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Some solutions to improve the efficiency of attracting and using ODA capital in the forestry sector in Vietnam - 1


FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL BUSINESS AND ECONOMICS

MASTER OF FOREIGN ECONOMICS

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Some solutions to improve the efficiency of attracting and using ODA capital in the forestry sector in Vietnam - 1


GRADUATION THESIS


Topic:

SOME SOLUTIONS TO IMPROVE THE EFFICIENCY OF ATTRACTING AND USING ODA CAPITAL IN THE FORESTRY SECTOR IN VIETNAM


Student name: Nguyen Hoang Diep Class: English 13

Course: 42D - KT&KDQT

Instructor: MSc. Nguyen Thi Thuy Vinh


HANOI - 11/2007


INTRODUCTION


In the world today, the trend of globalization, regional and world economic integration is really taking place very strongly, and is becoming more and more evident. The world is gradually changing from confrontation, from conflict to cooperation and development together. The trend of globalization leads to an increasingly deep division of labor, requiring each country to proactively promote its own potential and strengths to integrate and develop into the global economy. In that inevitable trend of integration, we are facing the reality that economic development between countries in the world, and even between countries in the same region, is taking place very differently and very unevenly, the gap between rich and poor between developed countries and developing countries as well as underdeveloped countries is getting wider and wider.

And also from the pulse of globalization, the need to support each other to develop together is increasingly being realized. Developed countries gradually realize their role in helping and supporting poor, underdeveloped or developing countries to be able to rise up to keep up with the times, and inevitably contribute to promoting bilateral and multilateral cooperation relationships in many fields of economics, politics, science, technology, culture... for mutual development. Currently, the forms of support that developed countries or international organizations give to underdeveloped countries are also very diverse, the most common of which are the forms of capital provision and loans with many preferential conditions, of which a very popular form is the official development assistance, abbreviated as ODA (Official Development Assistance).

Reality has proven that this source of capital has contributed significantly, even played a key role for many countries, in building and developing socio-economic potentials, contributing to promoting sustainable growth of the countries receiving loans.


or receive aid, thereby helping these countries keep up with the general development trend of the world economy, reducing the risk of falling behind countries with developed economies.

Since the early years of the economy's opening up and especially in recent years, aid projects, direct and indirect investment in Vietnam have increased sharply, both in quantity and quality. Along with the relatively high and stable economic growth, the demand for capital to focus on developing the necessary potential resources to promote the process of "Industrialization and Modernization" of the country has also increased sharply and become one of the extremely important factors that our Party and State pay great attention to. Resolution No. 15 NQ/TW dated March 18, 2002 clearly emphasized the issue: "Strengthening the expansion of international cooperation to mobilize capital, technology, equipment and markets".

For Vietnam, ODA capital is always an important, effective and necessary source of capital for the socio-economic development needs of Vietnam, especially in the coming time, when Vietnam accelerates the pace of socio-economic development. In the list of priority investment projects to mobilize OAD capital for the 2001-2005 and 2006-2010 periods, the Vietnamese Government has proposed hundreds of projects with a total ODA capital of up to tens of billions of USD. However, besides the very encouraging achievements, there are still many limitations in the work of attracting and using ODA capital in Vietnam. The solution to overcome and improve the attraction and use of ODA capital is always a constant problem and there is no optimal solution for the Government, ministries, strategic research institutes as well as all other interested people.

The following content will partly clarify for readers a general overview of the current situation of attracting, managing and using ODA capital over the past 10 years (1993-2006), especially in the forestry sector, a sector with great potential, and always prioritized by the Government to create conditions to attract ODA capital but has not been exploited effectively, causing serious waste and loss as well as reducing the trust of donor countries. On that basis, evaluate the results of implementing programs and projects


ODA projects, analyze the shortcomings, limitations, opportunities and challenges, thereby proposing and recommending key solutions to increase attraction and further improve the efficiency of ODA capital use in Vietnam in general and for the forestry sector in particular from now to 2020.

The main content of the Thesis includes 3 parts as follows:


Chapter I: Overview of ODA capital.


Chapter II: Current status of attracting and using ODA capital in the Forestry sector in Vietnam

Chapter III: Some solutions to improve the efficiency of attracting and using ODA capital in the Forestry sector in Vietnam.


CHAPTER I: OVERVIEW OF ODA CAPITAL


I. CONCEPT AND CHARACTERISTICS OF ODA CAPITAL


1. Concept


ODA is the abbreviation of three English words: Official Development Assistance, which means Official Development Assistance or Official Development Aid. In 1972, the Organization for Economic Cooperation and Development OECD defined ODA as "an official transaction established with the main purpose of promoting economic development".

- societies of developing countries. The financial terms of this transaction are concessional in nature and the grant element accounts for at least 25%".

In the world, the provision of ODA resources has actually been carried out for many decades, starting with the US Marshal Plan to aid Western European countries to restore their economies after World War II. Then, the Colombo Conference (in 1955) formed the first ideas and principles on development cooperation. After the OECD was established in 1960 and with the birth of the Development Assistance Committee (DAC) in 1961, donors gathered together into a community to coordinate common activities on development cooperation.

In essence, ODA is the transfer of a portion of national income from developed countries to developing and underdeveloped countries. The United Nations, in a plenary session of the General Assembly in 1961, called on developed countries to devote 1% of their Gross National Income (GNP) to support the sustainable economic and social development of developing countries.

Called official development assistance, ODA in principle focuses only on restoring and promoting the development of a country's socio-economic infrastructure such as building roads, public transport, irrigation works, hospitals, etc.


schools, water supply and drainage, environmental sanitation, etc. Projects invested from ODA capital are often projects with little or no potential for high profitability and little ability to attract private investment. Therefore, this resource is very meaningful in supporting the implementation of programs and projects serving public interests.

The view on ODA capital changes along with the development of the economy. Currently, the globalization period of the world economy has formed a completely new trend. This concept holds that ODA is a form of development cooperation between industrialized countries and international organizations with underdeveloped and developing countries. ODA that developed countries, international organizations, non-governmental organizations NGOs ... spend will bring benefits to both sides. Developed countries, through providing ODA, on the one hand want to improve their position in the international arena, on the other hand, investing in underdeveloped and developing countries to upgrade infrastructure will create a larger market, with better conditions for them to make direct investments.

According to the regulations on management and use of official development assistance (Issued with Decree No. 17/2001/ND-CP dated May 4, 2001 of the Government), Official Development Assistance is a development cooperation activity between the Government and donors, including:

Foreign governments.


Intergovernmental or international organizations, including:


United Nations (UN) development organizations such as: United Nations Development Program (UNDP); United Nations Children's Fund (UNICEF); World Food Program (WFP); Food and Agriculture Organization of the United Nations (FAO); United Nations Population Fund (UNDCF); United Nations Industrial Development Organization (UNIDO); World Health Organization (WHO); United Nations Educational, Scientific and Cultural Organization (UNESCO); International Fund for Agricultural Development (IFAD)...


European Union (EU), Organization for Economic Cooperation and Development (OECD), Association of Southeast Asian Nations (ASEAN).

International financial organizations: International Monetary Fund (IMF), International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD) belonging to the World Bank (WB) group, Asian Development Bank (ADB), Petroleum Exporting Countries Fund (OPEC), Nordic Investment Bank (NIB)...

2. Characteristics


2.1. Highly preferential


Among the many forms of loans and grants that a country provides to another country, ODA capital is always considered the most preferential and prioritized source of capital. ODA capital often has a long loan period (repayment period), usually from 20-30 years or more, with a long grace period (the period when only interest must be paid, not the principal). Usually, ODA has a non-refundable aid part (ie free), this is the point of distinction between aid and commercial loans. The lending factor is determined based on the loan period, grace period and comparison between the aid interest rate and the commercial credit interest rate in international practice. For preferential ODA, the non-refundable factor reaches at least 25% of the loan value. Loans from WB and ADB organizations only have service fees, long loan terms including grace periods. Specifically: IDA loans are interest-free, service fee is 0.75%/year, loan term is 40 years, including a 10-year grace period; ADF loans are interest-free, service fee is 1%, loan term is 40 years, including a 10-year grace period; Government loans have different interest rates depending on the type of loan currency, loan term is from 20-40 years, including a grace period of 5-10 years.

The preferential nature of ODA is also reflected in the fact that it is only for developing and underdeveloped countries and for development purposes. Normally, each ODA-providing country has its own policies focusing on the areas of their interest or


have the ability (technology, management experience). At the same time, the priority goals of these countries also change over time. Therefore, understanding the priority directions of countries and organizations is extremely necessary for aid recipients.

Currently, Vietnam is enjoying preferential ODA loans (concessional loans) from the donor community. Preferential ODA is only for countries (mainly developing countries) with low income, per capita below 850 USD/person/year and it has some basic characteristics as follows: low interest rate, long loan term, high grace period. Among the more than 430 donors with whom Vietnam has a borrowing relationship in the form of ODA, there are 3 largest ODA donors, accounting for 70% - 80% of the total annual ODA capital, namely: Japan, World Bank (WB), Asian Development Bank (ADB). WB's ODA usually has an interest rate of 0.75%/year, a loan term of 40 years, including a 10-year grace period, with binding terms on the purchase of goods, services... included. ADB's ODA usually has an interest rate of 1%/year, a loan term of 40 years, including a 10-year grace period and binding terms on the purchase of goods, services, etc. Japan's ODA usually has an interest rate of 0.75%/year to a maximum of 3%/year depending on the nature of each project, a loan term of 30-40 years, including an 8-10-year grace period and binding terms on consultancy, goods, services, etc. Other donors also apply similar conditions.

2.2. Multi-purpose


Providing and receiving ODA aid brings many benefits to both the country or organization providing aid and the country receiving it, specifically as follows:

For aid recipient countries: ODA contributes to promoting sustainable growth, poverty reduction, institutional capacity enhancement, environmental protection, etc.

For aid countries or organizations: ODA contributes to expanding foreign markets to promote domestic production; strengthening political position in the international arena, determining its position of influence over aid recipient countries.

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