“JICA will remain active for ODA operations in Vietnam”

11:31:29 AM | 4/10/2019

 “In recent years, Japan’s ODA share over the total ODA to Vietnam exceeds 30% and Vietnam has been one of the biggest recipient countries of Japan’s ODA in comparison to the rest of the world,” said Mr. KONAKA Tetsuo, Chief Representative, JICA Vietnam Office, regarding the effectiveness of cooperation programs between Vietnam and Japan. Huong Ly reports.

Cooperation between Vietnam and Japan is based on three main pillars, which are promoting economic growth and strengthening international competitiveness; Response to fragility; and enhancing governance. Would you please tell us about the effectiveness of cooperation programs between the two countries based on these three pillars in recent years?

In recent years, Japan’s ODA share over the total ODA to Vietnam exceeds 30% and Vietnam has been one of the biggest recipient countries of Japan’s ODA in comparison to the rest of the world. In 5 years between 2014 and 2018, the total amount of loan, technical cooperation and grant aid has accumulated up to 5,324 billion JPY, 40 billion JPY and 73 hundred million JPY, respectively.

The first pillar is Promotion of Economic Growth and Strengthening International Competitiveness, which aims to support to improve the market economy system. JICA’s support to Vietnam under this pillar in recent years continue to focus on financial reform and state-owned enterprises reform, infrastructure development (road, bridges, urban transport) as well as to strengthen industrial competitiveness and human resource development. Some out of the numerous projects effectively being implemented under this Pillar are: the “Ho Chi Minh City Urban Railway Construction Project (Line 1), which will be the first underground metro system currently under construction; the “Lach Huyen Port Infrastructure Construction Project,” which was the first PPP collaboration using Yen Loan opened in 2018; and the “Vietnam-Japan University (VJU)”, which is a joint creation of both countries and opened in 2016 in Hanoi.

The second pillar, Response to fragility, supports addressing emerging issues caused by rapid urbanization, natural disasters and climate change and to develop the systems in the fields of health-care sector and social security. JICA has been providing cooperation for adaptation and mitigation measures for climate change in addition to support in policy formulation and enforcement, supporting HCMC and Hanoi with water environment improvement for flood damage prevention; helping Ben Tre province with water management to protect agriculture from salinity intrusion during dry season. In terms of healthcare and social security, in recent years, such projects as Vaccine production facilities of POLYVAC or insurance provider payment methods and basic health service have helped Vietnam to address the pending issues in health care and social security.

Under “Good Governance”-the 3rd pillar, JICA continues to provide training to government officials, to support developing training curriculums and texts for legal professionals (judges, prosecutors and lawyers), to promote E-Government and to strengthen the capacity of the Office of the National Assembly of Vietnam. These interventions have helped to strengthen governance, enhancing capacity of improving and executing the legal system, and ensure justice, fairness, neutrality and transparency of the governance

Could you tell us the outcome of Japan's ODA loan projects in Vietnam from beginning of 2018 up to now? What are some of your difficulties and challenges in implementing ODA loan projects in Vietnam?

For completed projects, we confirm that Vietnam has performed very well, particularly in terms of implementing projects in line with its development goals and policies, and delivering development impacts. This has been our assessment through ex-post evaluation by third parties, and Vietnam’s performance has been even better in comparison to neighboring Asian countries; and interestingly, this outcome was found to be similar in ADB and World Bank projects.

However, we observe that the disbursement ratio has deteriorated recently. The disbursement ratio, which is the ratio between actual disbursement and total remaining balance for the pipeline projects, dropped to 13.6% in Japanese fiscal year 2018 while the rates used to be around 20% in the past 10 years, or even close to 30% in 2015 as its peak. This fiscal year, the progress is merely 13% against our annual disbursement plan, despite the fact that we are reaching half of the fiscal year. We have some on-going projects without any disbursement this year, and 1/3 of our portfolio has been facing shortage of budget appropriation. Some projects had finally received additional budget allocation in July, but actual disbursements are lagging behind due to slow administration procedures, so we only expect disbursement to catch up at the final quarter of the calendar year. This is critical and a deep concern. Disbursement is an important indicator measuring progress on project implementation. Slow disbursement means delay in project completion and, thus, delivery of development impacts. Besides, many contractual obligations are breached due to late payments, and this deteriorates the reputation of business in Vietnam among international contractors, despite efforts of the government to get full acknowledgement on its market economy by other countries.

Do you have any recommendations to the Government of Vietnam to improve the effectiveness of cooperation projects between the two countries?

Not only JICA but also other international development organizations are currently facing difficulties in implementing ODA projects due to tight public debt control through the Medium-term Investment Plan (MTIP) and ODA related laws/decrees. A more efficient, flexible and streamlined approach in this regard is long awaited. Our suggestions were communicated to the ODA Steering Committee through a meeting in June, with the Six Banks representatives.

It is also highly important to assess and carry out post-evaluation of completed and on-going projects to obtain lessons learnt for further improvement in effective use of ODA. Appropriate evaluation is an indispensable step under the PDCA cycle that enables good project formulation/implementation. It may be advised to the Vietnamese government to introduce a self-evaluation system not only focusing on ‘financial terms’ but also on ‘economic terms’ and ‘development impacts’, which can be assessed through indicators such as Economic Internal Rate of Return (EIRR) or reviewing the project planning/implementation process. This kind of self-exercise can lead to improving ownership and active role of counterpart personnel in future project preparation and implementation.

Enhancing sustainability of completed projects through strengthening of O&M (Operation and Maintenance), with both daily and systematic large-scale maintenance, is also essential to maximize project effectiveness and ensure the longevity of infrastructures. These points will also be a vital preparation for the long-term future when Vietnam enters the Upper Middle Income category and when grants and technical assistance from development partners, including JICA, will gradually decrease.

 Do you have any plan to promote your activities in Vietnam?

In view of the continuing economic development needs, JICA will remain active for ODA operations in Vietnam. Nonetheless, there are many difficulties that JICA is facing, and we will place priority on (1) the facilitation of all ongoing projects; (2) early resumption of delayed projects; and, (3) commencement of already agreed projects. Regarding the ongoing ODA loan projects in particular, JICA continues to request the Vietnamese Government to resolve the delayed payment issues for early completion of construction and realization of development impacts.

In parallel, we will consult with relevant authorities and formulate new projects, which are relevant to the Social Economic Development Plan 2021-2015 and Social Economic Development Strategy 2021-2020 now in preparation by the Government of Vietnam. As for example, JICA Vietnam Office concluded with the Vietnam Academy of Social Sciences (VASS) the Minutes of Cooperation to enhance strategic and comprehensive collaboration for the development of Vietnam on July 24, 2019. Under the Minutes, JICA Vietnam Office and VASS reaffirmed their long-term cooperation to facilitate further sustainable development of Vietnam. The two sides are to work together to prepare Vietnam’s Socio-Economic Development Strategy 2021-2030 (SEDS 2021-2030), the Provincial Socio-Economic Development Plan (P-SEDP 2021-2025) of Ben Tre Province and Ha Giang Province, and to study emerging countries in Asia.

Besides, relatively new cooperation schemes are also growing under our operation, such as supporting Japanese small and medium enterprises to increase investment to Vietnam. At present, some projects being piloted are: verification of model for advanced cultivation and development of human resources in agriculture in Lam Dong province; and verification of mobile weighing system for overload detection on roads.

In addition, the private sector investment financial scheme should also be enhanced. For example, JICA has made contribution to the Leading Asia’s Private Infrastructure (LEAP) Fund, from which, a portion of fund is used to co-finance a floating solar energy project in Vietnam together with ADB. The signing of the Loan Agreement to finance this project was conducted on October 2, 2019.

 

Thank you very much!