Vietnam: New points regarding the rules for using ODA, concessional loans and reciprocal capital

09:25, 13/10/2018

On October 01, 2018, the Government of Vietnam issued Decree No. 132/2018/ND-CP on amendments to a number of articles of Decree No. 16/2016/ND-CP. Notably, there are new points regarding the rules for using ODA, concessional loans and reciprocal capital.

According to Decree No. 132/2018/ND-CP of Vietnam’s Government:

- Grant ODA should be used for execution of institutional and administrative reform; natural disaster recovery and preparedness, climate change adaptation, social security, preparation for projects having complicated infrastructure or technology, PPP projects, sponsoring projects funded by concessional loans to increase their grant element.

- ODA loans should be used for projects for healthcare, education vocational training, climate change adaptation, environmental protection, essential traffic infrastructure investment in which cannot be directly recovered.

- Concessional loans should be used for large-scale infrastructure projects that are able to generate revenue for debt repayment; on-lending projects.

Grant of loans on conditions that suppliers or contractors be appointed by the foreign sponsor shall be applied to: Loans for solving emergency issues related to natural disasters, national defense, energy security; cases in which the project owner can prove that foreign sponsor’s goods or equipment are more advantageous in terms of technology or prices; other cases decided by the Prime Minister.

- ODA loans and concessional loans shall only be used for development investment instead of regular spending.

- The use of ODA and concessional loans in other cases shall be decided by the Prime Minister.

In particular, reciprocal capital should be provided for programs and projects funded by ODA and concessional loans that are fully disbursed by state budget from 5-year public investment plans and annual public investment plans on schedule under international treaties or agreements on ODA or concessional loans, and such capital are actually disbursed during the execution.

More details can be found in Decree No. 132/2018/ND-CP of Vietnam’s Government, which takes effect from October 01, 2018.

-Thao Uyen-

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