Vietnam seeks loans for nuclear plants

HANOI: Vietnam has held talks with Japan and Russia to borrow funds, including a $7.7 billion package from Russia, to build its first nuclear power plants, state-run media and a government statement said.

Vietnam plans to use the funds to build the first nuclear power plant in the south-central province of Ninh Thuan, the Finance Ministry said in a statement posted on its website late on Friday.

Construction of the plant using Russian technology is expected to start in 2014.

Vietnam has also been negotiating a loan package with Japan for its second nuclear plant, the finance ministry's statement said. It did not give the size of the loan from Japan, now one of Vietnam's biggest aid donors.

Russia will help build Vietnam's first nuclear power station in 10 years, the head of Russia's atomic agency has said, following an agreement during a visit of President Dmitry Medvedev to Hanoi last October.

Vietnam has also chosen to partner with Japan in the construction of its second nuclear power plant, Japanese Prime Minister Naoto Kan told reporters during a visit to Hanoi last October.

As Vietnam struggles to contain double digit inflation, it has tightened monetary policy and cut the country's annual lending growth to below 20 percent, prompting companies to seek funds from external sources.

"Due to the tightening monetary policy, foreign loans for companies are on the rise during the first months of the year," Saturday's official Tuoi Tre newspaper cited a Finance Ministry report as saying.

"We expect national foreign debt to account for 44.5 percent of GDP in 2011", the report said, up from 42.2 percent of GDP last year, based on the Finance Ministry data.

Among the latest foreign loans, domestic firms have signed deals to borrow $750 million from China's Eximbank to fund the construction of two thermal power plants, the Finance Ministry said.

The World Bank has forecast Vietnam's foreign debt to total $49.6 billion this year, or 43.1 percent of GDP, up from 42.5 percent in 2010.

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Copyright Reuters, 2011