The Government will soon promote Official Development Agency (ODA) disbursement through commercial joint-stock banks.

"ODA capital is mostly disbursed through State finance institutes with many limitations and cumbersome procedures," Le Ngoc Hoan, a finance and investment expert, was quoted as saying in Dau Tu (Vietnam Investment Review) newspaper.

"Up to 2017, Vietnam will continue to receive preferential loans from international finance institutes and Governments. Therefore, how to effectively exploit ODA is very important," he added.

Last year, Vietnam disbursed US$5.6 billion from ODA but according to the Ministry of Planning and Investment, ODA loans were not fairly distributed among industries and localities.

In addition, slow ground clearance progress, changes and adjustments to projects prolonged projects and increased expenditures.

"Along with the fair distribution of ODA loans, related authorities like the ministries of Finance and Planning and Investment should change their point of view that ODA loans are just for state-owned enterprises," Nguyen Hoang Hiep, deputy general director of Thai Son Investment Consulting company, said.

Since the beginning of this year, the Government has released policies to increase effectiveness for ODA disbursement with a goal to reduce public debt in a sustainable way and spend 70 per cent of ODA loans for social-economic development.

At a meeting between the National Steering Committee about ODA and preferential loans with six international banks at the beginning of the year, Vietnamese authorities stressed that the preparation process will receive more attention to ensure effectiveness and lower costs.

The most important aspect in ODA disbursement is how to bring capital to the appropriate enterprises and projects. This can help increase economic effectiveness of business operations.

Furthermore, the Government is looking for good commercial joint-stock banks to deliver ODA loans because they have a good understanding of localities, along with professional staff to manage projects.

HD Bank is the first commercial joint-stock bank which has been officially approved by the Government on behalf of the Finance Ministry to loan VND3 trillion ($141 million) from the Japan International Cooperation Agency (JICA) to the southern province of Dong Nai's Nhon Trach Water Supply project for the second phase.

The project has total expenditures of VND3.6 trillion ($169 million) with 85 per cent of capital from JICA.

"With this project, HD Bank has signed with the Ministry of Finance to cover 20 per cent of risk in order to reduce public debt," Tran Hoai Nam, deputy general director of HD Bank, said.

For other projects, the ministry and bank will suffer varying degrees of risk (from 100 per cent or less), depending on the agreement negotiated between the two sides.

VNS