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Understanding ODA Definitions and Concepts

Understanding ODA Definitions and Concepts. Romilly Greenhill Workshop for Elective Members on Supervising Aid Hanoi, October 2007. Some basic definitions. Overseas Development Assistance (ODA) Grants and concessional loans Development purposes

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Understanding ODA Definitions and Concepts

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  1. Understanding ODADefinitions and Concepts Romilly Greenhill Workshop for Elective Members on Supervising Aid Hanoi, October 2007

  2. Some basic definitions • Overseas Development Assistance (ODA) • Grants and concessional loans • Development purposes • Coming from donor countries to developing countries • From official (governmental) sources • Grants • Money which does not need to be repaid • Loans • Money which needs to be repaid • Can be concessional or non-concessional • Concessional means that interest rates are lower than market rates and repayment terms easier • Non-concessional means at market rates

  3. ODA, Grants and Loans in Vietnam

  4. ODA in Vietnam • Vietnam receives about $2bn a year in ODA • About 1/3 of this is grants – is does not need to be repaid • About 2/3 is loans – it will need to be repaid out of Vietnam’s tax revenues at a future date • Why do loans matter? • Future obligation on Vietnam’s citizens • Low interest but not zero – and borrowing is in dollars • Needs to be repaid regardless of the impacts

  5. Who provides ODA? • Multilateral donors • World Bank, IMF, ADB etc • Use contributions from bilateral donors and recycled loan repayments • Often more conditional aid, more loans • Bilateral donors • Individual countries e.g. UK, US, Japan • Funded out of domestic taxation • New donors emerging e.g. China, India • Others e.g. INGOs also provide aid, but this is not counted as ODA

  6. Main sources of ODA in Vietnam 2001-05

  7. Who spends ODA? • Governments • NGOs • When official donors pass on aid to local or international NGOs, it is counted as ODA • Private sector • Government may pass on grant or loan finance to private sector institutions • Other institutions

  8. Aid spending by sector in Vietnam

  9. Types of aid • Project aid (‘investment project assistance’) • Funding for individual projects • Usually implemented by/with government, NGO or private sector • Often implemented through separate ‘Project Implementation Units’ • Time bound • Programme based/budgetary aid • Direct funding to the governments budget • Treated like tax revenue and allocated by the government • Technical Cooperation (TC)/Technical Assistance (TA) • Consultants, training and research • May be linked to projects (‘investment related’) or ‘free standing’ • Emergency and relief assistance • Food aid, aid for natural disasters etc • Often in kind and short term • NGO aid

  10. ODA in Vietnam by Type, 2003

  11. Understanding conditionality • World Bank and IMF usually lead conditionality, but bilaterals follow • World Bank Poverty Reduction Support Credits (PRSCs) generally co-funded by other donors – as in Vietnam • IMF’s Poverty Reduction and Growth Facility (PRGF) usually used as a ‘seal of approval’ for aid • Bilateral donors may have other conditions including on more political issues

  12. Conditionality in Vietnam • World Bank Poverty Reduction Support Credit (PRSC), co-financed by a number of other donors, includes following conditions: • Issue Intellectual Property Law in accordance with WTO requirements (PRSC 5) • Eliminate restrictions on imports in accordance with WTO requirements (PRSC 5) • Equitisation of State Owned Commercial Banks (expected PRSC 7) • Approve plans for restructuring of selected large State Owned Enterprises (PRSC 5)

  13. In summary • Vietnam receives about $2bn in ODA each year, just under 5% of national income • Two thirds of this of this is in the form of loans – Vietnam will need to repay this in the future • Japan, ADB and World Bank are the largest donors • Most aid comes in project form, to fund large infrastructure projects e.g. transport • Aid in Vietnam is still highly conditional

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