ODA in Vietnam: Highlights of Decree 242 for Investors

Effective from September 10, 2025, Decree No. 242/2025/ND-CP (“Decree 242”) has replaced previous regulations on the management of official development assistance (ODA) in Vietnam. Regulating ODA and concessional loans, the decree prescribes eligible projects, restricts misuse of funds, improves transparency in implementation, and provides leeway to the private sector and state-owned enterprises in making use of ODA.

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Vietnam has released Decree 242 dated September 10, 2025. It introduces a new regulatory framework for managing ODA and concessional foreign loans. The decree replaces Decree No. 114/2021/ND-CP and Decree No. 20/2023/ND-CP, consolidating earlier provisions into a new set of rules.

Vietnam is expecting to mobilize about US$820 million in ODA and concessional loans in 2025, broadly in line with the annual average of US$800 million to US$1 billion between 2021 and 2025.

Scope and purpose of ODA regulations

The decree applies to ODA and concessional loans provided by foreign governments, international organizations, and other authorized institutions. These resources are directed to the Government or the State of Vietnam for development investment purposes. The regulation aims to standardize how funds are accessed, allocated, monitored, and reported, while preventing misuse, corruption, or inefficiency.

The decree stipulates that ODA and concessional loans are to be used exclusively for development investment expenditures, not for recurring operating costs. It expands the scope of entities eligible to manage and implement projects financed by ODA and concessional foreign loans, which means state-owned enterprises can now directly use these sources of capital.

Methods of providing capital

The decree outlines several methods for providing ODA capital and preferential loans:

• Programs designed around national or sectoral development goals;
• Projects with specific objectives and measurable outputs;
• Non-projects, like capacity-building or technical assistance; and
• Budget support, where funds are channeled directly into national or sectoral budgets under agreed conditions.

Priority sectors and activities

The new rules define priorities for both grant-based ODA and loan-based instruments that beneficiaries need to stick to.

ODA grants

Non-refundable ODA in Vietnam will focus on areas with strong public-good characteristics:

• Socio-economic infrastructure development;
• Capacity building and institutional strengthening;
• Disaster risk reduction, epidemic response, and relief measures;
• Climate change adaptation and green growth initiatives;
• Science, technology, innovation, and digital transformation;
• Social welfare programs and project preparation activities; and
• Co-financing of loan-based projects to enhance their concessionality.

Preferential loans

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Preferential loans will target projects that are eligible for re-lending under existing laws by focusing on socio-economic infrastructure. The government may also allocate such loans to large-scale or public investment projects with transformative potential.

The regulations provide project implementers with more autonomy in disbursement. Allocated capital plans and re-loaned capital plans can now be disbursed independently, so there is no requirement to follow rigid allocation ratios.

State management responsibilities and ineligible projects

The decree has listed responsibilities for state management of ODA and concessional loans. These responsibilities are:

• Drafting and implementing legal documents regulating ODA and loan management;
• Developing medium-term orientations to align with socio-economic development plans;
• Monitoring, inspecting, and evaluating fund use and outcomes;
• Ensuring transparency through publication of cooperation policies, priority areas, and loan conditions on official portals (chinhphu.vn and mof.gov.vn); and
• Preventing corruption, waste, and inefficiencies in fund management.

The decree specifies that ODA and concessional foreign loans cannot be diverted to routine operating costs of project management boards. They are also excluded from financing training and study tours unless these activities are directly linked to technology transfer or the operation of project equipment.

Tax payments, loan interest, and auditing expenses are also ineligible, as are vehicle purchases unless specialized vehicles have been approved by competent authorities. Funds cannot be used for spare parts or materials that extend beyond project completion unless explicit authorization is granted. Likewise, compensation, resettlement, and support expenses fall outside the eligible scope unless they are an integral part of the project investment.

Procedures for management and use

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The decree has procedures for different categories of ODA and concessional loan use. For investment programs and projects, the process should be establishing and appraising policies, obtaining investment approvals, notifying donors, signing treaties or loan agreements, managing implementation, and finalizing results.

Non-refundable ODA projects follow similar steps and have some extra steps, like project document preparation and donor agreement, whether through treaties, memoranda of understanding (MoU), or letters of commitment.

Regional initiatives need government approval to participate, followed by project documentation and formal agreements with donors.

Budget support requires the preparation of support records, policy decisions, and signing of relevant agreements, with results that are tied to national target programs. Blended financing mechanisms will need to combine ODA and preferential loans to maximize concessionality.

Private sector access

The decree has now opened up channels for private sector participation too. Enterprises can access ODA and concessional loans through:

• Project preparation and support for investor selection under the public-private partnership (PPP) framework;
• Participation in donor-backed programs that target private-sector development; and
• Implementation of public investment tasks delegated by competent state agencies.

Integration with national development and international commitments

The regulations have linked ODA priorities with Vietnam’s national and global climate agendas. Vietnam has pledged to cut greenhouse gas emissions by 15.8 percent unconditionally and 43.5 percent with international support by 2030, and to reach net-zero emissions by 2050.

The framework also supports domestic objectives under the 2021-2025 socio-economic development plan. It plans to achieve annual GDP growth of 6.5-7 percent, raise per capita income to US$4,700-5,000 by 2025, and advance toward modern industrial status.

As per United Nations Development Program, Vietnam requires an estimated US$368 billion through 2040 for climate mitigation and adaptation. Effective use of ODA and concessional loans is critical to mobilizing this scale of finance. The new framework seeks to ensure that international funding contributes directly to renewable energy projects and other green transition priorities.

ODA in Vietnam: Administrative and operational challenges

Vietnam’s debt management plan for 2025-2027 has set borrowing limits at VND 2.218 quadrillion (US$83.4 billion), with VND 35 trillion (US$1.3 billion) earmarked for on-lending from ODA and concessional loans.

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Despite regulatory improvements, persistent challenges remain in disbursing ODA and concessional loans. By April 2025, disbursement had reached only 4.6 percent of the annual target. Between 2021 and 2024, only VND 66.5 trillion (US$2.5 billion), was disbursed, equivalent to 22 percent of the assigned investment.

Bottlenecks are stemming from slow project preparation, lengthy administrative procedures, delays in budget allocation and site clearance, and limited resources among project management units. The weaknesses in disbursing ODA are restricting Vietnam’s ability to translate foreign assistance commitments into on-the-ground results.

In brief

Decree 242 establishes rules for the management and use of ODA and concessional foreign loans in Vietnam. It limits ineligible expenditures and directs funds toward health, education, climate response, and essential infrastructure. Future success will depend on the enforcement of these rules and the government’s ability to balance development needs with debt sustainability.

Read more: Driving Innovation: Vietnam’s PPP Framework for Science, Tech, and Digital Transformation

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(US$1 = VND 26,372.4)

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