HOÀN THIỆN CÔNG tác THẨM ĐỊNH dự án ODA tại NGÂN HÀNG PHÁT TRIỂN VIỆT NAMe

HOÀN THIỆN CÔNG TÁC THẨM ĐỊNH DỰ ÁN ODA TẠI NGÂN HÀNG PHÁT TRIỂN VIỆT NAM IMPROVING THE ASSESSENT OF ODA PROJECTS FINANCED BY VIET NAM DEVELOPMENT BANK CONTENTS LIST OF ABBREVIATIONS i LIST OF TABLES ii LIST OF CHARTS ii INTRODUCITON 1 CHAPTER I: RATIONALE FOR EVALUATION OF INVESTMENT DEVELOPMENT PROJECT 3 1.1 PROJECT AND DEVELOPMENT INVESTMENT PROJECT 3 1.1.1 General issues of project 3 1.1.2 General issues of development investment project 4 1.1.3 The sequence and contents of the development investment projects draft 10 1.2 EVALUATION AND DEVELOPMENT INVESTMENT PROJECT EVALUATION 11 1.2.1 Project evaluation 11 1.2.2 Development investment project evaluation 13 1.3 PROCESS OF DEVELOPMENT INVESTMENT PROJECT EVALUATION 14 1.3.1 The process development investment projects evaluation in the Vietnam Development Bank 15 1.3.2 ODA loan projects evaluation in the Vietnam Development Bank .17 1.4 ASSESSMENT CRITERIAS OF INVESTMENT DEVELOPMENT PROJECTS EVALUATION QUALITY .35 1.4.1 Investment development project evaluation quality: .35 1.4.2 Assessment criterias of investment development projects evaluation quality 39 1.5 INTERNATIONAL EXPERIENCE IN THE INVESTMENT DEVELOPMENT PROJECT EVALUATION 45 1.5.1 Experience of China .46 1.5.2 Experience of Malaysia 47 1.5.3 Experience of Poland 48 CHAPTER II REAL SITUATION OF THE APPRAISAL OF ODA PROJECTS OBTAINING LOAN FROM THE VIETNAM DEVELOPMENT BANK 49 2.1 OVERVIEW OF THE VIETNAM DEVELOPMENT BANK .49 2.1.1 The history and development of the Vietnam Development Bank .49 2.1.2 Organizational structure and Business Regulations of the Vietnam Development Bank 49 2.1.3 VDB’s business performance in the period of 2008 - 2013 52 2.2 REAL SITUATION OF THE APPRAISAL OF ODA PROJECTS OBTAINING LOAN FROM THE VIETNAM DEVELOPMENT BANK 53 2.2.1 Perceptions of VDB’s Managements towards the appraisal of projects of development investment 53 2.2.2 VDB’s appraisal process of ODA projects 54 2.2.3 Methods of appraisal of investment projects for development of VDB 63 2.2.4 Capacity of personnel participating in the appraisal of investment projects for development of VDB 73 2.3 SHORTCOMINGS AND CAUSES OF SHORTCOMINGS OF THE APPRAISAL OF INVESTMENT PROJECTS FOR DEVELOPMENT 75 2.3.1 Several fundamental shortcomings during the project appraisal 75 2.3.2 Causes of shortcomings 79 CHAPTER III SEVERAL SOLUTIONS TO ENHANCE THE APPRAISAL OF ODA PROJECTS OBTAINING LOAN FROM THE VIETNAM DEVELOPMENT BANK 84 3.1 STANDPOINTS ON APPRAISAL OF ODA PROJECTS OBTAINING LOAN FROM THE VIETNAM DEVELOPMENT BANK THAT NEED TO BE GRASPED 84 3.1.1 The Vietnam Development Bank’s orientation to 2020 and the vision to 2030 84 3.1.2 Forecasts for ODA flows into Vietnam and on-lending ODA by the Vietnam Development Bank for the period 2013-2020 85 3.2 SEVERAL SOLUTIONS TO ENHANCE THE APPRAISAL OF ODA PROJECTS OBTAINING LOAN FROM THE VIETNAM DEVELOPMENT BANK 92 3.2.1 Solutions to enhance the appraisal and decision-making process of granting credit to ODA projects obtaining loan from VDB .92 3.2.2 Solutions to enhance the appraisal of ODA projects obtaining loan from VDB 94 3.2.3 Solutions to establish a system of indicators to serve the appraisal of ODA projects obtaining loan from the Vietnam Development Bank .102 3.2.4 Solutions to the organization and training of human resources to improve the capacity of appraisal official 104 3.2.5 Other supporting solutions 105 CONCLUSION 110 REREFERENCES 111 APPENDIX 114 i LIST OF ABBREVIATIONS Abbreviations CI VDB KEXIM ADB JBIC KFW VCB Full Writing Credit Institutions Vietnam Development Bank Export Import Bank of Korea Asian Development Bank Japan Bank for International Cooperation German Development Bank Joint Stock Commercial Bank for Foreign Trade Vietinbank of Vietnam Vietnam Joint Stock Commercial Bank for AFD ADB Agribank Industry and Trade French Agency for Development Asian Development Bank Vietnam Bank for Agriculture BIDV Development Joint Stock Commercial Bank for Investment and Eximbank Development of Vietnam Joint Stock Commercial Export Import Bank of and Rural Vietnam World Bank International Monetary Fund Feasibility Study Foreign Direct Investment Gross National Product Official Development Assistance WB IMF F/S FDI GNP ODA IC EC VND GB Investment Credit Export Credit Vietnam Dong Government Budget LIST OF TABLES Number Table 1.1.2 Content Page Structure of ODA capital disbursed in the VDB 6 Table 2.3 over the years Quantity of ODA capital on-lending projects in 8 Chart 1.1.4 VDB 2007-2013 The process of a loan project evaluation in the 15 VDB ii Chart 1.1.5 Development investment project evaluation Table 3.2 process diagram Several financial indicators to compare the 16 103 financial status of enterprises LIST OF CHARTS Number Chart 1.1.2 Content Page The committted ODA capital for lending over the 7 Chart 1.1.3 Chart 2.4 Chart 2.1.2.1 years Structure of Funds Status of ODA lending in VDB VDB organization 8 9 51 Chart 2.5 VDB organization and apparatus 71 iii COMMITMENTS I hereby commit that I clearly acknowledge and understand the examination regulations of Paris Graduate School of Management, France and I represent that I have conducted this thesis in true manner in compliance with regulations of School Hanoi, August 20, 2014 Student Nguyen Anh Tuan INTRODUCITON 1 Necessity of the research In recent years (from 1993 up to present), an increase in ODA commitments by international donors to Vietnam showed increasing confidence, sympathy and support of the international donor community to Vietnam’s “Doi-moi” career and socioeconomic development policies The use of ODA resources to the socio-economic development demonstrates their role for the economy of Vietnam In fact, capacity of management and use of ODA in general and management system for project evaluation to ODA on-lending by the Vietnam Development Bank (VDB) is much of obstacles In order to improve this fund more effective, it is required that management in general and project evaluation quality in particular is improved, based on formal and comprehensive research on prject evaluation in VDB’s On-lending this important source of capital From the point of view of the state authority of the ODA loan management, VDB has considered the project appraisal stage is critical as the central and the most important task in the management of ODA loans in VDB For such purposes, the thesis is to recommend useful solutions contributing to improving investment efficiency of development investment projects funded by ODA specifically within VDB through the evaluation of ODA projects 2 Research Purpose of the Thesis The Research aims at the followings: To systemize the theories on the appraisal of investment projects development To analyse of the evaluation of ODA loan projects in VDB, which then defines causes of the issues in the appraisal of development investment projects in VDB To propose some primary solutions to improve the evaluation for ODA projects in VDB 3 Object and scope of the research: Object of the research: The appraisal of development projects Scope of the research: This thesis only focuses on analysis of the status of the evaluation of development projects in VDB for the period 2007-2013, from which recommendations and proposals are given out for the coming years 4 Method of the research Methods of analysis, comparison, synthesis - descriptive analysis (Descriptive Analysis) has been used in this research Following methods of data collection are used: Secondary data: Taken from the annual report of the organization, financial institutions and government agencies Page 1 Primary data: Interviewed from experts as well as related subjects 5 The meaning and practice To improve quality of the evaluation of investment projects is of major concern not only for the investors of the project with a desire to achive the best financial results, but also for the financing institutions in order to minimize credit risk For the VDB, along with the target of socio-economic development of the sectors, locals and country, capital preservation issues are of top priority Through this research, the thesis aims to: Elucidate the fundamental issues of evaluating investment projects Systemize indicators to assess the financial and economic efficiency of the project investment analysis and evaluation of the evaluation of ODA loan projects in VDB and give scientific explanations the status of this work Propose solutions and its conditions to contribute to improving the quality of evaluation ODA loan projects in VDB 6 The Structure of the thesis This thesis namely, "Improving the evaluation of ODA projects in the Vietnam Development Bank" is structured into three chapters: Chapter 1: Rationale for evaluating development investment projects Chapter 2 Situation of evaluating ODA projects in Vietnam Development Bank Chapter 3 Some main solutions to improve the evaluation of ODA projects in Vietnam Development Bank Page 2 CHAPTER I: RATIONALE FOR EVALUATION OF INVESTMENT DEVELOPMENT PROJECT 1.1 PROJECT AND DEVELOPMENT INVESTMENT PROJECT 1.1.1 General issues of project Project is a series of activities which are arranged to achieve a specific result within fixed budget and time – A project is not a plan A project has five basic characteristics * Has one or a system of specific,clear and quantifiable objectives * Is a chain of sequential continuous operation, which each operation’s result is the basis for the next one * Constraints of resources (the of input resources such as money, manpower, materials, equipment ) * Constraints of time: started time and ended time * Project Organization is a temporary apparatus of its own After the completion of project, the project organization as well ends its mission A project has a cycle of four stages: Identifying and building projects - Planning - Implementation management - Project completion The work of the first stage is a feasibility study to clearly determine the objectives of the project, and to build the project proposal The second stage of the project is to build the plan from the objectives and the final work is to identify the task that must be performed, the estimated time required to complete; to arrange the suitable order of tasks and also the personnel apparatus in accordance with the task Implementation phase requires using all of the traditional management skills, as well as checking and strict supervision This will ensure that the project will always stick to schedule, also guarantee the certain budget quality standards One of the most important characteristics of the project is that it has a certain lifespan The project will end after achieving objectives and transfer the results to the stakeholders The project team as well cease operating, but only after the member has been summarized and learned the lessons 1.1.2 General issues of development investment project Development investment activitiy is an investment which always associated with the operation to create resources, new asset for the economy and society Development investment affects directly to the aggregate supply and aggregate demand in the Page 3 economy; the stability, development and growth of the economy; the economic restructuring,; it also enhances modernizing the national science and technology However, development investment as well has a number of general characteristics as follows: * Development investment activities often use a large capital, during the investment, the work has not been put into operation so there is no profitability * Development investment activity is a long-term activity, which reflected in 02 stages: the execution time of investment (construction works and equipment installation); performing time of investment results (the business) * The results and effectiveness of development investment activity is influenced by factors that are not fixed by time, depending on the natural and socio-economic situation of the national and the world * The results of the development investment activities is the construction works and equipment installation, which will operate right where they were born Geographical, topography factors not only affect the investment process, but also the operation of such investment results Therefore, to carry out a high socio-economic effectiveness development investment, we need to perform a good investment preparation, including drafting investment projects Standing on a content perspective, it can be referred that: investment project is an overall of proposed activities and the costs required to be arranged in a strict plan, with certain time and place to create, expand or renovate specific facilities to achieve certain objectives in the future Implementation of investment projects must rely on some objectives: development objective that represents the contribution of the project to the overall development of the country, the benefits in terms of economic and social that the project bring; direct objective expressed that in the framework, resources, certain time, the investment projects will bring benefits and profitability for investors However, the implementation an investment project should ensure the following requirements: science; practicality; legality; and consistency Vietnam, as well as other developing countries, has received ODA capital to use in many different contents in order to serve the growth and economic development objectives The use of ODA capital for which specific objectives or investment areas depends on the circumstances, conditions and perspectives of each country ODA capital in general and on-lending in particular are being used by Vietnam in some Page 4 - Maximum loan term: 12 years including 2-year grace period as from the signing date - Loan interest rate is 1.7%/year (in which management of Vietnam Development Bank is 0.2%/year) 2.2 Contra capital by investment credit capital source of the State - Total maximum loan: 103,000 million VND - Maximum loan term: 11 years including 2-year grace period as from the signing date for the first loan reimbursement - Loan interest rate is 6.6%/year 2.3 Some recommendations to the Employer - Employer should complete investment procedures and sequence under the current Investment Law, Construction Law and Bidding Law - Before deciding on project investment, the Employer is kindly requested to review costs related to the project performance supplement and calculate full costs in total investment of the project under the regulations - Shareholders contribute own fund (58,541 million VND) and register as charter capital at Binh Duong Province Department of Planning and Investment in accordance with the project progress and commit to balance the amortization of assets formed from own fund to pay loan of Vietnam Development Bank in the first years of the project operation - There should be comments by the specialized agency on the environmental impact, fire control plan and evaluation on the suitability of equipment line and investment technology - Completing full legal procedures on land lease for project implementation under the regulations - Employer buys equipments, goods and services from India as defined in the Credit Agreement worth at 27 million USD signed on 12/8/2009 and observes current regulations on ODA management and use - Using the assets formed from loan as guarantee assets for the loan Page 115 Nguyễn Anh Tuấn – IeMBA-B04 Page 116 Nguyễn Anh Tuấn – IeMBA-B04 No Item R ate Cost/ Unit of product Annual cost price Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 I I Fixed cost 1 Amortization of fixed assets 23,912.05 14,575.65 23,520.10 14,575.65 22,987.30 14,575.65 22,421.50 14,575.65 21,802.90 14,575.65 21,164.50 14,575.65 5% 1,168.20 1,168.20 1,168.20 1,168.20 1,168.20 1,168.20 10% 531.14 531.14 531.14 531.14 531.14 531.14 10,308.18 10,308.18 10,308.18 10,308.18 10,308.18 10,308.18 10% 657.28 657.28 657.28 657.28 657.28 657.28 10% 1,910.84 1,910.84 1,910.84 1,910.84 1,910.84 1,910.84 680.34 6,506.15 1,179.60 213.30 557.01 200.00 129,896.24 680.34 6,114.20 1,179.60 213.30 557.01 200.00 144,240.69 680.34 5,581.40 1,179.60 213.30 557.01 200.00 158,444.29 680.34 5,015.60 1,179.60 213.30 557.01 200.00 172,614.89 680.34 4,397.00 1,179.60 213.30 557.01 200.00 171,996.29 680.34 3,758.60 1,179.60 213.30 557.01 200.00 171,357.89 2 a Construction 0 1 b Construction 0 1 c Production equipment 2 1 d Other equipment 0 1 e Other cost 0 2 3 4 5 6 7 % 1 Major repairing of equipment Fixed loan interest Management cost Land use right value Insurance of fixed assets Fire control Total cost (Ct) 0.35% CALCULATION OF ECONOMIC EFFICIENCY OF THE PROJECT Page 117 Nguyễn Anh Tuấn – IeMBA-B04 Project term No Item Year 0 Year 1 Year 2 Year 4 Year 5 Year 6 Year 7 I Design capacity of the project (ton) Available capacity of the project (ton) Capacity promotion coefficient Production and consumption Selling price (without VAT) Total annual benefit (Bi) 1 Total revenue (B) 2 Other receivables - - - - - - 3 Recovered asset value (Vb) - - - - - - 1 2 3 4 5 II III 1 2 Annual cost price (Ct) Total annual cost price (Ci=It+Cot) Investment cost (It) Annual operation cost (Cot) 6, 200 5, 600 Year 3 70% 3, 920 33 200 130,144.00 130,144 00 6,200 6,200 6,200 5,600 5,600 5,600 5,600 5,600 80% 90% 100% 100% 100% 4,480 3 3.200 5,040 3 3.200 5,600 5,600 5,600 33.200 33.200 33.200 148,736.00 167,328.00 185,920.00 185,920.00 185,920.00 148,736.00 167,328.00 185,920.00 185,920.00 185,920.00 144,240.69 158,444.29 172,614.89 171,996.29 171,357.89 123,550.84 139,530.96 154,886.36 156,922.28 157,101.03 123,550.84 139,530.96 154,886.36 156,922.28 157,101.03 146,329.95 112,613.44 36,657.90 146,329.95 3,799.00 - 6,200 129,896.24 36,657.90 - 6,200 108,814.44 In which: taxes (Tn): + VAT payable Page 118 Nguyễn Anh Tuấn – IeMBA-B04 + Other VAT (Vk) + Corporate income tax (Vtn) Vtn = (B-Ct-GTGT-Vk) x tax rate - IV Post-tax profit (LNst) - V LNst = B - Ct - Tn Financial incomeexpense balance (BiCi) (36,657 90) (146,329.95) 1,2 43.72 1,862 72 3 ,898.64 4,077.39 247 76 4,4 95.31 7,6 39.99 11,442.39 10,0 25.07 10,484.72 17,530.56 25,1 85.16 27,7 97.04 31,033.64 28,9 97.72 28,818.97 Page 119 Nguyễn Anh Tuấn – IeMBA-B04 No VI Item Year 0 Total debt payment of the project - Year 1 Year 2 - + Amortization of fixed assets (Dt) 14,575.65 + Fixed loan interest (Lt) VII 1 2 + Post-tax profit Debt payment schedule (Fixed loan interest + Receivables) 82.50 - + Other loan - + Other loan including loan construction 3 6,506.15 2 47.76 Opening balance + Loan from Vietnam Development Bank Fixed loan interest + Loan from Vietnam Development Bank including loan interest during construction interest + Other loan - 82.50 82.50 82.50 6, 339.35 5, 000.00 5,00 0.00 8,206.15 129,212.00 Year 5 Year 6 Year 7 25,312.44 23,985.18 23,576.61 14,575.65 14,575.65 5,721.20 14,575.65 4 ,397.00 5 ,012.54 16,215.60 16,397.00 15,758.60 5,015.60 3,758.60 5,242.36 117,112.00 79,3 00.00 37,8 12.00 5, 581.40 4, 936.80 106,712.00 95,512.00 83,512.00 72,100.00 64,100.00 55,300.00 34,612.00 31,412.00 28,212.00 5,015.60 4,397.00 3,758.60 5,758.50 127,512.00 86,5 00.00 41,0 12.00 6,1 14.20 5,4 12.00 4,428.60 3,867.60 3,286.80 7 47.65 7 02.20 644.60 587.00 529.40 471.80 10, 400.00 7, 200.00 11,200.00 12,000.00 12,000.00 8,000.00 8,800.00 8,800.00 3, 200.00 3,2 00.00 3,200.00 3,20 0.00 87,500.00 41,712.00 6, 339.35 5, 588.55 5,588 55 750.80 75 0.80 during Principal payable + Loan from Vietnam Development Bank 21,329.56 Project term Year 3 Year 4 22,9 23, 37.50 977.04 14,5 14, 75.65 575.65 6,1 5,5 14.20 81.40 2,2 3,8 47.66 20.00 16,5 15, 14.20 981.40 6,506.15 - - 1,700.00 - - 1,000.00 10,4 00.00 7,2 00.00 - - 7 00.00 3,2 00.00 Page 120 Nguyễn Anh Tuấn – IeMBA-B04 VIII IX X Debt payment balance = (VI) - (VII) Other legal source for debt payment Accumulation after debt payment ( 82.50) (6,339.35) 13,123.41 Page 121 6,4 23.30 7,9 95.64 9,096.84 7 ,588.18 7,818.01 ... selection in using ODA must be enhanced Linking ODA with general strategy: To use ODA capital effectively, we should link and incorporate synchronously strategy, plan to attract and use ODA to development... ensure the autonomy of our country in the use of ODA ODA capital is not readily available and is not primarily gratuitous Both nonrefundable ODA and ODA loans require very high responsibility of... built in Vietnam was by ODA capital, especially ODA from Japan Recently, according to ODA White Paper 2013 statistics of Japanese government, Vietnam is now the largest ODA recipient of Japan