Abstract
This paper analyses the motivation determining the European Union’s (EU) aid allocation to Vietnam. Existing literature and EU official documents are used to build upon four models with respect to new aid allocation: donor interest, recipient interest, recipient capacity and potential donor influence. The paper concludes that the EU’s aid policy in Vietnam has a long-term objective in conformity with Vietnam’s development strategy—poverty alleviation. Moreover, the EU’s political and economic interests, a successful economic reform and development strategy, a high level of ownership (good governance) and potential donor influence are identified as contributions to make Vietnam an ‘aid darling’.
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Notes
‘European aid’ refers to aid from the European Union institutions. In this study, humanitarian aid would not be considered.
In the 1980s, as a poor country undergoing war for a very long time and as a member of the former Socialist bloc, Vietnam received much aid from the Soviet Union. At its peak in the mid-1980s, Soviet aid amounted to about 10 % of GDP and constituted more than 40 % of the government budget and 75 % of total public investment (Pike 1987, c.f Kokko 2011, p. 26).
After 3 years of consecutive growth in the EU ODA, the financial crisis has led to a 500-million-euro decline in development aid between 2010 and 2011. Although a negative trend in resource allocation has been a common feature of at least the 2011 and 2012 budgets, the 2013 budget’s share for external policies has been particularly affected. The European Parliament’s final agreement of 12 December 2012 eventually accepted the Council’s (member states’) request for an allocation of €6.4 billion in payments to EU external action, that is to say the 4.8 % of the total EU budget, which is a remarkable shrinkage in comparison to the 6.4 % of the total budget that heading four counted for in 2012 (see European Parliament resolution of 12 December 2012 on the Council position on the new draft general budget of the European Union for the financial year 2013—all sections (17195/2012–C7-0399/2012–2012/2307(BUD)).
At the Sixth Party Congress in 1986, the Vietnamese Communist Party introduced a comprehensive economic and political reforms programme entitled Doi Moi (renovation policy or open-door policy), which has shifted Vietnam from a bureaucratically centralised planned economy to a multi-sector economy operating under a market mechanism with state management and a socialist orientation. This strategy consists of three inter-related fundamental thrusts: (a) shifting from a bureaucratically centralised planned economy to a multi-sector economy operating under a market mechanism with state management and a socialist orientation; (b) democratising social life and building a legal state of the people, by the people, and for the people; and (c) implementing an open-door policy and fostering foreign relations between Vietnam and all other countries in the world community for peace, independence and development.
Interview with H.E Mr. Chris Patten, European Commissioner responsible for external relations, International Affairs Review (2000), no. 8, pp. 5–6, Vietnamese version
Statement by the President of the European Council Herman Van Rompuy in a visit to Vietnam in 31 October 2012
Since the official establishment of a diplomatic relation, the EU issued continuously many documents institutionalising the EU-Vietnam economic and development cooperation such as the 1992 textile trade agreement, the 1995 Framework Cooperation Agreement, the 2004 Market Access Agreement and the 2012 EU–Vietnam Partnership and Cooperation Agreement (PCA). On 26 June 2012, the EU and Vietnam officially launched negotiations for a Vietnam-EU FTA, which is hoped to conclude in the end of 2014.
Also, this point is analysed more in Chaponnière (2009). Currently, many scholars state that China has reached the Lewis turning point in economy (see Garnaut and Li 2006). When an economy first becomes industrialised, it grows very fast by importing foreign technology and employing capital and plentiful, cheap, unskilled labour from the farm. But after a while, the extra agricultural labour is put to work and wages start to rise. This makes firms less profitable, and they have to come up with their own technology to keep growing. This shift is known as the Lewis Turning Point. Also, in China, due to various administrative measures taken by the government, such as the one-child policy, their demographic structure is changing and the amount of surplus labour is decreasing. Labour shortages, wage pressures and reduced migration recently have eroded China’s cost advantage and caused it to lose its competitive edge as a low-cost manufacturing base. This makes foreign investors look for alternatives to China and move concerns to Southeast Asia.
Country Strategy Papers are response strategies issued by the European Commission since the 2000s, which provide a common framework for programming community aid to all developing countries receiving financial assistance from the European Development Fund (EDF), the Asia/LatinAmerica (ALA) programme and the Mediterranean (MEDA) programme.
Vietnam issued MOF Decisions No. 04/2005/QD-BTC of 18/01/2005 on tariff reduction for the EU’s wine and spirit and No. 05/2005/QD-BTC on tariff quotas for scooters.
Speech of De Gutch (2013) during the official visit to Vietnam on 7th March 2013
The Survey on Monitoring Paris Declaration hosted by OECD is an evaluation of the 2005 Paris Declaration principles and the Accra Agenda for action for achieving more effective aid. It offers the most comprehensive assessment of progress in implementing commitments on aid effectiveness in terms of developing country ownership of policies and strategies; alignment of aid to developing countries’ priorities and systems; efforts among donors to harmonise aid practices; predictability and transparency; and results and mutual accountability.
The governance indicators of the World Bank represent the aggregated views on the quality of governance of a large number of enterprises, citizen and expert survey respondents in industrial and developing countries. These data are gathered from a number of survey institutes, think tanks, nongovernmental organisations and international organisations.
The Vietnamese government has articulated its development vision for the decades 2001–2010 and 2011–2020 in its Socioeconomic Development Strategy (SEDS), which reveal a strong commitment to economic development accompanied with ensuring social equity and environmental protection. These SEDS, endorsed by the 9th Party Congress in 2001 and 10th Party Congress in 2011, present a path of transition towards a market economy with socialist orientations.
Political aid conditionality entails the linking of aid to the fulfilment of various political conditions, relating to human rights, democracy and good governance. Conditionalities can be either negative, which means a threat of penalties in the event of failing to comply (e.g. suspension of financial aid) or positive, in which case they resemble incentives (e.g. financial assistance).
Transformation Index BTI provides a ranking that combines qualitative, in-depth evaluations with quantitative scores for the performance of 129 developing and transition countries. The BTI measures the current state of democracy and market economy in a given country, its evolution and the quality of governance performed by its leadership. The state of economic transformation (market economy status) is calculated in terms of seven criteria, which are based on a total of 14 indicators given by two country experts. This biennial evaluation of transformation and development allows us to assess observed trends and identify the outcomes of transformation strategies. In this study, BTI 2006 and BTI 2008 cover the period from January 2003 to January 2005, from January 2005 to January 2007.
These periods were examined because they were markers in practising GoV’s SEDP (2001–2005, 2006–2010), the EC’s country strategy papers for 2002–2006 and 2007–2013 in Vietnam.
The term ‘aid fatigue’ was used to explain the drops in foreign aid for much of the 1990s (Bird 1999, Erixon and Sally 2006). Causes include worsening financial affairs and economic downturn as well as lack of recognisable aid effects, leading to doubts about aid and thus sometimes making it difficult to gain support for increasing aid budgets.
The MUTRAP I (2001–2003) and II (2005–2008) contributed to the successful end of Vietnam’s accession negotiations to the WTO and the fact that 25 WTO-related laws were drafted and adopted in 2005 alone and changed about 100 related legal documents in 2006 in the run-up of WTO membership. In the period of Vietnam’s post-WTO accession, MUTRAP III (2008–2012) assisted Vietnam in realising its WTO commitments and building modern market institutions and social protection through supports for drafting trade strategies (a Development Strategy for the Vietnamese Export–import in the period 2011–2020, a Decree on the Regulation of Commercial Agents), establishing platform for private sector contribution, negotiating trade-related agreements.
Announcement of Ambassador and Head of the EU Delegation to Vietnam, Sean Doyle, in press release, 15 July 2010
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Acknowledgements
The author would like to thank Professor Stefan Collignon (Sant’Anna School of Advanced Studies, Italy), Professor Jan Orbie and colleagues at Centre for EU Studies (Ghent University, Belgium) for their comments and suggestions.
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Hoang, H.H. Aid darling and the European Union’s aid allocation policy: the case of Vietnam. Asia Eur J 12, 301–324 (2014). https://doi.org/10.1007/s10308-014-0386-6
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DOI: https://doi.org/10.1007/s10308-014-0386-6