Econ
More than 4 billion USD concessional loan for Vietnam: Opportunities for private enterprises
At the World Bank’s workshop of Country Partnership Framework for period 2017-2020, with an aim to be foundation for the cooperation with Vietnam in September 14, World Bank is expected to approve the concessional loan of 4 billion USD to Vietnam for the period 2018-2020.
The amount of concessional loan to Vietnam is depended on the current global economic siutaion, so that the number can be adjusted in the future.
Focus on 3 priority areas
In reality Vietnam has exceeded the requirements to be eligible for Official development assistance (ODA) of the World Bank, in which the majority is from the International Development Association (IDA). In new period, Vietnam will move on from the IDA loan with interest rate of 0% plus the service fee to getting loan from the International Bank for Reconstruction and Development (IBRD) – an agency of the World Bank. As such, Vietnam will get the transitional IDA loan (with the same conditions of IBRD) of 2.2 billion USD for the period of 2018-2020. With the IBRD fund, Vietnam is expected to get 1.88 billion USD for this period. “New fund will be financed for the government’s midterm investment plan. We will mobilize all partners and institutions, such as International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), as well as available instruments to diversify the source, transform the loan strategy, policy discussion, analyzing and consulting, or guarantee” – World Bank Country Director in Vietnam - Mr. Ousmane Dione said.
The country partnership framework focus on 3 areas and 11 objectives, including: creating conditions for harmonized growth and the participation of private economic sector. In this aspect, the focus will be on finalizing the management of the economy along with principles of market economy, developing private economy and agricultural enterprises; Increasing the commercial competitiveness in multimodal transport and logistics; finalizing the master plan for infrastructure development and urban area; 2nd aspect: investment in human resources and knowledge, in which improve public and private health service, improve efficiency in social support and health insurance; improve the education quality and the work force; 3th aspect: ensure the sustainability and the health of environment; including renewable energy, saving energy, resistance against climate change, natural resources management and water resources.
Increase capability to access capital
Concessional loan is one of the important external force contributing to the socio-economic development, especially infrastructure development of Vietnam in recent years. Despite the role of ODA in Vietnam has reduced, financial sources supporting Vietnam at present are still better than the current market’s conditions in term of interest rate, long grace period, which is essentially valuable fund Vietnam can get for investment and development. However, there remains shortcomings such as slow disbursement progress, political barriers or project appraisal, counterpart fund, site clearance.
According to the expansion of private sector, opening the door of foreign concessional loan to private enterprises will be the decisive factor to solve the lack of fund situation which enterprises are facing. IBRD fund often has low interest rate at 2-3%, while the credit loan at present is 9-11% in Vietnam for mid term and long term loan. The problem is how to approach this loan. Representative of IFC said, the company has invested 25 million USD into VPBank, in which 15 million USD is for the private enterprises, especially for small and medium enterprises (SME), with preferential mechanism for textile & garment industry.
At present, Vietnam is a middle income country, so the relationship with sponsors must change into the relationship of cooperation. Which means, in the future, Vietnam and the government of partner country will only have an indirect role of creating favorable condition and certain support for the direct parties to work with each other. “Mechanism for disbursement fund for private enterprieses is feasible. However, it is important is the dependence on the criteria to choose projects of private enterprises. In order to simplify this procedures, foremost, information with regard to the concessional loan must be disclosed in public with transparency for private enterprises. Besides, the government and credit institutions must set up the legal framework, financial conditions and qualifications to guarantee the loan” – Mr. Ousmane Dione said.
Focus on 3 priority areas
In reality Vietnam has exceeded the requirements to be eligible for Official development assistance (ODA) of the World Bank, in which the majority is from the International Development Association (IDA). In new period, Vietnam will move on from the IDA loan with interest rate of 0% plus the service fee to getting loan from the International Bank for Reconstruction and Development (IBRD) – an agency of the World Bank. As such, Vietnam will get the transitional IDA loan (with the same conditions of IBRD) of 2.2 billion USD for the period of 2018-2020. With the IBRD fund, Vietnam is expected to get 1.88 billion USD for this period. “New fund will be financed for the government’s midterm investment plan. We will mobilize all partners and institutions, such as International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), as well as available instruments to diversify the source, transform the loan strategy, policy discussion, analyzing and consulting, or guarantee” – World Bank Country Director in Vietnam - Mr. Ousmane Dione said.
SMEs can now access the World Bank's concessional loan easily.
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Increase capability to access capital
Concessional loan is one of the important external force contributing to the socio-economic development, especially infrastructure development of Vietnam in recent years. Despite the role of ODA in Vietnam has reduced, financial sources supporting Vietnam at present are still better than the current market’s conditions in term of interest rate, long grace period, which is essentially valuable fund Vietnam can get for investment and development. However, there remains shortcomings such as slow disbursement progress, political barriers or project appraisal, counterpart fund, site clearance.
According to the expansion of private sector, opening the door of foreign concessional loan to private enterprises will be the decisive factor to solve the lack of fund situation which enterprises are facing. IBRD fund often has low interest rate at 2-3%, while the credit loan at present is 9-11% in Vietnam for mid term and long term loan. The problem is how to approach this loan. Representative of IFC said, the company has invested 25 million USD into VPBank, in which 15 million USD is for the private enterprises, especially for small and medium enterprises (SME), with preferential mechanism for textile & garment industry.
At present, Vietnam is a middle income country, so the relationship with sponsors must change into the relationship of cooperation. Which means, in the future, Vietnam and the government of partner country will only have an indirect role of creating favorable condition and certain support for the direct parties to work with each other. “Mechanism for disbursement fund for private enterprieses is feasible. However, it is important is the dependence on the criteria to choose projects of private enterprises. In order to simplify this procedures, foremost, information with regard to the concessional loan must be disclosed in public with transparency for private enterprises. Besides, the government and credit institutions must set up the legal framework, financial conditions and qualifications to guarantee the loan” – Mr. Ousmane Dione said.
