Vietnam trying to wean itself off preferential ODA loans

Last update 12:00 | 27/08/2017

VietNamNet Bridge – Vietnam now has to think of attracting private capital for development projects as preferential ODA loans will now have higher interest rates. 

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From 2018, Vietnam will no longer receive preferential ODA loans from WB, ADB and other financial institutions in developed countries at preferential loans of 2-3 percent. The interest rates will be 5-6 percent, not including the service fee.

The Nhon – Hanoi Station urban railway project kicked off in September 2010 and was initially planned to be completed in September 2017. However, as the project has been going slowly, the deadline has been extended to 2021.

Despite the four-year delay, Vietnam will still have to begin paying debts in 2017 and the total debt by in 2020 is VND822 billion, according to the Hanoi People’s Committee.

The project was initially estimated to cost 783 million euros, but after two adjustments, the estimates have reached 1.176 billion, or VND36 trillion. The total ODA loan of the project, as estimated by the Hanoi Urban Railway Management Board, is 957 million euros. The debt payment will be made until 2055.

The Cat Linh – Ha Dong project has been cited repeatedly at conferences and workshops as an example of sluggish construction, multiple delays and severe sanction provisions in the loan contract.

The Cat Linh – Ha Dong project has been cited repeatedly at conferences and workshops as an example of sluggish construction, multiple delays and severe sanction provisions in the loan contract.

The project implementation came to a standstill because of slow disbursement. Under the initial plan, the project will be implemented from November 2008 to November 2013 with total investment capital of $552.86 million.

However, the groundbreaking ceremony only took place in April 2010 and started in October 2011. After some adjustments, the estimates of the projects have increased to $868.04 million and the project will not be completed prior to the second quarter of 2018.

Analysts commented that in many cases, the preferential loans turned out to be costly because of delays and many problems.

To obtain capital for investment and development, Vietnam will have to seek new capital sources in the society.However, according to economist Nguyen Mai, the problem is that the capital mobilized from sources in the society cannot be used effectively. The loans are allocated to important projects that serve socio-economic development.

Mai emphasized that it is necessary to gather strength on the most important projects instead of calling for capital for so many projects as Hanoi is doing

Nguyen Tri Hieu, a banking expert, said mobilizing resources for transport infrastructure and high-technology agriculture should be a top priority, while it is necessary to reconsider cultural projects which are not urgent.

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M. Ha

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