and the role of ODA in the development of economic infrastructure in Vietnam for the period 2010 - 2019 based on data on the implementation of projects in Vietnam by donors published on
GENERAL ABOUT OFFICIAL DEVELOPMENT ASSISTANCE (ODAI
What is ODA?
ODA (Official Development Assistance) is a form of foreign investment through a long- term loan with low or no interest rate to the Government of the country where it is invested for economic development and improvement of social welfare
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 & Development cooperation capital “N0 1 1a neeee- mœ Comes with some binding condifions các nh hang te 4
ODA is another form of cooperation between governments of developed countries, international organizations, and developing or underdeveloped countries These are grants that are non-refundable or have a loan policy with preferential conditions In addition to providing preferential loans, the donor hospital will provide goods, transfer science and technology, and provide other services, etc The aid recipient must be responsible for using the capital source for other projects socio-economic development objectives, building infrastructure, creating favorable conditions for economic development, improving people's living standards ¢ Funding has many incentives
ODA loans have very low-interest rates, ranging from only a few percent, if it is the world bank, the loan is 0% a year Intending to support developing and underdeveloped countries, ODA is more preferential than any other source of capital, not to mention: a long loan term of over 30 years associated with a high credit interest rate The low, relatively long grace period, Âô Comes with some binding conditions
The ODA donor countries all have different binding policies and regulations with the receiving country The donor countries both want to gain political influence and make profits for themselves, etc Therefore, ODA always has certain economic, political, or geographical conditions
ODA is divided into 3 types based on the method of repayment: ô Non-refundable ODA:
is a type of loan that does not require repayment The funds provided are used for projects in the borrowing country, as agreed upon by both parties Notably, contractors for these projects typically come 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
There is a period of no interest or debt repayment.
Official Development Assistance (ODA) encompasses a hybrid form that merges non-refundable grants with concessional loans This combination provides developing countries with financial support for infrastructure development, educational advancements, and healthcare improvements.
ODA-lending countries have their own purposes: expanding cooperation relationships, expanding markets, for political reasons, national security & defense For example, ODA-borrowing countries must gradually remove tariff barriers to foreign investors
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 ODA lending country
The lending country will participate in projects using the borrowing country's ODA in the form of expert or contractor support
The ODA recipient country will have funding to restore and develop the economy For example, partly thanks to ODA from developed countries, from 2002 to 2018, GDP per capita of Vietnam increased 2.7 times, reaching more than 2,700 USD in 2019 and more than 45 million people were lifted out of poverty The rate of poor households decreased sharply from more than 70% to less than 6% (equivalent to 3.2 USD/day)
ODA helps develop human resources in the country ODA projects that help train human resources will create a premise for the development of the whole economy in the long run At the same time indirectly attract investment capital from abroad
Creating bilateral relations: ODA is not only a source of funding, but also involves good political and diplomatic relations ODA diplomatic relations to become more active and it can create new job opportunities, trade deals, and even better security arrangements Although the donor country is taxable as a direct cost, there are many benefits.
However, exchange rate fluctuations cause the value of ODA capital to increase - until debt repayment, the ODA value is very large In addition, if ODA loans are not used effectively (for corruption, wastefulness, lack of project management experience, etc.), it will be harmful to the ODA borrowing country
5 The history of ODA in Vietnam
20 years ago, on November 8, 1993, the Roundtable on ODA for Vietnam was held in Paris, France This important event officially marks the beginning of the development cooperation relationship between Vietnam on the way of innovation and the international donor community and has been continuously improved over the years both in terms of capital and commitment contract signed capital and disbursed capital ODA to Vietnam is mainly in two forms, namely aid ODA and loan ODA, in which ODA loans tend to increase and account for an increasingly large proportion compared to aid ODA
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
ODA has supported the construction and development of several key sectors and fields of Vietnam such as transport - transportation and warehousing; energy (energy policy, renewable energy, energy distribution policy); water supply and sanitation; education; multidisciplinary fields; environmental Protection; Agriculture, Forestry, and fishery; Government and civil society; medical; budget support; Banking and financial services: industry, mining, and construction
6 Top countries/organizations supporting ODA for Vietnam
Japan is Vietnam's leading important economic partner, the largest ODA donor with an amount of nearly 27 billion USD, accounting for approximately 30% of the amount of ODA that the Japanese Government has invested in for countries around the world, the number 2 investor, the 3rd tourism partner, and the 4th largest trading partner of Vietnam
In recent years, Japan's ODA support for Vietnam is on a downward trend As Vietnam becomes a middle-income country, the source of development assistance has gradually decreased, and conditions for preferential loans are becoming more and more stringent Specifically, since 2013, ODA from Japan has dropped sharply from $6.8 billion to $3.9 billion in 2015 and to $2 billion in 2018
The EU is the largest non-refundable ODA development aid provider to Vietnam In the period 1993-2013, the EU's ODA accounted for 20% of the total commitments of international donors to Vietnam, of which non-refundable aid was 1.5 billion USD In the 2014-2020 period, the EU has provided 400 million euros in aid to Vietnam, focusing on the areas of sustainable energy and strengthening 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.
The redirection of ODA capital flows nh nhà Hà Hà ha nga e 24 & Orientation to attract and use ODA capital in the recent period
¢¢ Orientation to attract and use ODA capital in the recent period (2016 - 2020 period)
The economic development plan for the next five years is built on the economic - social - environmental development triangle, so the attraction of ODA must also be based on that triangle
Regarding society, the coming ODA will focus more on social infrastructure such as building hospitals and schools, focusing on hunger eradication and poverty alleviation activities in remote and isolated areas to create sustainable development evenly across regions and regions throughout the country
Environmental initiatives will target urban, rural, and industrial areas, as well as rivers facing water scarcity and potential "dead zone" status These projects aim to enhance the environment and mitigate the risks associated with water scarcity.
| think that the field of environment will receive special attention from many donors in the coming time In my opinion, these are the new points in the economic development plan in general and the attraction of ODA of Vietnam. ô> How have investment sectors changed over time?
ODA is mobilized mainly in the fields of transport, environment and urban development, energy and industry, agriculture and rural development, poverty alleviation The results of ODA mobilization are relatively close to the objectives, principles and priority areas set out in the Prime Minister's Decision No 251/QD-TTg dated February 17, 2016, on approval Project "Orientation for attracting, managing and using ODA and concessional loans of foreign donors in the period 2016 - 2020" and Decision No 1489/QD-TTg dated November 6, 2018 of Prime Minister on approving "Orientation for attracting, managing and using ODA and concessional loans of foreign donors for the period 2018 - 2020, vision 2021-2025" and ensuring the following targets: the amount of public debt, government debt and the level of state budget deficit within the allowable safe limit
Distribution rate of ODA in the period 2011-2015 and 2016-2020
Graph 1.2.4 Distribution rate of ODA in 2011-2015 and 2016-2020 by sector
Vietnam has mobilized ODA and concessional loans from 51 donors, including 28 bilateral donors and 31 multilateral donors In which, about 80% of Vietnam's ODA capital is mobilized from 6 banks, including: World Bank (WB), Asian Development Bank (ADB), Japan International Cooperation Agency (JICA), the Export-Import Bank of Korea (KEXIM), the French Development Agency (AFD) and the German Bank for Reconstruction (KfVV).
However, ODA flows into Vietnam tend to decrease significantly (especially when Vietnam becomes a low-middle-income country in 2010) and become less favorable when Vietnam "graduates" from officially aid of the International Development Association - IDA (2017) and Asian Development Fund - ADF (2019) At the same time, the contribution of ODA in total development investment as well as investment from the state budget is also in a decreasing trend
The change in ODA capital flows in the two periods 2011-2015 and 2016-2020
ODA and concessional loans to total investment from the state budget ratio
ODA to Total development investment ratio
The ratio of ODA to GDP halved from 2.9% in the period 2011-2015 to 1.5% in the period 2016-2019 Similarly, the ratio of ODA/Total development investment decreased from 8.8% in the 2011-2015 period to 4.7% in the 2016-2019 period The contribution of ODA and concessional loans in total investment capital from the state budget has also decreased from 38.8% (2011-2015) to 27.3% (2016-2020)
3 Some issues of ODA disbursement in recent years
3.1 Vietnam’s ODA in 2019 a Delay in ODA disbursement
Until 2019, the disbursement of ODA and concessional loans from 2016 had not met the estimate In the first 5 months of 2019, total disbursement reached VND 1,605 billion, which was equal to 2.7% of the estimate assigned by the National Assembly and equal to 5.6% of the plan assigned by the Prime Minister
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
Resolution were VND 360,000 billion By the end of 2019, total amount of capital allocation in the state budget for 2016-2019 was VND 244 300 billion (remaining VND 115,700 billion), equaling 67.9% of the adjusted plan for the whole period The accumulated disbursement from 2016 to May 2019 was VND 133,042 billion, equal to 54.5% of the assigned plan (2016-2019), equal to 36.96% of the adjusted medium-term plan for the period 2016-2020 (compared with the plan of VND 300,000 billion, reaching 46%)
As per the revised financial plan, the undisbursed capital balance from the original plan (300,000 billion VND) as of May 2019 was 166,958 billion VND, while the balance from the adjusted plan (360,000 billion VND) was 226,958 billion VND Notably, only 2.7% of the 2019 capital plan sanctioned by the National Assembly was utilized within the first five months of the same year.
According to Eric Sidgwick, ADB's Director in Vietnam, Vietnam previously had a high disbursement rate but has experienced a gradual decline since 2014, affecting not only ODA but also foreign concessional loans This low rate has become a major concern for key donors WB, ADB, JICA, KfW, K-Exim, and AFD, as it negatively impacts Vietnam's economic development.
Why was there this delay? Some experts in Vietnam believed that it was due to legal procedures in public investment in Vietnam This is a mandatory procedure after Vietnam receives ODA from other countries, especially large-scale projects (over 1000 billion) 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 However, at the end of 2018, Ho Chi Minh City was only approved to allocate capital for 3 projects with a total amount of 199 billion VND In which, the Ben Thanh - Suoi Tien railway project needed 7,000 billion VND and the water environment improvement project needed 2,500 billion VND capital, which were not arranged
In addition, according to a representative of the State Treasury, the difficulty in site clearance was the biggest problem, causing the most hindrance to the disbursement of public investment capital The units must do well the ideological and political work to mobilize the people to hand over the site clearance sooner Many projects must be carried out interlaced with construction and mobilizing people to hand over the ground.
For example, in some localities, the government had to mobilize people to hand over the site for clearance early, many projects had to both construct and mobilize people to hand over the site