Vietnam - Instep with donors to get ODA funds working well

On the occasion of annual Consultative Group Meeting in Hanoi this week, Minister of Planning and Investment Bui Quang Vinh shares his view with Ngoc Linh on the current state of play regarding the economy and aid effectiveness.

In February, the government issued Resolution 11 consisting of six groups of measures to rein inflation and stabilise the macroeconomy. After nine months of implementation, has this resolution been a success?

Resolution 11 is a timely decision comprising comprehensive measures with the most important ones being fiscal and monetary measures. Thanks to these measures, we have got positive results.

For instance, consumer price index growth has slowed since August and in the last month the index rose only 0.39 per cent. This indicates we are able to keep in inflation at around 18 per cent this year and based on this we can expect a single-digit inflation next year.

At the same time, we have also seen positive results in dealing with other economic challenges like the trade deficit and financial instability. By the end of November, trade deficit accounted for only 10.4 per cent of total export turnover, much lower than 16 per cent targeted by the government in Resolution 11. Meanwhile, the forex market has been stabilised and national foreign currency reserves have been rising since early this year.

These results show that the government’s measures are on the right track and effective. However, we cannot be inattentive at this time because, for example, inflation remains high despite being slowing down. Therefore, those measures need to be continued to reach the final goal.

How do you observe the effectiveness of official development assistance (ODA) so far? Some analysts have raised concern over Vietnam’s external debts which reached 42.2 per cent of GDP at the end of 2010 and suggested that Vietnam should reduce foreign loans. What do you comment on this issue?

For ODA provided by international donors to Vietnam, the usage effectiveness is always the first priority and we have monitored ODA funded projects very closely. Since 1993 when donors resumed ODA to Vietnam, the commitments have risen sharply.

Last year, international donors committed $7.9 billion in ODA to Vietnam. This means tehy are confident in the effective aid usage of our country. Regarding external debts, I think the most important thing is to closely monitor the usage of foreign funds, ensuring effective investment and ability to pay our debts. Vietnam has joined the group of middle income countries but we still need assistances from the international community in infrastructure development, poverty reduction and education.

ODA disbursement this year is estimated at $3.65 billion. This is a high disbursement by comparison with the past years but still lower than average level reported by the World Bank. In your opinion, what needs to be done to improve ODA disbursement?

I agree that ODA disbursement at many projects is very slow. This is a challenge that should be addressed soon. Because of the slow disbursement, total investment at many ODA funded projects have increased much higher than the initial cost estimations.

There are many reasons causing slow disbursement but the key is slowness in preparation and approval of projects. It can take two or even four years to approve a project, establish the management unit and complete other essential procedures.

To tackle this issue, I think we need determination from the government and donors as well. Being responsible for coordinating ODA, the Ministry of Planning and Investment has been closely working with related state agencies to remove difficulties for donors. Those activities will be continued in the future to improve disbursement at ODA funded projects.

Ngoc Linh | vir.com.vn

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