JICA launches a 10 billion JPY Standby Emergency Credit for Urgent Recovery

The Japan International Cooperation Agency (JICA) in Vietnam introduced Deputy Minister Nguyen Hoang Hiep and MARD officials to the Stand-by Emergency Credit for Urgent Recovery (SECURE) to provide quick disbursement for recovering from the natural disaster, responding for capital demands at the post-natural disaster recovery stage in partner countries.

According to Mr. Kubo, even though Japan has been expanding cooperation with countries affected by natural disasters through urgent support activities and reestablishment cooperation, there is still a time gap between these models and there is a dearth of expansion-eligible cooperation activities during the recovery phase. SECURE enables the cooperation in the recovery stage through rapid disbursementm responding to capital demand.

"A portion of this capital included in the new generation ODA loan program can be used to combat and prevent natural disasters, specifically for SECURE. Mr. Kubo explained that the benefit of this credit is the provision of a loan or disbursement as soon as feasible for the recovery phase following a natural disaster through the signing of an Exchange of Notes and Loan Agreement in advance.

According to the JICA representative, unlike other loans, this one requires the recipient nation to develop a policy framework for the field. "With this form of credit, not only JICA provides funds for partner agencies and the Government to implement their activities, but also it must ensure the prerequisite condition that two sides collaborate to establish a policy framework" , Mr. Kubo commented.

According to JICA's information, target nations of the Stand-by Emergency Credit for Urgent Recovery are those stable macroeconomic and public financial management, having experience or plan of utilizing Japan's technical cooperation for disaster prevention. The limit is 10 billion JPY or 0.25 percent of GDP, whichever is lower. In principle, the disbursement period is three years and will be extended to a maximum of fifteen years by conducting the applicable extension procedures every three years. Currency Conversion Option is also available under the terms and conditions of a 20-year repayment period including a 6-year grace period or a 15-year repayment period including a 5-year grace period. Front End Fee will be charged at 0.5% of the commitment amount, and 0.25% of the unpaid balance when the disbursement period is extended.

Deputy Minister Nguyen Hoang Hiep deemed the Stand-by Emergency Credit for Urgent Recovery a decent program that meets the requirements of the Ministry of Agriculture and Rural Development. In addition to financing, ODA is crucial for post-natural disaster reconstruction.

"Signing a loan typically takes three years, whereas disbursement is relatively quick if there is a reserve budget in place. The reserve credit for natural calamities is ideally suited to Vietnam's circumstances, according to Deputy Minister Nguyen Hoang Hiep.

Agreeing with JICA, the Deputy Minister said that the most difficult job presently is building a policy framework. Vietnam's regulations on emergency recovery after natural disasters have been finalized, but there is a need for a policy framework between Vietnam and Japan or the Ministry of Agriculture and Rural Development and JICA regarding such factors as the scope of the credit; beneficiaries; and, in the event of natural disasters and damages, what type of account can be used and, most importantly, the disbursement plan. The Deputy Minister believes that the sponsor's opinion is necessary for this credit program to be compatible with ODA loans.

The Deputy Minister expressed that the Ministry of Agriculture and Rural Development and JICA proactively creating a policy framework will play a decisive role in this loan. It is suggested that JICA dispatch more specialists to proactively begin constructing a policy framework.

At a press conference in October, JICA Vietnam Chief Representative Sugano Yuichi stated that Japan is continuing discussions with Vietnam to provide flexible ODA capital related to new generation ODA.

According to the Chief Representative of JICA Vietnam, the purpose of the ODA loan signed with the Vietnamese Government in July of this year is to provide financial support for the Government's policies to recover and develop socio-economics following the pandemic. Covid-19 is a pioneering initiative of the new generation of the ODA program.

Mr. Yuichi said, regarding JICA Vietnam's activities in fiscal year 2023, an outstanding result that needs to be mentioned is the ODA loan agreement signed in July for 3 projects, with a total value of more than 60 billion yen (equivalent to 10,672 billion VND) in 3 areas: Improving urban public transport infrastructure; Strengthening agricultural supply chains; Socio-economic recovery and development after the Covid-19 pandemic.