Enterprise representatives are presented with an overview of the STF of Bình Dương and its policy on lending for R&D projects. — Photo quykhcnbd.khcnbinhduong.gov.vn

HÀ NỘI — The regulation requiring provincial Science and Technology Funds (STFs) in Việt Nam to preserve their capital while lending for R&D projects is crippling their operation.

The Law on Science and Technology mandates that provincial STFs operate on the State Budget's financial allocations and entrusted resources from enterprises' STFs.

This regulation places provincial STFs under the category of State-Budget-financed funds, which are subject to the principle of capital preservation.

However, the principle presents a significant hurdle for fund managers as S&T research inherently carries risks. If a project fails to deliver the expected outcome, fund managers would risk paying out of their own pockets to meet the "capital preservation" requirement.

Personal liability causes the funds to operate cautiously, or even not operate at all to avoid risk.

Lâm Văn Tân, Director of Bến Tre's Department of Science and Technology, revealed that the STF of Bến Tre, with a capital of VNĐ10 billion (US$393,000), had approved loans for 16 projects.

He said he was worried about the possibility that some projects might default on their loans, causing the fund to lose money. In that case, he might have to use his own money to cover the loss.

"In the worst-case scenario, where borrowers default on their loans, I would have to use my own money to repay the fund," said Tân.

"I have submitted a request to the provincial authorities to cease the operation of the fund, but I was told to wait for instructions from the Ministry of Science and Technology."

Bến Tre is not the only province that wants to dissolve STFs. Of the 32 provinces and cities that have established STFs, Đà Nẵng, Kiên Giang and Trà Vinh have shuttered their STFs due to their ineffectiveness.

Lending activities by STFs in other provinces and cities are also low. Notably, there are only nine STF-financed projects with a total capital of VNĐ11.3 billion ($445,000) across the country.

Nguyễn Hồng Sơn, Director of Hà Nội's Department of Science and Technology, revealed that the STF of Hà Nội had been inactive since its establishment and was merged into Hà Nội's Development Investment Fund in February 2018.

Despite the merger, the new fund has also been unable to provide loans to any businesses engaged in S&T activities.

"The biggest issue that prevents the fund from lending is the requirement to preserve its capital," Sơn said.

The Ministry of Science and Technology has proposed two optional amendments to the Law on Science and Technology to deal with the legal issue that holds back STFs.

Option 1 involves abolishing the regulation on STFs as few provinces and cities have established such funds in recent years. For those funds that have been established, their operations will continue to be suspended.

Option 2 involves revising the regulation on STFs to allow provinces and cities to decide whether or not to establish such funds. An additional provision can also be enacted to encourage the establishment of enterprise-owned STFs and venture capital funds for the R&D of advanced technology. — VNS