Mobilization of investment from local community for construction of rural technical infrastructures in the mekong delta region
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A BRIEF OF MSC IN PUBLIC MANAGEMENT
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 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.
i
A BRIEF OF MSC IN PUBLIC MANAGEMENT
GROUP 15 - MPPM INTAKE 6 - UPPSALA
Research 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?
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,
ii
A BRIEF OF MSC IN PUBLIC MANAGEMENT
GROUP 15 - MPPM INTAKE 6 - UPPSALA
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
iii
A BRIEF OF MSC IN PUBLIC MANAGEMENT
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 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.
Key words:
Community ; PAPI indicator;
Participant ; Transparency ;
Investment attraction ; Responsibility of explanation;
Mechanism ; Eco-social development ;
Technical infrastructure ; Rural development ;
Rural ; Mekong Delta Region.
iv
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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
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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
-3-
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
-4-
ACRONYMS:
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
-5-
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
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.
-6-
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
-7-
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.
1.4 Literature reviews
1.4.1 Theories of investment, the role of investment and investment
policy in socio-economic development.
Sachs - Larrain (1993) in "Macroeconomics in the global economy"
-8-
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
-9-
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
- 10 -
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.
- 11 -
(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
- 12 -
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:
- 13 -
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
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 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.
i
A BRIEF OF MSC IN PUBLIC MANAGEMENT
GROUP 15 - MPPM INTAKE 6 - UPPSALA
Research 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?
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,
ii
A BRIEF OF MSC IN PUBLIC MANAGEMENT
GROUP 15 - MPPM INTAKE 6 - UPPSALA
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
iii
A BRIEF OF MSC IN PUBLIC MANAGEMENT
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 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.
Key words:
Community ; PAPI indicator;
Participant ; Transparency ;
Investment attraction ; Responsibility of explanation;
Mechanism ; Eco-social development ;
Technical infrastructure ; Rural development ;
Rural ; Mekong Delta Region.
iv
-1-
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
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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
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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
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ACRONYMS:
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
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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
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.
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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
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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.
1.4 Literature reviews
1.4.1 Theories of investment, the role of investment and investment
policy in socio-economic development.
Sachs - Larrain (1993) in "Macroeconomics in the global economy"
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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
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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
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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.
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(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
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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:
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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