Rise from failure

(Baonghean)-Since the end of 1993, after resuming relations with the international financial community, Vietnam has been able to open up the channel to mobilize ODA capital with many countries and international financial organizations. However, in the near future, Vietnam will no longer receive abundant ODA sources as before. Recognizing and re-evaluating the failures in using this capital source is to draw lessons that are always very necessary, according to the "insider" - Dr. Nguyen Thanh Do, former Director of the Department of Debt Management and External Finance (Ministry of Finance).

ODA capital and preferential loans are prioritized for infrastructure construction (Illustration photo - internet source)

Waste of capital

Besides the marks in mobilizing and using ODA of Vietnam, it is clear that there are also dark corners that we cannot help but mention. We have had ODA programs and projects that either completely failed or were not as effective as expected. First, there was the rice bran oil extraction project in Ben Tre, the jute bag weaving line project in Ho Chi Minh City, borrowed ODA capital from India, because of outdated technology, lack of raw materials and no place to consume products, so after handover, they could not operate at all.

Second, the Ha Long frozen seafood factory project, funded by Italian ODA, is not operational due to lack of raw materials. Even the silkworm development program in Lam Dong, funded by Italian ODA, failed because the products could not compete in the market. Not to mention the clean water supply project in Kon Tum and Yen Bai, funded by French ODA, which was ineffective because only 1/3 of the designed capacity was used, or the cotton and Arabica coffee planting program, funded by French ODA, which failed due to poor planning, implementation, and management.

It can be seen that the above mentioned failed projects are all ODA projects implemented under the loan-for-re-lending mechanism. Under this mechanism, when a project cannot repay its debt, we clearly see and admit that it is a failed project. However, among ODA projects, up to 70% are projects implemented under the budget allocation mechanism. For these projects, there has been almost no assessment of the failure aspects, except that in a few projects, some errors or negative manifestations have been discovered.

Weak in demonstrating leadership

In fact, in ODA projects, there are also certain failures, the biggest being the waste of capital: waste due to slow progress, waste due to high investment rates, waste due to ineffective projects, and spread out investments... For example, the rural development program, which borrowed capital from the World Bank (WB), was not effective because the majority of the roads built were degraded and seriously damaged after only a few years of use; or many provincial hospitals invested heavily but lacked equipment, medical staff, doctors, etc.; the investment rate in ODA projects is often higher than similar projects made from other sources of capital...

Experience shows that ODA capital is not always effective for any country (Illustration photo - internet)

Experience in using ODA in the world shows that ODA is not always effective for any country or any field. For Vietnam, in the concept of some ODA beneficiary agencies both at the central and local levels, there is still a lingering "ODA in the subsidy period", considering "non-refundable ODA is given by the Government, ODA loans are paid by the Government". The consequence of this misconception is the effort to take advantage of ODA capital without calculating economic efficiency, sustainability after the project and debt repayment ability.

The second mistake is that the state management policy mechanism on ODA is not synchronized with each other, the project approval procedures are still cumbersome, the apparatus is cumbersome, the responsibility of the project implementation level is unclear, causing waste, congestion, reducing flexibility in the implementation process, and at the same time, the responsibility of the implementing units in case the project is not effective. The preparation of programs and projects to register for capital use is still sketchy and not thorough, the main thing is to be included in the list of funding requests, even in some cases the project preparation work (project documents, feasibility study reports, surveys, designs, bidding documents, management, supervision) is left to foreign consultants, so when implementing, there are many problems, having to adjust and supplement project documents, leading to prolonging the project implementation time, reducing the grace period, affecting investment efficiency.

Not only that, the organization of bidding to select contractors is complicated, long-lasting and of low quality, especially for construction and equipment procurement items, which often takes 2-3 years. In many cases, the price of purchased equipment is higher than the international market price, is not synchronized, and the technology quality is low. The capacity and qualifications of investment management staff are still limited, most clearly shown in the project appraisal stage, especially in the technical and financial aspects of the project.

The above-mentioned weaknesses are mainly due to the fact that we have not fully promoted our role as the master in exploiting ODA in accordance with the characteristics of this resource due to limitations in capacity, qualifications, foreign languages ​​as well as management experience, analysis and contract negotiation ability. On the other hand, when considering providing ODA, donors set conditions for using consultants, contractors and equipment to supply for programs and projects (limited bidding or designated bidding), making it very difficult for project owners to control, costs for consulting activities are high, and the high price of purchased equipment affects investment efficiency. Therefore, overcoming the above-mentioned shortcomings is a fundamental issue to improve the efficiency of using ODA capital.

Increased coercion

From the failures and shortcomings in mobilizing and using ODA capital in the past as well as from international experience, it is necessary to draw basic lessons for Vietnam. First of all, it is necessary to be proactive in managing and using ODA capital, avoiding the manifestations of "chasing after quantity without really paying attention to ensuring the quality of investments from loan capital", capital use must be associated with the ability to generate revenue to repay debt, any projects deemed ineffective and incompatible with the purpose of use must be rejected.

In the long term, it is necessary to continue to increase the savings level and investment rate from domestic capital, increase the proportion of counterpart capital in the investment structure of programs and projects using ODA capital. The use of ODA capital must be allocated to essential areas. At the same time, due to the low financial feasibility of ODA programs and projects, it is difficult to generate direct foreign currency revenue to repay foreign debt, so the use of ODA capital must also take into account the creation of foreign currency from export activities, so that the country has a source to repay the debt to enhance the country's debt repayment capacity.

Second, the initiative in proposing, preparing projects and using ODA is a prerequisite to ensure the effective use of capital. International experience shows that where the proactive role of the recipient country is weak, the effectiveness of use is poor and sometimes fails. Third, the method of using ODA resources can be innovated, and the use of ODA as seed capital to implement projects under the PPP method can be greatly increased; the scope of re-lending to local authorities can be expanded to enhance local responsibility for the effective use of borrowed capital.

Fourth, it is necessary to have a transparent and highly enforceable legal environment. This is one of the conditions to promote the progress of implementing programs and projects. The management policy mechanism in the coming time needs to focus on issuing new or amending economic-technical norms to suit the actual situation; guiding the process and procedures for implementing programs and projects... Fifth, it is necessary to resolutely implement urgent measures to prevent and combat waste in projects using ODA capital. Sixth, it is necessary to define the authority and responsibility between agencies participating in the process of capital management and use, along with improving the qualifications and capacity of relevant agencies.

In addition, the role of inspection and examination of the Ministry in charge, the Ministries with management functions and the State inspection and audit agencies in project implementation and management activities of investors and project management boards must be strengthened. In addition, it is necessary to strengthen the capacity to collect, store, process and report all types of information on ODA. Build and complete the ODA database to provide timely, accurate and consistent information to serve the policy-making process and report as required to agencies and donors./.

Red River