The policies of investment in developing infrastructure for the purpose of economic growth, hunger eradication and poverty alleviation in the rural of Vietnam.

1
The policies of investment in developing
infrastructure for the purpose of economic
growth, hunger eradication and poverty
alleviation in the rural of Vietnam.
Presenter Dr. Chu Tien Quang Institute of
central economics management
2
Outline

1. The role of infrastructure toward economic growth
   and poverty reduction in Vietnamese rural area.
2. The policies of investment in developing
   infrastructure in rural area.
3. Primary results of developing several types of
   fundamental infrastructure in the rural and some
   limitations.
4. The orientations for the policies of investment
   in developing infrastructure in rural area.

3
I. The role of infrastructure toward economic
growth and poverty reduction in rural area.

• Rural infrastructure includes Roads,
  irrigational system, electricity system,
  information system, heath care centers, schools
  and market system. These types of infrastructure
  play an important part in developing economy and
  reducing poverty for the following reasons
• a. Set up a foundation and offer opportunities to
  promote the development of running business in
  many sectors in the rural such as agriculture,
  forestry, aqua culture, industry, commerce and
  services.
• b. Give necessary conditions for changing the
  living standards and the lifestyle in rural area.
• c. Create a socio-economic link between the rural
  and the urban.
• d. Play an important part in allocating the labor
  force and capital resources, thereby promoting
  economic development and poverty reduction in
  rural area.

4
II. The policies of investment in developing
infrastructure in rural area.
2.1. The content of the policies is considered
on 2 angles a. Call on financial resources to
invest in setting up and preserving the
infrastructure system in the long term. b.
Turning these resources into infrastructure to
make socio-economic activities suitable with the
developing requirements. 2.2. The results of
calling up capital for infrastructure in rural
area in the past few years.
5
II. (continue)

• Comparison between investment in agriculture,
  forestry and aqua culture with the total
  investment in the whole economy.
• Table 1- The proportion of social investment in
  agriculture, forestry and aqua culture in
  comparison with the total social investment in
  the whole economy, period 2000 2003 ( at 1994
  prices and current prices) Currency Billion
  VND

Year 2000 2001 2002 2003
1. Total investment in the whole economy at 1994 prices (billion VND) 110.636 124.143 143.601 158.606
2. Investmen in agriculture, forestry and aqua culture at 1994 prices (billion VND) 15.936 12.256 13.576 14.296
3. Investment in agriculture, forestry and aqua culture over the total investment capital in the whole economy at 1994 prices () 14,4 9,8 9,4 9,0
4. Total investment in the whole economy at current prices (billion VND) 145.333 163.543 193.099 219.675
5. Investment capital in agriculture, forestry and aqua culture at current prices (billion VND) 20.934 16.142 17.448 19.800
6. Investment in agriculture, forestry and aqua culture over the total investment in the whole economy at current prices () 14,4 10,03 9,03 9,01
Source Statistics yearbook-2003, section
Investment capital in Development, page 289,290
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II. (cont )
b. Comparison between state investment in
agriculture, forestry and aqua culture with the
total state investment in the whole
economy. Table 2- The proportion of state
investment capital in agriculture, forestry and
aqua culture in comparison with the total state
investment in the whole economy according to the
market prices of 1994 and current prices
Currency Billion VND
Year 2000 2001 2002 2003
1. Total state investment in the whole economy at 1994 prices (billion VND) 63.616 72.131 79.000 88.806
2. State investment in agriculture, forestry and aqua culture at 1994 prices (billion VND) 8.338 6.992 7.014 7.884
3. State investment in agriculture, forestry and aqua culture over the total state investment in the whole economy at 1994 prices () 13,1 9,69 8,80 8,87
4. Total state investment in the whole economy at current prices (billion VND) 83.568 95.020 106.231 123.000
5. State investment in agriculture, forestry and aqua culture at current prices (billion VND) 10.953 9.208 9.431 10.920
6. State investment in agriculture, forestry and aqua culture over the total state investment l in the whole economy at current prices () 13,11 9,69 8,88 8,88
Source Statistics yearbook - 2003 section
Investment of Public economic sector page 295,
296
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II. (cont)
c. The situation of investment in developing
infrastructure in poor areas in some national
target programs. First The project of hunger
eradication and poverty alleviation and creation
of employment (Decision No 133 TTg and 143 TTg of
Prime Minister) Table 3 Creation of omponents,
financial resources and agencies responsible for
launching the program of poverty reduction in 2
periods 1998-2001 and 2001- 2005
Components
Financial resources (Billion VND)
relevant organizations and agencies Of the
program for the period 1998-2001
for the period 2001-2005 I. Policies 1. Health
care investment
800 500
Ministry of Heath Care 2. Education
investment 834
-
Ministry of education
3. Manufacturing tools support
-
- 4. Ethnic
minorities aids
262 150
Commision of vietnamese ethnics 5.
Housing construction support
- 250 6.Special
supports for vulnerable residents
- 700
Ministry of labor II. Projects of poverty
reduction 1. Credits
6000 (loans) 750
(to compensate interest rate) Vietnamese
agriculture bank 2. Agriculture extension
services 200
100
Ministry of agriculture and rural development 3.
Modelling poverty reduction -
100
Ministry of labor III. Projects of poverty
reduction in villages beyond CT135 1.
Infrastructure building
3825 1 1400
Ministry of agriculture and rural
development 2. Manufacturing support
200
90 Ministry of
agriculture and rural development 3. Training

100 100
Ministry of labor 4. Stablizing new
economic zones -
1400
Ministry of agriculture and rural development 5.
Resettlement 1200
700
Ministry of agriculture and
rural development Total

6240 billion VND
Source The report on evaluating the national
target program of poverty reduction and the
program No 135, made by Ministry of Labor and
social war invalid- project VIE/02/00111/2004
In fact, capital disbursement in the period
2001-2005 is only 2,700 billion VND
8
II. (cont)
Secondly The program of economic development in
extremely disadvantaged communes and remote areas
(approved by the government with the decision
135, 31th, July 1998)

• - The government supports
  capital, material and means to set up
  infrastructure at villages level (roads, health
  care centers, schools, irrigational system, water
  supply, market system. etc)
• The government supports capital, material and
  means to set up infrastructure in communes
  (roads, health care centers and market system)
• Government implements the program of resettlement
  for ethnic minorities.
• Government encourages agriculture.
• Government supports personnel training (improving
  management ability and works supervision)

Content
Allocating capital
- Resettlement for
ethnic minorities and agricultural extension
services 3,5 - Training 1 - Setting up
infrastructure 95,5 (thus the program mainly
invests in infrastructure )
Some conclusions
- The programs have been
solving the problem - The programs have been
being implemented as scheduled. - The programs
help improving living standards in poor areas.
Limitations
- The capital allocation
remains disperse so the government can not
control and check the quantity and quality of
works. - Capital allocation is equal to poor
areas, creating the equality in gaining benefits.
Still, the allocation is proved unreasonable in
provinces with different number of residents. -
The government set criteria for capital
allocation but they can not tell whether these
criteria are followed. - There remains a
difference in capital allocation to provinces
(poorer provinces receive less capital than the
others) - Contributions of local households have
not been made public. - The programs do not help
reducing poverty, poverty reduction rate is not
sustainable. - Accounting and auditing system
have not been in place. - There are many
limitations in checking and monitoring the
implementation of the program.
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II. (cont)
d. Investment by credit methods Table 4
State credit investment in agriculture, forestry
and aqua culture over the total state
investment credit.
Year 2001
2002 2003 2004 The whole
economy 26.930 27.999
33.252 29.000 Agriculture, forestry and
aqua culture 2.720 3.714 5.597
6.273 Proportion 10,1
13,3 16,8 21,6
Source statisticsbook-2003 and the report on
Vietnamese economy 2004, Institute of central
economics research and management (figures on
investment credit in the whole economy), Ministry
of planning and investment (figures on
investment credit in agriculture, forestry and
aqua culture ) e. Investment of individuals and
private enterprises in rural areas.
Increasing from 6900 billion VND (2001) up to
(9500) billion VND (2004), expectedly up to 11500
billion VND by 2005 the proportion is about 35
of the total social investment in rural areas
in 5 years 2001 - 2005 f. Foreign direct
investment (FDI) in rural area. Increase
from 900 million up to 1,5 billion in 5 years
2001 2005, made up 5 of the total social
investment in rural areas.
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III. Results of developing several types of
fundamental infrastructure in rural area and some
limitations.

• 3.1. The road system.
• - Results The rural road system made up 80 of
  the road system nationwide.
• 94,5 of provinces has motorway to the center.
• 32,9 of provinces has concrete roads.
• 3,1 of provinces has modern roads.
• limitations
• The quality of roads in the highlands remains
  poor and it is difficult to travel, especially in
  rainy season.
• The demand of capital investment in developing
  road system in rural area is high but the local
  capital resource remains low and the country has
  not attracted enough foreign investment capital.
  
• The quality of roads remains poor , they are
  easily degraded due to storms and floods, making
  the rural traffics unstable.

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III. (cont)
3.2. Electricity supply The number of
provinces which has been provided with
electricity accounts for 89,6 , the number of
household using electricity accounts for 79
The biggest number of household using electricity
is in the area of Red river delta (98,8) and in
the northern central (88,4), the lowest in the
North West (51) and Central highlands
(51,5). - Problems of electricity supply in
rural area nowadays The set-forth target for
developing rural electricity was so high that it
is difficult to achieve this target. Because of
the diversified topography of highlands, large
area and scattered resident, it is very expensive
to carry out this program. Electricity
industry has not launched the program that guides
people and cooperatives who manage a system of
electricity supply, the management and technical
knowledge on the system of transformers and
electricity transmission. In some areas,
electricity industry is taking over the
electricity system of cooperatives, then selling
electricity to every household as in the urban
are, but this work has been faced with the
reaction of cooperatives.
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III. (cont)
3.3. Irrigational system - The agricultural land
actively irrigated made up 36,2, in which the
land for rice cultivation actively irrigated made
up 62,0, the area for annual plants cultivation
made up 48,1 - The problems of irrigational
system nowadays The planning for using water
sources is not satisfactory. The targets are
mainly focused on cereal plants (investment in
irrigation for rice cultivation often accounts
for 79-80 of the total investment in
irrigation.) The old irrigational system is
degrading while the irrigation fees can not cover
expenditure. The apparatus managing the whole
irrigational system is big (nowadays 172
enterprises has more than 20 thousand technical
specialists and workers.) The operation
mechanism of irrigational companies remains
unclear. They are on the one hand self-accounting
units, on the other hand have to provide public
services for agricultural production and other
economic activities. Users still do not know
that water is not an unlimited resource, it is
becoming scare.
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III. (cont)
Water quality is low and water is likely to be
polluted because of chemical fertilizers and
untreated industrial waste. Managers have not
focused on developing small and medium size
irrigational works that can present floods in
rainy reason and serve as reservoires for dry
seasons, especially in areas with erosion. the
policy of investment in irrigational system is
unequal in different areas. Red river delta
(71), the Mekong Delta (59), northern
central(36), the middle coastal area (31),
North east (23), South east (13), Central
highlands (6) and north west (7,7). The
investment level is low, production capacity only
amounts to 60-65 design capacity. Irrigational
system project is mainly invested by the state
funds, it lacks the mechanism of mobilizing
foreign capital. There remains limitations on
the public contribution to water management
because their knowledge is poor .
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III. (cont)
3.4. Clean water supply for rural area Table 5
The proportion of people with access to clean
water by region and by income group
The Proportion of people with access to clean water The Proportion of people with access to clean water The Proportion of people with access to clean water
1993 1998 2002
The whole nation Urban area Rural area 26,2 58,5 18,1 40,6 76,8 29,1 48,5 76,3 39,6
The Poorest The nearly poorest The middle class The nearly richest The richest 9,4 16,7 21,3 27,5 51,3 16,1 26,9 31,7 45,5 72,1 22,7 35,4 42,7 54 78,8
Source The report on the development of Vietnam
2004 (WB) limitations Lack of a master plan on
clean water supply and rural environment
protection on large scale. Have not supervised
the quantity and the quality of water supplying
for people. The localities often focus on
building up works for exploring and supplying
water, but hardly pay attention to sustainability
issues and the impact on long term water
resources . Attention has not been paid to
water pollution prevention. A mechanism of
lending credit and encouraging farmers to build
up clean water company has not been set up. .
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III. (cont)
3.5. Market system - The number of provinces
having markets made up 56,12 The Mekong Delta
nearly 72 The south east 70 The middle
coastal area 65 The Red river delta 63 The
north west 28,4 - Limitations Nearly 50 of
towns and provinces has no markets. The rural
market system remains unsettled, market is only
the place for exchanging goods. Have no big
trading centers.
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IV. Orientations for the policies of investment
in developing infrastructure in rural area
4.1. Adjusting the policies of investment in
rural areas a. Calling up investment capital
for rural area. Firstly The government should
adjust increasing the proportion of spending
budget on agriculture, forestry and aqua culture
as well as rural area to gain the proportion of
20-22 of the total spending of government budget
on the whole economy. Secondly The government
should make a clearer policy of land and
taxation, and investment guarantee to draw
capital of Vietnamese enterprises, FDI to
manufacturing, notably attracting FDI toward
sectors with many advantages and high
competitiveness such as sea products, coffee,
some fruit plants and milch cows raising .etc.
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IV. (cont)
Thirdly For export- oriented areas set up for
the past few years, besides state investment in
infrastructure, the government should make
agricultural enterprises and manufacturers
responsible for investing in fundamental
infrastructure of the manufacturing area such as
roads system, electricity transmission, water
supply .etc. Fourthly The locality should
actively promote and launch the models BT, BOT,
BOO8 in developing rural infrastructure.
Accordingly, authorities at provincial and
district levels should quickly allocate land for
infrastructure development.
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IV. (cont)
b. Allocating and using state investment in rural
areas Firstly The state budget. - The goal for
using this capital source lies in focusing
investment in infrastructure, helping farmers
restructure their production and expand
industrial production and services. - A unified
program which develops the rural
infrastructure. - The unified program
Development of the rural infrastructure should
be set up in the long term, with reference to
national targets for developing agriculture and
the rural area (by 2020 and in the farther
future) Secondly State investment credit The
goal for using this capital source is to support
local investment via credit provision, thereby
encouraging localities to use this capital
resource to invest. But it is necessary to
complete the rules of using and returning the
loans.
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IV. (cont)

• 4.2. Improving the mechanism of investment in
  developing the rural infrastructure
• a. The rural roads system
• - Clarify the capital for supporting to develop
  roads system in each communes of the province.
• Give the capital for building up roads at
  provincial and district level directly to the
  local authorities.
• For the roads system belonging to communes, give
  capital to local authorities based on the project
  passed by local residents.
• - b. Electricity supply
• - Socialize the management of low-tension
  electricity in the areas supplied with the
  national electricity.
• - Encourage people to use the manufacture form
  which consumes less electricity such as small
  irrigational system, small generator and other
  generators using solar energy in areas supplied
  with electricity but fail to expand to supply
  electricity for their neighborhood.

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IV. (cont)

• c. Irrigational system
• - Spend a considerable amount of investment
  capital in building up small reservoires to
  preserve water in areas suffering from flash
  flood in rainy season and drought in dry season.
• - Pay attention to the irrigational system in
  areas planting industrial plants, exported
  plants, or the areas raising cattle to reclaim
  new lands.
• - Invest in building up and reinforcing the levee
  system and strengthening sea water preventing
  system.
• Develop the irrigational system in areas with
  advantages in producing sea products, especially
  in the Mekong Delta.
• Reinforce the canal system.
• d. Clean water supply for rural area
• - Invest in the propaganda campaign that call
  people for using clean water and to take part in
  building up the clean water supply system.
• - Protect water resource from being polluted.
• Invest in exploring under ground water replacing
  clean water.
• Encourage private investors to invest in clean
  water supply sector.

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IV. (cont)
d. Market system - Take into account the opinion
of the public on the location, scale, the model
as well as their contribution to the market
system before the construction. - Assign locality
to manage the market system under clear
regulations on the their responsibilities and
duties. e. Other issues - Set up a cooperative
mechanism of responsibilities and benefits among
economic entities in constructing, managing and
using infrastructure in the rural area. - Pay
attention to train professional workers in order
to improve the effectiveness of using
infrastructure. - Make new investment, manage
and preserve together the infrastructure. Spend a
reasonable amount of capital on using and
exploring infrastructure. Clarify rights and
responsibilities of people when using and gaining
benefits from the infrastructure works.
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The policies of investment in developing
infrastructure for the purpose of economic
growth and hunger eradication and poverty
alleviation in the rural of Vietnam.
Presenter Dr. Chu Tien Quang Institute of
central economics management