EU’s Overseas Official Development Assistance to Vietnam

In 2018, the EU, together with its Member States, was the third-largest development assistance donors for Vietnam, with a total amount of €425 million (18.1% of all ODA disbursements). Among many things, the EU budget has particularly been instrumental in:

installing/upgrading 395 health centres,
immunising at least 97% of children under 1 year of age,
expanding health insurance coverage to 88.1%,
assisting the Vietnamese government’s programme to curb hospital over-crowding,
connecting over 56,000 rural households to the national electricity grid,
enabling environment for the establishment of a sustainable renewable energy market,
developing the legal and technical frameworks to attract private investors in the renewable energy market,
supporting the Vietnam Energy Partnership Group to improve coordination and policy dialogue on energy-related issues, and
providing technical guidance and training on effective response to gender-based violence, child abuse and sexual exploitation.

Vietnam’s ODA scene is currently undergoing a massive transformation. Thanks to rapid industrialisation, Vietnam has achieved a Middle-Income Country status. Thus the total ODA—which generally target developing countries—disbursed in Vietnam has decreased dramatically in recent years (see charts above). Compounding to this problem is that a majority of the traditional bilateral donors are beginning to withdraw their bilateral assistance. For instance, the Netherlands, Sweden, Denmark, the UK and Finland have stopped bilateral support in 2012, 2013, 2015, 2016 and 2018, respectively. Many of these countries continue their development support for Vietnam through multilateral channels such as EU institutions.

The changing landscape calls for a shift of focus, from poverty reduction to trade and from financial transfers to a post-aid development partnership. Government-to-government financial transfers are being replaced with new assistance modalities designed to promote knowledge partnerships between public, academic and private entities between Vietnam and the donor countries. This transition has opened up opportunities for the EU to promote global public goods, such as combating climate change, good governance and the rule of law, as a new focus of assistance or as conditions attached to new assistance modalities.

I believe that these changes work to Vietnam’s benefit for the following three reasons. Firstly, because Vietnam’s economy has been doubling in size every ten years for the past decades, poverty is not such a pressing problem as before. The newer sector-specific, efficiency-focused assistance and capacity building efforts are precisely what the country needs at this point. Secondly, with the decreasing importance of ODA, in comparison to the growing domestic revenues, public borrowing and foreign direct investment, the Vietnamese government needs to improve its governance, the effectiveness and efficiency of its national budget spending, as well as the attractiveness of foreign investments. The multilateral assistance modalities and the ever-increasing private sector investments serve as the necessary means to this end. Lastly, as the country’s income disparity increases along with the growing economy, Vietnam’s public goods need to be addressed effectively. Sustainable environment, gender equality, the rule of law, and labour rights are among the most significant challenges the country is facing. Fortunately, the recently came-into-force EU-Vietnam FTA is expected to influence a positive change and stronger rights for Vietnamese workers and citizens.

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