May 30, 2016
Exchange of signed documents
On May 28, the Japan International Cooperation Agency (JICA) signed Japanese ODA loan agreements with the Government of the Socialist Republic of Viet Nam to provide loans of up to a total of 166.124 billion yen for assistance forthree projects.
Since the 1990s, Viet Nam has maintained steady economic growth (see reference 1). By 2010, Viet Nam achieved status as a lower middle-income country, which had been a national goal, and successfully reduced its poverty rate.* In a process that began last year, tariffs are being abolished in stages within the ASEAN region. In order to maintain sustainable economic growth while progressing toward the goal of industrialization by 2020 under these new circumstances, Viet Nam must make economic structural and governance organizational reforms, including improvements to the financial system and to infrastructure to improve the investment environment. Taking these steps will create mid to long-term macroeconomic stabilization and strengthen international competitiveness. Viet Nam must also address its vulnerabilities by raising the income of rural residents who make up about 70 percent of the country’s population and have a higher poverty rate than urban regions, and by improving public sanitation, which worsens with urbanization.
Given this situation, these Japanese ODA loans will provide support for building the economic infrastructure essential to strengthening Viet Nam’s competitiveness, and for promoting environmental improvements to overcome the country’s vulnerabilities. The features of the four projects are summarized below.
(1) Support for economic infrastructure to strengthen international competitiveness
By constructing an urban railway, the Ho Chi Minh City Urban Railway Project (Ben Thanh–Suoi Tien Section (Line 1)) (III) will alleviate traffic congestion and air pollution while encouraging regional economic development. The Thai Binh Power Plant and Transmission Lines Construction Project (IV) will construct a power plant that uses coal produced in Vietnam, as well as building related facilities, to meet the pressing demand for power. These projects will promote economic development in Vietnam and strengthen the country’s international competitiveness.
(2) Support to overcome vulnerabilities
The Second Ho Chi Minh City Water Environment Improvement Project (III) will construct sewerage and drainage systems to improve the water treatment capacity of Ho Chi Minh City and reduce flood damage.
JICA’s policy is to dynamically implement projects that address development issues in Viet Nam while coordinating JICA’s various types of assistance, which include Japanese ODA loans, technical cooperation and grant aid.
* According to the “Country Report: 15 years achieving the Viet Nam Millennium Development Goals” by the United Nations Development Programme, the poverty rate in Viet Nam dropped from 37.4 percent in 1998 to 8.4 percent in 2014.
Reference 1. Growth Performance of Viet Nam
Created with reference to the IMF World Economic Outlook Database
Reference 2. Terms and Amounts of Loans
|Annual interest rate (%)||Repayment
|(1) Ho Chi Minh City Urban Railway Construction Project (Ben Thanh – Suoi Tien Section (Line 1)) (III)||90,175||0.1||0.01||40||10||Japan tied|
|(2) Thai Binh Thermal Power Plant and Transmission Lines Construction Project (IV)||54,982||1.4||0.01||30||10||General untied|
|(3) Second Ho Chi Minh City Water Environment Improvement Project (III)||20,967||0.3||0.01||40||10||General untied|
Note: Special Terms for Economic Partnership (STEP) apply to projects (1), and Preferred Terms (environment, climate change) apply to project (3).
To ensure the procurement process is fair and competitive, the government of Viet Nam and JICA will consult together and specify items for which Viet Nam will implement post-project monitoring by a third party agency with procurement procedures. The expenses for this monitoring are not included in the Japanese ODA loan.