Decision No. 1489/QD-TTg dated November 6, 2018 of the Prime Minister on approving the orientation for attraction, management and use of official development assistance and concessional loans of foreign donors in the 2018-2020 period, with a vision for the 2021-2025 period

DECISION

Approving the orientation for attraction, management and use of official development assistance and concessional loans of foreign donors in the 2018-2020 period, with a vision for the 2021-2025 period[1]

THE PRIME MINISTER

Pursuant to the June 19, 2015 Law on Organization of the Government;

Pursuant to the June 18, 2014 Law on Public Investment;

Pursuant to the November 23, 2017 Law on Public Debt Management;

Pursuant to the Government’s Decree No. 16/2016/ND-CP of March 16, 2016, on management and use of official development assistance (ODA) and concessional loans of foreign donors;

Pursuant to the Government’s Decree No. 132/2018/ND-CP of October 1, 2018, amending and supplementing a number of articles of Decree No. 16/2016/ND-CP of March 16, 2016, on management and use of official development assistance (ODA) and concessional loans of foreign donors;

At the proposal of the Minister of Planning and Investment,

DECIDES:

Article 1.To approve the orientation for attraction, management and use of official development assistance (ODA) and concessional loans of foreign donors in the 2018-2020 period, with a vision for the 2021-2025 period, with the following principal contents:

I. FOR THE 2018-2020 PERIOD

1. General viewpoints and principles

- To focus on solving problems and stepping up the disbursement and effective use of signed loans.

- To continue to select and prepare potential public investment projects (based on their socio-economic and financial efficiency), which will be disbursed after 2020, to ensure the continuity of and avoid a sudden decrease in development investment funds in the period after 2020. However, it is necessary to select potential and effective projects for sustainable socio-economic development while keeping the budget deficit and public debt safety indicators within the limits set by the National Assembly.

- To use loans for key fields and really important works which have spillover effects and inter-regional impacts as motivation for the development of regions and areas. To appraise and evaluate projects in a strict, objective and transparent manner in order to raise the use efficiency of foreign loans.

- To take advantage of the remaining ODA loans of multilateral donors in the 2018-2020 period. To continue to mobilize and use concessional loans from the International Bank for Reconstruction and Development (IBRD) of the World Bank (WB), ordinary capital resources (OCR) of the Asian Development Bank (ADB) and concessional loans of donors for infrastructure development. The mobilization and use of these concessional loans shall be considered based on public investment sources, loan limits and the state budget’s debt payment capacity; the impacts of these loans in the period after the 2021-2025 period should be considered and evaluated in order to gradually reduce budget overspending and public debts and restructure public investment according to Resolutions of the Party Central Committee and  National Assembly and the debt payment capacity of the state budget at all levels.

- To use foreign loans only for fields/projects for which the domestic public investment fund is unavailable and in which the private sector makes no investment because they are unable to generate profits or for special fields in which the State needs to invest in order to control and manage prices, facilitating the development of other economic sectors, such as commercial operation of riverports and seaports. To encourage the private sector to join hands with the State to invest in infrastructure facilities which have bottlenecks.

- To develop mechanisms for enterprises to access loans from the WB and ADB and concessional loans from other donors without the Government’s guarantee to implement programs and projects on renewable energy and climate change response.

- To use ODA and concessional loans only for development investment, but not for regular spending.

2. Principles of use of fund sources

- Non-refundable aid shall be prioritized for hunger eradication and poverty reduction; social affairs; formulation of policies on institutional and human resource development; knowledge and technology transfer; natural disaster prevention, control and risk reduction and climate change adaptation; preparation of infrastructure projects involving sophisticated techniques or technologies, investment projects in the form of public-private partnership (PPP), or co-financing projects funded by concessional loans to increase their grant element.

- ODA loans shall be prioritized for programs and projects on healthcare, education, vocational education, climate change adaptation, environmental protection, and essential transport infrastructure in which invested funds cannot be directly recovered, or which have large scale and spillover effects and inter-regional impacts in conformity with planning and promote the socio-economic development of regions and areas.

- Concessional loans shall be prioritized for large-scale infrastructure projects that are capable to generate revenues for debt payment; or for on-lending projects.

- For important programs and projects which should be prioritized and are unable to generate revenues for debt payment or which use other allocated funds, the Prime Minister shall consider and decide on the use of concessional loans on a case-by-case basis.

3. Priority fields/projects: Priority shall be given to fields/project groups which support the implementation of 3 breakthroughs in the socio-economic development strategy in the 2011-2020 period, specifically as follows:

- Socio-economic infrastructure, especially transport infrastructure and social infrastructure (healthcare, education and vocational education), smart city development, and hydraulic work.

- Study and formulation of policies and institutions, and reforms.

- Development of human resources, knowledge transfer and technology development.

- Environmental pollution remediation and environmental quality improvement; natural disaster prevention, control and risk reduction, climate change adaptation and green growth.

- Use as state investment in public-private partnership (PPP) projects.

4. Principles of reviewing the list of projects and increasing the efficiency of the use of loans

- Ministries, sectors and localities shall allocate funds for projects from the allocated funds under medium-term public investment plans.

- To allocate funds according to the implementation progress and disbursement capacity of projects in the following order of priority: (i) projects under loan agreements ending in the 2018-2020 period without extension; (ii) umbrella projects not yet included in the 2016-2020 medium-term plans; (iii) projects with realizable disbursement schedule and capacity, and large, important and urgent projects for which funds are slowly disbursed due to the lack of foreign loans and counterpart funds; and (iv) projects under concluded agreements but not included in the 2016-2020 medium-term public investment plans.

- For projects for which funds cannot be disbursed or disbursed slowly and ineffectively, their funds shall be cut down and transferred to other projects with realizable disbursement.

- Surplus funds of projects (including surplus funds after bidding, surplus funds due to changes in exchange rate, interest rate or unallocated reserve fund, and other surplus funds) may be used to take advantage of concessional loans already concluded with donors and improve the effectiveness of ongoing programs and projects, ensuring no addition of funds in the 2016-2020 medium-term foreign fund plans. To refrain from using surplus funds for ground clearance, tax payment, capacity building, training, and regular spending. The Prime Minister shall consider and decide on the use of surplus funds for each program or project.

- For projects with approved investment policy or project proposals: To review the list of projects. To conclude agreements only for really important and urgent projects which help address pressing issues of the economy; or which have been carefully prepared for a long time, or to take advantage of the remaining soft loans; and there must be enough funds for the disbursement of these projects in the 2018-2020 period.

- For new project proposals: The selection and preparation of new project proposals must comply with the Government’s key viewpoints on the vision toward, and the orientation for, the 2021-2025 period. To continue to select and prepare priority programs and projects on socio-economic infrastructure, and carry out prescribed procedures in preparation for the 2021-2025 medium-term public investment plan.

II. FOR THE 2021-2025 PERIOD

Key viewpoints in the orientation for attraction and use of ODA and concessional loans in the 2021-2025 period are as follows:

1. To avoid the sudden reduction of foreign loans. Foreign loans provide foreign currency supply, help improve the national payment balance and and meet the country’s demand for imports. To ensure uninterrupted financing sources for development investment and avoid the risk to payment balance in the context that new loans are reduced while debts increase, the Government shall adopt a strategy for keeping relationships with different sponsoring partners in order not to stop all foreign loans at the same time.

2. To raise the efficiency of foreign loans, the orientation for their use should be as follows:

- Any new loans must be subject to consideration of their economic efficiency, financial options, impacts on medium-term public investment plans, public debt indicators, budget capacity as well as debt repayment capacity in the future.

- Foreign loans shall be channeled into key fields to maximize economies of scale. To regulate a strict, objective and transparent appraisal and evaluation process through the development of a set of criteria for evaluation and selection of projects in accordance with international standards as suitable to the reality of Vietnam.

- To prioritize loans for projects with high socio-economic efficiency, helping spur growth in tandem with sustainable development, especially projects capable of generating medium- and long-term foreign currency revenues for strengthening the national debt payment capacity, e.g., projects addressing infrastructure bottlenecks (transport, smart city, clean energy and renewable energy, etc.), projects developing smart agriculture (hydraulic work, hi-tech application to agricultural production, and agricultural electrification, etc.), projects stimulating export industries or activities, and projects on innovation and technology transfer.

- To prioritize projects relating to public goods, which are funded by the state budget and have spillover effects, such as projects on climate change adaptation, improvement of environmental quality, education, healthcare, technology, or skill training.

- To use ODA and concessional loans as leverage to promote and attract private investment. To refrain from using foreign loans for projects in which the private sector is interested, and can be implemented with technology efficiency and lower cost.

- To use ODA and concessional loans as the lurement and catalyst to attract domestic funding sources, especially those from the private sector. To gradually reduce the proportion of foreign loans in the total project investment.

- To prioritize loans for on-lending for projects capable of recovering invested funds.

Article 2.The Ministry of Planning and Investment shall assume the prime responsibility for, and coordinate with related agencies in, further improving the orientation for attraction, management and use of ODA and concessional loans in the 2021-2025 period in conformity with the 2021-2030 socio-economic development strategy and the 2021-2025 socio-economic development plan; proposing a new development partnership strategic framework with a vision toward 2030 as a basis for formulating ODA or concessional loan-funded ant programs and projects and development cooperation activities in the coming period.

Article 3.This Decision takes effect on the date of its signing. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, and chairpersons of provincial-level People’s Committees shall implement this Decision.-

Prime Minister
NGUYEN XUAN PHUC