Oda Vietnam
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ODA CAPITAL IN VIETNAM April 2005 Instructor: Dr. Michel Henry Bouchet
Group
4
CFVG 12 - HCMC
Group members: Huynh Anh Tuyet Nguyen Thi Thanh Thao Pham Thi Minh Ngoc Thomas Froimovici Nguyen Duc Tue
Agenda ODA introduction Benefits of ODA to Vietnam Current situation of ODA in Vietnam Comments on ODA capital in Vietnam Constraints of ODA implementation in VN Recommendations Conclusion Group
4
CFVG 12 - HCMC
ODA Introduction - Definition Grants and loans that donors (the governments of rich countries) give to developing countries. According to a United Nations agreement, these donor governments agreed to contribute of 0.7 percent of their gross national product.
Group
4
CFVG 12 - HCMC
ODA Introduction - Criteria ODA comprises the funding flows which meet the following conditions: • Provided by official agencies; • Administered with promotion of economic development and welfare of developing countries as its main objective; and • Concessional in character to avoid severe burdens on developing countries and conveys a grant element (G.E.)* of at least 25%. * Grant element is an indicator of the "softness" of lending conditions. The lower the interest rate and the longer the repayment period, the greater the "grant element," and the more advantageous the loan is for the recipient country. In the case of grant aid, the grant element is equal to 100%. Loans must exhibit a grant element of at least 25% to be counted as ODA.
Group
4
CFVG 12 - HCMC
ODA Introduction - Types & Implementation ODA can be broadly divided into bilateral ODA and multilateral ODA. Bilateral ODA consists of bilateral grants and ODA loans. Bilateral grants are further divided into grant aid and technical cooperation. Multilateral ODA refers to contributions and subscriptions to multilateral institutions. The implementation structure depends on the type of ODA involved. The following paragraphs explain the contents and implementation of the following types of ODA: (1) grant aid; (2) technical cooperation; (3) ODA loans; and (4) contributions and subscriptions to multilateral institutions. 1. Grant Aid Rich countries provide grant aid mainly to countries that have a relatively low income among the developing countries and regions. Grant aid is primarily channeled to support basic human needs (BHN) (such as medical services, public health, water supply). 2. Technical Cooperation Technical cooperation is targeted toward development of the human resources necessary for the economic progress of developing countries. It includes: (1) the dispatch of experts; (2) the acceptance of trainees; (3) the provision of equipment and materials to facilitate technology transfer. 3. ODA Loans ODA Loans make development funds available to developing countries at low interest rates and with long repayment periods. These loans provide funds to develop and improve the economic and social infrastructure necessary. 4. Contributions and Subscriptions to Multilateral Institutions Aid provided through multilateral institutions. Multilateral institutions involved in development assistance can be broadly divided into two categories. The first group consists of international financial institutions that primarily provide funds needed for development (World Bank, IMF), while the second group consists of various United Nations agencies which engage in economic, social and humanitarian activities.
Group
4
CFVG 12 - HCMC
Benefits of ODA for Vietnam Finance: – An external resource of capital to the tight government budget
Economic: – Helped Vietnam maintain a high economic growth rate (GDP: 7.7% in 2004)
Social: – Improve Vietnam’s human development index (the Vietnam’s poverty rate has fallen to 7 percent from 27 percent 2003) – Improving on social infrastructure development (upgrading and building 3,700 km of highways and provincial roads; 10,000 km of rural roads and hundreds of bridges…) – Establish a strong development co-operation with some 25 bilateral and 19 multi-lateral donors and 350 international non-government organizations (INGOs)
Group
4
CFVG 12 - HCMC
Current situation of ODA in VNLegal frameworks in Vietnam Decree 20/CP (1993) Decree 87/CP (1997) Decree 211/1998/QD-TTg Decree 920/1998/ND-CP Decree 223/1999/QD-ttg Decree 17/2001/ND-CP Group
4
CFVG 12 - HCMC
ODA Capital in VN- Commitment & Disbursement (1993-2004) Millions USD 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1993 1994 1995
Group
4
CFVG 12 - HCMC
1996 1997 1998 1999 2000 2001
Commitment Disbursement
2002 2003 2004
Source: MPI
Current situation of ODA in VNThe main investment fields Transportation
16% 28%
12%
Social development
8%
Group
4
CFVG 12 - HCMC
Agriculture and rural development Water supply and drainage
Others
13% Source: MPI
TOTAL ODA DISBURSEMENT AND PROJECTS 2000 1800 1600 1400 1200 1000 800 600 400 200 0
1400 1200 1000 800 600 400 200 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Group
4
CFVG 12 - HCMC
USD Million Number of projects
Source: UNDP
TOP 10 PROJECTS IN 2003 Rank
Group
4
CFVG 12 - HCMC
Project name
Mil USD
%
1
Poverty reduction support credit
190
9.18
2
Poverty reduction support credit II
117
5.64
3
Rural finance 2
57
2.77
4
Power transmission
51
2.49
5
Third road improvement segment 1+2
48
2.3
6
Phu My thermal power plant project
41
2
7
Small scale poor infrastructure development
34
1.67
8
Pha lai thermal power plant
29
1.42
9
National highway No. 10
29
1.42
10
Rural energy
29
1.42
Source: UNDP
TOP 10 ODA Sectors in 2003 Natural resources
79
Development adminsitration
79
Health
109
Agricualture
116
Social development
136
HR development
136 187
Area development Energy
283
Transport
442
Economic management
442 0
Group
4
CFVG 12 - HCMC
100
200
300
Mil USD
400
500
Source: UNDP
TOP 10 Donors by disbursement in 2003 UK
38
Germany
40
Netherlands
43
EU
45
Denmark
61
Australia
65 106
France
252
ADB
575
WB
599
Japan
0
Group
4
CFVG 12 - HCMC
100
200
300
USD mil
400
500
600
700
Source: UNDP
Comments on ODA ODA made up of averagely 15% GDP of VN 20% of ODA is non-refundable aid, remain is concessional loan with favourable interest rate ODA capital used effectively in economic management, infrastructure & area development 55% of the total committed ODA has been disbursed so far => lower than the average of ASEAN Group
4
CFVG 12 - HCMC
Constraints of ODA in VN From Donors - Complicated procedure requirements (Rep. Office , Codonors, …) - Limitation of Foreign Consultants
From Vietnam - Incomprehensive policies - Slow land clearance & encounter capital - Difference of administrative procedures with donors - Lacking of proper management and effective supervision - Approval Procedures: complicated, wordy, lengthy
Group
4
CFVG 12 - HCMC
Recommendations Redefining ODA plan/strategy: - Regions: drawing ODA to remote and mountainous => balanced development nationwide - Sectors: concentrating on economic sectors (electricity, transportation) & on social sectors (healthcare; education)
Group
4
CFVG 12 - HCMC
Recommendations Simplifying the procedures Cooperate and empower to local authorities of the city/province where ODA is executed to spur the speed of relocation zones, land clearance and the construction work Strengthening diplomatic relationship worldwide Effectively combining between ODA & FDI Group
4
CFVG 12 - HCMC
CONCLUSION ODA has been an important financial resource for Vietnam development => VN still need more & more ODA fund But efficient ODA utilization so that it’s not a debt burden in future.
Group
4
CFVG 12 - HCMC
Group
4
CFVG 12 - HCMC
Group members: Huynh Anh Tuyet Nguyen Thi Thanh Thao Pham Thi Minh Ngoc Thomas Froimovici Nguyen Duc Tue
Agenda ODA introduction Benefits of ODA to Vietnam Current situation of ODA in Vietnam Comments on ODA capital in Vietnam Constraints of ODA implementation in VN Recommendations Conclusion Group
4
CFVG 12 - HCMC
ODA Introduction - Definition Grants and loans that donors (the governments of rich countries) give to developing countries. According to a United Nations agreement, these donor governments agreed to contribute of 0.7 percent of their gross national product.
Group
4
CFVG 12 - HCMC
ODA Introduction - Criteria ODA comprises the funding flows which meet the following conditions: • Provided by official agencies; • Administered with promotion of economic development and welfare of developing countries as its main objective; and • Concessional in character to avoid severe burdens on developing countries and conveys a grant element (G.E.)* of at least 25%. * Grant element is an indicator of the "softness" of lending conditions. The lower the interest rate and the longer the repayment period, the greater the "grant element," and the more advantageous the loan is for the recipient country. In the case of grant aid, the grant element is equal to 100%. Loans must exhibit a grant element of at least 25% to be counted as ODA.
Group
4
CFVG 12 - HCMC
ODA Introduction - Types & Implementation ODA can be broadly divided into bilateral ODA and multilateral ODA. Bilateral ODA consists of bilateral grants and ODA loans. Bilateral grants are further divided into grant aid and technical cooperation. Multilateral ODA refers to contributions and subscriptions to multilateral institutions. The implementation structure depends on the type of ODA involved. The following paragraphs explain the contents and implementation of the following types of ODA: (1) grant aid; (2) technical cooperation; (3) ODA loans; and (4) contributions and subscriptions to multilateral institutions. 1. Grant Aid Rich countries provide grant aid mainly to countries that have a relatively low income among the developing countries and regions. Grant aid is primarily channeled to support basic human needs (BHN) (such as medical services, public health, water supply). 2. Technical Cooperation Technical cooperation is targeted toward development of the human resources necessary for the economic progress of developing countries. It includes: (1) the dispatch of experts; (2) the acceptance of trainees; (3) the provision of equipment and materials to facilitate technology transfer. 3. ODA Loans ODA Loans make development funds available to developing countries at low interest rates and with long repayment periods. These loans provide funds to develop and improve the economic and social infrastructure necessary. 4. Contributions and Subscriptions to Multilateral Institutions Aid provided through multilateral institutions. Multilateral institutions involved in development assistance can be broadly divided into two categories. The first group consists of international financial institutions that primarily provide funds needed for development (World Bank, IMF), while the second group consists of various United Nations agencies which engage in economic, social and humanitarian activities.
Group
4
CFVG 12 - HCMC
Benefits of ODA for Vietnam Finance: – An external resource of capital to the tight government budget
Economic: – Helped Vietnam maintain a high economic growth rate (GDP: 7.7% in 2004)
Social: – Improve Vietnam’s human development index (the Vietnam’s poverty rate has fallen to 7 percent from 27 percent 2003) – Improving on social infrastructure development (upgrading and building 3,700 km of highways and provincial roads; 10,000 km of rural roads and hundreds of bridges…) – Establish a strong development co-operation with some 25 bilateral and 19 multi-lateral donors and 350 international non-government organizations (INGOs)
Group
4
CFVG 12 - HCMC
Current situation of ODA in VNLegal frameworks in Vietnam Decree 20/CP (1993) Decree 87/CP (1997) Decree 211/1998/QD-TTg Decree 920/1998/ND-CP Decree 223/1999/QD-ttg Decree 17/2001/ND-CP Group
4
CFVG 12 - HCMC
ODA Capital in VN- Commitment & Disbursement (1993-2004) Millions USD 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1993 1994 1995
Group
4
CFVG 12 - HCMC
1996 1997 1998 1999 2000 2001
Commitment Disbursement
2002 2003 2004
Source: MPI
Current situation of ODA in VNThe main investment fields Transportation
16% 28%
12%
Social development
8%
Group
4
CFVG 12 - HCMC
Agriculture and rural development Water supply and drainage
Others
13% Source: MPI
TOTAL ODA DISBURSEMENT AND PROJECTS 2000 1800 1600 1400 1200 1000 800 600 400 200 0
1400 1200 1000 800 600 400 200 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Group
4
CFVG 12 - HCMC
USD Million Number of projects
Source: UNDP
TOP 10 PROJECTS IN 2003 Rank
Group
4
CFVG 12 - HCMC
Project name
Mil USD
%
1
Poverty reduction support credit
190
9.18
2
Poverty reduction support credit II
117
5.64
3
Rural finance 2
57
2.77
4
Power transmission
51
2.49
5
Third road improvement segment 1+2
48
2.3
6
Phu My thermal power plant project
41
2
7
Small scale poor infrastructure development
34
1.67
8
Pha lai thermal power plant
29
1.42
9
National highway No. 10
29
1.42
10
Rural energy
29
1.42
Source: UNDP
TOP 10 ODA Sectors in 2003 Natural resources
79
Development adminsitration
79
Health
109
Agricualture
116
Social development
136
HR development
136 187
Area development Energy
283
Transport
442
Economic management
442 0
Group
4
CFVG 12 - HCMC
100
200
300
Mil USD
400
500
Source: UNDP
TOP 10 Donors by disbursement in 2003 UK
38
Germany
40
Netherlands
43
EU
45
Denmark
61
Australia
65 106
France
252
ADB
575
WB
599
Japan
0
Group
4
CFVG 12 - HCMC
100
200
300
USD mil
400
500
600
700
Source: UNDP
Comments on ODA ODA made up of averagely 15% GDP of VN 20% of ODA is non-refundable aid, remain is concessional loan with favourable interest rate ODA capital used effectively in economic management, infrastructure & area development 55% of the total committed ODA has been disbursed so far => lower than the average of ASEAN Group
4
CFVG 12 - HCMC
Constraints of ODA in VN From Donors - Complicated procedure requirements (Rep. Office , Codonors, …) - Limitation of Foreign Consultants
From Vietnam - Incomprehensive policies - Slow land clearance & encounter capital - Difference of administrative procedures with donors - Lacking of proper management and effective supervision - Approval Procedures: complicated, wordy, lengthy
Group
4
CFVG 12 - HCMC
Recommendations Redefining ODA plan/strategy: - Regions: drawing ODA to remote and mountainous => balanced development nationwide - Sectors: concentrating on economic sectors (electricity, transportation) & on social sectors (healthcare; education)
Group
4
CFVG 12 - HCMC
Recommendations Simplifying the procedures Cooperate and empower to local authorities of the city/province where ODA is executed to spur the speed of relocation zones, land clearance and the construction work Strengthening diplomatic relationship worldwide Effectively combining between ODA & FDI Group
4
CFVG 12 - HCMC
CONCLUSION ODA has been an important financial resource for Vietnam development => VN still need more & more ODA fund But efficient ODA utilization so that it’s not a debt burden in future.
Group
4
CFVG 12 - HCMC
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