Japan’s ODA Strategy in Vietnam

1. Japan’s ODA Strategy in Vietnam Daisuke Matsunaga Minister Embassy of Japan in Vietnam

2. Table of Contents • Background • Three Priority Areas ・ Growth Promotion ・ Improvement in living / social conditions ・ Institutional improvement • Japan’s ODA commitments

3. Background(1) • Global / Regional Integration & Competition • Although having achieved high growth rates, Vietnam faces difficult challenges both at home and abroad. • Vietnam is being integrated into global and regional economies, with its full AFTA integration and WTO accession.

4. Background(2) • Domestic Challenges • Despite considerable improvements in social indicators brought about by the high growth in recent years, its absolute income level is still low. (<$600, IMF 2004) • Social issues cannot be solved through economic growth alone, but in some cases may even deteriorate; - Urban-rural disparities, - Poverty among ethnic minorities, - Environmental degradation, - Lack of urban infrastructure, - Problems in the transportation sector, etc.

5. Background(3) • Two important agendas: Economic Growth and Poverty Reduction • Economic growth is a necessary condition for sustainable poverty reduction. • However, it is not a sufficient condition, because; ・ Quality of growth (how the fruit of growth is distributed) is important. ・ Existence of issues which growth does not resolve; e.g. environmental gradation, urban congestion. • On the other hand, improvement in social / living conditions provides basic conditions for subsequent growth.

6. Economic growth promotion (leads to improved economic and social circumstances) Improvement in living and social conditions (addressing directly the question of poverty reduction) Institutional development (problems associated with a transitional economy / society, fundamental to both growth promotion and living / social conditions’ improvement) Japan’s Three Priority Areas

7. Three Priority Areas : Basic standpoints • Support for development priorities of the Vietnamese government • Japan’s three priority areas correspond to the development priorities of the Vietnamese government embodied in such development plans as CPRGS and SEDP. • Japan, respecting national ownership, supports the development priorities of the Vietnamese government.

8. Priority Areas: (1) Growth Promotion • Significance of economic growth “Engine for growth” (private sector, incl. FDI), appropriate institutions and policies, and a foundation for economic activities (economic infrastructure and human resources) are important. • Main areas: • Improvement in investment climate • SME’s and private sector development • Development of economic infrastructure (transport, power and information and telecommunications) • Various economic reforms, including SOE and banking sector reforms • Human resources development to support growth

9. Priority Areas: (2) Improvement of living / social conditions Main areas: • Education • Health care • Rural development; • Urban drainage, waste water treatment • Environment

10. Priority Areas :(3) Institution improvement • Significance of institutional improvements • Serves as a basis for both economic and social activities. • Following cross-sectoral issues are targeted, together with individual sectors indicated in (1) and (2) above. • Main areas: • Legal framework development • Administrative reforms (incl. civil service reform and fiscal reform)

11. Japan’s ODA Commitment(at CG meeting on December 7, 2005) • Total amount of assistance to Vietnam; 100.9 billion yen (+9% ) • ODA Loans; 90.8 billion yen (+10.7%) • Japan will extend its assistance to basic infrastructure development of electricity and transportation, urban water environment improvement, human resource development, economic and social infrastructure development in provincial and rural areas. • Grants ; 10.1 billion yen • As for grant aid, Japan will provide a total of about 4.4 billion yen in such areas as health, medicine, rural development, and human resource development. • Grass-roots assistance and human security assistance in such spheres as basic education and vocational training in rural areas. • As for technical cooperation, Japan will accept 377 trainees and invite 109 youths from Vietnam to Japan. In addition, Japan is implementing a total of 22 technical cooperation projects, including human resource development.