required and valid documents.  With regard to the complicated investment project, the duration of assessment may be extended but shall not exceed 55 business days.  The following issues shall be subject to such assessment:

1. Subjects of the post-investment interest rate incentive.

2. Adequacy, legitimate and validity; relevance in terms of contents, data and sequence of release of materials included in the dossiers of the project having access to the post-investment incentive.

a) Conformity to the requirement that materials submitted to apply for the post-investment incentive must show consistency, relevance, chronological order, project name and investment contents;

b) Conformity to the requirement that materials submitted to apply for the post-investment incentive must show all legally required numbers and codes; date (dd/mm/yyyy) or stamp; signature; title, full name of the person having competence in affixing signature; title stamp which must be relative to the competence of the signer;

c) Conformity to the requirement that submitted materials, whether original or duplicate, must comply with applicable laws on issue of duplicate copies of the original copy in the copy authentication register and signature authentication.  The duplicate copy of a material consisting of at least 02 sheets must be fan-stamped.

Article 28. Decision whether or not to grant the post-investment interest rate incentive

Upon completion of the assessment of the entire project, within the maximum duration of 30 business days, the VEPF shall issue a written decision whether or not to grant the post-investment incentive to the project owner. In case of rejection, the VEPF shall send a written notification to the VEPF in which clear reasons for such rejection should be given, and simultaneously forward such notification to the Ministry of Natural Resources and Environment for reporting purposes.

Article 29. Disbursement of post-investment incentive fund

1. Post-investment incentive fund disbursement shall be made once a year and shall be calculated on the basis of the amount of principal repaid by the project owner to the lending credit institution within that year as specified in the loan agreement. 

2. Documents submitted to request the disbursement of post-investment incentive fund shall be composed of the followings:

a) 01 original copy of the Report of Commissioning of the entire project or separate protect constituents which have been completely developed for operation;

b) 01 duplicate copy of the Agreement on post-investment incentive, the Indebtedness Contract between the project owner and the lending credit institution extending a loan outside of the VEPF;

c) 01 duplicate copy of the Document evidencing the debt repayment made within the specified year by the project owner to the lending credit institution.

Chapter IV

RIGHTS AND OBLIGATIONS OF THE VEPF AND PROJECT OWNER

Article 30. Rights and obligations of the VEPF

1. Request the project owner to provide materials evidencing right investment purposes stated by the VEPF; feasibility and efficiency in economic, environmental and social aspects; financial capability of the project owner relative to specific forms of financial support before making a decision to grant its incentive to environmental investment projects.

2. Assess submitted documents, materials, approve or reject grant of a loan and post-investment incentive.

3. Grant preferential loans and post-investment interest rate incentives to eligible subjects at their request in accordance with this Circular.

4. Comply with commitments and agreements made in contracts.

5. Inspect and supervise the process of application for and grant of preferential loan and post-investment incentive, use of borrowed fund and debt repayment to the project owner; inspection of the asset put up as collateral or security for a loan when necessary.

6. Terminate a preferential loan or post-investment incentive, recover loan debts prior to the due date when establishing that the project owner has provided false information or defaulted on the signed contract.

7. Treat the mortgaged asset in accordance with applicable laws and regulations.

8. Initiate legal proceedings against the project owner at fault.

9. Retain and store loan documents, mortgage documents and post-investment incentive documents in conformity with laws and regulations.

Article 31. Rights and obligations of the project owner

1. Provide a sufficient amount of accurate information and materials relating to application for grant of preferential loan and post-investment incentive and purposes of borrowed fund to the VEPF on a timely manner, and bear legal responsibility for accuracy and legitimacy of information and materials provided to the VEPF. Enable the VEPF to perform pre-, in- and post-loan inspection and fulfill commitments and send a full review report on business operations, financial reports on a quarterly and annual basis to the VEPF during the period when loan debts have not yet been repaid in full.

2. Reject any request of the VEPF when such request is in breach of laws, contractual terms and conditions.

3. Request loan disbursement, post-investment incentive fund disbursement under acceptable conditions; assume responsibility for use of loan and post-investment incentive fund to serve the right purposes and ensure efficiency.

4. Repay loan debts agreed upon in the credit agreement on environmental protection investment.

5. Take legal responsibility for failure to comply with agreements on debt repayment and discharge of obligations to provide security for a loan under terms and conditions of the loan agreement.

6. File a complaint or lawsuit against any violation against contractual terms and conditions in accordance with laws.

Chapter V

IMPLEMENTATION PROVISIONS

Article 32. Transitional provisions

Preferential loans or post-investment interest rate incentives that have been signed prior to the date of entry into force of this Circular shall be continued according to existing agreements till expiration and completion of the relevant contracts.   Revision of terms and conditions of the Contracts from the date of entry into force of this Circular shall be carried out only if revised contents are compliant with regulations laid down herein.

Article 33. Effect

1. This Circular takes effect on May 5, 2017.

2. In the course of implementation, if there is any difficulty that may arise, relevant authorities or entities are advised to send timely feedbacks to the Ministry of Natural Resources and Environment for its further study, consideration and application of possible measures./.

For the Minister

The Deputy Minister

Vo Tuan Nhan