Vietnam looks back on 20 years of receiving, using development aid

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Vietnam looks back on 20 years of receiving, using development aid

With official development assistance greatly contributing to the growth of the country over the last 20 years, it is important that Vietnam ensure an effective and transparent use of such a valuable source of capital, local experts said Friday. Vietnam reviewed two decades of receiving and using development assistance (ODA) during a conference hosted by the Central Economics Committee for and the Bank for Investment and Development of Vietnam in the central city of Da Nang on Friday.

Foreign donors pledged a total of US$89.5 billion in ODA for Vietnam between 1993 and 2014, according to figures released at the event.

The Southeast Asian country has inked agreements on ODA of $73.6 billion, or an average of $3.5 billion a year, during the two-decade stretch.

Total ODA disbursement in the last 20 years was nearly $53.9 billion, or 73 percent of the aid agreements signed.

Deputy Prime Minister Vu Van Ninh underlined that ODA has provided an important and huge amount of capital for Vietnam’s eco-social development, especially at a time when the government and society forces were not strong enough.

ODA-funded projects have been carried out in a wide range of fields over the last two decades, from traffic, electricity, urban infrastructure, healthcare and education, the deputy premier said.

“Thanks to ODA, Vietnam has gradually perfected its policies, improved management and production ability, adapted technology transfers, which all contributed to boost trades and international integration,” Ninh concluded.

The development aid has also helped Vietnam to achieve its eco-social development targets and economic reforms, as Vuong Dinh Hue, head of the Central Economics Committee, remarked.

“It also created trust and encouragement for international investors to enter, and boost their presence in, Vietnam,” he told the conference.

Ineffective uses

Still, there are many shortcomings, including the poor ability to absorb development assistance or to implement ODA-funded projects, and the slow aid disbursements, Deputy Prime Minister Ninh said.

“Slow disbursement means that our use of this huge, important source of capital is ineffective,” he pressed.

Hue illustrated the poor ability to absorb the development aid by saying that the average ODA disbursement in the past 20 years was only 63 percent.

“There are many ODA-funded projects that lack feasibility and have poor capital use,” he said.

Dr. Nguyen Thanh Do, former head of the debt management agency under the Ministry of Finance, brought to the conference a list of ineffective, and failed, projects funded by development aid.

These include a rice bran oil production project in the southern province of Ben Tre and a jute bag making plant in Ho Chi Minh City, both funded by ODA loans from India, Do said.

“These projects used obsolete technology, and were unable to find neither sources of materials nor outlets for their products,” he elaborated.

“So the projects would never become operational.”

A frozen seafood plant in the northern city of Ha Long also failed to be commissioned due to the lack of material, whereas a silk project in the Central Highlands province of Lam Dong failed to compete on the market. Both of them were funded by ODA from Italy.

“A number of mechanics, water supply, and agriculture projects borrowing development aid from France and Germany are also ineffective,” he added.

Dr. Do pointed out that the common reason behind these failed projects is the misconception that ODA is a free source of capital.

“Only the government has to pay the debts, so local administration would just try to make use of the loans without considering the economic effectiveness, sustainability and debt repayment ability of the projects,” he said.

Dr. Tran Du Lich, a lawmaker from Ho Chi Minh City, said ODA must never be seen as a gift given to the country so every locality can take a share.

“Such a way of thinking is doing harm to the country,” he said.

Professor Vo Dai Luoc, former head of the Central Institute for Economics Research, said there must be a mechanism to oversee the transparency and effectiveness of using ODA.

Deputy Prime Minister Ninh said the government will try to improve the shortcomings in using development assistance and ensure that the aid will be “used effectively for the right purposes.”