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Vietnam should be cautious about loans from AIIB

Friday 17, 02 2017
Although the offered low-cost loans from AIIB (Asian Infrastructure Investment Bank) are very attractive, economists say Vietnam needs to think carefully before borrowing money.
AIIB said that if Vietnam needs loans worth $100-230 million and has fea
Vietnam should be cautious about loans from AIIB

Although the offered low-cost loans from AIIB (Asian Infrastructure Investment Bank) are very attractive, economists say Vietnam needs to think carefully before borrowing money.
AIIB said that if Vietnam needs loans worth $100-230 million and has feasible infrastructure development projects, AIIB is willing to provide loans to implement the projects.

AIIB offered the invitation when Vietnam is thirsty for capital to implement its projects on infrastructure development.

Dinh Trong Thinh from the Finance Academy said this was a great opportunity for Vietnam to access international preferential loans.
Thinh cited three advantages of borrowing money from AIIB: low capital cost, undemanding requirements and economic development. 

However, Thinh said Vietnam needs to give borrowing money from AIIB careful consideration and should weigh up the feasibility of every project.

AIIB, like any other international financial institution, has its principles and problems. “The loose requirements and permissiveness in appraising projects, lending and capital management are what we should be wary of,” he said.

The expert also mentioned the opinion of some analysts that AIIB is the bank with China as a charter member (China contributes 30 percent of shareholders’ capital). 

Meanwhile, many Vietnam’s large-scale projects implemented with Chinese investment capital are facing big difficulties, including slow pace of implementation, problems with contractors and unforeseen higher required capital.

Thinh notified that if Vietnam accepts loans from AIIB without finding ways to settle problems, it would cause serious consequences because of the conditions to be set by AIIB. 

Meanwhile, an analyst has also warned that the capital cost may not be as low as Vietnam expects, because Vietnam may have to pay higher amounts for the loans in the context of the unstable Chinese yuan.

"AIIB will use currencies beneficial to China and key members of the bank, including the Chinese yuan," he said.

“The Chinese yuan is weak at this moment. But it may be appreciated in the long term. It will really matter if we borrow for dozens of years,” he said.

Nguyen Hong Nga from the HCMC Economics & Law University also commented that Vietnam should not be hasty to get loans from AIIB. It would be better if it considers and approaches all possible competitive sources of loans.

-Compiled by VietnamCredit-

Categories:
Financial News

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