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Vietnam Today

Much gained

Released at: 08:05, 12/09/2015

Much gained

ODA has been a continued bright spot in the 40-year-old relationship between Vietnam and Japan and further achievements seem certain.

by Minh Tien

After landing at Hanoi’s Noi Bai International Airport for the very first time after a tiring six-hour flight from Tokyo’s Narita Airport, Mr. Tadashi, a Japanese businessman, jumped into a Toyota Vios taxi just after 10pm and headed to the city center. The car darted along the eight-lane Vo Nguyen Giap Highway and Mr. Tadashi closed his eyes and began to doze off, which was easily done given the Toyota rode so smoothly. He was then woken by different-colored bright lights shining in his eyes. The taxi driver, who barely spoke English, heard Mr. Tadashi awaken, turned around, smiled at him and with the few English words he could muster said: “Nhat Tan Bridge, the Vietnam - Japan Friendship Bridge”.

Nhat Tan Bridge, Vietnam’s largest suspension bridge, and Vo Nguyen Giap Highway not only amazed Mr. Tadashi but also millions of international visitors coming to Hanoi every year and are evidence of the fruitful relations between Vietnam and Japan, as both projects were funded by official development assistance (ODA) from the country of the rising sun. ODA from Japan has helped Vietnam develop a new level of infrastructure and supported major infrastructure projects, including National Highway No. 5, Tan Son Nhat International Airport, the North-South Expressway, and the Cai Mep - Thi Vai and Lach Huyen Ports, which are key projects for the country’s transport network. 

At an international symposium on “Attracting and Utilizing ODA in Vietnam: a 20-year Review”, held in central Da Nang city, the Central Economic Commission noted more than 50 ODA donors to Vietnam. Major donors included Japan, the US, the UK, Germany, France, Austria, Switzerland, Sweden, and Australia, with accumulated capital of more than $70 billion. Among the approximately 50 bilateral and multilateral donors to Vietnam, Japan provided the largest amount of ODA, exceeding $23 billion and accounting for more than 30 per cent of the total committed. Japanese ODA flowing to Vietnam is 12 per cent grant aid and the remainder preferential loans.

Japanese ODA projects have made significant contributions to Vietnam’s socio-economic development and are the fruit of 23 years of continued efforts between the two countries.

Road of roses

Japan decided to restart ODA to Vietnam in 1992 and all preparatory work was completed in the same year with the first package totaling JPY44.5 billion ($350 million). Bilateral relations between the two countries continued to blossom in 1993 with emerging economic cooperation when the relationship was upgraded to a strategic partnership. ODA has been a constant highlight of relations since.

ODA from Japan has been flowing into Vietnam on a large scale for the last 23 years, increasing almost every year despite various economic difficulties. In 2001 Japan decided to cut its ODA budget by 10 per cent but flows to Vietnam increased gradually in the decade following. In 2011 Japan suffered from two natural disasters that affected its economy yet still managed to boost its ODA to Vietnam. Flows only slowed in 2012 to 2014 due to the effects of the global economic crisis but have exhibited signs of recovery this year with strong commitments coming recently from leaders of both countries.

The long-term assistance program Japan provides to Vietnam is mutually agreed upon and aims at five main fields: the construction and improvement of transport and electricity infrastructure, agricultural development, environmental protection, the development of the education and healthcare sectors, and human resources development and institution building.
The major area ODA from Japan flows into is infrastructure, as the country believes that good economic infrastructure ensures development and that the goal of developing countries is to escape from under-development as quickly as possible. Japan’s ODA to Vietnam therefore focuses greatly on economic infrastructure (at approximately 90 per cent), primarily in transport and energy. 

In the context of State budget resources remaining limited and the tendency of foreign direct investment and private investment to focus less on infrastructure, Japanese ODA plays a prominent role in making a difference in Vietnam facilitating the building of fundamental infrastructure such as bridges and road networks to promote economic growth. 

Thorny issues

The difference between ODA provided by Japan and that from other donors is that Japan’s attaches importance to economic infrastructure without too many political constraints being imposed. Most of Japan’s ODA projects are also open to international bidding. However, Mr. Duong Duc Ung, former Director of the Foreign Economic Relations Department under the Ministry of Planning and Investment (MPI), believes that although it provides ODA with fewer constraints, Japan has several tools at hand to ensure its own benefits.

It is common that when ODA is provided to Vietnam, Japanese enterprises will express an interest in participating in associated projects. In several ODA projects Japan limits bidders to Japanese enterprises. “Even though ODA is provided by a developed country to a developing country, this does not imply that donors will not pursue their own economic and political purposes,” Mr. Ung said. There have also been scandals regarding transparency between Japanese enterprises and project management units on the Vietnamese side. 

There are three major factors slowing down Japanese ODA projects. Firstly, they sometimes fall short of achieving their anticipated results due to a lack of project management skills. Secondly, spending ODA funds is no easy task, as recipient agencies must prepare reciprocal capital, which is not a strength of Vietnam. And lastly, slow site clearance has delayed a number of projects, as about 90 per cent of Japanese ODA projects focus on infrastructure. 

In a recent interview with VET, Mr. Mori Mutsuya, Chief Representative of the Japan International Cooperation Agency (JICA) in Vietnam, identified certain changes. At the moment, measures to ensure transparency in the use of ODA are being actively implemented by the governments of Vietnam and Japan. Additionally, in the course of implementation, many Vietnamese companies have earned contract packages, he stressed. “Through technical transfers from lead Japanese partners and consultants that have international-level engineering knowledge, Vietnamese companies have significantly improved their quality of work and strengthened their overall competitive capacity and bargaining power.”

Mr. Mutsuya also emphasized that there is still a lot of room for enhancing the gains of local companies directly engaging in Japanese ODA implementation, particularly in the areas of engineering and project management. “It is, however, noted that many local companies still face financial challenges in mobilizing the necessary resources for efficient contract execution,” he said.

Despite there still being particular issues, both the Vietnamese Government and the National Assembly have agreed that Vietnam has used ODA from Japan in an effective manner. Through Japanese ODA projects, modern technologies have been transferred to Vietnam and Vietnamese staff have had the chance to work, learn and share their experiences with Japanese experts. 

“Prime Minister Shinzo Abe has a special affection for Vietnam. In a talk with Prime Minister Nguyen Tan Dung, he promised to provide ODA of up to JPY300 billion ($2.5 billion) to Vietnam in the fiscal year of 2015. This figure is triple the figure in 2014 and half as much the figure in 2013. This is a new record for ODA in a fiscal year and is for various basic infrastructure projects.”

Minister of Planning and Investment Bui Quang Vinh

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