Tài liệu Mobilization of investment from local community for construction of rural technical infrastructures in the mekong delta region

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 -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 MOBILIZATION STATE OF AND INVESTMENT POLICIES INTO ON 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 -2- 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 Urban Development Agency (2012), Annual Report on Urban Development of Vietnam, Ministry of Construction, Hanoi. 2 -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