World Bank study of Vietnams infrastructure strategy
Washington, United States of America – Vietnam has been remarkably successful in expanding access to infrastructure services over the past twenty years, but much remains to be done to achieve universal coverage. Policies and institutions that have worked in the past will need to be adapted as Vietnam’s development advances, says a new World Bank study, “Vietnam’s Infrastructure Challenges”.
“Vietnam has been tremendously successful in ensuring that the entire country has benefited from infrastructure investment, and this investment has underpinned rapid growth, increased access to basic services, and reduced poverty,” said Klaus Rohland, the World Bank’s Country Director for Vietnam, at the launch of the study at a workshop in Hanoi today. “But at the same time, new challenges are emerging such as the need to mobilize new sources of finance, accelerated urbanization, environmental issues, and increased recognition of governance issues.”
The study consists of six volumes: a report on Infrastructure Strategy provides an overview of the challenges facing Vietnam and deals with issues of common importance across infrastructure sectors; other sectoral reports deal with Water and Sanitation, Power, Transport, Telecommunications, and Urban Development. The study was prepared between 2004 and 2006 by World Bank staff and consultants. It is being discussed in a three-day workshop in Hanoi, as a means of inviting feedback on its contents from the Government and other stakeholders, prior to final publication.
Mr. Tr?n ?ình Khi?n, Vice Minister of Planning and Investment welcomed the study, saying “In order to successfully implement the targets and tasks established in the 5 year socio-economic development plan for 2006-2010 aiming a rapid and sustainable growth, the need for infrastructure investment is huge. We need to focus investments on socio-economic targets aiming at poverty reduction, to continue to support areas facing with difficulties, provinces that are facing with natural calamities, and to encourage all sectors of the society to invest in infrastructure in order to create a strong change in infrastructure structure, for the development of the country.”
The study finds much to praise in Vietnam’s existing infrastructure strategy, noting that total investments in infrastructure have been close to 10% of GDP in recent years, a very high level by international standards. As a result, Vietnam’s road network has more than doubled in length since 1990, and its quality has improved substantially. All urban areas and 88% of rural households have access to electricity. Access to improved water supplies grew from 26% of the population to 49% between 1993 and 2002, and during the same time access to hygienic latrines grew from 10% to 25% of the population.
But the study notes that new challenges are emerging that will require a revised infrastructure strategy.
- International donors currently finance almost 40% of infrastructure investment. As Vietnam becomes richer, donor assistance will play a smaller role and alternative sources of finance will need to be found.
- Around one million people are arriving in Vietnam’s cities each year from rural areas. To cope with this influx, urban planning and management need to be improved. In particular ad hoc residential development needs to be better controlled and basic infrastructure provided ahead of development taking place. Decentralizing more responsibility to local governments and adopting more flexible planning methods would help achieve this.
- Providing access to infrastructure generally yields high social returns, but as more and more people have access to basic services, it will become increasingly difficult to find “easy” investments with high returns. Improved planning processes will be needed to identify investment opportunities with high social returns. And governance reforms, addressing enterprise incentives and corruption, are necessary to maximize the returns from the chosen investments.
- As poverty is reduced in Vietnam, the difference between urban and rural poverty rates is diminishing. But at the same time, the gap between the highest income earners and the lowest income earners is increasing. An issue of increasing importance will be how to target any government fiscal support to infrastructure to benefit the poorest citizens.
Christian Delvoie, the World Bank’s Director of Infrastructure in East Asia and the Pacific, is hopeful that the study’s recommendations can serve as a reference point in discussions with the Government on infrastructure reform. “One of the pleasures of working with Vietnam is in Government’s willingness to pilot new ideas and to quickly disseminate those that prove to be suited to the Vietnamese situation. Through this study, the World Bank seeks to help the process of policy development by providing both an analysis of Vietnam’s infrastructure challenges and suggestions for reform based on lessons learned around the world.”
- The World Bank strongly supports Vietnam’s efforts in attaining Vietnam’s localized Millennium Development Goals and targets.
- The World Bank provides three types of services to Vietnam: (1) design and financing of development projects; (2) analytical work, policy advice, and technical assistance; and (3) donor dialogue facilitation. In addition, every year the Bank co-chairs the Consultative Group (CG) Meeting in which all donors gather to discuss the aid program for Vietnam.
- Since reengaging in Vietnam in 1993, the World Bank has supported 51 projects to help fight poverty in Vietnam through finance for agriculture, infrastructure, health programs, schools, and other essential needs.
- Since 1993, US$5.6 billion has been committed to Vietnam, of which over $2.9 billion has been disbursed. This makes Vietnam the largest IDA-only borrower in the world.