Despite suffering major losses due to the earthquake and tsunami in March the Japanese Government has committed to not trim its official development assistance (ODA) to Vietnam and has signed off on the first disbursement of 41 billion yen ($508 million) for fiscal year 2011. The loan will fund some of Vietnam’s major transport projects, including the Ho Chi Minh City - Long Thanh - Dau Giay and Da Nang - Quang Ngai highways.
“After the twin disasters in March we faced many difficulties but Vietnam is one of our most important partners so the Japanese Government will continue to provide support,” Mr Motonori Tsuno, Chief Representative of the Japan International Cooperation Agency, told local media. Japan has provided ODA to Vietnam since 1992 and many infrastructure, electricity, environmental and rural development projects have used the loans beyond expectations.
Other international donors have also committed to continuing to provide ODA to Vietnam. H.E. Ha Chan Ho, Ambassador of South Korea to Vietnam, announced in June the provision of some $3 billion in ODA to Vietnam from 2011 to 2015, up by 2.5 per cent against the 1996-2010 period.
South Korea’s assistance programmes in Vietnam will focus on four key sectors: creating a foundation for sustainable development, including environmental projects, developing human resources and transport infrastructure, and specific projects in the healthcare and rural development sectors. The Embassy of South Korea estimated that it would give $20 million in non-refundable ODA to Vietnam this year.
“From 1991-2010 we provided about $129 million in assistance to Vietnam, making it the second largest beneficiary of the Korea International Co-operation Agency (KOICA),” the embassy said. “The South Korean Government previously signed an agreement to offer $1 billion in preferential loans to Vietnam from 2008-11.” Many projects have been implemented throughout the country with this support, such as the Vam Cong Bridge in the Mekong Delta and the Hanoi - Hai Phong Highway.
The Australian Government will also provide an estimated A$137.9 million ($143.4 million) in ODA to Vietnam in 2011-2012, increasing 8.2 per cent against the estimate for 2010-11. “The increase in aid funding to Vietnam demonstrates Australia’s long-term commitment to assist Vietnam to reduce poverty and achieve sustainable development,” H.E. Allister Cox, Australian Ambassador to Vietnam, said at the announcement.
Australia’s aid programme aims to assist Vietnam achieve its objectives in strengthening human resources development, economic integration and infrastructure improvements, and environmental sustainability, which includes water supply and sanitation, climate change and agricultural research.
The aid is managed by the Australian Agency for International Development. Australia’s support will also include the design of the Cao Lanh Bridge, which will deliver significant economic and social benefits by improving transport access for residents in the Mekong Delta.
On June 22 Belgium signed a new cooperative agreement with Vietnam, under which Vietnam will receive ODA of $86.3 million for 2011-2015. The funds are expected to be mainly used to improve water and sanitation and governance. About $43 million will be allocated to water and sanitation to cope with and reduce climate change impacts in Ninh Thuan, Binh Thuan and Ha Tinh provinces, and about $17 million to cover interventions in governance.
The World Bank (WB), one of the largest multinational donors to Vietnam in 2011, has funded 53 programmes and projects with a total of $6.443 billion, of which $4.257 billion is yet to be disbursed. Its sector portfolio is energy 22 per cent, urban development 20 per cent, transport 20 per cent, agriculture and rural development 14 per cent, education 6 per cent, healthcare 6 per cent, administrative reform 6 per cent, telecommunications 1 per cent and others 2 per cent.
Disbursement in WB-funded loan projects is lower than the average regional rate. Nonetheless, WB gives high scores to Vietnam in terms of effectiveness in using its funds. “The WB programme in Vietnam is for Vietnam’s long-term development,” said Ms Keiko Sato, Portfolio and Operations Manager for the World Bank in Vietnam.
“As such, the use of financial resources from the WB is discussed with the government of Vietnam for the country’s medium- to long-term development goals. The Socio- Economic Development Plan of 2011-2015 serves as the foundation of our support. The government and the WB have been working closely and have agreed that the bank’s resources focus on the following priority areas: strengthening competitiveness in the regional and global economy, increasing sustainability, and broadening access to economic and social opportunity.”
Over the next five years, she continued, the WB will focus on these critical areas and through this engagement will also work on strengthening governance and the country’s resilience. “We expect Vietnam to utilise these resources well to address key challenges and achieve long-term development goals,” Ms Sato said. “In order for a development programme or project to successfully achieve its development objectives often requires institutional and capacity development.”
Foreign donors pledged $7.9 billion ODA for Vietnam in 2011 and this is the first time for several years that commitments have fallen.
But according to foreign donors, as Vietnam becomes a middle-income country it will no longer receive preferential lending treatment. It must therefore prioritise ODA in projects that serve economic development and are capable of generating repayments. Loans will mainly be used for developing infrastructure facilities, transport projects, and programmes to deal with climate change.
“We are aware that along with Vietnam’s development its ODA recipient status and the structure of funding will change,” Mr Vo Hong Phuc, former Minister of Planning and Investment, told the Consultative Group (CG) meeting in December last year.
“Vietnam needs ODA and support from other countries to deal with important issues relating to healthcare, education, poverty reduction, and climate change. The Vietnamese Government is committed to using ODA effectively.”
There can be no doubt that although Vietnam has recently become a middle-income country it still needs financial support from development partners for socio-economic development. However, whether the total value of commitments from international donors to Vietnam in 2012 will be the same or increase or decrease compared with last year will only be known at the CG meeting in December.