CIRCULAR

GUIDING THE MANAGEMENT OF THE CONSTRUCTION OF FOREIGN DIRECT INVESTMENT PROJECTS AND FOREIGN CONSTRUCTION CONTRACTORS IN VIETNAM

-Pursuant to the Law on Foreign Investment in Vietnam;
-Pursuant to Decree No.12-CP of February 18, 1997 of the Government detailing the implementation of the Law on Foreign Investment in Vietnam; and Decree No.42-CP of July 16, 1996 of the Government promulgating the Regulation on the Management of Investment and Construction;
-Pursuant to Decree No.15-CP of March 4, 1994 of the Government defining the functions, tasks, powers and organizational structure of the Ministry of Construction;
The Ministry of Construction provides the following guidances for the management of the construction of foreign direct investment projects and foreign construction contractors in Vietnam:

I- THE MANAGEMENT OF THE CONSTRUCTION OF FOREIGN DIRECT INVESTMENT PROJECTS

The management of the construction of foreign direct investment projects as defined in Chapter XI of Decree No.12-CP of February 18, 1997, includes:

1. Issuing certificates on the general planning as the basis for the investors to draw up investment projects;

2. Evaluating the general planning and architectural blueprints of the investment projects with construction structures;

3. Evaluating technical designs of the construction structures and deciding to build the structures.

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5. Managing the quality of construction structures.

1. Selecting the site for the construction of project and issuing certificate on the general planning

1.1- When drawing up the project, the investor shall have to consult the People�s Committee of the province or city directly under the Central Government (hereafter commonly referred to as the provincial People�s Committee) to get the approval of its investment in the locality, then proceed with the selection of a site for the construction of the project.

1.2- Basing him/herself on the investor’s request, the Director of the provincial/municipal Construction Service or the chief architect (with regard to urban areas having chief architects) shall have to recommend a new site of construction or agree on the existing site in conformity with the general planning and grant the general planning certificates in accordance with Decree No.91-CP of August 17, 1994 of the Government as well as the guiding documents of the Ministry of Construction which shall serve as basis for the investor to draw up investment project.

2. Designing and evaluating construction structures of the investment project:

2.1- When drawing up the construction investment project, the investor shall have to make a preliminary design which must display: the detailed planning of the total ground area, architectural blueprints, the installation of technological chains and technical infrastructures. With regard to structures inside or next to the existing structures which are being used or built on unsolid ground, there must be a preliminary design of necessary foundation structure and treament for evaluation;

2.2- With regard to the project-building site without technical infrastructures suited to the construction requirements, the investor must work out a plan on upgrading or supplementing the existing infrastructures or building separate technical infrastructures for such project;

2.3- When drawing up the project, all calculations on the environmental and construction safety must comply with the provisions on safety as well as the construction regulations and safety standards of Vietnam;

2.4- When evaluating the construction of the project, the evaluating agency shall have to base itself on the granted certificate of the general planning, the ratified detailed planning as well as the Vietnamese construction regulations and safety standards to make conclusions. The evaluation shall be conducted in accordance with Article 83, Chapter XII of Decree No.12-CP of February 18, 1997 of the Government.

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3.1- Contents of the design evaluation:

The design of construction structures shall be evaluated in accordance with the provisions of Article 84 of Decree No.12-CP of February 18, 1997 of the Government and the following guidances:

3.1.1- Regarding the legal person status of the designing organization:

a/ The designing consultancy organization which draws up the design of construction structures of the investment project must have the legal person status, the designing certificate granted by Vietnam or a foreign country, and must be notified in writing by the investor that it has been selected as the contractor or has won a bid in accordance with the Regulation on Bidding already approved by the Vietnamese Government;

b/ Vietnamese designing consultancy organizations which involve in project designing must have designing consulatncy certificates; and have full capabilities as stated in the certificates to perform the project designing;

c/ Foreign designing consultancy organizations which win bids or are selected for the project designing shall have to join at least one Vietnamese designing consultancy organization fully capable of designing such project and to register at the Ministry of Construction or a provincial/municipal Construction Service in accordance with the division of responsibility defined in Point II.5 of this Circular for being granted a permit to undertake the designing as prescribed;

d/ The survey in service of the project designing (including topographic survey, geological survey, hydro-geological survey and environmental survey) must be conducted by a Vietnamese surveying organization that has the legal person status and full capabilities stated in its operating certificate at the request of the designing organization through an economic contract;

In cases where the survey involves special technical requirements that the Vietnamese surveying organization is unable to meet, the investor is entitled to select a foreign surveying organization instead; the selected foreign surveying organization must obtain a permit for project surveying from the Ministry of Construction.

3.1.2- The design’s conformity to the general planning and architectural blueprints:

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b/ The connection with public technical infrastructures outside the project area must conform to the general planning; in cases where the general planning is not available, there must be a written agreement of the agency(ies) managing such infrastructures.

3.1.3- The project designing must be carried out in accordance with Vietnam�s construction regulations and construction standards or foreign construction standards already accepted by the Ministry of Construction.

For areas where projects are to be built and where exist complicated natural conditions regarding topography, geology, climate and environment, the Vietnamese standards shall apply.

3.1.4- Designing responsibility:

a/ The investor shall take responsibility before Vietnamese law for the project safety, fire and explosion prevention and fight, and environment protection in the course of building the project as well as in the whole process of using the project;

b/ The surveying and designing organization shall take responsibility before the investor and Vietnamese law for the results of their surveys and designs; the design must ensure the structural stability and safety and include detailed provisions on the fire and explosion prevention and fight, and environmental safety in the whole process of building and using the structures;

c/ In case of necessity, the investor may hire another consultancy organization to examine the calculations and designing results. The design examining consultancy organization shall conduct the examination through a contract signed with the investor at the mutually agreed price on the basis of the international price. The examination conclusions must be made in writing and affixed with signatures and seal. The design examining consultancy organization shall take responsibility before the investor and Vietnamese law for any incident occuring to the project due to mistakes in the examination.

3.2- Organizing the design evaluation by State management agencies:

3.2.1- The division of responsibility for design evaluation shall comply with Article 85 of Decree No.12-CP of February 18, 1997 of the Government.

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b/ Provincial/municipal Construction Services shall directly receive designing dossiers of Group B projects from the investors for organizing the evaluation and submission thereof to the provincial People�s Committees for decision.

3.2.2- The investors shall have to directly submit to the evaluating agency 3 dossiers, each of which includes:

a/ The application for design evaluation and the project construction permit (signed and sealed by the investor) in accordance with Appendix 3;

b/ Legal documents certifying the legal person status of the designing organization as prescribed in Item 3.1.1;

c/ Technical design documents, including:

c.1- The general illustrating report on the design of the project, attached with survey data regarding the climate, geology and environment..., a list of foreign designing standards already accepted by the Ministry of Construction; and a list of software programs used for the project designing;

c.2- The contract on examination and the written conclusions of the design examining organization (if any);

c.3- The drawings of the total ground area of the project, and the arrangement of technological lines;

c.4- The architectural blueprint of the project, including: the plans of the project�s horizontal, cross and vertical sections and plans of the general structure of the project foundations;

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c.6- A copy of the investment license and documents evidencing the State management agencies� agreement on the environmental protection, fire and explosion prevention and fight measures;

c.7- A valid copy of the decision on the land lease or the land lease contract attached with an extract of the map of land administrative boundaries with the scale of 1/200-1/500;

3.2.3- When evaluating the designs related to other specialized construction branches, the evaluating agencies shall have to invite people from the Ministry or provincial/municipal Service that manages such specialized construction branch and the municipal chief architect to participate in the evaluation.

The technical design of the project must be approved in writing by the Minister of Construction or the President of the provincial People�s Committee in accordance with the form given in Appendix 3 of this Circular. The investor shall be allowed to start building the project only after receiving the notice on the evaluation result.

3.2.4- The evaluated designing dossiers must be affixed with the seal of the evaluating agency; one of them shall be given back to the investor, one shall be kept at the evaluating agency and another shall be handed over to the provincial/municipal Construction Service for monitoring the implementation.

3.2.5- For a too large-scale project with many independent parts, the designing may be divided into phases. A rational division of designing phases must be determined in writing by the investor for the approval by the Ministry of Construction or the provincial People’s Committee. The evaluation shall be conducted phase by phase as approved and the evaluation fee shall be collected according to phases.

3.2.6- The time limit for the evaluation of the designs of the entire project or in phases shall be 20 days from the date of receipt of the full and valid dossier. With regard to an incomplete dossier, the evaluating agency shall send a written request to the investor for the supplement thereto. For such case, the time for the evaluation of the design shall last correspondingly to the time needed for the supplement to the designing dossier.

3.2.7- The investor shall pay the design evaluation fee to the evaluating agency with the amount determined by the Ministry of Finance.

3.2.8- If within 12 months after the issue of the decision on the evaluation and the construction of project, the project has not been built yet, the evaluation document and such decision shall no longer take effect. If it is necessary to go on with the construction of the project, the investor shall have to explain in writing the reasons to the evaluating agency for consideration and decision. In case of any change in the architectural blueprints, the general planning and main structure in the design, such change must be approved by the design evaluating agency before it is realized by the investor.

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3.3- Deploying the construction of the project:

After receiving the decision on the design evaluation and the construction of the project, the investor may commence the construction but shall have to inform the design evaluating agency and the local authority of the ground-breaking date and have to comply with the provisions stated in that decision.

For a city having chief architect, the investor shall have to submit copies of the designing dossier which has been evaluated and of the decision issued by the design evaluating agency to the chief architect for the management of the architectural blueprints and the general planning.

4. Inspecting the bidding for project construction:

4.1- For the construction of foreign direct investment projects, the investors shall have to organize bids in Vietnam in accordance with the Regulation on Bidding promulgated together with Decree No.43-CP of July 16, 1996 of the Government and the inter-ministerial Circular No.02-TTLB of February 25, 1997 of the Ministry of Planning and Investment, the Ministry of Construction and the Ministry of Trade and have to comply with the following provisions:

4.1.1- Vietnamese construction organizations participating in the bids for the construction of projects must have valid construction operating certificates granted in accordance with the current regulations and have the capabilities suited to the scales and technical requirements of the projects;

4.1.2- Foreign construction organizations participating in the bids must have valid operating certificates granted by their native countries as well as suitable capabilities to ensure the project�s quality; make a commitment to join at least one Vietnamese construction contractor professionally suitable to the project in the bids; and sign a contract to fulfil such commitment after winning the bids;

4.1.3- The joining with Vietnamese construction organizations can be carried out through a contract as guided in Appendix 4 of this Circular so as to define the responsibility for each party according to:

a/ The division of contracting responsibilities according to values in percentages as well as the division of risks and interests on the basis of agreement between the two parties;

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c/ The division of contracting responsibilities into the responsibilities of the contractor and sub-contractor or major sub-contractor so as to ensure the construction of the whole project.

4.2- The Ministry of Construction and the provincial/municipal Construction Services shall examine the validity of the bidding result as prescribed before granting the construction permit to the foreign contractor on the basis of the report of the investor on the bidding process and result, bid consideration and the duplicated document of the agency competent to approve such bidding result in accordance with the Regulation on Bidding.

4.3- Foreign construction firms, when winning bids or being selected as contractors or sub-contractors, shall all have to fill procedures to apply for the construction permits as guided in Section II of this Circular.

4.4- Upon the completion of the project construction, the investor shall have to make a completion report and a final account statement of construction in compliance with the provisions of Articles 88, 89 and 90 of Decree No.12-CP. A copy of such reports must be submitted to the design evaluating agency. The final account statement of project construction must be certified by the evaluating organization in accordance with Article 90 of Decree No.12-CP: The evaluating organization may be a lawful auditing agency or construction price managing agency of Vietnam that performs the evaluation through a contract signed with the investor.

5.- Management of the project construction quality:

5.1.- The quality of the construction of foreign direct investment projects in Vietnam shall be managed in accordance with the provisions of the Regulation on the Management of the Quality of Construction Projects issued together with Decision No.498/BXD-GD of September 18, 1996 of the Minister of Construction, more concretely with the provisions of Chapter III, IV, V and VI of the Regulation on the Management of the Quality of Construction Projects (except the provisions related to the establishment and responsibility of the State Council for the Test on Completion mentioned in Articles 29 and 32 of that Regulation).

5.2- The State management of the quality of construction projects is assigned as follows:

- The Department for the State Examination of the Quality of Construction Projects under the Ministry of Construction shall assist the Minister of Construction in excercising the State management over the construction quality of Group A projects.

- The Construction Services of the provinces and cities directly under the Central Government shall assist the provincial People�s Committees in excercising the State management over the quality of Group B projects.

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5.4- Upon the completion of each part of the project:

- The ground and foundations;

- The structures;

- or the installation of equipment, the perfection of the project, the investor shall have to organize a test on completion and inform the State agency managing the quality of construction projects (in accordance with the assignment in Item 5.2) so that the latter may witness or inspect when necessary.

After the investor has organized a test on completion of the whole project and put it into use, the above-said competent agency shall have to inspect the observance of the regulations on the test on completion and shall be entitled to request the investor to rectify the detected mistakes.

The record on the test on completion of each part or the whole project to be put to use and the list of dossiers and documents on the completion test of the project shall be made in accordance with the prescribed forms.

5.5- In case of any incident to the project, within 24 hours after such incident occurs, the investor shall have to report it to the State agency managing the quality of construction projects (in accordance with the assignment defined in Item 5.2) and the related law enforcement agencies. Within 24 hours after being informed, the above-said agencies shall have to send their officials to the site for inspection. The report on the incident must be kept and made in accordance with the prescribed form.

5.6- Within 3 months at the latest after the project is put to use, the investor shall have to submit a dossier on the completion of the construction of the project, documents concerning the quality examination and dossier on the test on completion of the project to the National Archive Agency in accordance with the Vietnamese State�s regulations on keeing documents.

II.- THE MANAGEMENT OF FOREIGN CONTRACTORS FOR CONSULTANCY, SURVEY, DESIGNING, CONSTRUCTION MANAGEMENT OR PROJECT CONSTRUCTION AND INSTALLATION IN VIETNAM

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1.1- Foreign contractors including contractors for construction consultancy (including consultancy on project management, bidding for construction, survey, designing, design evaluation, management of the construction quality and construction and installation), contractors for project construction and installation, referred to commonly as construction contractors when contracting for the construction of projects in Vietnam, shall all have to make dossiers in accordance with guidances provided for in this Circular so as to be granted permits for the construction consultancy or the project construction.

1.2- Permits for construction consultancy or construction undertaking (referred to as permits for construction undertaking) shall be granted to foreign contractors on project by project basis. When contracting for another project, the foreign contractor shall have to make a dossier of application for a new permit. In cases where the new project is to be implemented in the same year with the licenced project, the dossier of application for a permit for the new project shall include only the application and documents supplemented to the preceding dossier.

1.3- A permit for construction undertaking granted to a foreign contractor is a legal certificate for him/her to carry out the contract on construction consultancy and/or project construction and installation and to cooperate with Vietnamese State agencies so as to comply with the policies related to construction business prescribed by Vietnamese law.

2. Conditions for foreign contractors to be granted construction permits:

2.1- The legal person status: The foreign contractor must have a document certifying his/her legal person status, an operating certificate or a business license for construction consultancy or construction-installation, granted by his/her native country, provided that he/she has won a bid through bidding procedures or has been selected as the contractor in accordance with the provisions of Point 5, Section I of this Circular.

2.2- Having a written commitment to join or enter a cooperation contract with a Vietnamese construction consultancy organization or construction-installation organization which has suitable capabilities to perform the contract, and committing to comply with the provisions of Vietnamese law related to his/her activities.

2.3- Having the capital contributed by shareholders or the minimum prescribed capital as follows:

2.3.1- For a main construction contractor: Not less than 5,000,000 USD

2.3.2- For a designing consultancy contractor: Not less than 100,000 USD

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2.4- Having the annual gross turnover in the two latest years according to the type of work undertaken as follows:

2.4.1- For a construction-installation contractor: Not less than 20,000,000 USD/year

2.4.2- For a sub-contractor contracting for the construction and installation of different parts of the project: Not less than 4,000,000 USD/year

2.4.3- For a construction consultancy contractor, there must be a declaration of the experts� qualifications, the number of projects completed in the three latest years and their values .

2.5- Conditions on supplies and technology:

2.5.1- Having to use to the maximum construction materials and equipment available in Vietnam.

2.5.2- Manufacturing construction parts on the basis of the capacity available in Vietnam.

2.5.3- Applying advanced technologies to the management and construction of the project.

2.6- On personnel:

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2.6.2- Having to register the name of the authorized representative of the firm to perform the contract in Vietnam, which must be re-registered in case of any change.

3. Dossier of application for a permit for construction undertaking submitted by the foreign construction contractors shall include one original and three copies; the original shall comprise:

3.1- The application for the construction of project(s) (according to the form in Appendix 6).

3.2- A copy of the report on the bidding process, bid evaluation and the bidding result submitted by the investor to the Ministry of Planning and Investment or the People�s Committee of the province where the investment project is to be implemented and a document certifying the bidding result (with notarization) or a valid decision on selecting the contractor by the investor.

3.3- A copy of the investment license granted by the Ministry of Planning and Investment or the provincial People�s Committee (no need for notarization); or the investment decision and project investment license with regard to a project with domestic capital.

3.4- Documents certifying the legal person status of the foreign contractor, including: the establishment permit, the Company�s Statute (or business license) and the operating certificate granted to the contractor by his/her native country (the copies must be notarized by the country where the enterprise is registered).

3.5- Declarations.

3.6- The blueprint of the project and the contracted volume of the main construction and installation.

3.7- Joint venture contract or cooperation contract between the foreign contractor and a Vietnamese construction organization for undertaking the construction.

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4.1- The application for the permit for construction undertaking (according to the form in Appendix 6).

4.2- The investor�s notice of the decision on the selection of contractor or the bidding result (according to Item 3.2)

4.3- A copy of the investment license granted by the Ministry of Planning and Investment or the provincial People�s Committee (no need for notarization).

4.4- The certificate of the contractor�s legal person status for construction consultancy granted by his/her native country (notarized copy). The declaration of professional qualifications of consultants and designing experts for the project.

4.5- The list of the major similar projects completed in the three latest years.

4.6- The contents of bidding for the project.

4.7- The contract or agreement for joining a Vietnamese consultancy organization to carry out the consultancy and/or project designing.

5.- Considering the granting of permits to undertake the construction of the projects:

5.1- The Minister of Construction shall consider the granting of construction permits to contractors carrying out Group A projects with investment decided by the Prime Minister and other Group B projects not falling under the provincial People�s Committee�s competence to grant investment licenses.

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5.3- The granting of construction permits to foreign contractors must be completed within 20 days from the date of receipt of the full and valid dossier as prescribed. In case of an incomplete dossier, the permit issuing agency shall have to issue a written document requesting the supplement thereto; in that case, the time for considering the permit granting shall last correspondingly to the time needed for the supplement of the dossier.

The construction consultancy or construction permits granted to foreign contractors shall comply with the prescribed form.

The fee for the granting of construction permits shall comply with inter-ministerial Circular No.06-TTLB of January 22, 1994 of the Ministry of Finance and the Ministry of Construction, providing guidances on the regime of collection and use of construction business license fees.

6.- Jobs to be done by foreign contractors after being granted permits to undertake the construction:

6.1- Before doing the main job in a locality, the foreign contractor shall have to produce the construction undertaking permit to the provincial People’s Committee through the Construction Service of the province where the project is implemented for monitoring the implementation thereof.

6.2- Registering the address of his/her head office, the telephone and fascimile numbers in Vietnam and the name of the lawful representative at the People’s Committee of the province where the project is implemented and informing the Ministry of Construction and the provincial Construction Service thereof.

6.3- Opening business account at a bank in Vietnam for the furtherance of the construction undertaking permit.

6.4- Registering the accounting, statistical and tax payment regimes with the tax agency of the province where the contract is to be carried out.

6.5- Making reports every 6 months and after the completion of the contract on the activities according to the granted permit and send them to the Ministry of Construction and the provincial/municipal Construction Service (according to the form in Appendix 8).

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1.- Organizing the inspection:

1.1- The Ministry of Construction, the provincial/municipal Construction Services shall coordinate with each other in inspecting the construction of foreign direct investment projects and activities of foreign contractors once a year and when the test on completion is completed in phases according to the construction timetable announced by the investor. When conducting the inspection, they must inform the investment license granting agency thereof for coordination.

The unexpected inspection shall be conducted when it is discovered that the investor or contractor violated the construction legislation, when parties request the handling of infringements upon their interests, or when there�s a construction incident; the inspecting agency shall have to conduct the inspection and handle violations in accordance with the procedures prescribed by law.

The investors and foreign construction contractors shall have to create favorable conditions for the inspecting agencies to well perform their functions.

1.2- During the inspection, if any violation of the regulations on the construction management or other provisions of Vietnamese law is detected, such violation shall be handled in accordance with the provisions of Vietnamese law.

1.3- Any act of inspection at variance with the provisions at Point 1.1 above that causes troubles to the construction process is strictly forbidden.

1.4- Not later than 10 days after the completion of the inspection, the agencies conducting the examination or inspection shall have to report to the Minister of Construction, the Minister of Planning and Investment and the President of the People�s Committee of the province where the project is to be implemented for solution in case of necessity.

1.5- Every 6 months, the provincial/municipal Construction Services shall report to the Ministry of Construction on the granting of construction-undertaking permits as well as the situation on the construction of foreign investment projects in their respective localities.

2. Handling of violations:

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IV.- IMPLEMENTATION PROVISIONS

1. This Circular takes effect from the date of its signing and shall replace:

- Circular No.08/BXD-CSXD of March 30, 1995 of the Ministry of Construction providing guidances on the management of the construction of foreign investment projects in Vietnam and foreign construction contractors in Vietnam.

- Dossiers which have been submitted or dealt with before the signing of this Circular shall still apply the provisions of Circular No.08/BXD-CSXD.

2.- The Ministries, the ministerial-level agencies and the agencies attached to the Government, the People’s Commitees of the provinces and cities directly under the Central Government, the provincial/municipal Construction Services shall have to guide and implement this Circular.

THE MINISTER OF CONSTRUCTION




Ngo Xuan Loc