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Must Fully Satisfy All Conditions Set Out In The Agreement

During the project disbursement process, the steps of this process can be carried out many times, repeating according to a certain cycle specifically stipulated in the Financing Agreement.


1.2.4. Conditions for ODA disbursement

To be able to disburse ODA capital, it is necessary to meet the following basic conditions:

1.2.4.1. Have a valid ODA capital calling project:

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This is the first necessary condition for project disbursement, because without a project, the donor and the recipient country will not be able to develop a specific disbursement plan, including non-refundable aid (except for emergency relief and other special cases approved by the donor).

ODA projects signed must be projects that are included in the “Green Book” of the Government of the country calling for aid, which means that they must be part of the ODA capital use planning of the recipient country. In addition, valid ODA capital calling projects must meet quality requirements such as: satisfying the constraints set by the donor on the social environment and other constraints or the project has conducted a pre-feasibility study and a feasibility study, and the results of this study have been appraised and approved by both the donor and the recipient country according to the regulations and procedures of each party.

Must Fully Satisfy All Conditions Set Out In The Agreement

1.2.4.2. Donors agree to provide ODA capital

After the project has been approved by the appraising parties, capital is required to be disbursed, and therefore, the approval to provide funding will be the next condition for the disbursement process. The agreement to provide funding for the approved project will be specified in the Agreements signed between the two parties, the donor and the recipient country, according to the International Convention.

The signed Agreement will specify in detail the amount of capital sponsored by the sponsor, the amount of counterpart capital contributed by Vietnam, the time of capital withdrawal, the form of capital withdrawal, the method of disbursement, the process of transferring money from the sponsor to the recipient as well as payment procedures within the recipient country...

1.2.4.3. Must fully satisfy the conditions stated in the Agreement.

ODA capital is fundamentally different from other types of capital in that it is governed by factors outside of economic and financial factors. Therefore, meeting the environmental, social, economic, political constraints of donors will be an indispensable condition in the process of disbursing ODA capital:

Environmental conditions: funded investment projects must satisfy environmental conditions prescribed by the Global Environment Facility (GEF), including air environment, water environment, waste environment... Projects in the fields of industry, energy and rural agriculture must always satisfy strict requirements on environmental conditions when implementing the project.

Political constraints: the political and institutional framework of a country is a very sensitive issue, so depending on each case, the recipient country will respond at different levels. Particularly for Vietnam, as a country developing a socialist-oriented market economy, while the current donor community is mainly countries with capitalist-oriented economies, in the work of lobbying, negotiating and bargaining, Vietnam advocates minimizing constraints in this group (and even avoiding them).

Social conditions: The benefits of using ODA capital must be brought to the whole community of the recipient country, not just the benefit of a particular class in society. People in donor countries are not only interested in the quantity of aid but also in the quality of aid. There are also many cases where public opinion has exposed scandals in the provision and use of aid. In many countries,

People want the Government to reduce foreign aid due to a number of reception issues such as: slow reception of projects (slow disbursement of ODA capital), failure to strictly implement committed projects, signs of corruption in the use of aid, and lack of capacity to maintain and promote project achievements after completion.

The project participants must have sufficient capacity.

Once a project has been approved and ODA capital is available for disbursement from donors, the next condition for disbursement is only the implementation organization factor, in which the "human factor" is considered the most important.

In order for the ODA capital disbursement process to be convenient and quick, the capacity or professional level of the project staff plays a decisive role. Specifically, the Project Management Board will be the one directly involved in the project disbursement process, so the staff in the Management Board must ensure that they meet the requirements of foreign language proficiency, expertise and project implementation organization level. In addition, issues regarding the qualifications of the disbursement staff of banks, the treasury system, the capacity of contractors, consultants, etc. also have a decisive meaning on the time and process of disbursement.


1.2.5. Experience in promoting the disbursement of ODA capital

The history of developing economies has provided us with a rich and diverse body of experience in development financing. Many different models of disbursement of foreign capital have been tested and applied. The final results of implementing these models are very different, including some countries that are considered quite successful in disbursing foreign aid capital such as China, Malaysia, etc.; on the contrary, there are also countries that have failed in disbursing foreign capital such as African countries and Latin American countries. Therefore, surveying international experience in promoting disbursement of foreign capital

foreign investment in general and ODA in particular to understand the causes of failure as well as effective disbursement experiences, thereby drawing lessons to apply to the actual situation of the country.

1.2.5.1. Successful experience:

a) China: Before the 1980s, China pursued an outward-looking policy aimed at maximizing external resources for the reconstruction and development of the country. This orientation has created conditions for more and more foreign capital to flow into China, including ODA capital. In order to use and disburse the mobilized capital, the Government has allowed most programs and projects to quickly use this capital without emphasizing its effectiveness, "pursuing quantity, not paying attention to quality and efficiency". As a result, the borrowed ODA capital has increased the burden of national debt, pushing the country into a rather difficult period. In that situation, over the past two decades, China has made significant improvements in the disbursement of ODA capital:

- Prepare projects well, professionalize in making research reports

Feasibility study (F/S) and create favorable conditions right from the project preparation stage. The process of selecting and approving projects registered to use ODA capital is carried out in a unified and very effective order from the stage of project identification (pre-feasibility study, project proposal, approval in principle by the State Planning Commission) - Project preparation (feasibility study, technical design, environmental impact assessment) - Project evaluation (objectives, technology, market analysis, socio-economic efficiency, environmental protection, counterpart capital, debt repayment capacity, etc.). The project evaluation will be assigned to the Chinese Engineering Consulting Company and only when there is advice from this consulting unit, will the Planning Commission consider and select.

- Issue a system of detailed instructions on operations at each stage.

during the project cycle towards final approval with delegated authority

for local authorities and ministries. The final feasibility studies are comprehensively reviewed by a Chinese engineering consultancy firm on behalf of the Government after appraisal. The People's Bank of China or the Ministry of Finance can seek sponsors for the project with the approval of the Government. Negotiations with the sponsor side only take place after the feasibility studies of the selected projects have been approved and the loan approval is after the technical design has been completed. Therefore, the disbursement progress is very fast.

- Responsible for providing sufficient financial resources from the outset to

implement programs and projects. Counterpart funds are mobilized from domestic sources, including: the self-capital of the governing agencies, credit from state-owned and commercial banks and the issuance of “state development project” bonds. Allocating capital sources in a manner in which counterpart funds account for a high proportion has increased awareness of the role of project ownership and reduced the influence of external agencies, donors and lending institutions.

- Specialization in bidding and construction supervision. Bidding work is undertaken by specialized bidding agencies on behalf of the competent authority. These are agencies with experience in international bidding under the guidance of the sponsor. In addition, a construction investment appraisal agency is established to perform the task of granting licenses in the construction and implementation of the project. These are specialized agencies that perform supervision functions on the basis of contracts in accordance with domestic economic and technical guidelines and regulations such as: compliance with project implementation progress, personnel arrangement of the competent authority, whether construction quality meets design requirements or not, activities of foreign consultants, whether the procurement of goods and services is in accordance with the processes and procedures of lending organizations or not, whether the disbursement and withdrawal of capital is in accordance with the program content and the correct process or not, whether the construction works meet the standards and conditions in the project.

contract or not, project operation and maintenance preparation after completion.

- Focus on post-project evaluation and good implementation of reporting regime

and audit programs and projects after completion. The State Audit Office is responsible for auditing projects according to the Government's auditing regulations. Auditing is carried out at three stages of the project: before the project starts, during implementation and after the project is completed.

With the strategy of reforming and modernizing the economy, gradually transforming the economy from a "closed-door" centralized planning system to a market economy, China currently has an investment level of over 200 billion USD per year, of which ODA capital mobilized from bilateral and multilateral funding sources is about over 6 billion USD. The total ODA capital that China received from the commitments of donors in the period 1996 - 2000 was 36 billion USD, the amount disbursed reached 34 billion, accounting for 94% of the total committed capital - a great success that developing countries must learn from.

b) Malaysia : As a country with an emerging economy and a relatively high per capita income, in the past 10 years, this country has received ODA in the form of technical assistance from organizations in the United Nations system and bilateral donors. Preferential loans are mainly focused on large financial organizations such as ADB, JBIC... (the WB has only resumed preferential loans to overcome the consequences of the 1997 financial-monetary crisis) with a loan size that ensures a reasonable foreign debt limit. Malaysia's foreign debt is always within safe limits, with the total debt to GDP ratio and debt service to exports being 37.5% and 44.4% in 1990; 41.3% and 39.9% in 1995; In 1996, it was 42% and 42.2%, and in 1997 - the year of the crisis, it was still 49.8% and 49.5% respectively. Through studying Malaysia's experience, we can draw some basic lessons as follows:

- Malaysia is a leader in preparing a portfolio of completed projects.

designed with quality. The country has published a “Green Book” which lists priority projects requesting investment capital from ODA and other sources for the next fiscal year, ensuring that they are consistent with the overall economic development strategy. Up to now, Vietnam has also followed Malaysia’s example.

- In organizing project implementation, Malaysia makes the most of the support of

sponsors from the first stage to the post-project control stage. Once the feasibility study report is completed, the Government immediately approves it, thereby shortening this stage, and promptly applying the results of the sponsors' post-project evaluation to improve the design quality of new projects.

- There is a clear distinction between the functions and tasks of management agencies.ODA but still closely coordinate to create maximum convenience for Project Management Boards to implement ODA projects on schedule, apply quick approval procedures to reduce commitment fees. Any part of the project deemed ineffective or difficult to implement, the Malaysian Government proactively requests the donor to cancel.

- Malaysia does not encounter many problems due to differences in procedures

domestic and donor projects because in Malaysia, donor projects are allowed to apply uniform procedures and guidelines. In addition, the computerized payment system is perfect and fast, effectively serving the monitoring and supervision work of ODA management agencies and donors. According to Malaysia's data, strict control of foreign spending and borrowing is one of the reasons contributing to the reduction of state debt from 4.5 billion Ringgit (accounting for 50% of GDP in 1988) to 4.41 billion Ringgit (accounting for 46.45% of GDP in 1989), minimizing the loss of capital in the process of implementing long-term ODA projects.

1.2.5.2. Some unsuccessful lessons:

- This phenomenon has occurred in African countries, typically countries in the Sahara desert. Due to the lack of inspection and supervision of expenditures

spending of projects using ODA capital, negligence in accounting and auditing

Quarterly accounting has led to serious corruption. In the 1980s, these countries disbursed about 35-40% of total ODA with high concessional rates of up to 60-70% of the free rate, but the economic growth rate of these countries was still negative.

- That is the situation of widespread disbursement, not directed to the necessary sectors.

capital. Typically, some South American countries such as Brazil and Argentina. In these countries, the Government focuses too much on disbursing large projects, with the aim of disbursing as quickly and as much as possible. Disbursement work focuses too much on quantity without paying attention to quality, only chasing the speed of disbursement without paying attention to the direct beneficiaries. Reality has proven that fast disbursement speed is not necessarily the best, but if ODA capital is to be used best, it must be disbursed according to the project implementation progress in priority areas and according to the right capital users for the project to be successful. In the late 1980s, South American countries and Mexico were the regions with the highest foreign debt to GNP ratio in the world. As a result, Brazil in 1992, Mexico in 1994 and recently Argentina in 2002 all declared national bankruptcy, indefinitely postponing debt repayment.

- Due to not being able to build a debt repayment plan, there is no debt repayment strategy

clearly, losing the trust of sponsors and eventually leading to the sponsors

support the reduction of disbursements in the next stages. The recent case of Argentina shows that although this country has a foreign debt to total GNP ratio of about 45% - equivalent to Vietnam today, but due to the failure to control the debt, implementing the policy of dollarizing the economy plus high domestic interest rates, it has to spend up to 9% of GDP every year to pay off the debt. The level of long-term debt is too high, because the government of this country has borrowed too much for regular spending, and invested in the non-productive sector, not creating growth capacity.

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