1. Making Aid Accountable and Effective in Vietnam Workshop for Elective Members on Supervising Aid Hanoi, October 2007

2. Aid in Vietnam  Vietnam is a large recipient of aid and much of this aid has been used to benefit the Vietnamese people  Vietnam is also well known for its strong aid management and coherent development strategy  However, some donors are still not providing aid as effectively as they could be Some aid aims to meet donor priorities not those of the Vietnamese people Donors are not held accountable  Key objectives More ‘real aid’ which benefits Vietnam More accountable aid

3. What is Real Aid?  Real Aid = money that is genuinely available for national development  Real Aid = Official Development Assistance (ODA) minus ‘phantom aid’  Phantom Aid: Aid not targeted at poverty reduction Debt repayments and aid counted as debt relief Aid spent on overpriced and ineffective Technical Assistance Tied aid Poorly co-ordinated aid

4. Global real and phantom aid, 2003

5. Phantom Aid 1: Poorly targeted aid  Only 40% of global aid goes to low income countries  Even within low income countries, aid may not aim to reduce poverty: Japan’s aid to Vietnam: aims to promote Vietnam as a manufacturing base, a potential future export market and an energy supply base Aid therefore concentrated on large scale infrastructure

6. Phantom Aid 2: Debt repayments  Vietnam owes about 39% of national income in the form of debt  2% of national income is spent each year servicing debt  In other words, about half of the ODA received by Vietnam goes out again in the form of debt repayments  Vietnam has not yet had any debt cancellation although other developing countries have  When debts are cancelled, this is also counted as ODA

7. Phantom Aid 3: Technical Assistance  TA = spending on consultants, training and research  Accounts for ¼ - ½ of global aid  Heavy spending on consultants from the donor country Vietnam: one donor estimated that foreign consultants paid $18,000 - $27,000 per month, compared to $1,500 to $3,000 for local consultants Cambodia: 700 international TA = 160,000 Cambodian civil servants  Often over-priced, and spent on consultants from the donor country  Can skew priorities and follow donor agenda  Little evidence on effectiveness of TA in terms of long term capacity building

8. TA exceeds education spending in some countries

9. Phantom Aid 4: Tied Aid  Donors commonly tie their aid to purchase of goods and service from the donor country  Roughly 40% of Vietnam’s aid is tied (in line with global figure)  Increases costs by 15-40%  Skews development priorities, and undermines the development of the local economy

10. Phantom Aid 5: Poorly co-ordinated aid  Donors fail to co-ordinate aid and place a heavy burden on poor countries In 2005, Vietnam hosted more than 15 missions from donors per week, only 10% of them joint  Separate project implementation units also common – Vietnam alone has 111  Donors and governments are starting to improve aid through the implementation of the Paris Declaration on Aid Effectiveness.

11. More Real Aid in Vietnam means..  Making sure that national development is the key objective of all aid programmes  Cancelling illegitimate and unpayable debts  Making sure that Technical Assistance is demand driven and truly country owned  Untying all aid  Donors and Government fully implementing the Hanoi Core Statement on Aid Effectiveness  To get there, we need more Accountable Aid

12. From Donor Conditionality to Accountable Aid  Donor aid is highly conditional – they require policies to change before they provide aid…  Which makes governments more accountable to donors than to citizens or their representatives…..  But donors are not held accountable for meeting their promises….  Making it difficult for citizens to ensure that aid money is being well spent

13. Criticisms of conditionality  Conditionality is unfair, because it gives one group of countries the right to determine the policies of another  Conditionality undermines sovereignty, because decisions are taken away from citizens and given to donors  Conditionality is ineffective, because when governments have not determined their own policy choices, they are less motivated to implement them  Conditionality imposes inappropriate policies – the World Bank and IMF in particular have imposed one size fits all free market policies which have often been shown to fail

14. Donor accountability – the missing element  Donors impose conditions on governments, but are not held accountable themselves Numerous commitments over the years to improve quality and quantity of aid – rarely implemented Lack of transparency Lack of scrutiny by citizens in either North or South

15. More Accountable Aid means…  Governments Setting out clearly to donors what kind of aid they want, agreeing targets for donors as well as recipients, and saying no to bad aid Saying no to policy conditions Being transparent and accountable to citizens about the use of aid  Donors Being more transparent to citizens Agreeing binding targets with recipients for improving aid effectiveness and meeting those targets Being open to scrutiny by parliamentarians and civil society in recipient countries  National Assembly Members/Parliamentarians Scrutinising new loans and grants coming into the country to ensure that they truly benefit citizens Inviting donors to give evidence on their aid programmes Monitoring donors and governments to ensure they meet their commitments Regularly reporting on the performance of donors and government in effective use of aid  Civil Society Working with communities to monitor impacts of aid

16. In conclusion….  Real aid can help countries to develop and reduce poverty  But too much aid is currently ‘phantom aid’ rather than ‘real aid’  Increasing real aid in Vietnam means Ensuring that all aid is targeted at poverty reduction Cancelling debts – using additional money Making sure Technical Assistance is demand driven and builds capacity Untying aid Implementing the Hanoi Core Statement on Aid Effectiveness  We need to move from Conditionality to Accountable Aid Governments, donors, National Assembly members and civil society all have a role in making this happen