Vietnam, a neighboring country of China and also a close strategic partner of India, has shown its concern over the interest rates that have been changed by China for its loans. Interest rates are almost double those of other countries from the Chinese official development assistance (ODA), which are united with minus eye-catching loan terms. According to some sources of local media, Vietnam’s Ministry of Planning and Investment (MPI) has articulated a lot of distress over the loans of ODA from China. These Chinese ODA loans carry interest rates of 3% per year, which is higher than that of Japan (0.4 – 1.2%), South Korea (0 – 2%), or India (1.75%).
According the higher ministries, some privileged credit loans from China are alike to the export credit, which are the conditional loans that discuss to the recipient country requiring to adhere to a number of project-related needs regarding the use of Chinese contractors, among the others that are combined with some less attractive loan terms, comparing to the other donors. At one point in time, this would make the actual loan amount much complex than cases that have modest behests. Furthermore, Chinese loans are subjected to 0.5% commitment fee and 0.5% of the administrative fee. This loan’s duration and grace time are shorter than those of other donors that are standing at 15 years and 5 years, respectively.
All the Chinese preferential loans are offered through the Export-Import Bank of China, which is also called Exim Bank. The MPI stated that the Chinese preferential loans are only appropriate for the projects with a direct source of income and reimbursement capacity. Moreover, the projects that use Chinese ODA are experiencing huge delay amongst the contractors and equipment’s, which are resulting in low quality and increasing capital investment. The most tarnished case is the Cat Linh-Ha Dong Skytrain project in Hanoi, which has four times protracted the primary goal and experienced a cost overrun of US$316 million to US$868 million.