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Vietnam Today

In need of redress

Released at: 11:36, 19/03/2015 ODA for private sector

In need of redress

Vietnam's legal framework provides favorable conditions and also difficulties to private enterprises in accessing ODA.

Mr. Le Quang Manh
Director General of the Foreign Economic Relations Department under the Ministry of Planning and Investment

The consistent policy and guideline of the Vietnamese Government is to develop a multi-sector economy so the private sector is treated fairly when accessing capital sources. These policies and guidelines provide advantages to private enterprises when they seek to access official development assistance (ODA).

"There is a mechanism for private enterprises to borrow ODA in the way State enterprises do," according to Conclusion No. 64 on February 9, 2010 from the Secretariat on the results of examining the conduct of Resolution No. 14, which was launched on March 18, 2002 and stipulated the renewing mechanisms and policies to encourage and support the private economy.
Over the years, many stipulations have been promulgated and modified to establish a sound legal framework, institutional environment and social opinion for the private economy to develop, the Conclusion of the Politburo pointed out. The government, ministries, State agencies and local authorities have been active in conducting a range of solutions to support enterprises, including private enterprises.

Regarding the legal framework, Decree No. 38 issued on April 23, 2013 by the government defines the form and the conditions for private enterprises to access and borrow ODA. Moreover, Decree No. 78 issued on July 14, 2010 by the government stipulates that private enterprises can borrow capital sources of the government in the form of re-borrowing. Circular No.1 issued on January 9, 2014 by the Ministry of Planning and Investment also contributes to guiding Decree No. 38 (2013) on managing and using ODA and preferential loan capital.

Ministries and State agencies have been trying to modify and improve the legal framework to provide more favorable conditions to the private sector to access ODA and preferential loan capital.

However, the legal framework for the private sector to access ODA has not been improved and this presents difficulties for the sector in accessing ODA. Financial conditions and professional conditions on guarantees for using ODA have not been clarified. Stipulations on identifying the agencies of private organizations that receive ODA need to be improved. The absence of a legal framework on the responsibilities and capacity to repay ODA debts of the private sector is a further difficulty for them accessing ODA.

On the other hand, there is no mutual mechanism between Vietnam and sponsors to proclaim information on ODA sources and preferential loan capital where the private sector is the beneficiary.

Even so, there are several typical projects where ODA has been used effectively by private enterprises, for example the Phu My 2 thermal power plant project (World Bank), the credit line project to develop small and medium-sized enterprises (Denmark), the credit project to develop small and medium-sized enterprises and private enterprises (Japan), and the third rural financial project (World Bank), which was conducted by the Bank for Investment and Development of Vietnam (BIDV).

To have more excellent projects conducted by private enterprises, solutions to improve their ability to access and utilize ODA are very much needed. In accordance with the Conclusion of the Politburo, the legal framework should be enhanced to help the private sector gain easier access and utilize ODA efficiently. Otherwise, the transparency and disclosure of information related to ODA and preferential loan capital must be assured.

Furthermore, the private sector, when accessing ODA sources and preferential loan capital, must work on the principle that those who are ODA beneficiaries must take responsible for repaying debts and sharing the burden of risk with the government. Hence, private enterprises must also enhance their ability to use the source effectively.

All related parties, such as State agencies, banks, sponsors and the private sector must identify their roles as well as their responsibilities in the process of managing and utilizing ODA and preferential loan capital. Meanwhile, the role of public opinion has to be strengthened in regard to inspections over ODA use.

Priority areas for ODA and concessionary loan use

- Construction of large-scale and modern economic infrastructure, including transport infrastructure (roadways, railways, airports, seaports and internal waterways), urban infrastructure (traffic networks, water supply and drainage, environmental hygiene, and power infrastructure), communications and technological infrastructure, energy infrastructure (in particular the development of renewable energy and new energy sources), and irrigation networks and dykes.
- Development of social infrastructure, including culture, health, education and training, vocational training, social security, and poverty reduction.
- Development of hi-tech and science, source technology, and science and technology development in certain prioritized, concentrated fields, economic knowledge and high quality human resources.
- Development of agriculture and rural areas, including the restructuring and development of the agricultural economy, rural socio-economic infrastructure, and building new rural areas.
- Enhancement of institutional capacity and administrative reform.
- Protection of the environment and natural resources, disaster mitigation, climate change response, sustainable development, and green growth.
- Support for promoting commerce, investment, banking and finance, tourism and several production and business domains aimed at strengthening the economy's competitive capacity.
- Support for the implementation of national target programs.
- Other prioritized fields determined at the Prime Minister's discretion.

Source: Extracted from Government Decree No. 38/2013/ND-CP

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