Decision No. 251/QD-TTg dated February 17, 2016 of the Prime Minister approving the Project ‘Orientation toward attraction, management and use of ODA and concessional loans from foreign donors in 2016 – 2020 period’

THE PRIME MINISTER

Decision No. 251/QD-TTg dated February 17, 2016 of the Prime Minister approving theProject‘Orientation toward attraction, management and use of ODA and concessional loans from foreign donors in 2016 – 2020 period’

Pursuant to the Law on Government organization dated June 19, 2015;

Pursuant to the Law on investment dated June 18, 2014;

Pursuant to the Government’s Decree No. 38/2013/ND-CP dated April 23, 2013 on management and use of ODA and concessional loans from donors;

At the request of the Minister of Planning and Investment,

DECIDES:

Article 1.Grant approval for the project ‘Orientation toward attraction, management and use of ODA and concessional loans from foreign donors in 2016 – 2020 period (Hereinafter referred to as ‘the Project’)

Article 2.Budgets for implementation of the project are allocated in annual budget estimates of ministries, departments and localities according to the Law on State budget.

Article 3.This Decision takes effect on the signing date.

Article 4. Ministers,heads of ministerial-level agencies, heads of governmental agencies, presidents of People’s committees of central-affiliated cities and provinces shall be responsible for executing this Decision./.

The Prime Minister

Nguyen Tan Dung

PROJECT

ORIENTATION TOWARD ATTRACTION, MANAGEMENT AND USE OF ODA AND CONCESSIONAL LOANS FROM FOREIGN DONORS IN 2016 – 2020 PERIOD (Enclosed with the Prime Minister s Decision No. 251/QD-TTg dated February 17, 2016)

During the 2011 – 2015 period, Vietnam has achieved a lot of significant success in socio-economic development in spite of difficulties and challenges: (i) Economic growth remains at an appropriate level, the quality of growth enhanced; (ii) Scale and potential of the economy continues to rise; (iii) Most of Millennium Development Goals has been completed ahead of time, placing solid foundations for the implementation of UN Agenda 2030 for sustainable development goals; (iv) International integration has been increasingly deeper and wider, especially economic integration; (v) Position and reputation of our country in the world have continued to be reinforced and strengthen.

Development achievements Vietnam has made in recent years are indebted to the right policies of the Communist Party and the State, efforts of the entire people, departments, levels, especially the approval and supports of international friends.

In spite of accounting for only nearly 3% of GDP, the ODA and concessional loans from foreign donors in 2011 – 2015 period have supported Vietnam a lot in socio-economic infrastructural development and reduction of poverty in a sustainable way.

To accomplish socio-economic development tasks set by the 12^thNational Congress of the Communist Party, the Strategy for Socio-Economic Development (2011 – 2020), and the Plan for Socio-Economic Development (2016 – 2020), Vietnam has advocated mobilization of all resources for development investment of which ODA and concessional loans from foreign donors remain vital.

Project “Orientation toward attraction, management and use of ODA and concessional loans from foreign donors in 2016 – 2020 period” (hereinafter referred to as ‘2016 – 2020 ODA project’) is a strategic document showing policies on attraction, management and use of ODA and concessional loans from foreign donors in the context of a lot of changes in development cooperation relationship after Vietnam has become a middle-income country.

The Project isconstructed on the basis of:

1. Socio-economic development strategy (2011 – 2020);

2. National public debt and foreign debt strategy in 2011 – 2020 period and a vision to 2030;

3. Socio-economic development plan (2016 – 2020)

4. Medium-term public investment plan (2016 – 2020);

5.Project on construction ofa consistent infrastructure system serving industrialization and modernization of the country in 2011 - 2020;

6. UN Agenda 2030 for sustainable development goals;

7.Bussan Partnership Document for effective cooperation development (2011) and Vietnam Partnership Document (2012);

8. Result of implementation of the Project “Orientation toward attraction, management and use of ODA and concessional loans from foreign donors in 2011 – 2015 period (Hereinafter referred to as ‘2011 – 2015 ODA Project’) enclosed with the Prime Minister s Decision No. 106/QD-TTg dated January 19, 2012)

9. Open to suggestions contributed and recommended by ministries, departments, localities, donors, political organizations, socio-political organizations, socio-occupational organizations and foreign non-governmental organizations during the construction of the 2016 – 2020 ODA Project.

Contents of 2016 – 2020 ODA Project comprise three main parts:

- Part I: Necessities, purposes and scope of 2016 – 2020 Project;

- Part II: Assessment of implementation of 2011 – 2015 ODA Project;

- Part III: Orientation toward attraction, management and use of ODA and concessional loans from foreign donors in 2016 – 2020

Action plan for 2016 - 2020 ODA Project is component of the Project.

Part I

NECESSITIES, PURPOSES AND SCOPE OF PROJECT

I. NECESSITIES

Successful implementation of 2011 – 2015 ODA Project has made positive and effective contributions to the completion of targets of the socio-economic development plan (2011 – 2015). However, as a middle-income country, policies on ODA and concessional loans from foreign donors in the coming time shall change substantially from relationship of development donorship to relationship of partnership.

II.PURPOSES

2016 - 2020 ODA Project is the document showing the Government’s policies that specify guidelines of the Communist Party and the State on attraction, management and use of ODA and concessional loans from foreign donors supporting the implementation of strategy for socio-economic development (2011 – 2020) and plan for socio-economic development (2016 – 2020).

III.SCOPE

Scope of the Project embraces activities in relation to attraction, management and use of ODA and concessional loans from foreign governments, transnational or intergovernmental organizations.

Part II

ASSESSMENT OF IMPLEMENTATION OF 2011 - 2015 ODA PROJECT

I. MAIN RESULTS

2011 - 2015 ODA Project approved under the Prime Minister’s Decision No. 106/QD-TTg dated January 19, 2012 has made important contributions to the implementation of the plan for socio-economic development (2011 – 2015). Followings are the results:

1. Development cooperation relationship between Vietnam and community of donors continue to be strengthened and developed.

Commitments, conclusion and disbursement of ODA and concessional loans from foreign donors in 2011 – 2015 period have made positive changes:

a) Conclusion of International Agreement on ODA and concessional loans has made much progress.

Total ODA and concessional loans concluded under specific international agreements from 2011 - 2015 period to December 25, 2015 reached more than US$ 27.782 billion, up 31.47% compared with 2006 – 2010 period, of which ODA loans and concessional loans reached US$ 26.527 billion, accounting for 95.48%, non-refundable ODA reached US$ 1.254 billion, accounting for 4.52% compared with total ODA and concessional loans concluded for this period.

Structure of ODA and concessional loans from donors is shown in Figure 1 below. However, it is obvious that donors from six-development bank group (DDB, AFD, JICA, KfW, KEXIM, WB) remain dominant. Total ODA and concessional loans concluded with these donors in 2011 – 2015 period reached US$ 26.308 billion, of which about US$ 4.5 billion is ordinary capital resources from ADB, AFD and WB.

Figure 1

Structure of ODA and concessional loans concluded with donors in 2011-2015 period

Unit: Million US$

Sources: Ministry of Planning and Investment

Regarding structure of ODA and concessional loans by sector, Table 1 below shows that such sectors as transport, environment (water supply, drainage, response to climate change…), urban, energy and industrial development are relatively high in terms of proportion of ODA and concessional loans while such sectors as agriculture and rural development in combination with hunger eradication and poverty reduction, medical and social sector, education and training, science and technology and strengthening institutional capacity…is quite modest. The reason is that the proportion of non-refundable ODA in total ODA and concessional loans in these sectors are normally high.

Table 1

ODA by sector (2011 – 2015)

Unit: Million US$

Sources: Ministry of Planning and Investment

b) A breakthrough in disbursement of ODA and concessional loans

Under close directions of the Government along with great efforts of sectors, levels and close cooperation with donors during 2011 - 2015 periods, the implementation of programs and projects on ODA and concessional loans has made significant strides in progress and disbursed loans.

Significant progress in disbursement of ODA and concessional loans in 2011 - 2015 is noticeable... Total ODA and concessional loans disbursed in this period reached US$ 22.325 billion (approximately US$ 4.46 billion/year). This disbursement level is 39.53 – 59.46% higher than the targets of 2011 - 2015 ODA Project and 1.6 times higher than total ODA disbursed in 2006 – 2010 period. Disbursement from big donors (WB, Japan) has made significant improvements. Disbursement rate from Japan in Vietnam ranked second in 2011 and first in 2012 among the countries that received ODA from Japan. Disbursement rate from WB in Vietnam increased from 13% in 2011 to 19% in 2012.

c) Vietnam achieved high proportion of projects that meet development targets and set targets.

- According to project completion reports (PCR) and program performance audit reports (PPAR) implemented by donors that belong to the Six-development bank group to the end of 2014, the number of Vietnam’s successful projects achieved high proportion (See Table 2), specifically:

+ Regarding PCRs, ADB’s successful projects: 55/56, JICA: 17/17, KEXIM: 5/5, WB: 67/69.

+ Regarding PPARs, ADB’s successful projects: 11/16, KfW: 20/26, KEXIM: 16/16, WB

Table 2

PCR and PPAR by Six-development bank group

(Up to December 31, 2014)

Sources: The Six-development bank group’s JPPR 9

- According to the Six-development bank group’s independent internal assessment reports, the number of projects that met Vietnam’s development targets and set targets to the end of 2014 ranked below China and above India, the Philippines, Indonesia and Pakistan (See Figure 2):

Figure 2

Sources: The Six-development bank group’s JPPR 9

2. ODA and concessional loans from foreign donors have contributed positively and effectively to the cause of socio-economic development.

a) ODA and concessional loans have played an important role in development investment.

Table 3 shows that annual disbursement of ODA and concessional loans accounted for approximately 47.37% of total investment capital from state budget although they accounted for only 2.78% GDP and 8.64% of total investment capital of the entire society in 2011 – 2015 period. This indicates that ODA and concessional loans have played an important part in development investment in the context of limited state budgets for development investment and pressing demand for development of socio-economic infrastructure for the implementation of breakthrough phase of development of infrastructure oriented toward modernization under the strategy for socio-economic development (2011-2020).

Table 3

Proportion of ODA and concessional loans to GDP, total investment capital of society, total investment capital from state budget in 2011 – 2015 period

Notes: The figures shown are expected value.

Sources: the Government’s annual socio-economic reports.

b) ODA and concessional loans supported development created a new face for multiple sectors, areas and geographical territories.

Table 4

ODA by region (2011 – 2015)

Sources: Ministry of Planning and Investment

II.ASSESSMENT OF ATTRACTION, MANAGEMENT AND USE OF ODA AND CONCESSIONAL LOANS FROM DONORS

Attraction, management and use of ODA and concessional loans from foreign donors in 2011 – 2015 had following advantages and disadvantages:

1. Advantages

a) Total ODA and concessional loans in 2011 - 2015 period exceeded the targets of 2011 - 2015 ODA Project and was higher than previous five-year periods (See Table 5):

Table 5

Commitments, conclusion and disbursement over periods

Unit: Million US$

Notes: The figures shown above are expected value.

2. Disadvantages

a) Conclusion of ODA and concessional loans tends to decline.

Figure 3

Commitments, conclusion and disbursement over years in 2011-2015 period

Unit: Million US$

Sources: Ministry of Planning and Investment

Figure 4

Conclusion of non-refundable ODA in 2011 - 2015 period

Unit: Million US$

Source: The Ministry of Planning and Investment

b) Mechanism, policies and procedures:

- Management and use of ODA and concessional loans was not consistent with changes in laws of the country, public investment and changes in donors’ policies when Vietnam has become a middle-income country. Guiding documents issued by ministries, sectors were inadequate or sluggish to meet new aid modalities applied by donors.

- Vietnam’s legal system in relation to ODA and concessional loans, especially in the area of investment in fundamental construction, remained inconsistent with international practice and such has made considerable effects on the implementation and disbursement of these capital sources.

- Differences in processes and procedures between Vietnam and donors caused lengthy delays in preparation of projects in a number of cases and made initial designs become no longer appropriate, resulting in compulsory adjustments made. All such reduced investment efficiency.

c) Preparations, organization and implementation:

- Governing body, project owners, project management board did not fulfill their roles in the preparation and implementation of programs and projects using ODA and concessional loans.

- Limited aid absorption capacities of the country, sectors and localities resulted in the fact that total undisbursed ODA and concessional loans from programs and projects concluded to the end of 2015 were relatively large, approximately US$ 22 billion.

- A number of investment project did not ensure sustainability after investment. Skills and experience in the implementation of ODA projects were not fully promoted.

Part III

ORIENTATION TOWARD ATTRACTION, MANAGEMENT AND USE OF ODA AND CONCESSIONAL LOANS FROM FOREIGN DONORS IN 2016 – 2020 PERIOD

I. NATIONAL AND INTERNATIONAL CONTEXT

1. National context

The great achievements of economic development - society achieved in recent years has consolidated and strengthened the country s position and strength. With the achievement of most of the targets outlined in the Plan for socio-economic development (2011 - 2015), our country has created necessary foundations and conditions for accomplishment of the goals set out in the Strategy for socio-economic development ( 2011 -2020) with average economic growth rate at 6.7 – 7%/year, average GDP per capital in 2020 at US$ 3,200 – 3,500.

Vietnam’s resources remain limited to be able to meet large demands, especially demands for infrastructure, social security, social welfare, education, health, national defense and security. State management on the economy, economic structure, institutions, laws, mechanism and policies have not yet met requirements for development and international integration.

To step up development and achieve the targets outlined in the Strategy for socio-economic development (2011-2020), the Communist Party and State have advocated mobilization of all resources at home and abroad, especially social and private resources with much importance attached to outside investment sources (FDI, ODA, concessional loans…) for development.

In the area of development cooperation, Vietnam continues to receive approval and active supports from international community by which the development cooperation with donors continues to make substantial changes, ending transitional period, shifting from development aid relationship into partnership. With specific steps, donors continue to make adjustments to policies on development cooperation with Vietnam toward gradually shifting from supply of ODA into IBRD loans, focus much efforts on trade, investment cooperation or terminate development support programs to Vietnam.

For international financial institutions, World Bank in the short term, after IDA-17 in 2017, shall replace provision of IDA credits with IBRD loans. In this sense, Asian Development Bank (ADB) shall also replace ADF loans with OCR loans one or two years after WB.

2. International context

a) Trends toward peace, cooperation and development continue to be the mainstream, yet political situations as well as global and regional security show complicated and unpredictable development.

World economy shows slow recovery and latent, risks and threats for sustainable development at global level as well as in a number of regions due to slow recovery from financial, currency and public debt crisis, ongoing armed conflicts and spread of international terrorism.

Besides, international integration that takes place deeply and strongly at regional and global level within bilateral and multilateral trade agreements has brought about great development opportunities along with challenges for countries and peoples.

UN 2030 Agenda for SDGs and Paris Agreement on Climate Change (COP 21) have presented political commitments and strong determination of the world to hunger and poverty eradiation, inequality and climate change at a global level in the coming time.

b) Regarding ODA, although a number of DAC member countries of the organization for economic cooperation and development (OECD) have to face financial and budget difficulties, foreign ODA remains stable to the year 2018.

II.CHANGES IN ENVIRONMENT AND DEVELOPMENT COOPERATION POLICIES IN VIETNAM

1. Development cooperation environment

Since Vietnam became a low-middle income country in 2010, development cooperation environment begins to change gradually from aid relationship into partnership.. This change on the one hand reflects international recognition for Vietnam’s achievements in socio-economic development for the past 30 years of innovation of which more than 20 years are cooperation and supports from international community, on the other hand requires Vietnam to change substantially from awareness, thinking, policy-making to cooperation method, responsibility of parties in the spirit of partnership in development cooperation activities.

2. Development cooperation policies

To match changed development cooperation environment as mentioned above, in 2016 - 2020 period, development partners are expected to change development cooperation policies with main lines to be predicted as follows:

a) The development partners have ended official development assistance programs for Vietnam:

These partners shall focus mainly on stepping up development of trade relations and investment cooperation with Vietnam within bilateral and multilateral trade and investment agreements, including free trade agreements. Governments of these partners shall indirectly support direct cooperation relationship between subjects of the two parties in the areas and with implementation methods as agreed (universities, research institutes, public and private agencies, organizations, localities, non-governmental organizations and individuals). Governments of the two parties shall play an indirect role in creating favorable environment and providing certain support to the two parties for development of relationship with each other.

These partners shall also provide specific assistance to Vietnamese agencies and organizations through global and regional funds, UN organizations, Vietnamese or foreign non-governmental organizations or other bilateral and multilateral development partners currently operating in our country.

b) Development partners that continue to maintain ODA programs for Vietnam shall make adjustments to the policies to match new environment.

- A number of bilateral development partners shall continue to aid Vietnam in traditional areas such as construction of policies and development of institution, improvement in state management, intensification of human capability, responses to climate change and reduction of natural disasters, sustainable hunger eradication and poverty reduction, a number of small-scale investment projects in medical, education and training sectors, support global commitments like UN 2030 Agenda for SDGs. However, aid scale shall decrease gradually, scope of aid more extensive and aid methods more flexible. Among bilateral development partners, some have planned to end ODA for Vietnam in 2016 - 2020 period.

-European Commission (EC) shall continue development cooperation program that has taken shape for the past five years and focus more support on the areas in relation to the implementation of free trade agreement between Vietnam and EU.

- The six-development bank group – main supplier of ODA and concessional loans for Vietnam shall focus investment in socio-economic infrastructure works such as development of roads, ports, airports; construction of power plants, transmission and distribution system; development urban infrastructure (water supply and drainage system, waste treatment, urban traffic development...); development of agriculture and rural areas in combination with hunger eradication and poverty reduction; construction of irrigation system; development of medical and education areas; supports for environmental protection, management and appropriate use of natural resources ; development of medical, education and training, science and technology areas; development of policies, institution to support economic reforms and reinforce human capability,...

In the next five years, Development Bank shall continue to provide ODA to Vietnam with decreasing incentives of which WB shall stop provision of IDA loans after IDA-17 in 2017 and ADB shall stop provision of ADF loans one or two years after that. This shall result in a price increase of loans that requires Vietnamese agencies to be careful in making decisions on use of loans from development banks in order to achieve investment efficiency and ensure public debt safety.

3. Shaping new partnership in Vietnam

In the Fourth high-level Forum on Aid Effectiveness held in Busan, Korea on November 29, 2011, countries and international organizations ratified Busan Declaration on effective development cooperation with the fundamental principles: (1) ownership by developing countries; (ii) a focus on results; (iii) inclusive development partnerships; (iv) transparency and accountability to one another.

With strong political commitments, Vietnam and its partners have constructed and passed Vietnam Partnership Document at the Forum on Aid Effectiveness on November, 2012 as foundations for development of partnership in the context Vietnam is a low-middle income country.

To implement such commitments, Vietnamese agencies need to keep promoting ownership, strengthening coordination and aid absorption capacities, ensuring reciprocal conditions of Vietnam and heightening transparency and accountability;Development partners need to create conditions for Vietnamese partners and encourage them to promote the ownership, strengthen coordination with each other and with Vietnamese agencies through common aid programs or co-sponsorship for the same sector, area or in the same geographical territory, moving forward to complete removal of tied aids, streamlining and further harmonizing processes and procedures.

III.KEY TARGETS OF 2016 - 2020 ODA PROJECT

1. Key targets of 2016 - 2020 ODA Project

Total undisbursed ODA and concessional loans from signed programs and projects transferred from 2011 - 2015 ODA Project into 2016 - 2020 period is relatively large, approximately US$ 22 billion the majority of which came from investment projects by the six-development bank group with ODA loans. So, one of the key targets in 2016 - 2020 period is to focus maximum efforts on completion of these programs and projects according to progress and specified time, putting the works into operation, meeting requirements for socio-economic development of the country.

Simultaneously, it is necessary to have policies and measures to attract, manage and use ODA and concessional loans effectively on the principles of guidelines and priorities outlined in this Project to create capital sources and sustainable premises for periods after 2020.

2. Predictions for conclusion of international agreements on ODA and concessional loans

According to socio-economic development plan in 2016 - 2020 period, in order to achieve economic growth rate at around 6.5 – 7%, total social investment capital at current prices is expected to be about VND 10,567 trillion, equal to US$ 480 billion of which total development investment capital from state budgets of ministries, sectors and localities is expected to be around VND 3,570 trillion, equal to US$ 180 billion. According to the calculations, domestic capital is expected to be around 75% and foreign capital 25%. FDI in this period is expected to be around VND 1,462 trillion, equal to US$ 68 billion.

Regarding ODA and concessional loans, according to preliminary reports from ministries, sectors and localities, total demand for ODA and concessional loans in 2016 - 2020 is relatively large, around US$ 39.5 billion. Demand of capital is mainly intended for projects on transport, urban development, agriculture and rural development, environment, education and training, health, science and technology (See Figure 5):

Figure 5

Demand for ODA and concessional loans of ministries, sectors and localities in 2016 – 2020 period

Sources: Ministry of Planning and Investment

Based on capital demand as mentioned above, predictions for provision of capital by donors and balance of development investment capital sources from state budget, tasks of selection, progress of assessing and approving project document, negotiations and conclusion of International Agreement, total ODA and concessional loans concluded in 2016 - 2020 period is expected to reach around US$ 20 – 25 billion.

3. Predictions for disbursement

Disbursement of ODA and concessional loans in 2016 - 2020 period is highly feasible because most of the programs, projects are transferred from 2011-2015 period and arranged in the 2016 -  2020 middle-term public investment plan with conditions ensuring reciprocal capital for the implementation of programs and projects according to progress of international agreements and concluded aid negotiations.

Regarding public debts in relation to ODA and concessional loans, according to calculations of the Ministry of Finance, until the end of 2020, outstanding concessional ODA debt is expected to reach US$ 55 billion, accounting for 26% of outstanding public debt and 15% of GDP.

4. Principles for management and use of ODA and concessional loans in 2016 - 2020 period:

a) General principles:

- The Government shall unify state administration on ODA and concessional loans on the basis of decentralization of responsibility, authority, managerial capability and the initiative of sectors, levels; ensure coordination in management, inspection and tight control by relevant agencies.

- Attraction, management and use of ODA and concessional loans must be considered, balanced and chosen within total development investment capital sources, follow hard on the targets of the strategy for national public debt and foreign debt in 2011 - 2020 period and a vision to 2030, socio-economic development plan, middle-term public investment plan and middle-term financial plan (2016 - 2020), ensuring indices of public debts, government debts and the State budget deficit within permissible limits.

- Step up inspection, monitoring and assessment of the use of ODA and concessional loans, ensuring investment efficiency, quality of works according to laws; take initiative in preventing and strictly coping with negative acts, corruption and extravagance

b) Particular principles:

- Use by loan source

+ Non-refundable ODA loans shall be used as a priority for the implementation of programs and projects supporting the establishment of policies, development of institutions, reinforcement of human capability; directly supporting improvement of economic, cultural, social life and environment for people, especially the people living in rural, mountainous and ethnic minority areas; conducting scientific and technological research, innovation and creation; preparing programs and projects using ODA, concessional loans and investment projects in the form of Public-Private Partnership (PPP).

+ ODA loans shall be used as a priority for the implementation of programs and projects on infrastructure belonging to state budget spending task with high priority, widespread impact yet incapable of recovering capital directly; programs and projects belonging to state budget spending task capable of generating source of revenues for socio-economic benefits as main objectives; limited in the branches, areas that can be implemented through forms of private sector involvement.

+ Concessional loans shall be used to implement programs and projects capable of recovering capital, investment projects fostering private sectors including investment projects in the form of PPP. These loans should be closely reviewed with much focus on assessment of project solvency. Mobilization of these loans should be based on careful considerations to efficiency in the use of loans in order to create resources for paying debt in the future.

+ Reciprocal capital shall be prioritized for programs and projects using ODA and concessional loans that are entirely allocated by state budget from middle-term public investment capital plan and yearly public investment capital plan according to progress as prescribed in international agreements and concluded negotiations on ODA and concessional loans and actual disbursement of these loans during the implementation.

During the implementation of above principles, it is necessary to enhance awareness about necessity and usefulness of each capital source, possible combination with other sources, have flexible policies and mechanism on combination of non-refundable ODA, concessional ODA loans and concessional loans to increase preference of loans.

- Management of loans

+ ODA and concessional loans are state budget sources that shall be used to implement the targets for socio-economic development of the country and shall be reflected in state budget according to laws.

+ The Government shall unify state administration on ODA and concessional loans on the basis of decentralization of responsibility, authority, managerial capability and the initiative of sectors, levels; ensure coordination in management, monitoring and assessment by relevant agencies according to applicable regulations.

+ Ensure transparency, public disclosure and heighten accountability for policies, sequence and procedures on mobilization, management and use of ODA and concessional loans among sectors, areas and localities, implementation of ODA and concessional loans.

+ Prevent and combat corruption, losses, extravagance in the management and use of ODA and concessional loans; prevent and cope with such acts according to laws;

- Principles of domestic financial management

Strengthen on-lending and reduce dependence on state budget for projects using ODA and concessional loans; With respect to programs and projects outside state budget spending task, apply on-lending mechanism on the basis of sharing financial risks between the state and loan users in order to ensure efficiency in the use of loans and heighten accountability of loan users;

Principles of domestic financial management comprises:

+ Entire allocation from state budget, applied to programs and projects on infrastructure, social welfare or other areas incapable of recovering capital directly and belonging to state budget spending task according to the Law on State budget;

+ Whole or partial on-lending, to be applied in following cases: (i) programs and projects capable of recovering whole or part of capital; (ii) programs and projects outside state budget spending task; (iii) programs and projects using ODA and concessional loans on-lent by state budget governed by People’s committees of provinces;

+ If the Government on-lend ODA and concessional loans to People’s committees of provinces for programs and projects within local budget spending task, People’s committees of provinces shall be responsible for arranging local budget to refund ODA and concessional loans to the Government according to applicable regulations.

5. Areas prioritized for attraction, management and use of ODA and concessional loans in 2016 - 2020 period:

a) Help break through the implementation of the strategy for construction of consistent and modern infrastructure;

- Support implementation of projects on investment and construction of large and important socio-economic infrastructural works, especially in the areas of development potential to serve as a catalyst for attracting investment at home and abroad. Invest in infrastructure of transport, electricity, water, irrigation, fishery, telecommunications, information technology, education and health; Prioritize investment in inter-regional infrastructural projects, economic centers and infrastructural projects meeting requirements for responses to climate change, sea rising;

- Implement projects to gradually form urban systems with consistent, modern, green, environmentally friendly infrastructure, especially big urban areas; Enhance quality and efficiency in management and implementation of urban development investment according to master plan and plans, keep implementing national-level urban upgrading programs; Encourage development of housing for low earners and workers in industrial zones;

- Support implementation of the targets outlined in UN 2030 Agenda for SDGs, restructuring agricultural sector toward fostering intelligent agriculture that able to adapt to climate change associated with modernization and construction of new rural areas, social security, sustainable poverty reduction, construction of modern social insurance funds, dealing with bomb and mine aftermath of war;

- Support Vietnam in implementing commitments in free trade agreements (FTA) and TPP, accomplishing international duties; support economic sectors in taking part in global value chains, stepping up innovation and creativity and competitiveness of the economy;

b) Support research, construction of socio-economic and cultural development policies and fostering state administration capacity;

- Support completion of institutions on modern market economy in conformity with international practice  and requirements for extensive international economic integration;

- Support fulfillment of laws, mechanism and policies on encouraging economic sectors, domestic and foreign investors to take part in development of socio-economic infrastructure, especially in the form of PPP;

- Support reinforcement of state management capability, socio-economic and cultural management; support administrative reform, especially administrative procedures; enhance professional competence of officials and public employees through training and re-training;

c) Support development of human resources for scientific research and technological development;

- Support development of human resources, especially high-quality human resources to meet requirements for socio-economic development and international integration associated with application of state-of-the-art science and technology;

- Support innovation and creation, construction of a number of research Institutes for application of state-of-the-art science and technology, development of centers for innovation and creation, technological incubators;

d) Support environmental protection, responses to climate change and implementation of strategy for green growth;

- Reinforce state administration, complete legal system, mechanism, policies and synchronize measures aimed at responding to climate change, preventing and combating natural disasters, management of natural resources and environmental protection;

- Support implementation of projects on enhancement of forecasting and warning capability for natural disasters, climate change monitoring;  inspection and assessment of potential, reserves; completion of planning and reinforcement of management, monitoring, use of natural resources;

- Support implementation of projects on improvement of environmental quality and living conditions of people; Reinforce control on sources of pollution; Establish norms, standards on emission and technology for urban, rural areas and key industries according to the roadmap in accordance with actual conditions of Vietnam; Reinforce protection and development of forests, especially protective coastal forests, watershed forest, specialized forests; natural reserves and biodiversity; encourage use of renewable energy, new materials environmentally friendly;

dd) Support by geographical territory

ODA and concessional loans shall be used to support realization of development visions for geographical territories according to the 2016 - 2020 socio-economic development plan with priority given to localities facing economic difficulties, remote, isolated and ethnic minority areas in the administrative divisions of midlands and northern highlands,  north central coast , central coast, central highlands and Mekong River Delta with due account taken of development level, socio-economic, cultural characteristics, potential and advantages of each area, locality.

Programs and projects aim at supporting improvement of life and livelihood of local residents, handling of pressing issues during rapid urbanization in localities (infrastructure of poor urban areas, water supply and drainage, waste treatment, urban traffic development, housing for poor people,...);

e) Used as the State’s capital investment in projects in the form of PPP;

Used as state-contributed capital in socio-economic infrastructure development investment projects in the form of PPP;

IV.SYSTEM OF MEASURES TO IMPLEMENT THE PROJECT

To ensure implementation of 2016 - 2020 ODA Projects, the Government shall implement policies and groups of measures as follows:

1. Complete policies and institutions on management and use of ODA, concessional loans in accordance with legal system and development cooperation environment;

a) Study and report amendments made to the Law on the conclusion, accession to and implementation of international treaties, Ordinance on Conclusion and Implementation of International Agreements and the Law on Public debt management to the Government for submission to the National Assembly for considerations in order to complete institutional framework in relation to reception, management and use of ODA and concessional loans;

b) Study and submit amendments and supplements made to the Government’s Decree No. 78/2010/ND-CP on on-lending of the government s foreign loans to the Government for consideration;

c) Promulgate new decree replacing the Government’s Decree No. 38/2013/ND-CP on management  and use of ODA and concessional loans and circulars providing instructions on implementation of the Decree to comply with the Law on public investment and relevant legislative documents supplemented, amended and promulgated in accordance with the Constitution 2013;

d) Based on new Decree that replaces Decree No. 38/2013/ND-CP and circulars instructing implementation of this Decree, relevant agencies within competence should improve procedures and streamline internal administrative procedures on management and use of ODA and concessional loans from donors.

dd) Continue to foster harmonization of processes and procedures between Vietnam and donors, complete legal framework toward approaching international standards to consistently and effectively manage public investment capital sources including ODA and concessional loans from donors; Relevant ministries, sectors should check and complete legislative documents in relation to investment, construction, procurements and finance,…

2. Promote the role of Vietnam as the owner, strengthen coordination in the attraction, management and use of ODA and concessional loans, and construct sustainable partnership with development partners;

a) Departments and levels should strengthen leadership role and exercise political commitments strongly in development cooperation initiatives.

b) Vietnamese agencies and development partners shall construct reliable and sustainable partnership relationship, associating aid effectiveness with development effectiveness on the basis of principles and commitments in Busan Declaration on Effective Development Cooperation; Strengthen operation effectiveness of partnership groups, international supports by sector, area, combining development cooperation activities at department, regional levels with those at national level, especially through Vietnam Development Partnership Forum (VDPF).

c) Governing bodies and project owners should enhance the sense of initiative in proposing, constructing and implementing programs and projects, especially feasibility of document of programs and projects contributing effectively to the cause of socio-economic development of the country, sectors, areas and geographic territories.

3. Continue to strengthen disbursement of ODA and concessional loans for transitional programs and projects, step up the preparations of programs and projects for post-2020 periods;

All the departments and levels should focus on solving difficulties to step up progress of implementation, creating a breakthrough in the disbursement of programs and projects concluded in 2011 – 2015 period and at the same time make careful preparations for the conclusion and implementation of new programs and projects in 2016 - 2020 period with focus placed on following measures:

a) Consolidate and strengthen capacity of assistant apparatus of the standing Agency of National Steering Committee for ODA and concessional loans for providing effective supports to the Steering committee;

b) Complete organizational structure of head agencies at all levels toward promoting ownership role and enhancing the sense of initiative of ministries, departments and localities in the management and use of ODA and concessional loans;

c) Strengthen project management capacity toward professionalization and sustainability, especially managerial capability for large-scale projects through: (i) Promulgate circulars on methods and operation of management of ODA and concessional loan projects; (ii) Construct Project on training and reinforcing project management capability toward professionalization and sustainability; issue management certificates for ODA and concessional loan projects; and (iii) Put the system of training project management capacity on the basis of private sector involvement into operation;

d) Enhance quality of construction and design of programs and projects along with reinforcement of role and responsibility for quality supervision of competent authorities through the process of assessing and granting approval for the documentation of programs and projects;

dd) Foster coordination among all levels horizontally and vertically, strengthen coordination between Vietnamese agencies and donors to speed up preparations and implementation of ODA and concessional loan programs and projects;

e) Ensure fulfillment of reciprocal commitments from Vietnam, especially human resources, finance, in programs and projects concerning ODA and concessional loans;

4. Strengthen the tasks of planning for ODA and concessional loans;

a) Promulgate Circular on establishment of plans for implementation of programs and projects using ODA and concessional loans and integrate such plans into middle-term and annual public investment plans;

b) Reinforce capacity of governing bodies and project management board for establishing plans for implementation of programs and projects using ODA and concessional loans and integrating such plans into middle-term and annual public investment plans;

5. Ensure public disclosure, transparency and heighten accountability;

a) Ensure transparency, public disclosure of ODA and concessional loans, heighten accountability at all levels, especially governing body and project owner levels for reception and use of ODA and concessional loans;

b) The Ministry of Planning and Investment shall step up putting the website on supervision and assessment of public investment including information and data about ODA and concessional loan programs and projects into operation.

6. Strengthen the tasks of monitoring, supervising and assessing reception and use of ODA and concessional loans;

a) The Ministry of Planning and Investment shall establish and operate the system for monitoring and assessment of public investment, including ODA and concessional loans;

b) All departments and levels shall strengthen activities of monitoring, supervision and assessment, especially assessment of impacts of ODA and concessional loan programs and projects.

c) Strengthen combination between financial audit activities and audit activities for the implementation of ODA and concessional loan programs and projects;

V. PROJECT IMPLEMENTATION

1. Propagate, master and execute 2016 - 2020 ODA Project

a) The Ministry of Planning and Investment shall carry out propaganda activities about contents of 2016 - 2020 ODA Project to Vietnamese agencies, donors and the media.

b) Ministries, departments and localities shall thoroughly grasp spirit, guidelines and priority orientations toward attracting and using ODA and concessional loans, propose programs and projects supporting implementation of middle-term and annual socio-economic development plans of their own.. Integrate programs and projects proposed as meeting requirements as prescribed into middle-term and annual public investment plans for implementation;

c) Agencies within function and competence shall carry out duties as assigned in the action plan of 2016 - 2020 ODA Project.

2. Monitor and assess performance of 2016 - 2020 ODA Project

Ministries, departments and localities shall be responsible for making reports about performance of 2016 - 2020 ODA Project in their annual reports on management and use of ODA and concessional loans including proposals and recommendations for timely measures for issues arising during the implementation of the Project.

The Ministry of Planning and Investment shall make biannual reports on updates on performance of 2016 - 2020 ODA Project to Deputy Prime Minister, head of National Steering Committee on ODA and concessional loans and make annual reports on performance of 2016 - 2020 ODA Project to the Prime Minister in its annual reports on attraction, management and use of ODA and concessional loans./.