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Confidence and pressure

In Uncategorized on December 16, 2010 at 9:33 am

Confidence and pressure

QĐND – Saturday, December 11, 2010, 21:6 (GMT+7)

Development partners pledged US$7.9 billion in ODA for Vietnam in 2011 at the recent Consultative Group (CG) Meeting for Vietnam. The figure is roughly equivalent to last year’s commitment of US$8 billion. The issue now is how to use ODA effectively to avoid corollary of public debts.  

Vietnam has been recognised as a middle-income country (if annual per capita income of a country is US$950, Vietnam’s current level is now US$1,160).

Now that Vietnam has joined the global group of middle-income countries, bilateral and multilateral donors will have to find other ways of approach to provide ODA for Vietnam because the assistance policies for middle-income countries are different. This means that non-refundable aid will drop while loans with stricter conditions will increase. Consequently, Vietnam needs to manage ODA effectively so it can persuade donors to invest in the country.

The Country Director of the World Bank (WB), Victoria Kwakwa said that Vietnam is on the right track taking initiatives in its policies when it becomes a middle-income country. But the implementation of such policies remains a huge challenge. Donors agreed to hold talks with Vietnam to help it use ODA effectively without focusing on the actual amount, Mrs Kwakwa added.

Disbursement- an uphill task

Donors repeatedly mentioned the inefficient use of ODA by State-owned enterprises, citing the failure of the State-run Vietnam Shipbuilding Industry Group as an example. This has adversely affected Vietnam’s use of capital inflows including ODA. However, donors are still putting their confidence in Vietnam as evidenced by their pledged ODA of US$7.9 billion for next year. Donors’ confidence has put pressure on Vietnam to effectively and properly disburse and use ODA.

In 2010, around US$3 billion was disbursed and US$13.8 billion was disbursed during the 2006-2010 period, US$2 billion higher than the projected figure. Generally, donors gave positive assessments of ODA disbursement for projects in Vietnam but in fact it   was still slow.

The Director of the Asian Development Bank (ADB) in Vietnam, Ayumi Konishi, said the ADB pledged a total of US$1.5 billion for 2011 and is considering US$10 billion for the 2011-2015 period, but it is still concerned about the pace of disbursement. Therefore, accelerating the disbursement is a preparation before a project is carried out.

70 percent of Vietnam’s public debts are from ODA. Meanwhile, its public debts are reaching the end of the grace period. Despite having preferential interest rates with a grace period of 10 year under ODA commitments, Vietnam still has to clear 20 percent of its debts within 40 years. Thereby, it is crucial to use ODA effectively to avoid heavier debt burdens in the future.

Over the past 17 years, donors have pledged US$64 billion for Vietnam. According to Dr Duong Duc Ung, a senior policy advisor from the Ministry of Planning and Investment, Vietnam disbursed only half of this amount and the remainder will be disbursed in the following years which will pose a heavier task.

To iron out snags in ODA disbursement, it is essential to deal with domestic procedures and make them align with those of the donors.

In addition, Vietnam needs to meet all loan conditions with interest rates lower than commercial rates and continue to focus on previous ODA-funded areas such as poverty reduction and rural and agricultural development.

The bottom line is that the country must ensure its pubic debts will be paid within the time limit or projects will likely take back their capital.

Source: VOV

Source: QDND

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