Vietnam faces challenges for ODA loans

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Vietnam faces challenges for ODA loans

Saigon Times - 8/11/2015 8:49:45 AM

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Though the significant contribution of official development assistance (ODA) loans to the economy is undeniable, this source of low-interest funding has posed challenges for Vietnam.

Experts pointed out the challenges at an international symposium held in Danang City last Friday to review 20 years of ODA loans for Vietnam.

The symposium was organized by the Party Central Committee’s Economic Commission in collaboration with the government of Danang City and the Bank for Investment and Development of Vietnam (BIDV).

Vuong Dinh Hue, head of the Party Central Committee’s Economic Commission, said ODA pledges for Vietnam had amounted to US$89.5 billion as of late last year, with already-signed loans making up US$73.7 billion, or US$3.5 billion per year on average. Disbursements of ODA and preferential loans have neared US$54 billion.

A representative of the World Bank (WB) warned Vietnam of less ODA in the coming years.

National Assembly deputy Tran Du Lich said on the sidelines of the symposium that ODA loans are not grants and they carry risks, especially in terms of exchange rate.

“Japanese yen has weakened against the U.S. dollar recently. But if it had appreciated over the greenback, how would Vietnam have had to deal with ODA loans in yen?” he questioned.

The effective use of ODA loans is another major challenge for Vietnam. According to the WB, in order to effectuate this source of financing, Vietnam should work out ODA-funded programs in a way that matches the Government’s socio-economic development strategy. Management agencies need to devise specific plans of using ODA loans, cut unnecessary procedures and curb the establishment of new project management units.

Besides, ODA loans should be allocated to public service sectors like healthcare, poverty reduction and activities aimed to improve capacities and institutions for investment projects with clear objectives, the WB said.

The WB said it would draw up lending programs that support prioritized areas of the Government.

Speaking at the symposium, Deputy Prime Minister Vu Van Ninh said the ODA absorption capacity of Vietnam was limited, the disbursement percentage remained low, procedures were still complicated and the ODA-funded project management had yet to keep up with international standards.

“We will enhance inspections to ensure the effective use of ODA loans and avoid losses,” Ninh stressed.

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