DECREE

On promulgating the Regulation on management
of foreign loans and payment of foreign debts
*****

THE GOVERNMENT

-In accordance with the Law on Governmental Organization dated September 30, 1992;

-In accordance with the State Budget Law dated March 20, 1996 and the Law on a number of amendments and supplements to articles in the State Budget Law No 06/1998/QH10 dated May 20, 1998;

-In accordance with the Vietnam State Bank Law dated December 12, 1997;

- In accordance with the Law on Credit Organizations dated December 12, 1997;

- In accordance with the proposal of the Minister of Finance, the Governor of the State Bank of Vietnam, and Ministers of Planning and Investment, Justice and Government Office.

DECREE

Article 1: Attached to this decree is the Regulation on borrowing and settling foreign loans.

Article 2: The decree comes into effect 15 days after the date of signing and replaces Governmental Decree 58/CP dated August 30, 1993.

Article 3: The Minister of Finance, the Governor of the State Bank of Vietnam, the Minister of Planning and Investment, and heads of related bodies are responsible for implementing, guiding and supervising the implementation of the Regulation on borrowing and settling foreign loans attached to this decree.

Article 4: Ministers, heads of ministerial level bodies and governmental bodies, chairmen of the People's Committee of cities and provinces under the Central Government and heads of related bodies are responsible for implementing this decree.

Government Prime Minister

Phan Van Khai

REGULATION ON BORROWING AND SETTLING FOREIGN LOANS

(Attached to Governmental Decree
90/1998/ND-CP dated November 7, 1998

Chapter I
General provisions

Article 1: The terms listed below are interpreted as follows in this regulation:

1. Foreign loans are short, medium or long-term loans (subject or not subject to interest payment) that the State of Vietnam, the Government of Vietnam or enterprises being Vietnamese juridical entities (including foreign-invested enterprises) borrow from international financial organizations, foreign governments or banks, or other foreign organizations and individuals (hereinafter referred to as the foreign lender).

2. Short-term loans are loans that have a term of up to one year.

3. Medium or long-term loans are loans that have a term of over one year.

4. Foreign loans of the Government are loans assigned by the State or Government of Vietnam to a body which signs loan agreements with the foreign lender under the capacity of the State or Government of the Socialist Republic of Vietnam.

Foreign loans of the Government include official development aid (ODA) loans, commercial loans or export credit, and loans from the international capital market via the issuance of bonds under the capacity of the State or Government (including loans transfer bonds) to overseas.

5. Foreign loans of enterprises are loans directly borrowed from the foreign lender by enterprises allowed to be set up and operate in accordance with current laws of Vietnam (including foreign-invested enterprises) in the form of self borrowing and settling, or via the issuance of bonds to overseas (enterprise loans or bank loans...)

Foreign loans of enterprises include:

• Loans with Government guarantee;
• Loans with bank guarantee or other forms of guarantee as regulated in Article 23 in this regulation;
• Loans without guarantee or securities.

6. Foreign loan borrowing guarantee is the commitment made by the guarantor to the foreign lender regarding the complete and due payment of the loan of the borrower (enterprises). In cases where the borrower fails to pay the loan or does not fully pay the loan when it is due, the guarantor will have to pay the loan in place of the borrower.

There are two types of foreign loan borrowing guarantee:

-Government guarantee: enacted by the Ministry of Finance or the State Bank of Vietnam authorized by the Government in accordance with the regulation on guarantee of the Government for foreign loan borrowing. Foreign loans with Government guarantee will be managed as loans of the Government.

-Bank guarantee: enacted by banks of Vietnam in accordance with the regulation on guarantee and re-guarantee instructed by the Governor of the State Bank of Vietnam. Such guarantee is not considered a Government guarantee.

7. Agreements of re-lending include contracts of re- lending or sub-agreements of re-lending signed between bodies and organizations authorized by the Government to re-lend the foreign loans of the Government and domestic organizations and units which use these foreign loans. Conditions on borrowing and settling the loans in the agreements of re-lending can be different from those in the loan agreement signed with the foreign lender.

8. Domestic reciprocal capital of projects that use foreign loans (hereinafter referred to as reciprocal capital) is the necessary capital available in the country that Vietnam must pay to carry out these projects along with the foreign loans. Reciprocal capital can be foreign currencies (deposited money, money used to import machinery and equipment which cannot be bought by the lent money) or Vietnamese dong (used to spend on investigation, design, ground clearance compensation, construction and installation, tax and insurance...)

Article 2: The Government manages the borrowing and settling of foreign loans throughout the entire country, and authorizes ministries as follows:

1.The Ministry of Planning and Investment must:

-Map out the national strategy on borrowing and settling foreign loans and generalize the long-term plan on borrowing and settling foreign loans for the entire country in line with the national social-economic development strategy in each specific period and the national strategy on borrowing and settling foreign loans.

- Co-operate with the Ministry of Finance and the State Bank of Vietnam during the process of macro-management of foreign loans.

-Complete assignments of the Government as regulated in Article 13 in the regulation on the management and use of ODA attached to Governmental Decree 87/CP dated August 5, 1997.

2. The Ministry of Finance must:

Preside and co-operate with the State Bank of Vietnam and related bodies to map out policies and mechanism of the State in the field of managing foreign loans in line with the national strategy on borrowing and settling foreign loans as well as national financial policy.

-Preside and co-operate with the Ministry of Planning and Investment and the State Bank of Vietnam to map out the annual plan for borrowing and settling foreign loans of the Government to be submitted to the Prime Minister for approval; summarize the borrowing and settling of foreign loans of the Government in each year and co-operate with the State Bank of Vietnam to summarize the borrowing and settling of foreign loans of the entire country in each year to report to the Prime Minister.

-Financially manage foreign loans of the Government (including ODA loans, commercial loans of the Government and via the issuance of Governmental bonds), and enact Government guarantee in favour of enterprises (excluding credit organizations) to borrow foreign loans in accordance with the decision of the Prime Minister.

-Organize the settlement of foreign loans of the State and Government using the State Budget.

-Complete assignments of the Government as regulated in Article 14 in the regulation on the management and use of ODA attached to Governmental Decree 87/CP dated August 5, 1997.

3.The State Bank of Vietnam must:

-Manage the borrowing and settling of foreign loans of enterprises belonging to all economic sectors, enact Government guarantee allowing credit organizations to borrow foreign loans in accordance with the decision of the Prime Minister, guide and check the guarantee of commercial banks.

-Preside and co-operate with the ministries of Planning and Investment and Finance to map out the plan on the annual total commercial loan value limit of enterprises to be submitted to the Prime Minister for approval.

-Summarize the borrowing and settling of foreign loans in each year enterprises and report to the Prime Minister, and concurrently send to the Ministry of Finance to generalize the situation of borrowing and settling foreign loans of the entire country.

-Execute the annual total commercial loan value limit plan of enterprises, and carry out the registration to borrow foreign loans of enterprises.

-Complete assignments of the Government as regulated in Article 15 in the regulation on ODA management and use attached to Governmental Decree 87/CP dated August 5, 1997.

4. The Ministry of Justice must:

-Contribute opinions related to legal issues in agreements to borrow foreign loans of the Government as well as enterprises guaranteed by the Government before the agreements are submitted to the Prime Minister for consideration and decision.

-Give opinions regarding differences between agreements to borrow foreign loans of the Government and domestic laws; and supervise the treatment of such issues during the process of implementing commitments concerning the borrowing and settling of foreign loans.

-Give legal opinions in cases of necessity regarding agreements to borrow foreign loans of the Government and enterprises guaranteed by the Government, or contribute opinions to other legal issues related to the proposal of the State body or enterprises.

Article 3: Based on the practical requirements of the management of foreign loans, the Prime Minister can set up suitable inter-branches mechanism to deal with foreign loans management. In the short-term, if necessary, the Prime Minister can assign the State Finance - Currency Council (established in accordance with Decision 23/1998/QD-TTg dated January 31, 1998 of the Government) to consult on several broad issues related to foreign loans such as the national strategy on borrowing and settling foreign loans, major projects calling for foreign loans, and settlement of foreign loans.

Article 4: In cases where there are terms listed in the content of the draft of foreign loan borrowing agreements or guarantee agreements that are stated by the foreign lender and are not suitable to the law of Vietnam, the managing body which presides in the negotiation of such agreements must co-operate with related bodies (the ministries of Finance, Planning and Investment, Foreign Affairs and Justice, and the State Bank of Vietnam to reach an agreement to report to the Prime Minister for consideration and decision, or ask the Prime Minister to submit it to the President to consider and decide on terms no longer suitable to existing legal documents and ordinances.

Chapter II
Management of the borrowing and settling
of foreign loans of the Government

Article 5: The management of the borrowing and settling of foreign loans of the Government must meet the following basic requirements:

1. Ensuring that the borrowing and settling of foreign loans is consistent with the national strategy on borrowing and settling foreign loans so that to make the most of all available suitable sources of capital from outside to serve the national social- economic development plan in each specific period

2. Providing loans suitable to the list of prioritized projects, the ability of returning the lend money and domestic capability (in terms of reciprocal capital and workforce) of each project so that to allow the project to be implemented at the right pace and the lent money used effectively to create sources of foreign currencies and accumulated domestic funds to meet development targets and ensure repayment of the loan to the foreign lender.

Article 6: Basic principles for the management of the borrowing and settling of foreign loans of the Government:

1.The Government manages the borrowing and settling of all foreign loans of the Government based on the national strategy on borrowing and settling foreign loans, super- vises and ensures that foreign loans are borrowed and settled according to norms and plans set annually and for the long- term, and applies policies and financial tools to ensure a suitable structure, term and value of foreign loans and thus meet requirements related to balancing the macro-economy and development needs of the nation in each specific period.

2. Administrative authorities, mass organizations and administration management bodies at all levels are not allowed to borrow foreign loans.

3. State bodies, organizations and units which receive and use foreign loans of the Government must use the lent money to carry out the approved projects, and be responsible for complete and due repayment of the money lent from the foreign loans of the Government so that the Government can perform all its obligations committed with the foreign lender.

Article 7: The management and use of foreign loans of the Government must be suitable with the State Budget Law, and follow the financial mechanism below:

1. Regarding capital lent to development investment projects:

a. The Government will allocate capital from the foreign loans according to the mechanism of State Budget capital allocation to infrastructure investment projects. Projects serving social welfare and others which are not capable of directly returning the lent capital such as national and inter-provincial systems of bridges, sewers and roads, urban public transport systems, roads in rural and mountainous areas, railway and airway infrastructure facilities, sea-wharves, clean water supply systems in rural and mountainous areas, urban drainage and living waste treatment systems, construction investment projects in the fields of health care, education, scientific research, basic study, environment, broadcasting and television, projects for planting protective and upstream forests, and irrigation and flood prevention projects.

The Ministry of Planning and Investment presides and co-operates with the Ministry of Finance to map out and submit to the Prime Minister the concrete list of projects allocated capital from the foreign loans of the Government before international convention frameworks or agreements on the list of projects are signed with the foreign lender.

b. Regarding other development investment projects which are capable of recalling the invested capital (including infrastructure projects), the Government re-lends to these projects, collects the lent money and transfer it to the accumulation fund for debt settlement managed by the Ministry of Finance to pay foreign lenders when the loans are due.

The Ministry of Finance provides guidelines and organizes the re-lending of the foreign loans of the Government to development investment funds via the General Department for Development Investment, which is responsible for managing and collecting the capital from investors to pay to the State Budget, and at the same time enjoys the re-lending fee in accordance with the instruction of the Prime Minister. Based on the conditions on borrowing and payment as agreed with the foreign lender and the capability of recalling the invested capital of development investment projects implemented through foreign loans, the Ministry of Finance regulates the re-lending conditions regarding each specific loan according to the following principles:

- The re-lending term suitable to the capital recalling deadline set in the approved feasibility project.

- The re-lending interest rate:

+ Regarding commercial loans of the Government: re- lending in foreign currencies will apply the interest rate and fee of the foreign lender plus the re-lending service fee at home.

+ Regarding ODA loans: re-lending in foreign currencies or Vietnamese dong will apply the investment credit interest rate of the State (for each specific kind of currency) and be decided by the Prime Minister. The interest rate also includes the re-lending service fee at home.

- In cases of special necessity where re-lending conditions other than those listed above are needed, the Ministry of Finance must ask the Prime Minister for decision.

2. Regarding loans within credit programmes:

The Ministry of Finance signs contracts to re-lend to suitable banks which will again lend or provide lending service to the last capital user (enterprises, individuals) according to re-lending conditions approved by the Prime Minister. Except where the last capital user is clearly identified by the Prime Minister, banks which re-borrow the loans of the Government to provide loans have the right to select the borrower suitable to the credit programmes agreed with the foreign lender, and must bear all risks during the process of re- lending to the users.

3. Regarding loans in foreign currencies or goods not directly related to the projects: a. Foreign loans in foreign currencies, including those derived from bond issuance, will be transferred to the concentrated foreign currency fund managed by the Ministry of Finance. Loans obtained to assist the international payment balance will be transferred to the Foreign Currency Reserve Fund managed by the State Bank of Vietnam. All the borrowed foreign currencies will be used in accordance with the specific decision of the Prime Minister.

b. Foreign loans in goods:

- Regarding loans in goods with the domestic user of the lent capital identified, the Ministry of Finance will convert into the Vietnamese dong to make the balance of the State Budget collection and the balance of payment, allocation or re-lending of subjects to capital use.

- Regarding loans in goods with the user of the lent capital not specifically identified: the Ministry of Finance presides the organization of import, auction and paying to the State Budget.

Article 8: Development investment programmes and projects which use foreign loans of the Government must meet the following conditions:

a. The list of the programmes and projects must be included in the annual development investment plan of the State as well as ministries, branches and areas.

b. The programmes and projects have been approved by authorized bodies according to current regulations.

The body which is assigned to negotiate the loan agreement must be responsible for checking all these conditions before the agreement is signed with the foreign lender. In cases where the foreign lender requires that the programmes and projects due to be financed must be assessed and approved by them, the investor must talk with the foreign lender and report the results of the assessment of the foreign lender to the negotiating body before signing the specific agreement.

Article 9: Investors or banks which use foreign loans of the Government through re-lending are responsible for returning the lent money to the State Budget according to regulations set in the re-lending agreement. The sources to return the lent money to the State Budget are capital depreciation and profits earned after taxes have been paid in accordance with the law. In cases where these sources are not fully available when the loans are due, the funds of the enterprises and other legal sources of capital must be used to return the lent money.

Bodies and organizations authorized by the Ministry of Finance to provide re-lending services have the right to apply necessary measures suitable to present credit regulations and the law to ensure complete and due collection of the loans and returns to the State Budget.

Article 10: Based on the annual plan of using the State Budget to settle foreign loans which is approved by the Government, the Ministry of Finance organises the settlement of foreign loans according to commitments of the Government to the foreign lender . In cases of necessity, the Ministry of Finance presides and co-operates with other related ministries to negotiate with foreign lenders on the suitable level, term and method of loan settlement (in cash, export goods and services or transferred into in vestment debt..).

To create a source to ensure due settlement of loans and limit risks to the State Budget regarding borrowing and settling foreign loans, the accumulation fund for debt settlement belonging to the State Budget is set up and managed by the Ministry of Finance based on collections of debts from projects which borrow foreign loans and capital assistance of the Government, guarantee fee collections of the Government and other sources of collection instructed by the Prime Minister. The Minister of Finance maps out the regulation on the management of the accumulation fund for debt settlement to submit to the Prime Minister for approval.

Article 11: All programmes and projects which use foreign loans of the Government must receive enough and timely the needed reciprocal capital. Reciprocal capital of projects which are subject to State Budget allocation must be balanced in the annual State Budget plan. The compilation of the plan, approval and allocation of reciprocal capital to projects subject to State Budget allocation must abide by the State Budget Law and related under-law guiding documents and be suitable to the pace of implementation of the projects.

Regarding projects which borrow capital from the foreign loans of the Government, investors must obtain the necessary reciprocal capital, and are prioritised to obtain loans from credit sources of the State or from the national investment assistance fund.

The Ministries of Planning and Investment, and Finance are responsible for enough and timely allocation of reciprocal capital from the State Budget in each year to projects subjects to State Budget allocation, and guide investors to register the borrowing of reciprocal capital from credit sources of the State or from the national investment assistance fund.

The concrete loan agreement for each project can only be signed with the foreign lender after the investor has produced enough reciprocal capital.

Article 12: When mapping out investment projects to obtain foreign loans, investors must properly calculate all kinds of tax due to be paid in accordance with the law. In cases where not enough capital is available to pay tax as regulated, investors must accept loans to the State Budget regarding the tax shortage and the lent money, and be responsible for returning to the State Budget when the projects start operations according to guidelines form the Ministry of Finance.

Article 13: The issuance of bonds under the capacity of the Government or State to obtain loans from the international capital market must be conducted in accordance with current regulations of the Government concerning international bond issuance. The Prime Minister decides the use of the capital derived from the international bond issuance.

Chapter III
Guarantee of the Government

Article 14: Principles for guarantee of the Government: Foreign loans of enterprises used to develop production and trading activities according to self borrowing and payment form must be in line with regulations in Chapter IV in this regulation. In cases where the foreign lender requires a bank guarantee, the regulation on guarantee and re-guarantee by the Governor of the State Bank of Vietnam will be applied.

Regarding projects which obtain foreign commercial loans beyond the guarantee ability of banks and the foreign lender officially requires a guarantee from the Vietnamese Government, the Government can consider and grant a guarantee for the borrowing of commercial foreign loans in the following special cases:

a. Projects which play an important role in the national social-economic development plan.

b. Projects to import hi-tech equipment or to produce goods for export which need to be prioritised.

c. Commercial loans which go along with assistance or ODA loans to create sources of complex credit.

Article 15: Subjects to guarantee:

Subjects to guarantee of the Government are State-owned enterprises or credit organizations allowed by the Government to directly obtain foreign loans under the form of self borrowing and payment to carry out development investment projects, contribute capital to JVs with foreign partners or expand credit activities.

In special cases, and according to practical requirements and proposals of the guarantor, the Prime Minister will decide to allow the granting of the guarantee to each specific subject other than those listed above.

Article 16: Conditions for granting guarantees by the Government:

- Having a feasibility study approved by the authorized competent body in accordance with current regulations, in which the method of returning the lent money is identified.

- Having a signed borrowing contract and/or the commercial contract which is approved by the authorized competent body in accordance with current regulations.

Regarding organizations and units which are operating and due to be guaranteed: Having a normal state regarding business activities and financial status.

Article 17: The body which grants the guarantee of the Government:

The Ministry of Finance on behalf of the Government considers and grants the guarantee to enterprises (excluding credit organizations) in accordance with the decision of the Prime Minister. Regarding guarantees for commercial loans which go along with non-refundable assistance or ODA loans to create sources of complex credit, the Prime Minister assigns the Ministry of Finance to consider and grant guarantees to enterprises according to investment projects approved by the Government.

The State Bank of Vietnam on behalf of the Government grants guarantees to credit organizations in accordance with the decision of the Prime Minister. After granting the guarantee, the State Bank of Vietnam must send a guarantee document set to the Minis try of Finance for general supervision of the granting of the guarantee of the Government.

Article 18: Levels of guarantee:

The total norm of guarantee granting of the Government every year includes guarantees from the Ministry of Finance and the State Bank of Vietnam equal to at most 10 percent of the State Budget collection in that year. If the demand for guarantees in certain years surpasses the set maximum level, the Ministry of Finance must ask the Government for decision.

The Government provides guarantees to foreign loans according to each specific loan. In cases where the enterprises obtain loans from various sources, the total amount of borrowed money the Government commits to guarantee for a single enterprise is regulated as follows (except in special cases which will be specifically decided by the Government):

-Regarding enterprises engaged in the fields of energy, petroleum, gas, transportation, urban engineering, steel industry and information technology: the total amount of borrowed money the Government commits to guarantee for a single enterprise is 12 folds the current available capital owned by the enterprise at the moment of asking for the guarantee (including the capital allocated to the enterprise by the State Budget regarding State-owned enterprises, funds of enterprises and added capital derived from profits).

- Regarding enterprises engaged in other production industries: the total amount of borrowed money the Government commits to guarantee for a single enterprise is six folds the current available capital owned by the enterprise.

- Regarding credit organizations: the total amount of borrowed money the Government commits to guarantee for a single enterprise is no more than six folds the available capital of the organization.

The total amount of borrowed money the Government commits to guarantee for a single enterprise must minus the total out-standing loan balance incurred by unpaid foreign loans of the enterprises or credit organizations by the time of granting the guarantee. Regarding investment projects to set up new enterprises, the level of guarantee for each specific project will be considered and decided by the Prime Minister.

Article 19: The guaranteed must pay the body which grants the guarantee of the Government a maximum guarantee fee of 1.5 per- cent of the amount of guaranteed capital. The collection of the fee will be added to the accumulation fund to settle foreign loans as set in Article 10 in this regulation, including cases where the guarantor is the State Bank of Vietnam. The concrete level and deadline of payment of the fee is specifically regulated by the guarantor based on the ability to return the capital and the level of priority of each borrowing project.

In addition, the guaranteed must pay a fee for petition consideration and granting of permanent guarantee to the guarantor to make up for expenses arisen during the process of guarantee consideration and granting. The collection and deadline of payment of the fee is consistently regulated by the Ministry of Finance.

Article 20: The body which grants the guarantee of the Government is the final organization that assesses the guarantee petition document to report to the Prime Minister for approval and is the body which performs all obligations of the guarantor to the foreign lender. In cases where the guaranteed cannot repay the loans which are due, the body which grants the guarantee of the Government has the responsibility to apply measures and credit-financial tools in accordance with current laws to ensure a source to return the lent money. In cases where all these measures and tools have been applied and the source of capital to return the lent money is still inadequate or unavailable, the accumulation fund for settlement of foreign loans will be used.

Problems arising between the guaranteed and the guarantor will be settled in accordance with the regulation on guarantee of the Government, in line with the current law of the State of Vietnam and international common practice.

Article 21: The Ministry of Finance co-operates with the State Bank of Vietnam to map out the regulation on the guarantee of the Government to submit to the Prime Minister to issue in order to codify the implementation of principles and regulations related to granting of guarantee of the Government as set in this chapter.

Chapter IV
Management of borrowing and settling foreign loans of enterprises

Article 22: The borrowing and settling foreign loans of enterprises must be conducted in accordance with the following principles:

l. Enterprises belonging to all economic sectors set up and operating in accordance with the law of Vietnam have the right to directly obtain foreign loans under the form of self borrowing and payment to the foreign lender according to the committed conditions. Loans of enterprises cannot be converted into loans of the Government in any cases, except for loans guaranteed by the Government as set in Chapter III in this regulation.

2. Medium and long-term foreign loans (including via international bond issuance) of enterprises must be included in the annual total loan value limit plan approved by the Prime Minister and meet conditions regarding medium and long-term loans regulated by the State Bank of Vietnam in each specific period; he registered at and recognized by the State Bank of Vietnam; be reported periodically to the State Bank of Vietnam regarding the withdrawal of the capital and debt settlement according to the report mechanism set by the Governor of the State Bank of Vietnam.

Regarding State-owned enterprises, the loan agreement to be signed with the foreign lender must be consulted by the State Bank of Vietnam before the signing takes place. Cases with a Government guarantee will apply regulations set in Chapter III in this regulation.

3. Short-term foreign loans of enterprises must meet conditions regarding short-term loans regulated by the Governor of the State Bank of Vietnam for each specific period. The Governor of the State Bank of Vietnam submits the annual total outstanding loan balance limit to the Prime Minister for approval, including the limit for deferred payment letters of credit (L/Cs) for banks.

4. The withdrawal of the loan and money transfer to settle foreign loans of enterprises must be conducted via banks which are operating in the territory of Vietnam and are allowed to perform foreign exchange activities. In case of capital withdrawal and debt settlement by goods or assets (visible or invisible) not conducted via banks, enterprises must report according to regulations of the State Bank of Vietnam, and if necessary be consulted by the State management body of the related field or branches.

5. Enterprises borrowing foreign loans are obliged to use the lent money for the right purposes, not to use short-term loans to invest in medium and long-term projects, repay the loans (both principle and interest) according to the commitments made in the loan contract signed with the foreign lender, suffer all risks and be responsible by law of the State during the process of borrowing and settling.

6. Regarding medium and long-term loans of enterprises according to this regulation, banks can only withdraw the capital and transfer money to settle the debt to the foreign lender upon the requirements of enterprises as long as the loans are registered and recognized in writing by the State Bank of Vietnam. The State Bank of Vietnam provides concrete guide- lines related to the procedures, documents and conditions of foreign loans of enterprises to abide by the above-mentioned principles.

Article 23: Forms of loan guarantee:

l. In cases where the foreign lender requires that the loans of enterprises must be guaranteed by banks, the guarantee will be enacted in accordance with the regulation on guarantee and re-guarantee for foreign loans instructed by the Governor of the State Bank of Vietnam. Enterprises which borrow foreign loans can seek guarantee from non-residents (foreign banks, financial credit organizations or companies) as long as guarantee conditions are not in contrast to current laws of Vietnam. Regarding State -owned enterprises, the content of the guarantee letter must be consulted by the State Bank of Vietnam.

2. In cases where foreign loans of enterprises must be guaranteed by the Government, the Ministry of Finance or the State Bank of Vietnam will enact the guarantee in accordance with regulations set in Chapter III in this regulation.

3. The guaranteeing bank is the final decision maker and responsible for the guarantee for foreign loans of enterprises, In cases where conditions for guarantee according to the regulation of guarantee and re-guarantee are not met, banks must timely report to the enterprises. The guaranteeing bank is also allowed to select and apply one or more measures to ensure loan settlement in accordance with the law such as deposit, collateral or mortgage regarding specific loans or loan projects.

4. In cases where guaranteed enterprises fail to repay the loans when they are due, the guarantor must be responsible for settling the loans in place of the enterprises, and at the same time has the right to apply necessary measures suitable to current regulations on credit and other regulations of the law of Vietnam to recover the loans paid in place of the enterprises.

5. Enterprises can use the property derived from the lent capital or other forms of guarantee in accordance with the law of Vietnam in order to obtain foreign loans.

6. Regarding foreign loans without guarantee nor securities, the parties taking part in the loan agreement must negotiate their responsibilities over the risks.

Article 24: Within 30 days after the official signing of medium or long-term loan agreements (with or without bank guarantee), enterprises and credit organizations which want to obtain loans must produce a notarized copy of the documents signed with the foreign lender to the State Bank of Vietnam and the guarantor.

Chapter V
Reporting, checking and inspection

Article 25: Ministers, heads of ministerial level bodies and Governmental bodies, chairmen of the People's Committee of cities and provinces under the Central Government and heads of the central unit of mass organizations must be responsible to the Prime Minister for the checking and supervision of the receipt and use of the foreign loans of the Government, or have the Government guarantee for projects and program within their scope of management.

Article 26: The Ministry of Finance, the State Bank of Vietnam, the Ministry of Planning and Investment and the Governmental Office are responsible for guiding and helping ministries, branches and areas in the checking and supervision, and at the same time directly conduct the checking and supervision of the management of the use of foreign loans of the Government and the performance of the obligations of the enterprises using foreign loans within their range of functions as regulated in foreign loan agreements or re-lending agreements.

The checking and supervision of investment projects or construction projects using foreign loans must abide by current regulations or investment management and construction.

Article 27: The periodical report on the performance of programmes and projects using foreign loans of the Government (including loans guaranteed by the Government) must abide by regulations set in Articles 28 and 29 in the regulation on the management and use of ODA attached to Governmental Decree 87/CP dated August 5, 1997.

Article 28: Every quarter, year or whenever necessary, enterprises which directly obtain foreign loans must report to the State Bank of Vietnam, the guarantor and the direct managing body (regarding State-owned enterprises) on the performance of the loan contracts (the situation of capital withdrawal, use of the loan and settlement), and be under the checking and inspection in accordance with regulations set by the Governor of the State Bank of Vietnam.

Article 29: The Ministry of Finance must annually generalize and report to the Prime Minister on the borrowing and settling of foreign loans of the Government and the entire country, as well as the re-lending and receiving of the lent capital of the Government. The report must also be sent to the State Bank of Vietnam and the Ministry of Planning and Investment. The State Bank of Vietnam is responsible for reporting to the Prime Minister on the borrowing and settling of foreign loans of enterprises and credit organizations.

Chapter VI
Violation treatment

Article 30: Heads of bodies which directly manage State- owned enterprises, and credit organizations borrowing foreign loans must be responsible to the Government for the effectiveness of the loan project they approve or ask the competent body to approve to obtain foreign loans.

In cases of incorrect application of current regulations on approving or assessing investment projects using lent money, and incorrect decision on the investment direction causing economic losses, the maker and approver of the project must be responsible by law depending on the seriousness of the losses. If investors using foreign loans including those re-lent by the Government fail to repay the loans due to subjective reasons, such as ineffective use of capital, wastage, capital losses resulting in a loss of prestige to the Government and losses to the State Budget, they must also be responsible by law.

Organizations and individuals who violate this regulation and other related legal documents will depending on the seriousness of the violation receive administrative punishments or must compensate for the losses in accordance with the law. Serious violations will be prosecuted.

Government Prime Minister

PHAN VAN KHAI

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