Exclusive: JICA to Provide Preferential Loans to Vietnam till 2030

Tuan Minh

10:58 16/05/2016

BizLIVE - JICA will continue providing concessional loans for Vietnam till around 2030, Mr. Yamamoto Kenichi, senior representative of the JICA Vietnam Office, told BizLIVE.

Exclusive: JICA to Provide Preferential Loans to Vietnam till 2030

Mr. Yamamoto Kenichi, senior representative of JICA Vietnam Office. (Photo: JICA Vietnam)

Official development assistance (ODA) plays an important role in Vietnam’s socio-economic development, especially the government is struggling to offset its fiscal deficit and looking for resources for sizable projects.
In an interview with BizLIVE, Mr. Yamamoto Kenichi, senior representative of the Japan International Cooperation Agency (JICA) Vietnam Office, shared his views on Japan’s ODA plans for Vietnam.
Japan is among the largest ODA providers for Vietnam over the past two decades. While the World Bank plans to cut IDA loans for Vietnam next year and the ADB mulls over halting ADF loans in 2019, what ODA plans does the Japanese government have for Vietnam in the years to come? Which sectors will be prioritized?
Vietnam is currently classified into Lower Middle Income Countries with GNI per capita in the range between $1,046 and $1,985 in 2014. Interest rate of Japanese ODA Loans to Vietnam is 0.1%-1.4% per annum and repayment period is 25-40 years with 7-10 years of grace period. The conditions are more favorable than those of other financing sources such as other donors’ and government-bond issuance.
Considering the current economic growth of Vietnam, JICA will provide preferential loans to Vietnam till around 2030.
The Vietnamese government is giving its priority to infrastructure construction, such as road, airport, power plant, in order to level up the country’s socio-economic development, improve Vietnamese people’s life, and also strengthen the country’s competitiveness.
To support this policy of the Vietnamese government, JICA will continue to support infrastructure construction by providing ODA through the equal combination of both hard component (financial assistance) and soft component (technical cooperation) in alignment with the Japanese government’s policy.
In addition to that, the Vietnamese government has already recognized that food value and food variety are important matters for agricultural development of the country.
The Japanese and Vietnamese governments established Bilateral High Level Dialogue on Agriculture Cooperation in 2014 and approved the “Middle and Long-term Vision” on August 12, 2015. The vision aims at establishing a food value chain in Vietnam, which covers agriculture production, transportation, processing and marketing, with involvement of investment from public and private sectors of both countries.
Could you give an assessment on the effectiveness of environment projects funded with Japanese ODA in Vietnam?
Japan’s ODA for Vietnam’s forestry sector dated back in 1992. The aids contribute to the increase of forest coverage as well as capacity development of sustainable forest management.
Japanese students participate in saltwater plantation in Quang Ninh province. (Photo: thanhdoanhalong.gov.vn)
Notable forestry projects include “Afforestation on the coastal sandy area in southern central region”, “Afforestation under small scale pro-poor infrastructure development III (SPL III), “Protection, forest restoration and sustainable management project” (JICA-2), and “Sustainable Natural Resources Management Project” (SNRM).
At policy level, through policy dialogues under SPRCC, we have suggested necessary policy actions to the Vietnamese government and supported its implementation. So far more than 200 policy actions have been implemented and contributed to strengthening the capacity of Vietnam in responding to climate change.
Secondly, regarding mitigation area, we are supporting the Vietnamese government in establishing a legal framework to correspond to international standards after 2020, which is one of the turning points of the United Nations Framework Convention for Climate Change (UNFCCC).
Thirdly, in adaptation area, we especially support in enhancing resilience to natural disasters under the “building disaster resilient societies” project. In this project, we have contributed to developing the Integrated Flood Management Plan (IFMP) which outlines structural and non-structural measures to cope with flooding at river basin.
How about transport projects?
I want to emphasize that among the ODA loans provided by Japan to Vietnam, transport accounts for about 46%. Over the last five years, the Vietnamese government and JICA have put priority on utilizing Japanese ODA loan for the investment in key infrastructure.
One of the highlighted projects in recent year is the East-West Highway Construction Project which was officially put into operation in 2011. In order to tackle chronic traffic congestions, the East West Highway is an important arterial road connecting northeast and southwest outing area in the Ho Chi Minh City that provides a short and efficient route from the city center to the surrounding areas.
One of the most important impacts of the project is the construction of the Thu Thiem Tunnel under the Saigon River in which Japanese advanced technologies were applied.
In addition, in February 2015, the Ho Chi Minh City–Dau Giay Section under the North–South Expressway Construction Project was opened to traffic. The expressway section connecting HCMC and Dau Giay shortens the distance from HCMC to Vung Tau from 120 km to 95 km and reduces the travel time considerably.
Furthermore, as an example of JICA’s active operation in northern region, the Terminal 2 of Noi Bai International Airport, Nhat Tan Bridge and the road connecting the bridge with Noi Bai International Airport were inaugurated in January 2015. These 3 projects contribute to enhancement of transportation capacity from international gate to the center of city, thereby strengthening economic growth and international competitiveness of the country.
  The Nhat Tan bridge crossing the Red River in Hanoi was built with Japanese ODA. (Photo: www.doisongphapluat.com)
Another transport project which could be named for its high effectiveness is “the transport sector loan for national road improvement project” started in 2004 which has constructed so far a total of 144 bridges in two phases.
This project has helped improve the national road network, strengthen transport capacity, and improve traffic safety by replacing or reconstructing deteriorated bridges, thereby increasing the connectivity of logistics networks in ASEAN and the Mekong region.
Have ODA funds provided by JICA been disbursed on schedule?
The biggest concern regarding ODA loan projects is the delay in project implementation. Once the project faces severe delays, it will not only cause the cost overruns but also face the huge loss of economic profit.
Among the 19 Japanese ODA-funded projects put into use in the 2011-2015 period, there were eight projects that had been delayed due to bottlenecks in site clearance, insufficient capacity of executive agency, and insufficient capacity of contractor.
The main causes of the delays include the slow progress in site clearance due to the huge lack of budget for current expenditure and the complicated decision making process.
Slow site clearance is among the main causes of sluggishness of transport projects in Vietnam. (Photo: duongbo.vn)
In our understanding, the issue faced by the Vietnamese side now is how to establish the appropriate budget allocation mechanism based on the economic values which efficiently provides the necessary budget for site clearance for national or local projects in priority order.
Moreover, the coordination mechanism among the central and local government agencies is quite time-consuming and reaches to the further delays of the projects.  
With regard to the projects using ODA and less concessional loans, almost all decisions at the preparation stage need to obtain opinion of the related ministries but it is not yet defined who will be responsible and how responsible if this consultation process is not taken in time, hindering the decision making process. This is also one of the main reasons for slow implementation progress if there is a change in the project documents, that it is often the case.
Which measures does JICA plan to take to speed up the disbursement of much needed ODA?
To avoid delays in project implementation, the key solutions should be transparency and the third party’s evaluation.
Currently, JICA has been preparing for the information disclosure of each step of procurement implementation of all projects funded by ODA loan through website which monitors and tells the progress of procurement of contract packages and implementation for all projects.
As the next step, in cooperation with the Ministry of Finance and Ministry of Planning and Investment, it is planned to upgrade the system to cover all public investment projects in Vietnam in order to enhance efficiency and transparency.
We have also been considering the utilization of the third party’s evaluation for the projects which have no contract for consulting service two years after the conclusion of the loan agreement and/or four years in case of no contract for contractor.
Thank to these solutions, JICA expects to disclose and make clear the main causes in projects and governmental agencies which delay the project implementation. Also, JICA expects this mechanism to become the strong deterrence for the delay of projects’ implementation.