Vietnam-Japan Business Forum Discusses Measures for Private Firms to Use ODA

Representatives from local and foreign firms have requested authorities to let private firms access the official development assistance (ODA) fund, the Thoi Bao Kinh Doanh (Business Times) reported from the Vietnam-Japan Business Forum on Oct 20. Nguyen Hoang, General Director of N&G Development and Investment Corporation, proposes using part of the ODA or Japan’s preferential loans for supporting industries. With this source of fund, private firms can buy state-of-the-art equipment in order to work with high standard Japanese firms. Vu Tien Loc, chairman of Vietnam Chamber of Commerce and Industry (VCCI), said the proposal is necessary since supporting industries are essentials for manufacturing sectors but yet developed to meet the international standards. The ODA funds have advantages over commercial banks’ loans due to low cost, long term, and possible grace period for principal and interest payment. This is perfectly fit for weak supporting industries. However, economist Vo Dai Luoc of the Vietnam Economics Association raised concerns about the efficiency of private firms when receiving ODA. Because ODA is the agreement between countries, only government can receive ODA and redistribute for other recipients. The inefficiency of ODA use can raise national debt, which is already projected at around 62% of total country’s gross domestic product of end of this year. The ODA funds can be costly because receivers must use expensive inputs, hire foreign contractors due to agreement between two countries. Therefore, the price tag of ODA projects are very high, said Bui Tien Thanh, an economic expert. Vietnam often mobilized ODA for huge infrastructure projects. Earlier this year, economists and experts have warned the authorities that Vietnam has become a middle-income country and will soon not qualified for additional preferential loans. (Thoi Bao Kinh Doanh – Business Times Oct 20 p3)