Laws of Vietnam

THE PRIME MINISTER

DECIDES:

Article 1.- The State encourages enterprises of all economic sectors to sign contracts on sales of commodity farm produce (including agricultural, forestrial and aquatic products) and salt with producers (cooperatives, peasant households, farms, peasant households’ representatives) with a view to linking production with processing and consumption of commodity farm produce to develop production in a stable and sustainable manner.

The contracts, after being signed, shall serve as legal basis for binding the parties in their responsibilities and obligations, protecting the rights and legitimate interests of the raw materials producers and the production, business, processing and exporting enterprises under the contractual provisions.

Article 2.- The contracts on sales of commodity farm produce must be signed with producers right at the beginning of crop seasons, the beginning of the year or the beginning of a production cycle. For the immediate future, to sign contracts on sales of products being major export items: rice, aquatic products, tea, coffee, pepper, rubber, cashew nuts, fruits, mulberry, meat,… and major industrially processed products for domestic consumption: cotton, sugarcane, tobacco, raw material-forest trees for the paper industry, timber processing industry, milk and salt production...

The contracts on sales of commodity farm produce shall be signed between enterprises and producers in the following forms:

- Advance of capital, supplies, technical and technological assistance, for purchase of commodity farm produce;

- Sale of supplies and purchase of commodity farm produce;

- Direct consumption of commodity farm produce;

- Production cooperation: The peasant households may use the land use right value for capital contribution, joint venture, cooperation with enterprises or sublease land to enterprises, then the peasants may carry on production on the land they have used for capital contribution, joint venture or cooperation or have leased, and send farm produce to enterprises, thus creating the sustainable bond between the peasants and enterprises.

The contracts on sales of commodity farm produce must ensure the contents and forms as prescribed by law.

Article 3.- A number of key policies to encourage enterprises to sign farm produce-selling contracts with producers.

1. Regarding land

The People’s Committees of the provinces and centrally-run cities shall create favorable conditions for peasants to fully and legally exercise their rights on the use of land, the use of land use right value for capital contribution, joint venture or cooperation with enterprises engaged in the processing, export and import of farm produce; direct the elaboration and finalization of planning of regions for concentrated production of commodity farm produce, creating conditions for producers and enterprises to organize production, sign contracts on the sales of farm produce; direct the realization of patching land and fields together in places where it is so necessary.

The farm produce- processing, -selling and/or -exporting enterprises, which have demands for land to build processing plants or warehouses, goods preserving yards and transportation shall be given priority in land lease. The People’s Committees of the provinces and centrally-run cities shall specify the favorable conditions in terms of procedures and prices in order to support enterprises in receiving land for investment.

2. Regarding investment

The concentrated raw materials-producing zones are linked to commodity farm produce- processing and consuming establishments through contracts on sales of commodity farm produce and shall be partly supported by the State budget in investment in the construction of infrastructure (communications roads, irrigation works, electricity supply,…), system of wholesale markets, preservation warehouses, market information networks, commodity farm produce quality-inspecting establishments. The financial mechanism and budget support shall comply with the provisions in Article 3 of Decision No. 132/2001/QD-TTg of September 7, 2001 of the Prime Minister.

3. Regarding credit

- For commercial credit, the commercial banks shall meet the capital-borrowing demands of producers and enterprises, that have signed contracts, at negotiable interest rates under favorable conditions and procedures. The producers and enterprises may mortgage the assets formulated from loan capital to borrow capital from banks, may borrow capital with trust guarantee and borrow capital for efficient production and business projects.

- Producers and enterprises that sign farm produce-sale contracts and have projects on exports production and processing shall be entitled to benefit from the forms of State investment from the Development Assistance Fund as provided for in the Government’s Decree No. 43/1999/ND-CP of June 29, 1999 on the State’s investment credit and the Prime Minister’s Decision No. 02/2001/QD-TTg of January 2, 2001.

- Enterprises which have signed contracts on the sale of farm produce for export and have projects on exports production and trading shall be entitled to borrow capital from the Export Support Fund under Decision No. 133/2001/QD-TTg of September 10, 2001 of the Prime Minister promulgating the Regulation on export-support credit. Enterprises marketing farm produce according to crop seasons may borrow capital from the Export Support Fund to buy commodity farm produce under contracts and may be eligible for the application of the form of trust guarantee or mortgage with assets formed from borrowed capital to borrow capital.

- For deep-lying, far-flung, difficulty-hit, border and/or island areas, in addition to the current credit policies on lending to producers and enterprises such as providing loans to poor households, reducing lending interest rates upon repayment,… the following policies shall also apply:

+ For investment projects on processing agricultural products, selling commodity farm produce, borrowing capital from the Development Assistance Fund can be made at the annual interest rate of 3%. Where the projects are implemented by State enterprises, when the projects are put into operation, the State budget shall fully allocate 30% of the working capital;

+ The provincial/municipal People’s Committees shall decide on the use of local budgets to support the interests on bank loans for each project on production, processing and/or sale of commodity farm produce, suitable to the practical conditions of each locality.

4. Regarding transfer of technical advances and technologies

Annually, the State budget shall reserve some funding to support enterprises and producers that sign farm produce-sale contracts in the application and quick popularization (including import) of new strains, technical advance, new technologies to the preservation, processing of agricultural, forestrial and/or aquatic products; new investment in, renovation or upgrading of establishments for production and multiplication of plant varieties and animal breeds; diversification of propagation and education forms (video, radio, television programs, Internet,…) with a view to fast popularizing technical advances and new technologies, information on market and prices to producers and enterprises.

The concentrated commodity production regions under farm produce- sale contracts shall be given priority in deployment of and support for the work of agricultural, forestrial and fishery promotion.

5. Regarding markets and trade promotion

Apart from the current policies, for the concentrated commodity production regions, the exporting enterprises of all economic sectors, which sign commodity farm produce-sale contracts with peasants right at the beginning of the crops, shall be given priority to participate in performing the State’s trade contracts and trade promotion programs organized by the Ministry of Trade, the concerned ministries and branches, the Commodity Lines Associations and localities.

Article 4.- The signing and performance of commodity farm produce-sale contracts between producers and enterprises must strictly comply with the law provisions on contracts.

The commodity farm produce-sale contracts shall be certified by commune People’s Committees or authenticated by the district notary offices.

Enterprises and producers shall have the responsibility to strictly observe the contractual commitments; any party that fails to comply with the signed contents, thus causing damage shall have to pay compensation to the party suffering from the damage.

The contractual parties shall reach mutual agreement on handling of risks brought about by natural disasters, sudden changes in market prices and other force majeure reasons on the principle of risk sharing and shall be considered by the State for partial support for the damage as provided for by law.

Enterprises must not compete to buy commodity farm produce of peasants who have got investment from other enterprises for production development; must not sign commodity farm produce-sale contracts with the producers who have already signed such contracts with other enterprises. The producers can sell their contractual commodity farm produce to other enterprises only when the enterprises which have made investment in the production thereof or have signed commodity farm produce-sale contracts refuse to buy or do not buy out their commodity farm produce.

Where there appear contractual disputes, the commune People’s Committees shall have to coordinate with the Peasants’ Association of the same level and the Commodity Lines Association in organizing and creating conditions for the two parties to settle their disputes through negotiations, reconciliation. Where the negotiation and reconciliation fail, the involved parties will bring their disputes to courts for settlement according to law.

Article 5.- In the course of contract performance, if enterprises breach one of the contents: failing to buy out commodity farm produce; failing to buy on time, at the right places as already committed in the contracts; committing trade frauds in the determination of quality standards and quantity of commodity farm produce; taking advantage of the contractual monopoly to buy at prices below the contractual prices or committing other acts which cause damage to producers shall, depending on the nature and seriousness of their violations, be subject to the following handling measures:

1. Paying compensation for all material damage caused by their acts of violation according to the law provisions on contracts;

2. The competent State bodies terminate or suspend their right to trade in the farm produce items which the enterprises have violated, and announce on mass media the contractual breaches by the enterprises.

Article 6.- In the course of contractual performance, if producers who have received the capital and supplies advanced by the contractual enterprises, but deliberately refuse to sell farm produce to the latter or sell their commodity farm produce to other enterprises which have not signed contracts for investment in production; sell with inadequate volume and/or not on schedule, fail to ensure the goods criteria and quality prescribed in the contracts; fail to repay in time or commit other acts of violation shall, depending on the nature and seriousness of their acts, be subject to the following handling measures:

1. Repaying to the enterprises the debt amounts on supplies, capital (including interests on bank loan capital for the duration of advance), which they have received as advance.

2. Paying compensation for the damage caused to the enterprises according to the law provisions on contracts.

Article 7.- The provincial/municipal People’s Committees shall have to direct the application of measures to accelerate the process of reorganization of production and sales of farm produce through contracts in their respective localities, paying attention to well performing a number of following tasks:

- Directing local branches to propagate widely among people the contractual production mode, to enhance law education, raise the sense of law observance for enterprises and peasants so that people sympathize with and respond to the new mode of business in the market mechanism;

- Selecting and deciding concretely (in cases of necessity, they should coordinate with concerned ministries, branches, State corporations) the enterprises to sign commodity farm produce-sale contracts; and at the same time step by step expanding the mode of signing contracts on sales of commodity farm produce so that at least 30% by 2005 and over 50% by 2010 of the commodity farm produce output of a number of big commodity production branches are marketed through contracts.

- Guiding enterprises and producers to sign contracts on production and sales of commodity farm produce in their respective localities; directing the Services, Departments and branches in the provinces to urge and inspect the signing and performance of contracts;

- Adopting measures to provide necessary assistance and create conditions for producers and enterprises in realizing the mode of contractual sale of commodity farm produce, detecting in time problems faced by enterprises and producers in the course of implementing this mode; handling in time problems which fall under the responsibility and competence of the localities and taking initiative in working with the concerned ministries and branches to handle matters falling beyond the jurisdiction of localities;

- Directing the building up of a number of models of contractual production mode so as to draw experiences for general direction and finalization of policies, aiming to accelerate the process of closer and closer and more efficient cooperation between the producers, processors and consumers of commodity farm produce.

Article 8.- Responsibilities of the concerned ministries, branches and organizations:

1. The Ministry of Agriculture and Rural Development and the Ministry of Aquatic Resources shall promulgate their respective branches’ model contracts on sales of commodity farm produce for application by enterprises and producers in the course of implementation; monitor and sum up the application of the mode of contractual sale of commodity farm produce for report to the Prime Minister.

2. The Ministry of Trade shall have to guide the support for enterprises in trade promotion and search for farm produce outlets.

3. The Finance Ministry shall examine tax policies to suit the contractual parties; work out policy mechanism for setting up commodity lines insurance funds and submit it to the Government for decision; guide the relevant financial policies.

4. The State Bank of Vietnam and the Development Assistance Fund shall guide the direction of loan provisions to enterprises and producers as prescribed in this Decision.

5. The Government’s agency exercising the State management over prices shall guide the principles for determining the floor prices of commodity farm produce purchased by enterprises from producers so as to ensure benefits for the producers and efficient business for enterprises.

6. Vietnam Peasants Association and the Commodity Lines Association shall promote their roles and positions to support enterprises and producers in signing contracts for sales of farm produce.

Article 9.- This Decision takes implementation effect after its signing.

Article 10.- The ministers, the heads of ministerial-level agencies, the heads of the agencies attached to the Government and the presidents of the provincial/municipal People’s Committees shall have to implement this Decision.

Prime Minister
PHAN VAN KHAI