ODA fuels growth engine

Since 1993, international donors committed to grant over $42.43 billion for the country. The government has used the ODA to build socio-economic infrastructure like roads, bridges, schools and clinics. A part of ODA was also used for eliminating hunger and reducing poverty, improving the quality of human resources and protecting the environment.

With the assistance of international donors, Vietnam’s economy recorded impressive growth rates. In 2007, growth was 8.5 per cent year-on-year. Poverty was bumped from 50 per cent in the early 1990s to 14 per cent in 2007. International donors highly appreciated the effective usage of ODA in Vietnam. The World Bank and Asian Development Bank said that Vietnam was one of the most effective countries using ODA worldwide.

To date, there have been 51 donors including 28 bilateral and 23-multinational donors having doled out aid to Vietnam. Another 600 non-governmental organisations are kicking-in funding and experience to the tune of $200 million each year.

International donors

In the latest Ministry of Planning and Investment (MPI) ODA report, it said ODA promoted the image of Vietnam to international donors and was important support for the country’s open foreign policy. Vietnam, two years ago, became a full member of the World Trade Organization after 11 years of discussion. This year, it joined the United Nations Security Council as a non-permanent member.

ODA is a key capital source helping the country improve infrastructure and human resources. For example, about $7 billion funded by ODA was used to build a series of power plants like Phu My, Pha Lai and O Mon. At present, international donors like Japan, Spain and Germany are assisting Ho Chi Minh City and Hanoi to develop metros aimed at easing severe traffic jams.

The success of ODA usage in human resources and infrastructure developments was catalyst for foreign direct investment in the country. Last year, Vietnam attracted a record FDI commitment of $21.3 billion and the figure climbed to $60 billion for the first 11 months of this year alone.

ODA also plays an important role in hunger elimination and poverty reduction. Since 1993, about $5.5 billion of ODA has been committed to large poverty reduction projects, which will help the country reduce poverty to targeted 11 per cent by 2010.

High commitment, but need more disbursement

Although international donors have raised their ODA commitments for Vietnam in recent years, more must be done to disbure these funds. Out of the $42.43 billion committed, just $22 billion has been disbursed by the end of October 2008, according to the MPI report.

“The disbursement is still lower than our target and even lower than average disbursement found throughout the world,” said the MPI. To boost disbursement, the Vietnamese government is trying to improve on its legal and administrative documents guiding the usage and management of ODA.

However, the current financial crisis could be an obstacle for ODA disbursement in the country. The MPI said that international donors, which were facing severe impacts from the crisis, could slow the implementation of their commitments. High inflation and a slowdown of Vietnam’s economy are also affecting disbursement this year.

However, MPI said the country still has a lot of advantages for luring ODA due to its political and social stability and an economic growth rate hovering at around 6.5 per cent.