ODA – Catalyst for opening up investment capital

CA - In the period from 2011-2015, ODA capital and preferential loans will be considered as catalyst for opening up private investment capital.

There will be great change in terms of object and way of using ODA in the period of 2011-2015 that is Vietnam will give priority in using ODA and preferential loans for important projects which are difficult to mobilize commercial loan or capital from private investment. “We will use ODA and preferential loans as a catalyst for opening up private investment capital through PPP model or making dissemination in promoting trade, investment, and economic shifting in areas and region”, said by Mr. Cao Manh Cuong, Deputy General Director of External Economic Department (Ministry of Planning and Investment).

According to Mr. Cuong, this is an important content of Scheme on Orientation for attraction, management and using ODA and other preferential loans of donors in 2011 – 2015 period which has been completed by Vietnamese Government. This scheme will also be sent to development partners of Vietnam at Year End Consultative Group 2011 which to take place on December 6th 2011 in Ha Noi.

Together with this Scheme, according to Mr. Cuong, Decree No. 131/2006/NĐ-CP on management and utilization of ODA will be amended. One of the important amended content is that for the first time, there will be mechanism for private sector to approach ODA. With the new mechanism, ODA-approaching object will be expanded, regardless of economic sectors and ODA will become the “prey” for encouraging private sector to make investment in developing economic and social infrastructure projects in the context that capital from state budget and government bond will be narrowed.

According to the plan, target for mobilization and attraction of ODA in the next period is of about 32-34 billion USD of committed ODA, annual average amount of 6.4-6.8 billion USD, approximate with the amount of 2006-2010 period (6.35 billion USD/year). While, expected disbursement capital is about 14-16 billion USD (equivalent to 6% of total social investment).

An orientation in attraction and use of ODA in nest stage is necessary, especially in context that Vietnam has become a developing country with average income. Therefore, nature, scale and conditions for ODA provision for Vietnam will have some certain changes. However, the matter is not only how much ODA capital it can draw and how to disburse it but how ODA capital can contribute better for development purpose?

Regarding this matter, Vice Minister of Planning and Investment, Mr. Dang Huy Dong, who had attended High Level Forum on Aid Effectiveness held in Busan (South Korea), said,  in the 10-year Socio-economic Development Strategy 2011-2020, the Government defined 03 strategic breakthrough elements that are institution, human resource and infrastructure. “Therefore, in order to be in line with socio – economic development purpose of Vietnam, aids should be focused on these 3 breakthrough elements“, Vice Minister Dong said.

According to Scheme on Orientation for attraction, management and using ODA and other preferential loans of donors in 2011 – 2015 period, one of important orientation in use of ODA capital in next stage is to support on construction of synchronous, large scale and modern infrastructure. In details, ODA capital will be used to develop expressways, seaports, international airports, some of railway routes, power source and transmission system, upgrade and newly construct some national railway route and urban railway including metro system in some big cities…

Agreed with orientation in attraction and use of ODA of Vietnam, Mrs. Victoria Kwakwa, Country Director of World Bank in Vietnam said that Vietnam need to choose priority order in the orientation so that ODA capital source can be used more effectively.

A message was sent, that Vietnam can only do this with cooperation of donors. And that Vietnam need longer commitment of donors in each sector that match with orientation of Vietnamese Government.