FOREIGN TRADE UNIVERSITY

HO CHI MINH CITY CAMPUS

___***___

GROUP ASSIGNMENT

Topic: ROLE OF ODA TO DEVELOPING COUNTRIES

GROUP GOODNIGHT TEAM
Subject: International Economic Relations
Academic year: 2023-2024
Class code: ML169

Name Student ID
Võ Ngọc Linh Đan 2212155053
Trương Minh Châu 2212155047
Nguyễn Văn Khánh 2212155104
Lê Đàm Gia Bảo 2212155039
Nguyễn Phương Anh 2212155034
Trần Thị Kim Ánh 2212155038
Nguyễn Quan Thiên Ân 2212155030
Trần Thị Ngọc Hân 2212155078
Nguyễn Thị Khánh Linh 2212155115

Lecturer: Ph.D. Tran Thi Phuong Thuy

Ho Chi Minh City, January 3rd, 2024
 TABLE OF CONTENT
INTRODUCTION ............................................................................................................. 1
CHAPTER 1: OVERVIEW OF ODA ............................................................................. 3
1.1 Definition of ODA .................................................................................................... 3
1.2 History of ODA ........................................................................................................ 3
1.3 Characteristics of ODA ........................................................................................... 4
1.4 Classification of ODA .............................................................................................. 5
1.4.1 Based on refund method ...................................................................................... 5
1.4.2 Based on source ................................................................................................... 6
1.4.3 Based on using goal ............................................................................................. 6
CHAPTER 2: ANALYSIS OF ROLES OF ODA TO DEVELOPING COUNTRIES
............................................................................................................................................. 7
2.1 ODA in developing countries .................................................................................. 7
2.1.1 Overview of developing countries....................................................................... 7
2.1.2 ODA statistics in developing countries from 1993-2022 .................................... 9
2.2 Role of Economic.................................................................................................... 13
2.2.1 The role of ODA on developing economic infrastructure ................................. 13
2.2.2 The role of ODA on economic growth .............................................................. 16
2.2.3 The role of ODA on promoting foreign and private investment ....................... 20
2.3 Role of Social .......................................................................................................... 23
2.3.1 ODA is a source of capital for enhancement in multifarious social aspects of
developing and underdeveloped nations .................................................................... 23
2.3.2 ODA helps poor countries absorb modern scientific and technological
achievements and develop human resources .............................................................. 24
CHAPTER 3: CASE STUDY OF ROLE OF ODA IN VIETNAM ............................ 26
3.1 Current status of attracting and using ODA capital in Vietnam ...................... 26
3.1.1. Sources of ODA capital attracted by Vietnam ................................................. 26
3.1.2. The situation of attracting and utilizing ODA funds in Vietnam: .................... 28
3.2 Role of Economic in Vietnam................................................................................ 30
3.2.1 ODA helps VN adjust economic structures....................................................... 30
3.2.2. ODA increases the ability to attract FDI capital and creates conditions to
expand domestic development investment in Vietnam .............................................. 32

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 3.3. Roles of Social in Vietnam .................................................................................... 33
3.3.1. Healthcare ......................................................................................................... 33
3.3.2. Education .......................................................................................................... 33
3.3.3. Implementation of social programs .................................................................. 34
3.3.4. Human resource development .......................................................................... 35
CHAPTER 4: RECOMMENDATIONS FOR PROMOTING ROLES OF ODA TO
DEVELOPING COUNTRIES ....................................................................................... 36
4.1 Implication for promoting roles of ODA in developing countries ..................... 36
4.2 Implications for Vietnamese government and firms .......................................... 38
4.2.1 Implications for the Vietnamese Government ................................................... 38
4.2.2 Implications for Vietnamese Firms ................................................................... 39
CONCLUSION ................................................................................................................ 40
REFERENCES ................................................................................................................ 41

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 TABLE OF FIGURES

Figure 2. 1 ODA in developing countries from 1993-2022 ................................................ 9

Figure 2. 2 ODA in developing countries from 1993-2022 (% of GNI) ........................... 10
Figure 2. 3 ODA to Ukraine from 2011-2022 ................................................................... 11
Figure 2. 4 Components of ODA from 2000-2022 ........................................................... 12
Figure 2. 5 Bilateral ODA of the least developed countries ............................................. 12
Figure 2. 6 ODA from DAC members (2022) .................................................................. 13
Figure 2. 7 ODA used on Economic Infrastructure .......................................................... 14
Figure 2. 8 South Africa: real GDP and public-sector economic infrastructural
investment, per capital, rands, 2005 prices, moving average ............................................ 15
Figure 2. 9 GDP per capita and Net official development assistance received of East Asia
& Pacific ............................................................................................................................ 17
Figure 2. 10 GDP per capita and Net official development assistance received of Latin
America & Caribbean........................................................................................................ 18
Figure 2. 11 GDP per capita and Net official development assistance received of Middle
East & North Africa .......................................................................................................... 18
Figure 2. 12 Poverty headcount ratio at $2.15 a day ......................................................... 20
Figure 2. 13 FDI, net inflows (% of GDP) ........................................................................ 21
Figure 2. 14 ODA percentage in funding in LDCs ........................................................... 23
Figure 2. 15 Official Development Finance to Technology by type of finance (2016) .... 24
Figure 2. 16 Official Development Finance to Science and Innovation by provider and
type of finance (2016) ....................................................................................................... 24
Figure 3. 1 Top ten donors of Gross ODA for Viet Nam, 2020-2021 26
Figure 3. 2 Net ODA received, Viet Nam ......................................................................... 27
Figure 3. 3 Scale of signing and disbursement of ODA capital from 1993 to 2020 ......... 28
Figure 3. 4 Distribution of ODA capital in 2011-2015 and 2016-2020 ............................ 29

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 INTRODUCTION
The Rationale of the Research
These days, developing countries account for most of the nations in the world, with
152 countries in 2023. Developing countries also contribute a lot to the global economic
by providing multiple resources. Therefore, it is the moral imperative for the world to
improve the prospects of developing countries. Developed nations entering the United
Nations made a commitment of adopting Millennium Development Goals, in which they
set aside 0.7 per cent of their Gross domestic product (GDP) for ODA.
The fund will be flowed into neglected sectors such as access to water, healthcare,
high-quality education and combating climate change. It is vital in aiding the development
of recipient countries reaching essential goals both for the populations and for international
stability.
How has ODA impacted developing countries? Will there be any opportunities or
difficulties that developing countries may face? With the goal to clarify these questions
and detect the overall trends, the authors choose the topic “Roles of ODA to developing
countries”.
Aims and Objectives
Aims of the research
The primary aim of this research is to comprehensively analyze the role of ODA to
developing countries, regarding both Social and Economic aspects. The impact of ODA
can be illuminated by thoroughly understanding the characteristics of developing countries
and the fundamentals of ODA.
Objectives of the research
As mentioned above, the research aims to analyze how ODA impacts developing
countries; therefore, these below objectives are established to achieve the goal:
- Review the fundamentals of ODA.
- Analyze the impact of ODA on developing countries in social and economic
aspects.

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 - Provide case study of Vietnam – a developing country – to delve into more
details.
- Conclude with recommendations and implications for policymakers of
developing countries in general and Vietnam in specific.
Research scope, objects and methods
Research scope
The research’s focus was on the developing countries, specializing in social and
economic aspects. The research was carried out in Vietnam, using data from World Bank,
WTO, OECD, and several other research papers.
Research objects and methods
The object of this study was ODA and developing countries. The study analyzed the
impact of ODA on developing countries using data from documents, records, and case
studies. This data was gathered through primary and secondary data analysis.
Research contributions
The object of this study was ODA and developing countries. The study analyzed the
impact of ODA on developing countries using data from documents, records, and case
studies. This data was gathered through primary and secondary data analysis.
Structure of the research
The research is structured according to the following divisions:
- Chapter 1: Overview of ODA
- Chapter 2: Analysis of roles of ODA to developing countries
- Chapter 3: Case study: Roles of ODA in Vietnam
- Chapter 4: Recommendations for promoting roles of ODA to developing countries

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 CHAPTER 1: OVERVIEW OF ODA
1.1 Definition of ODA
Official Development Assistance (ODA) is officially designated as government
assistance aimed at fostering and specifically addressing the economic development and
well-being of developing nations. The Development Assistance Committee (DAC)
embraced ODA as the benchmark for foreign aid in 1969, and it continues to serve as the
primary financial support for developmental aid initiatives. The Organization for
Economic Co-operation and Development (OECD) diligently collects, verifies, and
transparently disseminates ODA data (OECD.org, 2024).
Specifically, ODA encompasses all non-repayable support and preferential loans
(long-term loans with low interest rates extended by governments, United Nations system
entities, non-governmental organizations (NGOs), and international financial institutions
such as the International Monetary Fund (IMF), Asian Development Bank (ADB), World
Bank, and others) to recipient countries. ODA is implemented through the provision of
non-repayable grants and preferential loans, with conditions defined by the OECD.
According to the OECD, if ODA involves concessional loans, the non-repayable
component must constitute at least 25% of the total (OECDiLibrary, 2024).
1.2 History of ODA
Prior to the collapse of the communist block, the main ODA resources of Vietnam
stem from the Former Soviet Union, Eastern European countries and China. A few non-
bloc donors, such as Sweden and certain international organizations, were also involved.
Subsequently, the political events in Eastern Europe around 1990 caused the depletion of
Vietnam's primary source of foreign economic aid, posing a major challenge for
Vietnamese authorities (OECD Working Papers on International Investment, 2004)
In the early 1990s, the inflow of ODA into Vietnam was primarily modest
contributions from entities like UNDP and SIDA (Sweden), largely in the form of technical
assistance to the government. In an advent of improved relations between the United States
and Vietnam, the landmark Paris meeting of donors established a full cooperation between
Vietnam and the international financial community in November 1993. During the forums,

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the Vietnamese government and donors exchange views on socio-economic policies and
the ODA implementation committed by the donors. The stability of the committed amounts
may be taken to indicate a persistent confidence in Vietnam by the donor community.
Vietnam received ODA from a total of 25 bilateral donors and 15 international
organizations. Notably, the three major contributors, namely Japan, the World Bank, and
the Asian Development Bank (ADB), account for approximately 80% of the total value of
ODA-related international agreements signed during the period spanning 1993 to 2003, as
reported by the Ministry of Planning and Investment in 2004 (OECD, 2013).
Interestingly, the regional distribution of ODA is not biased toward the poor areas
of the country. For example, in Vietnam, large amounts of ODA were allocated to the
relatively prosperous urban centers rather than to the rural and mountainous areas. Based
on the underlying hypothesis that economic growth automatically leads to poverty
reduction, development expenditure should be allotted to relatively more “modern” areas,
thus generating economic growth.
1.3 Characteristics of ODA
ODA is typically guided by principles and characteristics that distinguish it from
other forms of assistance according to OECD (2022):
Concessional Terms
ODA is provided on concessional terms, meaning that it includes grants or low-
interest loans with favorable terms, such as extended repayment periods and low interest
rates. The concessional nature is intended to support countries with limited financial
resources.
Welfare Focus
ODA is specifically directed towards promoting economic development and
improving the welfare of people in recipient countries. It often targets areas such as poverty
reduction, education, healthcare, infrastructure, and other key sectors that contribute to
sustainable development.

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 Mutual Agreement
ODA is typically provided through agreements between official agencies, including
state and local governments, or their executive agencies. These agreements outline the
terms, conditions, and objectives of the assistance, ensuring a mutual understanding and
commitment to development.
Non-Profit Motive
The primary goal of ODA is to promote development rather than profit. Unlike
commercial loans or investments, the main purpose is not to generate financial returns for
the donor but to contribute to the improvement of living standards in the recipient country.
Transparency and Accountability
Donors and recipients are expected to be transparent about the allocation and
utilization of ODA funds. Accountability mechanisms are put in place to ensure that aid is
used effectively, efficiently, and in line with agreed-upon development objectives.
Respect for Recipient Country Ownership
ODA programs ideally respect the priorities and strategies of the recipient country,
emphasizing ownership and participation by the local population. This approach is seen as
crucial for the sustainability and effectiveness of development efforts.
Monitoring and Evaluation
ODA programs are subject to ongoing monitoring and evaluation to assess their
impact and effectiveness. This feedback loop allows for adjustments to be made and
lessons to be learned for future development initiatives.
1.4 Classification of ODA
1.4.1 Based on refund method
ODA can be classified based on the refund method, which includes grants and
concessional loans (OECD,2022). Grants do not require repayment, while concessional
loans are offered with favorable terms such as low-interest rates and extended repayment
periods.

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 1.4.2 Based on source
Another classification of ODA involves considering the source of the assistance.
ODA can be provided through both bilateral and multilateral channels. Bilateral ODA
refers to aid given directly from one country to another, while multilateral ODA involves
contributions to international organizations, such as the United Nations or the World Bank.
(OECD,2022)
1.4.3 Based on using goal
ODA can also be categorized based on the using goal, emphasizing the specific
areas or sectors targeted for development. This may include poverty reduction, education,
healthcare, infrastructure, and other key components contributing to sustainable
development. (OECD,2022)

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CHAPTER 2: ANALYSIS OF ROLES OF ODA TO DEVELOPING COUNTRIES

2.1 ODA in developing countries

2.1.1 Overview of developing countries
Around two-thirds of WTO’s members are developing countries. These countries
have a pivotal role in the development of the global economy as their part in the whole
economy is increasing due to several long-time efforts (WTO).
According to the World Bank’s Country Classification System, the gross national
income (GNI) is used to assess the development of a country. GNI measures, expressed in
USD, are determined using conversion factors derived according to the Atlas method
(World Bank, 2022). The latest World Bank Income classifications by GNI per capita
(updated July 1 of every year) are as follows (World Bank, 2023):
Low income $1,085 or less
Lower middle income $1,086 to $4,255
Upper middle income $4,256 to $13,205
High income $13,205 or more
In this table, the low and lower-middle-income countries are classified as
developing nations, and the upper-middle and high income are referred to as developed
countries.
In Improving Birth Outcomes published in the year 2003, the Institute of Medicine
(US) Committee stated that developing countries tend to share some characteristics:
- Low GDP per capita: In most developing countries, an imbalance exists in
increasing population size and low industrial and agricultural productivity. The situation
can be worsened by indebtedness as well as trade openness.
- Young populations: The population pyramid in most developing countries has a
large base, and a narrow tip because of the predominance of the young. A large young
generation means a large contribution to economic growth based on productivity and
innovation. The young population also provides a cheap future workforce, which is the

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utmost important factor for developed countries to consider when investing in developing
countries.
- High infant mortality and low life expectancy: Even though the figures in
developing countries have now been moderated, the statistics still show almost all
developing countries lag behind the developed world in these problems. The polluted
environment and low life quality of people can explain the situation.
- Epidemiological transition: Both infectious and non-infectious diseases threaten
developing countries' overall well-being. The most recent example is the COVID-19
pandemic, which took the lives of many developing countries' citizens due to a lack of
hygiene and innovation in treatment.
- Weak healthcare infrastructure: There exists a shortage of healthcare workers in
most developing countries, especially one in Africa continent. If there are professors, they
tend to concentrate in populous areas; therefore, in less dense cities and towns, people’s
well-being is not carefully taken care of. Also, the health expenditure of developing
countries is relatively lower than that of developed nations.
- Social unrest and violent conflict: The damage and loss of infrastructure lowers
the number of health services that are available. In addition, resources and attention for
health and social services are redirected toward military and defense projects.
- Other features: The following problems also affect many, but not all, developing
nations: low rates of literacy, particularly among women; primarily traditional, rural forms
of social organization; harsh climates; regular occurrences of natural disasters like floods,
droughts, and famine; widespread population displacement; and epidemic rates of
HIV/AIDS.
In developing countries with low domestic savings, the ODA subsidy, which is
distinct from domestic savings, can make up for differences in foreign currency rates as
well as budget deficits. However, the Sustainable Development Goals (SDGs) of the
United Nations (2016) advocate for increased development aid to developing nations,
stating that foreign aid is "fundamental to equitable progress for all".

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 2.1.2 ODA statistics in developing countries from 1993-2022
Official Development Assistance (ODA), a pivotal instrument in fostering global
cooperation and facilitating the development of countries facing economic challenges, has
contributed significantly to positive development outcomes, emphasizing poverty
reduction, improved living standards, and enhanced governance. This section delves into
the comprehensive summary of ODA statistics in developing countries from 1993 to 2022,
shedding light on the patterns, shifts, and impact of international aid in the developing
world..
Figure 2. 1 ODA in developing countries from 1993-2022

Source: OECD
ODA statistics in developing countries from 1993 - 2008
In the early 1990s, global GDP dropped while the end of the Cool War meant that
geopolitical competition declined, with a high impact on ODA. ODA volumes decreased
by 19% in real terms between 1990 and 1997 and from 0.33% of GNI in 1990 to 0.22% in
1997. The annual average growth rate of ODA was -0.2%, compared to an annual average
GDP growth of 2.7%. The aid quality, effectiveness, and results agenda started.

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 After the Millennium Development Goals were agreed upon in 2000, ODA began
to rise again. Commitments made by heads of state at the Monterrey Conference on
Financing for Development (2002) and the Gleneagles G7 Summit (2005) led to a 60%
increase in ODA in real terms. Annual average ODA growth was 5.7% compared to GDP
at 1.8%. The impact of the 2008 global financial crisis did not affect overall levels until the
following decade.
ODA statistics in developing countries from 2008 - 2019
ODA rose at a slightly higher rate (2.5%) than GDP (2.2%). ODA volumes and
share of GNI fell by 1% in real terms in 2011 and 4% in 2012, showing a lagged effect of
the financial crisis. ODA rebounded again in 2013, reaching its peak in 2016, mainly due
to rising in-donor refugee costs. While ODA volumes fell slightly in 2017 and 2018, there
were positive signs of renewed focus on the poorest countries in 2019.
ODA statistics in developing countries from 2019 – 2022
Figure 2. 2 ODA in developing countries from 1993-2022 (% of GNI)

Source: OECD
From 2019-2021, which was the height of the COVID-19 crisis, many DAC
members maintained or increased their ODA budgets to support developing countries.
DAC member countries provide foreign aid which rose to an all-time high of 211 billion
USD in 2022, as providers increased their spending on processing, and hosting refugees,
as well as on supporting Ukraine. This volume is a 17% increase in real terms from 2021
and represents 0.37% of member countries’ combined gross national income (GNI). More

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broadly, developing countries received USD 245 billion in total ODA in 2022 (a 24%
increase over 2021), which includes assistance from all official providers, non-DAC and
multilateral organizations. In 2022, the growth rate in ODA at 13.6%, was one of the
highest increases ever recorded, only surpassed in 2005 when net ODA rose by 32% due
to exceptional debt relief operations.
Figure 2. 3 ODA to Ukraine from 2011-2022

Source: OECD
“The COVID-19 pandemic and Russia’s war of aggression against Ukraine have
aggravated global instability, hunger and extreme poverty, undoing decades of
development progress in developing countries, particularly among the poorest and most
vulnerable,” OECD Secretary-General Mathias Cormann said. “Unsurprisingly, significant
additional resources were deployed by donor countries in support of refugees fleeing the
war in Ukraine and in aid for Ukraine. Importantly, donor countries have provided ODA
at an all-time high for the fourth year in a row. As well as providing support to deal with
short-term pressures, we must continue to remain focused and accelerate progress in pursuit
of our long-term development goals, particularly in support of the world’s poorest and most
vulnerable countries.”
The factor behind the 2022 increase was a jump in aid to Ukraine following Russia’s
invasion and ongoing war of aggression. Meanwhile, DAC member countries’ ODA to

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Ukraine totaled USD 17.8 billion in 2022, of which USD 2.4 billion was humanitarian aid.
Multilateral organizations added USD 10.8 billion, driven largely by the EU Institutions
(USD 10.6 billion), and non-DAC providers added a further 0.1 billion. In total, Ukraine
received USD 28.7 billion in ODA, making it the largest recipient of aid from all providers.
Figure 2. 4 Components of ODA from 2000-2022

Source: OECD
Spending on “in-donor” refugee costs amounted to USD 31.0 billion, or 14.6% of
ODA. Excluding these costs, 2022 ODA rose by 7.3% over 2021. DAC countries’
humanitarian ODA increased by 8.5% over 2021, reaching a historical peak of USD 23.9
billion in 2022.
Figure 2. 5 Bilateral ODA of the least developed countries

Source: OECD
In 2022, we saw a 0.7% decline in bilateral ODA to Least Developed Countries
(LDCs) compared to the previous year, it is important to note that ODA to LDCs in 2022
was up by 9% in real terms compared to 2019 – the last year before the COVID pandemic.

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At the same time, these preliminary estimates do not suggest that donors’ increased
spending on in-donor refugee costs (by 134% over 2021) entirely displaced their focus on
the poorest countries.
Figure 2. 6 ODA from DAC members (2022)

Source: OECD
Four DAC members – Germany, Luxembourg, Norway, and Sweden – met or
exceeded the 0.7% ODA/GNI target in the final ODA 2022 statistics.ODA rose in 27 DAC
countries, in many cases due to increased spending on hosting refugees, and fell in 4
countries. The largest increases were delivered by Poland (+268.1%), Estonia (+225.8%),
the Czech Republic (+184.5%), Lithuania (+173.4%), and Ireland (+121.3%).
2.2 Role of Economic
2.2.1 The role of ODA on developing economic infrastructure
ODA supports the state budget in investing in the development of economic
infrastructure. Economic infrastructure encompasses everything generated by productive
activities, such as manufacturing and the transportation of goods, including factories, roads,

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bridges, ships, and hydroelectric facilities. Most underdeveloped or developing countries
have impoverished economic infrastructure akin to that of developing nations. However,
their governments often lack the budgetary resources for investment. Moreover, private
investment in economic infrastructure is generally unappealing due to the low return on
investment. Consequently, in countries and territories utilizing ODA, opting for ODA to
invest in the development of economic infrastructure is considered a favorable investment
direction.
According to a World Bank report, from 1971 to 1974, in the Philippines, as much
as 60% of the total ODA funds were allocated for the development of economic
infrastructure. In Thailand, Singapore, and Indonesia, many socio-economic infrastructure
projects, such as airports, seaports, and central research highways of national significance,
were constructed using ODA funds. Taiwan and South Korea have historically relied on
ODA sources to modernize their economic infrastructure systems. In 2020, 21.82% of
ODA funds were allocated for investing in the development of economic infrastructure in
developing countries.
Figure 2. 7 ODA used on Economic Infrastructure

(Source: World Bank)

Economic infrastructure development is a necessary condition for national
economic development. Aschauer (1989a, 1989b, 1989c) found evidence for large rates of
return, there have been a great number of studies using national and international data that

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support the result that infrastructure is important to growth. For example, using cross
country data, Easterly and Rebelo (1993) find a positive effect of investment in transport
and communication on economic growth. Canning, Fay, and Perotti (1994) find a positive
effect of telephones on economic growth, and Sanchez-Robles (1998) finds a positive
impact of road length and electricity generating capacity on subsequent economic growth.
A big push with ODA funding increases investment in various sectors in which improved
infrastructure can lead to self-sustaining growth of developing countries (Easterly, Levine
& Roodman, 2003). A strong evidence for the public-sector economic infrastructural
investment and economic growth is the South African between 1960 and 2009. There were
similar upward trends of real GDP and public-sector economic infrastructural investment,
which illustrates the importance of economic infrastructure on the economy.
Figure 2. 8 South Africa: real GDP and public-sector economic infrastructural
investment, per capital, rands, 2005 prices, moving average

This is explained by the fact that economic infrastructure can increase productivity
and efficiently serve production and business activities. Moreover, the road and electricity
systems directly or indirectly impact the structural transformation of the economy, aiding
in the industrialization of developing countries and promoting the flow of goods and
exports. ODA investment in economic infrastructure often comes with the transfer of new

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technologies, advanced management practices, and workforce training for the recipient
country. Donor countries not only contribute financially but also engage in technical
collaboration.
2.2.2 The role of ODA on economic growth
Many researchers support the positive and significant impact of increasing ODA on
GDP growth rate, which is the most important index for economic growth (Snyder, 1993).
For developing countries having low domestic savings, the subsidy of ODA, which is
different from domestic savings, can compensate for the budget deficits. The United
Nations (2016) Sustainable Development Goals (SDGs), however, call for a rise in the
development assistance to developing world expressing that foreign aid is “fundamental to
equitable progress for all” (p. 44)
ODA had influential power on economic growth on different continents and varied
period of time (McArthur and Sachs, 2019; Musibau et al., 2019). According to Papanek
(1973), foreign aid, foreign investment, other capital flows, and domestic savings explain
economic growth in 34 countries in the period of 1950-1960. Karras (2006) concludes that
foreign aid positively affects economic growth in 71 aid-receiving developing countries
during 1960–1997. The study finds that a permanent expansion in foreign aid by US$ 20
per person results in a permanent increase in the growth rate of real GDP per capita by 0.16
percent. In the same period, Sub-Saharan African countries could gain one-quarter of one
percentage point of the growth rate of the economy from each one percentage point increase
in the aid to GNP ratio (Gomanee et al, 2005). Extending the surveyed time scale to 2018,
similar results are confirmed by the analysis of data from 37 developing countries (Azam
and Feng, 2022). The economic rationale behind this is that the ODA supports the
development of social and economic infrastructure, services, and production. Moreover,
ODA also develops the labor markets and creates more jobs for the local people (Blair and
Winters, 2020).

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Figure 2. 9 GDP per capita and Net official development assistance received of East
Asia & Pacific

Over the years, we observe a gradual increase in GDP per capita. This suggests that
the overall economic prosperity of the East Asia & Pacific region has improved steadily
from 1976 to the present day. In addition, until around 2006, there was a positive
correlation between GDP per capita and ODA received. As GDP per capita increased, so
did the amount of ODA received. However, after 2006, an interesting shift occurred: GDP
per capita continued to rise, indicating economic growth whilst ODA started to decline,
despite the economic progress.
The decline in ODA suggests that the region became less reliant on external aid for
development. As countries in the region developed, they became more self-sufficient and
capable of financing their own development projects. Furthermore, it relates to changing
priorities, when governments may have shifted their focus from basic infrastructure
development (which often relies on ODA) to other areas such as innovation, education, and
healthcare.

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 Figure 2. 10 GDP per capita and Net official development assistance received of
Latin America & Caribbean

Over the years, there has been a steady increase in GDP per capita of Latin America
and Caribbean. Notably, there was significant growth from 2000 onwards. Additionally,
ODA peaked around the mid-2000s and has been fluctuating since then. As can be seen in
the graph, the trend suggests that as GDP per capita increased, the region received varying
levels of ODA. The relationship between GDP per capita and ODA is complex, influenced
by economic growth, development priorities, and international aid policies.
Figure 2. 11 GDP per capita and Net official development assistance received of
Middle East & North Africa

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 Over the years, the MENA region has experienced fluctuations in GDP per capita.
Factors influencing this trend include oil prices (as many MENA countries are oil
exporters), political stability, economic diversification, and investment in human capital.
Oil-rich countries tend to have higher GDP per capita due to oil revenues, but they may
face challenges diversifying their economies. On the other hand, MENA countries have
received varying levels of ODA over time. ODA inflows depend on donor countries’
policies, geopolitical interests, and development priorities. Furthermore, it relates to
humanitarian crises, conflict, and development needs influence ODA allocation. Some
MENA countries receive substantial ODA due to their status as low- or middle-income
nations. This trend can be explained by certain rationales. MENA economies differ
significantly when oil-exporting countries (e.g., Saudi Arabia, UAE) have high GDP per
capita but may still receive ODA for development projects. Non-oil countries (e.g., Egypt,
Jordan) rely more on ODA. Secondly, MENA faces diverse challenges—unemployment,
youth bulge, water scarcity, and political instability so ODA helps address these issues.
However, as Burnside and Dollar (2004) argue that the quality of a nation’s
institutions and policies is also the determinant of the effectiveness of aid, the effect of
ODA is different among countries (Chenery and Carter, 1973). Duc (2006) indicates that
for developing countries the effectiveness and positivity of foreign capital depends partly
on the distinct characteristics of different economies as well as the use of the ODA capital.
When invested, aid is effective for growth, and this is likely to only occur based on the
extent of good fiscal, monetary, and trade policies in a panel data of 56 developing
countries (Burnside and Dollar 2000), which means good policies prevent aid from being
dissipated in unproductive government expenditures.
Many researchers prove the impacts of ODA on the long-run economic growth
(Adebayo and Kalmaz, 2020). Jones (2013) assesses the foreign aid-led growth hypothesis
in a panel of West African countries. The results of the panel cointegration test reveal that
in general, there is a long run co-integrating relationship between foreign aid and economic
growth in West Africa. Similarly, Hatemi and Irandoust (2005) use data over the period
from 1974–1996 in a panel of six developing countries in Sub-Saharan and South Asia:

19
Botswana, Ethiopia, India, Kenya, Sri-Lanka, and Tanzania. The study suggests that the
long-run elasticities (close to one for most countries) show that foreign aid has a positive
and significant effect on economic per- formance for each country in the sample.
Another aspect of economic growth, the poverty levels are believed to decrease
following the increase of GDP per capita. Abduvaliev and Bustillo (2020) observed that a
1% rise of ODA caused a 0.48% decline in poverty levels in Tajikistan over 1998–2016.
Statistics reveal that foreign aid flows continuously from donors to the developing
countries, though at the same time, poverty reduction in the poorest regions could have
achieved much better outcomes.
Figure 2. 12 Poverty headcount ratio at $2.15 a day

(Source: World Bank)

2.2.3 The role of ODA on promoting foreign and private investment
Kimura and Todo (2010) and Park (2014) concurred on the impact of foreign aid in
fostering private investment. ODA investment in the development of economic
infrastructure, as mentioned above, will to a certain extent stimulate an increase in FDI and
other investment sources. Dunning (1993) identified four categories of motives for FDI:
resource-seeking (to access raw materials, labor, and physical infrastructure resources),
market-seeking (horizontal strategy to access the host-country domestic market),
efficiency-seeking (vertical strategy to take advantage of lower labor costs, especially in
developing countries), and strategic-asset seeking (to access research and development,
innovation, and advanced technology). The economic infrastructure of a country is one of
the primary concerns for investors when deciding to invest, with more modern economic
infrastructure increasing the attractiveness for FDI. Therefore, spending ODA on economic

20
infrastructure is a type of investment with the potential to attract diverse sources of capital,
including both domestic and foreign capital, especially FDI.
By using ODA to invest in economic infrastructure, the government can allocate
domestic savings to invest in manufacturing and business enterprises. Furthermore, when
ODA is used for the development of economic infrastructure, it can reduce production
investment costs, thereby increasing profits and encouraging private investment in general,
and FDI in particular. Blaise (2005) uses province-level data and finds that Japanese aid in
China has a positive and significant impact on the locational choice of Japanese private
investors in China. Similarly, Anyanwu (2012), using cross-country time series data from
African countries for the period 1996–2008, finds that higher FDI follows where foreign
aid goes in Africa.
Figure 2. 13 Foreign direct investment and net inflows (% of GDP)

(Source: World Bank)

Economic structure adjustment: ODA has facilitated the adjustment of economic
structures in developing countries across various sectors, including agriculture,
transportation, energy, healthcare, and education:
Agriculture
Relating to infrastructure development, ODA often supports the construction of
agricultural infrastructure such as irrigation systems, storage facilities, and transportation
networks. This enhances the overall productivity of the agricultural sector and ensures
efficient market access for farmers. In terms of technology transfer, ODA initiatives
facilitate the transfer of modern agricultural technologies, seeds, and best practices. This

21
helps improve crop yields, resilience to climate change, and the adoption of sustainable
farming methods. Moreover, ODA investments often include training programs for farmers,
empowering them with the skills and knowledge needed for efficient and sustainable
agricultural practices.
Transportation
ODA contributes significantly to transportation infrastructure projects, including
the construction and maintenance of roads, bridges, and ports. Improved transportation
networks enhance connectivity, reduce trade barriers, and stimulate economic growth. It
also projects focus on connecting remote and underserved areas, ensuring that communities
have better access to markets, social services, and economic opportunities.
Energy
ODA supports the development of renewable energy projects, including solar, wind,
and hydroelectric power. This not only addresses energy poverty but also promotes
sustainable practices, mitigates environmental impacts, and contributes to climate change
mitigation efforts. In addition, its initiatives often target rural electrification, extending
access to electricity in underserved regions. This, in turn, fosters economic activities,
improves living standards, and supports the growth of small businesses.
Healthcare
ODA investments in healthcare focus on building and upgrading healthcare
infrastructure such as hospitals and clinics. Additionally, ODA supports the training of
healthcare professionals, improving the overall quality of healthcare services. ODA plays
a crucial role in disease prevention programs, including vaccination campaigns, maternal
and child health initiatives, and the control of infectious diseases. This contributes to
improved public health outcomes.
Education
ODA funds are often directed towards improving education infrastructure, ensuring
that schools are well-equipped and accessible. This helps increase enrollment rates and
improve educational outcomes. ODA supports initiatives focused on enhancing the quality

22
of education by providing training for teachers and developing relevant curricula. This
ensures that education is not only accessible but also of high quality.
In conclusion, ODA serves as a catalyst for positive economic transformations in
developing countries by addressing key sectors such as agriculture, transportation, energy,
healthcare, and education. The assistance provided through ODA contributes to sustainable
development, poverty reduction, and improved overall well-being in recipient nations.
Effective implementation, local ownership, and ongoing collaboration are crucial for
maximizing the impact of ODA in fostering economic structural adjustments.
2.3 Role of Social
2.3.1 ODA is a source of capital for enhancement in multifarious social
aspects of developing and underdeveloped nations
Based on data given by the OECD, ODA accounts for 91% of external financing
capital for development in 45 least developed countries (LDCs) in the world, serving as
funding resources for poverty alleviation and adequate infrastructure operation. In fact, it
would be difficult for these countries to maintain necessary social services without the
support from ODA. Hence, ODA is of utmost importance for LDCs to reach the IPoA
graduation goals related to income per capita, human assets and economic vulnerability.
Figure 2. 14 ODA percentage in funding in LDCs

Source: (OECD, 2018 “International development statistics (database)”

ODA manifests itself by virtue of six main approaches: policy assistance in poverty
alleviation, Human Security ensuring, reconstruction towards peace, World Heritage sites
preservation and disaster prevention.

23
 In reality, ODA has proven its effectiveness through multifarious ways. ODA serves
as a unique source of funding when other forms of funding and financing is not accessible
for LDCs in the process of modernization and urbanization. ODA also acts as one of the
solutions for over-indebtedness faced by underdeveloped countries. For those developing
economies facing climate change and its severe impacts, ODA is a compensation for the
deficiency of income in the private sector.
To summarize, ODA accounts for a large percentage of the capital of developing
and underdeveloped countries, mitigating the negative effects of capital deficit on social
stability.
2.3.2 ODA helps poor countries absorb modern scientific and technological
achievements and develop human resources
ODA contributes to the scientific and technological enhancement of poor countries
through their donors' participation in ODA projects. The recipient countries enhance their
pace of STI (science, technology and innovation) development through: deeper expertise
knowledge from technical documents, assistance in technical equipment, technological
lines for programs and educational development.
As seen in two pie charts below, the financing capital for STI accounts for about 70%
by DAC members (Development Assistance Committee), showing that technology and
science are of the major focuses of ODA.

Figure 2. 15 Official Development Finance to Figure 2. 16 Official Development Finance to Science

Technology by type of finance (2016) and Innovation by provider and type of finance (2016

24
 Source: CRS and the OECD Philanthropy Survey (2016)
The STI is also interrelated with HDI (human development index) since
technological and scientific growth transforms into human resources development.
Regarding ODA only, it offers various advantages for human resources quality
enhancement such as:
- Overseas education and educational investment
- Opportunities to “rub” with new worldwide advances
- Jobs creation through economic growth
- Improvement in life standards

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 CHAPTER 3: CASE STUDY OF ROLE OF ODA IN VIETNAM

3.1 Current status of attracting and using ODA capital in Vietnam

3.1.1. Sources of ODA capital attracted by Vietnam
For developing nations like Vietnam, ODA is a significant source of funding.
Vietnam used to receive two significant bilateral ODA funding: one from the Economic
Assistance Council (SEV), which the former Soviet Union mostly funded (Tien, 2020).
Since Vietnam's official normalization of relations with the majority of the world in
1993, ODA capital has grown in importance as a foreign capital source and has served an
essential part in significantly advancing the economic and societal development process.
Between 1993 and 2007, Vietnam's successes in attracting and utilizing ODA were quite
impressive. Vietnam receives an average of 3.5 billion USD annually in ODA from 51
international donors (28 bilateral and 23 multilateral). Of these, six banks account for
approximately 80% of Vietnam's ODA capital mobilization, namely the World Bank (WB),
Asian Development Bank (ADB), Japan International Cooperation Agency (JICA), Korea
Export-Import Bank (KEXIM), French Development Agency (AFD), and German
Reconstruction Bank (KfW) (Dung, 2023).
Figure 3. 1 Top ten donors of Gross ODA for Viet Nam, 2020-2021

Source: OECD
Regarding the last two decades, the total amount of ODA capital signed between
1993 and March 2020 was $86,664.1 million, of which $77,373.576 million were ODA

26
loans, $1,623.31 million were preferential loans, and $,7667.214 million were non-
refundable aid. Between 2011 and 2019, 6.9% of overall social investment capital, 34.09%
of state budget investment capital, and roughly 2.4% of GDP came from ODA capital and
concessional loans. Vietnam. Vietnam has received preferential loans and about 85 billion
USD in ODA funding as of 2019. Approximately 70 billion USD is loan capital with an
interest rate of less than 2% (equivalent to 90% of total ODA capital and preferential loans);
1.7 billion USD are less preferential loans, but the interest rate is still lower than
commercial loans (accounting for 2%); and 7 billion USD is non-refundable aid capital
(equivalent to 8% of total ODA capital and concessional loan capital). The sum disbursed
came to over 65 billion USD (Khanh, 2022). Mobilized ODA capital and preferential loans
totaled 12.553 billion USD between 2016 and 2020 alone. Of these, loan capital made up
12.04 billion USD (ODA loan: 9.169 billion USD, preferential loan: 2.871 billion USD),
while non-refundable aid totaled 513 million USD.
However, in recent years, The World Bank has ceased giving Vietnam aid through
IDA, its most preferred ODA source, on July 1, 2017, as the nation prepares for entry into
the "middle-income" stage. Additionally, South Korea and Japan, two other bilateral
contributors, are progressively lowering their incentives for Vietnam (Tien, 2020).
Vietnam will consequently need to borrow money at higher interest rates, for shorter loan
terms, and with the appearance of certain costs like commitment fees.
Figure 3. 2 Net ODA received, Viet Nam

Source: World Bank

27
 3.1.2. The situation of attracting and utilizing ODA funds in Vietnam
After 20 years from 1993, Vietnam has been effectively taking advantage of ODA
resources from the over 50 multilateral donors including: World Bank (WB), The Asian
Development Bank; Asian Development Bank (ADB), International Monetary Fund (IMF),
United Nations (UN), Non-governmental organization (NGO), Nonprofit organization
(NPO),.... (VnEconomy, 2015). During this period, ODA funds helped foster economic
expansion and decreased poverty, progressively allowing Vietnam to join the group of
middle-income nations (Trang, 2021).
On the basis of that commitment, from 1993 to 2015, there was a gradual increase
in the amount of signed and disbursed ODA capital in Vietnam over the years. Specifically,
Vietnam continued to receive funding of more than 64,322 billion USD in December 2011,
of which the total disbursed capital reached 33,414 billion USD, accounting for over 61%
of total signed ODA capital. The figure reached its peak in the period of 2010-2015,
especially in 2014 the disbursed capital amounted to 5,655 million USD. From 2016 to
2020, ODA capital progressively decreased, disbursing 1,654 billion USD by 2019 and
424 billion USD by 2020, because Vietnam has been recognized as a middle-income
country leading to the reduction in ODA capital preference.

Figure 3. 3 Scale of signing and disbursement of ODA capital from 1993 to 2020

(Source: The Ministry of Finance, 2020)

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 During the given period (1993-2020), ODA capital is allocated in various fields such
as: construction of transportation infrastructure; construction of hydroelectric, thermal
power and renewable energy projects, urban infrastructure projects, environmental
protection such as water supply and drainage, wastewater treatment; natural disaster
prevention projects; agricultural and rural development programs and projects such as
irrigation and rural transportation; health projects, education and training, human resource
development…

Figure 3. 4 Distribution of ODA capital in 2011-2015 and 2016-2020

(Source: The Ministry of Planning and Investment, 2020)

As observed, during 2011 - 2020, around 57,7% of ODA capital is allocated into
the construction of traffic infrastructure, thermal energy, industries, agricultures, rurals,
which acts as a driving force to boost the economic growth in the short term. In fact,
approximately 42.3% of ODA capital is invested in health projects, education and training,
human resource development, which facilitates long-term economic growth in either direct
or indirect way.

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 3.2 Role of Economic in Vietnam
3.2.1 ODA helps VN adjust economic structures
Vietnam’s economic structures can be analyzed using different approaches: by
economic sectors and by territories, namely Northwestern, Red River Delta, North Central
Coast, South Central Coast, Central Highlands, Southeastern and Mekong River Delta. In
this essay, we focus on the impact of ODA on economic sectors in Vietnam that gain ODA
donors, including agriculture, transportation, energy, healthcare and education.
Agriculture
Since 1993, Vietnam has received ODA funding from major donors such as the
World Bank, Asian Development Bank, along with the governments of Japan, Germany,
Australia, South Korea, etc. However, it was not until 1999 that the Agriculture Project
Management Board (APMB) was established to take responsibility for managing and using
such capitals for stimulating rural infrastructure and sustainable production, which can
potentially promote the international position of Vietnam’s agriculture. Accordingly,
during the 1999-2019 period, APMB executed 20 projects effective in 63 regions across
the country from the total funding of US$1,968 billion. Thanks to these ODA-based
programs, millions of farmers were given special training on crop cultivation, coffee
production, cattle breeding and sustainable aquaculture operations. Many programs has
been implemented successfully such as Agriculture Diversification project, Dairy Products
Development project, Sugar cane and Coffee Production project and especially The
Vietnam Sustainable Agriculture Transformation Project (VnSAT) which is primarily
funded by the World Bank through a total capital of almost US$300 million to support
farmers in applying innovative farming practices, lowering production costs, boosting
productivity and preserving natural environment.
Transportation
The Sixth National Congress (1986) pointed out that “transportation must be one
step ahead of all to meet the development requirements of the national economy”.
Therefore, a large portion of ODA capitals has been used for transportation system
modernization, covering several of its sub-sectors: highway, railway, airports, waterway.

30
 For the road system, ODA has given priority to the national highway network,
municipal and countryside roads as well as bridges, evidenced by various significant
projects such as Noi Bai - Lao Cai highway, national highways No. 4, No. 10 and No. 18,
national roads 1A, Nhat Tan bridge, etc, making Vietnam become the top 3 Southeast Asia
countries having the most cutting-edge motorways (Bidding Newspaper, 2016). Based on
data from the Ministry of Industry and Trade, until 2017, Vietnam had constructed almost
24,000 km of 146 national highways and 13 freeways. Besides, regarding railway
transport, the North-South railway restoration was emphasized, combined with many
noticeable restoration projects like Ho Chi Minh City railway construction, Ben Thanh -
Suoi Tien Metroline Ben Thanh–Suoi Tien Metro Line Project, Ben Thanh - Suoi Tien
sections. For the infrastructure of Vietnam’s major airports, investments were carried out
in Tan Son Nhat, Da Nang and Noi Bai international airports, thereby adapting innovative
machinery and aligning with international standards. For waterways system, ODA
significantly contributed to the construction or development of numerous nationwide and
regional ports including Hai Phong Port, Tien Sa Port, Sai Gon Port, Can Tho Port, Cai
Lan Port, Nha Trang Port, not only facilitating trade in goods but also creating more
employment opportunities and raising localities’ income. Waterways, which is currently
stretching over 47,000 km across the country and transporting approximately 18% of goods,
has been the second most prevalent form of transportation after roadways.
Energy
Energy is one of the economic sectors that gained the most substantial ODA donors,
only after transportation. During the 2010-2017 period, the industry acquired a total ODA
of US$4,676 billion, of which almost 80% off the capital primarily provided by Japan (53%)
and the World Bank (29%). One project having a remarkable capital outlay was the erection
of Thai Binh Thermal Power plant, which obtained a total investment of nearly US$1.1
million. After 4 years in construction and installation, the plant officially operated in April
2018, insuring the Red River Delta’s electricity supply. Another noteworthy projects were
the building of Nghi Son Thermal Power plant with 85% of US$904 millions ODA loan
was issued by the Japan International Cooperation Agency (JICA), or the project for

31
electric power distribution (DEP) with a total investment of approximately US$665
millions chiefly funded by the Clean Technology Fund (CTF), the International
Development Association (IDA) and the International aid agency of the Australian
Government (AusAID). As a result, by the end of March 2018, EVN’s electricity
transmission system encompassed 24,365 km of lines, 140 electricity substations plus
transformers’ total capacity of about 78,000 MVA, hence citizens’ easy access to this
system and progressive connectivity to electricity grids of neighboring countries.
Thus, it is reasonable to conclude that infrastructure development has been the top
priority of ODA donors to Vietnam, which in turn encourages the equitable growth of
various industries and promotes economic structure modification.
3.2.2. ODA increases the ability to attract FDI capital and creates conditions
to expand domestic development investment in Vietnam
Before making investment decisions, foreign investors always carefully consider
and evaluate the recipient country’s infrastructure as they want to take advantage of the
host country’s available facilities, leverage the resources and ensure cost optimization.
Previous studies are conducted to analyze factors affecting FDI inflows and come to the
result that infrastructure development positively affects FDI inflows. Demirhan and Masca
(2008) use a cross-sectional data analysis model to identify the factors influencing FDI in
38 developing countries during the 2000-2004 period. The research findings show that,
except for labor costs and political risks, all the proposed factors including infrastructure
support FDI attraction. Jayasekara (2014) examines the determinants of FDI in Sri Lanka
by using the FMOLS model and finds that infrastructure encourages FDI inflows. Many
other researchers reach the same conclusions (Wheeler and Mody, 1992; Jordaan, 2004;
Alam and Shah, 2013; Caroline, 2015). In Vietnam, empirical studies also investigate the
positive effect of infrastructure improvement on foreign investment, among which are
research by Anh and Thang (2007), Anwar and Nguyen (2010), Loi et al. (2020).
In fact, ODA funds often prioritize projects for improving economic infrastructure
quality such as transportation networks (roads, bridges, railway, ports, airports) and power
plants. Improved transportation infrastructure creates favorable conditions for foreign

32
investors to smoothly access their markets. Investments in other critical facilities including
electricity grids, irrigation systems and stable energy supply allow large-scale production.
Importantly, better access to schools and hospitals in addition to income growth have
positive effects in human capital formulation, which consequently provide the investors
with skilled labor force. The importance of ODA for Vietnam’s economic development is
as an important additional source of capital for development investment, to absorb
scientific achievements, modern technologies and development of human resources. These
are basic and long-term benefits to Vietnam, which help in adjusting the economic structure
of the country, in increasing ability to attract FDI as well as in creating conditions for
expanding investment and development.
3.3. Roles of Social in Vietnam
3.3.1. Healthcare
In the medical sector, ODA loans are allocated for the investigation of antibiotics,
as well as the prevention of some terminal or contagious diseases such as HIV/AIDS,
malaria, tuberculosis, H5N1, etc. (Duong, 2018). For healthcare infrastructure, ODA
projects helped facilitate medical technology advances by supplying high-tech
pharmaceutical equipment and building blood donation centers and antibiotics-generated
facilities. Furthermore, to improve healthcare services and capabilities under the influence
of COVID-19, JICA mobilized about JPY¥120 million to purchase COVID-19 diagnostic
equipment for Cho Ray Hospital only, not to mention JICA’s delivery of many crucial
medical machinery such as ECMO, ventilators, patient monitoring products, ambulances
to both Cho Ray and Hue Central hospitals.
3.3.2. Education
For many years, plans for those projects using ODA capital and preferential loans
and managed by the Ministry of Education and Training have seen ingenious and
comprehensive education as the core value, following closely the government’s 10-year
socioeconomic development strategy. Through ODA programs, not only underprivileged
children were given opportunity to attend school but also Vietnamese workers received
advanced training from international professionals in many fields such as Engineering,

33
Banking Finance, Public Governance. Moreover, there are many projects aimed at
constructing both national and international universities, including the Ha Noi University
of Science and Technology project, Vietnam - Germany University project. At the Standing
Committee meeting held on 2 November 2017, Vietnam’s Government approved of
making ODA loans of roughly US$300 millions from the International Financial Institution
to finance for the transformation of Ha Noi, Da Nang and Ho Chi Minh national universities
into 3 premier “university town”, thereby upgrading the ranking of Vietnam’s universities
in the international area. Such assistance progressively modernizes Vietnam’s education
system in order to help it catch up with education standards in the region. Particularly, most
ODA projects for education and training were provided in the form of non-refundable aid
through independent technical cooperation projects (Nguyen, 2010). Thus, it is reasonable
to conclude that infrastructure development has been the top priority of ODA donors to
Vietnam, which in turn encourages the equitable growth of various industries and promotes
economic structure modification.
3.3.3. Implementation of social programs
Regarding social development, ODA projects primarily allocate resources to vital
social initiatives, including programs focused on population and development, vaccination,
children's nutrition, initial healthcare, and the prevention of HIV/AIDS and drug abuse.
Vietnam joined forces with The Idea 20/20 at the United Nations International
Conference on Social Development in Copenhagen in 1995, pledging to devote 20% of the
total budget and 20% of ODA to essential social services (Nguyen, 2010). During the June
10, 1998, Hanoi Consensus Summit on Initiative 20/20, developing countries and the
international donor community underlined their commitment to this goal. Vietnam is
remarkable for being among the first emerging nations to increase spending on social
services, especially in the fields of healthcare and education. According to The Idea 20/20,
an assessment in 1999 on social services in Vietnam, co-authored by the Vietnamese
government and the UNDP, showed a steady rise in the state budget for these services since
1990, with the amount reaching 17.1% in 1997 (8.5% of the UN's requirements). As part
of the cooperative efforts between UNDP, the UN, and the government to protect

34
expenditures on social services, the report also noted that aid in social services reached 10%
of UN criteria in 1997.
ODA has positively supported hunger elimination and poverty alleviation programs
including priority programs such as Program 135 on economic development for
communities existing under extremely difficult circumstances, Program 133 on the
development of northern mountainous provinces, the 5-million-hectare Forest Program, the
Initiative of Central Provinces on Lightning and Natural Calamity and so on (Vu, 2005).
3.3.4. Human resource development
ODA plays a significant role and benefits Vietnam by promoting the country's
human resources (Xuana, 2019). The investment in industry or services will use a lot of
labor in our country, thereby helping our country's redundant labor force to have a job,
bringing a stable income, thereby improving people's lives as total national income
increases in relation to economic growth (Tien, 2019). The technical and professional
qualifications of human resources are constantly improved. Human resources in Vietnam
also have the advantage of acquiring the historical tradition of the country: the tradition of
hard work, diligence, hard work, and love of labor. Vietnamese workers are considered to
be intelligent, industrious, skillful, and relatively highly educated compared to the national
income level, quickly absorbing scientific and technological advances of the world. This is
a significant comparative advantage for Vietnam's human resources in the integration
process.

35
CHAPTER 4: RECOMMENDATIONS FOR PROMOTING ROLES OF ODA TO
DEVELOPING COUNTRIES

4.1 Implication for promoting roles of ODA in developing countries

Utilizing ODA for economic infrastructure in developing countries involves
addressing several challenges and implementing strategic recommendations to ensure
effective and sustainable development. One key challenge is the presence of budgetary
constraints, which often hinder significant investments in economic infrastructure. To
overcome this hurdle, developing nations are recommended to diversify funding sources.
This involves developing strategies to combine ODA with mobilized domestic resources
and exploring alternative financing mechanisms. By doing so, countries can mitigate
dependency on a single funding stream, fostering financial resilience and flexibility in
infrastructure projects.
Another critical challenge lies in ensuring the alignment between ODA projects and
national priorities, a task that demands strategic planning and priority setting. Developing
countries are advised to engage in comprehensive planning exercises to identify key
national priorities. Establishing effective communication channels with donors is crucial
to align projects with identified priorities, ensuring that ODA contributes to impactful
economic infrastructure development that aligns with the country's overarching
development goals.
Weak institutional capacity is identified as a challenge that hinders the effective
implementation of ODA-funded projects. In response, developing nations are
recommended to prioritize capacity-building initiatives. This involves investing in training
programs and governance reforms to enhance the implementation capabilities of
institutions responsible for project execution. Strengthening project management expertise
is emphasized to ensure the long-term sustainability of ODA-funded initiatives, addressing
the challenge of weak institutional capacity.
Transitioning to the realm of achieving economic growth through ODA, governance
and policy reforms are crucial to overcome challenges related to institutional quality.

36
Developing countries are urged to undertake comprehensive reforms aimed at improving
institutional quality. This includes initiatives to enhance transparency, strengthen the rule
of law, and implement policies that foster a conducive environment for economic growth.
Such reforms lay the foundation for effective utilization of ODA funds and promote a
robust economic ecosystem.
Policy coherence and coordination present another challenge in maximizing the
effectiveness of ODA in promoting economic growth. Developing nations are encouraged
to foster coordination among various government departments, ensuring that fiscal,
monetary, and trade policies align with the goals of ODA projects. This coordination is
instrumental in creating a harmonious policy environment that enhances the impact of
ODA on economic development.
The challenge of the varying impact of ODA on poverty reduction necessitates
strategic approaches to ensure the equitable distribution of gains from economic growth.
Developing countries are advised to design and implement strategies that focus on social
welfare programs, education, and healthcare. This targeted approach aims to address
poverty effectively and ensures that the benefits of economic growth reach all segments of
the population.
In the context of attracting foreign and private investment through ODA, strategic
project selection becomes paramount. Effective utilization of ODA requires developing
countries to strategically choose projects that not only contribute to economic infrastructure
development but also directly enhance the overall business environment. Prioritizing
initiatives with high potential for attracting private investment ensures that ODA serves as
a catalyst for broader economic development.
The sustainability of attracting foreign and private investment depends on long-term
success, emphasizing the need for proactive long-term planning and maintenance.
Developing countries are recommended to implement comprehensive long-term planning
for ODA-supported projects, including strategies for maintenance and ongoing capacity-
building. This proactive approach ensures the sustained viability of projects, contributing
to lasting economic impact.

37
 4.2 Implications for Vietnamese government and firms

4.2.1 Implications for the Vietnamese Government

The great achievements of socio-economic development gained in recent years have
consolidated and strengthened Vietnam's position and strength with the vital contribution
of ODA resources. The authors submit 3 recommendations to improve the ODA
management in Vietnam in the next period.
Firstly, it is necessary to improve the institutional framework on the management
and use of ODA capital. Correspondingly, the consistency between domestic legal
documents and harmony with donors can be ensured (such as Japan only invested ODA in
Yen, Russia invested ODA through scholarships), simplifying processes and procedures.
Defining clearly the functions and tasks of the agencies in charge of ODA management,
combined with specific sanctions to punish violating individuals and organizations should
be prioritized. Also, the government has to specify the composition of the Criminal Law to
strictly handle and have measures to recover the capital that was lost.
Secondly, solutions should be proposed by the Government of Vietnam to
effectively utilize ODA capital, including both short-term and long-term aspects. In the
short term, policy makers need to classify ODA-funded projects into specific investment
plans, sectoral and local development plans, coordinating with other projects with other
sources of funding. Additionally, a unified inspection agency should be set up, responsible
for monitoring the effectiveness of ODA use throughout the country. Similarly, each
ministry and branch participating in any stage of the ODA project also needs to set up an
inspection committee to check the progress of the project at any stage and cross-check
other agencies in carrying out the activities.
Thirdly, the Vietnamese Government has to promote transparency in implementing
ODA-funded projects. This can be done by accelerating the reform of administrative
procedures and publicizing all stages of the investment process on the official website of
the agency. Furthermore, organizing seminars and conferences to consult national and
international experts, as well as introduce the need to use ODA capital on the mass media

38
should be strongly encouraged. Information about ODA and concessional loans must be
made transparent. Implementing levels, especially implementing agencies and project
owners, need to be accountable for the receipt and the use of ODA and concessional loans.
Such practices can help involved bidders and parties to comply with the requirements of
investors (environmental protection, climate change prevention, gender equality guarantee,
anti-poverty, disease, etc), to call for the support and assistance of bilateral and multilateral
sponsors in the world.
4.2.2 Implications for Vietnamese Firms
Before participating in projects using ODA capital, Vietnam enterprises should
understand the procedures of donors and international practices in order to meet the
requirements of technical, financing and experience. In other words, they should
thoroughly examine the bidding documents, the preparation of bids (Cost of bidding, letters
of bid and schedule, validity period of bid, the submission and evaluation of bid) and most
importantly, pay attention to the regulated terms on eligible bidders. For instance, a bidders,
which can be a single entity or joint venture, shall be disqualified by JICA if it has a close
business relationship with the personnel who directly involved in any part of the bidding
process, including (1) the preparation and prequalification of bidding documents, (2) the
bidding evaluation and (3) the contractual supervision. Currently, ODA projects require a
strict contractor selection process following the procedures of international large-scale
competitive bidding and domestic small-scale competitive bidding. As long as Vietnamese
enterprises deeply comprehend these mandatory requirements, they are able to join the
projects. In fact, numerous Vietnamese contractors have participated in competitive
bidding packages and won large-scale packages worth over $100 million such as
CIENCO4 or Vinaconex E&C. Correspondingly, understanding the ODA procurement
process is not just an option but a necessity for Vietnamese enterprises seeking to leverage
this valuable resource for growth, competitiveness, and contribution to national
development. By investing in knowledge and navigating the process strategically,
Vietnamese firms can unlock the full potential of ODA and achieve their business goals
while contributing to the country's progress.

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 CONCLUSION
The essay on the role of official development assistance (ODA) for developing
countries goes into great detail about the definition, classification, and features of ODA. It
delves into specific issues regarding aid given to developing and impoverished countries,
with a focus on Vietnam. This research examines key characteristics, broad trends, and
capital allotted to ODA across different sectors.
One of the essay's strongest points is its in-depth analysis of how ODA contributes
to the socioeconomic development of developing and underdeveloped countries, using
Vietnam as a case study. By doing this, the essay highlights the significant impact that
ODA has had on the current circumstances in these nations. This approach broadens the
discussion and helps readers understand the true impact of ODA on the ground.
Beyond a mere description and analysis, the study also makes recommendations and
ideas for enhancing the attraction and effective use of ODA in Vietnam. This helpful
element raises the essay's value by highlighting issues and offering potential solutions. The
essay recognizes that getting ODA on its own is insufficient; it needs to be strategically
used to maximize its positive effects on development. By addressing the need for effective
utilization, this is accomplished. Stakeholders and legislators are urged to plan and act
decisively to optimize the advantages of ODAin the recommendations section. This feature
improves the essay's relevance and practicality in real-world scenarios.
In summary, the essay skillfully combines theoretical concepts with empirical
observations to offer a thorough examination of the function of ODA in developing and
developing countries, particularly Vietnam. The recommendations section offers a critical
and insightful analysis of a crucial area of international development while also enhancing
the essay's usefulness and applicability.

40
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