Họ và tên: Lê Thu Uyên

STT: 27

Mã Sinh viên: 18CL73402010137

ID phịng thi: 581 058 0048

Khóa/Lớp:(Tín chỉ): CQ56.11.CL2_LT1

Ngày thi: 02/10/2021

(Niên chế): CQ56.11.03.CLC

Ca thi: 8h50

BÀI THI MƠN: TÀI CHÍNH QUỐC TẾ
Hình thức thi: Tiểu luận
Mã đề thi: Test 1

Thời gian thi: 3 ngày
CHỦ ĐỀ:

Question 1 (4 points): What is foreign loan? In terms of loan nature, how many
types of foreign loan are there? Analyse of advantages and disadvantages of foreign
loan?
Question 2 (6 points): From your perspective, what are strong and weak points of
ODA management in Vietnam? By researching important information and
comparing when necessary, analyse some important characteristics of ODA in a
specific social-economic field of Vietnam. In your opinion, what can be done to
improve the quality of ODA management in that economic field?

BÀI LÀM


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Question 1:
• Concept of foreign loan:
Foreign loan refers to a short, medium or long-term loan offered to a government
or an enterprise with legal status (including foreign invested enterprises), or
organizations of a foreign government, territory, organization, individual or an
international financial organization.
• Nature of loan classification:
- Foreign commercial loan: refers to a loan under market conditions which are similar
to conditions of export credit loan or mobilization on the international capital
market.
- Foreign concessional loan: refers to a foreign loan, in which concessionality is
achieved by interest rates, maturities, grace periods, loan guaranties, and other
preferences. However, to be eligible to receive such soft loans, the debtor must
accept some conditions applied by the creditor.
• Advantages and disadvantages of foreign loan:
o Advantages:
- To be a critical source of income for a country to ensure the essential spending
demand without causing inflation directly.
- To facilitate a country to further increase investment funds, strengthen socioeconomic development and uphold available potentials in the country.
o Disadvantages:
Foreign loan may cause negative impacts as follows:
- The fact that borrowers have to settle interests for foreign creditors which leads to
a reduction in partial national income.
- Excessive reliance on foreign loan may impose a debt burden on future generations.


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- High foreign loan may lead a country to insolvency. National insolvency (National
bankruptcy) is the failure or refusal of a government to pay back its debt which is
calculated in gold or in foreign currencies. There will be extremely serious
consequences to a nation once it declares insolvency.
Question 2:
Ø Definition of ODA (Official Development Assistance)
ODA is flows of official financing administered with the promotion of the economic
development and welfare of developing countries as the main objective, and which
are concessional in character with a grant element of at least 25 percent (using a
fixed 10 percent rate of discount). By convention, ODA flows comprise
contributions of donor government agencies, at all levels, to developing country
(“bilateral ODA”) and to multilateral institutions. ODA receipts comprise
disbursements by bilateral donors and multilateral institutions, (OECD, Glossary of
Statistical Terms).
1. Strong and weak points of ODA management in Vietnam
Ø Strong points:
- Help absorb modern science and technology and develop human resources.
• Through ODA projects, Vietnam can improve its science and technology level and
human resources level with the activities of donors.
• Strengthen opportunities and diversify investment methods, improve the quality of
human resources and income of the majority of people.
• Through this process of participating in indirect investment, domestic investors and
people will have the opportunity to "rub", train and foster knowledge, experience
and skills, helping to improve their personal level in particular, the quality of human
resources in general.

- Promoting growth, improving life, contributing to poverty alleviation.

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• By its loans or non-refundable investments, the investment countries have
contributed to the supplementation of our state budget. Creating conditions for
investment in economic and social development...
• This capital has played an important role in the strategy of growth, poverty
reduction, economic restructuring, institutional reform, promoting the socioeconomic development of our country. ODA has contributed to the success of a
number of national programs with far-reaching significance such as population and
development programs, expanded immunization, child nutrition…
- Contributing to the adjustment of economic structure.
• ODA projects that donors invest in Vietnam mainly in the fields of infrastructure,
technical economy, human resource development. It creates a balance between
industries throughout the country.
- Expanding development investment and attracting FDI direct investment.
• In order to attract investment from developed countries, it is certain that our country
must consider aspects such as its infrastructure. The problem is that when foreign
investors decide to invest in a country, the first thing they care about is profit. The
State should develope infrastructure, transportation systems or means of
communication…
• When foreign indirect investment capital increases, there will be positive
consequences of increasing the chain to the flow of direct investment capital in the
country.
- Establishing and improving international relations
• Currently, our country receives ODA from many different countries in the world,
the investment of these countries has helped the diplomatic relations of our country

and the investment country become more intimate and cohesive ... Since then,
expanding international relations.

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- ODA is an important additional source of capital for investment and
development.
• In the cause of industrialization and modernization of the developing country of
developing countries in general and Vietnam in particular, it is necessary to require
a huge amount of investment capital, which if only domestic capital mobilization is
not enough, so receiving ODA support is extremely necessary.
Ø Weak points:
- Increasing the gap between rich and poor, creating the dependence of
borrowers on lenders and especially ODA has exacerbated our country's
balance of payments.
- ODA has increased the national debt:
• ODA is constantly increasing to improve the economic and social situation but also
contributes to increasing the national debt source.
- ODA increases inflation:
• Debt ⇒ new debt ⇒ debt increase ⇒ increase in borrowing ... This spiral will lead
debtors to default or inflation spiral: Debt ⇒ increase debt obligations ⇒ budget
deficit ⇒ increase inflation. At this time, debt will consume all budget expenditures
for social development and stability, straining the state of capital thirst, social chaos.
• Moreover, the "tighten one’s belt" to pay debts leads to restrictions on imports and
increases in exports, including consumer goods that are lacking in domestic
⇒Imbalance of money, price increases, increases inflation.
- Economically negative impact:

• ODA recipients must accept the removal of goods protecting fledgling industries
and import and export tax tables of the donor countries' goods. ODA recipients are
also required to gradually open up the protection market for new goods of the donor
country.

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• In addition, the countries receiving ODA also become waste dumps for donor
countries such as outdated technology machinery and equipment, ...
• ODA recipients have the right to use ODA, but usually ODA project portfolios
must also have the consent of the aiding countries, although they do not directly run
the project, but they can participate indirectly in the form of contractors or support
experts.
• The impact of the exchange rate can also cause the amount of ODA to be repaid
increased
• Loss and waste in the use of ODA in unreasonable fields, management level and
incompegence in handling and operating projects will cause loss of ODA, leading to
ODA receiving countries may be in debt.
2. Analyse important characteristics of ODA in Energy sector of Vietnam.
Since Innovation in 1986, Vietnam's economy has grown dramatically from one
of the underdeveloped countries to a low-middle-income country in 2009, with the
corresponding gross domestic product per capita rising from 130 USD/person to
1,100 USD/person.
During this period, the majority of ODA was spent on infrastructure development
to restructure the economy through the application of modern production methods.
Specifically, From 2010 to 2017, the proportion of ODA for the group Economic
Infrastructure accounts for the highest proportion with a value of nearly 15.77 billion

USD (accounting for 47.6% total ODA capital of the whole period), included
sectors: Transportation, Communication, Energy, Banking service and finance,
Business services and other services.

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Chart 1: ODA Disbursement in the field of Economic Infrastructure in Vietnam
in period 2010 - 2017 (millions dollars)
Energy is an important sector that plays an important role in promoting
economic development. Therefore, this is also an area that receives a lot of ODA in
the Economic Infrastructure group (only after the field of transport).
In the period from 2010 to 2017, the total amount of ODA disbursed to the
energy sector was 4676 million USD, accounting for 29.65% of the total ODA
invested in Vietnam's infrastructure. In particular, ODA for coal-fired power plant
construction projects is the largest with more than 1.6 billion USD (equivalent to
34.31% of ODA value in the energy sector); this was followed by power distribution
and transmission projects with nearly 1.43 billion USD (30.58%). Manufacture nonrenewable energy and orther source projects with ODA disbursed in the whole
period of 2010-2017 were 718 million USD, equivalent to 15.37%. One point to note
is that the proportion of ODA for projects related to energy policy and administrative
management is relatively high compared to other sectors, reaching 6.33% of the total

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ODA for the energy sector, equivalent to 295.95 million USD. Projects related to

hydropower plants have ODA disbursements for the whole period of 210.81 million
USD (4.51%). In addition, ODA for the energy sector has also supported solar, wind,
gas distribution, bio-fuel-burning power plants, but the value is still very low.

Chart 2: ODA disbursement in the field of Energy in the period of 2010 – 2017
(millions dollars)
ODA for the energy sector comes mainly from Japan (accounting for 52.95%
of total ODA for the whole sector), from the World Bank through IDA (29.26%),
from Germany (7.8%), ADB (3.6%) and France (3%). However, due to different
funding priorities, the ODA form of these donors also has a very different structure.
For example, IDA is mainly ODA loans for power distribution and transmission
projects, developing energy management policies. ODA loans from Japan for
distribution and transmission, energy production, non-renewable sources; In
addition to power distribution and transmission projects, ODA is also allocated to

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energy production projects and renewable sources; France has ODA for hydropower
plant projects.
A point to note is the coal-fired power plant projects, power distribution and
transmission ; non-renewable energy and other source projects have more than 98%
of ODA loans are used. Meanwhile, projects related to energy conservation,
education and training, research in the fields of energy, wind power, natural gas
power plants, nuclear power plants using 100% ODA aid. Solar-related projects have
an ODA aid rate of 25%. In the future, Vietnam needs to note this point to have a
more reasonable ODA strategy to ensure long-term energy supply without affecting
the environment and reducing greenhouse gas emissions.

Some projects with large capital disbursement in the period of 2010 - 2017
are the construction project of Thai Binh Thermal Power Plant and power
transmission lines with a total investment of about 26,584 billion VND. Japan has
supported the first ODA loan package of 20.737 billion Yen (loan agreement signed
in November 2009), a second loan package worth 36.392 billion Yen (loan
agreement signed in January 2015), a third loan package worth 9.873 billion Yen
(loan agreement signed in July 2015) and a fourth loan package worth 54,982 billion
Yen. After more than 4 years of construction, construction and installation of
equipment, both units of the plant have been in commercial operation since April
2018 and February 14, 2019, EVN held the inauguration ceremony of Thai Binh
Thermal Power Plant project. This is a project that is evaluated to ensure quality and
comply well with environmental regulations... When put into operation, the plant
contributes to strengthening the power supply capacity for socio-economic
development in the Red River Delta region, thereby improving the level of safety,
stability and economy for the operation of the power system. It is expected that the
plants will emit to the national grid the power output from 3.6 to 3.9 billion kWh per
year.

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Another significant Japanese project is Nghi Son I Thermal Power Plant. This
is a project started in July 2010, with a total investment of nearly 22,260 billion
VND, including 85% of ODA loans from the Japanese Government through the
Japan International Cooperation Agency (JICA) and 15% of the reciprocal capital of
Vietnam Electricity Group (JICA) (JICA) and 15% of the reciprocal capital of
Vietnam Electricity Group (JICA). EVN). After more than 3 years of actively
implementing the construction and installation of equipment, the plant officially

joined the national grid on October 7, 2013 with an annual electricity production
output of 3.6 billion KWh. With this level of output, the plant ensures the supply of
electricity for production activities in Nghi Son Economic area, generally meeting
the socio-economic development needs of Thanh Hoa province in particular and the
North Central region.
In addition, the World Bank (through IDA) also cooperated with EVN to
implement the Distribution Effective Project (DEP) in the period of 2013 - 2016.
This is the largest total funding grid project of EVN with a total initial investment of
about 724.8 million USD, in which ODA is 488.9 million USD and reciprocal capital
is 238.1 million USD. Then the project received funding from the International
Development Association (IDA) of the World Bank (WB), The Clean Technology
Fund (CTF) and the Australian Government's Agency for International Development
(AusAid) funded a total investment of approximately 665 million USD. This project
is implemented in 5 power corporations: North, Central, South, Hanoi and Ho Chi
Minh City to invest to improve the efficiency, supply capacity and reliability of the
power distribution system through the upgrading, expansion and modernization of
the 110kV distribution power grid system, middle-voltage and meter system.
Thanks to the support of ODA, by the end of March 2018, the national power
transmission system operated by EVNNPT has a total of 24,365 km of lines
(including 7,503 km of 500 kV lines and 16,862 km of 220 kV lines), 140 substations

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(including 28 substations 500 kV and 112 substations 220 kV) with a total
transformer capacity of 77,613. MVA. The national power transmission system has
reached most provinces and cities in the country, gradually connecting to the power
transmission grid of countries in the region, with increasingly modern technology

such as multi-circuit lines, multiple voltage levels, 220 kV high-voltage underground
cables, GIS 220 kV station, unmanned substation, computer-integrated control
system, incident locator, online oil monitoring, SCADA system...
Vietnam's energy development is moving in the right direction, but this is a
complex field that needs more resources to develop the energy market. ODA and
preferential loans have been used effectively, as shown by the strong development
of the power system in terms of power sources, transmission power grids,
distribution power grids, improving the reliability and safety of operating the
system... The programs and projects really bring practical effects to investment in
the development of the electricity sector, making an important contribution to
economic growth and improving people's lives, as well as contributing significantly
to the industrialization and modernization of the country. Although the
implementation and disbursement of ODA programs, projects and concessional
loans have made positive changes, they are still slower than expected. Many projects
remain, disbursement capital is slow. The speed of disbursement compared to the
level of commitment is still inconsistency.
3. Improve the quality of ODA management in Energy sector of Vietnam.
Firstly, it is necessary to ensure adequate and timely reciprocal capital for ODA
programs and projects to achieve the highest and fastest disbursement rate, which is
very urgent for Vietnam. Lack of reciprocal resources, including finance and
competent human capital, is unlikely to succeed in using ODA effectively to serve
development goals. Whether ODA loans or non-refundable aid requires domestic
costs to realize ODA into specific development results.

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Secondly, the trend of non-refundable ODA and preferential interest rates

decreased when Vietnam became a low-middle-income country, instead of using
less preferential loans. Therefore, the effective use of this loan requires Vietnam to
strengthen its capacity and drastically improve the project implementation situation,
using more focus to invest in building large-scale, valuable economic and social
infrastructure and creating a pervasive impact on the overall development of the
country.
Thirdly, finalize legal documents, innovation in ODA project management
process and procedures on the basis of combining the standards of donors, especially
in three important stages of work: Procurement bidding; Compensation, Migration
and Resettlement; Financial management of programs, the project leads to a "dual"
browser status.
Fourth, in the new development cooperation, new aid models will be applied
more, the participation of the private sector and non-governmental organizations are
encouraged. Therefore, the Government needs to have appropriate policies and
institutions to create an environment for new models and approaches. In addition, it
is necessary to work closely with donors to properly use new aid approaches and
models, especially to support the budget in receiving funding to improve efficiency
of use, reduce procedures and contribute to improving Vietnam's public management
systems in accordance with international standards and practices.
Fifth, it is necessary to identify investment priorities when using ODA and
improve the supervising, monitoring and evaluating projects. Because ODA is still
a loan and is obliged to repay debts, it is necessary to eliminate the idea of "applying"
ODA in a part of cadres at all levels, including leaders who do not understand the
role and nature of ODA, leading to insufficient attention to the effective use of this
capital. Therefore, it is necessary to improve capacity and awareness for the team
involved in managing and using ODA.

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