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Japan aid official voices confidence in Vietnam’s debt-worthiness
Viet Nam repays up to $279 million in ODA loans to Japan annually. The top official of the Japanese International Co-operation Agency in Viet Nam, Motonori Tsuno, speaks to the issue of ‘boomerang’ aid.
Japan’s ODA for Viet Nam reached a record high of more than 202 billion yen (Over US$2 billion) in 2009. Will such a record be repeated this year?
Japan’s ODA to Viet Nam began at 44.5 billion yen in 1992 (The year Japan resumed ODA to Viet Nam). Out of the total 202 billion yen in ODA for Viet Nam last year, about US$500 million was emergency aid to help mitigate the effects of the global economic crisis. The question of whether similar assistance will be provided this year depends on how the economic situation in the country progresses.
Personally I don’t think Viet Nam will require more emergency aid. So I doubt that Japan’s ODA commitment to Viet Nam this year will surpass last year’s figure.
Last year Viet Nam made ODA loan repayments of 21 billion yen ($234 million) to Japan. Do you think Viet Nam will be able to continue meeting its ODA repayment obligations in years to come?
All ODA debt is cleared after a 10-year grace period. So last year’s payment for example was made for ODA projects that started as early as 1992. Under my estimation, Viet Nam must pay between 20-25 billion yen ($223million-$279 million) in repayments to Japan every year. Even so, Japan does not worry about Viet Nam’s ability to pay its debts. The IMF has not revealed any concern about Viet Nam’s ability to clear its debts. The World Bank’s assessment was also a reason why they together with the Asian Development Bank lent more than $2 billion to Viet Nam last year.
Does this mean Viet Nam will have to pay five times more for Japan’s ODA projects by 2020?
When Japan commits to grant an ODA project to Viet Nam, JICA does not disburse the whole sum at one time. Instead, money will be spent over the project life-cycle, usually five to seven years. Debt repayments will be varied depending on the level of accumulated debt each year. Obviously the more Viet Nam borrows from Japan the bigger the amount of debt they will have to repay. Accordingly, these debts are likely to increase annually but will not jump 5-6 times higher than previous years’.
Viet Nam’s economic growth was about 5 percent last year despite the fact the country was hit hard by the global economic crisis. Viet Nam’s economy will also grow in the future. There are important data to support Viet Nam’s ability to repay its ODA debts, according to international analysts.
Which companies are eligible to implement ODA projects in Viet Nam?
In principle, companies from any country can bid for ODA projects. The composition of contractors will vary year to year. For example, last year Japanese companies won 30 percent of the value of ODA projects. The same year Vietnamese companies won 50 percent worth of contracts.
There is also a binding condition for the number of ODA projects that only Japanese companies are permitted to participate in, those involving technology transfer from Japan to Viet Nam. Preferential interest rates, therefore, will be applied to these projects at 0.25 per cent a year for 40 years with a 10-year grace period. The others, meanwhile, will carry an interest rate of 1.2 per cent for 30 years with a 10-year grace period on repayments.
Viet Nam will not be asked to pay interest within the 10-year grace period. Payment of both of principal and interest will be made from the 11th year.
JICA hopes that Vietnamese companies can acquire technology transfer from Japanese partners through the implementation of these binding projects.
Have Vietnamese partners been successful in acquiring technology from Japan since ODA resumed in 1992?
I think Vietnamese companies still have to learn experiences and techniques from Japanese companies. This will contribute to raise the quality of ODA projects in Viet Nam.
I would like to cite the example of two bridges. The first is Thanh Tri Bridge which was a joint venture ODA project implemented by Japanese and Vietnamese companies.
The second is Vinh Tuy Bridge which was built by Vietnamese companies and funded by the Government. According to the evaluation of international experts, the quality of the first was much better than the second.
But it is worth noting the ability of Vietnamese companies has improved a lot since 1992. The building of Vinh Tuy Bridge is a proof of that.
VietNamNet, VietNamNews
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