New models of Japanese assistance to Vietnam

09:36 | 12/03/2019 Investment

(VEN) - Since Japan resumed its official development assistance (ODA) for Vietnam in 1992, it has poured almost US$30 billion in loans and grants to support the country’s development. Although still Vietnam’s biggest aid provider, Japan is shifting some of its aid models, partly due to Vietnam’s transformation into a low middle-income country.

new models of japanese assistance to vietnam
The Ben Thanh-Suoi Tien Metro Line project is funded by Japanese ODA

New models

According to Konaka Tetsuo, Chief Representative of the Japan International Cooperation Agency (JICA) Vietnam Office, the Japanese government will continue providing aid according to its latest policy on national support, approved in December 2017, to help Vietnam promote economic growth and enhance global competitiveness, support vulnerable groups and improve state administration.

“JICA will develop new cooperation models, such as Private-Sector Investment Finance (PSIF) programs and other models with the participation of local communities and authorities, as well as social organizations, in order to enhance the effectiveness of ODA use,” Konaka Tetsuo said.

PSIF programs will facilitate Vietnamese private companies’ access to new, stable financial resources through projects in the fields of infrastructure development, support for the poor and climate change adaptation. An example is a US$75 million loan agreement between JICA and Cafe Outspan Vietnam Limited, a subsidiary of Olam International Limited, providing funds for a coffee value chain project.

Widespread effects

According to Konaka Tetsuo, Japanese ODA has helped Vietnam develop large-scale projects in fields such as electricity, transport, seaport, urban and rural infrastructure, education, healthcare and environmental protection.

Major transport projects using Japanese ODA include the upgrade of Hanoi’s Noi Bai International Airport, which has increased its service capacity from 3.6 million passengers in 2010 to 8.9 million passengers in 2017; and the construction of Hanoi’s Belt Road No. 3, including Thanh Tri Bridge and Lach Huyen Port.

JICA is also helping Vietnam meet growing domestic demand for energy. The project to expand the Da Nhim Hydropower Plant was completed in late 2018, costing more than VND1.95 trillion, with Japanese ODA accounting for 85 percent coming through JICA.

In the health sector, ODA funding has enabled the construction and upgrade of Bach Mai Hospital, Cho Ray Hospital, Hue Central Hospital. Japanese funding for the construction of the Center for Research and Production of Vaccines and Biologicals (POLYVAC) has contributed significantly to improving the quality of medical diagnosis and treatment.

Japan will continue offering ODA loans to Vietnam until the country achieves upper-middle-income status, with

average income per capita exceeding US$12,200 per year. Although Vietnam has achieved lower middle-income

country status, Japanese ODA loans to Vietnam continue to be preferential, with low interest rates and a long

repayment period of 30-40 years, which private financial companies cannot offer.

Ngoc Thao