Mobilization of investment from local community for construction of rural technical infrastructures in the mekong delta region

GROUP 15 - MPPM INTAKE 6 - UPPSALA Title: Mobilization of investment from local community for construction ofrural technical infrastructures in the Mekong Delta Region Level: Thesis of M

in the Mekong Delta Region

Thu Nguyen Thi Hoai

Dzung Mai Quoc

Dr Sven-Erik Svard PhD

Dr Hung Nguyen Manh PhD

MPPM INTAKE 6 — Group 15

UNIVERSITY OF ECONOMICS & BUSINESS, VNUH

MASTER THESIS

Mobilization of investment from local

technical infrastructures in the Mekong Delta

Region

Authors. Thu Nguyen Thi Hoai

Dzung Mai Quoc

Supervisor.’ Dr Sven-Erik Svard PhD

Local Supervisor.’ Dr Hung Nguyen Manh PhD

Hanoi, May — 2013

We would like to express our gratitude to our Swedish supervisor Dr Erik Sv rd PhD for his useful comments, remarks and engagement through the process of this master thesis His willingness to motivate us contributed tremendously to our research.

Sven-At the same time, we would like to extend our grateful thanks to our local supervisor Dr Hung Nguyen Manh PhD for his valuable guidance and advice since our first meeting for expressing our thesis idea and for his con/umus support of our research, for his patience, motivation, enthusiasm, and immense knowledge We could not have imagined having a better advisor and mentor for our study.

On the other hand, our sincere thanks also go to our leaders and coworkers who work for Ministry of Construction, Ministry of Investment and P/ nnnfng.

Yf ih their hclps, busincs.s trips to Mekong Delta Region and the dfS 6ltSS fO ?

75 about the insuffic iency on the mobilizing investment from local community policies for construction of rural technical infrastructures were our reality knowledge for this research.

Bes ide, we would like to thank Uppsala Coordinators and Staffs, who works

in the Center of International Training & Education (CITE) of University of Economics and Business, Vietnam National University, Hanoi.

Also we thank our Uppsala Intake 6 classmates for the stimulating discR5S /PnS , for a// thefun we have had in a year.

Las I but not the least, we would like to thank our family members who have supported us throughout tht3 entire proceS3.

GROUP 15 - MPPM INTAKE 6 - UPPSALA Title: Mobilization of investment from local community for construction of

rural technical infrastructures in the Mekong Delta Region

Level: Thesis of MSc in Public Management

Author: Thu Nguyen Thi Hoai

Dzung Mai Quoc

Supervisor: Dr Sven-Erik Svärd PhD

Dr Hung Nguyen Manh PhD

Date of presentation: 18th May, 2013

Objectives:

Awareness about the important role of technical infrastructure foreconomic development and social stability, Viet Nam Government has spentabout 9-10% annual GDP to priority invest for infrastructure developmentacross the country, especially rural areas - where 66% of Viet Nam'spopulation live and work However the dependence on almost 100% of thelimited national budget and have not been mobilized other sources from thecommunity for rural infrastructure is a major constraint in Viet Nam in thepast in which farmers in the Mekong Delta is a typical example By a research

on policies to attract investment to construct rural infrastructure, the authorsstated that: there is a big incentive for rural development in a great potential

of Mekong Delta if can gather contributions of the people to buildinfrastructure through a mechanism to attract investment from the community

in this area Therefore, to identify key elements in terms of policies influence

on investment attraction of community to build infrastructure and analyzeroles of the community in activities of investment attraction to construct ruralinfrastructure in the Mekong Delta, it is a necessary to makerecommendations on mechanisms to attract investment with communityinvolvement

i

GROUP 15 - MPPM INTAKE 6 - UPPSALA Research Questions:

- What is the community’s role in participating in construction of ruralinfrastructures in the Mekong Delta Region?

- What are the major factors that impact the mobilization of investmentfrom local community for construction of rural technical infrastructures inthe Mekong Delta Region?

The objective and scope of the thesis

This paper aims to analyze the role of the community in investmentattraction Moreover, it aims to identify the main factors of policy affectingthe mobilization of investment from the community in construction of ruralinfrastructure in the Mekong River Delta Thereby, the paper also look forrecommendations on mechanisms to promote investment attraction with theparticipation of the community in construction of rural infrastructure in theMekong River Delta

Theoretical Framework

The model of studying investment mechanism with participation ofcommunity in technical infrastructure construction in MDR based onconsidering the role of the local community participation in the World Bank’sspecific project in 2002 (Community-based Rural Infrastructure Project -CBRIP) in relation to indices such as voluntary contribution, transparence andresponsibility for explanation to people of The Viet Nam ProvincialGovernance and Public Administration Performance Index (PAPI-2011)

Research Method:

Through using data of statistical reports, specialized reports, especiallyperformance indicators and management of provincial administration in VietNam - 2011 (PAPI), and based on actual results of a project have beenimplemented by the World Bank in Viet Nam, the authors had analyzed,

ii

GROUP 15 - MPPM INTAKE 6 - UPPSALA

compared advantages - disadvantages of Mekong Delta rural from which topoint out opportunities and challenges for building a mechanism ofinvestment attraction from community on technical infrastructure sectors bySWOT analysis

Reflection and conclusions:

Based on analysis results of actual states and affecting factors, authorscome into a conclusion as follow: transparency and accountability to peoplehave an organic relationship with participation and contribution of people inbuilding mechanism of attracting investment in community It is alsorecommended to adjust some contents in legal documents together withclassify community and perform mechanism of managing basic constructioninvestment as for rural infrastructures The study shows that policy onmobilizing resources from community is considered as an important factor todevelop technical infrastructure as well as rural socio-economic development

in the whole country generally and Mekong Delta in particularly

Recommendation for a futher study:

In the scope of study with limitation of time, group of authors proposed

to use secondary data to analyze in the thesis; it is seen to be a reasonableoption due to legitimacy, reliability and level of credibility of data used inreports and researches made by prestige organizations including GovernmentInspectorate,Ministry of Interior, United Nations, etc However, mechanism

of investment attraction with participation of community to develope ruraltechnical infrastructure in Mekong Delta can be more effective if there ismore time to conduct the thesis that allows to integrate analysis andassessment into report results based on provincial competitiveness index (PCI– 2011) and group of authors in charge of exploiting, analyzing primary datathrough summary of questionairs and extensive surveys due to characteristics

of population areas apart from each other, difference in education as well as

iii

GROUP 15 - MPPM INTAKE 6 - UPPSALA

management skill of commune-level officers in this area; this is really large challenge during study

Value of the thesis:

In a scope of this research, an objective is to advise policy makers andauthorities at all levels The central authorities can base on the proposals toenact policy frameworks (in the form of legal documents such as decrees ofthe Government, decisions of the Prime Minister ), local authorities base onproposed mechanisms of the central authorities to issue specific policieswhich meet with their local conditions (particularly at the provincial level).The study has also suggested new recommendations (for proposed newmechanism) or adjustment (for current policies) some legal documents Thestudy also plays a role to orient developers (including foreign and domestic)

in dialogues and suggestions policies for central and local governments interms of investment to construct infrastructure

iv

TABLE OF CONTENTS

1 INTRODUCTION 5

1.1 Rationale 5

1.2 Research Questions 7

1.3 The objective and scope of the thesis 7

1.4 Literature reviews 7

1.4.1 Theories of investment, the role of investment and investment policy in socio-economic development 7

1.4.2 Theories, viewpoints about investment, its policies, and capital source for rural infrastructure development in Vietnam 11

1.4.3 Definitions and roles of infrastructures in development issue: 15 1.4.4 Roadmap for building legal documents related to public-private partner 17

2 THEORETICAL FRAMEWORK 19

2.1 The connection between community participation and investment in building rural technical infrastructure 19

2.2 The Provincial Governance and Public Administration Performance Index (PAPI) 22

3 RESEARCH METHOD 28

3.1 Data collection 28

3.2 Methods of analysis 28

4 CURRENT STATE AND POLICIES ON MOBILIZATION OF INVESTMENT INTO RURAL INFRASTRUCTURE IN THE MEKONG DELTA REGION 29 4.1 Current social-economic and rural infrastructure situation of the Mekong Delta 29

4.2 Rural infrastructure development policy in Vietnam and the Mekong Delta Region 32

4.2.1 General Guideline and policy 32

4.2.2 Investments in infrastructure development 35

4.3 Analysis of PAPI index to identify the factors that impact on infrastructure investment in the Mekong 38

5 CASE STUDIES: CAN THO CITY AND LONG AN PROVINCE 43

5.1 Can Tho City 43

5.2 Long An Province 46

6 POLICY RECOMMEDATIONS 50

6.1 Adjusting Regulations 50

6.2 Classifying community to make investment attracting mechanism more effective 50

6.3 Implementation of typical basic investment management for rural technical infrastructures 51

7 CONCLUSION 53

REFERENCES 57

APPENDIX 61

LIST OF FIGURE, DIAGRAM:

Figure1:The location map of Mekong River Delta 5

Figure 2: Two measuring factures in PAPI 24

Figure 3: PAPI index and component indices 26

Figure 4: Influences between PAPI’s assessment contents 26

Figure 5: Analysis frame for attraction mechanism of investment in building infrastructure with participation of the community 27

Figure 6: Administrative map of the MDR 29

Figure 11: Infrastructure Development Funding mechanisms 35

Figure 8: The chart on contribution mobilization from the community - PAPI 2011 39

Figure 9: The index of openness, transparency and accountability to the people of 13 provinces in MDR 39

Figure 10: Administration map of Can Tho City 44

Figure 11: Administrative map of Long An Province 46

LIST T OF TABLE: Table 1: Summary of some infrastructure criteria of Mekong Delta in 2011 31 Table 2: Infrastructure Investment Funding Mechanism (%GDP) 36

Table 3: Total investment capital for rural development 47

LIST OF REFERENCE: Box 1: (PPP) Public Private Partnership 17

Box 2: PAPI in Vietnam for the period 2009 – 2011 23

Box 3: New Rural Program 68

LIST OF APPENDIX FIGURE: APPENDIX FIGURE - 1: Comparison of PAPI 2011 in some provinces/cities 61

APPENDIX FIGURE - 2: PAPI Table - 2011, weighted summary 62

APPENDIX FIGURE - 3: PAPI Table - 2011, non-weighted summary 64

APPENDIX FIGURE - 4: PCI map 2011 66

APPENDIX FIGURE - 5: Ranking of Provincial Competitiveness Index in 2011 67

MDR - Mekong Delta Region

PAPI - Viet Nam Provincial Governance and Public Administration

Performance Index

PCI - Provincial competitiveness index

CPMU - Central Project Management Unit

PPMU - Provincial Project Management Unit

CPCC - Communal Project Coordination Committee

1 INTRODUCTION

1.1 Rationale

Located at the South of Vietnam, the Mekong Delta Region, so calledSouthern Delta Area or Southwestern Area by Southern people of Vietnam, isone of the rich and large delta areas in the Southeast Asia and in the world,MDR consists of 13 provinces/cities with the natural land area of 4.05 million

ha (accounting for 12% land areas of the country)and the population is about17.33 million (accounting for 19.7% of the national population)1; in which,the land area and population in rural area are 3.51 million ha (accounting for87% regional area) and 11.54 million people (accounting for 66.64% ofregional population)2, respectively The people of MDR have high solidarity,creativeness and many similarities in habits

(Source: Report of construction planning implementation for MDR - 2012

Figure1:The location map of Mekong River Delta

The regional development planning orientations showed that MDR plays

an important role in regional trading, production for export, ruraldevelopment of Vietnam With its favorable geographic location (about700km coastal line and 400km road borderline), MDR is potential for

1 Preliminary statistics - 2011, Available at: http://www.gso.gov.vn/default.aspx?tabid=427&idmid=3

2 Urban Development Agency (2012), Annual Report on Urban Development of Vietnam, Ministry of

Construction, Hanoi.

development of maritime, international aviation transport and known as theconnection hub between South Asia and East Asia In addition, on the basis ofthe favorable natural conditions (land, soil, climate, river network), MDR hasmany advantages in food production, fruit trees, aquaculture (accounting formore than 90% rice output for export; 70% fruits and 74.6% aquatic products

of the country) It is possible to say that MDR is strategically located ininternational exchange among Vietnam and other countries in the region, atthe same time, plays an important role in securing food security for thecountry and region

Although, the natural condition of MDR is very convenient for theinvestors, especially agricultural sector, the management method of localauthorities at all levels are active, flexible; so far, socio-economicdevelopment in MDR is not respective to the available potentials of theregion, especially in rural areas (which account for majority of land area andpopulation of the whole region) It is the rural technical infrastructureweakness that adversely impacts on the socio-economic development in ruralareas in particular and the general development of the whole region

Infrastructure is always regarded as the background for socio-economicdevelopment and strongly attracts investment resources However, thetechnical infrastructure works require a great deal of investment costs but theirprofitability is not so high, therefore, in the last time, 100% investment in ruralinfrastructure in Vietnam, particularly in MDR is originated from the Statebudget while ODA fund gets more and more difficult due to pressure of interestrate, consequently, investment in rural infrastructure becomes the burden on thenational budget and seems impossible to meet the people’s demands while theresources from community have not been properly explored Some recentprojects have shown that the infrastructural works in rural areas in MDR arestill attractive in some certain fields because of the social security objectivesand promotion of the community’s development The infrastructure works such

as rural roads, grid, communication network and waste water treatment worksetc… are constructed at rural areas of MDR with the direct investments fromthe local residents (by fund, resources and knowledge …) which partiallyproved the correctness of the foresaid statement However, to make residents’investment stronger and more effective, it is necessary to develop aninvestment attraction mechanism from the community From the essential

demands, the authors group chose the topic: “Mobilization of investment from local community for construction of rural technical infrastructures in the Mekong Delta Region” in our research.

1.2 Research Questions

The research is to answer two main questions:

- What is the community’s role in participating in construction of ruralinfrastructures in the Mekong Delta Region?

- What are the major factors that impact the mobilization of investmentfrom local community for construction of rural technical infrastructures inthe Mekong Delta Region?

1.3 The objective and scope of the thesis

This paper aims to analyze the role of the community in investmentattraction Moreover, it aims to identify the main factors of policy affectingthe mobilization of investment from the community in construction of ruralinfrastructure in the Mekong River Delta Thereby, the paper also look forrecommendations on mechanisms to promote investment attraction with theparticipation of the community in construction of rural infrastructure in theMekong River Delta

presented the general definition of investment as follows: "Investment is thecumulative production to increase production capacity in the post period ofthe economy" Production includes the production domestically manufacturedand imported from abroad – according to the flow of products; for tangibleproducts such as housing, capital construction, machinery and equipment orintangible products such as patents, property transfer fees

There are main types of investment as the following:

+ Investment in fixed assets: including investment in factories,machineries, equipment, vehicles This form of investment is to raiseproduction capacity The ability to achieve high or low growth depends onthis kind of investment

+ Investment in intangible assets: current assets include raw materials,semi-finished and inventory finished goods Thus, the amount of investment

in current assets is the change in volume of the above –mentionedcommodities in a certain period

+ In consideration of the macro level of the economy, there is animportant form of investment in fixed assets, it is the investment ininfrastructure The kind of investment requires the large fund and delayedpayback However, investment in infrastructure promotes the development ofother sectors in the economy

J M Keynes (1936) has stated that the governmental intervention in themarket is essential, in other words, it is needed to have the State’s interventionthrough primarily applying financial instruments (tax and expenditures) toincrease the aggregate demands, to prevent from recession and unemployment.The State policies play a certain important role in increasing the aggregatedemands and reducing the risk of unemployment Therefore, to overcome thecrisis, unemployment, the state government must be regulated through itseconomic policies, which enable consumption demands improvement andinvestment insulation To achieve economic growth, the Government should

work more in public works, and also promote or encourage investment ofprivate sectors [Keynes 1936].

J.M Keynes brought out the multiplier model in theory, in which it isevitable to increase national income (national productivity) and investment atthe same time He studied the relationship between them and introduced theconcept of “investment multiplier” The investment multiplier (k) presents therelationship between investment increase and income increase Based onKeynes’s model, if an extra amount of money is added to aggregateinvestment, then the income will increase by an amount equal to k timesinvestment increase

His multiplier model is presented as: K = ∆Y / ∆ I, so: ∆ Y= k ∆ I

(in which Y is income variation; k is multiplier, I is investment variation)According to Keynes, income is divided into either consuming andsaving or consuming and investing Accordingly, he believes that:

Saving (S) = Investment (I) This is also considered economic growthmodel of Keynes

Consequently, each increase in investment will bring about the demand

of supplementary employer and means of production, which raises the incomeand job opportunities Boosting the income will be the major premise forextending the new investment Hence, the investment multiplier magnifies thenational income based on its chain impacts It indicates the direct proportionbetween investment increase and income increase

Discussing the economic growth and the role of external investment forthe developing countries, Samuelson said that most of developing countries isshort of capital; their low income only serves for their minimal subsistence.Thus their capital accumulation is limited, which is shown in theory "thevicious cycle" and "external jostle" In the opinion of Samuelson, humanresources in developing countries are limited by age and low education,lagging technology Therefore, many developing countries are getting more

difficult and increasing their "vicious circles" So, it is necessary to have

“external jostle” to develop the economy in order to break the "vicious circles".Samuelson's theory states about overseas investment in developing countries:experts, technology, capital ., the necessity for facilitating overseasinvestments [P Samuelson, 2009]

According to the “vicious circle model” of Samuelson, the development

of a country or a specific territory in a developing area will be limited if itdepends entirely on Government resources without other impacts fromforeign investment

Figure 2: Vicious circle model of Samuelson

Discussing about the concept of the term "Policy", the economist - FrancEllis3 said that there is no a single definition of "Policy" He said: "The Policy

is defined as roadmap and intervened solutions selected by the Government toachieve the target of a sector in the economy."

Meanwhile, the Japanese economist – Harry T.Oshima (1987) in thebook “Theory of Economic Growth in the Asia” asserted that countries withwater rice agriculture in the peak season are still short of labors To settle thisissue, the theory offers two main keys in order to improve the living standard

of farmers, rural civilization and economic growth and also to avoid a lot ofpressures on urban areas They are :

- Remain the agricultural labors and also create more jobs in idle months

3 Franc Ellis (1995), Agricultural Policies in Developing Countries, Agricultural Publishing House, Hanoi.

(increasing crops, diversifying livestock, plants, trades to improve the income).

- Implement agricultural industrialization: infrastructural construction(electricity, water, transportation and communication systems), development ofprocessing industry and social infrastructure (education, health, culture) for ruralareas Economic restructuring, labor structure shifting, replacement of manuallabors with high-yield machinery and equipment

In brief, through the literatures that have been discussed, we believe thatthe investment in infrastructure through investment attraction mechanismfrom external resources is essential to create greater incentives for socialdevelopment At the same time, investment in infrastructure and economicdevelopment will enable countries to avoid the risks of unemploymentincrease and economic crisis

1.4.2 Theories, viewpoints about investment, its policies, and capital source

for rural infrastructure development in Vietnam

The research on investment policies for agriculture, farmer, urban –current situation and direction in the current time” (2009) of AgriculturalEconomics Department (Ministry of Planning and Investment) concludedthat: argiculture, farmer and rural areas play a crucial position in terms ofindustrialization - modernization in our country Developing agriculture andurban , rasing standard of living to farmers are the foundation to ensure thatour country can develope stably To implement this mission, we need not onlyenhance the investment from the state budget in accordance with Resolution

of the Party Central Committee on argiculture, farmer and rural but also havereasonable investment policies to attract more investments from enterprisesuch as: domestic enterprises, FDI enterprises with the aim at industrialdevelopment investment, handicraft and cottage industry, service, atractingmore investment in potential branches that is not exploited

Law on Investment in 2005 has stated: “Investment means the use ofcapital in the form of tangible or intangible assets for the purposes of forming

assets by investors to carry out investment activities In term of deveplopment,investment is to purchase capital on economic and social activities to get mucheconomic social benefits in the future Through investment activity, materialand technical foundations and manufacturing ability served for the economy isperfected, innovated and modernized; that mainly contribute to form and adjustthe economy structure, that is to realize the aims of stabilizing themacroeconomics, to enchance the economy and sociability development Onthe other hand, investment generally issacrifice the current resource inoder toconduct activities with the aim at gaining certain results in the future which is

to obtain greater results Therefore,investments are used with the aims to gainbigger outcomes than which investors invested in the period of carring out aninvestment.In there, the resources that is indicated here is capital, naturalresource, technical, workshop, labour, intelligence… and the aim is toraisefinancial assets (capital), physical assets (factory, road, hospital,machine…), goodwill ( qualification, skill, capacity, management level…) inthe sociable manufacturing

Hence, it can be understood that investment stimulating or attractingpoliciesare general viewpoints, methods, tools that the State uses to act upon

on investment branchs to adjust investment object’s activities to the desiredaims of the states That is divisd into two main policy group : (i) policy group

of distributing and mobilizing capital for construction, setting up generalinfrastructure works to develop social and economic activities andinfrastructure to develop a certain branch or sector; (ii) policy group instimulating, attract capital from people, domestic associations, foreigninvestors who directly invest in manufacturing activities in urban area

The investment economic textbook of National Economics Univesrity (2007)specifies that investments are classified into three categories basing on theoutcome of investment activity, the enssence and benefit of invesntmentconcludes:

 Financial investment:

Financial investment is a kind of investment in which people who has lot

of money buying financial instrustments to get predetermined interest rate, orinterrest rate that depends on the result of business activities of the releasingoffice Financial investment don’t creat new treasure for the economy (if wedon’t regarding international relationship in this branch), financial investmentonly raise finacial treasure of the group or individual With the operation ofthis investment types, capital is cycled easily, can be withdrawn rapidly ifnecessary This is a really important capital providing resource for investmentand development

 Trade- related investment:

Trade- related investment is a form of investment, in which investorsspend money on buy goods and then sell them at a higher price in order to getprofit by the difference in the purchase and sale price This type of investmentdoes not create new assets for the economy (if not consider foreign trade),which only increases the financial assets of investors in trading process,transfer of ownership of goods between sellers and investors and amonginvestors with their customers However, trade related investment canpromotecirculation of material wealth created by investment and development Fromthat promote investment and development, increase budget revenues, capitalaccumulation for production and business development services in particularand the society in general production

 Development investment :

Development investments the investment activities that creates newassets for the economy, increase the potential business and other socialactivities, development investment is the essential condition to create jobs,improve living standards of all people in society On the other hand,development investment is to spend money on building or repairing buildings,infrastructure, buying equipment installing them on thepedestal, training andfostering human resources, implementing of normal costs associated with the

operation of these assets to maintain operation capability of existing institutions and create new potentials for socio-economic background.

Three types of investment always exists and has a mutual relationshipwith each other, in which development investment is the most fundamentalinvestment, paving the cumulative problem, development of financialinvestment and commercial investment Development investmentis a conditionfor the introduction,existence and development of any service businessestablishment Besides, financial investment and business investment supportand create conditions to increase investment and development However, in thecontext of this topic, the authors only deeply find down, consider the problem

of economic development investment-type investment decisions direct thedevelopment of social production, is prerequisite for the introduction, existenceand development of any service business establishment

There are several capital resources for urban technical infrastructure inVietnam:

- State budget capital: a direct capital budget expenditures at all levels(central and local) for the construction of the infrastructure or may be derivedsources of funds (ODA capital, state credit, capital of the state enterprises )

- Non- state budget capital, including capital resources from the state sector, contributing citizens, funds from donors, benefactors

non-Capital investment structure between state and non-state fundscurrently don’t have accurate statistics However, it is possible to see that amajor source of capital investment for infrastructure mainly comes from rural

or derived budget (focus budget, ODA, government bonds, investmentpreferential credit of the State) because investing in infrastructureconstruction in rural areas is the branch not being able to make profit orrecover capital slowly, as well as the amounts of work maintenance, lowincome The mobilization of contributions from non-state sector is still verylimited The mobilization of local capital contributions primarily uses to build

community infrastructure such as rural roads, inland canals, aquacultureinfrastructure, village infrastructure, small bridges the small scale works,contribution of the investment to build irrigation - hydropower, infrastructure

of industrial zones, processing zones

1.4.3 Definitions and roles of infrastructures in development issue:

In general, infrastructure is an overall structure consisting of materialfacilities, techniques and architectures which set the foundation for socio-economic activities to operate properly

In variety of researches on infrastructures, researchers often dividesinfrastructures into 2 main types, including economic infrastructures andsocial infrastructures

As a diversified and practical structure, infrastructures take an importantpart in the socio-economic development progress of every country and territory.After having studied database from 121 countries globally in the period

of 1960-2000; Cesar Calderon and Luis Serven (2004)4 concludes 2 importantstatements, namely: (1) infrastructure level actively influences in economicgrowth and development (2) the higher level of infrastructures means the lesslevel of inequality in incomes in society From these two statements, oneconclusion has been implied, accordingly, infrastructures strongly affect work

on hunger eradication and poverty reduction.

Naoyuki Yoshino and Masaki Nakahigashi (2000)5carried research onroles of infrastructures in economic development for the following tworeasons: (1) infrastructure development contributes to increase economicproductivity and efficiency; (2) infrastructure development makes great

contribution to poverty reduction Kingsley Thomas (2004) states that

infrastructure is important because it is not only an essential part of

4 Cesar Calderon, Luis Serven (2004), The Effects of Infrastructure Development on Growth and Income

Distribution, Draft for Discussion, March.

5 Naoyuki Yoshino, Masaki Nakahigashi (2000), The Role of Infrastructure in Economic Development,

Preliminary version, November.

manufacturing business activities for every enterprise and family but also aneconomic area accounting a large proportion in GDP Investment forinfrastructure development makes up 20 % of total investment and 40 - 60%

of public investment in almost all developing countries On average, indeveloping country, 4% of GDP spends for infrastructure development,especially, 10%GDP6in some cases

In a research on influences of infrastructure development in Vietnam,Pham Thi Tuy (2006)7 finds out 6 significant impacts of the issue, they are:(1) Infrastructure development brings more opportunities to attractvarious investment for socio-economic development;

(2) Building comprehensive and modern infrastructure is of greatimportance to develop driving force economic zone and majoreconomic area, and then gradually influences and involves neighboringarea;

(3) Develop infrastructure to raise living standard directly affectspoverty, including poor family and region;

(4) Infrastructure development takes it full effect on the poor as well asactively contributes to protect the environment;

(5) Poverty reduction benefits most from the result of investment ininfrastructure, especially in rural traffic system;

(6) Infrastructure development brings opportunity to raise peopleawareness and knowledge levels, to improve health condition and tominimize social inequality for the poor

In a study in (2000)8, World Bank’s report pointed out that poorinfrastructure results in poor living standard despite income raising

In conclusion, infrastructure plays an crucial important part in

socio-economic growth, making a driving force for development of every country in the world

6 Kingsley Thomas (2004), The Role of Infrastructure in Development, The Lecture Program 2004, The

Development Bank of Jamaica.

7Pham Thi Tuy (2006), Impacts of infrastructure development for poverty reduction, Economic Magazine

Box 1: (PPP) Public Private Partnership

PPP is the model of transfer for privatesector ininvestment project belonged which toin the past

Government’s investment and operation There aretwosignificant aspects need to be considered, they are: private investor in charge of providing services through some projects and risks related to project.

PPP includescooperation between State and Private sector, especially the spirit of a joint venture.

Source: WB inVietnam:

Development report.

1.4.4 Roadmap for building legal documents related to

public-private partner - PPP

Whereas private investment in “public” projects and activities has

become popular globally, this model has not been utilized to mobilize

financial resource for infrastructure development in Vietnam, the situation is

considered one of the reasons leading to GDP deficit from 2-3% before 2009.9

A number of questions are given;

including: what should the Government do to

ease the burden of national budget for

investment in building infrastructures every

year? And how to exploit the rich potential

resources of both foreign and domestic

investments for infrastructure development,

especially with work and project requiring

high cost but bringing about high

profitability, including rural clean water

supply, rural waste treatment or rural traffic

system project, etc…

In fact, the Government notices the on-going difficulties of using

national budget to invest in infrastructures, and the ability to borrow money

from both domestic and foreign funds is limited In the coming years, ODA

fund will be reduced because Vietnam per capital income ranks medium

Therefore, mobilizing private financial resources has become great

importance, the situation also shows the important roles of private sector in

Vietnam economy Apparently, it is extremely important to develop

market-oriented financial and infrastructure system to take full advance of variety of

capital sources, such as community budget, private investment and ODA For

example, according to statistics from WB, in the period of 1996-2006,

9World Bank (2010), Report on Vietnam development in 2009, page 95.

Vietnam attracts only USD 6 billion private investments in infrastructurescompared to 40 billion USD in the Philippines, 42 billion USD in Indonesiaand 100 billion USD in China Therefore, it is necessary for Vietnam to applyand catch up with Public Private Partnership (PPP) model.

Due to increasing demand of infrastructures, Vietnam Governmentdecides to carry out important steps with an aim to improve overallenvironment for Public Private Partnership and to build capacity in effectiveimplementation In order to enhance PPP model, the Governmentpromulgated several policies and guidelines Currently, Decision No.71/2010/QĐ-TTg dated November 09th 2010 requires a significant regulation

on pilot investment applied PPP model

Decision No.71 is considered the first step to attract private investmentfrom both domestic and foreign sectors in infrastructures for serving publicservices

It is mandatory for Investor in Project that equity capital need to be atleast 30% of private sector taking part in Project Investor can mobilizecommercial loan or other capital courses (without Government guarantee) up

to 70% of private sector’s capital in Project10 However, this public-privateregulation has not worked properly due to some reasons, for examplemisunderstanding definitions of “Socialization” and “Public PrivatePartnership”; besides, there are wrong operation of Governmental existinginvestment mechanism and inflexibility of regulation on minimum capital inPPP model (must be at least 30%), etc… In addition, the misunderstandingabout the beneficiaries of infrastructures invested through PPP model, whichcan contribute to mobilize huge community resources, has been ignored.Although, it is important to utilize community resources and local peopleresources, an appropriate mechanism to attract investment that peoplevoluntarily take part in and contribute to local infrastructure development isalso needed

10 Decision No 71//2010/QÐ-TTg of the Prime Minister on November 09, 2010, Article 3 – Pilot investment principle in form of public-private partners.

2 THEORETICAL FRAMEWORK

2.1 The connection between community participation and investment

in building rural technical infrastructure.

An experimental study of World Bank in Vietnam from 2002 indicated:The method to call for community participation during decision-makingprocess of project is to standardize a process as a way to help the local peopleknow how to participate in process, which includes:

- Organize some forums wherein the locals can take part in (the localadvisory meetings) so as to together determine the necessary infrastructureneeded sponsoring by the Project;

- Provide support for the locals to make decisions on which way todevelop in their own local area with the assigned and public budget (with thehelp from the propagandist mobilized in the community

- Train local cadres and people in the skills at determining necessaryinfrastructure as well as supervising the quality of local small-scaledevelopment project

- Decentralize administration to commune level; instruct to enable thecommune staff to administer and supervisor the performance process andproject finance from the beginning

- Equality in decision-making of project performance (the project isavailable for the women to participate in)

[Community-based Rural Infrastructure Project (CBRIP) of World Bankhas been implemented in Vietnam in 2002]

According to the study, by comparing the modern investmentmechanisms with the conventional ones (with community participation),creating the participation opportunities at grass root levels is in a tiedrelationship with the explicitness and accountability

- Lack of connectivity with the authority

- Job opportunities, low income

Initiative investment process from

grassroots level

Source: Authors

Figure 3: Conventional investment method and consequences

- Job opportunities and income

- Closely link to authority

- Opportunities to

- Contribute the free capital

- Enhance the sovereignty rights and responsibility -

Source: Authors

Figure 4: Community-based investment method and consequences

Beneficiaries takes part in the infrastructure investment project unlesstransparency is clearly mentioned in the project information, from that theycould contribute their ideas and make decision Simultaneously, local staffsmust understand the information and be able to explain the concern if any.Conversely, if the project information is transparent and the accountability isenhanced, it will be more persuasive for community to take part in buildingthe infrastructure, thence raising their opportunities to participate in all steps:designing, planning and implementing the project This will enhance personalattitude and responsibility which ensure the solidity of the infrastructure Onthe other hand, if the projects receive the participation from the communityalong with the increase in explicitness and accountability, instead of entirelyinvested in rural infrastructure as the conventional investment methods, theburden put on the national budget will be decreased.

Source: Authors

Figure 5: The relationship between community participation and

transparency, accountability

The CBRIP Project clearly shows that:

1 A clear roadmap for decentralization, management, monitoring andevaluation accompanied with sufficient financial, technical, consultancy, etc.,support at the beginning and during the implementation of the project is required

to ensure proper project implementation progress and to form strong basis fortimely assessing impacts and results of the project as well as for preparingreports

2 Sufficient attention should be given at the outset design of the

Management Information System (MIS) and the Monitoring and EvaluationSystem (M&E) These systems need to meet the demand of baseline survey,reports and impact evaluation throughout project’s life.

3 Better information and communication strategy should be formed toinstitutionalize learning lessons from the CBRIP for other projects and programs

4 At the beginning of technical design preparation, discussion with

WB should be made to harmonize procedures so that unnecessary procedures

on funds management and financial management can be eliminated to providebetter conditions for CPMU, PPMU, DPMUS and CPCCs during their projectimplementation

5 Consensus on project management apparatus, action plan and furtherincrease of project management responsibility should be made

6 Norms of operational expenses are considered on the basis ofreasonable spending so that the project can maintain its stable projectapparatus with experienced officers, avoid repetitive training and enhanceproject effectiveness

7 For successful implementation of a newly piloting approach ascommunity participatory one, indispensable elements are: strict adherence todesigned training process; strengthening of necessary capacities to cadres atvarious levels, especially at grassroots one

8 Reasonable calculation of technical parameters should be made toenhance project’s life and avoid wasting society’s capital and labor

2.2 The Provincial Governance and Public Administration Performance Index (PAPI) 11

The Viet Nam Provincial Governance and Public AdministrationPerformance Index (PAPI) is a joint policy research implementedcollaboratively between the Centre for Community Support and DevelopmentStudies (CECODES) – a non-government organization under the Viet Nam

11 PAPI 2011 full report, www.papi.vn

Box 2: PAPI in Vietnam for the period 2009 – 2011

In 2009, PAPI was piloted in 3 provinces The results of the project which were presented in workshops in the 3 provinces got a lot of sympathy, encouragement and suggestions for the improvement of the project These results also have practical significance from the Party leadership, the government, the Fatherland Front, departments and the media.

In 2010, the project was implemented in 30 provinces/cities.

In 2011, PAPI was implemented across all 63 provinces/cities in Vietnam, reflecting experience and feeling of 13.642 people and marking a great turning point of the PAPI study in making positive efforts for the policy making based on empirical data.

Union of Science and Technology Associations (VUSTA), the Front

Magazine under the Vietnam Fatherland Front (VFF) he Commission on

People’s Petitions (CPP) under the Standing Committee for the National

Assembly (since February 2012), and the United Nations Development

Program (UNDP) in Viet Nam

PAPI measures the standards of governance and public administration

drawn from citizens’ experiences in their interactions with governmental

authorities at different levels As a tool to monitor performance, PAPI

contributes to accelerate continuous improvement in governance and public

administration performance In an environment reliant on “self-assessments”

by government stakeholders to measure government performance, PAPI helps

provide a bottom-up perspective to study people’s experiences and actual

feelings

“People know, people discuss, people do and people verify” is a

Vietnamese phrase that perhaps best summarizes the goals of the Provincial

Governance and Public Administration Performance Index (PAPI) PAPI

provides not only objective information about citizens’ experiences and

interactions with local authorities, thus “people know” but also a means for

the discussion and validation of findings at central and local levels in order

for “people to discuss” PAPI illuminates the collective experience of what

citizens do, enabling policy makers to act in their interests, thereby fulfilling

the precept that “people do” Finally, PAPI provides an efficient tool to assess

actual administrative performance allowing “people to verify”.

In a context of increasing demand for the engagement of citizens ingovernance and public administration performance, PAPI has proven itself as

an innovative way to inject objective and evidence-based measures into making decisions This pioneering effort to capture citizens’ experiences intheir interactions with local authorities is making its way into mainstreampolicy-making, policy implementation, and policy monitoring processes

policy-Source: www.papi.vn

Figure 2: Two measuring factures in PAPI

In fact, PAPI has got Initial Reflections and Policy Usage:

1 Provincial:

 Increasing evidence of provinces discussing PAPI findings and ways to improve performance

(e.g: Ha Tinh, Kon Tum, Dak Lak, Ho Chi Minh City, Da Nang)

 Kon Tum’s action plan to improve performance

in M&E indicator system on Anti-Corruption under construction.

 PAPI data used to identify its usefulness for monitoring theimplementation of the National Strategy on Gender Equality

 PAPI is not only an output but also a means of public governance asper General Plan 2012 – 2016 between the Vietnamese Governmentand the UN in Vietnam

 On the other hand, the Ministry of Home Affairs (MoHA), as aleading governmental agency in charge of the implementation ofpublic administration reform (PAR), is looking at PAPI as apotential framework to guide and complement its upcoming set ofPAR index at the central and local levels

3 International

 PAPI’s framework, methodology and philosophy highlighted as ainternational example in several international discussions (Beijing,Nepal, Tunisia, ASEAN + ROK, and Indonesia) and in thegovernance assessment portal (GAP)

PAPI looks at six different dimensions of provincial governance andpublic administration, each individual dimension is a combination of three tofour sub-dimensions and these are grouped from indicators respectively,including: (1) participation at local levels; (2) transparency; (3) verticalaccountability; (4) control of corruption; (5) public administrative procedures,and (6) public service delivery, particularly as follows:

(Source: www.papi.vn)

Figure 3: PAPI index and component indices

PAPI assesses three mutually reinforcing processes: policy making,policy implementation and the monitoring of public service delivery Thedimensions are specifically tailored to Viet Nam’s national and local levelcontexts

Source: Authors

Figure 4: Influences between PAPI’s assessment contents

Investment attraction

mechanism

Improvement of people’s life

(trading, knowledge, economy, culture, etc.)

Within the scope of the topic, the authors chose to deeply study the index

belong to the following contents: the participation of people at grassroots

level (voluntary contribution); publication and transparency; responsibility for

explaining to the people to see the role of the participation of the community

in building rural infrastructure in Mekong Delta and factors influencing the

participation of people in investment attraction mechanism

Considering the role of the community participation in the WB’s specific

project in relation to indices such as voluntary contribution, transparence and

responsibility for explanation to people of PAPI-2011, the authors propose the

model of studying investment mechanism with participation of community in

technical infrastructure construction in MDR as follows:

Source: Authors

Figure 5: Analysis frame for attraction mechanism of investment in

building infrastructure with participation of the community

3 RESEARCH METHOD

3.1 Data collection

There are 2 sources of data which are used for final thesis:

- The Secondary Data Source: The Viet Nam Governance and PublicAdministration Performance Index (PAPI) 2011: Measuring Citizens’Experiences A Joint Policy Research Paper by Centre for Community Supportand Development Studies (CECODES), The Front Review of the CentralCommittee for the Viet Nam Fatherland Front (FR), Commission on People’sPetitions of the Standing Committee for the National Assembly of Viet Nam(CPP), and United Nations Development Program (UNDP),ect

- Data and Statistical Reports: Local Authority, Ministry ofConstruction, and Ministry of Planning and Investment

4 CURRENT STATE AND POLICIES ON MOBILIZATION OF INVESTMENT INTO RURAL INFRASTRUCTURE IN THE MEKONG DELTA REGION

4.1 Current social-economic and rural infrastructure situation of the Mekong Delta

Annually, the Mekong Delta Region contributes around 27% to thewhole nation’s GDP, over 50% of total food production and more than 90%

of export rice of the whole country, and earns more than two billion USD peryear12 in terms of foreign currency

(Source: http://www.mekongdelta.com.v

Figure 6: Administrative map of the MDR

Up to July 2011, land area of rural areas in the Mekong Delta is around3.51 million ha (accounting for 87% of the total region’s area) and population

is approximately 11.54 million people (accounting for 66.64 % of the region’spopulation It means that the urbanization of the whole region is only33.36%)13, including thirteen provinces and cities namely Long An, Dong

12 Data collected from the Submittal to the Government on Program of Implementing Decree 26/NQ-TW of the Steering Committee of the Southwestern region

13Urban Development Agency (2012), Annual Report on Urban Development of Vietnam, Ministry of Construction.

Thap, An Giang, Tien Giang, Vinh Long, Ben Tre, Kien Giang, Can ThoCity, Hau Giang, Tra Vinh, Soc Trang, Bac Lieu and Ca Mau The totalnumber of communes of the whole region is 1,303 (Long An has the largestnumber of communes with 166 communes and Can Tho City has the smallestnumber of communes in the region with 36 communes)14.

In the 2000-2010 period, the investment in infrastructure building hasreceived much attention Thus, the rural infrastructure is newly constructedand upgraded in term of both the width and depth, facilitating thedevelopment of production, innovation in rural areas and the higher livingstandard of people

- The traffic network in rural areas within the Mekong Delta consists ofdistrict and commune roads with a total length of 40,192 km, of which districtroads of 8,700 km, commune roads of 31,492 km

- Power: Investment in development of rural grid power andelectrification in Mekong Delta in 2000 - 2008 obtains good results, nationalgrid has covered totally communes, fundamentally satisfying demand forproduction and daily life of residents Electricity consumption per capita in

2008 was 481.3 kWh / year, in which that of Can Tho City reaches highestlevel of 899.8 kWh/capital/year, that of Long An ranks the secondly highestlevel of 867.9 kWh/capital/year

- Because of complicated terrain, the rural telecommunication wasdesigned and constructed under the combination of three methods (installinghome phones, setting cables and pulling subscriber lines to subscribers’homes in flat and crowded areas; synchronously using two modes of ruraltelecommunications networks radio and satellite communications for theremote areas In July 2011, telephones are absolutely availed in 100%communes) 89% of rural households can use of this communication system.People living in the Mekong Delta Region gets used to take rain water

14General Statistics Office of Vietnam (2012), Results of Rural, Agricultural and Fishery Census

2011.Statistics Publishing House.

for drinking and cooking whereas canal water is used for living and domesticactivities In some places, water is mainly supplied from water wells In late

2008, over 65% of the population in countryside was provided with qualifiedwater for living activities As of July 2011, approximately 81.1% of totalcommunes had equipped with concentrated water supply system for livingactivities

-Irrigation: The irrigation has provided about 10 million people,equivalent to 66% of total population in Mekong Delta, with domestic water.About 50% of rural population has chance to utilize clean water originatedfrom the irrigation system said above Irrigation works not only play animportant role in increasing economic output in agricultural, forestry andaquaculture production but also greatly improving the environment,

-In July 2011, the share waste water drainage system had beencompletely built in 31.8% of total communes and 51.9% of total communeshas organized the movement of waste collection

In general, there are some certain investments in infrastructure ofMekong Delta in recent years so as to improve, higher the living standards ofpeople and push the socioeconomic development within the Mekong Delta

Table 1: Summary of some infrastructure criteria of Mekong Delta in 2011

Province/

City

Comm une

Road to People’s Committee of Commune

Power wastewaterShare

Comm une Comm une % Com mune % Com mune % Com mune Com mune