‘Softening’ ODA loans to ensure sustainability of agricultural projects

The Ministry of Agriculture and Rural Development (MARD) convened the International Support Group (ISG) meeting on December 6, during which this recommendation was proposed. The conference, which was attended by representatives from the World Bank, embassies, international organizations, and local authorities, was designed to emphasize the effectiveness of ODA and concessional loans in the agricultural sector during the 2026-2030 period.

Softening loan terms

The Mekong Delta Integrated Transformation Project (WB11) and a carbon emission reduction project are the two significant initiatives in which Dong Thap province is currently engaging in. In the past, ODA funding frequently included government-backed support to "soften" loan terms, significantly benefiting capacity development and altering local perceptions.

However, recent proposals from givers have primarily concentrated on infrastructure development, without any corresponding initiatives to increase awareness and modify production practices. This oversight could affect the sustainability of the project.

Representatives from Dong Thap encouraged donors to reevaluate the high interest rates on loans and prioritize awareness-building programs by seeking funding sources, thereby assuring the project's sustainability. In particular, considering the substantial ongoing initiatives in the Mekong Delta, ODA projects that are designed to reduce carbon emissions should be prioritized with more favorable loan conditions. This method benefits Vietnam and conforms with the global commitments made under COP26 to reduce emissions.

In addition, Dong Thap advocated for the establishment of preferential policies and distinctive mechanisms to enable provinces that are experiencing funding constraints to effectively carry out projects, particularly those that focus on emission reduction and sustainable regional transformation.

Mr. Cao Duc Phat, the former Minister of MARD, emphasized the efficacy of previous partnerships with development partners such as the World Bank. He attributed the accomplishment to the effective utilization of technical support provided through ODA programs.

For example, he referenced the VnSAT initiative, which facilitated the tripling of Vietnam's coffee yield to 2.5-3 tons per hectare—equivalent to three times the global average. Vietnam has become the world's second-largest coffee exporter as a result of this accomplishment.

The VnSAT project in rice production played a role in the establishment of high-quality rice production zones, with the one-million-hectare high-quality rice initiative resulting in the further development of approximately 200,000 hectares.

"We need to calculate and utilize technical support from ODA more effectively to enhance investment attraction and efficiency," Mr. Phat added.

'The gifts' from international organizations

Minister Le Minh Hoan underscored the necessity for Vietnam to adopt a new approach to ODA funding during the ISG plenary meeting.

The Minister acknowledged that Vietnam is unable to reduce interest rates independently for non-preferential ODA loans. However, it should consider ODA as a resource for capacity building, policy recommendations, and empowerment at all levels, including communities and local governments, rather than merely as infrastructure investment capital.

For instance, the rice project that spans one million hectares and is both high-quality and low-emission is a prime example of comprehensive coordination. It encompasses the development of a supply chain, mechanization, community agricultural extension programs, emission reduction, and high-quality rice cultivation.

Minister Le Minh Hoan acknowledges the transformative effect of ODA initiatives on Vietnam, particularly in rural and agricultural regions.

In order to reduce the financial burden on local communities, he suggested that interest rates be "softened" through grants. This would help individuals and communities feel more balanced and less affected by the increasing rates. He also encouraged a candid evaluation of localities that perceive ODA as low-interest funding that is exclusively applicable to infrastructure development.

As the government reforms its institutional frameworks and streamlines management under Resolution 18, MARD leadership has called for closer collaboration with donors in the context of Vietnam's new development era. Additionally, the National Assembly is revising laws concerning ODA to establish a more advantageous legal framework for donors.

The Minister urged international partners to optimize the value of projects for beneficiaries by simplifying procedures, reducing overlaps between ministries, and preventing delays in project implementation.

"If a project involves too many central agencies or localities, the 'gift' from donor organizations may be delayed. This causes distress for management agencies like ours," the Minister remarked.

He emphasized that ODA initiatives should have a significant impact that extends beyond a single province to affect multiple regions. Additionally, they should generate cross-sectoral value, such as the development of agricultural infrastructure that facilitates transportation and livelihoods.

The Minister encouraged the Ministry of Finance and the Ministry of Planning and Investment to adopt a more comprehensive perspective on ODA projects, emphasizing the importance of resolving constraints to optimize the use of funding, in addition to interest rates.