VietNamNet Bridge – While highly appreciating the official development assistance (ODA) as an important resource for the economic development, economists have called on to be cautious in receiving and using the capital.

Vietnam has escaped hunger and poverty to become a middle income country. However, it still needs the assistance of the international donors through ODA to ensure the sustainable development and help avoid the “middle income trap.”

International donators have pledged to provide Vietnam $78.2 billion worth of capital under the mode of ODA since 1993, when it began receiving the assistance.

Of this, the officially signed agreements have the value of $58.5 billion and $37.6 billion has been disbursed, setting a firm foundation for the Vietnam socio-economic development, the hunger elimination and poverty reduction.

According to the Ministry of Agriculture and Rural Development (MARD), ODA has helped reduce the hunger and poverty rate from 60 percent in 1993 to 10 percent in 2012.

However, as Vietnam has become a middle income country, it has been warned that the ODA capital would be decreasing, while the loans would be less preferential and that it needs to get ready for the new circumstances.

Economists also think that it is now the right time for Vietnam to think carefully about the ODA use efficiency. As Vietnam has become a middle income country, it would be better not to think too much about the capital, or refuse the capital.

In fact, the pros and cons of ODA is not a new story. A lot of research works had been made to become a conclusion that ODA is not as highly effective as people think, and that it brings high risks to both the donators and ODA receivers.

The former Soviet Union’s scholars once called ODA a kind of the new imperialism, while advising developing countries not to welcome ODA.

The scholars from the donating countries themselves also advised developing countries not to try to obtain ODA at any cost, because ODA is not the “sweet milk bottle” as thought.

In principle, ODA receivers have the right to use the capital and manage the funded projects. However, in fact, donators always keep an eye over every step of the project implementation.

In general, 90 percent of the products and services used in the projects must be imported from the donating countries. The assistance receivers cannot use the domestic resources for the project implementation to save costs. As such, the real benefits Vietnam can make with ODA projects are not as big as people think.

The scholars have pointed out that donators would not make donations if they cannot earn as twice or triple as the money they spend.

ODA has been considered the “ideal capital source” because of the preferential interest rates. However, Dr. Vu Dinh Anh, a well-known finance expert, warned that the interests and the principals Vietnam has to pay may become very high due to the local currency devaluation.

Dr. Vo Dai Luoc, a well-known economist, said it is necessary to reconsider the efficiency of the projects funded by ODA.

The Ba Ria – Vung Tau port system is big and good, but it cannot compete with Binh Duong and Dong Nai. As a result, it has been deserted with the modest capacity of tens of percent of the designed capacity.

The Thi Vai Port has also been left idle, even though it has the huge investment capital of $800 million. Analysts noted that if the port had been developed by a domestic company, the investment capital would have been much lower.

Compiled by C. V