Hanoi (VNS/VNA) - The State Bank of Vietnam (SBV) is collecting opinionsfrom organisations and individuals on the Prime Minister's draft decision onoffshore loans and guarantees for non-residents of economic organisations.

Accordingto the SBV, recently, in Vietnam, there has been a need from economicorganisations to lend abroad, or learn related regulations. However, there arestill no specific regulations and guidelines, and they must directlyconsult with the Prime Minister.

Thisis why the formulation and issuance of the above Decision is necessary. Itwould also create conditions for economic organisations wishing to lend abroad,guaranteeing residents understand the criteria and procedures for applying forthe PM’s approval. In addition, it would help coordinate agencies to appraisethe contents of related functions and tasks, as a basis for the PM to considerand decide to approve or refuse requests for loans abroad.

Thisprovision in the Foreign Exchange Ordinance clearly shows the policy of strictand prudent management of foreign loans and guarantees for non-residents ofeconomic organisations, in accordance with the country’s economy which stillhas many difficulties and limitations on investment capital. The country isconcentrating capital for domestic business development, ensuring growth goals.

Inaddition, this policy is also in line with the prudent capital flowliberalisation roadmap, following the Government's orientation as well as theIMF's recommendations, to avoid risks that may arise.

Therefore,an important objective for building this Decision was to establish a prudentand rigorous review process for applications for offshore loansand guarantees for non-residents. It would comprehensively reviewrelated areas of State management and the above-mentioned prudent managementprinciples.

Thedraft decision stipulates a number of basic principles for economicorganisations' implementation of foreign loans and guarantees fornon-residents. In which, foreign lending activities of economic organisationsto support production and business as well as foreign investment activities donot affect macro safety or socio-political security. It is not contrary todefence, foreign policy and orientations for macroeconomic stability in eachperiod.

Economicorganisations providing offshore loans must comply with the Decision’sprovisions, the law on currency, foreign exchange, investment, tax and otherrelevant laws. They must also comply with laws of the country and territory ofthe borrower, guarantor and relevant international treaties. They are solelyresponsible for the efficiency and risks related to offshore loans andguarantees for non-residents.

Theorganisation must have operated for at least 5 years with profitable businessoperations without bad debts, and no overdue foreign debts. They do not owe taxdebt to the State Budget for two consecutive years before the time ofsubmitting the application for approval of the loan or guarantee.

Theymust have a plan for offshore lending and guarantee for non-residents approvedby the competent authority in accordance with the law on the management and useof State capital to invest in production and business (in case the economicorganisation is a State-owned enterprise).

Thisregulation aims to require economic organisations to prove their economicpotential to make loans or guarantees and not affect budget revenues,demonstrating self-responsibility in deciding and implementing transactions forthis service.

Regardingthe criteria for the borrower, the guaranteed party belongs to one of thefollowing groups: the parent company or member companies of the same system inforeign countries of the lender; foreign government or a foreign organisationguaranteed by a foreign government.

Foreigncurrency for offshore loans must be from sources from production andbusiness activities, not using foreign currency purchased from creditinstitutions or borrowed at home and abroad./.