Lessons Learned to Improve the Efficiency of ODA Re-Lending at Credit Institutions for Vietnam

ODA funding method for projects

Malaysia implements the ODA re-lending mechanism through the National Investment Fund (Khazanah Nasional) for economic and agricultural infrastructure development projects, especially ODA projects invested by economic sectors. The rate of ODA re-lending is determined based on the investment structure in the strategy and master plan for ODA use. The Malaysian Government selects investment projects and assigns the National Investment Fund to re-lend ODA capital to ensure the socio-economic development strategy. There is participation of the private sector in ODA project implementation, especially in infrastructure, energy and industrial projects [53]. The National Investment Fund (KN) re-lending and managing ODA loans in the form of non-risk-bearing, so there is no difference in re-lending interest rates and foreign loan interest rates.

Effective use of ODA capital for socio-economic development

In Malaysia, ODA is considered an item in the state budget, the government is responsible for using and repaying the debt, ODA belongs to the public expenditure sector of the state. Malaysia manages ODA capital according to a centralized mechanism in state financial management. The government closely links ODA projects to economic development plans and requires an independent and strict evaluation process for ODA projects [53].

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ODA capital is prioritized for projects that directly promote economic growth, especially those that can increase the ability to generate foreign currency in the medium and long term, with priority given to economic infrastructure projects and rural agricultural development infrastructure projects. ODA capital is focused on key areas, under the centralized coordination of the Economic Planning Office [89].

In organizing project implementation, Malaysia maximizes the support of donors from the first stage of the project to the post-project control stage and has close coordination with donors in these activities. Thanks to that, ODA projects in Malaysia are quite successful, the rate of capital recovery is high, and ODA capital management in this country is assessed as public and transparent [89].

The effectiveness of ODA re-lending to the National Investment Fund

Supervision to ensure the purpose of capital use and investment efficiency in ODA projects is given attention. Malaysia has close coordination between donors,

The Office of Economic Planning, the Ministry of Treasury, the National Investment Fund and beneficiaries in the inspection and supervision of ODA projects, ensuring that ODA capital is used for the right purposes and effectively. Post-project evaluation focuses on comparing the effectiveness of the project with the original plan, policies and development strategies. Strengthen project implementation measures and focus on results [53].

In Malaysia, ODA re-lending at the National Investment Fund (KN) is considered effective. The debt collection of re-lending is enhanced, ensuring full and timely payment. Malaysia evaluates ODA loans according to the actual situation of the investor, on that basis, a table is established to classify debt groups. Debt collection plans are made in detail for each ODA project, analyzed and monitored periodically. During the period 1975 - 1985, the overdue debt rate for ODA re-lending was maintained at less than 1%. This proves that ODA projects operate effectively [89].

The ODA re-lending activities of the National Investment Fund (KN) are highly effective. The income from this activity mainly comes from the funding source collected from the ODA re-lending management fee and the exchange rate difference compensation and management fee from the Government. Operating under the National Investment Fund model in Malaysia has created great financial efficiency for this agency [89]. Malaysia only focuses on re-lending ODA capital at the National Investment Fund, in the form that this agency does not bear the risk of default.

In the management and implementation of ODA re-lending in Malaysia, information technology is widely applied and quite successful. Information on ODA re-lending to investment projects is managed on an integrated high-tech application platform, closely monitored, and made public and transparent. This helps to limit capital corruption and ensure the effective use of ODA capital in infrastructure investment [89].

1.3.2. Experience from China [88]

China is a country with a market economy operating under state regulation, so there are many similarities with Vietnam. In the 1980s, China pursued a strategy of economic reform and modernization, gradually transforming the economy from a centrally planned economy to an economy in which the market mechanism plays an important role, so there have been significant improvements in human resource development, poverty reduction and

development of science and technology. High savings rate, accounting for about 40% of GDP, is the basic resource for investment to promote economic growth. In the period of 1980 - 1990, China mobilized about 6 billion USD of ODA capital each year from bilateral and multilateral funding sources for investment in economic and social infrastructure.

ODA funding method for projects

China applies both the budget allocation mechanism and the ODA re-lending mechanism to implement economic and social infrastructure investment projects. Re-lending of ODA projects invested by local governments is implemented and managed directly by the Ministry of Finance, while re-lending of projects invested by economic sectors is implemented through policy banks or commercial banks [88]. The China Development Bank (CDB) is authorized by the government to re-lend ODA capital for development investment projects in both the form of CDB bearing the risk of default and the Government bearing the risk of default, the commercial banking system carries out re-lending in the form of credit institutions bearing the risk of default. This is quite similar to Vietnam in managing ODA re-lending.

Effective use of ODA capital for economic development

China focuses on encouraging the use of ODA loans to invest in infrastructure construction in special economic zones. Priority areas for ODA capital use are energy, industry, raw materials, science and education, transportation and agriculture. Based on the State's announcement on specific ODA capital conditions for each donor, based on the strategy, development planning and priority capital use policy, investors prepare program and project documents and send them to the Development and Reform Commission for selection and inclusion in the priority list of ODA capital mobilization in localities [88].

Negotiations with donors by the government take place once the feasibility studies of selected projects have been approved and the loan is accepted after the technical design has been completed. As a result, the disbursement of ODA projects is very fast. Counterpart funds are mobilized from domestic sources. The allocation of funds in a manner in which counterpart funds account for a high proportion has increased awareness of the role of

investors and reduce the influence of external agencies, donors and re-lending banks [88].

China focuses on and emphasizes the management and supervision of projects using ODA loans, ensuring that investment is targeted, effective, and avoids waste and corruption. China also pays great attention to post-project evaluation and implements a good reporting and auditing regime for programs/projects after completion. The State Audit is responsible for auditing projects according to the Government's auditing regulations. Special attention is paid to post-project evaluation and its role in decision-making and management of ODA projects is enhanced [88].

The effectiveness of ODA re-lending for re-lending agencies

Supervision of the use of ODA capital for the right purpose and effectiveness is ensured. The use of ODA capital for re-lending in projects is carried out according to a strict process. The Ministry of Finance and the re-lending agency are primarily responsible for supervising the use of ODA capital according to the right purpose and plan. The governing ministries and localities closely coordinate with the Ministry of Finance in supervising the use of ODA capital to achieve the goal of effectiveness.

Regarding the debt collection of ODA loans. The debt collection plan, debt collection, and implementation of payment commitments by investors are closely monitored and controlled. China classifies ODA projects into 3 types of ODA projects to clearly define debt repayment responsibilities, specifically: projects that the state borrows from abroad and repays the debt (implemented by the Central Government); projects that local governments borrow from and are responsible for repaying the debt (according to the Central Government's decision); and projects that economic sectors borrow from and are responsible for repaying the debt and implementing payment commitments. China's debt collection rate is very high, the overdue debt rate for ODA loans is very low and is maintained at a level below one digit [88].

In China, the ODA re-lending rate is the total ODA capital borrowed by the government from abroad. The re-lending interest rate is determined by the government differently from the foreign loan interest rate, but is still guaranteed to be much lower than the commercial loan interest rate due to the specific characteristics of ODA project investment. The ODA re-lending rate for projects is determined by the members.

The economic investment part is determined based on the priority of the project and the capacity of economic organizations [88]. This regulation ensures the financial efficiency of the ODA re-lending agency.

1.3.3. Experience from Thailand [45],[63],[83]

Thailand is considered a country with a developed socio-economic background in Southeast Asia and also has many similarities with the economy of Vietnam. In 2017, Thailand's GDP reached 455.22 billion USD, the growth rate was 4.9%, GDP per capita reached 5,910.6 USD/person [100]. The Thai government stipulates that all loans are not counted as budget revenue, but debt repayments must be planned in the annual budget. The Thai government stipulates that the debt level does not exceed 10% of the budget revenue plan, the debt repayment level is equal to 9% of export turnover or 20% of annual budget expenditure. This control is to balance the country's borrowing capacity, debt repayment, and export level, avoiding uncontrolled debt. Many projects that are suitable for socio-economic development requirements but have debt levels exceeding the permitted level cannot be implemented. This measure helps Thailand always pay its debts on time even though the country's foreign debt is quite high. During the period 1980 - 1986, Thailand borrowed an average of 1.78 billion USD/year, but the average debt repayment was over 1 billion USD/year [45].

ODA funding method for projects

Thailand mainly re-lends ODA capital through Krungthai Bank in the form of a non-risk-bearing bank. The government directly negotiates with foreign donors and entrusts Krungthai Bank to disburse and manage loans. The Ministry of Finance of Thailand is the agency that represents the government in entrusting the bank to re-lend ODA capital and recommends solutions to ensure the effective use of ODA capital.

Effective use of ODA capital for socio-economic development

In Thailand, a project, especially a loan project, must hire a consultant before proposing to review and determine the urgency of the project; loan options

foreign or domestic capital mobilization; the amount of capital needed to borrow; the efficiency of loan use and the ability to repay the loan. After the above issues are carefully analyzed, the Government will negotiate with partners to determine and select loan sources with preferential conditions on interest rates and repayment periods. Thailand utilizes ODA loans to build infrastructure, in addition to increasing domestic investment and attracting direct investment, promoting exports to increase savings, meet debt repayment requirements on time, and gradually reduce dependence on foreign capital [83]. Thailand allocates ODA loans focusing on economic infrastructure, while non-refundable ODA prioritizes social infrastructure [63].

Thailand selects contractors for projects through bidding to ensure the efficiency of public projects. Careful analysis of the urgency of the project, project efficiency, and the ability to recover re-loaned debt, and loan conditions before signing the agreement has helped Thailand to properly disburse the project, as well as strictly control debt collection [83].

The effectiveness of ODA re-lending for re-lending agencies

The work of inspecting and supervising ODA projects to ensure that capital is used for the right purposes and effectively is regularly carried out by Thailand through periodic or surprise inspections of re-loans, debt collection status, and exploitation and operation of invested projects [83].

The work of debt collection of ODA loans has been strengthened by Thailand. The careful analysis of the effectiveness of the project loan conditions before signing the agreement with foreign countries has helped Thailand ensure the ability to recover the loan debt. In addition, ODA loan agencies periodically make debt collection plans, regularly urge, compare and confirm the debt situation with the project, which has helped Thailand recover the debts fully and on time. Thailand clearly stipulates the conditions for ODA loans for each investor that arise overdue debt, so the rate of overdue debt of ODA loans is very low [83].

Thailand's ODA re-lending management also focuses on the quality of human resources and information technology. Thailand takes advantage of foreign technical assistance projects in human resource development, ensuring capacity and

The level of management and implementation of ODA re-lending teams [63]. Thailand organizes the management and implementation of ODA re-lending through a professional software system to monitor and supervise ODA re-lending activities. In addition, Thailand maintains a one-stop-shop for purchasing equipment and materials for ODA projects via the electronic network, ensuring access to information for parties participating in public procurement contracts [83].

1.3.4. Lessons learned to improve the effectiveness of ODA re-lending at credit institutions for Vietnam

In the above countries, ODA loan funding for projects is mainly implemented through the credit channel of credit institutions through the re-lending method. Malaysia entrusts the National Investment Fund, Thailand re-lends ODA through Krungthai Bank. In China, ODA capital management has many similarities with Vietnam, depending on the characteristics of the project, the borrower, ODA re-lending is either directly implemented by the Ministry of Finance or authorized to the bank. Studying the experience of re-lending ODA capital of countries around the world can draw lessons for Vietnam to improve the efficiency of re-lending ODA capital at credit institutions as follows:

First, ODA capital re-lending process.

To ensure the effectiveness of re-lending and using ODA capital, the above countries have built a scientific ODA re-lending process from appraisal to implementation and debt collection.

Re-lending appraisal is an important step in the re-lending process and determines investment efficiency. Thailand requires investors to hire consultants to evaluate the feasibility study report, and after careful analysis, an appraisal council is established, and based on the appraisal results, a decision is made to approve or reject the re-lending. China makes a decision to lend when the project completes the technical design and appraisal report results. The appraisal content focuses on the project's socio-economic efficiency, financial efficiency and debt repayment ability.

In implementing re-lending, it is necessary to speed up the disbursement progress for ODA projects. China's experience shows that to ensure the disbursement progress, it is necessary to have a specific capital use plan for each project, and counterpart capital mobilized from

Domestic sources and technical conditions must be ensured before signing ODA loans with foreign countries. It is necessary to simplify and speed up project appraisal and technical appraisal procedures; promptly resolve difficulties and obstacles in the process of project implementation; reform administrative procedures according to the one-stop mechanism from central to local levels; speed up investment progress. Thailand selects contractors through bidding to ensure the effectiveness of re-lending ODA projects. Malaysia makes the most of the support of donors in all stages of the project and management of re-lending ODA capital, especially technical assistance projects and transfer of experience in re-lending foreign loans.

Second, ODA capital re-lending organization tool

(1) Policy system and mechanism for re-lending ODA capital. Vietnam needs to have a policy of prioritizing the use of ODA capital as a lever to promote and attract private investment. Select and prepare effective investment projects for sustainable socio-economic development. Take advantage of ODA capital to continue using it for infrastructure development. Prioritize using it for large-scale projects with high spillover, inter-regional nature, in line with planning and promoting the socio-economic development process of regions and areas across the country; prioritize using ODA loans to re-lend large-scale infrastructure projects that are capable of generating revenue to repay debts. ODA loans only focus on a few key areas, under the centralized and unified coordination of planning agencies and strict, objective and transparent project appraisal and evaluation. Use ODA capital for re-lending as a catalyst for domestic capital sources and FDI. It is necessary to establish a strict management and supervision mechanism for projects using ODA loans to ensure progress, purpose and effectiveness.

(2) Human resources and organization of ODA re-lending apparatus. Improving the quality of human resources in the management and implementation of ODA re-lending and foreign loans is of great concern to countries. The experience of Malaysia and Thailand shows that taking advantage of technical assistance from foreign donors to train human resources for re-lending agencies. In particular, improving professional capacity, management capacity, and the ability to apply modern technology to develop human resources through technical assistance projects are regularly implemented by countries.

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