INTRODUCTION
Official Development Assistance (ODA) plays a crucial role in Vietnam's socio-economic development and poverty alleviation efforts As a state budget resource, ODA is prioritized for building both social and economic infrastructure Since its introduction in 1993, ODA has significantly contributed to the growth of key sectors in Vietnam However, challenges have emerged, particularly after Vietnam transitioned to a middle-income country in 2010 and achieved the 2015 Millennium Development Goals.
This presentation analyzes the role of Official Development Assistance (ODA) in enhancing Vietnam's economic infrastructure from 2010 to 2019, utilizing project implementation data from various donors as published in the OECD's database.
GENERAL ABOUT OFFICIAL DEVELOPMENT ASSISTANCE (ODA)
What is ODA?
Official Development Assistance (ODA) represents a type of foreign investment characterized by long-term loans offered to governments at low or zero interest rates, aimed at fostering economic development and enhancing social welfare in recipient countries.
For example, one of the projects using ODA capital for Noi Bai airport T1, Nhat
Tan bridge, the ODA capital of these works is from the Japanese government.
Characteristics
Official Development Assistance (ODA) represents a collaborative effort among governments of developed nations, international organizations, and developing or underdeveloped countries This form of assistance includes non-refundable grants and preferential loan arrangements Beyond financial support, donor countries also contribute goods, transfer technology, and offer various services It is essential for recipients of ODA to utilize these funds responsibly for socio-economic development projects.
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ODA loans offer exceptionally low-interest rates, often just a few percent, with the World Bank providing loans at a remarkable 0% per annum Designed to assist developing and underdeveloped nations, ODA loans are more advantageous than other capital sources, featuring extended loan terms exceeding 30 years and favorable credit conditions Additionally, these loans come with a relatively long grace period, enhancing their appeal for recipient countries.
Comes with some binding conditions
ODA donor countries implement varying policies and regulations when engaging with recipient nations These donors often seek to enhance their political influence and secure economic benefits, leading to the imposition of specific economic, political, or geographical conditions on the aid provided.
Classification
ODA is divided into 3 types based on the method of repayment:
A non-repayable loan is a financial arrangement where the borrowing country is not required to repay the funds This type of capital is specifically allocated for projects agreed upon by both the lending and borrowing nations, ensuring that the contractors for these projects are sourced from the lending country.
ODA loans with a preferential interest rate and an appropriate repayment period It is not used for social or environmental purposes.
Preferential conditions include: ã Low-interest rates ã Long repayment period
There is a period of no interest or debt repayment.
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Official Development Assistance (ODA) is a financial aid mechanism that integrates both non-refundable grants and concessional loans This dual approach enables ODA to effectively support the development of essential infrastructure, as well as enhance sectors such as education and health.
Benefits & Drawbacks
ODA-lending countries pursue various objectives, including enhancing cooperative relationships, expanding markets, and addressing political, national security, and defense concerns For instance, ODA-borrowing countries are often required to progressively eliminate tariff barriers to attract foreign investment.
The ODA lending country requires the borrowing country to purchase equipment, hire personnel - services at a rather high cost.
Special trade terms must be met maximum import of certain products of the
The lending country will participate in projects using the borrowing country's ODA in the form of expert or contractor support.
ODA funding plays a crucial role in restoring and developing the economies of recipient countries For instance, between 2002 and 2018, Vietnam's GDP per capita surged 2.7 times, exceeding $2,700 in 2019, largely due to ODA from developed nations This financial support has also contributed to lifting over 45 million people out of poverty, with the percentage of poor households plummeting from over 70% to less than 6%, equivalent to about $3.20 per day.
ODA plays a crucial role in enhancing human resources within the country, fostering long-term economic growth through targeted training initiatives These projects not only build a skilled workforce but also serve as a catalyst for attracting foreign investment.
Official Development Assistance (ODA) serves as a vital tool for fostering bilateral relations, extending beyond mere financial support to enhance political and diplomatic ties By actively engaging in ODA, countries can stimulate job creation, establish beneficial trade agreements, and improve security collaborations, ultimately leading to a more prosperous and stable partnership.
Although the donor country is taxable as a direct cost, there are many benefits.
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Exchange rate fluctuations can significantly inflate the value of Official Development Assistance (ODA) until the debt is repaid Furthermore, ineffective utilization of ODA loans—due to issues such as corruption, wastefulness, and inadequate project management—can adversely affect the borrowing country.
The history of ODA in Vietnam
On November 8, 1993, the Roundtable on Official Development Assistance (ODA) for Vietnam took place in Paris, marking the official start of Vietnam's development cooperation with the international donor community Over the past two decades, this relationship has evolved significantly, with improvements in both the capital committed and the funds disbursed ODA to Vietnam primarily consists of two forms: grant aid and loan assistance, with ODA loans increasingly dominating the funding landscape.
According to the OECD, based on the implementation objectives, ODA projects are allocated into 11 groups of fields That is:
- Group 1: Social infrastructure and services
- Group 2: Economic services and infrastructure
- Group 3: Group of manufacturing industries
- Group 4: Multidisciplinary, multi-disciplinary group
- Group 5: General program support group and commodity support
- Group 10: Supporting refugees in donor countries
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ODA has played a crucial role in the construction and development of key sectors in Vietnam, including transportation and warehousing, energy policies focusing on renewable sources, water supply and sanitation, education, environmental protection, agriculture, forestry, and fisheries Additionally, it has supported government and civil society initiatives, healthcare, budget support, banking and financial services, as well as industry, mining, and construction.
Top countries/organizations supporting ODA for Vietnam
Japan stands as Vietnam's foremost economic partner, contributing nearly $27 billion in Official Development Assistance (ODA), which represents about 30% of Japan's global ODA investments Additionally, Japan ranks as the second-largest investor in Vietnam, the third-largest tourism partner, and the fourth-largest trading partner, highlighting the robust economic ties between the two nations.
In recent years, Japan's ODA support for Vietnam is on a downward trend As
Vietnam has transitioned into a middle-income country, leading to a gradual decline in development assistance and increasingly stringent conditions for preferential loans Notably, since 2013, Official Development Assistance (ODA) from Japan has significantly decreased.
$6.8 billion to $3.9 billion in 2015 and to $2 billion in 2018.
The European Union (EU) stands as the largest provider of non-refundable Official Development Assistance (ODA) to Vietnam, contributing 20% of total international donor commitments between 1993 and 2013, amounting to 1.5 billion USD in non-refundable aid From 2014 to 2020, the EU allocated 400 million euros to support Vietnam, with a focus on sustainable energy and enhancing institutional capacity.
EU ODA projects have effectively supported Vietnam's socio-economic development goals The two sides also promote cooperation in culture and art, heritage conservation, education, and people-to-people exchanges.
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From 2016 to 2020, Vietnam has been a key partner for South Korea, receiving approximately 20% of Korea's total development assistance, which amounts to over 300 million USD annually This aid consists of 90% ODA loans and 10% non-refundable assistance The focus of Vietnam-Korea development cooperation includes critical sectors such as transportation and urban infrastructure, healthcare, education, environmental protection, green energy, and information technology.
From 2002 to 2018, Germany invested 2.17 billion USD in Official Development Assistance (ODA) projects in Vietnam, making it the fifth largest donor during this period This financial support has significantly benefited various crucial sectors in Vietnam, including general and post-secondary education, healthcare, water supply, rail transport, forestry, and biodiversity.
6.5 World Bank IDA (World Bank):
In 1978, the International Development Association (IDA) provided Vietnam with a USD 60 million loan for the Dau Tieng irrigation project After a hiatus from 1979 to 1992, Vietnam resumed borrowing from the World Bank in 1993, securing loans for two significant projects: the National Highway 1A Project for USD 112.4 million and the Primary Education Project for USD 70 million However, by July 2017, the World Bank announced the cessation of preferential Official Development Assistance (ODA) for Vietnam, necessitating a shift towards less-preferential loans and market-based borrowing Consequently, the terms of these loans have been altered to require quicker repayments and increased interest rates, rising from 2% to 3.5%.
Since 1993, the Asian Development Bank (ADB) has collaborated with Vietnam's Ministry of Finance on 16 programs and projects, providing a total of $460 million in Official Development Assistance (ODA) loans and capital ADB's support primarily targets essential public financial management reforms In 2018, ADB is committed to maximizing the impact of its $613 million funding for Vietnam, as the country will lose access to concessional financing starting January 1, 2019.
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Comparison of ODA with other foreign assistance
Characteristi ODA FDI Bilateral aid Multilateral Humanitarian c Aid Assistance
Vietnamese Hỗ trợ phát triển Nguồn vốn đầu Viện trợ song Viện trợ đa Hỗ trợ nhân
Meaning chính thức tư trực tiếp phương phương đạo nước ngoài
Official Development Assistance (ODA) encompasses all forms of Foreign Direct Investment (FDI) and can be categorized as bilateral or multilateral aid Bilateral aid refers to assistance provided directly between two countries, while multilateral aid is distributed through international organizations like the United Nations or the International Monetary Fund (IMF) This aid often includes humanitarian grants and investment assistance, which are typically non-refundable and aimed at supporting poorer nations ODA is crucial for financing emergency relief efforts and addressing natural disasters or conflicts, as it helps low-income countries manage their development challenges through long-term loans and low-interest rates.
ADB, WB), non- organizations resume their governmental normal lives organizations (NGOs) for aid recipient countries.
Purpose The purpose of FDI’s purpose Support and Support and Aid for disaster
ODA is to aid and is to invest and aid with aid with certain or conflict
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Governments of developed countries often provide funding to support developing nations, particularly those that are poorer or affected by conflict, war, or natural disasters This financial assistance aims to help these underdeveloped countries rebuild their economies and improve the livelihoods of their citizens By investing in local businesses and production establishments, developed nations can play a crucial role in fostering sustainable growth and stability in these regions.
THE BACKGROUND OF VIETNAM'S ODA AFTER 2010
Vietnam's ODA graduation
The economy has consistently experienced robust growth, elevating our nation from underdeveloped status to that of a middle-income developing country Between 2001 and 2010, the average gross domestic product (GDP) rose by 7.26% every nine years, highlighting significant economic progress.
Between 2001 and 2005, Vietnam experienced an impressive average annual GDP growth rate of 7.5%, followed by a remarkable increase to over 8% in 2006 and 2007 However, during the global economic-financial crisis from 2008 to 2010, the growth rate declined to an average of 5.96%, with specific rates of 5.3% in 2009 and 6.78% in 2010.
The economic structure has seen a positive transformation, with the share of industry and construction in the GDP rising from 36.7% in 2000 to 41.1% in 2010 Conversely, the contribution of agriculture, forestry, and fishery declined from 24.5% to approximately 21.6%, while the services sector remained stable at 38.3% Additionally, the percentage of agricultural laborers decreased significantly from 65.1% in 2000 to 57.1% in 2005, and further to 48.2% in 2010.
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From 2001 to 2008, Vietnam received a total of 29.77 billion USD in committed Official Development Assistance (ODA) The World Bank's statistics indicate that Vietnam's per capita income rose significantly from $687.48 in 2005 to $1,217.27 in 2009, coinciding with the country's shift away from preferential loans from the World Bank During this period, Vietnam focused on accelerating its industrialization and modernization efforts in alignment with its socialist goals.
The day when Vietnam "graduated from ODA" and became a middle-income country.
The decline in official development assistance (ODA) presents a challenge, signaling positive economic growth, as evidenced by the GDP per capita income rising to $1,317.89, reflecting an 8.26% increase from the previous year.
This remarkable economic achievement highlights the country's transition from underdeveloped status to becoming part of the middle-income developing nations, especially amidst the global economic challenges.
The economic structure shifts in a positive direction The socialist-oriented market economy institution continued to be perfected.
In 2010, the gross domestic product (GDP) at real prices exceeded 101.6 billion USD, with a GDP per capita of 1,168 USD The macro-economy demonstrated stability, maintaining several key economic balances, including the state budget and the balance of payments.
Between 2000 and 2010, the economic structure experienced a positive transformation, with the industrial and construction sectors increasing their share of GDP from 36.7% to 41.1% Conversely, the contribution of agriculture, forestry, and fishery declined from 24.5% to approximately 21.6%, while the services sector maintained a steady proportion of 38.3% Additionally, the percentage of agricultural laborers decreased significantly from 65.1% in 2000 to 48.2% by 2010.
The economy continues to face challenges with low growth quality, productivity, and competitiveness, resulting in slow improvements and unstable macro balances Additionally, the slow development and lack of synchronization are significant barriers to progress, compounded by an incomplete and subpar transport network.
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Economic growth rate is maintained at a high level.
In the period 2011 - 2015, the growth rate of gross domestic product
In the 2016 - 2019 period, the growth rate will reach 6.8%/year, in 2020 due to the Covid-19 epidemic, the growth rate is estimated at over 2%
Between 2011 and 2020, the GDP growth rate is projected to average around 5.9% per year, positioning the country among the high-growth nations both regionally and globally Additionally, GDP per capita is anticipated to rise significantly, increasing from $1,331 in 2010 to approximately $2,750 by 2020.
Despite the World Bank ceasing preferential loans, the average GDP continues to rise, showing improvement compared to previous years Currently, our nation is prioritizing a socio-economic development strategy, with per capita income reaching $2,785.72 in 2021, which is 2.11 times greater than in 2010.
1.2 Commitment and disbursement of ODA by some organizations
Graph 1.2.1 Disbursement from OECD to Vietnam from 2011 to 2019 (unit: million USD)
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Graph 1.2.2 ODA disbursement/commitment rate from 2011 to 2019
The main donors of Official Development Assistance (ODA) to Vietnam are countries within the OECD's Development Assistance Committee (DAC) and international multilateral organizations Notably, DAC countries contribute 62.2% of the total ODA, while multilateral organizations provide 37.56% of the overall disbursed ODA throughout the entire period.
2010 - 2017 However, the amount of ODA from DAC countries currently has a decreasing proportion compared to the amount of ODA from multilateral organizations donating to
Vietnam's future donor partnerships are increasingly shifting towards multilateral organizations rather than individual countries Among these multilateral donors, the International Development Association (IDA) has historically contributed the largest share, accounting for 24.63% of total Official Development Assistance (ODA) over the years However, as Vietnam transitions to a middle-income country, the proportion of ODA from IDA is on the decline For instance, in 2010, IDA's contribution represented 26% of Vietnam's ODA, but by 2016, this figure had dropped to 20%.
Between 2010 and 2017, the Asian Development Bank (ADB) emerged as the second largest multilateral donor to Vietnam, contributing 8.57% of the country's official development assistance (ODA) However, after a significant increase in ODA from 2010 to 2014, there has been a noticeable decline in ADB funding in recent years.
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In Vietnam, the majority of Official Development Assistance (ODA) is channeled through the public sector, accounting for 89.56% of total ODA, while multilateral organizations contribute 2.8%, and civil society and NGOs represent 2.41% Other channels, including educational institutions and research organizations, account for 1.7%, with remaining sources making up less than 0.2% Despite this, the disbursement rate for ODA through the public sector stands at only 84.66% of the committed funds, which is the second lowest among all ODA transfer channels in Vietnam, while multilateral organizations have the lowest disbursement rate at 72.83%.
The redirection of ODA capital flows
Orientation to attract and use ODA capital in the recent period (2016 - 2020 period)
The five-year economic development plan focuses on the integration of economic, social, and environmental factors, emphasizing that the attraction of Official Development Assistance (ODA) should align with this comprehensive development triangle.
The upcoming Official Development Assistance (ODA) will prioritize enhancing social infrastructure, particularly through the construction of hospitals and schools It aims to combat hunger and alleviate poverty in remote and isolated areas, fostering sustainable development and promoting equitable growth across all regions of the country.
We will prioritize projects aimed at enhancing the environment across urban, rural, and industrial areas, as well as addressing the critical state of rivers facing water scarcity I believe the environmental sector will garner significant interest from donors in the near future These initiatives represent key aspects of Vietnam's broader economic development strategy and its efforts to attract Official Development Assistance (ODA).
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How have investment sectors changed over time?
Official Development Assistance (ODA) is primarily directed towards key sectors such as transport, environment, urban development, energy, industry, agriculture, rural development, and poverty alleviation The outcomes of ODA mobilization align closely with the objectives, principles, and priority areas established in the Prime Minister's Decision No 251/QD-TTg, approved on February 17, 2016.
The "Orientation for Attracting, Managing, and Utilizing ODA and Concessional Loans from Foreign Donors" outlines strategic guidelines for the period of 2016 to 2020, as well as the subsequent framework established by Decision No 1489/QD-TTg on November 6, 2018, which approves similar objectives for 2018 to 2020 with a vision extending to 2021-2025 This initiative aims to ensure that public debt, government debt, and the state budget deficit remain within safe and manageable limits.
Graph 1.2.4 Distribution rate of ODA in 2011-2015 and 2016-2020 by sector
Vietnam has successfully secured Official Development Assistance (ODA) and concessional loans from 51 donors, comprising 28 bilateral and 31 multilateral sources Notably, approximately 80% of Vietnam's ODA funding is sourced from six major institutions: the World Bank (WB), Asian Development Bank (ADB), Japan International Cooperation Agency (JICA), Export-Import Bank of Korea (KEXIM), French Development Agency (AFD), and the German Bank for Reconstruction (KfW).
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Since Vietnam transitioned to a low-middle-income country in 2010, Official Development Assistance (ODA) flows have significantly declined, particularly as the nation approaches graduation from receiving official aid from the International Development community.
The contributions from the International Development Association (IDA) in 2017 and the Asian Development Fund (ADF) in 2019 highlight a significant trend: the share of Official Development Assistance (ODA) in total development investments, alongside state budget contributions, is on the decline.
Between 2011 and 2015, the ratio of Official Development Assistance (ODA) to GDP was 2.9%, but this figure halved to 1.5% from 2016 to 2019 Similarly, the ODA as a percentage of total development investment fell from 8.8% during the earlier period to 4.7% in the latter Additionally, the share of ODA and concessional loans in total state budget investment decreased from 38.8% in 2011-2015 to 27.3% in 2016-2020.
Some issues of ODA disbursement in recent years
3.1 Vietnam’s ODA in 2019 a Delay in ODA disbursement
As of 2019, the disbursement of Official Development Assistance (ODA) and concessional loans from 2016 fell short of expectations In the initial five months of 2019, total disbursement amounted to VND 1,605 billion, representing only 2.7% of the National Assembly's estimated target and 5.6% of the Prime Minister's assigned plan.
According to the medium-term public investment capital plan for the 2016-2020 period, ODA loans and adjusted foreign preferential loans according to the National Assembly
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By the end of 2019, the total capital allocation from the state budget for the period of 2016-2019 reached VND 244,300 billion, which is 67.9% of the adjusted plan, leaving a remaining balance of VND 115,700 billion The accumulated disbursement from 2016 to May 2019 amounted to VND 133,042 billion, representing 54.5% of the assigned plan for the same period and 36.96% of the adjusted medium-term plan for 2016-2020, which had a target of VND 300,000 billion, achieving 46% of that goal.
As of May 2019, VND 166,958 billion of the initially planned VND 300,000 billion remained undisbursed, while the adjusted plan of VND 360,000 billion left VND 226,958 billion unallocated Notably, only 2.7% of the capital plan for 2019 received approval from the National Assembly during the first five months of the year.
Mr Eric Sidgwick, ADB's Director in Vietnam, highlighted that Vietnam previously enjoyed a high disbursement rate for foreign aid; however, since 2014, this rate has significantly declined, affecting both ODA and foreign concessional loans This reduction has negatively impacted the country's economic development and has raised concerns among the six primary donors: the World Bank, ADB, JICA, KfW, K-Exim, and AFD.
The delay in project initiation in Vietnam has been attributed by experts to the complex legal procedures associated with public investment These procedures are mandatory following the receipt of Official Development Assistance (ODA) from foreign nations, particularly for large-scale projects exceeding 1,000 billion VND.
Specifically, a representative of Ho Chi Minh City said that in 2019, the demand for ODA capital, which allocated to the central budget for 5 projects, was 11,491 billion VND
At the close of 2018, Ho Chi Minh City received approval for funding on just three projects, totaling 199 billion VND Notably, the Ben Thanh - Suoi Tien railway project required 7,000 billion VND, while the water environment improvement initiative sought 2,500 billion VND, both of which were left unfunded.
A representative from the State Treasury has highlighted that site clearance challenges are the primary obstacle hindering the disbursement of public investment capital To address this issue, it is essential for units to effectively engage in ideological and political efforts to encourage the community to expedite the site clearance process Many projects need to be implemented concurrently with construction while actively facilitating the handover of land by the residents.
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In certain areas, the government faced challenges in site clearance, necessitating the mobilization of residents to facilitate early handovers Consequently, many projects were required to simultaneously engage in construction while coordinating with the community for site transfer.
The Ministry of Finance has identified three primary factors contributing to the slow disbursement of Official Development Assistance (ODA) and foreign concessional loans The first group of causes pertains to legal issues, which include the Law on State Budget, the Law on Public Debt Management, and the Law on Public Investment.
Investment challenges in capital planning stem from slow progress, delays in adjusting estimates, and issues with timely disbursement, particularly affecting projects in rural areas These factors hinder the implementation of projects according to schedule, ultimately impacting overall development and financial efficiency.
Ho Chi Minh City is currently grappling with significant investment challenges, which include issues related to project adjustment processes, site clearance, securing substantial capital, and the management board's capacity Additionally, the delays in Official Development Assistance (ODA) disbursement are adversely affecting Vietnam's economic landscape To address these issues, potential solutions must be explored to streamline investment procedures and enhance financial management.
Official Development Assistance (ODA) functions as a loan, accruing interest even before disbursement and utilization Consequently, the government faces elevated commitment fees, while project delays lead to increased costs for both the projects themselves and project management over time.
Contract disputes with contractors can significantly hinder project progress and damage Vietnam's reputation These disputes not only affect the overall efficiency of projects but also disrupt the initial financial assessments made by donors, potentially leading to a halt in ODA funding.
Experts suggest that the Law on Public Investment needs revisions to alleviate the burden of administrative procedures Currently, Vietnam imposes the same administrative requirements on public-private partnership (PPP) investments as it does on projects funded entirely by the state Additionally, the "Transition" clause in the Law allows projects to be carried over to the next year if not completed, creating a potential loophole for investors to delay disbursement and project progress.
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3.2 Vietnam's ODA in 2020 - There are still limitations in ODA disbursement
In the first eight months of 2020, the Ministry of Finance reported an improvement in the disbursement of public investment capital from foreign loans (ODA), with a total of VND 3,742 billion disbursed, reaching 21.64% of the assigned estimate This figure is higher than the disbursement rate during the same period in 2019; however, it still falls short compared to the domestic investment capital disbursement rate, which stands at 40% of its plan Additionally, by August 2020, nine ministries and branches requested to return ODA capital, with eight submitting official documents, totaling VND 3,700 billion, which represents 32% of the assigned estimate.
JICA - VIETNAM'S MAIN ODA DONOR
1 Projects funded by Japanese ODA loans
In general, Japan mainly invests ODA for Vietnam in the fields of Transport (9 projects) and Environmental management (10 projects).
Education 1 Project to build Can Tho University into an excellent institute for scientific research, technology transfer and training.
2 Technical support to improve training, research and university administration capacity at Vietnam Japan University Medical Construction project of Vietnam - Japan Friendship Cho Ray
Hospital Transportation 1 Construction of North-South Expressway (HCMC - Dau Giay)
2 Construction of North-South Expressway (Da Nang-Quang Ngai)
3 Construction of North-South Expressway (Ben Luc-Long Thanh)
4 Construction of Lach Huyen Port (building bridges and roads)
5 Construction of Lach Huyen Port (port construction)
6 Construction of urban railway in Hanoi (line 1: Ngoc Hoi - Yen Vien)
7 Construction of urban railway in Hanoi (line 2: Nam Thang Long
8 Construction of Ring Road 3 Hanoi (Mai Dich - South Thang Long section)
9 The 2nd Credit Project of the Transport Sector to Renovate the
National Road Network Resources - 1 Construction of Thai Binh thermal power plant and power Energy transmission line
2 Expansion of Da Nhim Hydropower Plant
3 Development of power transmission and distribution network in phase 2 Private Sector Hoa Lac hi-tech park infrastructure construction project
Agriculture - Renovating irrigation system in Northern Nghe An
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Environmental 1 Restoration and sustainable management of protection forests Management 2 Construction of Yen Xa wastewater treatment system
3 Improve water environment in South Binh Duong
4 Improving the water environment in Hue City
5 Construction of water infrastructure in Dong Nai province
6 Improve water environment in Ha Long city
7 Ben Tre Province Water Resources Management Project
8 Hai Phong City Environmental Sanitation Improvement Project
9 Drainage and wastewater treatment system of Bien Hoa City, phase 1
10 Ho Chi Minh City water environment improvement project phase 2 Climate change Measures to cope with climate change and natural disasters using
- Natural earth observation satellites disasters
2 Committed Loan Contract (L/A) and disbursement amount
3 The project has committed but has not signed a loan contract
Name of project Commitment date Estimated committed capital (billion yen)
Change Project using Earth observation satellites (Phase 2)
Project to strengthen vocational 31/05/2018 15.614 education sector in Vietnam
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4 JICA's ODA investment commitments in the future
On November 17, 2021, a significant meeting occurred between Mr Le Minh Hoan, the Minister of Agriculture and Rural Development, and Mr Shimizu Akira, the Chief Representative of the Japan International Cooperation Agency (JICA) in Vietnam.
4.1 JICA supports the food value chain project to be implemented from 2022
Mr Shimizu Akira, representative of JICA, announced the initiation of a food value chain project in the North, set to commence in March 2022 This initiative aims to enhance agricultural infrastructure, promote private sector investment, integrate modern technologies, and improve institutional policies Additionally, it focuses on deploying and replicating local cooperation models while strengthening disaster risk reduction efforts.
4.2 JICA will implement 2 projects in the field of "Climate change -
During the recent meeting, Mr Shimizu Akira emphasized the significance of disaster prevention initiatives He announced that JICA will commence two key projects focused on enhancing disaster resilience: the development of a master plan for natural disaster prevention and control in the Central region, and a project aimed at mitigating the risks of landslides and flash floods in Northern areas.
4.3 JICA's educational contributions to Vietnam's agricultural development in the long term
JICA will collaborate with Dong Thap to develop programs that send students to Japan for education, with the goal of returning to Vietnam to enhance the local workforce This initiative aims to strengthen human resources in the agricultural sector of the province.
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VIETNAM'S ODA IN THE GLOBAL PICTURE
Vietnam is categorized as a low-middle-income country alongside nations like India, Mongolia, and Ukraine While all these countries receive Official Development Assistance (ODA), their political contexts vary significantly Developed nations often leverage ODA to pursue specific economic objectives.
Secrets of China's aid program
Between 2000 and 2014, the amount of foreign aid provided by China was comparable to that of the United States, with the US spending $399 billion, primarily targeting African nations and regions near China However, the nature of the aid differs significantly; 79% of China's assistance consists of commercial loans that are expected to be repaid at market rates, while only 7% of US aid is structured this way In contrast, the majority of US aid, 93%, is classified as Official Development Assistance (ODA), characterized by low interest rates and extended repayment periods.
China, on the surface, declares development aid, but it is not actually a form of
ODA, but mainly lends at interest, to penetrate the market, expand its influence and promote its culture everywhere.
For example: In 2013, China Development Bank loaned Petroecuador Corporation
(Ecuador) 1 billion USD in a project called ODA, but it was in exchange for an oil
In 2013, China provided Jamaica with a $230 million investment, contingent upon the construction of a Chinese Garden aimed at enhancing cultural exchange and boosting tourism However, the agreement between the two parties appears to favor Beijing significantly, raising concerns about the terms and benefits for Jamaica.
Aid relationship between the US - Israel – Palestine
In 2018, the United States provided a whopping $38 billion in military aid to Israel, including the $3.3 billion in annual aid required by the U.S Foreign Military
Financing Act and $500 million to Israel anti-aircraft missile cooperation programs.
The United States reduced aid to Palestine by over $500 million to encourage acceptance of negotiations, coinciding with the White House's efforts to develop a peace plan for the Middle East.
Therefore, the US has used aid as a tool to exert political pressure on countries around the world.
Vietnam is recognized as a politically stable country, benefiting from Official Development Assistance (ODA) from various nations and organizations while preserving its institutional and economic independence This achievement is largely attributed to the recent efforts of the Government in fostering a resilient and self-sufficient economic environment.
CONCLUSION
While the contributions of Official Development Assistance (ODA) to economic growth over the past two decades are undeniable, an analysis of ODA capital inflows into Vietnam since its transition to a middle-income country in 2010 reveals significant trends in development from 2010 to 2021.
Official Development Assistance (ODA) is not a sustainable source of preferential capital for Vietnam, which necessitates the prudent use of these funds to foster socio-economic development, combat hunger, and reduce poverty As Vietnam transitions to a low-middle-income country, ODA donors are likely to reallocate aid to poorer nations, posing significant challenges for the transport sector amidst tight budgets and limited private sector investment.
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As Vietnam transitions to a middle-income country, the nature of its Official Development Assistance (ODA) is shifting towards less favorable terms, increasingly aligning with market conditions This necessitates a strategic approach to ODA borrowing, as it often comes with donor-imposed constraints and contributes to a growing debt burden Currently, the debt associated with ODA accounts for nearly 25% of the total disbursed capital, highlighting the need for careful planning in future borrowing to mitigate financial risks.
Official Development Assistance (ODA) has played a crucial role in Vietnam's progress towards achieving the Millennium Goals by 2015, particularly in the construction of social and economic infrastructure However, this reliance on ODA has also created a significant financial burden, as over 95% of ODA loans are allocated to key sectors like transportation and energy These projects often span long durations and experience slow implementation, leading to challenges in repaying the ODA loans due to capital constraints.
Vietnam has not fully graduated from Official Development Assistance (ODA) but has ceased borrowing from the International Development Association (IDA) since July 1, 2017 Moving forward, the country aims to establish a comprehensive roadmap for complete ODA graduation, focusing on enhancing the efficiency of ODA utilization and addressing existing challenges in ODA disbursement.
1 Official Development Assistance (ODA) - OECD https://www.oecd.org/dac/financing-sustainable-development/development- finance-standards/What-is-ODA.pdf
2 Ecuador’s unhealthy dependence on China is about to get $1.5 billion worse https://qz.com/256925/ecuadors-unhealthy-dependence-on-china-is-about-to-get-1- 5-billion-worse/
3 China’s Aid to Africa: Monster or Messiah? https://www.brookings.edu/opinions/chinas-aid- to-africa-monster-or-messiah/
4 Foreign Aid: Positive and Negative Impact in Developing Countries (Public
Administration Campus, Tribhuvan University, Nepal)
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