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Moving to Middle-Income Status: Donors and Vietnam beyond 2010

Martin Rama The World Bank in Vietnam February 29, 2008. Moving to Middle-Income Status: Donors and Vietnam beyond 2010. The Middle Income Squeeze. Growth Slowdown High income countries grew by 50% (1980-2000) ‏ Low income countries grew by 150% Middle income countries grew by 20%

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Moving to Middle-Income Status: Donors and Vietnam beyond 2010

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  1. Martin Rama The World Bank in Vietnam February 29, 2008 Moving to Middle-Income Status: Donors and Vietnam beyond 2010

  2. The Middle Income Squeeze • Growth Slowdown • High income countries grew by 50% (1980-2000)‏ • Low income countries grew by 150% • Middle income countries grew by 20% • High Volatility • Strategic Uncertainty • High income, high tech • Low income, low wage • Middle income, ???

  3. An East Asian Exception?

  4. Economies of Scale and Agglomeration Effects Dominate • International integration permits specialization • Specialization breeds innovation • Innovation requires higher education

  5. Economies of Scale and Agglomeration Effects Can Breed Social Stress • Urbanization • Inequality • Corruption

  6. Cities and Congestion • Facts • Cities have three times the productivity of rural areas, reflecting agglomeration economies • East Asia is witnessing the largest rural-to-urban shift in human history: 550 million over next 25 years • Large cities are coming under stress; secondary cities are growing faster • Implications • Urban growth will drive regional differences • Make large cities more livable • Improve connectedness and economic management of smaller cities

  7. Inequality in East Asia Has Increased, but not Everywhere

  8. Challenges for Donors • Move to non-concessional support • Embrace country policy priorities • Adapt flexibly to country systems • Provide advice and capacity building

  9. Adapt Flexibly to Country Systems • More budget and program support • Respect budget procedures • Improve predictability of transfers • Minimize special reporting requirements • Use/strengthen country financial management, results, and M&E systems

  10. Managing Risks: Corruption • A nervous authorizing environment, catering to parliaments and taxpayers • At one extreme: little oversight on budget support • At the other: detailed (and increasingly demanding oversight on projects • Abundant access to finance and the China effect

  11. A Donor Questionnaire • Sent to the entire donor community • For now, answered by a dozen donors: Asian Development Bank, Denmark, European Commission, Finland, France, India, Japan, Spain, Switzerland, United Kingdom, and World Bank • Accounting for much of ODA to Vietnam: For 2007, they pledged the equivalent of $426 million in grants and $3,139 million in loans

  12. Grant Volume in 2008-2010 Note: Weights based on 2007 pledges, measured in grant equivalent terms.

  13. Grant Volume in 2011-2015 Note: Weights based on 2007 pledges, measured in grant equivalent terms.

  14. Loan Volume in 2008-2010 Note: Weights based on 2007 pledges, measured in grant equivalent terms.

  15. Loan Volume in 2011-2015 Note: Weights based on 2007 pledges, measured in grant equivalent terms.

  16. Loan Terms in 2008-2010 Note: Weights based on 2007 pledges, measured in grant equivalent terms.

  17. Loan Terms in 2011-2015 Note: Weights based on 2007 pledges, measured in grant equivalent terms.

  18. Graduation Process • Several donors have a formal graduation process, towards less concessional ODA • They include ADB and World Bank, which are now in the “blending” process • Their full graduation of Vietnam could be complete as early as 2012 • Several donors may discontinue Vietnam as a focus country in their program

  19. Technical Assistance Note: Refers to the share of technical assistance in ODA (unweighted), compared to 2007 pledges.

  20. Investment Lending Note: Refers to the share of investment credits in ODA (unweighted), compared to 2007 pledges.

  21. General Budget Support Note: Refers to the share of general budget support in ODA (unweighted), compared to 2007 pledges.

  22. Sectoral Budget Support Note: Refers to the share of sectoral budget support in ODA (unweighted), compared to 2007 pledges.

  23. Through Non-Government Channels Note: Refers to the share of support to NGOs in ODA (unweighted), compared to 2007 pledges.

  24. Support to Private Sector Note: Refers to the share of private sector support in ODA (unweighted), compared to 2007 pledges.

  25. Sectoral Priorities

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