ODA CAPITAL IN VIETNAM

April 2005 Instructor: Group members:

Dr. Michel Henry Bouchet Huynh Anh Tuyet
Nguyen Thi Thanh Thao
Pham Thi Minh Ngoc
Thomas Froimovici
Nguyen Duc Tue
Group 4
CFVG 12 - HCMC
 Agenda

ODA introduction
Benefits of ODA to Vietnam
Current situation of ODA in Vietnam
Comments on ODA capital in Vietnam
Constraints of ODA implementation in VN
Recommendations
Conclusion
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CFVG 12 - HCMC
 ODA Introduction - Definition

Grants and loans that donors (the

governments of rich countries) give to
developing countries. According to a
United Nations agreement, these donor
governments agreed to contribute of 0.7
percent of their gross national product.

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CFVG 12 - HCMC
 ODA Introduction - Criteria

ODA comprises the funding flows which meet the following conditions:
• Provided by official agencies;
• Administered with promotion of economic
development and welfare of developing countries as its main objective;
and
• Concessional in character to avoid severe burdens on
developing countries and conveys a grant element (G.E.)* of at least
25%.
* Grant element is an indicator of the "softness" of lending conditions.
The lower the interest rate and the longer the repayment period, the
greater the "grant element," and the more advantageous the loan is for
the recipient country. In the case of grant aid, the grant element is equal
to 100%. Loans must exhibit a grant element of at least 25% to be
counted as ODA.

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 ODA Introduction - Types &
Implementation
ODA can be broadly divided into bilateral ODA and multilateral ODA.
Bilateral ODA consists of bilateral grants and ODA loans. Bilateral grants are further divided into grant aid and
technical cooperation.
Multilateral ODA refers to contributions and subscriptions to multilateral institutions. The implementation
structure depends on the type of ODA involved. The following paragraphs explain the contents and
implementation of the following types of ODA: (1) grant aid; (2) technical cooperation; (3) ODA loans; and (4)
contributions and subscriptions to multilateral institutions.
1. Grant Aid
Rich countries provide grant aid mainly to countries that have a relatively low income among the developing
countries and regions. Grant aid is primarily channeled to support basic human needs (BHN) (such as medical
services, public health, water supply).
2. Technical Cooperation
Technical cooperation is targeted toward development of the human resources necessary for the economic
progress of developing countries. It includes: (1) the dispatch of experts; (2) the acceptance of trainees; (3) the
provision of equipment and materials to facilitate technology transfer.
3. ODA Loans
ODA Loans make development funds available to developing countries at low interest rates and with long
repayment periods. These loans provide funds to develop and improve the economic and social infrastructure
necessary.
4. Contributions and Subscriptions to Multilateral Institutions
Aid provided through multilateral institutions.
Multilateral institutions involved in development assistance can be broadly divided into two categories. The first
group consists of international financial institutions that primarily provide funds needed for development (World
Bank, IMF), while the second group consists of various United Nations agencies which engage in economic,
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social and humanitarian activities.

CFVG 12 - HCMC
 Benefits of ODA for Vietnam

Finance:
– An external resource of capital to the tight government
budget
Economic:
– Helped Vietnam maintain a high economic growth rate
(GDP: 7.7% in 2004)
Social:
– Improve Vietnam’s human development index (the Vietnam’s
poverty rate has fallen to 7 percent from 27 percent 2003)
– Improving on social infrastructure development (upgrading
and building 3,700 km of highways and provincial roads;
10,000 km of rural roads and hundreds of bridges…)
– Establish a strong development co-operation with some 25
bilateral and 19 multi-lateral donors and 350 international
non-government organizations (INGOs)

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 Current situation of ODA in VN-
Legal frameworks in Vietnam

Decree 20/CP (1993)

Decree 87/CP (1997)
Decree 211/1998/QD-TTg
Decree 920/1998/ND-CP
Decree 223/1999/QD-ttg
Decree 17/2001/ND-CP

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CFVG 12 - HCMC
 ODA Capital in VN- Commitment &
Disbursement (1993-2004)
Millions USD
4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Commitment
Source: MPI
Group 4 Disbursement

CFVG 12 - HCMC
 Current situation of ODA in VN-
The main investment fields
16% Transportation

28% Agriculture and

rural
development
Water supply
and drainage

12% Social
development

Others
8%
13%
Group 4 Source: MPI
CFVG 12 - HCMC
 TOTAL ODA DISBURSEMENT
AND PROJECTS
2000 1400
1800
1200
1600
1400 1000
1200 800
1000
800 600
600 400
400
200
200
0 0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

USD Million
Source: UNDP
Group 4 Number of projects

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 TOP 10 PROJECTS IN 2003
Mil
Rank Project name USD %
1 Poverty reduction support credit 190 9.18
2 Poverty reduction support credit II 117 5.64
3 Rural finance 2 57 2.77
4 Power transmission 51 2.49
5 Third road improvement segment 1+2 48 2.3
6 Phu My thermal power plant project 41 2
Small scale poor infrastructure
7 development 34 1.67
8 Pha lai thermal power plant 29 1.42
9 National highway No. 10 29 1.42
10 Rural energy 29 1.42

Group 4 Source: UNDP

CFVG 12 - HCMC
 TOP 10 ODA Sectors in 2003
Natural resources 79
Development adminsitration 79
Health 109
Agricualture 116
Social development 136
HR development 136
Area development 187
Energy 283
Transport 442
Economic management 442

0 100 200 300 400 500

Group 4 Mil USD Source: UNDP

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 TOP 10 Donors by disbursement
in 2003
UK 38
Germany 40
Netherlands 43
EU 45
Denmark 61
Australia 65
France 106
ADB 252
WB 575
Japan 599

0 100 200 300 400 500 600 700

Group 4 USD mil

Source: UNDP
CFVG 12 - HCMC
 Comments on ODA

ODA made up of averagely 15% GDP of VN

20% of ODA is non-refundable aid, remain is
concessional loan with favourable interest rate
ODA capital used effectively in economic
management, infrastructure & area
development
55% of the total committed ODA has been
disbursed so far => lower than the average of
ASEAN

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CFVG 12 - HCMC
 Constraints of ODA in VN
From Donors
- Complicated procedure requirements (Rep. Office , Co-
donors, …)
- Limitation of Foreign Consultants
From Vietnam
- Incomprehensive policies
- Slow land clearance & encounter capital
- Difference of administrative procedures with donors
- Lacking of proper management and effective supervision
- Approval Procedures: complicated, wordy, lengthy

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CFVG 12 - HCMC
 Recommendations

Redefining ODA plan/strategy:

- Regions: drawing ODA to remote and
mountainous => balanced development
nationwide
- Sectors: concentrating on economic
sectors (electricity, transportation) & on
social sectors (healthcare; education)

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CFVG 12 - HCMC
 Recommendations

Simplifying the procedures

Cooperate and empower to local authorities of
the city/province where ODA is executed to
spur the speed of relocation zones, land
clearance and the construction work
Strengthening diplomatic relationship
worldwide
Effectively combining between ODA & FDI

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 CONCLUSION

ODA has been an important financial

resource for Vietnam development => VN
still need more & more ODA fund

But efficient ODA utilization so that it’s

not a debt burden in future.

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CFVG 12 - HCMC