Vietnam should reconsider official development assistant (ODA) loans from China in the days ahead as this source of funding comes with several conditions and a higher interest rate than loans from other countries, according to a report sent to the Prime Minister by the Ministry of Planning and Investment (MPI).

The Cat Linh-Ha Dong urban railway in the capital city of Hanoi – PHOTO: TTXVN

The report on orientations for attracting, managing and deploying ODA loans in the 2018-2020 period, with a vision toward 2025 indicated that the annual interest rate of China’s ODA loans is 3%, with commitment and management fees at a rate of 0.5% each. The maturity period is 15 years, including a grace period of five years. In addition, preferential credit packages are provided by the Export-Import Bank of China (China Eximbank).

Meanwhile, the interest rates of ODA loans for other countries are a mere 0-2%, along with fewer conditions.

For instance, the interest rate for South Korea’s ODA loans ranges from 0% to 2%, based on bidding conditions. The zero-interest rate is valid for tenders among South Korean firms, while the 2% rate is applicable to bidding projects executed by South Korean and Vietnamese companies. Besides this, the maturity period fluctuates between 15 and 40 years, with a grace period lasting from seven to 10 years.

The ministry noted that the preferential credit packages offered by China are only appropriate for projects with direct financial input and those that are eligible to pay liabilities. However, several projects using funding and equipment and executed by Chinese contractors have recorded slow progress, poor quality and cost overruns, which affect investment efficiency.

The investment capital of the Cat Linh-Ha Dong urban railway project in Hanoi, for instance, has increased fivefold compared with the initial plan, rising to some VND47 trillion from the original VND8.7 trillion.

In short, the MPI confirmed that taking ODA loans from China in the 2018-2020 period merited more consideration.

In the 2016-2017 period, China stood fifth in terms of offering ODA and preferential loans to Vietnam, worth some US$280 million. China was preceded by the World Bank, the Japan International Cooperation Agency and Asian Development Bank.

SGT