Effect of oda and fdi on vietnam s economy during and after covid 19

1. Brief overview of ODA (Official Development Assistance) and FDI (Foreign Direct Investment) Ever since ODA and FDI was created in their respective date, they have been the most crucial way to direct the flow of capital and investment from developed countries to developing countries. • ODA The term Official Development Assistance – or ODA – was first adopted in 1969 by OECD Development Assitance Committee (DAC). Up to today, the member of DAC compromised from major economics powers in the world such as EC, United State, United Kingdom, Japan, Germany, and many more. The aim of DAC is to create a way to aid of the developing countries effort to develop economic and social aspect but in a concessional in character. At first, they proposed that DAC members transfer 1% of the donor countries’ income to developing countries, and they has a flaw which is governments had no means of programming or even predicting the private element of capital flows, which in many years are more than half the total. So after many negotiations and changes, they finally agree to the “0.7% target”, where “Each economically advanced country will progressively increase its official development assistance to the developing countries and will exert its best efforts to reach a minimum net amount of 0.7% of its gross national product at market prices”. ODA has many positive impact. It would provide funds an capital to low – income countries where international finance would generally stay away. They also provide a concessional loans for such countries since normal loans may put some stress on their economy. • FDI

FOREIGN TRADE UNIVERSITY FACULTY OF BANKING AND FINANCE -*** - EFFECT OF ODA AND FDI ON VIETNAM'S ECONOMY DURING AND AFTER COVID 19 Class: TCHE414 Group: Lecturer: Assoc Prof Ph.D Mai Thu Hiền Hanoi – 6/ 2023 TABLE OF CONTENTS I Introduction 1 Brief overview of ODA (Official Development Assistance) and FDI (Foreign Direct Investment) Introduction to Vietnam's industry and economy Impact of COVID-19 on Vietnam's industry and economy .2 II Effect of ODA on Vietnam’s economy during COVID-19 .3 Explanation of ODA and its significance for developing countries 1.1 Definition of ODA 1.2 ODA’s significance for developing countries ODA contributions to Vietnam during the pandemic Impact of ODA on Vietnam’s economy III Effect of FDI on Vietnam’s economy during COVID-19 .5 Explanation of FDI and its importance for Vietnam’s economy .5 The role of FDI in Vietnam’s economy FDI inflow during pandemic Recommendation of some policies to attract FDI after COVID 19 Pandemic IV Effect of ODA and FDI on Vietnam's economy after COVID-19 Predictions for how ODA and FDI will impact Vietnam's industry and economy after the pandemic 10 Potential challenges and opportunities for ODA and FDI in Vietnam's postCOVID-19 recovery 11 Potential opportunities 12 V Challenges and considerations 13 VI Conclusion 13 References .15 I Introduction Brief overview of ODA (Official Development Assistance) and FDI (Foreign Direct Investment) Ever since ODA and FDI was created in their respective date, they have been the most crucial way to direct the flow of capital and investment from developed countries to developing countries  ODA The term Official Development Assistance – or ODA – was first adopted in 1969 by OECD Development Assitance Committee (DAC) Up to today, the member of DAC compromised from major economics powers in the world such as EC, United State, United Kingdom, Japan, Germany, and many more The aim of DAC is to create a way to aid of the developing countries effort to develop economic and social aspect but in a concessional in character At first, they proposed that DAC members transfer 1% of the donor countries’ income to developing countries, and they has a flaw which is governments had no means of programming or even predicting the private element of capital flows, which in many years are more than half the total So after many negotiations and changes, they finally agree to the “0.7% target”, where “Each economically advanced country will progressively increase its official development assistance to the developing countries and will exert its best efforts to reach a minimum net amount of 0.7% of its gross national product at market prices” ODA has many positive impact It would provide funds an capital to low – income countries where international finance would generally stay away They also provide a concessional loans for such countries since normal loans may put some stress on their economy  FDI Foreign direct investment (FDI) is an ownership stake in a foreign company or project made by an investor, company, or government from another country Generally, the term is used to describe a business decision to acquire a substantial stake in a foreign business or to buy it outright to expand operations to a new region This term, while seems somewhat similar to general capital movement between countries and Foreign Portfolio Investment (PFI), is different from those two Stephen Hymer, a Canadian economist, in his thesis, has clarified the definition and set the cornerstone for FDI While Foreign portfolio investment (FPI) is the addition of international assets to the portfolio of a company, an institutional investor such as a pension fund, or an individual investor It is a form of portfolio diversification, achieved by purchasing the stocks or bonds of a foreign company Foreign direct investment (FDI) instead requires a substantial and direct investment in, or the outright acquisition of, a company based in another country, and not just their securities Commonly, FDI are categorized as horizontal, vertical, or conglomerate With a horizontal FDI, a company establishes the same type of business operation in a foreign country as it operates in its home country In a vertical FDI, a business acquires a complementary business in another country In a conglomerate FDI, a company invests in a foreign business that is unrelated to its core business Because the investing company has no prior experience in the foreign company’s area of expertise, this often takes the form of a joint venture FDI has its own advantages and disadvantages FDI can foster and maintain economic growth, in both the recipient country and the country making the investment On one hand, developing countries have encouraged FDI as a means of financing the construction of new infrastructure and the creation of jobs for their local workers On the other hand, multinational companies benefit from FDI as a means of expanding their footprints into international markets A disadvantage of FDI, however, is that it involves the regulation and oversight of multiple governments, leading to a higher level of political risk Introduction to Vietnam's industry and economy The Second Indochina War ended in 1976 Viet Nam unified the North and the South 30 years of war and turmoil has devastated the economy During that 30 years, Vietnam economies and industry can be said to be non – exsistent to a degree They mostly focused on war economies and aid from the Communist bloc, namely USSR and China Stepped out of the war with devastations throughout country and with many aims to ultimately moving to the socialist stage, Vietnam choose an isolationist and self sustain approach This include promote heavy industry, reformation of non – socialist economy sector, centralized economy, and trading between members of the blocs, mainly China and USSR But with the Cambodian War and Sino – Vietnamese war in 1979, Vietnam’s economy still suffer a lot of setbacks and such isolationist style approach had proved themselves ineffective when managing the economy In 1986, General Secretary Nguyen Van Linh propose Doi Moi policy to fix the economic crisis in the country and to prepare for and ecomical independent as the dissolution of USSR rising in the horizon The main aim of the policy is to moving from centralize and collective economy to a socialist-oriented market economy regulated by government The policy proved to be effective and since Vietnam opened its economy for foreign trade, it introduced waves of ODA and FDI into Vietnam as part of some countries policy such as Japan From 1990 to 2023, the Vietnam’s ODA and FDI inflow has been increased significantly with the main source come from Japan and Korea Many big enterprises like Samsung, Apple, Mitsubishi, … have set up industrial sectors, creating thousand of jobs, follow up with the development of infastructure and service sectors Impact of COVID-19 on Vietnam's industry and economy Since the start of the COVID-19, Vietnam has follow an isolationist style policy like their neighbour China In summary, they would make a total lockdown if there is any threat of the pandemic This has a significant impact on Vietnam economy as their industry focus on exporting manufactured goods and their raw material inputs would come from China Also, during and after covid, they amount of orders from the West and US decrease significantly due to the lockdown This would pose many problems for the economy First, the supply scarcity affected the productivity and the ability to meet up with the orders China has been following a zero-COVID policy and has locked down its major economic centers such as Shanghai The disruption has snarled supply chains, with goods stuck at ports, airports, and trade hubs Disruption in logistics has also affected several cities such as Shenzhen, Guangzhou, Dongguan, and Foshan affecting their economies Some sectors faced supply shortages The worst sufferers were the electronics, wood, textiles, and footwear industries Businesses in the industry had to slow down export deliveries because their Chinese partners lacked empty containers for transporting raw materials and accessories Second, due to the lockdown, foreign order decrease significantly China following Zero – Covid policy lead to a decrease in agriculture product orders decrease International companies also decrease their order due to finanical difficulties And in result of orders decreased, domestic company started massive layoff Since the supply scarcity incured, enterprises had to deal dealing with employment and personal problems As the materials decrease, they have to stretch the worker’s shift thinner to maintain the cost and keep the production line running constantly Worker, who fortunate enough, couldn’t earn overtime And for those who unfortunate enough, they lost their jobs Massive layoff happened follow with massive movement from urban and industrial areas to countryside due to the cost of living This put heavy strain on the infastructure and socio – economics of Vietnam After Covid, Vietnam slowly kickstart their economy and industry through various means but such problems still exist to some degree II Effect of ODA on Vietnam’s economy during COVID-19 Explanation of ODA and its significance for developing countries 1.1 Definition of ODA According to the Organization for Economic Cooperation and Development (OECD), Official Development Assistance (ODA) is defined as government aid that promotes and specifically targets the economic development and welfare of developing countries ODA was adopted by the Development Assistance Committee (DAC) and considered as the “gold standard” of foreign aid in 1969 and it remains the main source of financing for development aid ODA data is collected, verified, and made publicly available by the OECD ODA is different from Foreign Direct Investment when ODA focuses on providing financial assistance and support for the development of recipient countries, whereas FDI involves long-term investments by individuals or entities with the intention of gaining profit and establishing a lasting presence in foreign markets 1.2 ODA’s significance for developing countries Neglected sectors are supported Public and private investors are not necessarily interested in projects towards essentials goals such as biodiversity protection, water, high-quality education, and healthcare improvement Through public aid such as grants, loans or other forms of support, ODA encourages the change in the most vulnerable by compensating the lack of funding the above sectors Also, banks, foundations, and companies might come into play for support and increase amounts devoted to development Africa focusing In 2021, the DAC members provided significant assistance to three countries India received $3.4 billion, while Afghanistan also received $3.4 billion, and Bangladesh received $3 billion Approximately 30% of ODA was allocated to African countries Around 45% of ODA is directed towards the least developed countries (LDCs) to identify the most vulnerable nations worldwide As of 2023, there were 46 countries included in this category Several LDCs feature prominently among the top ten countries receiving grants from the AFD in 2021 These countries include Senegal, Mali, Burkina Faso, Niger, Chad, Sudan, and Haiti Additionally, Côte d'Ivoire is included due to significant debt reduction and development initiatives, along with Lebanon and the Palestinian Territories ODA contributions to Vietnam during the pandemic ODA has played a significant role in supporting Vietnam during the COVID-19 pandemic and emerged as a vital strategy to stimulate growth amidst the challenges posed by the pandemic The most outstanding aid was 10.8 billion JPY worth (75 million USD) worth of ODA from the Japan International Cooperation Agency (JICA) in Vietnam, exclusive of funding for the private sector between April 2021 and March 2022 Health sector support JICA has helped strengthen Vietnam’s capacity in fighting the COVID-19 pandemic and responding to communicable diseases by donating 850 million JPY worth of medical supplies, including ECMO machines; and transferring technology and providing key equipment to a new Biosafety Level-3 Laboratory (BSL-3) of Ho Chi Minh City’s Pasteur Institute, worth more than 200 million JPY in total Economic stimulus packages 5-million-USD non-refundable aid has also been granted to Vietnam by JICA This is crucial for a developing country like Vietnam, as it helps to alleviate the burden of debt and allows the country to allocate its resources more effectively towards development initiatives By providing non-refundable aid, JICA enables Vietnam to invest in critical projects that can foster long-term growth and improve the lives of its citizens Infrastructure development The Japanese agency has also provided ODA for HCM City to implement the second phase of a water environment improvement project in the city The project aims to improve local environment through wastewater treatment capacity building and flooding damage control It has signed a loan agreement of up to 25 million USD with a private Vietnamese company for an onshore wind power project in Quang Tri, Shimizu Akira said, adding all the 51 carriages to be used on HCM City’s Metro Line No.1 are manufactured by Japan Impact of ODA on Vietnam’s economy Enhanced healthcare system and pandemic response ODA has been instrumental in strengthening Vietnam's healthcare system and enhancing its capacity to respond to the pandemic Assistance from international partners has helped Vietnam procure medical equipment, supplies, and vaccines It has also supported the training of healthcare professionals, the establishment of testing and treatment facilities, and the implementation of public health campaigns to raise awareness about COVID-19 Boosting economic recovery and stability ODA programs often target poverty reduction and social welfare initiatives in Vietnam Funds are utilized to improve access to basic services such as healthcare, education, clean water, and sanitation ODA helps in building schools, hospitals, and healthcare facilities, and providing training and capacity building to enhance service delivery ODA often includes programs aimed at stimulating private sector growth and entrepreneurship Financial support, technical assistance, and capacity building are provided to small and medium-sized enterprises (SMEs) and entrepreneurs This assistance helps create jobs, fosters innovation, and diversifies the economy, thereby promoting economic stability Strengthening infrastructure for future growth With the strong cooperation with Vietnamese counterparts, JICA’s projects have made great achievements such as more than 3,000 kilometer of roads, 250 bridges, five international ports and 10 power plants with the total capacity of 4,500 MW This has contributed to the sustainable growth in Vietnam as well as strengthened the connectivity and development in the whole ASEAN III Effect of FDI on Vietnam’s economy during COVID-19 Explanation of FDI and its importance for Vietnam’s economy Explanation  FDI (Foreign Direct Investment) is an ownership position made by an investor, business, or government from another nation in a foreign enterprise or project  The World Trade Organization defines Foreign Direct Investment (FDI) happens when an investor from one country (the host country) buys the right to manage an asset in another country (the host country) What distinguishes FDI from other financial tools is the regulatory component  FDI is a type of long-term investment made by a person or organization from one nation to another through establishing factories and commercial buildings To secure long-term interests and seize control of this property is the goal  In essence, foreign direct investment (FDI) is the meeting of the needs of two parties: the investor and the country receiving the investment Specifically, in it:  Investors have set rights and responsibilities to the investment location  Define ownership and management rights for capital invested - Included with the right to transfer state technology and methods in order to collaborate with the host nation Concerned with the growth of international businesses and organizations Constantly linked to the expansion of global financial markets and commerce  In Vietnam, the term “FDI enterprises'' is understood as an enterprise with foreign direct investment capital However, this form of company' identification in legal documents is not exactly apparent The role of FDI in Vietnam’s economy Since Doi Moi, luring foreign direct investment (FDI) has been regarded as one of Vietnam's brightest points or most notable accomplishments The Vietnamese economy is now more competitive, there are more jobs available, and the state budget is making more money thanks to FDI.Despite certain limitations, FDI has made a very positive contribution, acting as the pillars for the success of the economic reform policy Impact on economic growth and restructuring Increasing investment capital for expansion is the most evident and significant contribution Up until the end of 2021, the entire nation will have 34,527 active projects with a combined registered capital of little under 408.1 billion USD It is anticipated that 251.6 billion USD, or 61.7% of the total legal registered investment capital, has been realized across all foreign investment projects In comparison to the global average, the FDI sector's contribution to Vietnam's GDP is 9.5 percentage points greater (20.13% versus 10.6%), coming in at 15.15 percent in 2010 and rising to 18.07 percent in 2015 and 20.1 percent in 2021 The FDI sector has a positive impact on economic restructuring towards modernization Specifically: In the field of Construction: The FDI sector, which represents for around 55% of total industrial production value, helped to establish a number of important economic sectors, including telecommunications, oil and gas extraction, and electricity vehicles, motorbikes, information technology, steel, cement, agro-food processing, leather & footwear, textiles, chemicals, electronics, etc In high-tech industries like mining, FDI businesses represent a significant percentage of the market Exploiting oil and gas, the electronic sector, telecommunications, office supplies, and computers… In the field of Agriculture - Forestry - Fishery: The output growth rate of the FDI sector is always greater than that of the domestic economic sector in the area of agriculture, forestry, and fisheries, which has helped to boost agricultural production through product diversification and restructuring of the agricultural sector high value of exported agricultural products, the adoption of numerous cutting-edge technologies, and the development of plant breeds and varieties that meet worldwide standards; yet, the impact of FDI is minimal due to the sector's limited share in this region In the filed of Services: With current payment mechanisms like credit and debit cards, FDI has a significant impact on raising the caliber of banking and auditing services Some major towns and coastal regions have undergone changes as a result of FDI in tourism, hotels, and offices for rent Golf courses, bowling alleys, and amusement parks are just a few of the attractions that draw foreign tourists and investment Transfer technology, promote production improvement and innovation Numerous analyses have found that FDI has helped to foster innovation and technology transfer, progressively increasing domestic manufacturing capacity Many innovative and cutting-edge technology, particularly in the areas of petroleum, electronics, telecommunications, cars, and motorcycles, have been imported into our nation Particularly, some sectors of the economy have adopted modern technologies such as post and telecommunications, oil and gas, building, roads, bridges, textiles and footwear, and construction… The acquisition of cutting-edge managerial expertise and the training of a highly skilled workforce skilled in utilising contemporary technologies go hand in hand with the transfer of technology Additionally, technology transfer helps build domestic technological competence and jobs for employees Create jobs and improve workers' incomes The FDI industry makes a significant and unmistakable contribution to job generation The General Statistics Office's survey findings show that the foreign-invested company sector attracted 5.1 million employees, or about 10% of the country's total labor force (over 54 million workers), and 20% of all pay employment (25.3 million persons) Aside from directly employing people, the FDI sector indirectly employs many millions of people through supporting sectors and other businesses that are part of the supply chain for commodities used by FDI operations Even though fewer employment are being produced than in the case of small and medium-sized businesses, the "quality" of the workforce in the FDI sector is noticeably higher thanks to the internal training system within the business or affiliations with outside training institutes Many employees and officials in the FDI sector have been and continue to be the "nuclei" for developing Vietnam's highly skilled and qualified labor force Additionally, compared to the state sector or non-state sector, the average wage of workers in FDI businesses is higher According to data from the General Statistics Office, the average monthly wage for employees in the FDI industry is 8.2 million VND, while it is 9.2 million VND for male employees and 9.2 million VND for female employees The monthly wage for women is 7.6 million VND The average salary for employees in the state sector is 7.7 million VND per month, while that of employees in the non-state sector is 6.4 million VND per month FDI inflow during pandemic The total newly registered capital, adjusted capital, and contributed capital to buy shares by foreign investors reached 31.15 billion USD as of December 20, 2021, up 9.2% from the previous year, according to the Foreign Investment Agency the same time in 2020 In particular, 1,738 new projects received investment registration certificates (down 31.1%); these projects' total registered capital increased by 4.1% to over 15.2 billion USD; 985 additional projects (down 13.6%); their combined additional registered capital increased by 40.5% to over billion USD Additionally, there were 3,797 times (down 38.2%) and almost 6.9 billion USD (down 7.7%) worth of capital contributions and share purchases by foreign investors Despite an increase in overall FDI within the same time period, there were significantly fewer registered projects in 2021 The Foreign Investment Agency claims that one of the factors in Vietnam's recent elimination of small-scale projects with minimal added value is the country's selective investment attraction policy Out of the 21 national economic sectors, 18 have seen foreign investment at this point In terms of the number of new projects, manufacturing, wholesale and retail, professional activities, science and technology are the industries that attract the most projects, accounting for 33.1%, 27 respectively .8% and 16% of total projects With investments totaling over 18.1 billion USD, or 58.2% of the total registered investment capital, the processing and manufacturing sector takes the lead in this.It ranks second with 10 a total investment capital of more than years, despite the fact that the energy production and distribution industry has only attracted a modest number of new and adjusted projects and contributed funds to buy shares 0.7 billion USD, or 18.3% of all registered investment money, was invested The real estate sector follows, with wholesale and retail having filed capital totals of more than $2.6 billion and more than $1.4 billion, respectively However, 20% of FDI businesses have shifted a portion of their orders outside of Vietnam, while 14% are at the intended stage, according to a mid-August poll by the American Chamber of Commerce in Vietnam In addition, 13% of workers have quit, and 50% are only working at 50% of capacity A similar statement was made by the European Business Association, which claimed that 20% of businesses had relocated certain industrial operations from Vietnam to foreign markets The current economic crisis brought on by the trade war, or what is said to be its many asymmetrical incentives for domestic firms, is one of the factors driving multinational corporations to relocate Recommendation of some policies to attract FDI after COVID 19 Pandemic After COVID-19, the following fixes should be put into practice in order to continue encouraging FDI in Vietnam's economic development: First, promptly examine and modify foreign investment rules to meet and stay up with changes in global economic conditions and FDI company attraction techniques In order to create the best conditions for the operation of foreign firms and investors, it is also important to develop a competitive and open business investment environment Second, expedite the steps required to return socioeconomic operations to normal, end interruptions in the labor and good supply chains, and boost investor confidence and peace of mind investment from abroad Third, provide the conditions required to draw investment, such as reviewing and expanding the clean land fund and promoting the implementation of power projects Improve administrative processes for foreign businesses and investors, as well as policies and other initiatives aimed at encouraging the development of supporting industries IV Effect of ODA and FDI on Vietnam's economy after COVID-19 Vietnam's industry and economy have been significantly affected by the COVID19 pandemic To facilitate recovery and foster sustainable growth, the country can leverage ODA and FDI as key resources Vietnam has experienced a continuous increase in foreign direct investment (FDI) inflows since it reviewed its three-decade-long strategy for attracting foreign investments (VNA, 2023) According to data from the Ministry of Planning and Investment (MPI), the registered FDI in Vietnam amounted to $180 billion from January 2018 to April 20, 2023, which represents 40.3% of the total investment capital accumulated over the past 35 11 years As of April 2023, Vietnam had successfully attracted 37,065 foreign-invested projects with 12 a total registered capital of $445.87 billion, out of which $279.8 billion had been disbursed (Investment, 2023) A report by HSBC, which examined foreign investment in the ASEAN region in the middle of the previous year, highlighted a surge in foreign investments in ASEAN, with Vietnam and ASEAN emerging as the top destinations for such investments (HSBC, 2023) From 2018 to 2023, the total disbursement of FDI reached $107.47 billion, accounting for 38.4% of the total disbursed capital over the past 35 years On average, $1920 billion of FDI was disbursed annually during the review period, with a record disbursement of $22.4 billion in 2022 (VNA, 2023) Furthermore, the quality of foreign investments in Vietnam has shown significant improvement Predictions for how ODA and FDI will impact Vietnam's industry and economy after the pandemic Infrastructure Development: Investment in public infrastructure has been one of the key driving forces for Vietnam’s economic development over recent decades Vietnamese government approved a plan to spend US$43-65 billion on building and upgrading road, rail, inland waterways, sea, and air transport infrastructure between 2021- 2030 (Diep, 2021) The government also enacted a new Public Private Partnership (PPP) Law, effective March 29, 2021, to support and regulate private investment to scale up infrastructure upgrades, especially in the transportation, power grid, and power plant sectors This movement is to attract more private investment to reduce the burden on the national debt and fiscal policy According to the Asian Development Bank (ADB), ODAfunded projects in infrastructure can contribute to Vietnam's economic recovery and development by improving connectivity, reducing logistics costs, and enhancing trade competitiveness (ADB, 2021) Furthermore, FDI can bring in advanced technologies and expertise, leading to infrastructure improvements and industrial growth (Borensztein et al., 2020) Human Capital Development: ODA initiatives targeting education, healthcare, and skills training are predicted to enhance Vietnam's human capital and increase productivity A study by the World Bank highlights the positive relationship between education and economic growth in Vietnam (World Bank, 2020) FDI can contribute to human capital development by promoting technology transfer and knowledge sharing (Javorcik, 2018) FDI generates employment opportunities in the host country When foreign companies set up operations in Vietnam, they create jobs for the local workforce These employment opportunities contribute to 13 human capital development by providing individuals with valuable work experience, 14 improving their employability, and fostering skills development FDI can also stimulate entrepreneurial development and innovation (Wendy Cunningham, 2020) Sustainable Development: ODA investments in sustainable development projects, such as renewable energy and eco-tourism, can support Vietnam's transition to a greener economy The United Nations Development Programme (UNDP) emphasizes the potential of sustainable development projects in promoting economic growth and environmental sustainability in Vietnam (UNDP, 2020) FDI inflows can also drive the adoption of sustainable technologies and practices (Shapiro & Taylor, 2019) In order to achieve the goal of sustainable development, the Government has been implementing necessary solutions for the national energy transition, including policies to encourage investment in renewable energy development (VIETNAM BUSINESS NEWS MAY 23/2023, 2023) The growing availability of green funds in the world has exposed the need for a professional institution in Vietnam to take charge of the green money granted to the country Potential challenges and opportunities for ODA and FDI in Vietnam's postCOVID-19 recovery Potential challenges Competition for Resources The competition for ODA and FDI resources is intense globally Vietnam needs to effectively market its potential to attract sufficient funding and investment (Nguyen & Dao, 2021) Countries worldwide actively seek ODA funding and foreign investments to support their development goals Vietnam competes with neighboring countries in Southeast Asia, as well as emerging economies in other regions, for these resources The presence of adequate infrastructure and institutional capacity can make a country more appealing to both ODA providers and foreign investors Vietnam's ability to develop and maintain robust infrastructure, including transportation networks, energy systems, and digital connectivity, can improve its competitiveness in attracting ODA and FDI resources Changing Investment Patterns The COVID-19 pandemic has disrupted global supply chains and investment flows Vietnam must adapt to changing investment patterns and align its policies with emerging trends to attract and retain FDI (Vietnam Briefing, 2021) The pandemic highlighted the vulnerabilities of global supply chains, leading to a shift towards regionalization and diversification The pandemic accelerated the adoption of digital technologies and e- commerce Sustainability and Governance Effective utilization of ODA and FDI funds, as well as addressing environmental 15 and social concerns, requires robust governance mechanisms and transparent practices (Vu, 16 17 2020) Transparent governance mechanisms enable the efficient allocation and management of ODA and FDI funds Transparent practices reduce the risk of corruption, mismanagement, and inefficiencies, ensuring that funds are effectively utilized for sustainable development Investors seek a stable and predictable investment environment, free from corruption and irregularities Strong governance mechanisms, backed by transparent practices, reduce investment risks, protect investor rights, and contribute to a conducive business climate Potential opportunities Diversification of Supply Chains: Vietnam's strategic location, skilled labor force, and improving business environment position it as an attractive destination for diversifying supply chains, attracting FDI and expanding the industrial base (World Bank, 2021) By leveraging its strategic location, skilled labor force, improving business environment, and investment-friendly policies, Vietnam has the potential to attract FDI, diversify supply chains, and expand its industrial base Continued efforts to enhance infrastructure, promote innovation and technology adoption, and foster public-private partnerships will further strengthen Vietnam's position as a preferred destination for investors seeking to tap into the country's growth and potential Digital Transformation: ODA and FDI can support Vietnam's digital transformation efforts, fostering the growth of e-commerce, digital services, and advanced technologies This will enhance competitiveness and resilience (European Chamber of Commerce in Vietnam, 2021) Vietnam can enhance competitiveness in the global digital economy, improve productivity, and build resilience in the face of rapid technological advancements Strong partnerships with international organizations, private sector entities, and technology leaders can further support Vietnam's digital transformation agenda Regional Integration: Vietnam's participation in regional economic agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP), opens opportunities for increased ODA and FDI flows, trade expansion, and integration into regional value chains (Nguyen et al., 2020) ODA and FDI are expected to play vital roles in Vietnam's post-COVID-19 recovery, promoting industry development and economic growth However, addressing challenges and leveraging opportunities will be crucial in maximizing the benefits of ODA and FDI for Vietnam's sustainable development V Challenges and considerations Potential challenges in utilizing ODA effectively ODA, or Official Development Assistance, is a potential tool for supporting development in Vietnam However, there are potential challenges that may hinder its effective utilization The Vietnamese government's centralized decision-making process can be slow and bureaucratic, leading to delays in the disbursement of ODA funds Vietnam may lack the capacity to effectively utilize ODA funds due to a lack of skilled personnel, weak institutional capacity, and limited technical expertise This can prevent the effective implementation of ODA projects and limit their impact Besides, ODA projects may not be sustainable in the long term if they not take into account local needs and priorities They may also lack coordination, leading to duplication of efforts and inefficiencies If ODA projects are not designed and implemented in collaboration with local stakeholders, they may not be aligned with local needs and priorities This can lead to a lack of ownership and commitment, which can undermine their effectiveness ODA projects may have unintended negative environmental and social impacts if they are not designed and implemented with sufficient consideration for these factors ODA funds may be subject to political considerations, leading to a misalignment between the intended goals of the ODA and the actual outcomes achieved Risks and challenges associated with FDI Vietnam's economy benefits from foreign direct investment (FDI), but there are risks and challenges that can impact foreign investors Vietnam's political system is dominated by the Communist Party, creating political risks for foreign investors Vietnam's legal system can be complex and opaque, creating legal risks for foreign investors Vietnam's infrastructure and logistics networks are still developing, creating operational risks for foreign investors Vietnam's financial sector is still developing, creating financial risks for foreign investors Also, Vietnam's labor force is relatively young and inexperienced, creating human resource risks Vietnam is vulnerable to natural disasters and environmental degradation, creating environmental risks Vietnam's society is still undergoing significant changes, creating social risks Mitigation strategies for maximizing benefits and minimizing risks Research results indicate that in the long term, ODA is a positive factor to promote economic growth In the short term, ODA flows positively impact GDP growth but are delayed by years To further promote the effectiveness of this aid, we suggest some policies as follows: Agencies at all levels need to agree on the view that ODA inflows are an essential part of the state budget, so it is necessary to manage and use them effectively, if not effective, it will create a burden for the nation even for future generations 18