ODA - Powering Vietnam's Socio-economic Improvement

Political and social stabilisation, consecutive years of economic growth, and positive results from the poverty reduction programme are considered favourable conditions for Vietnam to call for ODA for its socio-economic development plan in 2001-2005 period.

Efficiency of ODA Utilisation

The volume of ODA pledged for Vietnam is often higher each year through annual consultant group meeting. Total ODA pledged for 2001-2005 period is expected at US$13.6 billion which includes non-refundable aid (15-20 percent) and soft loans.

Reports from the Government indicate that ODA represents around 15 percent of total investment from the State budget. Important projects funded by this source have helped fundamentally improve and gradually develop the economic infrastructure, especially transport and electricity. This stimulates the circulation of domestic capital source and attracts foreign direct investment, pushing up economic growth.

ODA plays a crucial part in boosting the development of agriculture and rural areas. This can be proved by figures from a recent survey on local living standard in which the rate of poor households has reduced from 58 percent in 1993 to 28.9 percent in 2002 and around 7 percent in 2004. This shows that Vietnam has exceeded the Millennium Development Goals that it has pledged with the world. 

Also according to the report, total ODA for education and training accounts for 8.5-10 percent of total spending for this activity, adding to improve the quality and efficiency of this field (ODA projects to assist primary, high school and tertiary education reform and vocational training…).

Most typical is the cooperation between Vietnam and sponsors in recent years to realise the plan of action on harmonisation and compliance with process and procedures of ODA.

Sluggishness in disbursement

The Minister of Planning and Investment Vo Hong Phuc pointed out that the tardiness in freeing up ODA has eroded the confidence of sponsors and wasted this source. This is blamed on complicated and sluggish process and procedures of the country’s administration system as well as of the sponsors. Slow resettlement and site clearance, poor management and supervision capacity of management boards, asynchronous and unclear legal documents on the management and usage of ODA sources have added to the problem. On the other hand, a lack of serious obedience to financial regulations at management levels has trimmed down the efficiency of ODA usage.

Directions for mobilisation and employment of ODA in 2006-2010

In meeting fast and sustainable development requirements in 2006-2010 period, the Vietnamese Government continues to gather up all financial sources, in which ODA still keeps its crucial role. Total realised ODA is expected at around US$11-12 billion, representing 80 percent of the pledged fund. 

According the Government’s report, priority measures in the first years of this period are to implement the Strategy to borrow and pay foreign loans, ensure the safety in foreign lending and complete the process of mobilising and using ODA source for socio-economic development.

The usage of ODA will prioritise the development of agriculture and rural areas in link with Comprehensive Poverty Reduction and Growth Strategy Programme (CPRGS); transport (especially in Southern and Mekong Delta regions); improvement of water supply and drainage, environment sanitation in urban areas and industrial parks; development of irrigation and electricity distribution systems (especially in rural and mountainous areas); education and vocational training; modernisation of provincial hospitals and assistance to national healthcare programmes.

• Mai Anh