Understanding ODA Definitions and Concepts

1. Understanding ODADefinitions and Concepts Romilly Greenhill Workshop for Elective Members on Supervising Aid Hanoi, October 2007

2. Some basic definitions • Overseas Development Assistance (ODA) • Grants and concessional loans • Development purposes • Coming from donor countries to developing countries • From official (governmental) sources • Grants • Money which does not need to be repaid • Loans • Money which needs to be repaid • Can be concessional or non-concessional • Concessional means that interest rates are lower than market rates and repayment terms easier • Non-concessional means at market rates

3. ODA, Grants and Loans in Vietnam

4. ODA in Vietnam • Vietnam receives about $2bn a year in ODA • About 1/3 of this is grants – is does not need to be repaid • About 2/3 is loans – it will need to be repaid out of Vietnam’s tax revenues at a future date • Why do loans matter? • Future obligation on Vietnam’s citizens • Low interest but not zero – and borrowing is in dollars • Needs to be repaid regardless of the impacts

5. Who provides ODA? • Multilateral donors • World Bank, IMF, ADB etc • Use contributions from bilateral donors and recycled loan repayments • Often more conditional aid, more loans • Bilateral donors • Individual countries e.g. UK, US, Japan • Funded out of domestic taxation • New donors emerging e.g. China, India • Others e.g. INGOs also provide aid, but this is not counted as ODA

6. Main sources of ODA in Vietnam 2001-05

7. Who spends ODA? • Governments • NGOs • When official donors pass on aid to local or international NGOs, it is counted as ODA • Private sector • Government may pass on grant or loan finance to private sector institutions • Other institutions

8. Aid spending by sector in Vietnam

9. Types of aid • Project aid (‘investment project assistance’) • Funding for individual projects • Usually implemented by/with government, NGO or private sector • Often implemented through separate ‘Project Implementation Units’ • Time bound • Programme based/budgetary aid • Direct funding to the governments budget • Treated like tax revenue and allocated by the government • Technical Cooperation (TC)/Technical Assistance (TA) • Consultants, training and research • May be linked to projects (‘investment related’) or ‘free standing’ • Emergency and relief assistance • Food aid, aid for natural disasters etc • Often in kind and short term • NGO aid

10. ODA in Vietnam by Type, 2003

11. Understanding conditionality • World Bank and IMF usually lead conditionality, but bilaterals follow • World Bank Poverty Reduction Support Credits (PRSCs) generally co-funded by other donors – as in Vietnam • IMF’s Poverty Reduction and Growth Facility (PRGF) usually used as a ‘seal of approval’ for aid • Bilateral donors may have other conditions including on more political issues

12. Conditionality in Vietnam • World Bank Poverty Reduction Support Credit (PRSC), co-financed by a number of other donors, includes following conditions: • Issue Intellectual Property Law in accordance with WTO requirements (PRSC 5) • Eliminate restrictions on imports in accordance with WTO requirements (PRSC 5) • Equitisation of State Owned Commercial Banks (expected PRSC 7) • Approve plans for restructuring of selected large State Owned Enterprises (PRSC 5)

13. In summary • Vietnam receives about $2bn in ODA each year, just under 5% of national income • Two thirds of this of this is in the form of loans – Vietnam will need to repay this in the future • Japan, ADB and World Bank are the largest donors • Most aid comes in project form, to fund large infrastructure projects e.g. transport • Aid in Vietnam is still highly conditional