VietNamNet Bridge - About $15.5 billion worth of preferential loans within the framework of official development assistance (ODA) have been allocated to localities in the last 10 years. However, most of the capital has been allocated to rich provinces because poor localities have few ODA projects.

 

About $15.5 billion worth of preferential loans within the framework of official development assistance (ODA) have been allocated to localities in the last 10 years.

According to the Ministry of Finance (MOF), two-thirds of the foreign loans have been allocated to key development projects at the central level, while the remaining one-third were given to investment projects in localities, totaling $15.5 billion.

Since the demand and the investment projects’ scale in provinces and cities vary, the capital amounts allocated are different. More ODA capital has been given to rich provinces.

Most of the capital has been allocated to rich provinces because poor localities have few ODA projects.

According to Truong Hung Long, director of the Ministry of Finance’s Debt Management and External Finance Department, the problem is that poor provinces have few large-scale investment projects because the local authorities are not sure about the debt payment capability. Meanwhile, more developed provinces can lure more capital because they are certain about the debt payment capability and follow more open management mechanisms.

However, Long admitted it is a big problem that the government allocates big capital for developed provinces and cities, while there are not large-scale projects in the mountainous provinces in the north, central region, Central Highlands and the western part of the southern region.

The provinces of Vinh Long, Bac Lieu and Hau Giang recently have no investment projects developed by local authorities. There are only projects funded by the state in the localities.

The State Budget Law ratified by the National Assembly in 2015 which is expected to take effect in 2017 has officially determined the local authorities’ right for overexpenditures. This means that local authorities can formalize the loans to fund the investment projects in their localities.

This would allow local authorities to differentiate debts and allotted capital, thus helping improve investment efficiency. Local authorities must understand that they must pay debts therefore, they will have to design debt payment plans.

It is expected that preferential loans for Vietnam would stop in 2017, i.e. Vietnam would then have to rely on commercial loans. 

Economists, therefore, recommend that it would be better to reserve ODA capital to poor provinces in an effort to quickly upgrade infrastructure. 

According to Nguyen Xuan Thao from the Ministry of Finance, a lot of problems have been found in the last 10 years of use of ODA. The efficiency of ODA projects remains low, while most projects lack reciprocal capital and went more slowly than scheduled.

“Some projects finished only after eight to 10 years, or even 12 years of implementation, though it was designed to be implemented within five years,” Thao said, adding that 90 percent of projects saw the deadlines extended once.


TBKTSG