Vietnam urged to ditch development aid for better financing options

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 The construction site of an elevated railway project in Hanoi. Photo: Thai Son
After receiving US$53 billion billion of development aid over the past two decades, Vietnam is now urged to stop relying on this source of funding. 
The advice was heeded by many economists and officials at an international conference on official development assistance (ODA) in the central city of Da Nang on Friday, news website VnEconomy reported.
Vuong Dinh Hue, chief of the Party's economic commission, was quoted as saying that it was a major success for Vietnam when it became a middle-income country in 2009. But the transition has created a challenge as ODA flows will no longer be as strong as before, he said. 
It is time Vietnam prepared for more expensive sources of funding, Hue said, adding that the government and sponsors have already been making "certain" adjustments to ODA policies in accordance with the new situation.
With the upcoming changes, Vietnam will need to improve its ability to attract, manage and use ODA loans, he said.
Many economists agreed with Hue, saying that some state agencies mistakenly considered ODA loans as free money, and thus often spent them carelessly.
Besides, Vietnam was often required to hire contractors from countries which lent the money, meaning it could end up with limited options, associate professor Nguyen Ngoc Son with the Hanoi-based National Economics University said.
As a result, many projects using ODA sometimes could be more expensive than when using non-ODA loans, Son said.
The government, for instance, has recently sought an additional loan of US$250 million from Chinese government for an ODA-backed project to build the Cat Linh-Ha Dong elevated railway in Hanoi. The adjustment came after the project's deadline has been changed several times since the end of 2013, when it was supposed to finish.
The 13-km line, whose construction started in 2008, was originally estimated to cost $552.86 million.
Although ODA pledges for Vietnam hit $89.5 billion between 1993-2014, the actual amount of money that Vietnam received was lower. 
So far, only $53.89 percent has been disbursed.
"Vietnam needs to graduate from this ODA school, turn down inefficient loans, and choose those which really bring good benefits to the economy and society instead," economist Vo Dai Luoc said.

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