Luận văn thạc sĩ UEB mobilization of investment from local community for construction of rural

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.

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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,

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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

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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 ;

Participant ;

Investment attraction ;

Mechanism ;

Technical infrastructure ;

Rural ;

PAPI indicator;

Transparency ;

Responsibility of explanation;

Eco-social development ;

Rural development ;

Mekong Delta Region.

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TABLE OF CONTENTS

1. INTRODUCTION ....................................................................

1.1 Rationale ..............................................................................................

1.2 Research Questions ............................................................................

1.3 The objective and scope of the thesis ................................................

1.4 Literature reviews

1.4.1 Theories of investment, the role of investment and investment

policy in socio-economic development. ...................................................

1.4.2 Theories, viewpoints about investment, its policies, and capital

source for rural infrastructure development in Vietnam .....................

1.4.3 Definitions and roles of infrastructures in development issue:

1.4.4 Roadmap for building legal documents related to public-private

partner .....................................................................................................

2. THEORETICAL FRAMEWORK ......................................

2.1 The connection between community participation and investment

in building rural technical infrastructure...............................................

2.2 The Provincial Governance and Public Administration

Performance Index (PAPI) ......................................................................

3. RESEARCH METHOD ........................................................

3.1 Data collection ...................................................................................

3.2 Methods of analysis ..........................................................................

4. CURRENT

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 .............................................................................................

4.2 Rural infrastructure development policy in Vietnam and the

Mekong Delta Region ................................................................................

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4.2.1 General Guideline and policy .....................................................

4.2.2 Investments in infrastructure development

4.3. Analysis of PAPI index to identify the factors that impact on

infrastructure investment in the Mekong ...........................................

5. CASE STUDIES: CAN THO CITY AND LONG AN

PROVINCE....................................................................................

5.1Can Tho City .....................................................................................

5.2Long An Province .............................................................................

6. POLICY RECOMMEDATIONS .........................................

6.1Adjusting Regulations ......................................................................

6.2 Classifying community to make investment attracting mechanism

more effective .............................................................................................

6.3 Implementation of typical basic investment management for rural

technical infrastructures ...........................................................................

7. CONCLUSION .......................................................................

REFERENCES ..............................................................................

APPENDIX.....................................................................................

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LIST OF FIGURE, DIAGRAM:

Figure1:The location map of Mekong River Delta ...........................................

Figure 2: Two measuring factures in PAPI .....................................................

Figure 3: PAPI index and component indices .................................................

Figure 4: Influences between PAPI’s assessment contents ............................

Figure 5: Analysis frame for attraction mechanism of investment in building

infrastructure with participation of the community ........................................

Figure 6: Administrative map of the MDR .....................................................

Figure 11: Infrastructure Development Funding mechanisms .......................

Figure 8: The chart on contribution mobilization from the community - PAPI

2011.................................................................................................................

Figure 9: The index of openness, transparency and accountability to the

people of 13 provinces in MDR ......................................................................

Figure 10: Administration map of Can Tho City ............................................

Figure 11: Administrative map of Long An Province ....................................

LIST T OF TABLE:

Table 1: Summary of some infrastructure criteria of Mekong Delta in 2011 31

Table 2: Infrastructure Investment Funding Mechanism (%GDP) .................

Table 3: Total investment capital for rural development ................................

LIST OF REFERENCE:

Box 1: (PPP) Public Private Partnership ........................................................

Box 2: PAPI in Vietnam for the period 2009 – 2011 .....................................

Box 3: New Rural Program .............................................................................

LIST OF APPENDIX FIGURE:

APPENDIX FIGURE - 1: Comparison of PAPI 2011 in some provinces/cities

.........................................................................................................................

APPENDIX FIGURE - 2: PAPI Table - 2011, weighted summary ...............

APPENDIX FIGURE - 3: PAPI Table - 2011, non-weighted summary ........

APPENDIX FIGURE - 4: PCI map 2011 .......................................................

APPENDIX FIGURE - 5: Ranking of Provincial Competitiveness Index in

2011.................................................................................................................

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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

1Preliminary 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