Decision No. 106/QD-TTg dated January 19, 2012 of the Prime Minister approving the scheme on orientations for attraction, management and use of official development assistance and other preferential loans of donors during 2011-2015

DECISION

APPROVING THE SCHEME ON ORIENTATIONS FOR ATTRACTION, MANAGEMENT AND USE OF OFFICIAL DEVELOPMENT ASSISTANCE AND OTHER PREFERENTIAL LOANS OF DONORS DURING 2011-2015

THE PRIME MINISTER

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the Government s Decree No. 131/2006/ND-CP of November 9. 2006, promulgating the Regulation on management and use of official development assistance;

At the proposal of the Minister of Planning and Investment,

DECIDES:

Article 1.To approve the scheme on orientations for attraction, management and use of official development assistance and other preferential loans of donors during 2011 -2015 (attached to this Decision).

Article 2.Funds for the scheme implementation shall be incorporated in annual budget estimates of the Ministry of Planning and Investment under the Law on the State Budget.

Article 3.This Decision takes effect on the date of its signing.

Article 4.Ministers, heads of ministerial-level agencies, heads of government-attached agencies, and chairpersons of provincial-level People’s Committees shall implement this Decision.

SCHEME

ON ORIENTATIONS FOR ATTRACTION, MANAGEMENT AND USE OF OFFICIAL DEVELOPMENT ASSISTANCE AND OTHER PREFERENTIAL LOANS OF DONORS DURING 2011-2015
(Promulgated together with the Prime Minister s Decision No. 106/QD-TTg of January 19, 2012)

FOREWORD

The national renewal and socio-economic development over the recent years have recorded many important achievements: (i) in the context of stagnation and crisis of the world economy. Vietnam s economy still grew at a relatively stable annual average rate of 7% in the 2006-2010 period; (ii) Vietnam has achieved most of its millennium development goals, including halving the rate of poor households right in 2002, and achieving and over fulfilling some other targets in 2008; (iii) it has integrated more deeply and widely into the international community, especially after its official accession to the World Trade Organization (WTO); (iv) its profile on the international arena has been further heightened and consolidated.

These development achievements are attributable to the Party and State s judicious socio-economic development lines and policies, the great efforts of all the people, sectors and administrations at all levels, and the advocate and support of international friends.

At present, over 50 bilateral and multilateral development partners have been actively assisting Vietnam in carrying out the renewal and reform in the process of transition to a market economy, performing the socio-economic development tasks and realizing sustainable hunger eradication and poverty alleviation.

The XI^thNational Congress of the Communist Party of Vietnam adopted the 2011-2020 ten-year socio-economic development strategy, setting forth the objective of turning Vietnam into a modernity-oriented industrial country by 2020. At its 2^thsession, the XIII^thNational Assembly of the Socialist Republic of Vietnam approved the 2011-2015 five-year socio-economic development plan.

To successfully realize the 2011-2020 ten-year socio-economic development strategy and the 2011-2015 five-year socio-economic development plan, while considering bringing into full play its internal strengths a main solution. Vietnam will continue to mobilize to the utmost all domestic and overseas capital sources, including official development assistance (ODA) and other preferential loans of donors as important sources, and commit to using these capital sources with the highest effectiveness.

The Government s scheme on orientations for attraction, use and management of ODA and other preferential loans of donors during 2011-2015 conveys Vietnam s policies on attraction, management and efficient use of ODA and other preferential loans of donors in a new context that Vietnam has become a lower middle income developing country.

The scheme on orientations for attraction, management and use of ODA and other preferential loans of donors during 2011-2015 has been elaborated on the following grounds:

1. The 2011-2020 ten-year socio-economic development strategy.

2. The 2011-2020 public debt management strategy.

3. The 2011-2015 five-year socio-economic development plan.

4. The scheme on building of a complete infrastructure system for the national industrialization and modernization during 2011-2020.

5. Results of and experience learned from the implementation of the scheme on orientations for attraction and use of ODA during 2006-2010, the principles for improving aid effectiveness set out in the 2005 Paris Declaration, the 2005 Hanoi Core Statement on Aid Effectiveness and commitments made at the 4"1 High Level Forum on Aid Effectiveness in Busan (the Republic of Korea) (2011).

6. Opinions contributed by agencies that manage, implement and benefit from ODA. the private sector, organizations, mass organizations and trade associations of Vietnam, development partners and some foreign non-governmental organizations in the course of elaboration of the scheme.

Part I

NECESSITY, OBJECTIVES AND SCOPE OF THE SCHEME

I. NECESSITY OF THE SCHEME

The scheme on orientations for attraction and use of ODA during 2006-2010 has actively and effectively contributed to the realization of (he objectives set forth in the 2006-2010 five-year socio-economic development plan. However, during 2011-2015, the attraction, management and use of ODA need some policy and institutional changes to make them suitable to the new context of development, especially when Vietnam has become a lower middle income country.

Therefore, to mobilize and effectively use capital sources of donors to support the realiza­tion of the objectives set forth in the 2011-2020 ten-year socio-economic development strategy and the 2011-2015 five-year socio-economic development plan, it is necessary to elaborate a scheme on orientations for attraction, manage­ment and use of ODA and other preferential loans of donors during 2011-2015 (below referred to as the 2011-2015 scheme) in order to orientate policies and adopt measures to assure the mobi-lization and effective use of these capital sources.

II. OBJECTIVES OF THE SCHEME

The 2011-2015 scheme is a document expressing the Government s policies to concretize the Party s and the Slate s under-takings and line for the attraction, management and use of ODA and preferential loans of donors (below referred to as ODA and preferential loans) in a new context that Vietnam has become a lower middle income developing country.

The 2011-2015 scheme contains policy orientations for improvement of the institutional environment and the organization, management and implementation of activities related to the attraction and use of ODA and preferential loans by Vietnamese management agencies at all levels and beneficiaries, aiming to attract to the utmost and raise the use effectiveness of these capital sources for the implementation of the 2011-2020 ten-year socio-economic development strategy and the 2011-2015 five-year socio-economic development plan.

This scheme serves as a basis for donors to make development cooperation policies; and formulate strategies and programs to provide ODA and preferential loans for Vietnam. It also publicizes the Vietnamese Government s policies on attraction, management and use of these capital sources to the public at home and abroad.

III. SCOPE OF THE SCHEME

The scope of the 2011-2015 scheme covers activities related to the attraction, management and use of ODA and preferential loans provided by foreign governments, bilateral aid organiza­tions and transnational or intergovernmental organizations to the State or the Government of the Socialist Republic of Vietnam.

IV. CONTENTS OF THE SCHEME

The 2011-2015 scheme consists of three parts:

- Part I: Necessity, objectives and scope of the scheme.

- Part II: Evaluation of implementation of the contents of the scheme on orientations for attraction and use of official development assistance during 2006-2010.

- Part III: Attraction, management and use of ODA and other preferential loans of donors during 2011-2015.

The plan of action for implementation of the 2011 -2015 scheme constitutes part of the scheme.

Part II

EVALUATION OF IMPLEMENTATION OF THE CONTENTS OF THE SCHEME ON ORIENTATIONS FOR ATTRACTION AND USE OF OFFICIAL DEVELOPMENT ASSISTANCE DURING 2006-2010

I. MAJOR RESULTS

The scheme on orientations for attraction and use of official development assistance during 2006-2010 (below referred to as the 2006-2010 ODA scheme) was promulgated under the Prime Minister s Decision No. 290/2006/QD-TTg of December 29, 2006, and has been successfully implemented, importantly contributing to the successful implementation of the 2006-2010 five-year socio-economic development plan as well as the 2001-2010 ten-year socio-economic development strategy.

Results of implementation of the contents of the 2006-2010 ODA scheme include:

1. The development cooperation relationship between Vietnam and the donor community has been further strengthened and developed, which can be seen in the following aspects:

a/ The ODA commitment, signing and disbursement during 2006-2010 saw positive progresses

- ODA commitment

Through five annual conferences of the donor consultative group for Vietnam (CG conferences), the total ODA capital committed by donors during 2006-2010 reached over USD 31.76 billion, 15% higher than the target set forth in the 2006-2010 ODA scheme. This high committed ODA level, especially in the context that some donors are also encountering economic difficulties and the demand for this capital source is strongly growing in the world, is an evidence of advocate and strong political support of the international community for the cause of renewal and judicious development policies of the Party and State of Vietnam as well as the donor trust in the effectiveness of ODA receipt and use by Vietnam.

- Conclusion of specific ODA international agreements

To validate the ODA commitments by international legal instruments, the Government and donors have concluded specific ODA international agreements on the basis of programs and projects they have approved. During 2006-2010, ODA capital amounts committed in these specific international agreements reached USD 20.61 billion, 12.7% higher than the target set forth in the 2006-2010 ODA scheme. This is attributable to the joint efforts of Vietnamese agencies and donors in preparing for programs and projects and carrying out procedures for negotiation and conclusion of specific ODA international agreements.

-ODA disbursement

Fully aware that committed ODA only demonstrates the political support and only the disbursement of this capital source can promote the creation of specific socio-economic works and products for the national development and the development of ministries, sectors and localities, all sectors and administration levels have exerted numerous efforts to speed up the ODA implementation and disbursement.

During 2006-2010, the total disbursed ODA capital reached USD 13.86 billion, equal lo 67.25% of the signed ODA and 11 % higher than the target set forth in the 2006-2010 ODA scheme. Though the ODA disbursement level has seen certain improvements in the recent years, to some donors it is still low compared to-the regional and international average.

Table 1 below shows the ODA commitment, signing and disbursement during 2006-2010:

Table 1: ODA capital commitment, signing and disbursement during 2006-2010

b/ The structure of signed ODA capital is basically suitable to the Government s priority orientations for the 2006-2010 period

Table 2 below shows that ODA for such sectors as energy and industry, transport development, communications and urban water supply and drainage reached higher levels in relative value and approximated the target set forth in the 2006-2010 ODA scheme in absolute value. Particularly, ODA for agriculture and rural development, health, education, etc was 3-5% lower than expected.

2. The ODA capital source has importantly contributed to the national financial balance, especially in the last years of the 2006-2010 period when Vietnam s economy was adversely impacted by the global economic recession.

Though the ODA contribution to Vietnam s GDP remains moderate, around 3-4% during 2006-2010, this source has contributed to assuring the macro financial balance and made up around 15-17% of investment capital from the state budget. In the context that the state budget allocations for development investment

Table 2: Structure of signed ODA by sector and field during 2006-2010

Source: Ministry of Planning and Investment, 2010 remain limited, this source is very precious for development investment in public-utility sectors to provide people, especially the poor in rural and urban areas, with more and more essential public services (health, education, daily-life water supply, improvement of transport conditions) of higher quality and at more competitive charge rates.

3. ODA has importantly contributed to the development of the system of policies and laws and the building of institutions to serve Vietnam s renewal and reforms in the transition to a market economy and international integration.

ODA capital implemented during 2006-2010, largely non-refundable aid, has been used for providing services of consultancy on development of policies in many areas, such as macro-economy, reform of the financial and banking systems and stale enterprises, development of small- and medium-sized enterprises, assistance for international economic integration, elaboration of laws and sub-law documents in different fields (land administration, commercial development, bidding, construction, public debt management).

ODA has importantly contributed to raising the quality of Vietnam s legal system. The integration and pilot implementation of a number of policies and institutions within the framework of ODA-funded infrastructure development programs and projects have contributed to the sustainable development of this sector under the market mechanism.

4. The ODA capital source has supported the development of many socio-economic infrastructure sectors and fields

a/ Agricultural and rural development combined with hunger eradication and poverty alleviation

During 2006-2010, total signed ODA capital in this sector reached over USD 3.34 billion, equal to 16.21% of total ODA value signed during this period. Though signed ODA capital for agricultural and rural development was lower than the target set forth in the 2006-2010 ODA scheme, this source was concentrated on supporting the development of small-sized rural infrastructure facilities (development of rural power grids, construction of rural roads, schools, health stations and hospitals, irrigation works, daily-life water supply and drainage, environmental sanitation, etc), development of agricultural production, forestry and fisheries combined with hunger eradication and poverty alleviation, agricultural extension and transfer of cultivation and husbandry technologies, grant of small credits, improvement of competitiveness of agricultural and husbandry products, application of clean technologies, raising of product quality, and food safely.

ODA capital disbursed for agriculture and rural development combined with hunger eradication and poverty alleviation reached USD 2.65 billion, equal to 21.76% of the total ODA value disbursed for the whole country and equal to 79.34% of signed ODA for this sector.

ODA has contributed to the hunger eradication and poverty alleviation for rural people, thereby contributing to the realization of Vietnam s commitments on the United Nations millennium development goal of reducing by 50% hungry and poor households by 2015.

b/ Energy and industry

During 2006-2010, signed ODA capital for energy and industry reached around USD 3.91 billion, accounting for 18.97% of the total ODA signed during this period, and was concentrated on supporting the development of electricity sources (building of thermal power and hydropower plants); power transmission and distribution networks, especially in rural, mountainous, deep-lying and remote areas and areas inhabited by ethnical minority people; renewable and green energies (solar power and wind power) and energy conservation and efficiency.

ODA disbursed for this sector reached USD 2.12 billion, equal to 17.4% of the total ODA value disbursed for the whole country and equal to 54.22% of signed ODA for this sector.

ODA has contributed to increasing the output and quality of electricity supplied for production and people s life, building a power sector operating under the market mechanism and enhancing the sector management capacity.

c/ Transport, post and telecommunications, and urban water supply and drainage

During 2006-2010, total signed ODA capital for the development of transport, post and telecommunications, and urban water supply and drainage reached USD 7.58 billion, accounting for the largest portion (36.78%) in the ODA structure in this period. The total disbursed ODA reached USD 3.31 billion, equal to 27.19% of the total ODA value disbursed for the whole country and equal to 43.66% of signed ODA for these sectors.

In the transport sector. ODA capital has been concentrated on the development and upgrading of the system of national highways, building of a number of seaports, consolidation and reinforcement of railway and international airport infrastructure facilities, building of urban traffic infrastructure in some major cities and development of rural transport. Besides, ODA has helped step up the planning of transport development, building of sector management capacity as well as improvement of awareness and education about laws and traffic safety in the entire society.

In the post and telecommunications sector, ODA capital has been concentrated on the development of a number of modern post and telecommunications technical infrastructure facilities of national importance to meet the needs of all economic sectors, rural telephone and community Internet networks and application of information technology, contributing to the implementation of the national administrative reform program and building of an e-government.

ODA capital has been used for urban development, water supply and drainage, environmental sanitation and improvement of living conditions in poor areas in cities and towns throughout the country.

d/ Health, education and training, environ­ment, science and technology and other sectors

During 2006-2010, signed ODA for these sectors reached USD 5.78 billion, accounting for 28.04% of the total signed ODA value of the whole country; the total disbursed ODA capital reached USD 4.1 billion, equal to 33.657c of the total ODA capital disbursed during this period. The disbursed ODA was equal to 70.93% of the signed ODA.

In the health sector, ODA capital was used to supply more medical equipment and instruments to a number of provincial-level and regional hospitals in order to lessen the workload on central hospitals: develop the public health care network in all areas, especially poor rural and mountainous areas meeting with great difficu­lties; support the fulfillment of the millennium development goals in the health sector, such as promotion of population and family planning work, reduction of child mortality and malnutrition rates, HIV/AIDS prevention and control: and assist the formulation of policies and building of the sector management capacity.

In the education and training sector, ODA capital was used to support the reform of primary education to tertiary education, with a view to raising education quality and reaching advanced education and training standards in the world, and grant overseas training scholarships. In the last years of the 2006-2010 period, ODA loans were mobilized for building a number of international-standard universities to develop high-level human resources.

In the environment sector, ODA capital was used for the management of natural resources and natural disaster risks, afforestation and management of water sources, and improve-ment of the environment in cities, concentrated residential areas and industrial parks. Especially, to surmount the challenges of the global climate change, ODA has been mobilized to support the implementation of the national target program on response to climate change.

In the course of implementation of ODA programs and projects, many advanced manage­ment experiences and scientific and technological advances have been transferred, popularized and widely applied, especially in the sectors of con­struction, transport, irrigation, industry , electricity, agricultural and rural development, health, education, public administrative reform, raising of competitiveness and international integration.

In addition, ODA capital has been used directly or integrated into programs or projects on such long-term issues as gender equality and women advancement, social security policies, etc.

5. The ODA capital source has supported the development of localities

ODA programs and projects have supported the development of many essential infrastructure facilities in provinces and cities in such fields as transport, water supply and drainage and urban environmental sanitation, building of schools and hospitals, agricultural and rural development combined with hunger eradication and poverty alleviation and building of local administration capacity. ODA has been a really important supplement to limited local budgets in realizing local development objectives during 2006-2010.

ODA attracted to poor provinces which meet economic difficulties and often suffer consequences of natural disasters has considerably increased thanks to the enhanced aid coordination of the Government as well as efforts of ministries, sectors and localities. Compared lo the 2001-2005 period, the per-capita ODA capital level in the 2006-2010 period markedly increased in most of these regions-. However, the results of ODA attraction still varied and remained uneven among different localities in the same region and among different regions. Particularly, the Central Highlands saw no remarkable increase in per-capita ODA capital level over that of the 2001-2005 period. At the same time, some regions and localities (some provinces in the Central Highlands and eastern South Vietnam) had a per-capita ODA level lower than the national average (see Table 3: signed ODA by region and territory in the 2006-2010 period).

Table 3: Signed ODA by region and territory in the 2006-2010 period

Source: Ministry of Planning and Investment, 2010

6. The ODA capital source has contributed to human resource development and human capacity building

Under ODA programs and projects, especially technical assistance projects, cadres and civil servants at all levels and in many sectors and fields (economic management, urban management, finance, banking, customs, environment, agriculture and rural development, etc.) have been trained and retrained lo meet the requirements of the transition to a market economy. Through the receipt and use of ODA capital, Vietnam has built a contingent of officers experienced in external economy and proficient in international practices in ODA state management agencies and ministries, provinces and major cities. A large number of officers in many sectors, localities, consultancy units and beneficiary units have been trained and acquired experience and knowledge about international practices in many fields, such as project management, bidding, community development, etc.

7. The ODA capital source has contributed to the trade and investment promotion and national competitiveness improvement

In the period of preparation for WTO accession as well as the post-WTO accession period. ODA has supported concerned Vietnamese agencies in preparing for and negotiating with partners on the WTO accession and carrying out deep and broad international integration activities as a WTO member.

ODA-funded economic infrastructure works such as national highways, seaports, bridges, airports, etc., have exerted pervasive impacts, boosting the development of industrial parks and commercial exchange among regions and areas, facilitating the positive economic restructuring in many provinces and cities with higher proportions of industrial production and services, creating more jobs and higher incomes for people and more revenues for local administrations, contributing to the hunger eradication and poverty alleviation.

II. PROBLEMS AND CONSTRAINTS IN THE ATTRACTION AND USE OF ODA

Besides the above achievements, the attraction, management and use of ODA in the past five years still see the following constraints and shortcomings:

1. The duration of preparation for an ODA program or project, from the project initiative to the conclusion of a specific ODA international agreement, remains too long, usually 2-3 years.

2. A number of regulatory documents of ODA programs and projects are of unsatisfactory quality and unsuitable to Vietnam s practical conditions, leading to repeated supplementation and adjustment of project contents, or even to cancellation of some projects.

3. The implementation of ODA programs and projects is slow, thus delaying the ODA disbursement. At present, the rate of ODA disbursement in Vietnam is lower than the average disbursement rate of this capital source in the region and the world. The slow disbursement has been the reason for the low effectiveness and efficiency of ODA in many programs and projects, and in some cases the Government had to pay a commitment charge for undisturbed capital amounts.

4. Information on ODA and the access to this capital source remains unclear, causing difficulties to the ODA mobilization and use.

III. CAUSES

1. Vietnam s system of legal normative documents on ODA attraction, management and use remains incomplete and inconsistent and still contains many overlapping or contradictory provisions which are unconformable with international practices, causing difficulties and problems to the preparation for and implementation of ODA programs and projects.

The managing agencies and managers of ODA programs and projects have not yet taken the initiative in preparing and implementing programs and projects, and still heavily depend on the donors.

2. The ODA management and use process and procedures of the Government and donors are not yet harmonious. There still exist disparities which are slow to address, affecting the implementation of ODA programs and projects.

3. The aid coordination of state management agencies remains ineffective and weak. In many cases, these agencies failed to take the initiative in coordinating with donors and ministries, sectors and localities in selecting and formula­ting ODA programs and projects; and failed to properly manage the strict observance of legal documents on ODA management and use.

4. Domestic conditions and resources have not been adequately and promptly prepared for the preparation for, implementation and assurance of the sustainability of ODA programs and projects after their completion (project preparation capital, domestic capital, program maintenance capital, qualified officers, physical and technical foundations, etc). Social organizations, experts, beneficiaries and affected stakeholders have not been widely mobilized to participate in the implementation, monitoring and evaluation in order to improve the effectiveness and efficiency of ODA programs and projects.

6. The institutional and personal capacity for ODA attraction, management and use of focal ODA management units in a number of ministries, sectors and localities and project implementation units is not satisfactory and professional. The capacity of domestic contractors and consultants remains limited, failing to meet both quantitative and qualitative requirements in supporting the ODA attraction and use. Some foreign consultants lack experience and information about Vietnam s practical conditions and the capacity for selecting and managing contracts with foreign contractors and consultants is still limited.

7. The monitoring and evaluation of the implementation of ODA programs and projects and the regime of reporting from the grassroots and feedback of ODA stale management agencies have not been seriously implemented under current laws.

IV. LESSONS

The following lessons can be learnt from the implementation of the 2006-2010 ODA scheme:

1. The results of implementation of the 2006-2010 ODA scheme reaffirm the consistent guideline of the Party and State of Vietnam that external capital sources are of important significance while domestic capital sources play the decisive role.

2. Legal documents directly or indirectly governing the ODA management and use must be consistent and conformable with international practices in order to assure the effectiveness of governmental agencies in aid coordination, and at the same time promote the proactiveness and creativity of project managing agencies and managers as well as beneficiaries. This will also promote donors compliance with Vietnam s management systems, improve aid effectiveness and reduce transaction costs.

3. The spirit of ownership at the national as well as grassroots levels in the ODA attraction, management and use is decisive to the success of programs and projects. At the national level, ownership is demonstrated in the ODA coordination capacity to meet development requirements in a uniform and effective manner. At the grassroots level, ownership is the responsibility to initiate or select projects, take the initiative in cooperating with donors and arranging resources in the preparation for and implementation of ODA programs and projects in order to achieve sustainable results and economic and social benefits.

4. Decentralization of ODA management and use is judicious and necessary. Decentralization must go hand in hand with empowerment and clear definition of responsibility, especially responsibility of heads. At the same time, it is necessary to heighten the role of ministries and specialized agencies in receiving and implementing specific programs and projects. Building capacity for agencies managing and implementing ODA programs and projects is key to successful decentralization.

5. Information sharing, straight and open dialogs based on a constructive and responsive spirit and development of reliable partnerships constitute a particularly important factor for the attraction and use of ODA capital sources.

Part III

ATTRACTION, MANAGEMENT AND USE OF ODA AND OTHER PREFERENTIAL LOANS OF DONORS DURING 2011-2015

I. CONTEXT

1. Global context

The world economy and trade are slowly recovering after the recession and remain latently unstable and unforeseeable. The prices of energies and other input raw materials continue to fluctuate in a complicated fashion, causing many difficulties to import-dependent economies like Vietnam.

The global ODA supply sources are likely to decrease due to economic difficulties facing a number of OECD-DAC member states caused by their heavy public debts, while the demand for ODA in developing countries continues to rise. Donors lend to provide more ODA to underdeveloped countries and Middle East and North African countries in need of political stability.

2. Domestic context

Thanks to the socio-economic development achievements recorded in the recent past, Vietnam has escaped from the group of low-income underdeveloped countries and joined the group of middle-income developing countries, laying important foundations for its development in the new period.

The country s face has been uplifted. Its political and social situation is stable. Vietnam s position on the international arena has been strengthened and enhanced. By carrying on its substantive reform and renewal as well as straight and constructive dialogs with all partners in the development process. Vietnam has won the trust of the donor community.

However, for five years to come. Vietnam s economy will continue to face numerous difficulties and challenges in many fields, including poor infrastructure, insufficient and incomplete market economy institutions and limited human resource quality. Besides, there exist many pressing problems in the people s life, cultural and social affairs, unsustainable hunger eradication and poverty reduction, environmental pollution and adverse impacts of global climate change.

In the field of development cooperation, the aid policies of development partners toward Vietnam will change to suit the context that Vietnam has become a lower middle-income country. Correspondingly, the characteristics and size of and conditions for provision of ODA for Vietnam will see the following trends:

a/ A number of bilateral donors will shift from official development cooperation relationship with Vietnam to direct assistance for developing cooperation partnership, like direct relationship between universities, institutes or research centers or between organizations of two parties. Some other donors may terminate programs on development aid for Vietnam in the coming years;

b/ Most donors will adjust and change their aid policies for Vietnam through reducing ODA capital and increasing preferential loans. This reality requires Vietnam to adopt appropriate approaches to attract and improve the use effectiveness of these capital sources in order to meet development investment needs and guarantee the capacity to pay foreign debts;

c/ Development aid approaches and modalities such as program-based approaches (PBA), general budget supports (GBS) and targeted budget supports (TBS) will be applied more frequently; labor distribution and mutual assistance on the basis of the comparative edges of development partners will be promoted;

d/ The private sector will be encouraged to participate in infrastructure development, especially in the form of public-private partnership (PPP); the participation of non­governmental organizations in the development process will be promoted, etc;

e/ A number of donors will provide ODA and preferential loans through global programs (on HIV/AIDS, climate change and sea level rise, etc.), regional cooperation activities within the ASEAN framework and cooperation in the greater Mekong sub-region, etc. This trend will be consolidated and expanded in the coming years.

The foregoing global and domestic contexts show many advantages as well as challenges for the attraction and use of ODA and preferential loans in the 2011-2015 period. This reality requires Vietnam to change its perception of this capital source, apply many new approaches, reform relevant processes and procedures, and step up the attraction, management and implementation of ODA and preferential loans so as to attract and effectively use this capital source and concurrently assure public debt security.

II. THE DEMAND FOR ODA AND PREFERENTIAL LOANS OF DONORS IN THE 2011 -2015 FIVE-YEAR SOCIO­ECONOMIC DEVELOPMENT PLAN

To guarantee the fulfillment of the set objectives and tasks, the 2011-2015 five-year socio-economic development plan estimates the entire society s total investment capital demand of around VND 5,745-6,140 trillion, approximately USD 250-266 billion, for the period at actual prices, with domestic capital accounting for around 75-80% and foreign capital, 20-25%.

ODA and preferential loans of donors in the 2011-2015 period are estimated to include committed capital of around USD 32-34 billion and disbursed capital of USD 14-16 billion (equal to some 6% of total social investment), of which around 50% will be disbursed from programs and projects signed during 2006-2010.

As a result, ODA and preferential loans in the 2011-2015 period will reach an annual average of around USD 2.8-3.2 billion.

The realization of commitments and disbursement of ODA and preferential loans mentioned above are significantly important for supporting the implementation of the 2011-2015 five-year socio-economic development plan. The Vietnamese Government will closely cooperate with donors and spare no efforts to fulfill these objectives and tasks.

III. GUIDING PRINCIPLES FOR IMPROVING THE INSTITUTIONAL AND LEGAL ENVIRONMENT, ORGANIZING AND MANAGING THE ATTRACTION AND USE OF ODA AND PREFERENTIAL LOANS OF DONORS DURING 2011-2015

1. ODA and preferential loans constitute a source of development investment capital. Therefore, the use of ODA and preferential loans must take into consideration the comparative advantages and complemen-tariness of this source and other development investment capital sources in order to achieve the highest socio-economic effectiveness and assure public debt security.

2. To perfect the institutional framework on management and use of ODA and preferential loans to assure the consistency and alignment of relevant domestic legal documents, harmonization with donors and simplification of processes and procedures; to continue the decentralization of powers and responsibilities along with the building of capacity for attracting, managing and using this capital source. To enhance the management systems in such fields as public investment, public procurement, public finance, etc., conform with international standards and practices, and on that basis to encourage donors to use the Government s system.

3. To step up the application of development aid approaches and modalities such as program-based approaches (PBA), general budget supports (GBS) and targeted budget supports (TBS) to suitable programs and fields like supports for implementation of national target programs. To promote labor distribution and mutual assistance on the basis of the comparative advantages of development partners.

4. To intensify the access to and use of ODA and preferential loans under global programs (on HIV/AIDS, climate change and sea level rise, etc.), regional cooperation activities within the ASEAN framework, cooperation in the greater Mekong sub-region (GMS), etc.

5. To improve and raise the role and effectiveness of aid coordination work of the ODA state management agencies. In the context of decentralization, it is necessary to vest more powers and assign more responsibilities to ministries, sectors and localities based on the principle that the Government uniformly manages ODA and preferential loans. The system of institutions and penalties should be improved to improve the effectiveness of the coordination, supervision and inspection of the ODA state management agencies.

6. To bring into full play the ownership, initiative and creativity of managing agencies at all levels, project managers and beneficiary units: Ownership must be the decisive factor in all stages of attraction, management and use of ODA and preferential loans. The promotion of ownership at all levels will assure that each program or project funded by ODA or preferential loans truly help ministries, sectors or localities effectively meet their urgent needs.

7. To assure sufficient and timely domestic conditions, including domestic capital, necessary human capacity, etc., for preparing for. implementing and guaranteeing the sustainability of programs and projects funded by ODA and preferential loans after they are completed.

8. To create a reliable and open environment and favorable conditions for deepening the partnership between the Government and donors through renewing the agendas and contents of forums for development policy dialogs at the national and sectoral levels, to associate aid effectiveness with development effectiveness.

9. To create conditions for private enterprises to use ODA and preferential loans in different forms such as use of credit limits, participation in project implementation, investment in infrastructure development in the PPP form, etc., on the basis of sharing benefits and risks between the State and private sector.

10. To assure the publicity, transparency and accountability for use and management of ODA and preferential loans, and perfect the mechanism for supervision by the people and social organizations of planning work, project preparation, arrangement of resources and implementation of programs and projects funded with this source.

IV. PRIORITIES IN THE ATTRACTION AND USE OF ODA AND PREFERENTIAL LOANS OF DONORS IN THE 2011-2015 PERIOD

The source of ODA and preferential loans shall be firstly used on the following principles:

- To support the achievement of the development objectives of the 2011 -2015 five-year socio-economic development plan, prioritizing the realization of the three major breakthroughs set forth in the 2011 -2020 socio­economic development strategy; the implementation of the scheme on building of a complete infrastructure system for the national industrialization and modernization in the 2011 -2020 period; and the implementation of national programs in the 2012-2015 period.

- To prioritize important public investment programs and projects in which investment can hardly be attracted from the private sector or which are funded with commercial loans.

- To use ODA and preferential loans as a supplementary capital source to encourage the private sector to invest in infrastructure development in various forms and modes, including the public-private partnership (PPP).

- To use part of ODA and preferential loans to invest in production development in order to promote commerce, create jobs and restructure the economy in regions and localities.

Based on the above principles, the sectors and fields prioritized for attraction and use of ODA and preferential loans of donors in the 2011-2015 period include:

1. Building of a synchronous, large-scale and modern infrastructure system

a/ To develop expressways, prioritizing the development of the road system in regions with large goods flows and localities in the country s growth poles, linking different localities and areas, and linking to other countries in the region and the world, creating a strong pervasive impact and promoting the whole country s growth;

b/ To build new national deep-water seaports, modernize and raise capacity of general services of existing ones; to form large marine economy centers;

c/ To build a number of international airports;

d/To upgrade and build a number of national railway sections and urban railways, including metro in some major cities;

e/ To upgrade, synchronously develop and modernize the infrastructure system in urban centers, especially major cities;

f/ To quickly develop the electricity source system and electricity transmission and distribution networks in combination with the application of energy-saving technologies, assuring sufficient energy for the national development and people s life: to develop renewable energies (wind power, solar power); to support the implementation of the national target program on energy conservation and efficiency;

g/ To synchronously develop and step by step modernize the irrigation system, natural disaster prevention and control works and the information system, with a view to meeting development and natural disaster mitigation requirements.

In parallel with the development of technical infrastructure facilities, the Government attaches importance to the development of policies and institutions for management of the infrastructure sector so that this sector can sustainably develop in the market economy and provide to the society quality public services at competitive prices.

2. Development of social infrastructure

a/ To support the substantial and comprehensive renewal of education in the direction of standardization, modernization, socialization, democratization and international integration, with the renewal of the education administration mechanism, development of the contingent of teachers and administrators as the key factor;

b/ To develop infrastructure facilities for teaching and learning and teacher training, paying attention to providing education and training supports for poor provinces and ethnic minority areas;

c/ To consolidate physical and technical foundations for medical examination and treatment, especially at the grassroots level;

d/ To build and furnish medical technical equipment for a number of public hospitals at the central, regional and provincial levels and a number of hi-tech medical centers;

e/ To support the implementation of the national health programs;

f/To support the effective implementation of the Program on quick and sustainable poverty reduction in 62 districts with a high poor household percentage;

g/ To support the implementation of the national target programs on sustainable poverty reduction: culture; introduction of information to mountainous, remote and border areas and islands; education and training; employment and job training; health; population and family planning; HIV/AIDS prevention and control; food hygiene and safety; drug prevention and control; crime prevention and combat;

h/ To support the implementation of the social security programs, the national action program on settling the consequences of exploring remnant of wars, etc.

3. Development of human resources, especially high-quality human resources, science, technology and knowledge-based economy

a/ To support the development of leading and managing personnel, highly qualified experts and business administrators, skilled laborers and leading scientific and technological workers:

b/ To support the implementation of programs and schemes on training of high-quality human resources for major and key sectors and fields; technology transfer and knowledge sharing; development of sciences and high technologies, aiming at the goal of sustainable growth and development of a knowledge-based economy in Vietnam.

4. Agricultural and rural development

To support the implementation of the national target program on building of a new countryside covering such activities as planning and building of a new countryside; development of socio-economic infrastructure (rural roads, electricity grid, health, education and training, construction, irrigation, etc.); to restructure and develop the economy (increase of incomes through developing commodity production with high economic efficiency; promotion of agricultural extension; to step up research and application of scientific and technological advances to agriculture-forestry-fisheries, agricultural mechanization, reduction of post-harvest losses in agriculture-forestry-fisheries; to conserve and develop traditional craft villages under the guideline "each village one product," development of crafts and trades that are local advantages; to step up job training for rural laborers, promote industrial production in rural areas, create jobs and quickly restructure the rural labor. In addition, the use of ODA and preferential loans will be prioritized for supporting the implementation of the national target program on rural clean water and environmental sanitation.

5. Building of the legal system and synchronous institutions of the socialist-oriented market economy

a/ To support the improvement of the legal system, mechanisms and policies to facilitate the synchronous formation and smooth operation of the commodity, service, finance, banking, securities, real estate, labor, science and technology markets. To create an equal business environment for all economic sectors;

b/ To support the national administrative reform in all aspects: institutions, organizational apparatus and administrative procedures.

6. Protection of the environment and natural resources, response to climate change, and green growth

To prioritize the use of ODA and preferential loans for the implementation of environmental and natural resource protection programs and projects; lo apply environment-friendly technologies and build green-growth models and support the implementation of the national target program on response to climate change; to remedy environmental pollution and improve the environment.

7. Promotion of investment and trade and a number of production and business sectors

ODA and preferential loans may be used to support the promotion of investment and trade through the transfer of technologies, modem production and management techniques, raising the competitiveness of a number of products and goods in a number of sectors in which Vietnam has potential and advantages (processing of agricultural, forest and fishery products, products of support industries and products being input materials for export production, etc.), laying a foundation for Vietnam s participation in the global production chain and regional and international economic integration. By supporting the promotion of trade and investment, these sources will support the creation of jobs and increase of incomes and contribute to the sustainable hunger eradication and poverty reduction.

8. Support by geographical area and territory

ODA and preferential loans will be used to support the materialization of the territorial development orientations set forth in the 2011-2015 five-year socio-economic development plans, prioritizing poor, difficulty-hit, deep-lying and remote provinces and ethnic minority areas in the northern midland and mountainous regions, northern Central Vietnam and central coast, the Central Highlands and the Mekong River delta.

Programs and projects will focus on supporting the improvement of living conditions and livelihoods of local people, the settlement of pressing issues in the process of rapid urbanization in provinces (water supply and drainage, garbage treatment, inner city transport development and housing for the poor, etc.).

V. SYSTEM OF SOLUTIONS FOR THE SCHEME IMPLEMENTATION

In order to secure the implementation of the 2011-2015 scheme, the Government shall implement the following policies and groups of solutions:

1. Perfecting policies and institutions

a/ To issue a new decree to replace the Government s Decree No. 131/2006/ND-CP on management and use of ODA, and circulars guiding the implementation of this Decree, aiming to assure their synchrony, consistency, explicitness. transparency and conformity with the contents and guiding principles for attraction, management and use of ODA and preferential loans of the 2011-2015 scheme.

b/ Based on such new decree replacing Decree No. 131/2006/ND-CP and the guiding circulars, related agencies shall revise administrative procedures.

c/ To issue guidelines on the allocation, management, implementation and supervision of disbursement of domestic capital from the state budget for programs and projects funded with ODA or preferential loans, including priority policies for each sector, field or difficulty-hit area.

2. Improving management and organization work

a/ To improve the organizational structure of focal agencies at all levels in the direction of promoting their autonomy and the initiative of ministries, sectors and localities in the management and use of ODA and preferential loans.

b/ To improve the effectiveness and efficiency of the operation of the Government s ODA working party by upgrading this working party into a national steering committee for ODA headed by a government leader.

3. Enhancing partnership relations and raising the aid effectiveness

a/ To raise the quality of dialogs between the Government and donors by renovating the agendas and contents of forums for development policy dialogs at the national and sectoral levels, combining aid effectiveness with development effectiveness.

b/ To enhance the role and raise the operation quality of the Aid Effectiveness Forum, focusing on the implementation of the Busan Declaration in Vietnam, and set up and operate a new aid architecture with the participation of related ministries, sectors and localities and partnership groups in different sectors and fields.

4. Building capacity for management and use of ODA and preferential loans

a/ To work out and implement medium-term plans on building capacity for management and use of ODA and preferential loans toward professionalism and sustainability.

b/ To provide basic training in policies, institutions, processes, procedures and professional operations of management and use of ODA and preferential loans for project managers at all levels and staffs of aid agencies.

5. Improving the implementation of programs and projects and speeding up disbursement

a/ State management agencies responsible for ODA and preferential loans shall closely coordinate with managing agencies, project managers and donors in organizing periodical reviews of program and project preparation and implementation activities, and proposing solutions to speed up the signing process and increase the disbursement rate.

b/ Managing agencies shall enhance the work of directing and supporting project managers in promptly settling difficulties and problems of their programs and projects funded with ODA and preferential loans.

c/ To continue the harmonization of processes and procedures between the Vietnamese Government and donors, including institu­tionalization of a number of actions to be taken in advance to shorten the duration of project commencement and implementation preparation right after specific international agreements on ODA and preferential loans take effect, and simplify procedures for supplementing and amending these international agreements in the course of program and project implementation.

6. Enhancing the monitoring, supervision and evaluation

a/ To enhance the monitoring, supervision and evaluation by improving the system of management information and data on ODA and preferential loans; to elaborate national statistical indicators on signed and disbursed ODA.

b/ To build personnel capacity, elaborate and apply penalties to secure compliance with regulations on monitoring, supervision and evaluation of the management and use of ODA and preferential loans.

c/ To increase the community-based monitoring and supervision by improving institutions, creating a favorable environment for and encourage the participation of the community, contributing to assuring the use effectiveness of ODA and preferential loans, preventing and combating losses, waste and corruption.

7. Assuring information publicity and transparency

a/ To coordinate with donors in publicizing policies, priority sectors and areas, and conditions for provision of ODA and preferential loans of donors.

b/ To improve the system of statistics on ODA and preferential loans.

c/ To update information on ODA and preferential loans in the mass media.

Actions, assigned tasks and indicators of monitoring the implementation of the groups of solutions are specified in the action plan for implementation of the 2011-2015 scheme.

VI. ORGANIZATION OF THE SCHEME IMPLEMENTATION

1. Dissemination, study and implementation of the 2011-2015 scheme

a/ The Ministry of Planning and Investment shall organize the dissemination of the contents of the 2011-2015 scheme among Vietnamese agencies and donors, and guide the implementation of the scheme.

b/ Ministries, sectors and localities shall thoroughly grasp the spirit, guiding principles and orientations for the attraction, management and use of ODA and preferential loans before formulating their programs and projects for this period, integrate them in the performance of the tasks of their socio-economic development plans, and at the same time base themselves on this scheme to attract and mobilize ODA and preferential loans.

c/ Agencies shall, within the ambit of their functions, perform the tasks assigned to them in the action plan for implementation of the 2011-2015 scheme.

2. Monitoring and evaluation of the implementation of the 2011-2015 scheme

a/ Ministries, sectors and localities shall report on the implementation of the 2011-2015 scheme and its results in their biannual and annual reports on management and use of ODA and preferential loans, including also proposals and recommendations to adopt timely solutions to problems arising in the course of implementation.

b/ The Ministry of Planning and Investment shall report on a biannual and annual basis to the Government on the implementation of the 2011 -2015 scheme and its results, and make and send to the Government a mid-term report and a final evaluation report on implementation results of the 2011-2015 scheme.-

APPENDIX

ACTION PLAN FOR IMPLEMENTATION OF THE SCHEME ON ORIENTATIONS FOR ATTRACTION, MANAGEMENT AND USE OF ODA AND OTHER PREFERENTIAL LOANS OF DONORS IN THE 2011-2015 PERIOD
(To the scheme on orientations for attraction, management and use of ODA and other preferential loans of donors in the 2011 -2015 period promulgated together with the Prime Minister s Decision No. 109/QD-TTg of January 19, 2012)