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Vietnam Today

Specific support

Released at: 10:40, 19/03/2015 ODA for private sector

Specific support

Promoting private sector engagement in accessing ODA loans is the best way for Vietnam to sustain its growth.

Mr. Mori Mutsuya, JICA Vietnam Chief Representative

Similar to any other country around the world, Vietnam is entering a stage where the private sector plays a role as an engine of development. For infrastructure investment alone, in order to sustain growth of 6 per cent Vietnam will need about $25 billion a year while the government is able to mobilize only $16 billion. Private sector financing is the only source that can fill this gap, though the general perception is that infrastructure should be financed by public investment. Together with other factors, an increasing ICOR and its higher value in Vietnam than in neighboring countries tells us that public investment is inefficient. Promoting the private sector while making a catalytic role for the public sector, including ODA, is the only way to sustain the country's growth.

Having experienced a similar development path, private sector development has been always on the agenda of Japan's ODA assistance to Vietnam. Japan is the top provider of ODA loans for infrastructure development. In the course of implementation, many Vietnamese companies have obtained contract packages. Through technical transfers from Japanese lead partners and consultants that have international-level engineering knowledge, Vietnamese companies have significantly improved their quality of work and strengthened their overall competitive capacity and bargaining power. On the other hand, there is still a lot of room for enhancing the gains of local companies directly engaging in Japanese ODA implementation, particularly in the areas of engineering and project management capacity. It is, however, noted that many local companies still face financial challenges in mobilizing the necessary resources for efficient contract execution.

Another example of JICA's support for the development of Vietnam's private sector is the extension of the Small and Medium-Sized Enterprises Finance Projects (SMEFP) (I) - (III) (1999-2015). Under SMEFP we aim to support SMEs in Vietnam by providing access to medium and long-term funds through participating financial institutions. Through three consecutive loans in the SMEFP series, JICA provided around 27 billion JPY ($228 million) (disbursed) and contributed to the businesses of more than 800 SMEs.

In response to the shift of main actors in the economy from the public to the private, JICA has also introduced and expanded its assistance menu. Newly introduced schemes addressing the needs of the private sector include the following:

  • The resumption of Private Sector Investment Finance (2011) aimed at directly supporting private entities participating in PPP projects in developing countries;
  • The introduction of Preparatory Survey F/S (PPP/BOT Infrastructure F/S Assistance); and
  • The introduction of Small and Medium Enterprise Partnership Assistance to support Japanese SMEs to expand their business overseas.

Most recently, given the specific conditions of agriculture development in Vietnam and the strong appetite of Japanese enterprises for the country's agricultural sector, JICA has been trying to identify the needs of the private sector and provide solutions in a timely manner by taking into account the broader view of the value chain in the market economy. The current ongoing technical assistance is to find an appropriate mechanism that would benefit both agriculture production companies and individual farmers, in order to address both basic development needs and the improvement of the business environment for further growth.

Conditions for private enterprises receiving ODA and concessionary loans

- Capacity to manage programs or projects must be confirmed by managing agencies of such programs or projects or by agencies providing the funds.
- The financial plans of the program or project and the financial capability of the project owner must be in conformity with laws and be in accordance with guidance from the Ministry of Finance.

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

Conditions for private enterprises to access ODA funds and concessionary loan funds

- Borrowing from domestic financial organizations or credit organizations through programs or projects in which credit limits or credit components are financed by ODA and concessionary loans for activities in conformity with international treaties on such capital sources and in compliance with the loan processes of financial organizations or credit organizations.
- Participating in the implementation of programs or projects in priority fields regarding the use of ODA and concessionary loans with funds re-borrowed from the State budget.
- Participating in the implementation of programs or projects under the PPP form, in which the government contributes using ODA and concessionary loans.
- Participating in the implementation of programs or projects with the target of supporting private enterprises in the management of programs or projects.

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

  • TAGS
  • ODA loans

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