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Main Points
Discussed
GRIPS Development
Forum
- This workshop aimed at widely exchanging ideas and
experiences on large-scale infrastructure and its contribution to
growth and poverty reduction. It was co-sponsored by the Ministry of
Planning and Investment (MPI), the World Bank, and the Government of
Japan, with participation of the central and provincial governments,
donors, researchers.
- The workshop consisted of three parts: (i)
presentation of aggregate perspectives based on the two ongoing
studies by GRIPS/Japan (i.e., analytical framework for assessing the
role of large-scale infrastructure in growth and poverty reduction)
and World Bank (i.e., empirical assessment of public investment
plan); (ii) presentation of specific studies by donors (i.e., JBIC/IDCJ,
DFID, AusAID), especially impact assessment of infrastructure
projects; and (iii) presentation of the first draft of a new chapter
of CPRGS by the working team within GoV.
Click here for the workshop
agenda.
< Opening
Remarks >
Dr. Cao Viet Sinh (Director
General, Dept. of National Economic Issues, MPI)
- Introduction of the background for drafting a new
chapter of CPRGS--dedicated to large-scale infrastructure--and the
future process of finalization (i.e., the draft chapter to be
finalized by end-October/early November, to be reviewed by the Prime
Minister in early-mid November, and the final version to be
presented at the December 2-3 2003 CG Meeting.)
Mr. Martin Rama (Lead Economist,
World Bank/Vietnam)
- It is important to open discussions on the Public
Investment Plan (PIP), which amounts to 18% of GDP. Introduction to
the WB (ongoing) study on the assessment of previous PIP
(1996-2000), which takes account of both direct and indirect effects
of expenditures (category “A” projects). The study intends to
draw implications for the future PIP process.
- Four main issues to be addressed in this
study:
- Analysis of counterfactual: “What would have
happened without investing in large-scale
infrastructure?”
- Appropriate financial tool, such as
public-private partnership in infrastructure financing.
- Trade off: spending on large-scale
infrastructure vs. poverty reduction?
- Need to consider how to integrate investment
(capital) and maintenance expenditures.
Mr. Mitsuru Kitano (Minister,
Embassy of Japan)
- Expected outputs from this workshop,
particularly:
- Shared understanding of the role of large-scale
infrastructure in growth and poverty reduction, by deepening
discussions on an analytical framework for channels and
linkages.
- Better understanding of various dimensions and
functions of large-scale infrastructure in endeavor of
development (e.g., its relationship with rural infrastructure,
social investment).
- Collaboration between the Vietnamese government
and donors (also among donors) toward drafting a new chapter of
CPRGS.
- Importance of ensuring a participatory process
of CPRGS. This workshop is based on wide-range of participation
and should provide a good opportunity for exchanging ideas.
< Presentation
on Analytical Framework >
Ms. Izumi Ohno (GRIPS
Development Forum, Japan): “Linking Economic Growth and Poverty
Reduction--Large Scale Infrastructure in the Context of Vietnam’s
CPRGS” (see Attachment
1 for PPT, 448KB)
- Pro-poor growth?
- Analytical framework for assessing the role of
large scale infrastructure
- Specific feature of Vietnam Case Analysis: linkages
among infrastructure, growth and poverty reduction
- National Highway No.5 and Hai Phong Port
- My Thuan Bridge and National Highway No.1
- North-South 500 kv Transmission Line
- Road network and user access to social service
(e.g., reproductive health project)
- Implications for future strategic planning and aid
partnership in Vietnam
Mr. Martin Rama (World Bank):
“An Empirical Assessment of Vietnam’s Public Investment Program
1996-2000” (see Attachment 2 for
PPT, 373KB)
- Shortcomings of traditional approach (“project
approach” vs. “statistical approach”). There is a need to
develop an empirical strategy, by combining the two
approaches.
- More specifically, it is proposed that empirical
assessment of large-scale infrastructure projects be conducted by
matching actual spending of PIP (categorized by sector, province,
year and funding pattern) with provincial growth and poverty
indicators.
- The study faces difficulties in data collection.
(Database still needs to be adjusted. In the meanwhile, findings are
not reliable.) Nevertheless, a possibility exists for assessing
growth and poverty impacts of the PIP.
< Comments
and Questions >
Dr. Cao Viet Sinh (MPI)
- It is important to carefully analyze funding
sources of infrastructure investment (such as ODA, public finance to
SOEs, and private finance).
Mr. Martin Rama (WB)
- The two presentations (Ohno & Rama) are
complementary. Both stress the indirect impact of large-scale
infrastructure on the poor.
Commentator: Mr. Vo Tri Thanh (CIEM)
- Questions on appropriate timeframe for analyzing
the past impacts of public investment on growth and poverty
reduction.
- 1993-1998: Remarkable progress in growth and
poverty reduction. (Could this trend be continued?)
- 1998-2002: Lower rate of return to public
investment, although its total volume has increased (including
ODA). It is especially difficult to reduce poverty in remote and
poor areas.
- It is useful to analyze the 1st and 2nd round of
impacts. At the same time, it is necessary to consider optimal
sectoral composition of investment, taking account of budgetary
constraints. (IFPRI research on rural investment in other countries
shows that agricultural extension and rural road are the most
effective investment.)
- There is a need to consider additional aspects,
such as:
- Capacity building and institutional
development.
- Allocation of O&M budget.
- Judgment of appropriate timing of the projects
(e.g. under-utilization of the Than Long bridge, constructed 10
years ago).
- Mitigation measures for potentially negative,
social and environmental impacts.
- Need to reduce transaction costs. (According to
the recent JICA study, transaction costs for ODA-financed
activities are quite high.)
Commentator: Mr. Dang Duc Dam
(Prime Minister’s Research Group)
- Importance of “network” concept, e.g.,
large-scale infrastructure and connecting feeder roads.
- There have been dramatic changes in the
socio-economic situations of Vietnam (during the past 10 years),
with clear impact of improvement in access to road and electricity.
Furthermore, large indirect impact has been observed, such as
agricultural diversification.
- Importance of urban infrastructure to promote
social development (including university).
- Need to pay attention to negative aspects of
large-scale public investment, particularly resettlement and land
acquisition.
Ms. Yumiko Niiya (GRIPS Development
Forum, Japan)
- Question on policy implications for empirical
assessment of PIP, particularly regarding appropriate stage(s) of
the policy-making process in which “output” of the WB study is
to be used.
- It is suggested a possibility to improve the
“project approach” by capturing network effect, indirect effect,
and benefit distribution
Other Comments and Questions
- Agree that large-scale infrastructure contributes
to growth. At the same time, the quality of growth matters, and it
is important to know whether and how total factor productivity (TFP)
has improved.
- Need to pay attention to potentially negative
aspects of infrastructure investment.
- Overemphasis on “trickle down effect”?
- Attribution problem on poverty reduction impact:
The changes have been brought not only by the development of large
-scale infrastructure, but also by overall social change in the
concerned areas.
- Need to pay attention to the costs of delayed
project implementation.
< Response >
Ms. Izumi Ohno (GRIPS)
- Dichotomy of two objectives (growth vs. poverty
reduction) is not relevant.
- Infrastructure services should be considered from a
“network” perspective. Emphasis should be placed on
“totality.”
- Agree on the importance of careful planning,
because of huge expenditure involved in large-scale infrastructure.
While investment in different sectors (e.g., infrastructure vs.
social sector) could have trade-off in financial terms, they are
complementary in achieving development impact.
- Importance of partnership, especially in mobilizing
various financial resources. A good example is the expansion of Phu
My Thermal Power Plant II (privately financed, following ODA-funded
phase I) and power network improvement in the Mekong Delta (financed
by local government and communities).
Mr. Martin Rama (WB)
- It is important to give serious consideration to
both negative and positive impacts of large-scale infrastructure
projects during project appraisal.
- Although the “project approach” has its own
merits, it may be difficult to capture the indirect impacts of
infrastructure.
< Presentation
on the Impact from Individual Projects >
Mr. Hisaaki Mitsui (IDCJ,
Japan): “Impact Assessment of Transport Infrastructure Projects in
Northern Vietnam” (see Attachment 3 for
handouts, pdf 1.9MB)
- Projects profile: Improvement of National Highway
No.5 and Hai Phong Port in the Red River Delta (so called
“northern transport corridor”).
- Recent trend of gross regional product (GRP) and
poverty ratio in the surveyed area: The area influenced by the
project (= four provinces along NH5) has transformed into a new axis
of economic growth, achieving significant reduction of
poverty.
- FDI attraction as an engine for regional economic
growth.
- Rural economy activation as a channel for
sustainable poverty reduction
Mr. Simon Lucas (DFID/Vietnam)
and Mr. Khai (consultant): “Study on Road Network Impacts on the
Poor” (see Attachment 4 for
PPT, 2.2MB)
- Infrastructure is a necessary, but not sufficient
condition for growth and poverty reduction. There are other
important issues, such as: (i) efficiency of infrastructure
services; and (ii) extent of its contribution to poverty
reduction.
- DFID’s participatory perception study on road
network: implemented in 9 communes (4 plain communes in Hung Yen
province and 5 mountainous communes in Lai Chau province). In each
commune, 5 different social groups have been interviewed.
- Plain communes ranked district roads as the 1st
importance, while mountainous communes ranked commune roads as
the 1st .
- Different perception is attributed to
people’s sphere of economic activities.
- High expectation on the improvement of road
network, in expanding economic activities and increasing access to
socio-cultural service and technology and information.
- Need for a good prioritization system (--“invest
efficiently, wisely, and practically”). There remains a difficulty
which level of roads should be prioritized in PIP.
Mr. Paul Kelly (AusAID) and Mr.
Tran Vo Hung Son (University of Economics-HCMC) “My Thuan Bridge
Impact Monitoring Study”(see Attachment
5 for PPT, 1.2MB )
- Profile of the project: the construction of My
Thuan Bridge.
- This study intends to contribute to a process of
developing appropriate methods for impact monitoring (including
setting up the baseline data).
- The study analyzes the following impacts of bridge
construction: (i) traffic volume (including origin and destination
survey on the My Thuan Bridge); (ii) economic development (i.e.,
development of Industrial Zone in the surrounding area); and (iii)
social and environmental aspects.
< Comments
and Questions >
Commentator: Mr. Simon Ellis (World
Bank)
- Strong evidence of linkages among infrastructure,
growth and poverty reduction. Infrastructure provides a platform for
poverty reduction and growth.
- Nevertheless, three issues merit special
attention:
- Planning: There is a need for: (i)
complementary policies and concurrent interventions (e.g.,
vocational training for FDI promotion) to ensure that the rest
of the economy benefit from improved infrastructure services;
(ii) a mix of various financial sources such as ODA, state
budget and private finance; and (iii) integrated network to
address “missing middle” (= the importance of looking at
“totality”). In this sense, “Master Plan” is a very
important tool to assess short-term and long-term priorities
under budget constraints.
- Asset management: Maintenance costs should be
considered in the planning process. Return to road maintenance
is quite high.
- Transport services: Importance of analyzing the
efficiency of transport services and the distribution of
benefits (realized by improved transport infrastructure). Who
benefited from reduction in travel time and vehicle operation
costs? Transport charges (prices) greatly affect rural
communities and the people’s access to social services.
Commentator: Dr. Nguyen Thang
(Institute of Economics)
- A sudden increase in traffic volume at the My Thuan
Bridge indicates that its construction did remove transport
bottlenecks in the Mekong Delta. However, there is a need for: (i)
complementary policies; (ii) rules for PIP prioritization based on
identified bottlenecks (particularly at the provincial level); and
(iii) establishment of reliable database for impact
monitoring.
- Economic growth and poverty reduction should not be
viewed as trade-off. But, it is also true that growth is not enough
for poverty reduction. In the Central Highland Region where the
depth of poverty is severe, soft infrastructure (such as education
and health) is very important.
- Importance of public-private partnership in
resource mobilization. Especially, certain type of investment (e.g.,
social sector) is unlikely to attract private finance.
Mr. Simon Lucas (DFID)
- Although large-scale infrastructure is expensive,
small-scale infrastructure can be even more costly.
- It is important to start debates, regarding whether
infrastructure investment should continuously concentrate in Hanoi
and HCMC or be more widely spread.
Ms. Izumi Ohno (GRIPS)
- It is important to recognize the role of
large-scale infrastructure in diffusing the fruits of economic
growth to the surrounding areas. So, spatial dimension of
infrastructure investment affects balanced regional development.
(Can Tho is a good example of creating a new growth center in the
Mekong Delta--in addition to Hanoi and HCMC.)
- DFID’s perception survey suggests: (i) a need for
poverty-targeted programs in remote, mountainous areas, e.g.,
through spending public money in commune roads (as highly ranked by
communities) where new economic opportunities are severely
constrained and commune roads are the only mean of their connection
to the outside world; and (ii) a possibility for broader options for
financing commune roads in plain areas, e.g., by mobilizing
resources of local government and communes, because these areas have
greater potential for participating in growth.
Dr. Nguyen Quang Thai (Senior
Economic Expert, MPI/ Adviser) CPRGS Inter-Ministerial Working Group (See
attachment 6 for handouts,
Word
107KB)
- Usefulness of cost-benefit analysis in
Vietnam.
- The “Master Plan” has a very important role in
considering how to link: (i) large-scale and small-infrastructures;
and (ii) urban and rural areas.
- Need to examine diverse financial sources for
investment (including public-private partnership).
- Participatory process involving various sectors is
important to ensure the sustainability of investment (e.g.,
O&M).
Mr. Hisaaki Mitsui (IDCJ)
- Replicability of Vietnam’s experience: To what
extent is the Vietnamese experience relevant to other countries?
What are the lessons for the poorer and land-locked countries?
Other Comments and Questions
- Vietnam’s case is an example to show the role of
large-scale infrastructure in a particular stage of development. Its
replicability depends on country-specific factors, e.g., natural
resource endowment, development needs and strategy.
- Although a BOT option was examined at the appraisal
of the My Thuan bridge, F/S concluded its feasibility low because of
lack of regulatory framework. This suggests a need for public
administration reform.
- From a viewpoint of poverty reduction, how to
balance investment in large-, medium-, and small-scale
infrastructure remains a difficult question (e.g., investment in
growth engine areas vs. more difficult areas).
- State budget should be directed to the poorer
areas. At the same time, it should be also recognized that poverty
continues to prevail despite substantial investment in rural
infrastructure and that Program 135 has a difficulty in O&M.
There is a need for proper budget allocation for investment and
maintenance.
< Presentation on the Draft Chapter of CPRGS >
Professor Nguyen Quang Thai
(Adviser, CPRGS Inter-Ministerial Working Group)
- Explanation of main points of the draft, new
chapter of CPRGS.
- Specific issues to be considered for large-scale
infrastructure investment.
- Greater priority should be placed on how to
link large-, medium-, and small-scale infrastructure. This
implies a need to connect remote areas with power grids (now
that the government has developed national grids) and trunk
roads with feeder roads, etc.
- Importance of “Master Plan” so that
infrastructure investment can link growth and poverty
reduction.
- Importance of policies for ensuring
equity.
- Need to mobilize resources from various
sources, including the people, public and private sectors.
- Importance of decentralization.
- Issues of state monopoly.
- The new chapter can be closely linked to the other
chapters.
Dr. Cao Viet Sinh (MPI)
- The new chapter should be shortened and provide a
policy framework for investment in large-scale infrastructure. It is
not necessary to refer to specific projects, because the policy
framework should serve as a guide for sector policy and project
selection.
- It should also address opportunities and risks
associated with large-scale infrastructure development.
< Comments
and Questions >
Mr. Hiroshi Suzuki (Chief
Representative, JBIC)
- General comments: Welcome the government’s
initiative of CPRGS expansion. By including a chapter of large-scale
infrastructure, CPRGS will become more comprehensive.
- Co-existence of growth and poverty
reduction.
- Renewed attention to the role of infrastructure
(among donors). Vietnam is a frontrunner of such discussions
(e.g., commencement of a JBIC-WB-ADB joint study on the role of
infrastructure in East Asia).
- Specific comments: The new chapter should have
more focus on large-s scale infrastructure, incorporating the
following elements.
- Specific features of large-scale
infrastructure, by describing various linkages to growth and
poverty reduction.
- Agree with Dr. Sinh that the new chapter should
not refer to specific projects. Rather, it should provide future
orientation for the elaboration of sector priority, project
selection criteria, and the proper sequencing of
investment.
- It is important to align large-scale
infrastructure development to long-term visions with
consistency, paying attention to coherence with other policies,
budget, and investment planning etc. In particular, there is a
need to consider its budgetary implications for the efficient
use of ODA finance.
- Importance of measures to ensure the
effectiveness of infrastructure investment, e.g., by connecting
budges for investment and maintenance, strengthening project
management throughout the project cycle, promoting local
participation, and utilizing feedback from the lessons
learned.
- Need to refine targets. Reference should be
made not only to quantitative, but also qualitative (e.g.,
electricity pricing) and monitoring indicators.
- Due attention should be paid to the negative
aspects, such as resettlement issue.
- It is also suggested that duplication with other
chapters be avoided (particularly, sections related to rural roads,
water, and education).
Mr. Alessandro Pio (ADB)
"Comments for Draft Chapter on Large-Scale Infrastructure (See
attachment 8 for written comments, See
attachment 9 for
handouts, Word 25KB)
- Firm link between growth and poverty reduction,
both direct and indirect channels.
- CPRGS should address policy issues, and stay away
from specific projects.
- Five missing ingredients in the draft
chapter:
- Link between infrastructure investment and
services. It is important to pay attention not only to physical
aspects, but also service and management aspects (i.e., pricing,
competition, accessibility by the poor).
- Need to identify project selection criteria, in
order to prioritize infrastructure investment. Preliminary ideas
could include: (i) economic criteria (e.g., rate of return to
investment, O&M costs, cost reduction potential) and (ii)
social and poverty criteria (e.g., direct impact on poverty
reduction, likely distributional impact, network/linkage
effects, social and environmental impact).
- Financing options and modalities, e.g.,
government, ODA, domestic private sector, foreign private
sector.
- Macroeconomic and fiscal implications for
large-scale infrastructure investment.
- Process of project selection, e.g., the
formulation of Master Plan.
- Provocative (?) suggestion for integrating the
elements of the new chapter into the existing chapter (instead of
drafting a separate chapter for large-scale infrastructure).
Dr. Pham Lan Huong (CIEM)
- Need to include criteria for prioritization (e.g.,
sector-specific, region, project selection).
- Need to analyze sources of financing and budgetary
implications.
< Closing
Remarks and Wrap-up >
Mr. Martin Rama (WB) (See
attachment 10 for written comments)
- Importance of “Master Plan” to ensure the
consistency of investment (both sectoral and regional).
- Importance of funding aspects, particularly the
mobilization of various financial sources based on public-private
partnership (including the state budget, credit, bond
issuing).
- Need to strengthen mechanisms for prioritization
and project appraisal to ensure balanced growth and poverty
reduction.
- Importance of implementation, including
decentralization of project management.
- Need to pay attention to environmental and
resettlement issues.
- Need to pay attention to operation and
maintenance.
- Importance of infrastructure services.
- Need to establish information database for
projects, which should also serve for monitoring and evaluation.
Mr. Mitsuru Kitano (Embassy
of Japan)
- Significant achievements at the workshop,
particularly from the following three perspectives:
- Understanding of linkages among large-scale
infrastructure, growth and poverty reduction. In this regard, it is
important to avoid dichotomy between growth and poverty.
- Rich discussions on various dimensions of
infrastructure development, including:
- Measures to make large-scale infrastructure
more effective, such as complementary policies and concurrent
interventions.
- Measures to mitigate possible negative impacts
of infrastructure development.
- Importance of a proper mechanism for resource
allocation, especially addressing project appraisal, dual
budget, recurrent and capital spending. These issues should be
incorporated into the process of project selection and
appraisal.
- Importance of the government-donor partnership in
drafting a new chapter, and specific suggestions for further
improvement of the 1st draft.
- Need to strengthen a theoretical framework,
such as linkages and channels.
- Need to include policy issues.
- Need to pay attention to inter-relationship and
harmony between the new chapter and the existing other chapters
(or the new chapter to be integrated into the existing ones?).
Dr. Cao Viet Sinh (MPI)
- Appreciation to the collaboration by partners. The
workshop has confirmed wide consensus on direct and indirect
channels of poverty-reducing impacts of large-scale infrastructure.
It also reminds both positive and negative aspects of infrastructure
development, and the need to identify appropriate mitigation
measures.
- Large-scale infrastructure should be viewed from a
broader perspective, which requires thinking of proper location,
size, comprehensive and balanced approach. Therefore, the new
proposed chapter should incorporate the following issues:
- Importance of formulating Master Plan.
- Consideration to the country-specific context
of Vietnam, i.e., development needs of a low-income country
under transition to the market-oriented economy.
- Need to consider opportunity costs, including
the impact on regional economy and the assessment of
socio-economic and environmental aspects.
- Need to establish project selection criteria,
based on economic efficiency, social and poverty reduction
impact. This also includes the importance of participatory
approach.
- Proper attention to budgets for operation and
maintenance (particularly, roads).
- Need to consider various financial sources,
including the participation from enterprises and
communities.
- Importance of better monitoring systems.
- Further comments on the draft would be appreciated.
[End] |