Decree No. 52/2017/ND-CP dated April 28, 2017 of the Government on on-lending of the Government’s foreign borrowed capital to People’s Committees of centrally-affiliated cities and provinces

THE GOVERNMENT

Decree No. 52/2017/ND-CP dated April 28, 2017 of the Government on on-lending of the Government’s foreign borrowed capital to People’s Committees of centrally-affiliated cities and provinces

Pursuant to the Law on Organization of Government dated June 19, 2015;

Pursuant to the Law on Public Debt Management dated June 17, 2009;

Pursuant to the Law on Public Investment dated June 18, 2014;

Pursuant to the Law on State Budget dated June 25, 2015;

At the request of the Minister of Finance;

The Government promulgates the Decree on on-lending of the Government’s foreign borrowed capital to People’s Committees of centrally-affiliated cities and provinces.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of adjustment

1.This Decree provides regulations on the on-lending of capital borrowed from the ODA funds and concessional loans granted by the Government to People’s Committees of centrally-affiliated cities and provinces (hereinafter referred to as on-lent capital) in order to:

a) Execute socio-economic investment and development project which are identified in the local budget spending scheme.

b) Make a local capital contribution to Public-Private Partnership projects.

2.The use of ODA loans or concessional loans under national target programs defined in the Law on Public Investment according to the mechanism under which the Central budget offers its subsidies to the local budget, loans for response to natural disasters emergencies shall not be covered by this Decree.

Article 2. Subject of application

1.People’s Committees of centrally-affiliated cities and provinces (hereinafter referred to as provincial People’s Committee) .

2.Authorities, organizations and individuals that are responsible for monitoring and managing on-lending of borrowed capital derived from ODA loans and concessional loans of the Government to the provincial People’s Committee.

Article 3. On-lending principles

1.The on-lending of ODA loans and preferential loans to provincial People’s Committees shall comply with regulations of this Decree and other relevant legislation.

2.On-lent capital must be fully paid on time by the local budget or other lawful capital sources in accordance with effective laws.

3.Financial mechanism, on-lending percentage, project efficiency and debt repayment capacity must be calculated and determined when the provincial People s Committee proposes the policy for investment in the program or project financed ODA loans and concessional loans.

4.The on-lending of capital borrowed from ODA funds and concessional loans to provincial People s Committees shall ensure public disclosure, transparency and be appropriate to the local budget’s financial capability.

Article 4. Eligibility conditions for the provincial People’s Committee’s access to on-lent capital.

1.Have projects approved by competent agencies to mobilize loans for socio-economic development investment or projects funded by the local budget in the form of public-private partnerships, defined in the local budget spending scheme and the local medium-term investment plan approved by the competent authority under the provisions of the Law on Public Investment.

2.Have projects allocated the reciprocal capital according to effective regulations.

3.Ensure that the total loan balance of the local budget at the time of appraisal of the policy of investment in the programs or projects shall not exceed the outstanding debt limit of the local budget prescribed by the Law on the State Budget.

4.There is no on-lent capital from the Government more than 180 days overdue.

5.The annual debt service obligations of the provincial People’s Committees for on-lent capital shall not exceed 10% of local budget revenue sources, which shall be distributed according to the state budget decentralization system upon the date of consideration of the on-lent capital.

Article 5. On-lent capital proportion

1.The proportion of on-lent ODA financing for socio-economic development investment projects defined in the local budgets spending scheme proposed by the provincial People s Committees shall be determined as follows:

a) The local jurisdiction having the ratio of funding from the Central government budget to total local government budget expenditure equaling 70% or more shall be entitled to 10% of the on-lent capital derived from the ODA loan.

b) The local jurisdiction having the ratio of funding from the Central government budget to total local government budget expenditure ranging from 50% to below 70% shall be entitled to 20% of the on-lent capital derived from the ODA loan.

c) The local jurisdiction having the ratio of funding from the Central government budget to total local government budget expenditure below 50% shall be entitled to 30% of the on-lent capital derived from the ODA loan.

d) The local jurisdiction having revenues regulated into central budget (excluding Hanoi city and Ho Chi Minh City) shall be entitled to 50% of the on-lent capital derived from the ODA loan).

dd) Hanoi city and Ho Chi Minh city shall be entitled to 80% of the on-lent capital derived from the ODA loan.

2.The proportion of on-lent capital derived from concessional loans for socio-economic development investment projects defined in the local budgets spending scheme proposed by the provincial People s Committees shall be determined as follows:

a) The local jurisdiction having the ratio of funding from the Central government budget to total local government budget expenditure equaling 70% or more and is on the list of provinces with districts included in the list under Resolution No. 30a/2008/NQ-CP dated February 27, 2008 prescribed by the Government shall be entitled to 30% of the on-lent capital derived from the concessional loan.

b) The local jurisdiction receiving funding from the Central government budget which are other than those specified at Point a of this Clause shall be entitled to 70% of the on-lent capital derived from the concessional loan.

c) The local jurisdiction having the rate of revenues regulated into central budget shall be entitled to 100% of the on-lent capital derived from the concessional loan.

3.The on-lending rate of ODA loans, concessional loans used as local capital contributions to public-private partnerships (PPP) projects is 70%.

4.The on-lending rate prescribed in Clauses 1, 2 and 3 of this Article shall apply to repayment of principals and interests within term, fund arrangement fees and managerial fees as prescribed in the loan agreements signed with the foreign party.

People s Committee at the provinces shall allocate from the local budget to pay debt repayment obligations including commitment fees, late payment interest, early repayment fee and other charges incurred on the whole amount of ODA loans, preferential loans received.

5.Prior to the 1^stday of January of the first year during the budget stabilization period, based on the proportion of local budget receipts from the central budget to the total local budget expenditure, the ratio regulated into central budget which is decided by the National Assembly for the first year of the budget stabilization period, the Minister of Finance shall announce the rate of on-lent capital offered to specific centrally-affiliated cities and provinces in accordance with Clause 1 and 2 of this Article for the years during the budget stabilization period.

For the period from 2017 to 2020, the Minister of Finance shall announce the rate of on-lent capital offered specific centrally-affiliated cities and provinces before the effective date of this Decree.

Article 6. Financial provisions applied to grant of on-lent capital to provincial People’s Committees

1.On-lending currency is the original foreign currency specified in the foreign loan agreement. The debt recovery currency is the one in which the on-lent capital is denominated. In case of making payment in Vietnam dong, the selling rate of that foreign currency set by the servicing bank or the Bank for Foreign Trade of Vietnam at the repayment time shall be applied if the servicing bank s aforesaid rate is not available at the time of debt payment for debt recovery purposes.

2.The on-lending interest rate and fees shall be equal to those specified in the foreign loan agreement.

Late payment interest shall be calculated as 150% of the one under the on-lending agreement or under the foreign loan agreement, whichever is higher.

3.The on-lending term and grace period are equal to the loan term and grace period specified in the relevant foreign loan agreement. The time of acknowledging debts is the time the foreign lender record a debit to Vietnam.

4.Loan guarantee and on-lending charge shall not be required.

Chapter II

ASSESSMENT OF THE ABILITY TO REPAY DEBTS OF LOCAL BUDGETS

Article 7. Appraisal body

1.The Ministry of Finance shall be responsible for assessing the ability to repay debts of local budgets.

2.The appraisal results are the bases for carrying out negotiation procedures for ODA loans and concessional loans with donors. In cases where the provincial People s Committees are incapable of repaying debts, the Finance Ministry shall report to the Prime Minister for consideration and decision on the mobilization of foreign loans.

Article 8. Assessment process

1.When proposing investment projects using ODA loans or preferential loans according to effective regulations, People s Committees at the provinces shall send dossiers specified in Article 9 of this Decree to the Ministry of Finance for evaluation of the ability to repay debts of local budgets.

For programs or projects proposed by central government authorities involving two or more provinces, the participating localities shall send the dossier mentioned in Article 9 of this Decree to the proposing agencies to send to the Ministry of Finance.

2.Within 15 business days after receiving a complete and valid dossier, the Ministry of Finance shall evaluate the ability to repay debts of local budgets according to the eligibility for the provincial People’s Committee’s access to on-lent capital prescribed in Clause 3, 4 and 5 Article 4 of this Decree and give its comment on the application for approval of the policy for investment in the project. The Ministry of Finance shall notify evaluation results in order for the Ministry of Planning and Investment to prepare the consolidated reports for submission to the Prime Minister for his consideration and decision on investment projects and on-lent capital to provincial People s Committees. The opinions of the Ministry of Finance shall also be sent to the provincial People s Committees.

3.Based on the decision of the Prime Minister on approving the policy on the use of ODA loans and concessional loans for projects under the on-lending mechanism, provincial People s Committees shall complete the investment procedures according to regulations.

4.In either cases where the on-lending of capital borrowed from ODA funds and concessional loans exceeds the on-lending capital permitted by competent authorities or there are changes in the satisfaction of eligibility conditions, provincial People s Committees shall send the dossier to the Ministry of Finance for its review which must be completed within the maximum period of 30 days before the date of loan negotiation with the foreign party.

Within 15 business days after receiving a complete and valid dossier, the Ministry of Finance shall review the dossier.

a) After such review, if the provincial People s Committees are proven eligible for on-lent foreign capital on behalf of the State, they must be submitted to the Government for reporting to the State President for the undertakings and authorization to negotiate, The Ministry of Finance shall report to the Government or notify the State Bank of Vietnam (for loans proposed by the State Bank of Vietnam) for consolidating and reporting to the Government for consideration and giving comments on direction of the negotiation. The opinions of the Ministry of Finance shall be sent to the relevant People s Committees at the provinces and the Ministry of Planning and Investment.

b) After such review, if the provincial People s Committees are eligible for on-lent foreign capital on behalf of the State which is negotiated by the Ministry of Finance, the Ministry of Finance shall take charge of and cooperate with relevant bodies to negotiate with the foreign party, report to the Prime Minister for his consideration and decision on the conclusion of the loan agreement and on-lent capital to the provincial People s Committees.

c) After such review, if the provincial People’s Committees fail to meet the conditions for on-lending for the surplus capital or fail to meet other on-lending conditions specified in Article 4 of this Decree, the Ministry of Finance shall report to the Prime Minister for his consideration and decision.

5.In case the dossier has not been fully received as prescribed, within 5 days, the Ministry of Finance shall issue a written notice on the supplement of the dossier. The People’s Committees at the provinces shall supplement the dossiers within 7 days after receiving the notice from the Ministry of Finance.

Article 9. Application for assessment

1.An application for assessment of the ability to repay debts of local budgets consists of:

a) The competent provincial agency’s written consent to the mobilization of capital for investment or contribution of investment capital in a public-private partnership project under the Government s plan to on-lend of the Government’s foreign capital and sources of funding for repaying debt (copy).

b) The documents of provincial People’s Committees proposing the approval of the policy of investment or contribution of investment capital of public-private partnerships project with ODA loans, concessional loans according to regulation (copy), in which include plan on using on-lent capital.

c) A report on the status of lending and repayment of the locality at the time of the loan proposal, including details of all occurred loans and outstanding loans, lenders; report on the loan balance of the local budget last year and estimate the current loan balance of the current year, the percentage of debt repayment on the local budget revenue is allocated according to decentralization in the last three years (originals).

d) Annual budget estimates of the provinces approved by competent authorities (duplicate copies); repayment plan and detailed explanation of the plan and sources of debt repayment, including capital recovered from the investment project itself (if any), capital disbursed from local budgets and other lawful capital sources approved by competent authorities (original).

dd) Other relevant documents supporting the province’s solvency (if any).

2.Based on the decisions of the Prime Minister on approving the policy on the use of ODA loans and concessional loans for projects under the on-lending mechanism, prior to negotiating the foreign loan, provincial People s Committees shall complete the investment procedures and send to the Ministry of Finance the on-lending dossier.

Chapter III

IMPLEMENTATION AND MANAGEMENT ON ON-LENDING

Article 10. Signing of on-lending agreements

After the foreign loan agreement is signed, based on the Prime Minister s decision on on-lending of capital borrowed from the ODA funds and concessional loans to provincial People s Committees, the Ministry of Finance shall sign the on-lending agreement with the provincial People s Committees according to the conditions prescribed in this Decree.

Article 11. Repayment liabilities

1.The provincial People’s Committees shall allocate capitals from local budget or other lawful capital in accordance with effective law to sufficiently and punctually fulfill the debt liability (principals, interests and charges) of the on-lending of capital borrowed from the ODA funds and Government concessional loans.

2.The obligation to pay the signed on-lent capital must be fully calculated when making annual budget estimates and local medium-term financial plans.

3.The repayment of on-lending of capital borrowed from the ODA funds and concessional loans must be guaranteed by provincial People s Committees before paying other debts of provincial People s Committees.

Article 12. Handling of risks

1. In case of failure to make a debt repayment by the due date, the provincial People’s Committees must pay the late payment interests according to the provisions of Clause 2, Article 6 of this Decree.

2.If the provincial People s Committees have debts over 180 days overdue, the province shall not be considered for approval of on-lending of capital borrowed from the ODA funds and concessional loans for other projects.

3.If the provincial People’s Committees still have difficulty in repaying debts, the Ministry of Finance shall report to the Prime Minister for a solution on a case-by-case basis in accordance with Law.

Article 13. Reporting regime

1.Quarterly, the provincial People’s Committees must send the Ministry of Finance an evaluation report on the use of on-lent capital and a plan to repay on-lent capital in the subsequent quarter.

2.Annually, within the duration of no later than 60 days after the end of the previous fiscal year, the provincial People s Committees shall send the Ministry of Finance a detailed report on the use and repayment of specific on-lent capital from ODA loans and concessional loans, including: The outstanding balance at the beginning of the period, the withdrawal amount, the repayment amount specified within the period, the outstanding balance at the end of the period, the amount of overdue debts (if any) denominated in the predetermined-original loan currency and converted into Vietnam dong.

Article 14. Specialized unit in charge of management of on-lent capital

Within the scope of current organizational and manning structure, the provincial People s Committee shall organize a specialized unit under the Department of Finance to prepare a report on the province s repayment capacity, support investors in formulating financial plans for on-lending projects; monitor and evaluate the process of managing the province s on-lent capital, build a database on the provincial debt status, ensure that the on-lending is appropriate to the loan limit, monitor and plan the repayment when it is due.

Chapter IV

RESPONSIBILITY OF RELEVANT ORGANIZATIONS IN MANAGEMENT ON ON-LENDING OF PEOPLE’S COMMITTEES AT THE PROVINCES

Article 15. Responsibilities of the Ministry of Finance

1.Take charge and cooperate with the Ministry of Planning and Investment and relevant bodies in requesting the Prime Minister for his approval on the domestic financial mechanism applicable to programs and projects using on-lent capital from ODA loans and concessional loans by the provincial People s Committees in accordance with the Law on Public Debt Management and this Decree.

2.Evaluate the on-lent capital of ODA loans and concessional loans of provincial People s Committees according to the provisions of Articles 7, 8 and 9 of this Decree, sign on-lending agreements, supervise the repayment of the province s on-lent capital debts, build a database of debt statuses of the provincial People s Committees, monitor the recovery of the on-lent capital debts.

3.Prepare the State budget accounting report of on-lent capital derived from ODA funds and concessional loans to provincial People s Committees in accordance with regulations.

4.Take charge of and cooperate with relevant bodies in submitting a periodic (annual) or spontaneous report to the Government on on-lending and on-lent capital repayment activities of provincial People s Committees.

Article 16. Responsibilities of People’s Committees at the provinces

1.Provincial People’s Committees who are on-lending capital borrowed from the ODA funds and concessional loans shall be responsible for requesting the Ministry of Finance to appraise the eligibility of on-lent foreign capital and repayment capability of the province, signing the on-lending agreement with the Ministry of Finance, organizing the effective management and use of the on-lent capital in accordance with the approved projects plans and contents.

2.Within the scope of current organizational and manning structure, organize a specialized department under the Department of Finance to monitor and manage debts of the local budget, including on-lent capital from the central budget.

3.Monitor and evaluate the project implementation process from the on-lent capital source and make quarterly and annual reports to the Ministry of Finance, concurrently report to the Ministry of Planning and Investment according to the regulations of Article 13 of this Decree and report on the debt status of the provincial People s Committee.

4.Allocate annual local budget and other lawful capital sources to ensure full repayment on time and prevent debt risks of provincial People s Committees.

Article 17. Responsibilities of central government authorities managing umbrella projects

1.Agencies proposing the umbrella programs and projects are responsible for compiling the dossier prescribed in Article 9 of this Decree from the relevant localities and send it to the Ministry of Finance for evaluation of the debt repayment capability of the localities.

2.In the course of umbrella program or project implementation, the authority managing umbrella project is responsible for cooperating with the Ministry of Finance in monitoring and urging the localities to implement commitments in the on-lending agreements signed with the Ministry of Finance, including the performance of debt repayment obligations, the implementation of relevant sanctions in accordance with the provisions of law and this Decree on borrowing localities failing to make full repayments on time.

Chapter V

IMPLEMENTATION PROVISIONS

Article 18. Effect

1.This Decision takes effect on June 15, 2017.

2.To repeal Clause 3 Article 4; Clause 3 Article7; Point b Clause 1 Article 11; Point a Clause 2 Article 12 and Clause 5 Article 19 of Decree No. 78/2010/ND-CP on on-lending of the Government s foreign loans; Clause 2 Article 8 of Decree No. 16/2016/ND-CP on management and use of official development assistance and concessional loans granted by foreign sponsors from the effective date of this Decree

3.The project implementation in which financial mechanisms for the use of ODA loans and concessional loans have been approved by competent authorities before the effective date of this Decree shall be continued under such mechanisms.

Article 19. Implementation organization

1.The Minister of Finance shall be responsible for providing instructions for implementation of this Decree.

2.The Ministers, heads of ministerial-level agencies, heads of governmental agencies, Chairman of People’s Committees of provinces, heads of agencies, organizations and individuals involved in the management of on-lending to People s Committees of provinces from the source of ODA loans and government concessional loans are liable to execute this Degree./

For the Government

The Prime Minister

Nguyen Xuan Phuc