Predictability and Stability of ODA Flows
The Case of Vietnam
Dr. Pham Hoang Mai
Head of Japan and Northeast Asia Division
Foreign Economic Relations Department
Ministry of Planning and Investment Vietnam
Background
 Classical and Neo-classical Theories: ODA is
provided to cover 3 gaps:



Savings – Investment Gap
Foreign Exchange Gap
Technological Gap
 Dependency Theory: ODA is detrimental to
development:
Substituting for Domestic Savings
 Aid Fungibility
 Unsustainable Development

Background
 The Role of the Government Coordination



Allocating ODA for Priority Projects to create
favourable conditions for socio-economic
development
Directly tackle the poverty problems
Guarantee the results of economic growth will be
equally distributed
 Predictable and Stable ODA flows will help the
government to minimise the detrimental impacts
and maximise positive impacts of ODA flows
Description of Predictability and
Stability
 Volume
 Conditionality
 Financial
terms and conditions
 Policy reform conditions
 Procurement conditions
 Strategy
 Priority areas
→ Play important role for long- term development
plan of developing country
Glimpse of ODA in Vietnam
5
US$ bill.
4
3
2
1
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Pledged ODA
1.86 1.95 2.31 2.43 2.38 2.19 2.15 2.4
Disbursed ODA 0.41 0.72 0.74 0.9
1
1.2
1.4
1.7
2.4
2.5
2.8
3.4
3.7
4.4
1.5 1.55 1.4 1.65 1.7
1.8
ODA Contribution over the Period of
2001 – 2005
 ODA has contributed to 11% of Vietnam’s
investment and 17% of government investment
 Japanese ODA accounted for 28.8% of total
committed ODA and 36.2% of disbursed ODA
 Japanese ODA has contributed to 4% of
Vietnam’s investment and 6.2% of government
investment
 Sectoral contribution: Transportation, Power
generation, Education, Urban Infrastructure and
hence helped to attract FDI
Sector Allocation of ODA 2001-2005
(%)
Commitment
Disbursement
Agricultural and Rural Development
16
21
Power and Industry
16
17
Transportation and Telecommunication
25
25
Urban Infrastructure Development
9
7
Health Care, Education
11
7
Environment, Technology Development
3
5
Other
20
18
Successful Strategy of Vietnam
seeking support of the Donors in preparing
 Five year Socio-economic development plan
 Comprehensive Poverty Reduction and Growth
Strategy
 Sectoral and regional development plans
 ODA Framework for the period 2006-2010
 Holding regular policy dialogues
 Phasing-out for large scale projects
 Applying and improving the ownership
Successful Strategy of Donors
 Cooperation with Vietnam in developing
 5-year
socio-economic development plan;
 Comprehensive Poverty Reduction and
Growth Strategy;
 Sectoral and regional development plan
 Having country cooperation strategy for Vietnam
in line with the 5-year socio-economic
development plan and hence providing multi-year
pledges
Successful Strategy of Donors
 Support the sectoral and regional development
plan by financing priority projects
 Applying Program-based approach by
combining both development studies and
financing a number of priority projects
 Starting the harmonization in terms of
feasibility study, procurement, reporting
system (Hanoi core statement)
 Coordinating among donors
 Applying new aid modality (Budget support,
program-based approach etc.)
Forecast ODA Commitment and
Disbursement 2006-2010
ODA provision
capacity
Vietnam
disbursement
capacity
ODA commitment
2006 - 2010
ODA disbursement
2006 - 2010
ODA demand for
development
Vietnam Debt
limitation
Forecast ODA Commitment and
Disbursement 2006-2010
 Demand for ODA
 Development
target: Annual GDP growth
rate of 8%
 Share of ODA in total investment (8%)
 Donors’ Capacity
 Donors’ cooperation strategy
 Donors’ trend of ODA provision, past and
future
Forecast ODA Commitment and
Disbursement 2006-2010
 Disbursement Capacity
 Problems
of land clearance,
procurement, counterpart fund
 Target and solution
 Debt Management
 Debt management strategy
 Borrowing limitation
Forecast ODA commitment and
disbursement 2006-2010
4000
US$ mill.
3000
2000
1000
0
2006
2007
2008
2009
2010
Demand of ODA
Disebursement
1732
1942
2059
2227
2397
Demand of ODA
Commitment
2930
3223
3159
3238
3427
Donnors' Capacity
3107
3280
3337
3390
3440
Debt Limit
2328
2361
2394
2436
2474
Predictability and Stability of Japan
ODA in Vietnam
Japan decides ODA commitment to Vietnam based
on:
 Previous years commitment
 Performance



Economic growth
Disbursement
Contributions of ODA funded projects
 Policy reform
 Macro-economic reforms (SOEs reform, financial
reform etc)
 FDI related policies reform etc
 Road map for policy reform
Commitment and Disbursement of
Japan’s ODA to Vietnam
120
100
Yen billion
80
60
40
20
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Total
59.5
66
82.1
92.4
96.5
100.8
112
86.4
91.6
92.4
91.7
94.6
100.9
Grand aid
7.3
8.1
12.1
11.4
11.5
12.8
10.7
15.5
17.3
13.1
12.4
12.6
10.1
ODA loans (committed)
52.3
58
70
81
85
88
101.3
70.9
74.3
79.3
79.3
82
90.8
1.16
1.76
4.9
21.2
29.2
74.7
63.9
37.2
29.8
55
66.5
61.2
ODA loans (Disbursed)
Characteristics of Japan’s ODA in
Vietnam
 Advantages of Japan ODA
 Cover
a Wide Range of Activities
 Can Finance a Large Scale Projects
 Well-known for Technology Transfer
 Less Policy-related Conditionality
 Japan’s ODA for Vietnam focuses on construction
of large-scale infrastructure and human resource
development with a view of promoting economic
growth and poverty reduction.
 Northern Growth Triangle:
Hanoi-Hai Phong-Quang Ninh
 Central Growth Triangle:
Da Nang areas
 Southern Growth Triangle
Ho Chi Minh CityVung Tau areas
Challenges
 Full cooperation and supports with Vietnam in
realising the 5-year socio-economic
development plan, Comprehensive Poverty
Reduction and Growth Strategy, sectoral and
regional development plans
 Accepting Vietnam’s roadmap of policy reform
 Easing the conditionality
 Full harmonisation of the procedures, especially
in terms of procurement
Lessons Learned
 Strong Ownership
 Developing good development strategy,
in which ODA will directly tackle poverty
problem and provide favourable
environment to attract investment and
hence to promote economic growth
 Good understanding of Donors’
procedures and potential
Lessons Learned
Good coordination among donors,
sector, regions
Towards full harmonisation in
terms of procedures between
donors and Vietnam and among
donors