THE GOVERNMENT

DECREES:

Article 1.- To amend and supplement a number of articles of the Government�s Decree No. 20/1998/ND-CP of March 31, 1998 on development of commerce in mountainous areas, on offshore islands and in regions inhabited by ethnic minority people as follows:

Article 9.- Enterprise income tax

1. Traders who have enjoyed profit tax exemption and/or reduction preferences now continue to enjoy enterprise income tax exemption and/or reduction for the period and at the levels prescribed in (former) Article 9 of the Government�s Decree No. 20/1998/ND-CP of March 31, 1998.

2. Traders entitled to enterprise income tax exemption and/or reduction preferences must have their head offices or registered branches operating in mountainous provinces or provinces having mountainous areas.

Article 10.- Lending interest rates

1. Traders who borrow capital from the State commercial banks for reserve, retail of essential commodity items, and purchase of agricultural and forestry products in Regions II and III in mountainous areas, on offshore islands and in regions inhabited by ethnic minority people, shall enjoy the 20% reduction of the lending interest rate as compared to the ordinary lending interest rate of the State commercial banks at the time of loan provision.

Traders entitled to loan interest rate reduction must have their head offices or registered branches operating in mountainous provinces or provinces having mountainous areas.

2. The State Bank of Vietnam shall guide the implementation of this regulation and direct the State commercial banks in ensuring adequate capital sources to satisfy the borrowing demand of traders in mountainous areas, on offshore islands and in regions inhabited by ethnic minority people.

3. The 20% lending interest rate difference shall be apportioned in the annual budget plan. The offsetting allocation shall be stipulated by the Finance Ministry.

Chapter III: Price subsidies and freight subsidies in order to sell commodities under the social policies, purchase and consume commodities produced in mountainous areas, on offshore islands and in regions inhabited by ethnic minority people.

Article 12.- Essential commodity items with price subsidies and freight subsidies

The State shall provide price subsidies and freight subsidies in order to ensure that people living in mountainous areas, on offshore islands or in regions inhabited by ethnic minority people can buy essential commodity items in service of their production and daily life at the levels equivalent to the prices of the commodity items of the same type sold in mountainous towns.

The Minister-Director of the Committee for Ethnicities and Mountainous Areas shall base him/herself on the requirements and policies to encourage socio-economic development, after reaching agreement with the concerned ministries and branches and the People�s Committees of the mountainous provinces or provinces having mountainous districts, to decide a detailed list of commodity items entitled to price subsidies and freight subsidies in each period under the social policies.

Article 13.- Norms for supply of goods with price and freight subsidies

The provincial People�s Committees shall decide the levels and plans of supply of commodity items with price and freight subsidies every year. The demand of each locality, which is suitable to the province�s funding source in each year (including fund allocated by the central budget and fund supplemented by the local budget), shall serve as basis for determining the supply levels and drawing up the supply plans. Priority shall be given to ensuring adequate goods in service of deep-lying and remote areas.

Article 16.- Determining price subsidies, transport distances and places for delivery and reception of goods with price and freight subsidies

The Ministry of Trade shall assume the prime responsibility and coordinate with the Government Pricing Committee, the commodity lines-managing agencies and provinces having mountainous areas, offshore islands and/or regions inhabited by ethnic minority people in determining the price subsidies, the transport distances, goods delivery warehouses and places of reception of goods with price and freight subsidies so that people living in mountainous areas, on offshore islands and/or in regions inhabited by ethnic minority people can buy the policy commodity in a convenient manner, saving costs for the State.

The commodity lines-managing agencies, which have commodity items entitled to price and freight subsidies, shall have to direct their business units to give priority to signing contracts and transporting goods according to the volume and time requested by the provinces in mountainous areas, on offshore islands and/or in regions inhabited by ethnic minority people, thus meeting in time the consumption demand of people living in regions entitled to preferential policies.

Article 22.- Structure of the funds for price-subsidized, freight-subsidized commodity items:

1. The presidents of the People�s Committees of the provinces having mountainous areas, offshore islands and/or regions inhabited by ethnic minority people shall base themselves on the characteristics and use demand of people in each locality, the total funds for price and freight subsidies as well as the budget capability of their respective provinces to determine the structure of funds for each commodity item, with priority given to satisfying the people�s demand for a number of the most essential commodity items.

2. For a number of areas meeting with exceptional difficulties, if people cannot afford goods, the presidents of the provincial People�s Committees shall base themselves on the total price and freight subsidy funds allocated to their localities and the budget capability of their respective provinces to consider and decide the free-of-charge provision of a number of the most essential commodity items.

Article 23.- Providing freight subsidies in order to consume a number of commodities produced in communes meeting with exceptional difficulties in mountainous areas, on offshore islands and/or in regions inhabited by ethnic minority people

In order to support producers in communes meeting with exceptional difficulties in mountainous areas, on offshore islands and in regions inhabited by ethnic minority people in consuming their products, maintaining and developing goods production, thus contributing to creating the driving force for the economic restructuring in localities, the State adopts the policy of freight subsidies based on the results of the purchase by traders who directly purchase a number of commodities belonging to agricultural and forestry products and products processed from agricultural and forestry products (referred collectively to the agricultural and forestry commodities) from organizations and individuals (referred collectively to as the producers) in communes meeting with exceptional difficulties. Priority will be given to the purchase of agricultural and forestry commodities in communes meeting with exceptional difficulties in Region III.

2. Basing themselves on the principles in Article 23 and Clause 1, Article 24 of this Decree, the socio-economic development situation and plans in mountainous areas, on offshore islands or in regions inhabited by ethnic minority people, and the goods consumption requirements in each period of their respective provinces, the presidents of the provincial People�s Committees shall decide the list of products produced in their provinces and entitled to freight subsidies for annual consumption.

The Committee for Ethnicities and Mountainous Areas shall base itself on the annual budget capability to guide localities in shortening the list of products entitled to freight subsidies and notify the localities thereof for the implementation orientation.

1. To encourage traders of all economic sectors to directly purchase and consume commodities produced in communes meeting with exceptional difficulties in mountainous areas, on offshore islands or in regions inhabited by ethnic minority people. The Government shall provide freight subsidies for traders according to the volume of actually-purchased goods.

2. The maximum distance enjoying freight subsidies for the purchase and consumption of commodities produced in communes meeting with exceptional difficulties in mountainous areas, on offshore islands or in regions inhabited by ethnic minority people shall be agreed upon by the Ministry of Trade, the Government Pricing Committee and the concerned agencies for specific guidance.

2. The Government Pricing Committee shall guide the principles for determining the freight subsidy levels and the minimum purchase price (floor price) of products entitled to freight subsidies so that the provincial People�s Committees can set the minimum purchase prices of products entitled to freight subsidies and the level of freight subsidies for each product in each region enjoying freight subsidies.

4. The Ministry of Finance shall assume the prime responsibility and coordinate with the Committee for Ethnicities and Mountainous Areas and the Ministry of Planning and Investment in allocating funding sources from the annual State budget in order to attain this objective.

Article 28.- Developing and strengthening the State enterprises engaged in trade activities and the trade-service cooperatives in mountainous areas, on offshore islands or in regions inhabited by ethnic minority people

1. To develop and strengthen the State enterprises engaged in trade activities in mountainous areas, on offshore islands or in regions inhabited by ethnic minority people for the purchase of products and sale of production supplies and consumer goods to people in mountainous areas, on offshore islands or in regions inhabited by ethnic minority people; and to supply policy commodities.

The State enterprises engaged in trade activities must establish their goods purchase-sale networks to the centers of the clusters of communes in mountainous areas, on offshore islands and in regions inhabited by ethnic minority people. To develop the trade-service cooperatives and use economic organizations and prestigious persons in hamlets and villages as agents for purchasing and selling goods, including goods covered by price subsidy and freight subsidy policies, for State enterprises.

2. The branch-managing ministers and the presidents of the provincial People�s Committees shall have to develop and strengthen the State enterprises engaged in trade activities, organize and direct the coordination, and support the State enterprises engaged in trade activities in order to expand goods exchange in mountainous areas, on offshore islands and in regions inhabited by ethnic minority people, and realize the undertaking of ensuring policy commodities and consuming commodities for people.

Article 29.- Public-utility enterprises engaged in trade activities in mountainous areas, on offshore islands and/or in regions inhabited by ethnic minority people

The State enterprises conducting trade activities mainly in Region III in mountainous areas, on offshore islands and/or in regions inhabited by ethnic minority people, which fully meet the criteria prescribed in Clause 2, Article 2 of the Government�s Decree No. 56/CP of October 2, 1996, may be considered for conversion into public-utility enterprises according to the current regulations if they so wish.

Article 30.- Capital for the State enterprises conducting trade activities in mountainous areas, on offshore islands and/or in regions inhabited by ethnic minority people

1. The State enterprises in mountainous areas, on offshore islands and in regions inhabited by ethnic minority people shall be provided with working capital equal to 50% of their working capital demands. If the State enterprises engaged in trade activities fail to secure enough working capital at the above-said level, they may report such to the competent State bodies for considering the additional allocation of capital according to the provisions of the State Budget Law.

2. The State enterprises engaged in trade activities shall be allocated enough reserve capital for the policy commodity items. Depending on specific locality and commodity item, the average reserve level can satisfy the consumption demand of mountainous areas, offshore islands and/or regions inhabited by ethnic minority people for between 2 and 3 months. Enterprises shall be exempted from the capital use levy with regard to the capital amount allocated for policy commodity reserve.

3. The Ministry of Trade and the Ministry of Finance shall assume the prime responsibility and coordinate with the concerned ministries and branches in guiding the implementation of this Article.

Article 31.- Support for capital borrowing

The State enterprises conducting trade activities in mountainous areas, on offshore islands and/or in regions inhabited by ethnic minority people shall be entitled to borrow medium- and long-term capital from the State credit sources (including the National Fund for Investment Support) at the most preferential interest rate for investment in formulating more business locations in service of mountainous areas, offshore islands and regions inhabited by ethnic minority people, especially in Region III, and in expanding the business, manufacturing or processing scales.

2. The Ministry of Trade shall assume the prime responsibility and coordinate with the ministries of Planning and Investment, Finance, and Agriculture and Rural Development; the State Bank of Vietnam, the Committee for Ethnicities and Mountainous Areas, the Government�s Commission for Organization and Personnel and the Government Pricing Committee in guiding the implementation of this Decree.

The Minister of Trade shall assume the prime responsibility in monitoring and reporting the results of implementation of the policies on incentives and preferences for traders.

The Minister-Director of the Committee for Ethnicities and Mountainous Areas shall assume the prime responsibility in organizing the implementation, monitoring and reporting the results of implementation of the price subsidy and freight subsidy policies.

Article 2.- This Decree takes effect 15 days after its signing. All previous regulations, which are contrary to this Decree, are hereby annulled.

Article 3.- The ministers, the heads of the ministerial-level agencies, the heads of the agencies attached to the Government and the presidents of the People�s Committees of the provinces and centrally-run cities shall have to implement this Decree.

On behalf of the Government
Prime Minister
PHAN VAN KHAI