Wednesday, 22 Nov 2017

Promoting effective use of ODA loans

Updated at Saturday, 19 Dec 2015, 13:31
The Hanoitimes - Official Development Assistance (ODA) is broadly defined as a loan accorded to a branch of the Vietnam government with the objective of promoting sustainable social and economic development, reports the Ministry of Finance (MoF).

In its report the MoF goes on to say that agencies of the government contract with a multitude of sources for ODA such as members or agencies of the United Nations, international or multilateral lending institutions, or innumerable other governmental entities of foreign countries.

All ODA provided to the government contains concessional financial terms and indeed over the decade leading up to 2015 an estimated 92.15% of the total ODA of US$45 billion contained a grant element forgiving at least 25% of the total borrowings.

The remaining loans carried highly preferential interest rates and other benefits.

Approximately 38% of the ODA portfolio of loans for the 10 year period 2005-2014 was for the renewal of infrastructure, 35% for urban development projects and 23% for poverty reduction programs.


The majority of ODA has gone to the Electricity of Vietnam Group (EVN), Vietnam Airlines, Vietnam National Oil and Gas Group (PetroVietnam), Vietnam Expressway Corporation (VEC), and the Airports Corporation of Vietnam (ACV).

However, in its report the MoF noted the financial and management systems of the ODA loan portfolio by governmental agencies has been and continues to be less than favourable.

Elaborating on the findings of the MoF, Director Truong Hung Long of the Department of Debt Management and External Finance (DDMEF) emphasized the ODA control environments are notoriously fraught with problems.

Deputy Director Nguyen Xuan Thao of the DDMEF agreed. The deficiencies essentially stem from a lack of a control environment characterized by well thought out policies and procedures that allow for effective oversight.

The result Thao says results in a lack of accountability, inefficiency and waste.

“Most notably, projects are routinely implemented slower than scheduled with significant cost overruns,” Thao stressed as has been highlighted in news media reports on countless occasions.

The failures raise the spectre of an environment ripe with graft facilitating an ever-worsening slide towards corruption, which don’t work towards advancing social and economic causes but instead exacerbate the situation.

The long term implications are huge as ODA funding sources will eventually dry up and funding for social and economic programs will transfer to the state budget and be funded by taxes or quite possibly, not funded at all.

Thao suggests the MoF conduct annual reviews of all projects financed by ODA, identify causes of implementation failures, completion delays or reasons for bottlenecks and cost overruns.

The MoF should evaluate each program’s viability and timely terminate those of a dubious nature to minimize losses.

Deputy Director Le Xuan Sang of Vietnam Institute of Economics agreed with Long’s view saying specific sanctions should be devised and strictly enforced for those who misuse or abuse the ODA funding process.

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