Mobilization of investment from local community for construction of rural technical infrastructures in the Mekong Delta Region

i 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

i

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 for economic development and social stability, Viet Nam Government has spent about 9-10% annual GDP to priority invest for infrastructure development across the country, especially rural areas - where 66% of Viet Nam's population live and work However the dependence on almost 100% of the limited national budget and have not been mobilized other sources from the community for rural infrastructure is a major constraint in Viet Nam in the past in which farmers in the Mekong Delta is a typical example By a research

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

of Mekong Delta if can gather contributions of the people to build infrastructure 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 analyze roles of the community in activities of investment attraction to construct rural infrastructure in the Mekong Delta, it is a necessary to make recommendations on mechanisms to attract investment with community involvement

The objective and scope of the thesis

This paper aims to analyze the role of the community in investment attraction Moreover, it aims to identify the main factors of policy affecting the mobilization of investment from the community in construction of rural infrastructure in the Mekong River Delta Thereby, the paper also look for recommendations on mechanisms to promote investment attraction with the participation of the community in construction of rural infrastructure in the Mekong River Delta

Theoretical Framework

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

Research Method:

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

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compared advantages - disadvantages of Mekong Delta rural from which to point out opportunities and challenges for building a mechanism of investment attraction from community on technical infrastructure sectors by SWOT analysis

Reflection and conclusions:

Based on analysis results of actual states and affecting factors, authors come into a conclusion as follow: transparency and accountability to people have an organic relationship with participation and contribution of people in building mechanism of attracting investment in community It is also recommended to adjust some contents in legal documents together with classify community and perform mechanism of managing basic construction investment as for rural infrastructures The study shows that policy on mobilizing resources from community is considered as an important factor to develop 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 reasonable option due to legitimacy, reliability and level of credibility of data used in reports and researches made by prestige organizations including Government Inspectorate,Ministry of Interior, United Nations, etc However, mechanism

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

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

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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 and authorities at all levels The central authorities can base on the proposals to enact policy frameworks (in the form of legal documents such as decrees of the Government, decisions of the Prime Minister ), local authorities base on proposed mechanisms of the central authorities to issue specific policies which meet with their local conditions (particularly at the provincial level) The study has also suggested new recommendations (for proposed new mechanism) or adjustment (for current policies) some legal documents The study also plays a role to orient developers (including foreign and domestic)

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

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

ACRONYMS:

Performance Index

CPMU - Central Project Management Unit

PPMU - Provincial Project Management Unit

1 INTRODUCTION

1.1 Rationale

Located at the South of Vietnam, the Mekong Delta Region, so called Southern Delta Area or Southwestern Area by Southern people of Vietnam, is one 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 about 17.33 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 for 87% regional area) and 11.54 million people (accounting for 66.64% of regional 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, rural development of Vietnam With its favorable geographic location (about 700km coastal line and 400km road borderline), MDR is potential for

development of maritime, international aviation transport and known as the connection hub between South Asia and East Asia In addition, on the basis of the favorable natural conditions (land, soil, climate, river network), MDR has many advantages in food production, fruit trees, aquaculture (accounting for more 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 in international exchange among Vietnam and other countries in the region, at the same time, plays an important role in securing food security for the country and region

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

Infrastructure is always regarded as the background for socio-economic development and strongly attracts investment resources However, the technical infrastructure works require a great deal of investment costs but their profitability is not so high, therefore, in the last time, 100% investment in rural infrastructure in Vietnam, particularly in MDR is originated from the State budget while ODA fund gets more and more difficult due to pressure of interest rate, consequently, investment in rural infrastructure becomes the burden on the national budget and seems impossible to meet the people’s demands while the resources from community have not been properly explored Some recent projects have shown that the infrastructural works in rural areas in MDR are still attractive in some certain fields because of the social security objectives and promotion of the community’s development The infrastructure works such

as rural roads, grid, communication network and waste water treatment works etc… are constructed at rural areas of MDR with the direct investments from the local residents (by fund, resources and knowledge …) which partially proved the correctness of the foresaid statement However, to make residents’ investment stronger and more effective, it is necessary to develop an investment 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 rural infrastructures in the Mekong Delta Region?

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

1.3 The objective and scope of the thesis

This paper aims to analyze the role of the community in investment attraction Moreover, it aims to identify the main factors of policy affecting the mobilization of investment from the community in construction of rural infrastructure in the Mekong River Delta Thereby, the paper also look for recommendations on mechanisms to promote investment attraction with the participation of the community in construction of rural infrastructure in the Mekong River Delta

presented the general definition of investment as follows: "Investment is the cumulative production to increase production capacity in the post period of the economy" Production includes the production domestically manufactured and imported from abroad – according to the flow of products; for tangible products such as housing, capital construction, machinery and equipment or intangible 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 raise production capacity The ability to achieve high or low growth depends on this 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 –mentioned commodities in a certain period

+ In consideration of the macro level of the economy, there is an important form of investment in fixed assets, it is the investment in infrastructure The kind of investment requires the large fund and delayed payback However, investment in infrastructure promotes the development of other sectors in the economy

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

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

J.M Keynes brought out the multiplier model in theory, in which it is evitable to increase national income (national productivity) and investment at the same time He studied the relationship between them and introduced the concept of “investment multiplier” The investment multiplier (k) presents the relationship between investment increase and income increase Based on Keynes’s model, if an extra amount of money is added to aggregate investment, then the income will increase by an amount equal to k times investment 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 and saving or consuming and investing Accordingly, he believes that:

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

Consequently, each increase in investment will bring about the demand

of supplementary employer and means of production, which raises the income and job opportunities Boosting the income will be the major premise for extending the new investment Hence, the investment multiplier magnifies the national income based on its chain impacts It indicates the direct proportion between investment increase and income increase

Discussing the economic growth and the role of external investment for the developing countries, Samuelson said that most of developing countries is short of capital; their low income only serves for their minimal subsistence Thus their capital accumulation is limited, which is shown in theory "the vicious cycle" and "external jostle" In the opinion of Samuelson, human resources 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 overseas investments [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 it depends entirely on Government resources without other impacts from foreign investment

Figure 2: Vicious circle model of Samuelson

Discussing about the concept of the term "Policy", the economist - Franc Ellis3 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 to achieve the target of a sector in the economy."

Meanwhile, the Japanese economist – Harry T.Oshima (1987) in the book “Theory of Economic Growth in the Asia” asserted that countries with water rice agriculture in the peak season are still short of labors To settle this issue, 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 of pressures 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 of processing industry and social infrastructure (education, health, culture) for rural areas Economic restructuring, labor structure shifting, replacement of manual labors with high-yield machinery and equipment

In brief, through the literatures that have been discussed, we believe that the investment in infrastructure through investment attraction mechanism from external resources is essential to create greater incentives for social development At the same time, investment in infrastructure and economic development will enable countries to avoid the risks of unemployment increase 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 Agricultural Economics Department (Ministry of Planning and Investment) concluded that: argiculture, farmer and rural areas play a crucial position in terms of industrialization - modernization in our country Developing agriculture and urban , rasing standard of living to farmers are the foundation to ensure that our country can develope stably To implement this mission, we need not only enhance the investment from the state budget in accordance with Resolution

of the Party Central Committee on argiculture, farmer and rural but also have reasonable investment policies to attract more investments from enterprise such as: domestic enterprises, FDI enterprises with the aim at industrial development investment, handicraft and cottage industry, service, atracting more investment in potential branches that is not exploited

Law on Investment in 2005 has stated: “Investment means the use of capital 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 much economic social benefits in the future Through investment activity, material and technical foundations and manufacturing ability served for the economy is perfected, innovated and modernized; that mainly contribute to form and adjust the economy structure, that is to realize the aims of stabilizing the macroeconomics, to enchance the economy and sociability development On the other hand, investment generally issacrifice the current resource inoder to conduct 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 gain bigger outcomes than which investors invested in the period of carring out an investment.In there, the resources that is indicated here is capital, natural resource, technical, workshop, labour, intelligence… and the aim is to raisefinancial assets (capital), physical assets (factory, road, hospital, machine…), goodwill ( qualification, skill, capacity, management level…) in the sociable manufacturing

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

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

of distributing and mobilizing capital for construction, setting up general infrastructure works to develop social and economic activities and infrastructure to develop a certain branch or sector; (ii) policy group in stimulating, attract capital from people, domestic associations, foreign investors 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 the outcome

of investment activity, the enssence and benefit of invesntment concludes:

 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, or interrest rate that depends on the result of business activities of the releasing office Financial investment don’t creat new treasure for the economy (if we don’t regarding international relationship in this branch), financial investment only raise finacial treasure of the group or individual With the operation of this investment types, capital is cycled easily, can be withdrawn rapidly if necessary This is a really important capital providing resource for investment and development

 Trade- related investment:

Trade- related investment is a form of investment, in which investors spend money on buy goods and then sell them at a higher price in order to get profit by the difference in the purchase and sale price This type of investment does 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 among investors with their customers However, trade related investment canpromote circulation of material wealth created by investment and development From that promote investment and development, increase budget revenues, capital accumulation for production and business development services in particular and the society in general production

 Development investment :

Development investments the investment activities that creates new assets for the economy, increase the potential business and other social activities, 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 and fostering 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 relationship with each other, in which development investment is the most fundamental investment, paving the cumulative problem, development of financial investment and commercial investment Development investmentis a condition for the introduction,existence and development of any service business establishment Besides, financial investment and business investment support and create conditions to increase investment and development However, in the context of this topic, the authors only deeply find down, consider the problem

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

There are several capital resources for urban technical infrastructure in Vietnam:

- State budget capital: a direct capital budget expenditures at all levels (central and local) for the construction of the infrastructure or may be derived sources 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 funds currently don’t have accurate statistics However, it is possible to see that a major source of capital investment for infrastructure mainly comes from rural

or derived budget (focus budget, ODA, government bonds, investment preferential credit of the State) because investing in infrastructure construction in rural areas is the branch not being able to make profit or recover capital slowly, as well as the amounts of work maintenance, low income The mobilization of contributions from non-state sector is still very limited The mobilization of local capital contributions primarily uses to build

community infrastructure such as rural roads, inland canals, aquaculture infrastructure, 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 material facilities, techniques and architectures which set the foundation for socio-economic activities to operate properly

In variety of researches on infrastructures, researchers often divides infrastructures into 2 main types, including economic infrastructures and social infrastructures

As a diversified and practical structure, infrastructures take an important part 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 important statements, namely: (1) infrastructure level actively influences in economic growth and development (2) the higher level of infrastructures means the less level of inequality in incomes in society From these two statements, one conclusion has been implied, accordingly, infrastructures strongly affect work

on hunger eradication and poverty reduction

Naoyuki Yoshino and Masaki Nakahigashi (2000)5carried research on roles of infrastructures in economic development for the following two reasons: (1) infrastructure development contributes to increase economic productivity 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 an economic area accounting a large proportion in GDP Investment for infrastructure development makes up 20 % of total investment and 40 - 60%

of public investment in almost all developing countries On average, in developing 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 attract various investment for socio-economic development;

(2) Building comprehensive and modern infrastructure is of great importance

to develop driving force economic zone and major economic area, and then gradually influences and involves neighboring area;

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

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

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

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

In a study in (2000)8, World Bank’s report pointed out that poor infrastructure 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

publication 332, January

8World Bank (2000), Voice of the poor: Seeking for changes, Report on World Development

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

Box 1: (PPP) Public Private

Partnership

PPP is the model of transfer for private sector in investment project which in the past belonged to Government’s investment and operation

There are two significant aspects need to be considered, they are: private investor in charge of providing services through some projects and risks related to project

PPP includes cooperation between State and Private sector, especially the spirit of a joint venture

Source: WB in Vietnam: Development report

Vietnam attracts only USD 6 billion private investments in infrastructures compared to 40 billion USD in the Philippines, 42 billion USD in Indonesia and 100 billion USD in China Therefore, it is necessary for Vietnam to apply and catch up with Public Private Partnership (PPP) model

Due to increasing demand of infrastructures, Vietnam Government decides to carry out important steps with an aim to improve overall environment for Public Private Partnership and to build capacity in effective implementation In order to enhance PPP model, the Government promulgated 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 investment from both domestic and foreign sectors in infrastructures for serving public services

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

to 70% of private sector’s capital in Project10

However, this public-private regulation has not worked properly due to some reasons, for example misunderstanding definitions of “Socialization” and “Public Private Partnership”; besides, there are wrong operation of Governmental existing investment mechanism and inflexibility of regulation on minimum capital in PPP model (must be at least 30%), etc… In addition, the misunderstanding about the beneficiaries of infrastructures invested through PPP model, which can contribute to mobilize huge community resources, has been ignored Although, it is important to utilize community resources and local people resources, an appropriate mechanism to attract investment that people voluntarily take part in and contribute to local infrastructure development is also 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-making process of project is to standardize a process as a way to help the local people know how to participate in process, which includes:

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

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

- Train local cadres and people in the skills at determining necessary infrastructure as well as supervising the quality of local small-scale development project

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

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

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

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

- Lack of convincement

Political orientation

Subjective plan

Demand Reality

Initiative investment process from

State plan and investment

Community participation

Political orientation

Community:

- Meet the practical needs

- Job opportunities and income

- Closely link to authority

- Opportunities to

- Contribute the free capital

- Enhance the sovereignty rights and responsibility Real-time

demand

Beneficiaries takes part in the infrastructure investment project unless transparency is clearly mentioned in the project information, from that they could contribute their ideas and make decision Simultaneously, local staffs must understand the information and be able to explain the concern if any Conversely, if the project information is transparent and the accountability is enhanced, it will be more persuasive for community to take part in building the infrastructure, thence raising their opportunities to participate in all steps: designing, planning and implementing the project This will enhance personal attitude and responsibility which ensure the solidity of the infrastructure On the other hand, if the projects receive the participation from the community along with the increase in explicitness and accountability, instead of entirely invested in rural infrastructure as the conventional investment methods, the burden 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 and evaluation 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 for timely assessing impacts and results of the project as well as for preparing reports

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

Management Information System (MIS) and the Monitoring and Evaluation System (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 to institutionalize 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 provide better conditions for CPMU, PPMU, DPMUS and CPCCs during their project implementation

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

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

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

8 Reasonable calculation of technical parameters should be made to enhance 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 Administration Performance Index (PAPI) is a joint policy research implemented collaboratively between the Centre for Community Support and Development Studies (CECODES) – a non-government organization under the Viet Nam

11 PAPI 2011 full report, www.papi.vn

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

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

actual administrative performance allowing “people to verify”

In a context of increasing demand for the engagement of citizens in governance 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 in their interactions with local authorities is making its way into mainstream policy-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 the implementation of the National Strategy on Gender Equality

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

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

3 International

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

PAPI looks at six different dimensions of provincial governance and public administration, each individual dimension is a combination of three to four sub-dimensions and these are grouped from indicators respectively, including: (1) participation at local levels; (2) transparency; (3) vertical accountability; (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 The dimensions are specifically tailored to Viet Nam’s national and local level contexts

Source: Authors

Figure 4: Influences between PAPI’s assessment contents

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

Technical infrastructure development

Improvement

of PCI index

Improvement

of people’s life

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

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 Public Administration Performance Index (PAPI) 2011: Measuring Citizens’ Experiences A Joint Policy Research Paper by Centre for Community Support and Development Studies (CECODES), The Front Review of the Central Committee for the Viet Nam Fatherland Front (FR), Commission on People’s Petitions 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 of Construction, 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 the whole 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 per year12 in terms of foreign currency

(Source: http://www.mekongdelta.com.vn)

Figure 6: Administrative map of the MDR

Up to July 2011, land area of rural areas in the Mekong Delta is around 3.51 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’s population It means that the urbanization of the whole region is only 33.36%)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

13

Urban 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 Tho City, Hau Giang, Tra Vinh, Soc Trang, Bac Lieu and Ca Mau The total number of communes of the whole region is 1,303 (Long An has the largest number of communes with 166 communes and Can Tho City has the smallest number of communes in the region with 36 communes)14

In the 2000-2010 period, the investment in infrastructure building has received much attention Thus, the rural infrastructure is newly constructed and upgraded in term of both the width and depth, facilitating the development of production, innovation in rural areas and the higher living standard of people

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

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

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

- Because of complicated terrain, the rural telecommunication was designed and constructed under the combination of three methods (installing home phones, setting cables and pulling subscriber lines to subscribers’ homes in flat and crowded areas; synchronously using two modes of rural telecommunications networks radio and satellite communications for the remote 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

14

General 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 domestic activities In some places, water is mainly supplied from water wells In late

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

-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 originated from the irrigation system said above Irrigation works not only play an important role in increasing economic output in agricultural, forestry and aquaculture production but also greatly improving the environment,

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

In general, there are some certain investments in infrastructure of Mekong Delta in recent years so as to improve, higher the living standards of people 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

Share wastewater drainage

VSMT

Comm une

Comm une %

Com mune %

Com mune %

Com mune

Com mune

Total 1303 1213 93.1 1303 100 414 38.1 676 51.9

Long An 166 162 97.6 166 100 63 38.0 91 54.8 Tien Giang 145 145 100.0 145 100 50 34.5 102 70.3 Ben Tre 147 147 100.0 147 100 42 28.6 84 57.1

Vinh Long 94 94 100.0 94 100 30 31.9 56 59.6 Dong Thap 119 117 98.3 119 100 47 39.5 85 71.4

An Giang 120 119 99.2 120 100 57 47.5 76 63.3 Kien Giang 118 98 83.1 118 100 35 29.7 29 24.6

Province/

City

Comm une

Road to People’s Committee of Commune

Power

Share wastewater drainage

VSMT

Comm une

Comm une %

Com mune %

Com mune %

Com mune

Com mune

(Source: General Statistics Office of Vietnam- 2012)

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

4.2.1 General Guideline and policy

At the beginning of Doi Moi , Communist Party of Vietnam has directed people to focus on developing the infrastructure, which was weak at that time This direction has been confimed in other key documents issued by the Party

According to the 7th Party Congress (1991): “Developing the infrastructure, driving back the down gradation, enhancing the explanation and modernization of traffic network, by-sea transportation, river, railway and international airway, developing rural and mountainous traffic system, etc.”15

The socio-economic strategy (2001-2010) prepared in the 9th Party Congress

(2001) has defined the target of infrastructure development strategy: “Firstly, infrastructure system is developed in order to meet demand of socioeconomic development, national defense and social security, etc Secondly, the traffic network in rural area is expanded and upgraded, etc Power, phones and other post and telecommunication services are gradually common in most of communes, etc Clean water is sufficiently supplied to urban areas, economic parks and above 90% of population in rural area”.16

At the 10th Party

15The Communist Party of Vietnam(1991), Documents of Party's 7st Meeting, Truth Publisher, Hanoi, p 65

16

The Communist Party of Vietnam(1991), Documents of Party's 7st Meeting, Truth Publisher, Hanoi, p

176-177

Congress (2006), the policy of encouraging and facilitating economic components, including enterprises with foreign direct investment, to take part

in the development of the infrastructure system is clearly shown: “Investment from the national budget shall be mainly used for socioeconomic infrastructure development, etc Preferable credit of the State shall be firstly given to the construction of infrastructure with capability of capital return and used for some key projects of economy, etc Building up the strategy of attracting ODA, mainly the construction of infrastructure in economic centers and other places with many obstacles in socioeconomic conditions” 17

In revolving with the investment mechanism and Regional development, Vietnamese Government has issued some documents as the legal based for “the outstanding development” of socio-economy of Mekong Delta They are great and comprehensive directions of the whole Mekong Delta and also primary legal bases for determination of investment and development distribution, based to the construction planning, including rural construction planning; therefore, parameters of projects need to be given priority shall be concretely determined The priority should be especially given to the construction of technical infrastructure works Accordingly, the mobilization of resources shall

be implemented by “continuing to pursue the socialization policy, etc in accordance with the specific socioeconomic conditions of each place State budget shall be mainly used for the construction of infrastructure” and the funding assistance mechanism shall be carried out by “absolutely using reciprocal capital for ODA projects managed by each locality” applicable to qualified projects approved by the Government

Additionally, with respect of rural investment and development, concretely rural infrastructure investment and development, the Government has issued various documents with aim at attracting many enterprises to invest