SOCIALIST REPUBLIC OF VIETNAM
Hanoi, November 6, 2018
Pursuant to the Law on Government Organization dated June 19, 2015;
Pursuant to Law on Public Investment dated June 18, 2014;
Pursuant to Law on Management of Public Debt dated November 23, 2017;
Pursuant to Decree No. 16/2016/ND-CP dated March 16, 2016 on management and use of official development assistance (ODA) and concessional loans of foreign sponsors;
Pursuant to Decree No. 132/2018/ND-CP dated October 1, 2018 of the Government on amendment to Decree No. 16/2016/ND-CP dated March 16, 2016 on management and use of official development assistance (ODA) and concessional loans of foreign sponsors;
1. General principles
- Focus on dealing with difficulties, promoting disbursement and effectively utilizing granted funding sources.
- Continue to select and prepare public investment projects effectively (based on socio-economic and financial effectiveness), disburse after 2020 to guarantee continuity and prevent sudden decrease in investment and development funding sources after 2020. However, further screening is required to select effective projects to maintain sustainable socio-economic development, prevent budget deficit and maintain public debt safety indicators approved by the National Assembly.
- Focus loan capital on primary sectors and key constructions that connect multiple regions, promote regional development while appraising and assessing projects closely, objectively and transparently to improve effectiveness of foreign loan capital.
- Utilize remaining ODA loans of multilateral sponsors in 2018 - 2020. For IBRD loan of World Bank (WB), OCR of the Asia Development Bank (ADB) and concessional loans of other sponsors, continue to mobilize and use for infrastructure development. Mobilization and use must be reviewed in total of public investment capital, loan limit and repayment capacity of state budget; considered and assessed in terms of impact until the period following 2021 – 2025 to ensure gradual reduction of deficit, public debt, restructuring of public investment rate according to Resolutions of the central government, National Assembly and repayment capacity of all budget levels.
- Only employ foreign loan capital for sectors/projects where domestic public investment has not been able to fulfill, where private sector is not mobilized to invest due to lack of investment or for specific sectors that require investment from the Government to control and manage price in order to facilitate development of other economies such as river port, sea port, etc. Encourage private sector to cooperate with the government in investing in dealing with issues relating to infrastructure.
- ODA and concessional loans shall be used for investment in development but not recurrent expenditure.
2. Loan use principles
- Non-refundable aid: Prioritize for eliminating hunger and reducing poverty; social sectors; developing regulation and personnel development policies; transferring knowledge and technology; preventing, relieving natural disaster consequences and adapting to climate change; preparing infrastructure projects with complicated technical, technological basis, investment projects in form of public-private partnerships (PPP) or co-funding projects utilizing concessional loans to increase incentives of loans.
- ODA: Prioritize for programs and project in medical, education, vocational education, climate change adaptation, environmental protection, essential traffic infrastructures that cannot recover capital directly, have large scale, connect multiple regions, conform to planning and promote socio-economic development of regions.
- Concessional loans: Prioritize for infrastructure projects that have large scale and can generate revenues to repay loans; lending projects for on-lending.
- For important projects and programs that must be prioritized but lack the capacity to generate revenues to repay debt or projects and programs that are provided or assigned, the Prime Minister shall consider and decide on using concessional loans on a case-by-case basis.
3. Prioritized projects/sectors: Prioritize projects/sectors assisting implementation of 3 breakthroughs in Socio-economic development strategy 2011 - 2020, to be specific:
- Socio-economic infrastructure, in which, prioritize traffic infrastructure, social (medical, education, vocational education) infrastructure, smart urban and hydraulic development.
- Research, policy and regulation development, and renovation.
- Resolution for pollution and improvement of environmental quality; prevention and remediation of natural disaster consequences, adaptation to climate change, and green growth.
- Use as government investment in executing projects in form of public-private partnerships.
4. Principles for reviewing list of projects and improving capital effectiveness
- Ministries and local governments shall balance and allocate funding sources from assigned funding sources for mid-term investment plans.
- Allocate capital plans according to implementation progress and disbursement capacity of projects in the following order of priority: (i) projects that conclude loan agreements of the period 2018 – 2020 and cannot be extended; (ii) joint projects that have not allocated with mid-term plans for the period 2016 – 2020; (iii) projects that have good progress and disbursement capacity, major projects, important projects, and urgent projects that are hindered in terms of disbursement due to lack of foreign capital plans and counterpart fund; (iv) projects that have entered into loan agreements but have not entered mid-term public investment plans for the period 2016 – 2020.
- For projects that lack disbursement capacity or have low, ineffective disbursement capacity, reduce capital and channel to other projects with good disbursement capacity.
- Remaining capital of projects (including remaining capital after bidding, remaining capital due to change of exchange rate, interest rate, back-up capital that has not been allocated and other remaining capital) shall be used for utilizing preferential funding sources signed with sponsors, utilizing projects and programs in progress without adding limit to mid-term foreign capital plans of the period 2016 – 2020. Refrain from using remaining capital to pay for land clearance, tax, capacity improvement, training and recurrent payment. Prime Minister shall consider and decide on using remaining capital on a case-by-case basis.
- For projects that have been issued with investment guidelines or approved propositions: Review the lists. Only enter into agreements for particularly important and urgent projects that deal with pressing issues of the economy; projects that have been thoroughly prepared over a long period of time or utilize remaining inexpensive loan and ensure that disbursement of these projects in the period 2018 – 2020 must be within balance capacity of funding sources.
- For new proposed projects: Selection and preparation of new projects must conform to direction of the Government regarding vision and orientation for the period 2021 – 2025. Continue to select and prepare programs, projects prioritized for socio-economic infrastructure, and adopt necessary procedures as per the law to prepare for mid-term public investment plan of the period 2021 – 2025.
Primary direction for attracting and using ODA and concessional loans of the period 2021- 2025 as follows:
1. Avoid sudden cut of foreign loan: Foreign capital that generates foreign currency supply, improve national balance of payments and satisfy major demands regarding national demand for importing investment commodities. In order to guarantee financial sources for uninterrupted investment development and avoid risks to the balance of payments in case decrease of new loans take place simultaneously with increase in debt repayment, the Government must develop strategies for maintaining relationship with multiple partners, sponsors and avoid ceasing all foreign loans simultaneously.
2. In order to effectively utilize foreign loans, direct use as follows:
- New loans must be reviewed in terms of effectiveness of economic, financial measures, assessed in terms of impact on mid-term public investment plans, public debt indicators, budget and future solvency.
- Use foreign loan in a concentrated manner for primary sectors to utilize economic effectiveness. Procedures for appraising, assessing closely, objectively and transparently must be developed by promulgating indicators for assessing and selecting projects according to international standards and satisfactory to Vietnamese situations.
- Prioritize for projects that are socio-economic effective and projects that directly promote growth and sustainable development, especially projects that can generate foreign currency revenues in mid and long term to improve repayment capacity, such as: projects dealing with simple infrastructure issues (traffic, smart urban, clean energy and renewable energy, etc.), projects developing smart agriculture (hydraulics, application of science and technology in agricultural production, agricultural electrification, etc.), projects promoting export and projects renovating, transferring technology.
- Prioritize projects that involve public commodities, projects that are incurred by state bank, projects that include adaptation to climate change, improve environmental quality, education, technology, skills.
- Prioritize using ODA and concessional loans as attraction for private investment, refrain from using foreign loans for projects that are within concern of private sectors and can be implemented with effective technology and lower cost.
- Use ODA and concessional loans as seed capital and reagents for domestic funding sources, especially private investment capital. Gradually reduce foreign loan percentage in total project investment.
Article 2. Hereby assigns Ministry of Planning and Investment to take charge and cooperate with relevant agencies in finalizing Orientation for attracting, managing and using ODA and concessional loans for the period of 2021 – 2025 conforming to 10-year socio-economic development strategy of 2021 - 2030 and 5-year socio-economic development of 2021 - 2025; conduct research to propose Strategy framework for new development partners and vision until 2030 which serve as the basis for developing programs and projects which are expected to utilize ODA, concessional loans and activities relating to cooperation in development in future stages.
Article 3. This Decision comes into effect from the day of signing. Ministers, heads of ministerial agencies, heads of Governmental agencies, Chairpersons of People’s Committees of provinces and central-affiliated cities are responsible for implementation of this Decision./.
Nguyen Xuan Phuc