The prime minister, on January 5, 2011, has issued Decree 01/2011/ND-CP on issuing sovereign bonds, government-guaranteed debts and local governance debts.
Accordingly, the decree allows government bond issuance to be used as budget expenditure for economic and social development under the Law on State Budget; to compensate the temporary budget deficit; to restructure debts and debt portfolios; to lend to enterprises, financial and credit institutions, and local governments in accordance with law; and to ensure the national financial security.
Under the decree, issuance of government-guaranteed bonds should be used for investing in (1) programmes and projects of which investment policies decided by the National Assembly or the prime minister, including debt-restructuring plans of those programmes and projects; (2) programmes and projects applying high-technology, projects in energy, mining, minerals processing sectors, or projects for manufacturing and providing exported goods and services decided by the prime minister in line with the national social and economic development orientation; (3) programmes and projects subject to State’s investment encouragement policy under the decision of the prime minister; (4) credit programmes implementing State’s purpose carried out by Vietnam Development Bank, Vietnam Bank for Social Policies, or credit and financial institutions under the decision of the government and the prime minister.
Issuance of government-guaranteed bonds must meet six conditions: (1) issuing bonds to invest in programmes and projects described in the decree; (2) programmes and projects with complete investment procedures under current laws on investment and related regulations; (3) meeting regulations in Section 2 Clause 34 Law on Public Debt Management; (4) satisfying requirements of the laws on corporate bond issuance; (5) having bond issuance plans passed by Ministry of Finance and the prime minister; (6) complying with other rules on granting and managing government guarantee.
The decree allows local governance debt issuance to be used for the social and economic development purposes under the tasks of local budget expenditure in accordance with the Law on State Budget; for investing in projects with capital return ability in local areas.
Issuance of local governance bonds must satisfy three conditions: (1) issuing bonds to invest in social-economic development projects under the task of local budget expenditure in accordance with the Law on State Budget and in the investment portfolio of the five-year plan which have been identified by provincial People’s Council as having capital return ability; those projects must complete investment procedures under current laws on investment and related regulations; (2) having bond issuance plans passed by provincial People’s Council and approved by Ministry of Finance in writing; (3) the issue value must be within the limit of outstanding debt from the annual mobilised funds of provincial budget under the Law on State Budget and other guidance documents; for projects identified as being able to return capital, the issue value, including the issuance of bonds to invest in a project, should not exceed 80 percent of the total investment of that project.
Decree 01 also defines specific regulations on activities related to the issuance of government bonds such as issuance methods, issuance fees, payment of bonds, etc.
The decree will take effect from February 20, 2011.