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Theo Ib Larsen and Martin Rama

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1 Theo Ib Larsen and Martin Rama
An Empirical Assessment of Vietnam’s Public Investment Program Theo Ib Larsen and Martin Rama The World Bank Workshop on Development of Large-Scale Infrastructure for Growth and Poverty Reduction  Hanoi, September 25, 2003

2 The Issue The PIP amounts to roughly 18 % of GDP
It consists of hundreds of projects in a variety of sectors The impact of those projects is seldom assessed

3 The Project Approach A rate of return is computed
It compares an upfront cost (I) To a long-term flow of additional income (ΔY) But only direct income (YD) is taken into account

4 The Statistical Approach
The impact on an outcome is computed It evaluates the immediate change in income (ΔY) Associated with public spending (I) But only local income (YL) is taken into account

5 The Shortcomings of these Approaches
The project approach ignores indirect effects (such as job creation or congestion) Which are common in developing countries The statistical approach ignores network effects (such as connecting distant places to a grid) Which are typical of large-scale infrastructure

6 The Nature of Large-Scale Infrastructure Impacts
Externalities

7 The project approach and the statistical approach need to be combined
This presentation is a first step in that direction It uses the PIP as an illustration

8 Quantifying Growth Impacts

9 Quantifying Poverty Reduction Impacts

10 The Empirical Strategy
To generate a database of large-scale infrastructure projects from the PIP Based on actual (not planned) spending By main sector By province By year of spending By funding And to match it with provincial growth and poverty indicators

11 First difficulty: Assessing actual spending per year
Delays in implementation in most projects Scattered information on disbursement Inconsistencies between donors and PMUs

12 Second difficulty: allocating spending by province

13 Projects in the Database
4 % Projects ( number ) Investment Volume (billion VND) Sector PIP 1996 - 2000 Database Share Energy 14 9 64 % 46,301 44,624 96 % Transport 42 27 64,622 60,832 94 % Urban Water / Sanitation 35 40 % 19,316 1 4 ,500 75 Irrigation 16 5 31 % 12,014 9,293 77 % Large Scale infrastructure 107 55 50 142,253 29 ,249 Other sectors 124 0 % 183,263 Total 231 32 325,516 Projects ( number ) Projects Projects ( ( number number ) ) Investment Volume (billion VND) Investment Investment Volume (billion VND) Volume (billion VND) Sector PIP 1996 - 2000 Database Share PIP 1996 - 2000 Database Share Sector Sector PIP 1996 PIP 1996 - - Database Database Share Share PIP 1996 PIP 1996 - - Database Database Share Share 2000 2000 2000 2000 Energy 14 9 64 % 46,301 44,624 96 % Energy Energy 14 14 9 9 64 % 64 % 46,301 46,301 44,624 44,624 96 % 96 % Transport 42 27 64 % 64,622 60,832 94 % Transport Transport 42 42 27 27 64 % 64 % 64,622 64,622 60,832 60,832 94 % 94 % Urban Water / Sanitation Urban Water Urban Water 35 14 40 % 19,316 1 4 ,500 75 % / / Sanitation Sanitation 35 35 14 14 40 40 % % 19,316 19,316 1 1 4 4 ,500 ,500 75 75 % % Irrigation 16 5 31 % 12,014 9,293 77 % Irrigation Irrigation 16 16 5 5 31 % 31 % 12,014 12,014 9,293 9,293 77 % 77 % Large - Scale infrastructure Large Large - - Scale Scale 107 55 50 % 142,253 1 29 ,249 9 1 % infrastructure infrastructure 107 107 55 55 50 50 % % 142,253 142,253 1 1 29 29 ,249 ,249 9 9 1 1 % % Other sectors 124 0 % 183,263 0 % Other sectors Other sectors 124 124 0 % 0 % 183,263 183,263 0 % 0 % Total 231 32 % 325,516 1 29 ,249 4 % Total Total 231 231 32 32 % % 325,516 325,516 1 1 29 29 ,249 ,249

14 Funding for Large-Scale Infrastructure
Planned (in billion VND) Actual (in billion VND) Sector Total Government ODA Energy 46,301 13,435 33,003 25,743 4,799 20,680 Transport 64,622 16,324 49,098 49,534 16,033 33,558 Urban Water /Sanitation 19,316 4,529 14,876 6,061 1,356 4,705 Irrigation 12,014 6,379 5,644 2,863 488 2,375 Large-Scale infrastructure 142,253 40,667 102,621 84,202 22,676 61,318

15 Share of total Investment
Donors and the PIP VND billion Share of total ODA Share of total Investment Japan 40,707 40 % 29 % World Bank 13,623 13 % 11 % Asian Development Bank 10,136 10 % 8 % Others and non-identified 38,488 37 % 25 % Large-scale infrastructure 102,621 100 % 73 %

16 Delays in implementation are considerable

17 But they vary across donors
Donor A Donor B

18 Few empirical results to report
The database still needs to be adjusted In the meantime, findings are not reliable

19 Still, some preliminary evidence of externalities
Despite controlling for unobservable province characteristics

20 Conclusion Assessing growth and poverty impacts of the PIP is not impossible It requires combining the project approach And the statistical approach It also requires a good information system To monitor project implementation


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