The Central Economic Committee coordinated with BIDV to organize the Workshop "ODA activities in Vietnam - 20 years looking back"

The workshop was attended by Mr. Vu Van Ninh, Member of the Party Central Committee, Deputy Prime Minister; Mr. Vuong Dinh Hue, Member of the Party Central Committee, Head of the Central Economic Committee; Mr. Nguyen Chi Dung, Deputy Minister of Planning and Investment; Mr. Huynh Duc Tho, Deputy Secretary of the City Party Committee, Chairman of the People's Committee of Da Nang City; Mr. Nguyen Duy Son, Acting Country Portfolio Director of the WB in Vietnam; together with ministries and central branches; Embassies, international organizations, international financial institutions; Commercial banks in Vietnam; Businesses; local; Experts, scientists and press agencies…

Mobilizing and using ODA capital, looking back 20 years

The workshop aims to assess the impact, current situation, and difficulties in mobilizing and using official development assistance (ODA) capital, foreign concessional loans and other capital sources over the past 20 years. The workshop also offered recommendations, suggestions as well as solutions to improve the efficiency of mobilization and effective use of ODA capital and other capital sources in Vietnam to serve socio-economic development in the period 2016-2020.

According to the report at the Conference, the 20-year journey (1995-2015) is a landmark journey, affirming the correct path of innovation and integration of the entire Party and all Vietnamese people. In particular, close and regular cooperation with donors and international organizations through ODA capital is an important material and spiritual motivation for Vietnam to overcome difficulties, especially the two crises of 1997-1999 and 2008-2009, overcoming instabilities and weaknesses to achieve important socio-economic achievements. With the success of the Roundtable Conference on aid for Vietnam in Paris on November 9-10, 1993, the connection between Vietnam and donors became increasingly closer and regular. As of December 2012, there have been 20 consulting group conferencesHa sponsored Vietnam (referred to as the Annual CG Conference) to be held. Since 2013, Vietnam's cooperative relations with donors have been raised to the level of partnership through the Vietnam Development Partnership Forum (mainly from Japan, Russia, China, the International Development Association IDA, ADB, WB).

To effectively use ODA capital, along with public debt management, Vietnam's legal framework and methods of managing and using ODA capital are constantly being innovated and improved such as: Law on Public Debt Management No. 29/2009/QH12; Decree 79/2010/ND-CP, Decree 38/2013/ND-CP on management and use of ODA capital and concessional loans from donors. The policy planning stages to the specific stages of the process of management, use, monitoring and reporting on the results of implementation of ODA programs and projects are strictly regulated to ensure the highest efficiency, directing capital flows to the right addresses, programs, projects, and areas and contributing to promoting Vietnam's socio-economic development.

ODA capital in Vietnam is implemented in 3 main forms including ODA grant aid accounting for about 10-12%, ODA concessional loan accounting for about 80% and mixed ODA accounting for about 8-10%. Accumulated from 1993 to 2014, the total value of ODA capital committed to Vietnam has reached 89.5 billion USD, total signed capital reached 73.68 billion USD, an average of 3.5 billion USD/year, ODA capital and disbursed preferential loans reached 53.89 billion USD, accounting for over 73.2% of total signed ODA capital. The effectiveness of ODA capital use is also positively evaluated by donors. Vietnam continues to be a good user of ODA capital. The approximately 80 billion USD that donors have committed to Vietnam over the past 20 years not only provides Vietnam with important additional capital to serve the process of socio-economic development and hunger eradication.Poverty reduction, agricultural and rural development, infrastructure construction, training and human resource development... More importantly, this commitment also affirms the international community's strong support for the innovation and correct development policies of the Party and Government of Vietnam, and the donors' trust in Vietnam's effectiveness in receiving and using ODA capital.

However, when looking at some limitations in the use of ODA capital, Mr. Vuong Dinh Hue, Member of the Party Central Committee, Head of the Central Economic Committee, said that: The mobilization and use of ODA capital in recent years has also revealed a number of limitations, the main reasons being: (1) Lack of an overall orientation with a long-term vision as a basis for mobilization and use more effectively, especially after Vietnam "graduated from IDA". in 2018 and the following years; (2) In reality, preferential ODA capital sources often come with conditions such as appointment of contractors, priority of foreign contractors, and requirements to purchase machinery, equipment, and materials from the ODA funding country; (3) Because projects lack competitiveness, actual investment costs often increase much morewith the original estimate; (4) Because capital is easy to access and the borrower's responsibility is not high, projects using ODA capital are at risk of ineffective management and many inadequacies.

The representative of the Ministry of Planning and Investment provided orientations on the use of ODA capital and concessional loans in the coming time as expected as follows:

–       For non-refundable ODA capital: Used to implement programs and projects to support policies, develop institutions, strengthen human capacity; Direct support to improve economic, social and environmental life for people, especially the poor in rural, mountainous and ethnic minority areas; scientific research, innovation; prepare programs and projects using ODA and concessional loans and investment projects in the form of public-private partnerships.

–       For ODA loans: Used to prepare and implement programs and projects that do not have the ability to directly recover capital; Programs and projects within the state budget's spending tasks can generate revenue to serve national socio-economic interests.

–       For preferential loans: Used to invest in key national programs and projects with a solid revenue source and debt repayment ability such as building power plants, toll highways, subways, elevated railways in big cities, telecommunications communication systems, production projects with high technology and technical content,...

       BIDV - a unit that successfully deployed and effectively used ODA capital

As a bank with a tradition of more than 58 years, a key player in lending for investment and development of the country, BIDV is assigned to implement, manage and disburse many ODA projects. From that practice, BIDV has achieved many outstanding achievements, specifically:

(1) BIDV effectively manages the Government's ODA capital programs/projects with more than 200 programs/projects, total value of about 15 billion USD, and is one of the leading state-owned commercial banks assigned to serve many large projects from foreign trust capital sources of the Governments of Japan, France, Germany, Switzerland... as well as international financial organizations such as WB, ADB, NIB, EIB. Projects have been served by BIDV, promoting quick, effective and safe disbursement.

(2) BIDV successfully performs the role of Wholesale Bank for Rural Finance Projects I, II, III: Since 2002, BIDV has been trusted by the Government to perform the function of Project Owner for a series of 3 Rural Finance Projects with WB loan capital equivalent to 548 million USD. TNTT projects have added more than 44 trillion VND (2.1 billion USD) to investment in rural development, funded over 1.7 million production and business plans of households and businesses, including over 600 thousand poor households, creating over 410 thousand new jobs in rural areas nationwide.

(3) BIDV contributes to enhancing Vietnam's image and reputation in relations with the international donor community. The WB evaluates Vietnam as the country that has most successfully implemented the Rural Finance project model in the world, both in terms of implementation model, management, implementation organization as well as investment efficiency and socio-economic impact on rural areas.

As a bank serving ODA projects over the past 20 years, Mr. Tran Bac Ha, Chairman of the Board of Directors of BIDVoffered a number of proposals to improve the efficiency of ODA capital use in the coming time:

–       Regarding the orientation of mobilizing and using ODA capital: Focus on attracting and using ODA capital for socio-economic development projects that have the ability to quickly self-pay, in accordance with the needs of industrialization and modernization of the country by 2020 with a vision to 2030. Especially programs and projects for regional economic development, regional integration, and domestic enterprise development, prioritize the use of ODA capital and other preferential loans of Sponsors of important public investment programs and projects are unlikely to attract private sector investment or use commercial loans.

–       Regarding improving policy mechanisms: It is necessary to continue to improve Vietnam's system of legal documents on ODA in harmony with the Donor's processes and procedures. First of all, it is necessary to adjust the content related to the way to calculate interest rates for credit institutions to re-lend ODA capital in Decree 78/2010/ND-CP dated July 14, 2010 of the Government on Re-lending of foreign loans. Currently, the interest rate for re-lending to credit institutions according to the provisions of Decree 78 (about 8.2%/year) is relatively high and needs to be considered and adjusted appropriately.

–       Regarding counterpart capital for programs/projects: Counterpart capital for programs/projects is currently one of the reasons slowing down the implementation progress of many projects, therefore, BIDV proposes to consider innovating the method of supplementing counterpart capital through the following forms: Attracting social resources to supplement counterpart capital for ODA projects by allowing economic sectors (State and private) to participate in investing in projects in the form of BOT, BT, PPP, thereby reducing the burden on the State Budget. Investors can be project owners or participate in project management and share benefits from projects in proportion to their capital contribution. Expanding the application of commercial banks to re-lend capital for projectsODA projects have a credit component, which can be in the form of wholesale banks (as in the TCNT Project) or retail banks for Project capital (in Renewable Energy projects, Small and Medium Enterprise Loan Projects,...), whereby participating banks will arrange their own counterpart capital for the project.

–       Regarding the implementation model of ODA Projects: Expand the application of on-lending of ODA capital according to the model of re-lending to credit institutions and bearing credit risks (such as in TNT Projects, Renewable Energy Projects, Small and Medium Enterprise Lending Projects,...), to reduce the pressure on domestic counterpart capital and the pressure on public debt of the Government, but still meet the need for capital for socio-economic development and implementation of target orientations. proposed development goals.