Viet Nam improves ODA disbursement but needs target the poor

Dec 9, 2002

Ha Noi - Viet Nam improve disbursements of Official Development Assistance (ODA) which could reach as high as US$1.5 billion in 2002, up some 9% over 2001’s level, according to a report on foreign aid released today by the UN Development Programme (UNDP).

The UNDP annual Overview of Official Development Assistance (ODA), however, says this projection will depend very heavily upon disbursement rates in the last two months of the year. By end-October 2002, available official data
indicate that disbursements had already exceeded US$1.1 billion with another US$0.4 billion, including some large quick disbursing ODA loans, scheduled for disbursement in the last two months of the year.

Much more effort is also needed to ensure that the poor are genuinely benefiting from ODA through effectively targeting the more isolated and needy areas, according to Jordan Ryan, the United Nations Resident Coordinator and UNDP Resident Representative in Viet Nam. Mr. Ryan emphasizes that "ODA should play a role in helping Viet Nam address the country’s emerging challenge of widening social and economic inequalities”.

Mr. Ryan points out the decline in ODA disbursements to a number of critical human development areas in 2001. Latest available data suggest that ODA investments in education and training were down 30% to some US$86 million last year. Similarly, ODA investments in health also declined to some US$80 million from US$90 million. These are two areas with a clear link to the Millennium Development Goals to reduce poverty, which Viet Nam has committed itself to.

The report argues that there is an urgent need to focus on access to and quality of social services, especially in the poorer and more isolated areas, in order to avoid increasing disparities in accessing education and health services.

Jordan Ryan says: “There seem to be scope for a better balanced regional distribution of ODA”. A comparison between ODA disbursements into the regions and the poverty distribution shows that the Northern Uplands, the North Central Coast and the Mekong Delta are the most disadvantaged regions in the country. Even if these three regions concentrate nearly 70% of all poor people in Viet Nam, they only account for 44% of ODA disbursed directly in provinces, according to UNDP data.

In addition, the overall share of ODA going directly to the provinces have been reduced over the last years, from nearly 70% of total ODA in 1999 to 59% in 2000 and further to 52% in 2001. As more ODA is disbursed through national agencies, the challenge for Viet Nam will be to ensure this money finally reaches the remote and isolated regions of the country where the poor concentrate.

In 2001, Viet Nam experienced the first decline in ODA disbursements since 1993 as disbursements fell 16% on the previous year.

According to UNDP data, the decrease was largely due to the completion of a number of Japanese financed projects and programmes. These include the Phu My, Pha Lai, and Ham Thuan Da power plants, as well as the Miyazawa Initiative, which was in support of private sector development, and State Owned Enterprises and trade reform.

In terms of the allocation of ODA funds by broad categories, the largest share of ODA funds continues to be allocated to large infrastructure projects. Infrastructure received US$568 million or 42% of all ODA funds last year despite the significant decline from the previous year.

Quick disbursing ODA loan facilities made up 20% of total ODA or US$258 million. This was mainly due to the World Bank’s Poverty Reduction Support Credit (PRSC) and IMF’s Poverty Reduction and Growth Facility (PRGF).

Rural development was the third largest recipient of disbursements despite an absolute fall in disbursements. The sector received US$207 million, which was approximately 15% of all ODA funds. Closely behind, with 14% of total ODA, was human resource development.

According to UNDP data, the share of new debt in ODA remained quite stable at around 71% with pure grant assistance making up the remaining 29%.

Japan remained the largest donor in 2001, with total disbursement of US 321 million, despite a significant decline in disbursements, followed by World Bank, ADB and the IMF. These were in turn followed by France, Denmark, the United Nations, Republic of Korea, Sweden and the United Kingdom. Bilateral donors as group provided some 50% of ODA disbursements. Total disbursements from the European Union (both EU Member States and the EC) in 2001 was US271 million, and if included as a whole, would rank third in disbursements.

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