According a report on socio-economic development over the past five months, US$571 million in ODA funds was disbursed, equivalent to 30 percent of the yearly plan and 80 percent of last year’s level.

The slow disbursement was attributed to the rising rate of inflation and readjustment of budget estimates for some projects. However, not all additional capital projects, including donor-invested projects, were agreed to by investors. This posed a great challenge to poverty reduction projects funded by donors.

The Vice Chairman of the Son La provincial People’s Committee, Cam Van Doan, said the province has suspended the implementation of some projects under the guidance of the Government to guarantee capital sources for ODA-funded poverty reduction projects.

Poor people are most affected by the current price inflation. Therefore, if the disbursement of poverty reduction projects is accelerated, it will benefit the poor. At present, the province is reducing the use of investment capital from its budget in order to pool capital for ODA projects. In addition, the province is streamlining procedures concerning capital investment construction and the bidding process, said Mr Doan.

At the CG meeting, international donors showed their confidence in the Vietnamese Government’s policies aimed at curbing inflation, stabilising the macro economy and reducing poverty.

Regarding Vietnam’s disbursement of ODA funds, the head of the EC delegation to Vietnam Ambassador Sean Doyle said that recently, Vietnam has disbursed more than US$5billion in both non-refundable aid and loans. This showed that Vietnam has regained the confidence of international donors.

Mr Donal Brown, Chief Representative of the UK Ministry for International Development said the capital provided by the UK Government for Vietnam is mostly non-refundable aid, focusing on poverty reduction projects. Most aid is disbursed under the management of the Government, thus making the speed of disbursement faster.

Investors have also highlighted the Vietnamese Government’s efforts in cutting public spending and capital for unnecessary projects. The Ministry of Planning and Investment (MPI) said in terms of Government bonds and the regular budget, total investment capital was reduced by VND14,000 billion compared to VND135,000 billion set in the Government’s plan set for this year.

The Government is considering a plan to shift a number of projects using the State budget to Build-Operation-Transfer (BOT) projects using domestic and foreign investment capital or sell and transfer projects that can take back capital for businesses. Apart from that, private businesses can also exploit or directly invest in projects to increase the investment efficiency.

Daisuke Matsunaga, envoy of the Japanese Embassy in Vietnam, said that donors agreed with the Government’s opinion about tightening public spending but the country must ensure social investment to maintain social security for the poor.

According to a recent World Bank survey, the average Vietnamese family produces food worth around VND15.4 million annually and they spend around VND10.2 million. However, around 46 percent of rural families purchase store-bought food so they are easily affected by the rising rate of inflation.

UN coordinator John Henda emphasised that the country should not ignore these people in a difficult time. Food price hikes have placed an intolerable burden on poor people and the Government should provide support to lift it from their shoulders.

Martin Rama, chief economist of the World Bank (WB) in Vietnam, suggested that the Government continue implementing its policies, including tightened fiscal and monetary policy.

Minister of Planning and Investment Vo Hong Phuc said that if Vietnam does not devise drastic solutions, the target to reduce poverty to 11-12 percent set by the National Assembly will be difficult to achieve. Vietnam identified that loose monetary policy is attributed to the current runaway inflation.

However, donors should discuss measures to accelerate the implementation of poverty reduction projects, said Ho Quang Minh, head of the MPI’s Foreign Economic Relations Department. The implementation of ODA projects is facing difficulties in terms of over-reliance on international aid and inflation. Finding measures to ensure enough foreign aid is necessary but a more immediate solution is needed to accelerate the implementation of projects. Both the Government and donors should raise capital for projects.

For ODA projects, if donors do not adjust capital according to new prices their operational time-frame will need to be shortened.

Minister Phuc said that Vietnam chose Sapa to organise the meeting because it is representative of other northern provinces where there is growing concern about many funded projects. The Government has issued decision N037 on the development of northern provinces. In addition, the region has the highest number of poor households, around 27-28 percent, while local people find it difficult to access social welfare, including health care and education. Poverty reduction projects are very important for them.

This year, Vietnam plans to disburse around US$2.5-3 billion of ODA capital. Two years ago, donors were committed to providing nearly US$10 billion to Vietnam and only US$2.1 billion were disbursed last year.