Basic rules for state management of ODA and concessional loans in Vietnam

Basic rules for state management of ODA and concessional loans in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Basic rules for state management of ODA and concessional loans in Vietnam

According to Clause 2, Article 6 of Decree 114/2021/ND-CP, basic rules for state management of ODA and concessional loans include:

- ODA and concessional loans shall be used to finance capital expenditures only, and are not available for recurrent expenditures.

Foreign loans must not be used to carry out activities, such as training or drilling for capacity building, except transfer of technologies and skills in operating equipment and machinery; make study visits or trips; pay taxes, fees, and interest expenses on loans; purchase cars, except for specialized cars decided by competent authorities, reserve supplies and equipment for operation phase after the project is completed, except for special ones decided by competent authorities in accordance with legislative regulations; pay compensation, support and resettlement expenses; pay operating expenses of the Project Management Unit; 

- The Government shall unify the state management of ODA and concessional loans on the basis of ensuring the effective use of capital and solvency; decentralization associated with accountability, power, managerial capability of ministries, central and local authorities; ensuring coordinated management, supervision and evaluation of concerned agencies in accordance with applicable laws;

- Ensure information disclosure and transparency; promote accountability in terms of policies, procedures for raising, managing and using ODA and concessional loans among industries, sectors and localities; and the effectiveness of using ODA and concessional loans;

- Disclose information about cooperation policies, priority fields of foreign donors on the Government's web portals (chinhphu.vn; mpi.gov.vn; mof.gov.vn; mofa.gov.vn);

- Prevent and combat corruption, losses and wastefulness in management and use of ODA and concessional loans; prevent and impose punishments for these acts in accordance with law;

- Methods of determining capital expenditures funded by the state budget: Capital expenditures are determined in compliance with the provisions of the Law on Public Investment, the Law on State Budget, the Law on Construction and other relevant legislative documents.

2. Scope of state management for ODA and concessional loans in Vietnam

According to Clause 1, Article 6 of Decree 114/2021/ND-CP, scope of state management for ODA and concessional loans is as follows:

- Formulate, promulgate and organize the implementation of legislative documents on management and use of ODA and concessional loans;

- Formulate and implement Proposals for attracting, managing and using ODA and concessional loans in each stage to facilitate the implementation of 5-year socio-economic development plans; measures and policies to effectively manage and use such funding sources;

- Supervise and provide information about management and use of ODA and concessional loans;

- Monitor, evaluate, and inspect the management and use of ODA and concessional loans according to regulatory provisions.

3. Principles of applying domestic financial mechanism for ODA and concessional loans in Vietnam

Principles of applying domestic financial mechanism for ODA and concessional loans according to Article 7 of Decree 114/2021/ND-CP are as follows:

- For programs/projects funded by central government budget, the method of full grant of foreign ODA loans and concessional loans from the central budget shall be applied. 

- For investment programs/projects funded by local government budget, the method of partial or full on-lending of foreign ODA and concessional loans as prescribed by legislation on on-lending of the Government’s foreign ODA loans and concessional loans shall be applied.

For investment programs/projects funded by local government budget that use foreign ODA and concessional loans to finance the locality's contribution in public-private partnership (PPP) projects, the method of full on-lending of foreign ODA and concessional loans as prescribed by legislation on on-lending of foreign ODA and concessional loans shall be applied.

- For investment programs/projects with full or partial cost recoverability, the method of full or partial on-lending of foreign ODA and concessional loans from the central budget as prescribed by legislation on on-lending of the Government’s foreign loans shall be applied.

- For ODA grants, including those associated with loans, ODA grants for investment projects, technical assistance projects (e.g. independent projects, preparatory and supporting projects), and non-projects, the method of full grant of 100% of the loan proceeds shall be applied.

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