Progress of ODA Disbursement: Growing Volume but Still Lagging Behind

 

Total ODA loans disbursed in 2007 are estimated at US$2.05 billion, surpassing the set target by 5 per cent. Sponsors highly appreciated the achievements in this sector of Vietnam, said Mr Ho Quang Minh, Head of the Foreign Affairs Department under MPI.

 

Mr Omkar Shrestha, Deputy Country Director of Asia Development Bank (ADB), noted that ADB is one of the major sponsors with the highest rate of ODA disbursement in Vietnam. The way Vietnam actively receives financial support from the international community has made ADB believe in the development prospect of the country as well as the long-term aid intentions of international sponsors to Vietnam.

 

However, the disbursement rate should still be improved as total aid is increased every year. Mr Ajay Chhibber, WB Country Director to Vietnam said that if the disbursement rate is not further improved in 2008, it will be difficult for Vietnam to reach the set target, especially when the committed aid will reach a record US$5.426 billion next year, an increase of nearly US$1 billion on year.

 

Looking back at 12 years of receiving ODA loans, the disbursement speed, although being raised, still fails to meet the development demand. In 2001-2005, ODA disbursement in the country accounted for only about 87 per cent of the target. Mr Minh said in 2006-2007, Vietnam has disbursed about US$3.9 billion, equal to 32 per cent of total ODA loans scheduled for disbursement in 2006-2010. Vietnam should have strict measures to speed up the disbursement rate, to ensure meeting the target of US$11.9 billion of ODA loans in the period.

Mr Minh said that the slow progress rate in disbursement is attributed to the fact that 50 per cent of ODA loans for Vietnam have been spent on infrastructure projects which require much time for implementation, three to five years longer than other projects. Meanwhile, other developing countries such as African countries use only one third of total ODA loans for this sector.

 

Other reasons include delayed processing of ODA disbursement, emigration for resettlement, site clearance and bidding activities, as well as managing boards’ weak capacity for supervising ODA-funded projects. In addition, the reciprocal capital has not been properly arranged, planning for the use of ODA loans has so far not been completed to guide bodies and localities in using these capital sources. The slow disbursement of ODA loans is also attributed to tight requirements set by sponsors and complicated phases in investing in technical infrastructure projects. However, the main reason is subjective and internal.

 

ODA loans have such advantages as: large scale, low interest rate (below 3 per cent), long borrowing term (25-40 years), a big sum of non-refundable aid, at least 25 per cent of total ODA loans.

Japan plans to expand its assistance to Vietnam, mounting to a total of 123.2 billion yen, approximately US$1.12 billion, a 19% increase over 2006.

Japan commits 115.8 billion yen in loans, approximately US$1.05 billion, an increase of about 20 billion yen, compared with 95.1 billion yen of the last fiscal year.

Our focus points continue to be economic and social infrastructure development such as transportation, power generation and water environment improvement. The package covers 8 projects including 3.5 billion yen for PRSC6 co-finance.

The project list includes key projects like the “South Vietnam Express Highway Construction Project (Ho Chi Minh City-Long Thanh-Dau Giay section)” and the “Hanoi City Ring Road No.3 Construction Project”.

 

On the grant front, Japan is planning to provide 7.4 billion yen, approximately US$67 million, for projects and programs including technical cooperation.

 

In grant aid, Japan will provide a total of 2.3 billion yen consisting of programs in such areas as health, medicine, education, water supply, rural development and human resources development. We will also support activities at the local level under grassroots human security assistance schemes in basic education and vocational training, mostly in rural areas.

 

Regarding technical cooperation, Japan will accept 454 trainers and invite 110 young people from Vietnam to Japan. We will also dispatch 500 Japanese experts and 26 Japan Overseas Cooperation Volunteers (JOCV) to the country.

 

In addition, we are implementing a total of 28 technical cooperation programs. We are also carrying out 7 development surveys, paving the way for future projects and programs.

 

These are the main features of Japanese ODA for the next fiscal year, and I’d like to reiterate our firm resolve to work side by side with the Vietnamese government and its people in their endeavours to develop their country.

 

Together with increased investment, Korea will spare no effort to increase ODA to Vietnam and will pledge a bigger amount than ever, showing Korea’s strong will to actively support Vietnam’s sustainable economic growth. With the quantitative expansion of ODA, Korea is also committed to continuously improving its aid effectiveness and efficiency to benefit the Vietnamese people.

Contrary to the fear the government may have had that its economic success may result in Vietnam receiving less overseas development assistance (ODA), in fact, a number of development partners are now, or are preparing to, step up their support to Vietnam, with the full appreciation of the country’s greater needs in infrastructure development, social inclusion and environmental sustainability. But a key concern is the country’s absorptive capacity. The total ODA pledged to Vietnam has been increasing steadily: from US$2.8 billion in 2004, US$3.4 billion in 2005, US$3.7 billion in 2006, to US$4.4 billion in 2007. However, disbursement has remained at about the same level, US$1.7 billion or 61 per cent of the pledged amount in 2004, US$1.8 billion or 53 per cent of the pledged amount in 2005, and US$1.9 billion or 51 per cent of the pledged amount in 2006. Commitments have increased but disbursements have not kept pace. Furthermore, the loan funds allocated for specific projects that are not proceeding is a serious loss of opportunity for the country, as there are many other projects ready for implementation but which cannot be realized due to the unavailability of funds.