Vietnam central city turns down cheap foreign loan for port expansion

By VnExpress   July 31, 2016 | 04:00 pm PT
Vietnam central city turns down cheap foreign loan for port expansion
A vessel at Da Nang Port. Photo by Da Nang Port JSC
Vietnam is now reluctant to borrow foreign aids amid high public debts.

Da Nang Port Joint Stock Company kicked off construction for the second phase of development at Tien Sa Port in the central city on Sunday, having turned down Overseas Development Assistance (ODA) from Japan.

Total investment for the second phase is estimated at VND1.1 trillion ($48.8 million), with 70 percent financed by the company and its stakeholders and the remainder by banks, news site VietnamPlus reported on Sunday, quoting Nguyen Huu Sia, general manager of Da Nang Port Joint Stock Company.

The second phase is planned for completion by June 2018.

Tien Sa Port is expected to be able to handle 10 million tons of cargo a year when the project is completed compared to 6.5 million tons in 2015. It will also be able to receive vessels of up to 75,000 DWT compared to 45,000 DWT ships at present.

Signs of ODA cuts

Vietnamese ministries are also carefully evaluating an offer from China that promises to provide more than $300 million to finance a road project in the northern province of Quang Ninh.

China, via the state-owned Export-Import Bank of China, has offered to lend Vietnam $304.6 million or nearly 80 percent of the total investment of $382 million to implement the project.

In June, Vietnam’s Ministry of Finance requested state agencies to submit reports on their use of ODA and other preferential loans in an attempt to keep loans at a "safe level". The request follows a directive from Prime Minister Nguyen Xuan Phuc aimed at preventing public debt from rising from 2016-2020.

On Saturday, Phung Quoc Hien, vice chairman of the National Assembly (Vietnam's legislature), told VnExpress the country’s shift to domestic funding is necessary as preferential ODA loans will dry up by July 2017.

In 2015, Vietnam's public debt reached a record high 62.2 percent of GDP; a significant increase in a short time given the ratio was only 38 percent in 2011, according to the State Bank of Vietnam. 

The 2015 figure may have stayed within the National Assembly’s cap of 65 percent, but the public debt ratio has risen quickly with ineffective investments causing huge losses. 

Vietnam's government debt also rose to 50.3 percent of GDP as of the end last year, 0.3 percent higher than the cap imposed by the National Assembly.

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Vietnam eyes tightening foreign aid to curb public debt

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