At a recent conference of the International Support Group (ISG) to discuss official development assistance (ODA) funding for agriculture and rural development, Dr. Le Van Minh, Head of International Cooperation and Director of the ISG Office said that the agricultural and rural development sector needs around US$400-450 million per year and up to US$2-2.25 billion over the next five years.

Huge capital inflows, slow disbursement
Fifteen years after first inviting ODA funding, Vietnam has mobilised US$35.2 billion, including US$ 5.5 billion from 41 donors, accounting for 15.66 percent of the total ODA funding.

This ODA funding was provided by the Asian Development Bank (ADB), the World Bank (WB), the French Development Agency (AFD), the Japan International Cooperation Agency (JICA) and the German Bank for Development and Reconstruction KWF, with the funding allocated to irrigation work (40%), agriculture (23%) and forestry (19%).

However, the disbursement of ODA has been slow as it takes another 1-2 years to put projects into effect, resulting in a low investment efficiency.

According to the MARD, despite total ODA funding for agriculture and rural development being quite high, the number of small-scale projects is less than expected. Projects worth between US$70-100 million and more than US$100 million only account for 1.7 percent and 1.3 percent of the total ODA funding, respectively.

The execution of ODA funding has proved ineffective and has exposed many weaknesses such as a lack of guidelines on using ODA funding, especially for agriculture and rural development, an uneven allocation of capital in different areas and poor management of ODA.

The MARD has attributed the slow disbursement of ODA in the 2003-2008 period to a failure to identify priority areas that need investment and localities’ poor capacity to acquire land and capital to compensate people living in areas that are being cleared.

In order to solve this, the MARD has came up with a number solutions to utilise capital from different funds, including the Climate Change Fund and decentralise project management boards to the provinces to accelerate disbursement.

In addition, the MARD have agreed with donors that after Vietnam makes a list of priority areas for investment, donors will then disburse their capital. This mechanism will be implemented in 2010.

Changes have been seen in giving priority to the use of ODA funding which previously only focused on three areas: protection of natural resources, poverty reduction and infrastructure development. But in the future, the focus will be on four areas, including putting in place a policy for agriculture and rural development and farmers, poverty reduction, food safety and food security, said Dr. Minh.