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


priority sectors, such as infrastructure, health, education, craft villages development,
environmental protection and agriculture, forestry and fisheries ... In fact, only a few
financial institutions which have the capacity will get to participate in on-lending
activities.
ODA on-lending is an activity that the Vietnam Development Bank on behalf of
the Ministry of Finance/Sponsor let the borrower borrow a portion or the entire ODA
capital to implement the Program/Project that has potential capital recovery or
designated by the Prime Minister.
In the management and using of ODA capital in our country, on-lending is
considered one of the important issues which were carried out from 1993. To
participate in the process of ODA capital on-lending in Vietnam, there are some large
scale financial institutions such as the Vietnam Development Bank (VDB), the Bank
for Investment and Development of Vietnam (BIDV), JSC Bank for Foreign Trade of
Vietnam (Vietcombank). Among the banks that participated in this on-lending activity,
the Vietnam Development Bank accounts for the highest rate, with nearly 60% of the
total ODA capital on-lending. The received ODA capital is used in the priority areas
that need to be encouraged to develop such as described above. In the credit operations
of the Vietnam Development Bank, ODA on-lending does not account for a large rate
but plays a positive role for the development of the economy and has an increasing
trend (Table 1.1.2 ).

Table 1.1.2: Structure of ODA capital disbursed in the VDB over the years
Unit: billion VND

Page 5


Year
Structure
Investment
lending
Export
lending
ODA

on-

lending
Postinvestment
support
ODA
debt
balance

2006

2007

2008

2009

2010

2011

2012

2013

9.870

21.877

18.600

21.686

24.295

24.926

21.819

29.461

8.200

9.500

27.275

32.446

20.211

25.036

7.533

7.652

4,850

8.729

7.802

8.069

10.021

9.450

18.101

11.148

187

254

237

254

250

240

147

44

44,761

50.607

54.622

72.951

84.380

109.290

120.000

117.282

Source: VDB
It can be seen that basically, ODA capital on-lending of the Vietnam
Development Bank is always lower than other lending areas, however the absolute
number increased over the years from 2006 to 2010; specifically compared to 2006,
2011 has increased 52% with the absolute number increased from 4,850 to nearly
10,000 billion VND. Particularly in 2012, it increased sharply compared to 2011 with
absolute numbers from 9,450 to 18,101 billion billion (increasing by 1.9 times).
In fact, ODA on-lending through the Development Bank of Vietnam is mostly
performed under ODA on-lending authorization contracts between the Ministry of
Finance / Sponsors and the Vietnam Development Bank.
ODA capital on-lending authorization contract: is a contract signed between the
Ministry of Finance / sponsors and the Vietnam Development Bank that the Ministry
of Finance / Sponsor authorize the Vietnam Development Bank to implement ODA onlending. Of which, sponsors are foreign parties or foreign parties that provide ODA for
the project.
The total committed capital under the authorization contract until 31/12/2013
was over USD 7.3 billion, the Vietnam Development Bank is the biggest on-lending
implementing agency of the Government with a total capital management accounted
for 60% of total ODA on-lending of the country (Chart 1.1.2).

Page 6


9000

Chart 1.1.2: Thecommitted ODA capital for lendingover
theyears (million USD)

8000

8063

7000

7905

7386

6000
5000

5400

4000

5014

3000
2000
1000
0
2009

2010

2011

2012

2013

Source: Ministry of Planning and Investment
The chart shows that despite the world economy had a negative fluctuation, sharp
decline, the committed ODA capital for Vietnam increased through the years from
2006 to 2013. Although from 2011 to 2013 the committed number have reduced by the
global economic crisis, the commitment of sponsors remained relatively high. The
increase of commitment led to the increase of ODA signed and disbursement which
was a positive sign in attracting and using ODA in Vietnam over the past time.
For ODA funding commitments and on-lending authorization, there are bilateral
and multilateral sponsors. Among the 24 bilateral and multilateral sponsors, 88% of
the ODA belongs to the 6 major sponsors which are ADB, WB, JBIC, KfW, AFD and
KEXIM (Chart 1.1.3).

Chart 1.1.3: Structure of funds

Page 7


Source: VDB
Until December 2013, the Vietnam Development Bank has managed the onlending of 421 projects with a total capital under the credit contract signed equivalent
to over USD 9.58 billion, increase 127 projects with a total capital of USD 3.34 billion
compared to 01/07/2006. The total disbursement in the past 6 years reached VND
38,000 billion. The projecs were implemented in 58 provinces and cities across the
country, which focuses primarily on Ho Chi Minh City managed by Operation Center
II and Hanoi managed by Operation Center I (Table 2.3).
Table 2.3: Quantity of ODA capital on-lending projects in VDB 2007-2013
Year
Quantity of projects
Rate of increase

2007

357
9,17

2008
376
5,32

2009
403
7,18

2010
420
4,21

2011
412
-2

2012
432
4,85

2013
421
-1,02
Source: VDB
Table 2.3 shows that, the quantity of implemented ODA on-lending projects

basically increased (no significant reduction) over the years during the period 2007 to

2013. This reflects that the need for ODA on-lending of Vietnam to implement
economic development objectives is enormous and the effectiveness of investment
projects through the ODA on-lending project was quite clear, the sponsors have
already recognized the contribution of ODA capital to the economic-society
development of Vietnam.
The increase in the quantity of ODA on-lending projects led to the increase of
loan amount each year in the period, following year was higher than previous year
(Chart 2.4)
Chart 2.4: Status of ODA lending in VDB
Unit: billion VND

Page 8


120000

109290

100000

84380
72951

80000
60000

50607

54622

40000
20000
0

120000

18101
8729

2008
L

ending

7802

2009

8069

10021

2010

2011

9450

2012

2013

Total debt balance

Source: VDB
Chart 2.4 illustrates the amount of ODA capital on-lending in the recent period
which showed that it increased over the years, particularly compared to the 8,729
billion VND of capital on-lending in mid-2008's, the Year 2013 has increased to
18,101 billion VND that is 2.07 times. The amount of lending increased sharply led to
the increase of capital on-lending from 50,607 billion VND in 2007 to 120,000 billion
VND in 2013, representing a 2.37 times increase in 6 years. These very specific
figures show that the increase of debt balance was more than the increase amount of
lending, this could not reflect the situation and the risk of debt collection because most
of the projects were long-time loans. To assess the risk of on-lending activities we
need to consider several angles of the process.
In the organizational structure of the Foreign capital Department, the structure of
specialized sections also been strengthened to stick to the characteristics of each
operation segment. Specifically, the Department has been divided into the Objectives
Program Management Office, bilateral capital Management Office and multilateral
capital Management Office.
On-lending specialization and operation have been increasingly completed with
the issue of ODA On-lending Operational Manual (2009) which clearly states the
management process not only for the form of traditional ODA on-lending (not under
credit risk) but also for the form of ODA on-lending under credit risk. This is the basis
to strengthen and improve the quality of the on-lending activity that is performed in
the whole system of the Vietnam Development Bank.

Page 9

Through 8 years of operation in the Vietnam Development Bank, ODA onlending and management have become one of the main activities and significance of
the Vietnam Development Bank today with various programs and projects in the areas
such as transport infrastructure, water supply, process and waste management, efficient
energy usage, renewable energy, renovating power grids ... These programs and
projects using ODA capital have been advancing effectively and contributing to the
socio-economic development of Vietnam.
1.1.3 The sequence and contents of the development investment projects draft
For a development investment project, the process of forming and implementing
comply with the following steps:
* Investment preparation: research and detect investment opportunities, study
pre-feasibility, study feasibility and evaluate investment project.
* Investment execution: Complete the procedures, design the estimation,
construct, take acceptance test and put into use.
* Investment’s result operation: the first phase when just put into operating can
not guarantee to use fullest of capacity design, the phase to achieve the highest
capacity, the phase when capacity start a downward trend and the last phase of the
project.
Under current regulations, investment project drafting must comply with several
steps, such as: study investment opportunities; study pre-feasibility; feasibility study.
The implementation steps must ensure the following requirements: Every aspect of the
project must be considered in dynamic state, in each year during the life of the project;
All unstable elements are mentioned in each study content; Studying results of this
phase must achieve the highest level of accuracy. However, to prepare investment
project to achieve the quality, the content and the research should thoroughly clarify
the following issues:
* Research on the overall socio-economic situation : examine natural conditions,
natural resources, population and labor conditions, legal conditions, socio-economic
development situation, foreign trade situation and the relevant institutions, foreign
exchange situation ...
* Research on market aspect: Analyze supply and demand on products and

services current and future forecast in the market; make marketing plans to help
product sales, implement services activities of project; analyze competitiveness and
market domination ability of project’s product.
Page 10


* Research on technical aspect: Select the investment forms, types of businesses;
select feasible capacity of the project, expected production levels; determine the
production program and the requirements to be met; select investment location; select
technology; select machinery and equipment; construction techniques; dealing with the
impact on the environment; progress and schedule of project implementation.
* Research on financial aspect: Estimate total investment and capital structure;
financial statements expected; indicators reflecting financial; evaluate on financial
security; analyze project in case are more likely risks; effects of devaluation, exchange
rates and inflation.
* Research on socio-economic aspect: Examine the direct and indirect effects
when the project launched; calculate and evaluate the financial economic indicators of
the project.
1.2

EVALUATION

AND

DEVELOPMENT

INVESTMENT

PROJECT

EVALUATION
1.2.1. Project evaluation
Evaluating investment project is to research, analyze objectively, scientifically,
comprehensively all economic and technical content of the project, in relation to the
natural environment, socio-economics to make investment, funding decision for the
project.
The project plays an important role to investors, managers and make direct
impact to the process of socio-economic development. Without projects, the economy
will have difficulty in taking development opportunities. The century works of the has
always been proving the importance of the project. The project is important basis for
investment decision, plan and monitoring the investment process. The project is the
basis for financial institutions to make funding decisions, for the government agencies
to approve and license the investment. The project is also considered as an important
tool in management of funds, materials and labor in the investment process. Therefore,
understanding the characteristics of the project is one of the determinants of the
project’s success.
This is a process of testing and evaluating the basic content of the project
independently, separating from the drafting process. Project evaluation creates a solid
basis for the effective of investment activities. The conclusions drawn from the

Page 11


evaluation process is the basis for the units and branches, the competent agencies of
government to make investment decision, allow investment or sponsor the project.
Evaluating the reasonableness of the project expresses in the efficiency and
feasibility in each content and the way of calculating the projects
Evaluating the efficiency of the project in two aspect: finance and socioeconomy.
Evaluating the feasibility of the project: This is a very important purpose.
Feasibility reflects in the consideration of the implementation plan, the legal

environment.
How carefully the project is prepared and analyzed, there are still the subjective
view of analysts and project planner, deficiencies, deviations existed in the projects. To
assert more rationally and effectively, the feasibility of the projects as well as the
investment decision of the project, there should be independent consideration and
checking with the preparation and drafting, or in other words, the project needs to be
evaluated. Project evaluation helps investors overcome the subjectivity of the editor
and helps to detect and supplement the deficiencies in the analytical content of each
projects. Project evaluation is a part of investment management, it creates a solid basis
for the implementation of investment activities to be effective.
The projects will be successful if the characteristics of the project could be
identify and assess correctly by the project managers. Therefore, investment project
evaluation is significant in the enterprise.
To help investors select the best investment options.
To helping government management agencies assess the suitability of projects
for the overall development plan of the sector, country in such aspects: objectives,
scale and efficiency.
To identify the pros, cons of project.
To help sponsors decide exactly whether funding for the project or not.
To clearly define the legal status of the investment parties.
1.2.2. Development investment project evaluation
Drafting process ODA projects in particular and investment projects in general
can be very carefully but still subjective, so there may be analytical, calculating flaws
or loopholes expressing phrases that cause conflicts between partners. Project
evaluation contributes to detect and repair those flaws, add measures to ensure the
feasibility of the project. Moreover, the evaluation of investment projects will

Page 12

determine the legality, validity of projects. However, in different perspectives,
investment project evaluation has many different purposes:
On the investors’ perspective: evaluation helps examine the profitability on
finance

of

the

project,

make

the

most appropriate

investment

decision.

On the macroeconomic managements’ perspective: evaluation helps assess the impact
of the project on the implementation of the socio-economic development programs,
objectives in order to make final investment decision. On the other hand, through
evaluation they can make the most appropriate support solutions.
On the banks’ perspective: evaluation help assess the financial efficiency and
repayment capacity of the project, in order to make decisions to approve or disapprove
of funding for the project.
On VDB’s perspective: evaluation aims to ensure that investment projects comply
with all policies and guidelines, investment policy and to build oriented socioeconomic development of Communist Party, the Government, sectors and localities in

plan period. In addition, the evaluation also helps confirm the feasibility of the project
in terms of financial, economic, socio-economic and loan repayment ability of the
project to consider funding or participating with competent Government agencies
under authority and the fields assigned.
However, the evaluation of investment projects must also comply with general
regulations, which are the mandatory requirements for the project:
* Ensure the principle that not to invest the inefficient projects but also not to
ignore the investment with opportunities to be efficient.
* Choose the right investment projects.
Besides the above benefits, evaluation investment projects also have a lot of
meaning for each subjects and aspects:
* Help investors choose the best investment option to bring the highest economic
and financal efficiency.
* Help Government management agencies assess the suitability of the project for
socio-economic development planning, sectoral development planning, local
development planning in many aspects, with lot of content as the objectives, scale,
planning and effectiveness. Furthermore, investment project evaluation helps define
the benefits and the negative effects of the project when goes into operation, thereby
have the measures to maximize the benefits and minimize the negative effects.
* Help financial institutions make decisions accurately in projects lending or
funding activities.

Page 13


* Clearly define the legal status of the investing parties, as well as the
responsibilities and authority of these parties.
1.3 PROCESS OF DEVELOPMENT INVESTMENT PROJECT EVALUATION
Evaluation contributes to the overall assessment of the investment project’s
relevant contents, for different projects there will be many different relevant contents.

In special cases, the project’s content will have the project’s specific characteristics,
investment sector and expected investment local. Investment project evaluation
content typically includes some of the following issues:
1.3.1 The process development investment projects evaluation in the Vietnam
Development Bank
1.3.1.1 The process of a loan project evaluation in the Vietnam Development
Bank (Chart 1.1.4).

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Board of Management

General Director

Deputy General Director of Credit and
Deputy General Director of Evaluation

Department related to Credit activity

Leaders of Operation Center and Branches

Offices related to Credit activity of Operation Center and
Branches

Clients

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1.3.1.2 Development investment project evaluation process diagram (Chart
1.1.5)
Investment Credit
Department

Evaluation Department

Foreign capital
Management Department

Inputs Evaluation

Legal requirements
Evaluation

Inputs Evaluation

Management
Organization Evaluation

Investment necessity
Evaluation

Management
Organization Evaluation

Project financial
Evalutaion

Technical solution

Evaluation

Project financial
Evalutaion

Enteprise financial
Evaluation

Environmental impact
Evaluation

Enterprise financial
Evaluation

Legal

requirements

evaluation:

and capacity of the investor
project investing ability of the

Reviewing the legal dossiers, legal status

Socio-economic aspect
Evaluation

can

assess

generally

the

investors, as well as the legal

support of the relevant agencies for the project.
Investment necessity evaluation: This process contributes to identify, analyze,
assess and confirm the role, suitability with the overall socio-economic development
planning, sectoral development planning, local planning or investment policy of the
competent authorities for the project and the investors; the analysis and evaluation of
supply and demand in the market for the product, service operations on the database
and analytical methods, future forecasts and competitiveness on the market can
confirm the feasibility of product consumption alternatives, confirm the necessity of
investment projects in the current period.
Technical evaluation: To consider selecting the location, project construction
ground; consider the forms of investment and the feasible capacity of project; research
to select theequipment and technology for the project, thereby assess the overall
technical plan of the project.

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Inputs evaluation: To analyze the elements like raw materials, fuel, utilities, other
infrastructure to serve the project, labor to ensure that the project will be put into
operation stability with a maximum operating capacity.
Technical solution evaluation: The solutions on space, architecture, in terms of
structural thereby can confirm that the project factory's construction are feasible, with

the least investment capital but still ensure the technical requirements of the project.
Environmental impact evaluation: To analyze factors that affecting the
environment, assess of the environmental protection measures. For economic
development and international economic integration, environmental protection is one
of the important conditions to select the plan, location of investment projects.
Management organization evaluation: is the implementation of the relevant
agencies to assess the human resource ability of the project.
Project financial evaluation: Through examining the total capital investment and
progress, working capital needs for the operation of the project, production, cost and
selling price of the product, capital structure and capital source to invest to determine
the financial effectiveness of the project.
Socio-economic aspect evaluation: Through the analysis and assessment of
socio-economic benefits to valuate the economic of the project, which includes:
foreign trade goods, non-traded goods, the adjustment exchange rate.
Enterprise financial evaluation: Through analyzing the financial indicators of
enterprises to assess overall about the financial situation, production and business
situation of enterprises. With the basis of a stable and efficient financial economic,
enterprises can have the capability of developing and expanding the scale of operations
based on planned investment projects.
1.3.2. ODA loan projects evaluation in the Vietnam Development Bank
As early its foundation, the evaluation of ODA loan projects in the Vietnam
Development Bank has been regarded as the first mission, thereby improving the
efficiency of ODA capital for investment and development objectives . To ensure a
good implementation of this mission uniformly within VDB system, in 19/12/2008,
Chairman of Management Board of the Vietnam Development Bank issued Decision
No. 63 / QĐ-HĐQL which promulgated the ODA on-lending in the Vietnam
Development Bank Regulation and Decision No. 88 / QĐ-HĐQL dated 31/10/2013 on
the amendment and supplement the ODA on-lending Regulation issued together with
Decision No. 63 / QĐ-HĐQL dated 19/12/2008. For each ODA capital, constraint by
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the conditions of different Sponsors, as well as being used to invest in many different
sectors, the evaluation carried many special features. However, it can be generalized
the content about evaluation of ODA loan projects in the Vietnam Development Bank
sequentially as follows:
1.3.2.1 Investor legal capability evaluation
To inspect, remark the subjects using ODA capital as prescribed or required by
the Government, the Prime Minister and the guidance of the relevant Ministries and
Branches and the Vietnam Development Bank, the subjects here could be the
investors, investment projects, project investment areas...
To inspect the civil legislation capability and civil act capability under the
provisions of the Civil Code for the investors, to hold an office or transaction
addresses physical inspection...
To inspect the business lines of the investor that must be consistent with the field
of

business

registration

and in accordance

with

the

investment project.

The investor must be those subjects according to all the regulations of the Government

Enterprise Law, the Enterprise Law, the Cooperatives Law or under other provisions
of the Government, the Prime Minister. Other business subjects must be founded by
decision of the competent Government agencies.
To inspect the enterprise establishment Decision of the competent Government
agencies; Certificate of registration or certificate of business registration operation
(unless otherwise not required to register under the provisions of Law) that must be
granted by the competent Government management agencies in accordance with the
provisions of current Law.
To comment on the scale, structure and operating organizational form; the major
business lines; quantity, structure and skill level of the workforce and management
staff.
To comment on the process of formation and development; the labor Law
observance and the relationships within the enterprise.
The major products, markets, customers traditional; recent turnover and export
value.
To comment on professional qualifications, moral character; reputation among
employees and business partners; the experience and managing and operating
organization capability and business sensitivity of the enterprise’s leader by the study
of occupations and fields of operation which the leaders have gone through.

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In addition to the above issues, for the investor which is the Government
Enterprise, it should be noted about: innovation process, enterprise equitization: either
remained 100% Government capital or equitized , assigned, exchanged, sold or rented;
implementation time and its impact to investment supporting and loan repaymenting of
the VDB. The age of enterprise directors; retirement potential (alternative) during
project execution, particularly during construction; subordinates planning resource that
will receive the debt and promote the project efficiency to repay.

1.3.2.2 Feasibility and current contribution to the local socio-economic development
evaluation.
During the renovation of the country, the foreign relations have been
strengthened. Especially, partnership has developed with an open 15-year relationship
between Vietnam and the international community. Since sponsors conference in Paris
1993 when Vietnam re-opened relations with international financial institutions such
as ADB, World Bank, IMF and the industrialized countries, it has been 15 Conferences
so far with sponsors, total committed capital to support to more than USD 37 billion
and total implementation capital of nearly USD 20 billion, which contributed
significantly to the country's development in the renewal process.
The attraction and use of ODA in Vietnam in recent years have been carried out
in accordance with the policy of the Communist Party and Government's priority to
support the socio-economic infrastructure development and contribute to economic
growth, hunger eradication poverty reduction. Thereby, also to perform good
cooperation with the international community in terms of ODA, FDI, FII and trade, to
create the new look of Vietnam in the international community.
Practical results: Over 15 years of mobilization and implementation of ODA,
there have been undeniable results in a sustainable development direction, which are:
Firstly, to supplement capital and enhance the infrastructure: ODA capital
supplemented an important part of the Budget for development investment, accounting
for approximately 22% to 25% of total investment capital from the Budget (including
ODA on-lending from the Budget). The important work sponsored by the ODA has
contributed to improve basically and further develop economic infrastructure,
especially transportation and electrical energy, contributed to mobilize domestic
capital and attract foreign direct investment, to promote economic growth, improve
people's lives. Through the ODA projects, the road system was significantly developed
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