Linking Economic Growth andPoverty Reduction
Large-Scale Infrastructure in the Context of Vietnam's CPRGSGRIPS Development Forum
November 2003

Linking Economic Growth and Poverty Reduction—Large-Scale Infrastructure in the Context of Vietnam’s CPRGS—

November 2003

GRIPS Development ForumAcronyms and Abbreviations
ADB
AFTA
AusAIDBOT
CEPIZA
CG
CHCs
CPRGS
DFID
DHCs
EIA
EVN
FDI
GDP
GMS
GSO
ICARD
IDCJ
IDS
IEC
IFC
IFPRI
IZ(s)
JBIC
JETRO
JICA
JOICFPMARD
MCH/FP
MDGs
MIGA
MOH
MOT
MPI
NGO
ODA
PIP
PMU
RH
RT
SIDA
SOE(s)
TDSI
USBTA
UNDP
VHLSS
VLSS
WTO

Asian Development BankASEAN Free Trade Area
Australian Agency for International Development
Build-Operate-Transfer
Can Tho Export Processing and Industrial Zones Authority
Consultative Group
Commune Health Centers
Comprehensive Poverty Reduction and Growth Strategy
Department for International Development (United Kingdom)
District Health Centers
Environmental Impact Assessment
Electricity of Vietnam
Foreign Direct Investment
Gross Domestic Product
Greater Mekong Subregion
General Statistics OfficeInformation Center for Agriculture and Rural Development
International Development Center of Japan
Institute for Development Studies
Information, Education, and Communication
International Finance Corporation
International Food Policy Research Institute
Industrial Zone (s)Japan Bank for International Cooperation
Japan External Trade Organization
Japan International Cooperation Agency
Japanese Organization for International Cooperation in Family Planning
Ministry of Agriculture and Rural Development
Maternal Child Health and Family Planning
Millennium Development Goals
Multilateral Investment Guarantee Agency
Ministry of Health (Vietnam)
Ministry of Transport (Vietnam)
Ministry of Planning and Investment (Vietnam)
Non-governmental organizations
Official Development Assistance
Public Investment Program
Project Management Unit
Reproductive Health
Rural Transport
Swedish International Development Cooperation Agency
State-owned Enterprise(s)Transport Development and Strategy Institute
United State Bilateral Trade Agreement
United Nations Development ProgrammeViet Nam Household Living Standards Surveys
Viet Nam Living Standards Surveys
World Trade Organization

Copyright © 2003 GRIPS Development Forum
Cover photo: DFID, JICA, and GRIPS.

Preface
This study responds to the initiative by the Government of Vietnam to expand theComprehensive Poverty Reduction and Growth Strategy (CPRGS) to include the role oflarge-scale infrastructure in economic growth and poverty reduction. This initiative isbased on the agreement at the 2002 Consultative Group (CG) Meeting for Vietnam (heldin Hanoi), and the government plans to present a new chapter of CPRGS (on large-scale
infrastructure development and poverty reduction) at the 2003 CG Meeting scheduled for
December 2-3, 2003, after consulting with various stakeholders concerned.
The study aims at providing an intellectual input to the current effort by the governmenton the expansion of CPRGS, and is built on the government-donor partnership. While theexpansion of CPRGS itself has been conducted under the ownership of the Vietnamese
government, several donors (which are actively involved in the country's infrastructuredevelopment) have expressed their willingness to assist the government in parallel—
particularly in the area of establishing an analytical framework regarding how large-scale
infrastructure can contribute to sustainable growth and poverty reduction in Vietnam.
The study was conducted by the GRIPS Development Forum* under the initiative of theGovernment of Japan and with the financial support of JBIC, in close coordination with
the Government of Vietnam (through the Ministry of Planning and Investment) and theWorld Bank, the Asian Development Bank (ADB), UK (DFID), and Australia (AusAID).
The study has greatly benefited from collaboration by the concerned partners. The
GRIPS study team expresses its deep appreciation to the Government of Vietnam (MPI,
MoT, MoH, EVN), provincial authorities, and donors including the World Bank, ADB,Japan (Embassy of Japan, JBIC, JICA), UK (DFID), Australia (AusAID), researchers,
consultants (ALMEC) and NGOs (JOICFP) for their valuable advices and researchsupport.
The Concept Paper for this study was distributed at the mid-term CG Meeting in Sapa in
June 2003, and its preliminary findings were presented at the workshop on large-scale
infrastructure, held in Hanoi in September 2003. (See http://www.grips.ac.jp/forum-e/ forthe main points discussed at the workshop.)
While the views in the document are closely coordinated with the above partners, thefinal responsibility rests with GRIPS Development Forum.

November 2003
GRIPS Development Forum* The GRIPS Development Forum is an independent policy research unit within the National Graduate Institute for Policy
Studies (Japan). The study team included: Izumi Ohno (team leader), Yumiko Niiya (researcher) and Asuka Suzuki(research assistant). The study team received support from national consultants, CONCETTI (contracted by JBIC). Kenichi
Ohno provided general advice to the team.

Linking Economic Growth and Poverty Reduction— Large-Scale Infrastructure in the Context of Vietnam's CPRGS —Table of Contents
Acronyms and Abbreviations
Preface
Chapter 1

Overview and Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Chapter 2

Analytical Framework for Assessing the Role of Large-Scale Infrastructure . . . . . . . . . . . .13
2-1 The Approach
2-2 Analytical Framework

Chapter 3

Specific Features in the Vietnamese Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
3-1 Patterns and Sources of Growth and Poverty Reduction
3-2 Past Progress in Large-Scale Infrastructure Development

Chapter 4

Linkages among Infrastructure, Growth and Poverty Reduction:
Selected Case Analyses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
4-1 Case Study 1: Hanoi-Hai Phong Northern Transport Corridor
4-2 Case Study 2: My Thuan Bridge and National Highway No.1
4-3 Case Study 3: North-South 500kv Transmission Line
4-4 Case Study 4: Accessibility and Road Network — Comparison of Hung Yen Provinceand Lai Chau Province
4-5 Case Study 5: Reproductive Health Project, as National and/or Regional
Programs Based on Community Participation
4-6 Case Study 6: Effective Demand for Road Construction — An Example of
National Highway No.18

Chapter 5

Vietnam's Development Challenges and the Role of Infrastructure . . . . . . . . . . . . . . . .79
5-1 Enhancing Competitiveness in the Globalized Economy
5-2 Promoting Rural Development
5-3 Strengthening the Effectiveness of Poverty-Targeting Measures
5-4 The Role of Infrastructure in Poverty Reduction

Chapter 6

Issues for Future Strategic Planning of Infrastructure Development and Aid
Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
6-1 Complementarities among Infrastructure, Social Investment and Institutions
6-2 Spatial Dimension of Infrastructure Development
6-3 Policy and Measures to Maximize the Effectiveness of Infrastructure
Investments
6-4 Government-Donor PartnershipAppendices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .95

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .117

Boxes1-1
1-2
1-3

Three Channels of Pro-Poor Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Infrastructure and MDGs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Selected Large-Scale Infrastructure Projects for Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

2-1
2-2

A Review of Infrastructure's Impact on Economic Development . . . . . . . . . . . . . . . . . . . . . . . . .14
Rich's Consumption Behavior and the Income Multiplier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

3-1
3-2
3-3

Vietnam's Achievement in Poverty Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Continued Progress in Poverty Reduction and Growth — Preliminary Results of VHLSS 2002 . . . .24
Opportunities vs. Vulnerability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

4-1
4-2
4-3
4-4
4-5
4-6
4-7
4-8
4-9
4-10
4-11
4-12
4-13
4-14

Hanoi-Hai Phong Corridor — Impact on Traffic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Satellite Investment of FDI, "Canon Effect" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Indirect Job and Income Generation in Transport Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Community Perception of Road Network — Duong Quang Commune, My Hao District,Hung Yen Province: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
My Thuan Bridge and National Highway No.1 — Impact on Traffic . . . . . . . . . . . . . . . . . . . . .47
Bus and Truck Operators Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Business Prospects in the Mekong Delta — A View of Factory Owner . . . . . . . . . . . . . . . . . . .53
Impacts of Improved Land Transport on Rice Farmers — A Case of An Giang Province . . . . .55
North-South 500kv Transmission Line — Changing Electricity Transfer between Regions . . . .59
Sustaining High Growth and Livelihood — The Contribution of Transferred Electricity . . . . . .61
Progress in Rural Electrification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
The Vietnam Reproductive Health Project in Nghe An Province . . . . . . . . . . . . . . . . . . . . . . . . .73
Views of Service Providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
Views of Users . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75

5-1
5-2

Impact of Infrastructure on Rural Poverty Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82
Balancing Economic and Social / Poverty Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85

6-1
6-2
6-3
6-4

Social Impacts of National Highway No.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87
Combining ODA and Private Financing: Phu My Thermal Power Plant Complex . . . . . . . . . . .91
My Thuan Bridge Monitoring Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92
Shared Development Vision toward Equitable Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93

Figures
2-1
2-2
2-3
2-4

Linkages among Large-Scale Infrastructure, Growth, and Poverty Reduction:
Hypothetical Illustration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Flow Chart (Linkage 1) Investment — Inducement Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Flow Chart (Linkage 2) Regional Economy Activation Effect . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Flow Chart (Linkage 3) Effective demand Effect (Infrastructure Construction) . . . . . . . . . . . . .19

3-1
3-2
3-3
3-4
3-5

Budget Operations: in proportions to GDP (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Broad ODA Trends 1993-2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
ODA Disbursements for Major Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Improvement in Power Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Improvement in Road Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

4-1
4-2
4-3
4-4
4-5
4-6
4-7
4-8
4-9
4-10
4-11
4-12
4-13
4-14
4-15
4-16
4-17
4-18
4-19
4-20
4-21
4-22
4-23
4-24
4-25
4-26
4-27
4-28
4-29
4-30
4-31
4-32
4-33
4-34
4-35
4-36
4-37
5-1
5-2
5-3
Tables
4-1
4-2
4-3
4-4

Growth Rate of Per Capita GRP by Province, Annual Average of 1995 to 2000 (%) . . . . . . . . .32
Reduction in the Number of Poor Households by Province from 1998 to 2000 (%) . . . . . . . . . .32
Highways and Port Link Two Centers, Attracting Investment and Diffusing Growth to
Rural Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Trend of FDI Inflow to the Four Provinces along Highway No.5 . . . . . . . . . . . . . . . . . . . . . . . .35
Structure of Industrial Gross Output of the 4 Provinces by Ownership . . . . . . . . . . . . . . . . . . . .35
Structure of Industrial Labor Forces of the 4 Provinces by Ownership . . . . . . . . . . . . . . . . . . . .35
Reduction in Planted Area of Paddy by Province from 1995 to 2001 . . . . . . . . . . . . . . . . . . . . .40
Change in Area of Water Surface for Culture Fishery by Province from 1995 to 2001 . . . . . . . .40
Structure of Average Income of the Surveyed Households: 1997-2002 . . . . . . . . . . . . . . . . . . . .41
Number of Tourists in Quang Ninh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Turnover of Tourism in Quang Ninh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
GDP Growth in Mekong Delta from 1995 to 2001 (by province) . . . . . . . . . . . . . . . . . . . . . . . .46
GDP Structure Rapid Increase of Industry in Can Tho Province . . . . . . . . . . . . . . . . . . . . . . . . .46
Passenger and Freight Movement to/from HCMC 1999 and 2002 . . . . . . . . . . . . . . . . . . . . . . . .49
Can Tho Ferry Traffic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Road Network in Mekong Delta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Average Annual Growth in Freight Movement (1994-2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Real Industrial Output Percentage Increase from 1995 to 2001 (at constant 1994 prices) . . . . . .52
Industrial Output Value (at constant 1994 prices) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
Output Value of Agriculture and Fishery in Mekong River Delta (at constant 1994 prices) . . . .52
Average Per Capita Income by Source of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Poverty Incidence by Sectoral Occupation in the Mekong Delta . . . . . . . . . . . . . . . . . . . . . . . . .54
Tourism Development in Can Tho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
Bridges and Highway Link Two Centers and Activate the Mekong Delta Economy . . . . . . . . .58
Demand and Supply Balance of Electricity by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
Source of Lighting among Lowest Income Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
Households Using Electricity as a Source of Lighting by Region . . . . . . . . . . . . . . . . . . . . . . . .64
Variation in Poverty "depth" and Poverty "density" in Vietnam . . . . . . . . . . . . . . . . . . . . . . . . .65
Relative Income Levels Perceptions and Access to Basic Transport . . . . . . . . . . . . . . . . . . . . . .67
Relative Income Levels for Communes with Differing "Connectivity" to Markets and Services . . . .68
Road Network and the Project's Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74
Road Network and User Access to RH Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74
Main Sources of Monthly Income of Workers' Families . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
Number of Months Working Off-Farm (2 years ago) — Unskilled Workers . . . . . . . . . . . . . . . .77
Number of Months Working on NH 18 Construction — Unskilled Workers . . . . . . . . . . . . . . .77
Contribution of NH 18 Seasonal Income to Family Monthly Income — Unskilled Workers . . .78
Use of NH 18 Seasonal Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
Costs of Key Infrastructure Services in Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80
Average Distance to Nearest Motorable Road, by Per Capita Expenditure Quintiles, 1993
and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83
Average Number of Days per Year that Nearest Road is Impassable by Per Capita
Expenditure Quintiles, 1993 and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83
Number of FDI in Major Industrial Zones alongside Highway No.5 . . . . . . . . . . . . . . . . . . . . . .36
Use of Highway No.5 and Hai Phong Port by FDI in the northern Vietnam . . . . . . . . . . . . . . . .37
Employees Survey at FDI Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Per Capita Income at he Surveyed Communes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

4-5
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4-8
4-9
4-10
4-11
4-12
4-13
4-14

Views of Local Traders about Change in the Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Employee Survey at Selected Hotels in Quang Ninh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Poverty Incidence by Region, 1993-2002, Headcount Index (%) . . . . . . . . . . . . . . . . . . . . . . . . .46
Employee Survey at Selected Hotels in Can Tho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Historical Trend of Growth Rates of Real GDP and Electricity Sales . . . . . . . . . . . . . . . . . . . . .58
Annual Demand Growth of Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
Electricity Tariff Reduction at Viet-Sing IZ after Connecting to the EVN Network . . . . . . . . . .63
Socio-economic Comparison between Hung Yen and Lai Chau . . . . . . . . . . . . . . . . . . . . . . . . .67
Hung Yen Province — Hung Long Commune vs. Tong Phan Commune . . . . . . . . . . . . . . . . . .69
Lai Chau Province — Na Son Commune vs. Ban Giang Commune . . . . . . . . . . . . . . . . . . . . . .70

5-1

Assessment of Competitiveness in terms of Specific Factors Impacting FDI . . . . . . . . . . . . . . .81

Maps
Chapter 3

Trunk Road Network as of June 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

Chapter 4

Electricity Network Improvement as of June 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Map of Lai Chau Province and Hung Yen Provinces (with surveyed and studied
communes indicated) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Map of Studied Communes in Hung Yen Province . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
Map of Studied Communes in Lai Chau Province . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71

Chapter 1. Overview and Introduction
1-1. Objective
The main objective of this study is to analyze the role of large-scale infrastructure in economic growthand poverty reduction in the context of Vietnam, with special attention to various channels and linkages
among infrastructure, growth and poverty reduction. The study focuses on large-scale infrastructure(which benefiting many (or more than one) provinces) in the transport and power sectors, in view of
their core function as economic and industrial infrastructure to promote economic growth.
More specifically, the paper is designed to:Develop an analytical framework for assessing the role of large-scale infrastructure in the povertyreducing growth process;
Clarify various linkages among infrastructure, growth, and poverty reduction in the Vietnamesecontext, based on case analyses;
Suggest their implications for the country's future development challenges; andHighlight key issues, considered essential for Vietnam's future strategic planning of infrastructuredevelopment and donor partnership.
■

■

■
■

The study does not intend to propose prioritization among individual projects or develop an
infrastructure investment strategy. It is understood that these tasks would be handled separately by the
Vietnamese Government under its future cycles of strategic planning.

1-2. Economic Growth and Poverty Reduction
There is broad consensus that growth is essential to sustained poverty reduction, although it may not bea sufficient condition. At the same time, recognizing that recent discussions on pro-poor growth tend tobe narrowly focused on direct poverty-targeting measures, there has been increased awareness of theneed to analyze how to generate a dynamic growth process, while ensuring social equity ("inclusive
growth") in the country-specific context1.
To achieve sustainable growth and poverty reduction, interaction among the following three channels is
critically important:Box1-1: Three Channels of Pro-Poor Growth(1) Direct channel, which impacts the poor directly (such as programs for basic health, sanitation,
education, and rural roads);(2) Market channel (or “trickle down”), where growth helps the poor via economic linkages (such as intersectoral and inter-regional labor migration, increased demand, reinvestment through formal, informal
and internal finance); and(3) Policy channel, which supplements the market channel and guides the development process toward
greater equality (through subsidies, fiscal transfer, public investment, and proper design of trade,investment and financial policies and so on).

1

For example, the PRSP progress report presented at the 2002 World Bank Annual Meeting [IMF/World Bank 2002] notes
the importance of in-depth, country-specific understanding of sources of growth, elements which make growth pro-poor, andconcrete policies which make pro-poor growth possible. The PRSP Unit of the World Bank (PRMPR) is currently organizing
a series of studies around these topics.

1

Linking Economic Growth and Poverty Reduction

Infrastructure can play a vital role in each of these channels. For example, basic rural infrastructure canaddress poverty problems through the direct channel. Large-scale infrastructure can contribute to
growth and poverty reduction through the policy channel, but also serve as a pre-condition for realizing
the market channel and affect the patterns and quality of growth. In fact, there has been increased
recognition of the critical role of infrastructure investment for economic growth, as well as its linkages
with the provision of social services and the attainment of the Millennium Development Goals (MDGs)[Box 1-2]. Furthermore, greater attention is being paid to the importance of addressing infrastructureneeds, particularly in the context of improving the investment climate in respective developing
countries and the living conditions of their peoples2.
The Vietnamese government is keenly aware of the importance of growth promotion in poverty
reduction and recognizes the interaction of the channels noted above. The CPRGS has sets an economic
target of 7.5% of annual growth for 2001-2005 and proposes priority policies and resource
requirements to achieve this goal (policy channel). At the same time, the CPRGS and the Public
Investment Program (PIP) include the national targeted program for poverty reduction, and thegovernment plans to double its funding, compared to the 1996-2000 period (direct channel) [SRV
2002a, SRV 2002b].

Box1-2 : Infrastructure and MDGs
Statement by Mr. Shengman Zhang, Managing Director of the World Bank
I know of no country that has achieved continuous development without a corresponding development of
infrastructure. It would be like trying to drive a car without gas. It is hard to imagine poor people being able
to link up with technology and markets if they do not have access to modern energy sources such as
electricity. Another link is more indirect, but just as important, particularly from the perspective of theMillennium Development Goals: access to clean water and sanitation services contributes to reduction inchild mortality. In addition, reliable transport services tend to facilitate access to schools and increaseenrollment.
Thus, infrastructure development, economic growth, and poverty reduction are all connected, althoughcauses and effects may vary. Looked at another way, to the extent that the Millennium Development Goals
are ultimately about improving human welfare, we must pay attention to both social development issues andinfrastructure investment needs. The two mutually reinforce each other.
(Quoted from “The Bank should Invigorate Infrastructure Lending: Interview with World Bank Managing
Director Shengman Zhang” in the World Bank Newsletter, Transition.)
Source: World Bank [2003a], Transition (The Newsletter About Reforming Economies), Volume 14, No. 1-3, pp.1-3,
http://www.worldbank.org/transitionnewsletter.

2

These points were emphasized at the 2003 Spring Meeting of the World Bank/IMF Development Committee (held in
Washington D.C., April 2003). More recently, the Executive Board of the World Bank approved a new infrastructure action
plan in July 2003. In the OECD, DAC Network on Poverty Reduction (POVNET) also plans to include infrastructure in the
2003-05 work program.

2

Chapter 1. Overview and Introduction

1-3. Analytical Framework for Assessing the Role of Large-Scale Infrastructure
It has long been recognized that infrastructure contributes to economic development by increasing
productivity of firms and individuals and by enhancing the quality of life. In particular, large-scale
infrastructure generates significant structural changes in national and regional economy.
Compared with small-scale infrastructure whose beneficiaries are clustered narrowly around the projectsite, the impact of large-scale infrastructure is much broader and more complex. It takes time to emerge
fully and depends on supporting policies and the supply of other infrastructure. A comprehensive viewis required to study its effect on income and employment generation. Moreover, large-scale
infrastructure involves large expenditure flows. Additionally, the mode of its utilization andmanagement affects the efficiency and the effectiveness of the infrastructure services.
Economically, large-scale infrastructure is part of investment. As such, investment has two different
impacts on the economy, one through the supply-side effect of increasing the capital stock and the otherthrough the demand-side effect of providing additional effective demand. Due to the special properties
arising from its nature as "public goods," the supply-side effect of large-scale infrastructure investment
should be construed as contributing to general productivity enhancement. For example, transport andenergy infrastructures are intermediate inputs for firm production, and they raise the productivity ofother factors. With respect to social service delivery, they contribute to improving the productivity ofhealth workers and equipment. Consumption of infrastructure services also enhances the welfare ofpoor people. Furthermore, large-scale infrastructure contributes to economic growth that may provide
private and public resources to reduce poverty.
Largely due to the multiplicity of linkage effects, a methodology for quantitative analysis of its poverty
impacts is yet to be established. Thus, this study relies primarily on qualitative analysis.
Linkage Effects of Large-Scale Infrastructure
To analyze the linkage effects of large-scale infrastructure, it is important to recognize the first round
impacts and the broader and more general impacts (realized through fiscal and private spending
channels) on poverty reduction [see Figures 2-1 ~ 2-4 in Chapter 2].
In the first round, there are two initial impacts of development of large-scale infrastructure that could leadto poverty reduction through economic growth. These are the supply-side and the demand-side effects.
(1) On the supply side, improved infrastructure services in terms of costs, availability, and reliability
could create, at least, two types of linkage effects:• Investment-inducement effect: This is a channel through which new investment is generated byenhanced business climate. Attraction of FDI and domestic investment could promote industrial
growth, and generate jobs and income at the newly invested firms and in relatedindustries/services (through increased procurement of local inputs and services).
• Regional economy activation effect: This is a channel through which new economic opportunities
are opened up, and productivity of the existing economic activities is enhanced (even without
additional investment). For example, better access to markets and information could generate jobs
and income in rural households through improved agricultural productivity, diversification ofagricultural products, and promotion of off-farm industry in rural areas, etc.
(2) On the demand side, it is possible to expect the effective demand effect of infrastructure
construction. This is a channel through which jobs and income are generated by implementing the
project itself. For example, effective demand from construction work could generate jobs andincome during the construction period — directly and indirectly (through the procurement of local
inputs and services).

3

Linking Economic Growth and Poverty Reduction(3) In the social dimension, better infrastructure services (particularly, the availability of transport andpower supply) could increase access to basic social/public services and thus improve the living
conditions of the poor.
Moreover, the impact of large-scale infrastructure should be understood in a broader and more generalcontext. In the subsequent rounds, fiscal revenue and multiplier effects can be created. Increased fiscal
revenues (through growth) could generate additional budget for pro-poor targeted programs that
improve the living conditions of the poor. Private spending could also generate multiple-round impacts.
This virtuous circle makes poverty reduction sustainable. (However, it should be noted that the extent
and feasibility of creating such a virtuous circle depend on the government's commitment and capacity
to effectively implement pro-poor programs, as well as country-specific initial conditions.)

1-4. Linkages among Infrastructure, Growth and Poverty Reduction
Specific Features of Vietnam
Vietnam's experiences in the early 1990s confirm that robust growth had raised government revenue,
with the result that by the mid-1990s public expenditure on infrastructure, education, and health hadrisen sharply. Furthermore, because per capita GDP had increased substantially, real per capita
government expenditure also increased (e.g., nearly twice as high in 1994 as in 1989). Greater fiscal
revenue, together with increased aid flows, has enabled the government to intensify its efforts in growthpromotion and poverty reduction, especially since the mid-1990s.
As the results of the latest VHLSS 2002 show, Vietnam continues to make progress in improving theliving standards of the population. Between 1998 and 2002, poverty has further declined in both ruraland urban areas. The percentage of population living below the poverty line decreased from 37% (in1998) to 29% (in 2002). In all regions, household incomes of the poorest quintile increased, comparedto those of 1999. Three regions—North East, South Central Coast, and Mekong Delta — haveexperienced a large reduction of poverty incidence. Despite such progress, poverty remains a largely
rural phenomenon in Vietnam. Furthermore, the rate of reduction in rural poverty is slower than that ofurban poverty, and urban-rural inequality tends to increase.
The existing studies suggest that despite several weaknesses, Vietnam has an extensive safety net bypoor country standards. Public social expenditures are more equally distributed than household
expenditures, playing an important re-distributive role. Other studies indicate that in Vietnam the poorand the rich are not static groups. A high proportion of the population is clustered around the poverty
line. While this implies their vulnerability to shocks, it also means that even small increases in mean
per capita expenditure will be quite effective in moving a large number of households over the poverty
line. This suggests the effectiveness of creating income "opportunity," including "trickle-down" effects
through backward and forward linkages.
Findings of Case Analyses
Case studies of selected large-scale infrastructure projects—particularly national highways and power
generation and transmission constructed in the 1990s—confirm their important role in recent povertyreducing growth in Vietnam. On the basis of the case analyses, it is fair to say that such trunk
infrastructure has helped: (i) the creation of sources of growth; and (ii) the spreading of linkages between
growth centers and their surrounding rural areas, particularly through the investment-inducement effectand rural-economy activation effect. A large number of the Vietnamese population has participated in andbenefited from such processes. Thus, large-scale infrastructure (trunk roads and major power production)
provides the foundations on which economic growth for the formal, non-farm economy is built.

4Chapter 1. Overview and Introduction

Box1-3 : Selected Large-Scale Infrastructure Projects for Case Studies(1) Improvement of National Highway No.5 and the expansion of Hai Phong Port (funded by Japan/JBIC andTaiwan, completed in 2000);(2) Construction of the My Thuan Bridge (funded by Australia/AusAID, completed in 2000) and theimprovement of National Highway No.1 (co-financed by the World Bank, the ADB, and Japan/JBIC),
with particular focus on the southern Ho Chi Minh City-Can Tho section (completed in 1999); and,
(3) Development of overall power supply capacity and regional electrification, including the construction of
the North-South 500kv transmission line (financed by the Vietnamese government, completed in 1994).

Cases for this paper's analysis are selected from the large-scale infrastructure projects in the transportand power sectors, which were recently completed and are under operation:
In addition, three complementary analyses are conducted, in order to obtain diverse perspectives oflinkages among infrastructure, growth and poverty reduction, including:(4) Accessibility and road network, in light of "economic distance" and "connectivity" to markets(based on the UK/DFID experience of rural road projects in Hung Yen and Lai Chau provinces);(5) Accessibility and road network, in light of access to social service delivery (based on the experienceof Japan/JICA-supported reproductive health project in Nghe An province); and(6) Effective demand of highway construction (based on Japan/JBIC-funded National Highway No.18).
The main findings of the case analyses are as follows.
(1) Hanoi-Hai Phong northern transport corridor—linking two centers, attracting investment
and diffusing growth to rural areas.
In the north, the improvement of National Highway No.5 (NH5) and the expansion of the Hai Phong
Port, together with other infrastructure, has strengthened the Hanoi-Hai Phong transport corridor.
Travel time between the two centers—Hanoi and Hai Phong—was cut by half (from 3.5-4 hours to 1.52 hours), and the traffic volume on NH5 doubled during 1999-2003. The volume of container cargohandled at the Hai Phong Port increased by 50% during the period 2001-2002. The corridor has
reinforced the link between two growth centers and in particular, has enhanced the access of Hanoi(largest city in the north) to global markets by improving land and sea transport. After 2000, FDI tomajor industrial zones (i.e., Thang Long, Noi Bai, Sai Dong B, Nomura-Haiphong Industrial Zones)
increased significantly, and is now becoming a driving force of industrial output in the north. As of
mid-2003, the four IZs accounted for about 85% of the entire FDI to northern IZs, both in terms of thenumber of projects and registered capital. Two-thirds of these investments came in or after 2000. A
recent firm survey also suggests that nearly 90% of new FDI to the north would not have been realized
without the improvement of the two transport facilities.
Moreover, this growth has spread to neighboring areas (particularly Hung Yen and Hai Duong), and therural economy has experienced major structural transformation. Domestic investment to these areas has
increased, and rural households have diversified their agricultural production. In this connection, it isimportant to recognize the link between feeder roads and trunk roads in enhancing the activation of therural economy. The transport corridor has spurred tourism in Ha Long Bay by pushing up demand for
tourism (e.g., day trips) and facilitating business. The number of tourists (both Vietnamese and foreign)
quadrupled from 1995 to 2002, with a sharp increase from 2000. During 1995-2001, tourism turnoverincreased by more than five times (with a 45% increase from 2000 to 2001 alone).
All these effects contributed to the creation of new employment and income for workers at factories andhotels (direct jobs), and for the transport industry and services (indirect jobs). Industrial FDI has
created a large number of direct jobs. As of mid-2003, FDI firms at the four major IZs employed a total

5

Linking Economic Growth and Poverty Reductionof 14,000 workers. Workers receive higher salaries than before, an important income source for theirhouseholds. Increased cargo volume at Hai Phong Port has stimulated demand for transport industry
and services, and truck drivers in Hai Phong city receive higher incomes and heavier workloads. Rural
households now enjoy higher disposable income, and their purchasing power appears to have increased.
The existing data also indicate that from 1995 to 2000, most of the provinces along the Hanoi-Hai
Phong corridor achieved faster growth in per capita income and reduction in the number of poor
households, compared to the average for the Red River Delta or the whole country. Nevertheless, FDI
contribution to the total industrial labor force remains small relative to its contribution to industrial
output. This is partly because most FDI firms are in the early stages of operations, and greater impacts
can be expected in the future. (Also, the figure may partly reflect redundant labor at inefficient firms,
especially large SOEs.) At the same time, developing supporting industries is a major challenge forVietnam's industrialization.
(2) My Thuan Bridge and National Highway No.1—linking two centers, opening up and activating
the Mekong Delta economy.
In the Mekong Delta, the construction of the My Thuan Bridge and the improvement of National
Highway No.1 (NH1) have greatly changed the nature and volume of the economic linkage between Ho
Chi Minh City (the largest city in Vietnam) and Can Tho (the commercial center of the entire Mekong
Delta). After the opening of the My Thuan Bridge in 2000, travel time between the two centers was
reduced from 4.5-5 hours to 3.5 hours (with the time for crossing the Tien River being cut from 32 to 56 minutes, and further time reduction thanks to road improvement). Freight and passenger movement
has significantly increased, as shown by the doubling of traffic volume at the My Thuan Bridge
between 1999-2001. Can Tho is the fastest growing province in the Mekong Delta, and its industrial
growth has accelerated, particularly from 2000. Can Tho province currently has three industrial zones(Tra Noc I and II, and Hung Phu Industrial Zones). Altogether they boast about 80 firms (including
about 20 FDI firms), employing 13,000 workers. Easier transport has also promoted tourism
development in Can Tho, particularly since 2000.
Moreover, the available data suggest broader impacts brought about by the improved land transport,
namely, strengthened function of NH1 as the main artery linking HCMC and the Delta cities, andspreading of benefits to the provinces beyond NH1 (e.g., An Giang) and to the area where improvement
has not yet taken place (e.g., south to Can Tho). It is expected that the proposed Can Tho bridge willfurther stimulate economic dynamism in the Mekong Delta. As the Can Tho economy is activated, its
effect will be felt throughout the Mekong Delta region, in both the provinces through which NH1
passes and in those through which it does not.
The pattern and nature of investment attraction in Can Tho is distinct from that observed in the northerntransport corridor. In Can Tho, industrialization is natural resources-based, linked with the local
economy (e.g., agriculture and fishery production). There are many Vietnamese enterprises engaged infood processing manufacturing in industrial zones. In fact, provinces in the Mekong Delta appear to be
growing by taking advantage of their respective resource potentials. As the latest VHLSS 2002 shows,
the Mekong Delta has achieved major poverty reduction and growth in per capita income (particularly
agriculture and fishery income) during 1998-2002. Although this cannot be attributed solely to theBridge and NH1, it is fair to say that the two large-scale infrastructures projects have, at least,
accelerated poverty-reducing growth in this region.
(3) North-South 500kv Transmission Line—achieving system stability, sustaining high economic
growth and improving living standards in the 2nd half of the 1990s.
The North-South 500kv Transmission Line was completed in 1994. By transferring low-cost, surplus
electricity generated by the Hoa Binh hydropower plant, it has contributed to mitigating power
shortages in the central region and the fast-growing south (which often had to rely on costly diesel-fired
generation). After its operation began in 1994, the demand for electricity in the south and central region
jumped about 20%. For example, when the Vietnamese economy recorded dynamic growth in 1996-97

6

Chapter 1. Overview and Introduction

at 8.8% in real terms (particularly with the south growing at 9.2%), the electricity transferred from thenorth supported about 20% of the electricity demand for the south and about three-forth of that for thecentral region (to satisfy the demand of industrial, residential, and service or other sectors). The transfer
of electricity from the north to the south continued until 1999-2000 when large-scale exploitation ofnatural gas potential began in the south, and when the capacity of thermal power plants such as Phu My
and Ba Ria expanded in the late 1990s, utilizing offshore natural gas.
Particularly in the south, electricity transfer through the 500kv Transmission Line and the subsequent
increase in the power generation capacity of the region allowed rapid expansion of the electricity
network. Thanks to this network expansion, power supply conditions have significantly improved,bringing substantial benefits to firm production and rural electrification. In fact, firms in HCMC and its
vicinity report major improvements in power conditions, including the achievement of substantial
elimination of blackouts (since 2000) and more stable and cheaper supply of electricity to firms. The
latest VHLSS 2002 data also confirm important progress in rural electrification in the south. During
1998-2002, among the lowest income group, the ratio of households using electricity increased from
54% to 72%.
At present, the 500kv Transmission Line provides system stability and shifts electricity between
regions at peak times. Future investments should take account of cost factors (for transferring bulk
power between regions) and be made in the overall plan so that generation capacity in the north and thesouth could roughly balance and satisfy the projected demand in each region.
In addition, the following analyses offer complementary perspectives on the linkage effects.
(4) Improving "connectivity" to markets—road network and accessibility in rural areas.
A comparative analysis of Hung Yen and Lai Chau provinces confirms the usefulness of different levelsof roads and their vital importance (as a road network) in connecting commune residents to markets,
information, education and health services, and improving local livelihoods. Generally, local people
attach high value to commune roads because they provide key links to opportunities—through theirconnection to national, provincial, and district roads. At the same time, the analysis reveals inter- andintra-provincial variations in income and resource-mobilization ability. "Economic distance" and"connectivity" to markets and services are key determinants for such variations, along with theavailability of productive assets.
Road development has had critical impacts in Hung Yen, in terms of both social and economic benefits.
Situated close to Hanoi and NH5 to Hai Phong Port, the rural population of Hung Yen has benefited
substantially from the growth of the region. Lai Chau has also benefited from improved road network,
but the province is less able to take full advantage of the opportunities that improved road access canbring. This is partly because Lai Chau is located in the remote Northwest of Vietnam and still lacks
basic infrastructure services and access to markets. Furthermore, Hung Yen has greater ability tomobilize resources for infrastructure development (e.g., from commune budgets and the people's
contributions) than Lai Chau which primarily depends on the central government budget for ruraltransport investment. Benefits are not equitably distributed within communes either, with the better-off
households more likely to capture the opportunities to increase their income. All these remind that there
are certain disadvantaged groups (or the "chronic" poor) which are less likely to participate in the
recent broad-based growth.
(5) Improving user access to social services—through the strengthened function of road network.
Trunk roads constitute an indispensable part of the road network, together with rural roads improving
user access to social services. There are several factors that critically determine user access to social
services. These include ensuring physical access, improving the quality of social service delivery, andproviding education for users (changing people's awareness of social service needs), etc. In particular,
the latter two require the effective implementation of national and/or regional programs based on

7Linking Economic Growth and Poverty Reduction

community participation. The role of the road network—particularly the contribution of large-scale
infrastructure—in improving social service delivery should be understood within this broad context.
The experience of the Reproductive Health Project (ongoing) in Nghe An province suggests thecomplementary nature of different levels of roads to improve the provision of (or access to) informationand services, from the viewpoint of both service providers and users. Trunk roads and inter-commune
roads (connecting district capitals and commune centers) facilitate communication and knowledge
sharing among health workers, project staff and stakeholders, and thus are indispensable for service
providers and project staff engaging in regional (or even national) health care programs. Inter-commune
roads and inter-hamlet roads are essential to providing core services to commune residents, services
such as basic health care (e.g., contraceptive methods, pre-natal check-ups, delivery attendance atcommunity health centers) and access to information, for example, through IEC (Information,
Education and Communication) seminars and consultation with health workers.
(6) Creating effective demand for highway construction—off-farm job and income opportunities.
In the construction of highways, a number of simple works can be carried out economically by locallyrecruited manual labor (e.g., route clearance, earth digging and piling, manual transporting of materials,
making road tallies, planting and maintaining grass). The employment of local farmers for such
unskilled works contributes to job and income generation in the surrounding rural areas, particularly
during off-farm seasons.
The ongoing improvement of NH18 covers approximately 129km between the Noi Bai International
Airport (in Soc Son district, Hanoi city) and Cua Ong town (Quang Ninh province), including theconstruction of the Pha Lai Bridge. The construction works commenced in October 1999 and have been
largely completed, with exception of the Noi Bai-Bac Ninh section. According to estimates by the
Project Management Unit, the works have so far involved 3,650 unskilled works (31 days per
assignment), in addition to 2,934 skilled workers (normally, fixed-term assignment for the average
period of 667 days). Most of the unskilled workers have been engaged in the NH18 works for 24months or longer, implying that many work repeatedly. A recent interview survey with unskilledworkers at the construction site (Noi Bai-Bac Ninh section) also confirms that: (i) off-farm activities are
an important source of their family incomes (on average, accounting for 68% of annual cash incomes of
their households); (ii) income from the NH18 construction works occupies significant part of theirfamily incomes; and (iii) thanks to the beginning of NH18 construction, off-farm job and income
opportunities have greatly increased. These rural households use the resulting additional income forroutine expenses, education, family savings, etc.
Cross-cutting Issues
In most cases, the initial impacts of large-scale infrastructure are not necessarily on the poorest
segments of the population (except for social service delivery in (5) above). Many of those employed at
FDI factories and hotels are graduates of upper secondary schools or higher. But, given the fact that the
majority of the Vietnamese population is clustered around the poverty line, it is important to increase
wages and disposable income because this would reduce their vulnerability to risks and raise theirpurchasing power. This, in turn, would stimulate consumption demand for a variety of goods, including
those produced by the poor (through the multiplier effect), and create new markets for agricultural
products, industrial products, and services. In fact, the case analyses suggest that such a "virtuous
cycle" of broad-based growth is emerging in the provinces along the northern transport corridor and in
the Mekong Delta region.
The analyses of the regional economy activation effect also confirm a vital role of trunk infrastructure
in promoting income diversification and off-farm employment. Infrastructure network (both large andsmall, trunk and rural) is a key determinant for "economic distance" and "connectivity" to markets andserves as a pre-condition for realizing poverty-reducing growth in rural areas. This is so particularly inthe context of Vietnam, where the majority of the population belongs to the "transient" poor (people

8Chapter 1. Overview and Introduction

below and just above the poverty line) and the creation of income "opportunities" through "trickledown" effects appears to be effective.
Moreover, it is important to connect remote areas with power grids, and trunk roads with feeder roads
to achieve poverty-reducing growth. Greater attention should be given to the synergy of networking
between large and small, trunk and rural infrastructure. To maximize the gains of each level ofinfrastructure requires a planned approach that adequately invests in both areas and ensures"connectivity." One way of seeking balanced investment decisions (between growth and poverty
reduction) might be to incorporate a "network" perspective into investment planning and prioritization.
But, the physical improvement of infrastructure alone is not enough. Case studies suggest theimportance of complementary policies and measures to realize and spread the benefits of large-scale
infrastructure, such as the enabling investment climate, agricultural policies to promote diversification
and research and extension, and deregulation of transport and distribution services.
Case studies have also found potentially negative externalities associated with large-scale
infrastructure. In particular, road safety is becoming an emerging social problem. Improved
infrastructure, rapid motorization, and increasing traffic densities (largely motorcycle user) are allcontributing to a high level of road-related fatalities. Regarding resettlement, experience shows that if
properly handled, affected families (e.g., by relocation) could sufficiently enjoy the benefits ofdevelopment of large-scale infrastructure. But, the implementation of resettlement and land acquisition
has turned out to be often time-consuming, affecting the progress of construction work. Since the poor
are more likely to be vulnerable to adverse consequences, it is important to strengthen capacity of
government agencies responsible for social and environmental monitoring so that proper safeguards canbe taken throughout the planning, construction, and operation of projects.

1-5. Future Role of Large-Scale Infrastructure and Aid Partnership in Vietnam
Vietnam's Development Challenges and the Role of Infrastructure
As Vietnam continues to make progress in poverty-reducing growth, it must fine-tune its development
strategy to respond to new challenges. Infrastructure should be treated as an integral part of overall
development strategy and attention should be paid to its complementarity with other policies. The
government must play a leading role in articulating a development vision and clarifying the role oflarge-scale infrastructure in it.
The future role of large-scale infrastructure must be considered in light of the following development
challenges.
(1) Enhancing competitiveness in the globalized economy(2) Promoting rural development, particularly by creating off-farm employment(3) Strengthening the effectiveness of poverty-targeted measures.
To fully exploit its potential for labor-intensive export manufacturing, efforts must be geared to raisingproductivity and international competitiveness. This is so particularly as Vietnam's international
integration is proceeding very rapidly (with USBTA, AFTA and WTO accession). As the existing
surveys show, despite major improvements, investors perceive Vietnam's infrastructure conditions, both
physical and qualitative, to be insufficient compared to those of its East Asian neighbors. Since efficient
infrastructure is a key element of trade logistics and facilitation, continued progress in this area is
indispensable. At the same time, there are other investment bottlenecks such as difficulty in procuringlocal parts, problems with business practices and inconsistent FDI policies. Thus, it is necessary to takean integral approach to improve the investment climate and treat infrastructure as part of a national
strategy to strengthen industrial competitiveness.

9Linking Economic Growth and Poverty Reduction

Moreover, to sustain gains in poverty reduction, Vietnam needs to make greater efforts in stimulating
off-farm employment and urban employment growth, creating "economic opportunities" for the
majority of the population. Here, rural infrastructure (e.g., roads, irrigation, electricity) can make directcontributions to improving the productivity of rural households, and large-scale infrastructure (such as
trunk roads) can complement this by helping provide linkage to markets. Nevertheless, this should notmask the fact that there exist certain groups (or the "chronic" poor) severely constrained fromparticipating in new economic opportunities. To ensure wider benefits and broad-based growth, it isimportant for the government and other agencies to design the effective poverty-targeting programs.
The three channels for pro-poor growth will be of differing importance to the "chronic" poor in the
remote areas and the "transient" poor in the better-off areas3. The "chronic" poor are unlikely to benefit
from economic growth directly. Consequently direct interventions aimed at improving local economic
opportunities (transfer of agricultural technology, rural roads, etc.) are the most appropriate to help
achieve equitable growth. In addition, social safety net or "policy" channel interventions should also be
adopted (e.g., subsidies, fiscal transfer, etc.) to redistribute the gains from growth in the wider economy
to poorer areas so that basic services are securely provided.
In the better-off areas (where there are large numbers of the "transient" poor), interventions that enable
poor households to improve their economic linkages with domestic and external markets and support
for non-farm diversification are most relevant. Put another way, to enable a "trickle down" to takeeffect, the formal economy needs to be made accessible to the poor. This is the most likely route forbringing the most benefit to the large segment of the population who have already benefited from
Vietnam's growth but now need to be assisted to make the next step from farm to non-farm, andinformal to formal employment.
Key Issues for Future Strategic Planning
As this paper shows, the links and channels through which large-scale infrastructure promotes
economic growth and poverty reduction has been clearly established. The perceived dichotomy
between growth and poverty should be avoided because infrastructure provides a platform for both. The
government needs to articulate a shared vision for the role of infrastructure, under an overall
development strategy.
In this sense, it is important to strengthen the link between large-scale infrastructure investments andfuture strategic planning, so that development toward shared and equitable growth, environmental
sustainability and macroeconomic stability will be realized. In doing so, it is necessary to ensure theprovision of efficient and effective infrastructure services — through investment planning, regulation,
financing, etc. On the basis of Vietnam's past experience, three issues merit special attention.
(1) Complementarities among infrastructure, social investment and institutions: Human capital isessential to ensure the development effectiveness of infrastructure investment (affecting the
productivity of labor and firms). It is also necessary to address the potentially negativeenvironmental and social aspects of infrastructure projects by taking proper safeguard measuresthroughout planning, construction, and operation of projects. Moreover, there exist institutional
complementarities. There is a need to pay attention to not only physical, but also the service andmanagement aspects (such as pricing, competition, and accessibility by the poor) of infrastructuredevelopment — because the latter affects the efficiency of infrastructure services and the distributionof benefits of improved infrastructure to the society (including the poor). Institutional reforms must
be implemented in parallel.

3

The broad categorization of the chronic and transient poor is by no means definitive. There are varying levels of types andperiodicities of poverty defined by a number of factors, such as access to opportunities and vulnerability.

10Chapter 1. Overview and Introduction(2) Spatial dimension of infrastructure development: To ensure rapid but equitable economic growth,
there is a need for continued efforts in developing and deepening linkages between growth centers
and adjoining rural areas, so that benefits of growth are widely spread. Consequently, it is essential
to ensure that the areas in which there is a concentration of poor people located near the "growthcenters" are well connected to these markets and non-farm opportunities, if the "economic growth
and trickle down" channel is to be effective for the "transient" poor. This implies the importance ofincorporating the spatial dimension into development vision in a pro-active manner. It also requires
strategic planning and better coordination of infrastructure investments at the national, sub-national,
and regional levels, under the broadly shared vision.
At the same time, in view of inter- and intra-provincial variations in the poverty situation, there is aneed to: (i) address the poorer provinces funding shortfalls; and (ii) carefully design projects andprograms so that the interventions can benefit the "chronic" poor living in the poorest remote areas,in an inclusive manner. Such variations also suggest a need for taking different approaches to ruralroad development between the areas where the "transient" poor live and where the "chronic" poor
are concentrated.
(3) Policies and measures to maximize the effectiveness of infrastructure investments. In light of theirsignificant fiscal implications, it is important to give due attention to the issues specific to sector
policies and project management—particularly, selection criteria, financing, maintenance, and theregulatory framework for infrastructure investments and operations. This is essential to ensure thesustainability of investments in large-scale infrastructure. Continued capacity building efforts arenecessary to promote the following measures:
Measures to ensure appropriate resource allocation (e.g., selection and allocation procedures,
recurrent financing);
Measures to make inputs into large-scale infrastructure effective (e.g., mobilization of diverse
resources, sector policies, the network effect, operations and maintenance); andMeasures to mitigate its possible negative impacts (e.g., addressing environmental and social
impacts).
■■■

In particular, it is vital to establish proper project selection criteria, so that infrastructure investment canbe prioritized and planned consistently with the development vision. This point is crucial because
future investment decisions on infrastructure will become more difficult, as the marginal returns toinvestment tend to diminish with the progress in trunk infrastructure development. Such selection
criteria should take account of two aspects: (i) the infrastructure "network," i.e., how to maximize
synergy effects of different levels of infrastructure; and (ii) a proper balance of economic vs. social andpoverty concerns. Ideally, a system should be developed, where the proposed projects would be ranked
based on the most relevant criteria and priority be given to the best-ranked investments under thebudget constraints. This is far from easy task. Concerted efforts are needed to identify such criteria andestablish a practical mechanism for incorporating them in the PIP process.
It is also important to pay attention to measures to promote foreign investment and mobilize private
financing for infrastructure development. At the same time, in the areas where the private sector isunlikely to participate but which have significant implications for social and economic development,
public funds and ODA may be utilized.
Toward Enhanced Government-Donor Partnership
Vietnam is a country where government-donor partnership (including NGOs) is active. There are many
areas where the government-donor partnership can be fruitful to achieve effective and sustainable
investments in large-scale infrastructure. This is so especially because complementary measures areneeded to enhance the impacts of large-scale infrastructure—for example, by developing rural roads,
investing in human capitals, enhancing the investment climate, and building capacity in areas of project11

Linking Economic Growth and Poverty Reduction

planning and selection, maintenance and operations, and institutional and sector policies. In addition,
there are certain groups which are severely constrained from participating in the growth process. For thosegroups, targeted interventions are necessary, and it is important to support such poverty-targeted programs.
In this regard, aid partnership will be useful in supporting the government's efforts, with each partner
playing a complementary role based on its strength(s). In doing so, it is essential that the diversity of
aid modalities be recognized according to the nature and the size of specific activities. For example, inthe case of investments in large-scale infrastructure, project-based management appears to be generally
appropriate because these projects involve large financial resources and require careful monitoring fromengineering, social, and environmental aspects. The situations can be different for targetedinterventions, which are relatively small in size and can be more effectively managed on the basis ofprograms. The "best mix" of aid modalities should be sought—consistent with the nature and the sizeof interventions—under a shared development vision and strategies for promoting growth and poverty
reduction.

12

Chapter 2. Analytical Framework forAssessing the Role of Large-Scale InfrastructureThis chapter explains the approach and analytical framework adopted in this study in order to assess therole of large-scale infrastructure in achieving sustainable growth and poverty reduction. Dueconsideration is given to the interaction among the three channels noted in Chapter 1. It is also designed
to provide a basis for the subsequent case analyses.

2-1. The Approach
The study focuses on large-scale infrastructure (benefiting more than one province) in the transport andpower sectors, in view of their core function as economic and industrial infrastructure to promoteeconomic growth. This type of infrastructure primarily corresponds to the group "A" projects classified
in the PIP. Moreover, the transport and power sectors account for the largest share of public investment
and donor assistance in Vietnam.
Economically, large-scale infrastructure is a part of investment. As such, investment has two different
impacts on the economy, one through the supply-side effect of increasing the capital stock and the otherthrough the demand-side effect of providing additional effective demand. However, as distinct frommachine and equipment, investment in large-scale infrastructure exhibits the following properties
arising from its nature as "public goods."
Low excludability or congestion in use (up to some limits)
A high degree of indivisibility
Large initial investment
Complex and indirect effects on production (less direct than private capital)
Often built by public investment and ODA, especially in low-income countries
■
■
■
■
■

Let the production function be:(1) Y = A・F (L, K) + u
where Y, L, K are output, labor and capital, A is efficiency and u is a random shock. Due to the special
properties noted above, large-scale infrastructure investment should be construed as contributing to the
upward shift in A rather than a regular accumulation of K.
On the demand side, let the national income-expenditure equality be:(2) Y = Cp + Cg+ Ip + Ig + (X - M)
where Cp, Cg are private and government consumption, Ip and Ig are private and government
investment, and X and M are exports and imports. Construction of large-scale infrastructure belongs to
Ip or Ig, depending on the source of funding. As Ip or Ig is increased as an autonomous spending, it
will trigger the usual Keynesian multiplier effect.
Furthermore, large-scale infrastructure has a more direct effect on the provision of health and education
services. If equation (1) above is re-interpreted as the production function of such services, better
infrastructure will improve the productivity of available medical staff or equipment by expanding the
production possibility frontier (i.e., raising A).
Transport and energy, like other infrastructure services, are intermediate inputs. This is particularly thecase for investments in large-scale infrastructure. They make possible other activities that increase
productivity and enhance the welfare of poor people, and they contribute to economic growth that may
provide private and public resources to reduce poverty. Other political, socioeconomic, and cultural13

Linking Economic Growth and Poverty Reduction

Box 2-1: A Review of Infrastructure's Impact on Economic Development
Kessides (1996) defines infrastructure as: "the long-lived engineered structures, equipment and facilities, andthe services they provide, that are used both in economic production and by households." He summarizes
economic benefits from infrastructure in the context of developing countries as follows:
Infrastructure contributes to economic development both by increasing productivity and by providing
amenities that enhance the quality of life. The services generated by infrastructure investment lead to growthin the production of firms in two ways:(i) infrastructure services are intermediate inputs to production, and any reduction in these input costs raises
the profitability of production, permitting higher levels of output, income, and/or employment;(ii) infrastructure services raise the productivity of other factors (labor and other capital)—for example, bypermitting the transition from manual to electrical machinery, reducing workers' commuting time, andimproving information flows through electronic data exchange.
Both effects contribute to economic growth by stimulating aggregate supply as well as demand.
The consumption of infrastructure services by households contributes to economic welfare because many ofthese services, notably clean water and sanitation, create environmental amenities, while others (recreationaltransport, residential telecommunications) are valued items of consumption in their own right. Also, these
services provide access to jobs and other consumption opportunities, and promote the health of individuals.
All of the above contributions of infrastructure to economic growth and the quality of life, which are longrecognized in economic theory, derive not from the mere existence or creation of the physical facilities but
from their efficient operation and the value that users perceive from the services generated.
Source: Kessides [1996], "A Review of Infrastructure's Impact on Economic Development" in Infrastructure and theComplexity of Economic Development.

factors are likely to be important determinants of the poverty impact of transport and energy
investments [ADB 2001a].
The study relies primarily on qualitative analysis. Largely due to the multiplicity of linkage effects, amethodology for quantitative analysis in this area has yet to be established. The existing literature on
poverty impacts of infrastructure4 is confined to: (i) the evaluation of rural infrastructure (where direct
linkages can be traced through econometric analysis of household survey data); and (ii) aggregate,
macroeconomic models, typically using the Computable General Equilibrium (CGE) model. It is expectedthat a fuller, quantitative analysis would be conducted in the subsequent stages, if judged necessary.

2-2. Analytical Framework
It is widely acknowledged that investment in infrastructure services can contribute to sustainablegrowth by5:

4

The following literature contains comprehensive review of the survey of the existing studies: C. Willoughby, "Infrastructure
and Pro-Poor Growth: Implications of Recent Research" revised draft [December 1, 2002]; D. Booth, L. Hanmer, and E.
Lovell, Poverty and Transport, ODI [June 2000]; ADB "Assessing the Impact of Transport and Energy Infrastructure on
Poverty Reduction," Interim (Stage 1) Report [2001].
5
Quoted from DFID [2002], Making Connections: Infrastructure for Poverty Reduction, p.6 (adapted from Booth et al 2000).

14

Chapter 2. Analytical Framework forAssessing the Role of Large-Scale Infrastructure

■
■

■
■
■

■
■

Reducing transaction costs and facilitating trade flows within and across borders6.
Enabling economic actors—individuals, firms, governments—to respond to new types of demandin different places.
Lowering the costs of inputs used in the production of almost all goods and services.
Opening up new opportunities for entrepreneurs, or making existing business more profitable.
Creating employment, including works (both as social protection and as a counter-cyclical policy
in times of recession).
Enhancing human capital, for example, by improving access to schools and health centers.
Improving environmental conditions, which link to improved livelihoods, better health andreduced vulnerability of the poor.

On the other hand, there is very little empirical work concerning the impacts of large-scale transport andenergy investments in poverty. In this sense, while focusing on rural infrastructure, the recent works by
IFPRI [S. Fan, L. Zhang, and X. Zhang 2002] and ADB [I. Ali and E. Pernia 2003, A. Balisacan, E.
Pernia, and A. Asra 2002, B. Prakash 2003] shed important light on methodologies and analyticalframeworks for capturing the multiplicity and endogenous nature of linkage effects [see Appendices formethodologies for integrating poverty impact assessment in the economic analysis of projects, and ananalytical framework for the links between rural poverty and infrastructure]. Building on such preceding
works, this study uses the following analytical framework to clarify various linkages through whichlarge-scale infrastructure can/did contribute to sustainable growth and poverty reduction in Vietnam.
To analyze the linkage effects of large-scale infrastructure, it is important to recognize the first round
impacts and the broader and more general impacts (realized through fiscal and private spending
channels) on poverty reduction.
In the first round, there are two initial impacts of the development of large-scale infrastructure that
could lead to poverty reduction through economic growth. These are the supply-side and the demandside effects on the economy.
• On the supply side, improved infrastructure services in terms of costs, availability and reliability
could create at least two types of linkage effects: (i) investment-inducement effect; and (ii) regional
economy activation effect. By promoting market creation and expansion, enhanced services could
attract FDI and domestic investment and expand output and productivity of rural/urban
economies. These could result in job and income generation—both directly and indirectly7.
• On the demand side, it is possible to expect an effective demand effect of infrastructure
construction which, by increasing procurement of local inputs and labor force, could promote
output expansion of rural/urban economies, thus generating jobs and income8.
In the social dimension, better infrastructure services (particularly, with the availability of transport andpower supply) could increase access to basic social/public services and thus improve the living

6

The recent World Bank study on the trade and logistics [Carruthers and Bajpai 2002] also highlights the importance oflogistics costs in influencing the location of enterprises—both between countries and between regions within countries.
7
Indirect benefits of national infrastructure to poverty reduction are well recognized in Making Connections [DFID 2002].
The report also proposes a 'joined-up' approach to infrastructure services by linking the national level to the local level.
8
In general, public works on transport infrastructure has been used to reduce poverty through providing employment inrecessions or in area of extreme need. Booth et al. [2002] contains examples of direct and indirect impacts of labor-based
works (pp.44-45).

15

Linking Economic Growth and Poverty Reduction

conditions of the poor.
Moreover, the impact of large-scale infrastructure should be understood in a broader and more generalcontext. In the subsequent rounds, fiscal revenue and multiplier effects can be created 9. Increased
fiscal revenues (through economic growth as explained in the above (i)-(ii)) could generate additional
budget for pro-poor targeted programs that improve the living conditions of the poor. Private spending
could also generate multiple-round impacts. This virtuous circle makes poverty reduction sustainable.
The extent and feasibility of creating such a virtuous circle depend on the government's commitment
and capacity to effectively implement pro-poor programs, as well as country-specific initial conditions(e.g., asset distribution, educational level, social structure).
Figure 2-1 indicates such linkages schematically. Some of these possible linkages are further developedin Figures 2-2 ~ 2-4. In Chapters 3-4, the relevance and the extent of respective linkage effects are
examined in the context of Vietnam, through case analyses.
Figure 2-1: Linkages among Large-Scale Infrastructure, Growth, and Poverty Reduction:
Hypothetical Illustration

Infrastructure Development

Poverty Reduction(1st Round Impacts)

Poverty Reduction(Broader Impacts)

Social Dimension

Improved
infrastructure services• Availability• Cost reduction• Time saving• Reliability

Effective demand of
infrastructure
construction(& operations)Improved access tobasic social/public
services,with availability oftransport & power
supplyEconomic Dimension
Market creation/
expansion• Increased
incentives to entry• Opening up new
economicopportunities• Improved
productivity ofexisting economic
activities
Procurement• Materials• Labor demand9

Sustainability

Improvedsocialindicators
Foreign residents/
travelers’ demand
New investment• FDI• Localinvestment
Regional economy
activation• Rural• Urban....via: agriculture,
off-farm business,tourism, services,manufacturing etc.

Growth

Employment
creation

Fiscal channel:
Increased
revenues for:• Pro-poor
programs• Infrastructure• Recurrent
costs etc.

Private channel(Trickle down)• Investment• Consumption

Higher
IncomeIshikawa [2002] argues the need to balance the two sets of expenditures for poverty reduction, i.e., (i) "pro-poor targeted";and (ii) "broad-based growth." In the latter, the expenditures contribute to GDP growth first and then poverty reduction, by
way of increased savings, which are channeled through the fiscal and financial systems to address specific needs including
poverty reduction. Klein et al. [2001] also states that these two are complements and that growth (with FDI as a key
ingredient) is needed to fund the government's pro-poor programs.

16

Chapter 2. Analytical Framework forAssessing the Role of Large-Scale Infrastructure

Linkage 1: Investment-inducement Effect (FDI and Domestic Investment)This is a channel through which new investment is generated by an enhanced business climate, as theresult of improved infrastructure services. For example, attraction of FDI and domestic investment
could generate: (i) jobs and income at the newly invested firms; and (ii) jobs and income in relatedindustries/services, through increased procurement of local inputs and services10.
Moreover, FDI could induce a foreigners' demand effect. For example, increased demand derived fromforeign residents and travelers could promote such business activities as hotels, tourism, commercial
activities, real estate, and generate jobs and income.
Figure 2-2: Flow Chart (Linkage 1) Investment—Inducement Effect

Poverty reduction:
1st round impacts

Improved infrastructureservices

Poverty reduction:
Broader impacts

Higher industrial
output and growth
Development oflarge-scale transport
infrastructure (trunk
roads, bridges &port)• Cost reduction• Time savings

Creation offactory
employment

Increased
FDI & local
investment

Devel opment of
power infrastructure• Cost reduction• Reliability of• power supply

Procurement oflocal inputs

Fiscal channel:
increased
revenues forpriority
investment etc.

HigherincomeExpansion of
supporting
industries

Expansion ofrelated-services

Initial conditions
Other exogenous factors

Employment
creation

Private channel:
trickle down

Regional
economic
growthForeigners
residents/travelers’demandNote: This illustration focuses on the economic dimension of linkages.

10

In assessing the effects of FDI on poverty reduction, Aaron [1999] notes the need to draw a distinction between its direct
and indirect impacts. While direct impacts can be measured by job and income generation, indirect impacts may not be
quantifiable because they cover the benefits transmitted through linkages (backward and forward), spillovers, anddemonstration effects and may even include improved human capital formation, technology transfer, community
development, fiscal contribution, and so on.

17Linking Economic Growth and Poverty Reduction

Linkage 2: Regional Economy Activation EffectThis is a channel through which new economic opportunities are opened up, and productivity of theexisting economic activities is enhanced (even without additional investment), as the result of improved
infrastructure services. For example, better access to markets and information could generate jobs andincome in rural households through improved agricultural productivity, diversification of agricultural
products, and promotion of off-farm industry in rural areas, etc. Moreover, time and cost savings intransport, the reliable supply of electricity could benefit (price- and time-sensitive) tourism-related
services, which are labor-intensive and likely to have spillover effects.
Furthermore, stimulation of urban-rural economic activities (e.g., increased urban demand, labor
migration to urban areas, and increased investment from urban to rural areas) could promote job andincome generation.
All these factors suggest the potential importance of the spatial dimension of infrastructure investments,
which could affect industrial location, the patterns of promotion and diffusion of growth centers,balanced regional development, and so on.
Figure 2-3: Flow Chart (Linkage 2) Regional Economy Activation EffectIm proved infrastructure -Increase of traffic volume& travel speed
services-Time surplus for domestic
activity-Increased use of electricalequipment, etc.

Construction oftrunk roads andbridges• Cost reduction• Time savings
Electrification of
the region• Availability• Reliability of
power supply

Marketcreation/
Expansion

Increased
demand for
tourism
business

Initial conditions
Other exogenous factors

Poverty reduction:
1st round impacts

Poverty reduction:
Broader impacts

Diversified
agriculture
production
Improved
productivity ofexisting
agriculture

Employment
creation

Greater
opportunities for
non-farm
businesses

HigherincomeHigher profits
and growth of
tourism business

Employment
creation atservices(e.g., hotels,
restaurants,souvenir shops)
Procurement oflocal inputs

Note: This illustration focuses on the economic dimension of linkages.

18

Regional
economic
growthFiscal channel:
increased
revenues forpriority
investment etc.

Privatechannel:trickle downChapter 2. Analytical Framework forAssessing the Role of Large-Scale Infrastructure

Linkage 3: Effective Demand Effect of Infrastructure Construction
This is a channel through which jobs and income are generated by implementing the project itself. For
example, effective demand from construction work could generate jobs and income during theconstruction period—directly and indirectly (through the procurement of local inputs and services).
Similarly, it is possible to expect effective demand during the operations and maintenance period.
While the majority of jobs and income generated through this channel is for the duration of
construction only, income gained in such projects can become the initial capital required to break out ofthe poverty trap.

Figure 2-4: Flow Chart (Linkage 3) Effective demand Effect (Infrastructure Construction)
Poverty reduction:
1st round impacts

Poverty reduction:
Broader impacts

Employment
creation at thework site

Civil work
during road
construction

Creation of
construction
demandProcurement oflocal materials& inputs(e.g., cements)
Increased demand
for services(e.g., hotels,
restaurants),
particularly forforeigners

Initial conditions
Other exogenous factors

Employment
creation

Fiscal channel:
increased revenues
for priority
investment etc.

HigherincomePrivate channel:
trickle down
Regional
economic
growthGrowth ofconstruction
sectorNote: This illustration focuses on the economic dimension of linkages.

Fiscal revenue and multiplier effects
It is important to note that the above linkages are only the first-round impacts. Once injected into theeconomy, these stimuli will have broader spillover effects through fiscal and private spending channels.
These effects do not stay in the initial localities but are likely to spread to wider areas, even the entire
nation.
Expenditure propagation can occur through increased fiscal revenue generated by greater income andeconomic activity. The use of additional revenue by the authorities will set off the next round of
impacts, including enhanced social programs, more public investment, salary increases for public
servants, and so on. In fact, Vietnam's experiences in the early 1990s confirm that robust growth hadraised government revenue, with the result that by the mid-1990s public expenditure on infrastructure,
education, and health had become much higher.

19

Linking Economic Growth and Poverty Reduction

Another crucial channel for expenditure propagation is the multiplier effect, as described in basic
macroeconomics. All new income generated directly or indirectly by infrastructure construction, as
discussed above, will induce a second, third, ... etc. round of spending whose cumulative magnitudedepends on the marginal propensities of "leakages" (saving and imports). This will typically be several
times the initial impact. If the population spends a large part of new income on domestically produced
goods and services, the multiplier effect will be all the greater. The additional fiscal spending noted
above also enters this multiplier process [see Box 2-2].
In the context of poverty reduction, the crucial coefficient here is how much of new income is spent on
the items produced by the poor (the marginal propensity to consume can be divided into that on poorproduced goods and services and the rest). If this coefficient is high, the poor will enjoy a larger shareof benefits from overall growth. In developing countries where the markets for the rich and the poor are
severely segmented, new income only buys luxuries imported from abroad. But in Vietnam, additional
income seems to be directed to locally made food, clothing and housing, as well as modern
manufactured products.

20

Chapter 2. Analytical Framework forAssessing the Role of Large-Scale Infrastructure

Box 2-2: Rich's Consumption Behavior and the Income Multiplier
Consider the Keynesian income multiplier in elementary macroeconomics, but add the assumption of two
population groups: rich and poor. Each group spends income on the goods produced by the rich or the goods
produced by the poor, and the remainder goes to saving or the purchase of imports ("leakage"). Even with thesame pattern of income inequality, the ultimate incidence of income increase will differ significantly
depending on how the two groups allocate their income.
For the purpose of numerical illustration, assume the following marginal propensities*.

On poor’s
goods

On rich’s
goods

Leakage(saving &imports)

Sum

0.6
x

0.2
0.8 – x

0.2
0.2

1.0
1.0

Poor’s spendingRich’s spending

The ultimate income of the poor is a function of x (rich's spending on poor's goods) as well as the location of
initial injection of autonomous expenditure (public spending, ODA, FDI, etc.). The graph below shows that,
if the rich's consumption pattern is similar to that of the poor (i.e., x is high), a large income increase accrues
to the poor regardless of the location of initial impact. Hence, both growth acceleration and pro-poor
measures are effective in poverty reduction. In contrast, if the rich buy very little from the poor (i.e., x islow), not only the final income increase of the poor is low but also the location of initial income injection
matters greatly. In this case, public policy must target the poor directly in order to raise their income, sincethe "trickle-down" is severely limited. More generally, growth policy can reduce poverty automatically if the
population is relatively homogeneous in consumption, while that is not the case in a country where the richand the poor are sharply divided in life style. Although the detailed analysis correlating the production andspending patterns of different income groups is not available, it is suspected that Vietnam is a relatively
homogeneous country compared with developing countries in Africa or Latin America with similar income
levels.

Simulation: Poor's Share in Income Increase
100%
80%
60%

Initialimpact on

40%

Poor
50:50

20%

Rich

0%
0

0.1

0.2

0.3

0.4

0.5

0.6

Rich's marginal propensity to consume on poor's goods
Note: *We set the marginal propensities to leak to 0.2 for both groups, which means that the overall income multiplier is always
five. This is for the convenience of illustration only, and other parameter values can be easily accommodated with similar
conclusions. Note that this propensity must be nonzero for both groups to have a converging multiplier.
Source: Prepared by the study team.

21

Chapter 3. Specific Features in the Vietnamese Context
In the analysis of linkages among large-scale infrastructure, growth and poverty reduction, it is criticallyimportant to understand the features specific to Vietnam. These include: (i) the patterns and sources ofgrowth and poverty reduction; and (ii) progress of infrastructure development over the last decade.

3-1. Patterns and Sources of Growth and Poverty Reduction
Vietnam is frequently cited as one of the successful globalizers which has achieved rapid and fairly
equitable growth during the past decade11. As the result of high and sustained economic growth, thecountry has already halved income poverty during the past decade and achieved one of the importantgoals in MDGs [Box 3-1].

Box 3-1: Vietnam’s Achievement in Poverty Reduction
As Vietnam has integrated, it has had a large increase in per capita income and no significant change ininequality. Thus, the income of the poor has risen dramatically and the level of absolute poverty has been cut
in half in 10 years. Among the very poorest households, survey evidence shows that 98% became better off
during the 1990s. This improved well-being is not just a matter of income. Child labor has declined andschool enrollment has increased. Vietnam's export directly provided income-earning opportunities for poor
people: exports included labor-intensive products such as footwear and rice, which is produced by most lowincome farmers.

Poverty reduction in Uganda, India, Vietnam, and China closely related to growth% per year,
1992-98

9.9

10

8.4

6.4

5.9

6
4

7.5

7.1

8

4.4

3.8

2
0
UgandaIndia*

Vietnam

GDP p.c. growth rate

Chinapoverty reduction

Note: * India poverty reduction figure is for 1993-99.
Source: World Bank [2002a], Globalization, Growth, and Poverty: Building an Inclusive World Economy,
World Bank Policy and Research Report, p.6.

The findings of two VLSS (conducted in 1993 and 1998) provide valuable insights into the nexus
between growth and poverty reduction in Vietnam. Also, the preliminary results of the latest VHLSS(conducted in 2001-2002 and currently being analyzed) are useful to understand the trends of growthand poverty reduction after the late 1990s periods, when the large-scale infrastructure projects (underconsideration in this study) have been put into operations. The latest VHLSS 2002 shows further
progress in improving the living standards and reducing poverty [see Box 3-2].

11

For example, see World Bank [2002a], Globalization, Growth, and Poverty: Building an Inclusive World Economy.

22

Chapter 3. Specific Features in the Vietnamese Context

The full results of the latest survey are not yet available; but, according to the foregoing two VLSS,
three aspects are particularly noteworthy12.
The patterns and sources of growth in the past:
During 1993-98, the main source of poverty reduction was rapid growth, particularly fromagricultural liberalization, improved agricultural productivity and diversification of on-farmactivities. The favorable terms of trade for primary agricultural commodities also provided a
supportive environment. Average household incomes in the agricultural sector grew by 61% (pp.
viii-ix, p.41).
■

Likely sources of growth in the future:
The rural sector will continue to dominate employment in Vietnam over the short- to mediumterm. However, Vietnam might not be able to replicate the success of agricultural diversificationof the 1990s, which is now reaching its limits (p. 41, p.148).
In the future, the sources of growth are likely to be different from those in the 1990s. Greater
reliance will need to be placed on two other areas of growth, i.e., (i) off-farm employment andservices in rural areas; and (ii) urban employment. These must play a relatively more importantrole in poverty reduction in Vietnam (p.41, p.148).
Vietnam's human capital (and also its availability of labor relative to land) is very high comparedto other countries in East Asia. Vietnam has untapped export potential in labor-intensive
manufacturing13. In terms of resource endowments, it satisfies the preconditions to replicate the
manufacturing export and employment success of other East Asian nations (p.147, p.166).
■■■

The nature of poverty:
In Vietnam, the poor and the rich are not static groups, and their living standards vary over time(with such exceptions as ethnic minorities)14. A high proportion of the population is clustered justaround the poverty line. While this suggests their vulnerability to shocks, it also means that evensmall increases in mean per capita expenditure will be quite effective in moving a large number ofhouseholds over the poverty line (p.101, p.173) [see Box 3-2].
Although the incidence and depth of poverty have declined in both rural and urban areas, urban
areas have grown faster than rural ones (except the Red River Delta). The inequality in Vietnam isalmost entirely due to the widening gap between rural and urban areas, rather than due toinequality rising within either rural or urban areas (pp.69-73). The latest VHLSS 2002 shows thaturban-rural inequality is expanding. (Between 1998 and 2002, the rate of reduction of poverty inrural area was 5.4% against the urban figure of 6.1%.)
■

■

12

The below are primarily drawn from VDR2000: Attacking Poverty (Poverty Working Group 1999). The corresponding
pages are indicated in the parentheses.
13
It is estimated in VDR2000 that if Vietnam were to exploit fully its comparative advantages, manufacturing exports would
represent around 25% of its current GDP and up to 1.6 million more jobs could be created in labor-intensive export
manufacturing in the next three to five years.
14
Only about 40% of households were in the same expenditure quintile in the two periods of VLSS (1993, 98).

23

Linking Economic Growth and Poverty Reduction

Box 3-2: Continued Progress in Poverty Reduction and GrowthPreliminary Results of VHLSS 2002
The preliminary results of VHLSS 2002, published by the General Statistics Office (GSO), show Vietnam’s
continued progress in reducing poverty and improving the living standards of the population.
Between 1998 and 2002, poverty has further declined in both rural and urban areas. The percentage of the
population living below the total poverty line has decreased from 37% to 29%. Rural poverty has declined
from 45% to 36%. Three regions have experienced a large reduction of poverty incidence, the North East
(from 58% to 38%), the South Central Coast (from 35% to 25%), and the Mekong Delta (37% to 23%). On
the other hand, some increase in poverty incidence has been observed in Ho Chi Minh City and its vicinity(from 8% to 11%). In all regions, household incomes of the poorest quintile increased, compared to those of
1999.

Vietnam’s Poverty Incidence (as measured by per capita expenditure)
70%

1993

66%

50%
40%

1998

58%

60%

2002
45%
37%

36%

30%

29%

25%

20%
9%

10%

7%

0%
Rural

Urban

National

Source: GSO and World Bank estimates based on VLSS 93, VLSS 98 and GSO [2003b] based on VHLSS 2002.
Note: In VHLSS 2002, the survey sample was selected based on the areas covered in the Population and Housing Census
1999. The sample size was greatly expanded from the previous surveys, comprising of 75,000 households
representing the whole country, urban and rural areas, and 61 provinces/cities (expenditure data were compiled,based on the sample of 30,000 households).

24Chapter 3. Specific Features in the Vietnamese Context

Box 3-3: Opportunities vs. Vulnerability
In Vietnam, a high proportion of the population is clustered just around the poverty line. Moreover, the poorand the rich are not static groups. Both quantitative and qualitative data indicate that the poverty status ofhouseholds fluctuates over time. The Transition Matrices (based on the VLSS data) indicate that: (i) many
more households moved out of poverty than moved into it between 1993 and 1998; but (ii) the direction of
movement is not entirely one way*. There has been movement amongst all three categories, as shown in thetable below.
Histogram of Per Capita expenditures, 1998
-15

Share of population

Food Poverty line
Poverty line

0
2500

5000

7500

10000

Real per capita expenditure (VND ooos, Jan 1998)

Poverty Transition Matrices for Vietnam, 1993 to 1998(% of panel households)
Poverty Status in 1993
Very Poor
Poor
Non Poor
Total

Very Poor

Poverty Status in 1998
Poor
Non Poor

8.2

7.6
9.4

3.5
0.8
12.4

4.0
21.0

Total

7.1
20.3
39.2

22.8
33.3
43.9

66.6

100.0

Source: Elaborated by the study team, based on the World Bank (Vietnam Development Report 2000, Vietnam Attacking
Poverty). The original data are based on VLSS 93 and VLSS 98.
Notes: 1) Dark shaded cells indicate the percentage of panel households whose poverty status did not change between
1993 and 1998.
2) * About 4300 of the same households were included in both VLSS 93 and VLSS 98, allowing a panel analysis of
how individual households’ living standards have changed over time. Note, however, that the above table may
overstate transitions due to measurement errors in household expenditures.
3) Poverty status is defined as: the very poor (those below the food poverty line), the poor (those below the total
poverty line), and the non-poor (those above the total poverty line).

As stated in the CPRGS, Vietnam has long accorded high priority to social equity. The data suggest thatpublic social expenditures are more equally distributed than household expenditures, playing animportant re-distributive role15. When compared with other countries at similar levels of income,Vietnam's social indicators are much better, as seen by the adult literacy rate of 93 % and the infant andchild (under five) mortality rate of 34 per 1,000 live births [2000 data, World Bank 2003c]. Moreover,the Vietnamese government has eight national poverty programs targeted at ethnic minority groups in
the mountainous areas and poor families in remote areas (or those under the "static" poverty) [SRV
2002a]. All these factors may suggest the effectiveness of creating income "opportunity" in reducing

15

Vietnam Public Expenditure Review 2000 notes that based on the VLSS 1998 data, the poorest quintile receives 26% ofprimary education expenditures, a 6% point jump from 1992/93 [Government of Vietnam- Donor Working Group 2000].

25

Linking Economic Growth and Poverty Reduction

poverty, and thus the importance of "trickle-down" effects through backward and forward linkages.
In sum, in order to sustain the past gains in poverty reduction, Vietnam needs to make greater efforts instimulating off-farm employment and urban employment growth, creating "opportunities" for the
majority of population. Moreover, to fully exploit its potential for labor-intensive export manufacturing,efforts must be geared to raising productivity and international competitiveness. This is particularly
important as Vietnam's international integration is proceeding very rapidly (such as USBTA, AFTA andWTO accession). At the same time, the government must be conscious of the need to respond to
emerging social problems in the growth process.

3-2. Past Progress in Large-Scale Infrastructure Development
Vietnam's experiences in the early 1990s confirm the importance of overall growth in generating fiscal
revenue and (as a result) allowing for increased public expenditure on infrastructure, education, andhealth, etc. Thanks to high growth and initial reforms of the tax system, government revenue increased
rapidly after 1991. As Figure 3-1 shows, government expenditure as a share of GDP became muchhigher in 1994 than in 1989. Furthermore, because per capita GDP increased substantially during thisperiod, with real per capita government expenditure nearly twice as high in 1994 as in 198916.
Greater fiscal revenue, together with increased aid flows, has enabled the government to intensify its
efforts in growth promotion and poverty reduction, especially since the mid-1990s.
Over the last decade, the Vietnamese government has consistently placed high priority on the
Figure 3-1: Budget Operations: in proportions to GDP (%)
30.0%
25.0%

Expenditure

20.0%
15.0%
Revenue

10.0%

FiscalBalance

5.0%
0.0%
-5.0%
-10.0%
1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000p

Source: The data from 1986 to 1993 are based on MPI/JICA [1998], Table 6 “Budget operations: in proportions to GDP (%),”
p.84. The data from 1994 to 2000 preliminary are based on IMF [2002], Government Finance Statistics Yearbook andInternational Financial Statistics Yearbook.

rehabilitation and development of national infrastructure, such as trunk roads, ports, airports and power
supply, as well as local infrastructure, allocating substantial amounts of public investment to this end.
During 1996-2000, about 40% of the total public investment (state budget, state credit, and SOE
investment) was directed to transport and power infrastructure17. Moreover, since 1996/97, major
infrastructure has received the largest proportion of ODA, particularly in the transport and energy
sectors [Figures 3-2, 3-3].
16

Dollar and Litvack, "Macroeconomic Reform and Poverty Reduction in Vietnam," in World Bank [1998] Household
Welfare and Vietnam's Transition, Chapter 1, pp.1-28.
17
During 1996-2000, the public sector was responsible for approximately half of all investment in the country [SRV 2002b].
Here, ODA (which is directed to both state budget and state credit) is counted as public investment. For example, roads
constructed by the Ministry of Transport (including ODA) are part of the capital spending of the state budget, while powergeneration projects constructed by Electricity of Vietnam (including ODA on-lending) are classified as the state credit.

26

Chapter 3. Specific Features in the Vietnamese Context

Figure 3-2: Broad ODA Trends 1993-2001

USD million
1800
1600
1400
1200
1000
800
600
400
200
0
1993

1994

1995

Major infrastructure
Natural resources and industry
General quick disbursing

1996

1997

1998

Rural development
Policy and institutional support

1999

2000

2001

Human resource development
Emergency and relief

Source: UNDP ODA Survey

Figure 3-3: ODA Disbursements for Major Infrastructure

100%
80%
60%
40%
20%
0%
1993

1994

1995

1996

1997

1998

1999

2000

Drinking water and sanitation
Communications and urban development
Transport
EnergySource: UNDP ODA Survey
Source: UNDP [2002], ODA Flows to Viet Nam, http://www.undp.org.vn/undp/fact/ODAflow.pdf.

27

2001

Linking Economic Growth and Poverty Reduction

Infrastructure development in the 1990s and the resultant improvements in power supply andtransportation are shown in Figures 3-4, 3-5 and map.

Figure 3-4: Improvement in Power Infrastructure
Electricity Generation and Consumption 1990-2002
Energy-GWh

Capacity-MW

40000

7000

35000

6000

30000

5000

25000
4000
20000
3000

EnergyGeneration(GWh)
EnergyConsumption
(GWh)

15000
2000

10000

Peak Load
(MW)

1000

5000

0

0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Year

Electrification Rate 1990-2002

(%)
100
80

Rate ofcommunes withelectricity (%)

60

Rate of rural
households withelectricity (%)

40
20
0
1996

1997

1998

1999

2000

2001

2002

Year
Note: It is estimated by EVN that households with electricity accounted for 13.9 % of the total households in 1990.
Source: Prepared by CONCETTI based on the data from Electricity of Vietnam.

28

Chapter 3. Specific Features in the Vietnamese Context

Figure 3-5: Improvement in Road Infrastructure

Total Length of Provincial Roads

Total Length of National Roads(km)
18,000(km)

20,00018,00016,00014,00012,00010,000
8,000
6,000
4,000
2,000
0

16,00014,000earthenroad

12,00010,000gravel

8,000
6,000

paved
road

4,000
2,000
0

1995

1997

earthenroad
gravel
paved
road

1995

1999

Total Length of Rural Roads

1997

1999

Number of Communes without Access-Roads(among total of 8,937 communes)(km)200,000

700
600
500
400
300
200
100
0

160,000
District
road (km)120,000

Communeroad (km)80,00040,000

663
515
269

1996

0
1994

1997

1999

1999

2002

2002

Source: Prepared by the study team based on the data from the Ministry of Transport, Transport Development and Strategy Institute an
Japan International Cooperation Agency.

29

Linking Economic Growth and Poverty Reduction

Trunk Road Network as of June 2003*1

Notes: *1 This map excludes on-going projects.
*2 This map does not include provincial roads improved by the Provincial People’s Committee’s own budget.
Source: Prepared by the study team based on the data from Ministry of Transport

30

Chapter 4. Linkages among Infrastructure, Growth and Poverty Reduction:
Selected Case Analyses
This chapter discusses how large-scale infrastructure has contributed to generating poverty-reducing
growth in Vietnam through various linkages, as illustrated in the previous chapter. To this end, ananalysis of specific cases is presented.
Special attention is paid to the supply-side effect, namely, the investment-inducement effect (FDI anddomestic investment) and the regional economy activation effect (agriculture production, tourism
promotion etc.). The analysis focuses on three cases of recently completed, large-scale infrastructure
projects in the transport and power sectors. All of them are currently under operation:■■■

Case Study 1: Improvement of National Highway No.5 and the expansion of the Hai Phong Port
(funded by Japan/JBIC and Taiwan, completed in 2000);
Case Study 2: Construction of the My Thuan Bridge (funded by Australia, completed in 2000)
and the improvement of National Highway No.1 (co-financed by the World Bank, the ADB, andJapan/JBIC, with the southern Ho Chi Minh City-Can Tho section having been completed in1999); andCase Study 3: Development of overall power supply capacity and regional electrification,
including the construction of the North-South 500kv transmission line (financed by the
Vietnamese government, completed in 1994).

In addition, the following cases are analyzed to obtain diverse perspectives on the role of large-scale
infrastructure in poverty reduction and growth.
Case Study 4: Accessibility and road network, in light of "economic distance" and "connectivity"
to markets (based on the UK/DFID experience of rural road projects in Hung Yen and Lai Chauprovinces);
Case Study 5: Accessibility and road network, in light of access to social service delivery (basedon the experience with the Japan/JICA-supported Reproductive Health Project in the Nghe An
province); andCase Studies 6: Effective demand for highway construction (based on Japan/JBIC-funded
National Highway No.18).
■■■

4-1. Case Study 1: Hanoi-Hai Phong Northern Transport Corridor
In recent years, the provinces along the Hanoi-Hai Phong transport corridor have demonstrated
dynamic economic performance. Hanoi (the national capital) and Hai Phong (which has the largest
international port in the north) have been growth centers in northern Vietnam. With the improvement of
National Highway No.5 (NH5, hereinafter) and the expansion of Hai Phong Port, the transport corridor
has reinforced the link between the two growth centers, and has enhanced the access of Hanoi to global
markets by improving land and sea transport. FDI to major industrial zones has increased significantly,
particularly since 2000, driving industrial and export growth in the north. Figure 4-3 shows theseeffects schematically.
Moreover, this growth has spread to neighboring areas, particularly Hung Yen and Hai Duongprovinces (located between the two growth centers), and the rural economy has experienced major
structural transformation. Domestic investment in these areas has increased, and rural households havediversified their agricultural production. Faster and more convenient transportation has also spurreddemand for tourism in Ha Long Bay. The number of tourists to Quang Ninh province quadrupled from1995 to 2002.

31

Linking Economic Growth and Poverty Reduction

All these effects contributed to the creation of new employment and higher income for workers atfactories and hotels (direct jobs). Rural households now enjoy higher disposable income. The existingdata indicate that in recent years, most of the provinces along the Hanoi-Hai Phong corridor achieved
faster growth in per capita income and reduction in the number of poor households, compared to theaverage for the Red River Delta or the whole country [see Figures 4-1, 4-2].
Figure 4-1: Growth Rate of Per Capita GRP by
Province, Annual Average of 1995 to 2000 (%)

Figure 4-2: Reduction in the Number of Poor
Households by Province from 1998 to 2000 (%)

NH1

NH1
NH18

Thai Nguyen

NH18

Thai Nguyen

Vinh Phuc

Vinh Phuc

Phu Tho

Phu Tho

Bac Glang
Ha NoiHa TayHa Noi

Quang Ninh

Ha TayBac Ninh

Hai
Duong

Hung
Yen

Bac Glang

Quang Ninh
Bac Ninh

Hung
Yen

Hai
Duong

Ha NamThai Binh

Hai
Phong

Hai
Phong

%
Ha NamNH5

Thai Binh

10.0 7.0-9.0

Ninh Binh

Nam Dinh

100% -

NH5

6.0-6.980-99%
Ninh Binh

75-79%Nam Dinh

-5.9

-74%

Source: JBIC/IDCJ [2003]. Poverty data are based on Statistics of Agriculture and Rural Development 1991-2001.

Figure 4-3:Highways and Port Link Two Centers, Attracting
Investment and Diffusing Growth to Rural Areas

Red River Delta Region
Northern Transport Corridor

Ha LongBay

Hwy 5
Hai Phong

Ha NoiHai Phong PortBy water

By land & air

National & Global Economy

32

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Box 4-1: Hanoi-Hai Phong Corridor — Impact on Traffic
National Highway No.5 (NH5, hereinafter) is a 2-lane trunk road of approximately 100km connecting thenational capital Hanoi and Hai Phong Port, the largest international port in northern Vietnam. It is one of themost important arteries for traffic flow of export and import goods, as well as of domesticallycommercialized products. The corridor is considered a crucial element for the competitiveness of northern
Vietnam. However, previously, the highway was narrow and deteriorated. The road network in the region was
not linked due to rivers without bridges.
Therefore, the Vietnamese government has placed high priority in investing in the corridor to strengthen its
transportation capacity. Thanks to the completion of several projects listed below, this purpose has beenachieved. Travel time between Hanoi and Hai Phong was cut by half—from 3.5-4 hours (at a speed of 25-28
km/hour) to 1.5-2 hours (at 60 km/hour). After its expansion, Hai Phong port now has a container-specialized
port at Chua Ve.
Upgrading NH5

Related donor
funding projects

Hai PhongPort
Rehabilitation
Project

Contents
of projects

Km 0-47

Km 47-62

Km 62-93

Km 93-106

Funding Agency
Project Cost

JBIC
￥8,782
millionTaiwan
US$34.5
million

JBIC￥5,470
million

JBIC￥6,709million

JBIC￥3,975
millionCompletion Year

1999

1997

1999

2000

2000

Sources: JBIC/IDCJ [2003].
Taiwan-financed project: the Ministry of Transport

The corridor development has reinforced the transportation network—by improving connections with theother trunk roads (e.g. NH1, NH10 and NH 18) which have also been upgraded—and enabled the expansionof container cargo handling capacity at Hai Phong Port to cope with increased traffic demand. Furthermore,
there have been parallel improvements in rural (feeder) roads in the surrounding areas, financed from various
sources (e.g., local budget, commune contributions, and donors such as the World Bank, DFID and JBIC).
The traffic count and truck drivers’ interview surveys of NH5 and Hai Phong Port (conducted in the JBIC
post-evaluation study) show the following:• Between 1999 and 2003 (“before” and “after” its improvement), the traffic volume along NH5 almost
doubled. Especially, the intermediate section (HW39-HW183) has experienced the largest increase of
traffic volume by all types of vehicles.
• At present, 64.5% of total traffic uses NH5 exclusively. If the other routes are included, about 85% of
total traffic uses NH5.
• 70% of total vehicle traffic is for the main port of Hai Phong. (The statistics of Hai Phong port also showthat during 2001-02, the volume of container cargo rose by 1.5 times from 22.7 to 33.5 thousand TEU.
(The total volume of cargo increased from 8.6 mil tons to 10.4 mil tons during the same period.)• Container trucks account for 38% of total vehicles. 47% of the container trucks carry 40 foot containers.
• 32% of total freight (to/from Hai Phong port) is farm produce (e.g., rice and maize).
Also, the provincial data suggest that the volume of exports handled at Hai Phong port increased by 31%
from 1999 to 2000 (compared to 17.5% of the overall increase in cargo volume at the port).
According to the JBIC post-evaluation study, EIRR of the NH5 improvement project is estimated at 19.71%(discount rate =12%).

33

Linking Economic Growth and Poverty Reduction

Cargo Throughput in Hai Phong Port (1993-2000)
12,00010,350Total Volume (*1000tons)
10,000

Container (*100TEUs)

8,575
7,645

8,000
6,510
6,000
4,515
4,000

2,706

3,350

1994

1,170

870

670

450
1993

4,588

3,250

2,000
0
Year

4,810

5,446

1995

1996

1,838

1,410

1997

1998

2,140

1,988

1999

2000

2,270

2001

2002

Source: Project Completion Report (Hai Phong Port Rehabilitation), April 2002, PMU and Brochure of Hai Phong
Port in 2003, Hai Phong Authority.

Traffic Volume of Highway No.5
Percentage Increase from 1999 to 2003
140%
119

120%

123

123

113

100%
80%

76

81

80

73

60%
40%
18

20%
0%
HW1-HW39

HW39-HW183
Total

4-wheel

HW183-Hai Phong
2-wheelNote: Highway No.5 intersection with
HW 1: Gia Lam
HW39: Connected to Yen My and Hung Yen towns
HW183: Hai DuongSource: Elaborated by the study team, based on JBIC/IDCJ [2003].

Rapid Industrial Growth and FDI Attraction: Investment-inducement Effect
The JBIC-financed post-evaluation study (hereinafter, JBIC/IDCJ study) on the upgrading of NH5 andthe rehabilitation of Hai Phong Port18 provides useful insights on the nature and extent of the dynamictransformation in the four provinces along this transport corridor (i.e., Hanoi, Hung Yen, Hai Duong,and Hai Phong). This study finds that increased industrial output and FDI attraction, and the resultant
job creation and higher income are major benefits realized by the improved transport infrastructure.
18

Impact Assessment of Transport Infrastructure Projects in Northern Vietnam, prepared by International Development
Center of Japan (IDCJ) for JBIC. The post-evaluation focused on the two transport projects. The draft report was presented
at the June 12, 2003 workshop in Hanoi, and finalized in July 2003.

34

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Industrial output growth. In all of the four provinces, FDI contribution to industrial production has
increased. In 2001, FDI firms accounted for over 30% of industrial output in Hanoi and nearly half ofthat in Hai Phong. Hanoi and Hai Phong are the most popular destination for FDI. However, Hung Yen
and Hai Duong also started attracting FDI, particularly after 2000, when NH5 began to be practically inuse. In Hung Yen, FDI firms are dominant producers, accounting for over 70% of the provincial
industrial output. Domestic investment has also increased. In Hung Yen, out of the 33 newly registereddomestic investment projects (total of the 1995-2000 period), 20 projects were registered in 2000.
Figure 4-4: Trend of FDI Inflow to the Four Provinces along Highway No.5
mil. US$No. of FDI projects

3,500

120

3,000

100

2,500

80

2,000
60
1,500
40

1,000

20

500
0

0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Registered Capital

Number of FDI

Note: The figure includes non-industrial FDI.
Source: MPI [quoted from JBIC/IDCJ, 2003].

Figure 4-5: Structure of Industrial Gross Outputof the 4 Provinces by Ownership

Figure 4-6: Structure of Industrial Labor Forcesof the 4 Provinces by Ownership100%

Non state

100%

Non state

90%

State

90%

State

80%

FDI

80%

FDI

70%

70%

60%

60%

50%

50%

40%

40%

30%

30%

20%

20%

10%

10%

0%

0%
1995

2000

1998

Source: DPIs of Hanoi, Hung Yen, Hai Duong and Hai Phong Peoples Committees, General Statistical Office.

35

2000

Linking Economic Growth and Poverty Reduction

The existence of well-developed infrastructure is a key determinant of business location. All of the four
major industrial zones (IZs) in the north—Thang Long (JV of Japan and Vietnam, registered in 1997),
Nomura-Hai Phong (JV of Japan and Vietnam, registered in 1994), Noi Bai (JV of Malaysia andVietnam, registered in 1994), and Sai Dong B (JV of Korea and Vietnam, registered in 1996)—arelocated between Hanoi and Hai Phong cities. As of June 2003, the four IZs have attracted 98 FDI
projects—equal to 85% (in terms of the number of projects) and 86% (in terms of registered capital) of
FDI in the northern IZs. Two-thirds of these firms entered the zones in or after 2000 [MPI data].
Table 4-1 shows the number of FDI projects in the four IZs. Although negatively affected by the Asianfinancial crises, these IZs started to attract investors again from 2000, when basic transport
infrastructure connecting the zones and their surrounding areas was completed. In Hung Yen and Hai
Duong provinces, both FDI projects and local firms are concentrated along NH5 [see Appendix for thelocation of industrial zones in Hanoi and its vicinity].
Table 4-1: Number of FDI in Major Industrial Zones alongside Highway No.5
Thang Long IP

1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003

Noi Bai IZ

Nomura- Hai Phong IZ

1
1
1

3
1

3

2
2
6
13
N.A.

2
2
N.A.

5
12
4

Sai Dong B*

1
1
5
1
1
1
3
4
5
2

Notes: 1) *Excluding the expansion by two companies in 2002-03.
2) The data are as of March 2003. These are slightly different from MPI data on FDI (e.g.,licensed year), but the trend and magnitude are largely consistent.
3) According to the MPI data (as of June 2003), there are 1 new project in Thang Long IP,1
project in Noi Bai IZ, and 8 projects in Nomura Hai Phong IZ in 2003.
Source: JBIC/IDCJ [2003].

As Table 4-2 shows, NH5 and the Hai Phong port are frequently used by FDI firms. A recent interview
survey with over 70 FDI firm managers19 suggests that nearly 90% of new investments would not havebeen realized without the improvement of the two transport facilities. This survey also indicates major
benefits realized by the improved transport infrastructure, including: (i) cost reduction in transporting
imported inputs; (ii) time-saving in delivering raw materials and final products; (iii) increased
reliability (less variation) in transportation time, leading to improved coordination of production andsales schedule; and (iv) business facilitation, e.g., by making one-day business trips between Hanoi and
Hai Phong cities much easier.

19

Based on the results of an interview survey conducted by IDCJ in March 2003, for over 70 managers of FDI enterprises in
the northern Vietnam.

36

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Table4-2: Use of Highway No.5 and Hai Phong Port by FDI in the northern Vietnam
FDI
type

Productionsite

1

Ha Noi2

Ha Noi

Local

3

Ha NoiLocal

4

Ha NoiInternet

5

Ha NoiNoi BaiHai PhongX

6

Hai PhongHai PhongHai PhongXX

7

Hai Phong

Local

8

Hai Phong

Local

9

Hai Phong

10Vinh PhucMainmarketExportchannelImportchannelUse ofHP portUse ofNH5Business
examplesHai PhongHai PhongXXXX

OA products

Hai PhongXXXX

sanitary ware

Hai PhongXX

X

Hai Phongglass ware
SoftwareX

electronic parts
clothes, bags

Hai PhongXX

X

glass container

Hai PhongHai Phong

XXX

XX

heavy metal structure

Noi BaiNoi BaiXX

jewelryX

motorbike

Local

Hai PhongX

Note: X shows frequency of use.
Source: JBIC/IDCJ [2003], based on FDI firm survey in March 2003.

Job and income generation. Industrial FDI has created a large number of direct jobs. As of mid-2003,
FDI firms at the four IZs employed a total of 14,000 workers. Many of them plan to hire more staff in
the near future, to 20,000 by end-2003. According to a questionnaire survey of employers at major IZs(including the above four), most of the workers are graduates of upper secondary schools or higher.
Over 80% of the workers responded that income from foreign firms is significant for their householdincome (with 45% of the workers answering "very" significant)20. On average, income from FDI firms
occupies about half of their total household income. Current income from foreign firms is higher thanprevious income (regardless of type of previous jobs).

Table 4-3: Employees Survey at FDI Firms
Current Position
Factory worker

Previous Job Experience
102

43%

Farming1

Factory supervisor

94%

Handicraft

104%Administration staff

76

32%

Factory employment

26

11%

Manager/professional staff

43

18%

Trade & Service

10

4%

Others10

4%

Government employee

13

5%

Total

240

100%

Others47

20%

Academic Background0%

No experience10

4%No answer

123

51%

Total

240

100%

Significance in HH Income

Secondary school

9

4%

Very significant

107

45%

High school

66

28%

More or less significant

90

38%
12%

Vocational school

34

14%

Not significant

28

Higher education

113

47%

No answer

15

6%

Others

18

8%

Total

240

100%

Total

240

100%

Source: JBIC/IDCJ [2003] and CONCETTI.

20

Based on the results of a questionnaire survey conducted by IDCJ/CONCETTI in March 2003, for 240 workers at FDI firms
at major industrial zones (in the north).

37

Linking Economic Growth and Poverty Reduction

The "Canon Effect" is a good example of a synergetic impact of FDI attraction. Through the promotionof "satellite investment," additional jobs and income are generated. Canon's investment decision in
Thang Long Industrial Park cannot be solely attributed to the improved Hanoi-Hai Phong transport
corridor, but the existence of well-functioning infrastructure remains one of the key determinants, oreven a prerequisite for attracting FDI [see Box 4-2].
In Hai Phong province, direct industrial labor created by FDI firms more than tripled during 1995-2001(from 3,120 to 10,406 jobs). This corresponds to 8.4% of the provincial industrial labor force in 2001
[Statistical Yearbook of Hai Phong]. Such growth in FDI jobs is impressive, but the figure is small
compared to FDI's contribution (45%) to provincial industrial output. Similar trends can be observed in
Hanoi, Hung Yen, and Hai Duong. This is partly because most FDI firms are yet to operate on a fullfledged scale. Greater impacts can be expected in the future. (Also, the figure may partly reflect
redundant labor at inefficient firms, especially large SOEs.)
The impact on job creation can be larger in the case of domestic investment. In addition to the above
major IZs, there exist a number of provincial industrial zones managed by local authorities. The Hai
Phong People's Committee has developed 15 industrial zones. In the Hai Phong province, the numberof non-state firms (particularly, limited companies) has been increasing rapidly. In 2001, their industrial
workers accounted for 59% of the total industrial labor force (compared to 41% in 1995).
Box 4-2: Satellite Investment of FDI, “Canon Effect”
In April 2002, Canon opened a printer assembly line in Thang Long Industrial Park. Since then, a variety ofparts suppliers has come to invest in northern Vietnam. Some of these FDI firms are located in the same
industrial park, but there are others located outside. As of March 2003, Canon employed about 2,000
workers (with further expansion planned). It is roughly estimated that related parts suppliers have created atleast 2,000 jobs.

Plastic products(Thang Long)

Plastic products(Nomura HP)

Power cord(Thang Long)

Canon
Printer Assembly(Thang Long)

Surface treatment(Thang Long)

Users’ manual(Thang Long)

Wiring system(Saidon B)

Logistics(Thang Long)

Plastic molds(Nomura HP)

Plastic molds(Noi Bai)Japan

Thai Subsidiary

Source: Elaborated by the study team, based on JBIC/IDCJ [2003].

Moreover, increase cargo volume at the Hai Phong Port has expanded opportunities of relatedbusinesses, which in turn have created jobs and income. The development of transport services in Hai
Phong is a good example of indirect job and income generation, associated with the investmentinducement effect [see Box 4-3].

38

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Box 4-3: Indirect Job and Income Generation in Transport Services
Transport, storage, and communications have been traditionally the most important sub-sector in service
industry in Hai Phong (contributing to 14-15% of the provincial GDP). The port expansion gave further
stimuli to them. Between 1999 and 2000, this sub-sector grew by 14% (compared to 9% of provincial GDP),and the volume of freight in Hai Phong city rose by 38% (compared to 10% during 1998-1999). The findingsof an interview survey of 45 truck drivers around the Hai Phong Port also confirm: (i) significant increase in
the volume of transported goods; and (ii) increased workloads and the resultant improvement in theirmonthly incomes.

Changes in Volume of Transported Goods Since 2000
Same
4%
(2 drivers)

Decreased
4%(2 drivers)

Increased
92%(41 drivers)

Source: CONCETTI, based on interviews with randomly selected,
45 truck drivers at the Hai Phong Port in August 2003.

Changes in Monthly Incomes of Truck Drivers Since 2000
8%
(3 drivers)

11%(4 drivers)

29%(11 drivers)

24%(9 drivers)

29%(11 drivers)

Significantly increased due to increased workload
Significantly increased due to low level of previous income
Significantly increased due to increased workload and previous low income
Unchanged
Decreased

Source: CONCETTI, based on interviews with 38 drivers (of 45) who responded
that they have been working at the port before 2000.

The survey also provides the information on changes in unloading time, procedures, and fees. The majorityof the interviewed drivers reported shorter time (38 out of 45) and simpler procedures (31 out of 45) for
unloading since 2000, thanks to the introduction of modern equipment. At the same time, some drivers
commented on changes in the levels and structure of unloading fees, including fee increase (17 of 45).
Source: Prepared by the study team, based on CONCETTI [2003a].

39

Linking Economic Growth and Poverty Reduction

Agricultural Diversification and Off-Farm Business Expansion: Regional Economic Activation
EffectIn Hung Yen and Hai Duong, rural households have greatly diversified their agricultural production (forexample, from rice to fisheries and poultry) and been increasingly engaged in new business
opportunities. The statistics show that many farmers transformed paddy fields into ponds for fish farms
and expanded fishery production. In Hung Yen, the agricultural share of provincial GDP declined from
52.7% (1995) to 42.7% (2000), and the share of industry increased from 14.5% to 27.3%. Hai Duong(which has a larger industrial base than Hung Yen) has seen rapid growth in the service sector.
Figure 4-7: Reduction in Planted Area of

Figure 4-8: Change in Area of Water Surface for

Paddy by Province from 1995 to 2001

Culture Fishery by Province from 1995 to 2001

Thai Nguyen

Thai Nguyen

Vinh Phuc

Vinh Phuc

Phu Tho

Phu Tho

Bac Glang
Ha NoiHa TayQuang Ninh

Ha TayBac Ninh

Hung
Yen

Hai
Duong

Ha NamThai Binh

Bac Glang
Ha Noi

Hung
Yen

Hai
Duong

Ha NamThai Binh

Hai
Phong

over -5%

Quang Ninh
Bac Ninh-1% to -4%
Ninh Binh

Nam Dinh

Hai
Phong

150% 〜
80〜140%0%Ninh Binh

Nam Dinh

Increase

50〜79%〜49%

Source: JBIC/IDCJ [2003], based on the data from Statistical Yearbook 2001, General Statistical Office.

Income generation. Two rural surveys conducted under the JBIC/IDCJ study provide insights into theprocess of change. These are: (i) a rural household survey, focusing on around 200 households(randomly selected) in six communes in Hun Yen and Hai Duong21, conducted in February-March
2003; and (ii) an interview survey with 54 traders (randomly selected) in local wholesale markets,
Duong Cai, Yen My, and Bac markets (in Hun Yen) and Nam Sach market (in Hai Duong), conductedin February-March 2003 [see Appendix for the methodology and main findings of the two surveys].
Between 1997 and 2002, per capita income at all the surveyed communes increased, but the growth rate
was higher in the five communes along NH5 (at 126% on average, compared to 67% of the An Duc
commune). However, the results also suggest that structural transformation has been spreading into all
the six communes. This may be partly due to the combined effect of the development of NH5 andnearby feeder roads. In all six communes, the source of income for the surveyed households has
diversified. The other findings include:
Almost half of the households started new economic activities.
While farming still accounts for the biggest share in the average household income, income fromlivestock production, fisheries and commerce increased significantly during 1997-2002.
These farmers started new businesses because they can now expect greater profits and morecustomers in the local market.
The information from agricultural extension service—either directly or through TV/radio media—
was very useful for households in starting new businesses.
■
■

■

■

21

Regarding the rural survey, five among the six surveyed communes are located along (or nearby) NH5 except for the An
Duc commune.

40

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Figure 4-9: Structure of Average Income of the Surveyed Households: 1997-2002
Unit: mil.VND

900
800

1997

700

2002

600
500
400
300
200
100
0

Fa
in

s

g

e

ce

at

t

ce

an

st

y

itt

er

rm

th

em

O

R
or

le

ct

ea

af

k

er

cr

m

di

om

an

Fa

R

C

H
y

oc

er

st

sh

ve

Fi

Li

Note: The sample covers 206 rural households in six communes in Hung Yen and Hai Duongprovinces. The rural household survey was conducted during February-March 2003.
Source: JBIC/IDCJ [2003].

Table 4-4: Per Capita Income at the Surveyed Communes
Per capita
income 1997

Per capita
income 2002

Growth105%

Lai Vu, HD

1,409

2,885

An Duc, HD

1,447

2,410

67%

Dinh Du, HY

1,668

5,824

249%

Giai Pham, HY

2,103

3,864

84%

Ban Yen Nhan, HY

2,107

4,431

110%

Cam Doai, HD

2,761

5,539

101%

Case communes along HW5

2,011

4,545

126%

Hai Duong Province average

2,962

4,732

60%

Hung Yen Province average

2,455

3,793

55%

Note: GDP per capita of Hung Yen 2000 is substituted for those of 2002 due to availability. Amongthe six communes surveyed, An Duc commune is located away from NH5.
Source: JBIC/IDCJ [2003].

These findings are consistent with the results of local traders survey. The interviewed traders notedsignificant changes in the variety and the origin of agricultural products sold in local markets during
1997-2002. Over 50% reported "much more" or "more" variety of products in the markets, and almost
70% of traders noted the diversification of product origins. Most of the farm products come from local
areas, particularly Hai Duong and Hung Yen.
It appears that the improvement of trunk roads—together with the development of feeder roads—has
promoted the diversification of marketing channels. The interviewed local traders noted the following
major important changes: (i) time-saving to access the markets; (ii) increased number of buyers; and(iii) access to greater market opportunities. The surveyed rural households also confirm the expanded
opportunities to sell their farm products over the last five years, through the increased number of local
retailers, local consumers, and traders visiting rural villages (from other provinces). The importance ofroad network (trunk and rural roads) in improving the living standards of rural communities is welldocumented in the DFID-supported perception study on four communes in Hung Yen province [seeBox 4-4].

41

Linking Economic Growth and Poverty Reduction

Table 4-5: Views of Local Traders about Change in the Markets
Access to more markets opportunities

Save time to access the markets

No. of traders

No. of traders
Very significant

13

24%

Very significant

815%Significant

27

50%

Significant

22

41%

No Impact

3

6%

No impact

4

7%

Negative impact

2

4%

Negative impact

1

2%

9

17%

No answer

54

100%

No answer
Total

Total

Increase in the turnover

19

35%

54

100%

Reason for the increase in the turnover*No. of traders

No. of traders

Very significant

4

7%

Significant

24

44%

Morepurchasingpowerof
local consumers

42

56%

No impact

2

4%Higher valued products

17

23%

Negative impact

2

4%Higher prices of products

11

15%

No answer

22

41%

Other reasons

3

4%

54

100%

No answer

2

3%

75

100%

Total

Total

* more than one answer
Source: JBIC/IDCJ [2003], based on local traders survey in February/March 2003.

Rising consumers demand. All the above suggest an emerging "virtuous cycle" in the rural economy.
Rural households now enjoy higher disposable income. With increased purchasing power, they havegreater consumer demand for a variety of products and services. Thanks to the improved access tocities, members of rural households visit large cities (particularly, Hanoi and Hai Duong) more
frequently, for the purposes of leisure, trade, and health care etc. [see Appendix on the rural road
network and public bus transport]. Public transport continues to be mainly used for their city visits (byabout half of the households); but the motorbike is increasingly becoming a popular means oftransportation.
One emerging social aspect of NH5 seems to be traffic accidents. While most of the surveyed
households consider NH5 convenient, at the same time, they point out that it is dangerous or difficult tocross. It is reported that the number of traffic accidents along the highway increased from 251 per year
(1999) to 376 (2002). (Although the number of accidents continues to rise, less injuries and deaths
along NH5 compared to the national average are reported.)

42

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Box 4-4: Community Perception of Road Network
Duong Quang Commune, My Hao District, Hung Yen Province:
Duong Quang commune is located 3km from NH5 running from Hanoi to Hai Phong. Despite its proximity
to this major highway, rice cultivation is still the main source of income. The income of residents isconstrained by lack of land. On average each resident has only 827m2 of productive land from which to makea living. There remain 171 poor households out of a total of 1,426 households in the commune.
A district road runs through the commune (upgraded by the World Bank/DFID-supported Rural Transport II
project in 2001-2002). Perceptions of the commune arethat the access provided by the road network (trunk and
Mr. Kieu Van Do, Duong Xa village:
local) is a key factor in the development of the commune.
"In the past, I had to carry paddy on mySince the rural road was upgraded linking the commune
shoulders to the Thua market, which is 7
to NH5, the following benefits have been perceived and
km far away. There were few rice mills intaken place:the commune at that time. Now there are
Incomes have increased at 7% a year over the last 5
20 rice mills, of which 3 ones at largeyears, reaching 3,200,000VND in 2002 (Equivalent toscale production run by 15 workers."
US$206 at US$1 =15,500VND).
Duong Quang commune, August 2003
Locally generated revenue for the communes own
development has increased at 15% per year.
The economic structure of the commune is transforming. From a rice-based to a mixed-economy including
cultivation, livestock rearing, services, and cottage industries. There are more shops, more rice mills, moretraders of agricultural produce, more means of transport: 1 truck, 6 mini-buses, 8 cong-nongs (a locallymanufactured farm vehicle), 492 motor-bikes, and 1,817 bicycles.
The commune also has better social infrastructure: primary schools, health clinics, power supplies and thepost office have all been upgraded and utilization of these services has increased. Enrollment andgraduation rates of school children have increased and primary health care programs reach more children as
they can access the commune clinic
Social life in the commune has also improved thanks to better economic conditions and easiercommunications. Some villages have mobilized resources from their own villagers to build concrete village
roads—to reliably connect themselves to the road
network. Villagers also apply rules to protect these roads
Mr. Kieu Van Do, Duong Xa village:
from overloading and raise maintenance revenues.
"In the past, when the road network was not

■

■

■

■

■

upgraded and improved, I had to pay 2,500
vnd for a sack of rice. Now the price is 2,000
vnd, a significant reduction"
Duong Quang commune, August 2003.

With better access to information local people are better
able to adopt technology and knowledge. They are using
improved and higher market value seeds, applying
modern techniques in cultivation and rearing livestock—
selectively absorbing appropriate innovations for
improving their livelihoods.
Markets have also become far more accessible, reducing costs in the local economy.
Some people have found jobs in the industrial factories established along NH5. High school students are
now motivated to study as they see opportunities forjobs with a higher cash income in industrial factories.
The disposable income from this employment has had aMr. Kieu Ngoc Quang, 32 years old,notable stimulating effect on local economic activity.
Duong Xa village:"Nowadays, price of pig is much higher
than before. Mobile agents go house-tohouse and buy. In the past, price of pig
Source: Participatory Perception Study, DFID September 2003.
sold in the commune was 500 vnd/kg
lower than that at markets near NH5.
Now there is no such difference. "Duong Quang commune, August 2003
■

■
■

43

Linking Economic Growth and Poverty Reduction

Booming Tourism in Ha Long Bay: Regional Economy Activation EffectWith the development of the trunk road network, travel time between Hanoi and Ha Long Bay has been
reduced from 5.35 hours (1993) to 3.35 hours (1998), and further down to 2.05 hours (2003)22. Astravel becomes more convenient and comfortable, demand for Ha Long Bay tourism has surged. Many
visitors to Hanoi now make day-trips to Ha Long Bay. The number of tourists (both Vietnamese andforeign) to Quang Ninh province quadrupled from 502,700 (1995) to 2,351,000 (2002), with a sharp
increase from 2000. In this regard, the improvement of NH18 (which links Noi Bai international airport
to Ha Long city) has also played an important role in tourism promotion, by developing the road
network, jointly with NH5.
Increased sales. Tourism development, in turn, has stimulated the local economy. The number of hotels
increased from 83 (1995) to 130 (1999), and 138 (2001). These new establishments are mainly locatedin Hon Gai, Bai Chay, and Mong Cai. During 1995-2001, tourism turnover increased by more than fivetimes (with a 45% increase from 2000 to 2001 alone) [Quang Ninh Dept. of Tourism].
Figure 4-10: Number of Tourists in Quang Ninh
Unit: thous. pers

2,500
2,000

Figure 4-11: Turnover of Tourism in Quang Ninh
Unit: VND. mil

350,000

International
touristDomestic tourist

300,000
250,000

1,500

200,000
150,000

1,000

100,000

500

50,000
0
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19

0
1995

Source: Statistical Yearbook of Quang Ninh.

1999

2000

2001

Source: Statistical Yearbook of Quang Ninh.

Provincial GDP grew at 9.6% per year (on average) during 1996-2000, and even faster at 12% in 2001
and 2002. During 2000-2002, poverty incidence in Quang Ninh province almost halved from 15% to
8%, based on a local standard [Quang Ninh DPI].
The results of an interview survey with selected hotel managers are also consistent with the above
trend. The hotel managers responded that hotels received more guests during the last five years andplan to expand their businesses in the future (including staff increases)23. They confirm that NH5 andNH18 are serving as the main traveling routes for guests, and are frequently used for their business withpartners. They also stressed such benefits that shorter traveling time from the hotel to main cities
greatly contributed to: (i) attracting more guests (both domestic and foreign) to the region, with themore convenient transportation; and (ii) facilitating the hotel in terms of procurement of commodities.
Job and income generation. Tourism has promoted the creation of local employment. The Departmentof Tourism in Quang Ninh estimates that direct labor in the tourism sector totals about 9,000. In Bai
Chay, for instance, most residents are employed by the hotels there. According to a questionnaire
survey on hotel staff, they are mostly local residents (living in the same or neighbor provinces such as
22
23

Based on an interview survey with 30 drivers, conducted by CONCETTI in June 2003.
These are the views expressed by the managers of five hotels in Quang Ninh (one 4-star hotel and four 2-star hotels)
conducted by CONCETTI in June 2003. Although this is not a sample survey, its findings are consistent with the generaltrend of tourism in Quang Ninh.

44

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Hai Phong, Hai Duong, Nam Dinh) and graduated from upper secondary school, or have completed
higher level of education (such as university and vocational school)24. The level of their salary is higheror the same, compared to that of their previous salary. About half of the interviewed staff responded
that monthly income is important for themselves and their families.
Link with the local economy. Since tourism touches all sectors, it has strong linkages with thedomestic economy25. The hotel managers stated that food is mostly procured from the same orneighboring provinces and that items such as cosmetics, furniture and fitting are purchased
domestically. Tourism has also attracted FDI to the Quang Ninh province. In terms of the number ofprojects, the share of the tourism and service sector in total FDI increased from 24% (2001) to nearly
50% by end-June, 2003. In terms of the amount of invested capital, this sector accounts for almost 60%of the total FDI in Quang Ninh, as of end-June 2003[Quang Ninh DPI].
Table 4-6: Employee Survey at Selected Hotels in Quang Ninh
Current Position

Frequency

Room-serving staff

5

Previous Job Experience
20.0%

Farming

Frequency
1

4.0%

Waiter/waitress

3

12.0%

Service

4

16.0%Marketing staff

3

12.0%

Government employee

6

24.0%

Manager2

8.0%

Others1

4.0%

Others1248.0%

No job experience

13

52.0%

Total

25 100.0%

Total

25 100.0%*Note: Others include receptionists, technicians, shop sellers andcashiers.

Academic Background

Frequency

How Does Income Change?

Frequency

Lower-secondary education

1

40%.

Significantly increased

6

24.0%

Upper-secondary education

13

52.0%

More or less increased

9

36.0%

Vocational education

2

8.0%

Unchanged

9

36.0%
4.0%

Higher education

9

36.0%

No answer

1

Total

25

100.0%

Total

25 100.0%

Source: CONCETTI (based on interview survey conducted in June 2003).

4-2. Case Study 2: My Thuan Bridge and National Highway No.1
In the Mekong Delta, the construction of the My Thuan Bridge and the improvement of National
Highway No.1 (hereinafter, NH1) have greatly changed the nature and volume of the economic linkage
between Ho Chi Minh City and Can Tho. Can Tho is the fastest growing province in the Mekong Deltaand has been emerging as a growth center in the region. During 2000-2001, provincial GDP and per
capita GDP grew at 14.6% and 13.3% per year—much faster than the average of the entire Mekong
Delta (8.1% and 6.4% respectively). The industrial sector is driving economic growth, and Can Tho has
become the most rapidly industrialized area in this region [see Figures 4-12, 4-13]. Such dynamism in
Can Tho was already visible, but the growth rate of industrial production has further accelerated since
2000. More recently, tourism has also been developing rapidly.
As the latest VHLSS 2002 shows, the Mekong Delta region has achieved important progress in poverty
reduction and growth in per capita income [see Table 4-7]. Although further analysis is needed, thismay be partly attributed to the strengthened economic link between HCMC and the Mekong Delta,
24
25

Based on a questionnaire survey on 25 employees of the above five hotels, conducted by CONCETTI in June 2003.
The World Travel & Tourism Council estimates that in Vietnam, the number of indirect jobs created in the sector is 3 times
greater than direct jobs [WTTC 2003].

45

Linking Economic Growth and Poverty Reduction

through the two large-scale infrastructure projects.
Regarding the impact of the construction of the My Thuan Bridge, useful data and information areavailable from a series of studies funded by AusAID, under the three-year monitoring program. The
Table 4-7: Poverty Incidence by Region, 1993-2002 Headcount Index (%)
Regions
Red River Delta
North East
North West
North Central
South Central Coast
Central Highland
Ho Chi Minh City and Vicinity
Mekong Delta

1993
63
79
75
50
70
33
47

1998
29
59
48
35
52
8
37

2002
23
38
69
44
25
52
11
23

Source: VLSS 1993, VLSS 1998, and VHLSS 2002.

Figure 4-12: GDP Growth in Mekong Delta from 1995 to 2001
(by province)

16.0%
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0

1995-99 1999-2000 2000-2001

MCf ae o elt
rag ng D
AvMe eko Mau
Ca
u&
Lie
Bac ng
Tra
Soc
h
Vin
Tra
ho
nT
Ca
iang
nG
Kie
Tre
Ben
ong
hL
Vin g
ian
nG
Tie
ng
Gia
An p
Tha
ng
Do
n
gA
Lon

HC

Source: Elaborated by the study team based on AusAID [2003a] p.9, Table 2-3.

Figure 4-13: GDP Structure Rapid Increase of Industry in Can Tho Province
Average ofMekong River Delta

Can Tho
100%

100%

90%

90%

80%

80%

70%

70%

60%

60%

50%

50%

40%

40%

30%

30%

20%

20%

10%

10%

0%

0%
1993
Industry

1993

2002
Agriculture

Other

Industry

Source: Elaborated by the study team based on AusAID [2003b], p.9, Table 2-4.

46

2002
Agriculture

OtherChapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

AusAID Interim Report notes substantial benefits of reduced travel time and improved travel
conditions, before and after the opening of the Bridge, and suggests a considerable amount ofadditional economic and social activity and attendant transport movement. In particular, the reportrefers to such positive impacts as: (i) the development of industrial zones in the areas between the Tien
River and the Hau River; and (ii) a rising number of shops and businesses along the vicinity of the My
Thuan Bridge [AusAID 2003a, 2003b].
At the same time, it is also important to assess the impact of the My Thuan Bridge from a broader
perspective. The Bridge should be understood more generally to be one crucial link in improving land
access between HCMC, which is the largest city in Vietnam, and Can Tho, which is the commercial
center of the entire Mekong Delta.

Box 4-5: My Thuan Bridge and National Highway No.1 — Impact on Traffic
The Mekong Delta, which accounts for nearly 40% of agricultural production and about one-third ofagricultural GDP in Vietnam, is the most important agricultural product base. National Highway No.1 (NH1)
is the only road that links the Mekong Delta at the southern end of Vietnam to the remainder of the country.
However, the transportation was not smooth due to the degraded road condition and interruption by branchesof the Mekong River, which was crossed by ferry. The upgrading of NH1 has been the top priority project in
the infrastructure development strategy of Vietnam and the access route to the Mekong Delta was one of thefirst corridors to benefit from this strategy. Two large-scale infrastructure projects were implemented byexternal funding. One is the improvement of NH1 from HCMC to Can Tho, and the other is construction of
the My Thuan Bridge across the Tien River, as shown in the table below.
The recent studies by AusAID [2003a, 2003b] and the World Bank [2003a] show the following direct

Contents
Of projects

Related donor
funding projects

Highway Rehabilitation Project

My Thuan Bridge Project

Improvement of NH1 from HCMC
to Can Tho

Construct a major cable stayed bridge
across the Mekong River (Tien Giang)
at My Thuan

Funding Agency

World Bank

AusAID

Project Cost

US$176 million (US$158.5 million
financed by IDA)*1

A$90 million (A$60 million funded byAustralian Government)

Opening to Public Use

September 1999*2

May 2000

Project Description

Notes: 1) This amount includes the improvement of the Hanoi to Vinh (Nghe An Province) section of NH1 under the same project.
2) During the same period, bridges along the HCMC to Can Tho section were constructed with JBIC funding. Also, the other sectionsof NH1 were upgraded under the JBIC-and the ADB-financed projects.
Sources: My Thuan Bridge Project: AusAID [2003a, 2003b].
Highway Rehabilitation Project: World Bank [2002b].

benefits realized by the two large-scale infrastructure projects [see Appendix for the details of their direct
impacts].
■■■

Travel time between HCMC and cities in the Mekong Delta was reduced by almost one third. In
particular, after the opening of the My Thuan Bridge, the time for crossing the Tien River was cut
from 31.6 minutes to 5.5 minutes (at normal traffic speed).
The current My Thuan Bridge tolls are much lower than the former ferry tolls in real terms. On
the other hand, bus fares and freight rates between HCMC, Vinh Long and Can Tho have been
reduced only slightly from 1998 to 2003.
The traffic volume at the bridge almost tripled between 1999 and 2002. Moreover, actual volume
is much higher than the original estimates (forecasted in 1995 at the time of appraisal).

47

Linking Economic Growth and Poverty Reduction■

The traffic volume on Can Tho ferry increased steadily during 1996-98; but its growth rate has
accelerated since 1999, when the rehabilitated section of HCMC to Can Tho was open to traffic(in September 1999).

According to the World Bank's Implementation Completion Report [2002b], EIRR of the NH1 improvement
project (HCMC-Can Tho section) is estimated at 55% (discount rate=10%).

Change in Truck Travel Time and Speed

Change in Bus Travel Time and Speed
1998

km

hours

2003

kph

hours

1998
%
increasein speedkph

HCMC to :2003

km Hours

kph

hours

kph

%
increasein speed

HCMC to:My Tho

72

2.2

33.2

1.5

47.8

44

My Tho

72

2.3

31.2

1.6

46.3

48

Vinh Long

136

3.5

38.5

2.7

51.2

33

Vinh Long

136

4.1

33.4

2.8

48.2

44

Can Tho

169

4.5

37.7

3.2

52.3

39

Can Tho

169

4.9

34.5

3.4

49.6

44

Source: Elaborated by the study team, based on the World Bank [2003a], p.3-10, Table 3.9 and 3.10.

Traffic at My Thuan Bridge, Forecast and Actual(average daily)
1999

2002

Forecast

Actual (ferry)

Forecast

Actual (bridge)

Motorcycles

3,600

3,120 (-13%)

4,580

10,610 (+132%)

Other vehicles

5,370

3,410 (-36%)

6,770

9,480 (+40%)

Vehicle Occupants

46,36035,29064,73086,770 (+34%)

Source: Elaborated by the study team, based on the AusAID [2003a], p.22, Table 3.4 and AusAID [2003b], p.35, Table 3.13.

Stronger and Broader Impacts on Traffic Movement in the Mekong Delta
The available data suggest broader impacts brought about by the upgrading of NH1 and theconstruction of the My Thuan Bridge in three ways. First, NH1 has strengthened its function as themain artery linking Ho Chi Minh City and the cities in the Mekong Delta. Figure 4-14 compares traffic
survey results from 1999 and 2002. Both surveys report passengers and freight movement between
HCMC and one of the Delta cities (collected at the exit of HCMC on NH1, based on origin/destination
surveys). Road traffic volume, particularly freight movement, increased sharply during 1999-2002 withthe growth rates ranging between 230% and 1,080% (significantly higher than the average growth rateof the Mekong Delta, at the annualized rate of 9.9% during 1995-2000)26. Data on Can Tho Ferry
traffic in Figure 4-15 also confirm the rising traffic volume, although the increase looks less dramatic.
All these results imply the strengthened economic link between HCMC and the Mekong Delta, throughimproved land transport [see also Appendix for the analysis of induced and/or diverted traffic].
Second, the impact of the improved land transport has widely spread to the provinces beyond NH1. The
influenced areas are not only alongside NH1 and include even An Giang province. Figure 4-14 clearlyshows that not only Vinh Long and Can Tho, but also An Giang has been greatly affected. During

26

Although the 1999-2002 data and the 1995-2000 data may not be directly comparable, they should be able to show themagnitude and direction of change. The 1995-2000 data are from AusAID [2003a], which calculate on the basis of "roadtransport tasks" (tonne-kilometers for freight movement).

48

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Figure 4-14: Passenger and Freight Movement to/from HCMC 1999 and 2002
passengers/day

6,000

freight (tons/day)

4,500
1999

5,000

4,000
3,500

2002

4,000

1999
2002

3,000
2,500

3,000

2,000
1,500

2,000

1,000
500

1,000

0

0
Vinh Long

Can Tho

An Giang

Vinh Long

Can Tho

An Giang

Note: The two traffic surveys are not precisely comparable due to methodological differences.
Source: Database from VITRANSS [1999] and HOUTRANS [2002], established under JICA-supported Study on the National
Transport Development Strategy in the Socialist Republic of Vietnam and Study on the Urban Transport Master Plan andFeasibility Study in HCM Metropolitan Area.

Figure 4-15: Can Tho Ferry Traffic(thousand)
1400
1200

Truck

1000

Bus

800

Sedan

600
400
200
0
1996

1997

1998

1999

2000

2001

2002

Source: Elaborated by the study team based on the World Bank [2003a].

1999-2002, the number of passengers and freight movement between HCMC and An Giang
dramatically increased.
NH1 does not pass An Giang. But its provincial capital Long Xuyen is connected to NH1 by threeroutes [see Figure 4-16 for map]: (i) NH1-Cao Lanh ferry-Vam Cong ferry; (ii) NH1-My Thuan
Bridge-Vam Cong ferry; and (iii) NH1-My Thuan Bridge-Can Tho ferry. A recent survey on bus andtruck companies shows that bus companies often use the route (ii) and have greatly benefited from theimproved NH1 and the construction of the My Thuan Bridge. Also, there is a sign that truck companies
are beginning to use Can Tho as hub for their operations on the west bank of the Tien River [see Box 46]. It is fair to say that the effects of these two large-scale infrastructure projects have been widely
spread throughout the Mekong Delta region and that they have created great opportunities for growth
due to the impacts of linking the region with HCMC.
Third, the area south to Can Tho (Han River) has also benefited. The origin/destination surveys on the
My Thuan Bridge at 1994 and 2002 show that freight movement between the area north of the Tien
River and the area south of Hau River [see Figure 4-17, red arrow] grew faster than the other areas,such as: (i) between the area north of the Tien River and the area bounded by the Tien and Hau Rivers(blue arrow); and (ii) between the area north of the Tien River and Can Tho (yellow arrow). Although49

Linking Economic Growth and Poverty Reduction

Figure 4-16: Road Network in Mekong Delta

CHAU DOC

NHW #1
Improved(HCMC-Can Tho)

Cao Lanh
Ferry

My ThuanBridgeLong Xuyen

TAN ANMY THO

Vam Cong
Ferry

BEN TRE

Vinh LongCan
Tho

RACH GIACan Tho Ferry
Bridge to beconstructed

Tra Vinh

Tien River
SOC TRANGCan Tho-Ca Mau
to be impoved

Hau River
BAC LIEU

CA MAU

National Highway
Provincial Road
Source: Elaborated by the study team, based on the AusAID [2003b], p.2. Figure 1.1.

Figure 4-17: Average Annual Growth in Freight Movement (1994-2002)

15%

My ThuanBridge14%

18%
Tien River

Hau River
Region North of Tien River to/from
Region between Tien & Hau River
Can ThoRegion South of Hau River
Source: Elaborated by the study team based on the AusAID [2003b], pp.30-32.

50Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Box 4-6: Bus and Truck Operators Survey*
Six bus companies and three truck companies which operate routes from HCMC to Vinh Long, Can Tho and
An Giang were selected from the companies surveyed in the JICA-supported HOUTRNAS study, in order toobtain their perception of the impacts of the improvement of NH1 and the opening of the My Thuan Bridge.
The survey was conducted in July 2003, by the HOUTRANS team.
1. Bus company survey
Among six companies, two operate the route to/from Can Tho and four operate the route to/from An Giang.
(No company was found which operates the Vinh Long route as it is considered on the way to otherdestinations). All companies noted reduction in time and tolls, thanks to the opening of the My Thuan Bridge.
Time-saving from the improvement of NH1 was not so clearly perceived due to the speed limit (regulated) andthe already heavy traffic. Operating costs have been reduced by 14% on average. But, bus fares have not been
decreased. Regarding bottlenecks to expansion of their operations, the interviewed companies responded: (i)waiting time for ferries (Vam Cong ferry for the An Giang route and Can Tho ferry for the Can Tho route); and(ii) increased traffic volume on NH1.
2. Truck company survey
All three companies interviewed include HCMC to Vinh Long, Can Tho and An Giang routes in theiroperations. All of them appreciated the time and toll reductions brought about by the opening of the My
Thuan Bridge and the improvement of NH1. In addition to these direct impacts, they noted safer conditions
for cargo transport and increased demand for cargo. One company explained that the freight service for the
HCMC to Vinh Long route has decreased. Instead, the company started to transport freight from/to Vinh
Long to Can Tho Terminal in order to use Can Tho as a hub on the west bank of the Tien River.
Note: * The survey was conducted by ALMEC in consultation with GRIPS. ALMEC is a Japanese consultant company, specialized in
the transport sector. The ALMEC team was responsible for the elaboration of VITRANSS [1999] and is currently engaged in the
HOUTRANS study under JICA-supported technical cooperation.

the NH1 at the region south of Hau River has not been improved, this area also appears to be enjoying
the benefits of improved land transport of HCMC and Can Tho.
Natural Resources-Based Industrial Growth: Investment-inducement and Regional Economic
Activation Effects
The patterns and nature of investment attraction in Can Tho are distinct from those observed in thenorthern transport corridor. Here, industrialization is natural resource-based, linked with the local
economy (e.g., agriculture and fishery production). It seems that in the Mekong Delta, the investment
inducement effect and the regional economy activation effect are mutually reinforcing.
Industrial output growth. Figures 4-17 and 4-18 show the growth of industrial output by province,
compared to 1995. Both in terms of output volume and growth rate, Can Tho has achieved the most
rapid growth in industrial production. There has been further acceleration in growth rates from 2000.
Furthermore, provinces in the Mekong Delta appear to be growing by taking advantage of theirrespective resource potentials. For example, in Ca Mau, Bac Lieu, and Kien Gian provinces, a rapid
increase in fishery production is observed. Agriculture output continues to rise in An Giang and Kien
Gian provinces [see Figure 4-20]. Although further analysis is needed, the improved land transport to
HCMC and Can Tho may be one of the contributing factors to their enhanced use of resource potential.

51

Linking Economic Growth and Poverty Reduction

Figure 4-18: Real Industrial Output
Percentage Increase from 1995 to 2001
(at constant 1994 prices)

Figure 4-19: Industrial Output Value(at constant 1994 prices)
Unit: Bill dongs

6000

160%

Can Tho

5000

140%
120%

4000

100%

3000

80%

2000

60%

1000

40%

0

Kien Giang

.
el 2
Pr 0
20
01

20

00

20

99

19

98

19

97

19

96

95

19

19

20%
0%
au
M
a
C ieu
L
c
g
Ba ran
T
c
So nh
Vi
a
o
Tr
Th
an ang
C
i
G
en
Ki
e
Tr
n
ng
Be
Lo
nh ng
Vi
ia
G
en
Ti angiG
p
An Thagon
D An
ng ide
nw
io

at

Lo

N

An Giang

Kien Giang

Can Tho

Soc Trang

Bac Lieu

Ca MauFigure 4-20: Output Value of Agriculture and Fishery in Mekong River Delta (at constant 1994 prices)
Agriculture

6,000.00

Unit: Bill dongs

4500

An Giang

4000

5,000.00

Fishery

Unit: Bill dongs
Ca Mau3500

Can Tho

Kien Giang

3000

4,000.00

2500

3,000.00

2000

2,000.00

1500

1,000.00

1000
500

0.00
20

20

19

19

19

19

19

0
20

20

19

19

19

19

19

01

00

99

98

97

96

95

01

00

99

98

97

96

95

An Giang

Can Tho

Kien Giang

An Giang

Can Tho

Kien Giang

Soc Trang

Bac Lieu

Ca MauSoc Trang

Bac Lieu

Ca MauSource: GSO [2003a].

According to CEPIZA (Can Tho Export Processing & Industrial Zones Authority), currently, Can Tho
has Tra Noc I and II Industrial Zones ((I) registered in 1994), and Hung Phu Industrial Zone (currently
being developed and located adjacent to the Can Tho port). Also, a plan to construct Vi Than Industrial
Zone is underway. Altogether, they boast about 80 firms (with total registered capital of approximately$230 million). Many of them are Vietnamese enterprises engaged in food processing. There are 20 FDI
firms (with a total registered capital of $100 million), eight of which were established in or after 2000
[MPI data as of March 2003].
Jobs and income generation. CEPIZA estimates that these firms have created about 13,000 jobs andthat their procurement of agricultural and fishery products (as raw materials) have benefited about
10,000 households in Can Tho province. About 80% of the factory workers come from Can Tho
province. The provincial authorities expect additional 60 investment projects by 2005, which should
generate 10,000 new jobs27.
27

Based on the authors' interviews with the Department of Planning and Investment in the Can Tho province and CEPIZA in
June 2003.

52

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Interviews with local businessmen and provincial authorities clearly show how the improved landtransportation has facilitated their business with partners and their procurement of inputs and raw
materials. Their views also highlight the importance of multimodal transport in thinking the future
development of Can Tho and the Mekong Delta [see Box 4-7].

Box 4-7: Business Prospects in the Mekong Delta—A View of Factory Owner
Mr. Nguyen Huu Thanh has been in the food processing business for 17 years. He taught at an agricultural
university in Thu Duc, worked for a food company in Vung Tau, and learned international business and thecustomer-satisfaction principle from foreign buyers. In 1997, he founded Viet Foods Co. Ltd, a private firm
specializing in frozen shrimp, in the Can Tho IZ. His sales rose from $5 million in 2000 to $23 million in
2002, with $30 million expected in 2003. He employs 1,300 workers and procures raw shrimps from coastal
provinces (Soc Trang, Tra Vinh, Ben Tre, Long An) in the Mekong Delta. He proudly guides visitors throughhis ultra-clean factory saying, "Can you smell any odor? Can you spot any dirt? The tools and vats are
disinfected every hour. If we don't do it, foreigners will not buy."
His shrimps are all exported, with 80% destined for Japan. They are either shipped from Can Tho Port infreezer containers or trucked via the National Highway No.1 to HCMC, where they are reloaded onto an
ocean-going vessel. Water transportation is securer but trucking becomes necessary since the capacity of Can
Tho Port is limited and there are only three small boats per week between Can Tho and HCMC.
The upgrading of NH1, including the building of My Thuan Bridge, benefited his company throughimproved access to foreign customers. Previously, it was much more difficult to convince potential buyers totravel all the way to Can Tho to visit his factory.
Mr. Thanh says, "All enterprises in Can Tho are looking forward to three things: (i) a new Can Tho (HungPhu) Port; (ii) a new Can Tho Airport; and (iii) construction of Can Tho Bridge. If these dreams are realized,
it will mean a booming economy for Can Tho as well as the entire Mekong Delta region."

Photo of a shrimp factory

Source: Interview and factory visit by authors, June 2003.

53

Linking Economic Growth and Poverty Reduction

As explained before, during 1998-2002, poverty incidence in the Mekong Delta declined much fasterthan the previous period of VLSS. Per capita income grew rapidly, and in 2002, it was the second
highest after Southeast (HCMC and its nearby provinces). It is also notable that fisheries andagriculture constitute important sources of income. During 1998-2002, households engaged inagriculture, forestry, and fisheries have experienced rapid poverty reduction, although the majority ofthe poor households continue to be found in this occupational group. Also, during the same period,
poverty incidence in households engaged in manufacturing and construction dropped sharply [seeFigures 4-21, 4-22, also see Box 4-8 for benefit distribution of improved land transport].

Figure 4-21: Average Per Capita Income by Source of Income
Unit: thousand VND

700.00600.00500.00400.00300.00200.00100.00
0.00

ut
Ea

D

h

t

st

es

st

g
on
ek r
M ive a
R elt

So

W

Ea

l s
tra nd
en la
C igh
H

th

th

r

h
ut ralSo ent st
C oa
C

or

or

th l
or ra
N nt t
e
C oas
C

N

N

e
iv
R
ed
R eltaD

Wages
Industry and Construction
OthersAgriculture, Forestry and Fishery
Commerce and Service

Source: GSO [2003b], based on VHLSS 2002.

Figure 4-22: Poverty Incidence by Sectoral Occupation in the Mekong Delta
(%)
60.0
50.0
40.0
30.0

1993
47.8
42.9

40.5

34.1
27.8
22.0

1998
38.6

2002

26.1

24.7
18.8
13.4
13.2

20.0
10.0

20.6
9.7
3.7

0.0
Total

Agriculure,
Forestryand Fishery

Manuf.,
Expl. andConstr.

Services

OthersNote: The surveyed groups are people from 15 years old and higher who have job in the past 12 month.
Source: GSO [2003b] based on VHLSS 2002.

54

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Box 4-8: Impacts of Improved Land Transport on Rice Farmers
A Case of An Giang Province
An Giang province is one of the largest rice production areas in the Mekong Delta, and rice provides a livelihood
to the majority of poor people. What is the nature of changes brought by improved land transport on the
distribution of farm products? Have benefits from the changes been shared by small-scale rice farmers in remote
An Giang province? [see Appendix for the detailed analysis].
The physical improvement of road conditions has made land transport (trucks in particular) more attractive incommodity distribution. This is shown in a sharp increase in the freight movement from HCMC and the
Mekong Delta, including An Giang [see Figures 4-14, 4-17]. The impact has been further strengthened byrecent deregulation of freight services and rice distribution.
Trucks have been mainly used for carrying perishable products (e.g., fruits, vegetables, fishery products) andto some extent, rice for domestic markets (e.g., fragrant rice). This is because these products require speedy
handling and transaction in relatively small volume. (According to the Vietnam Southern Food Corporation,
95% of their rice for exports is transported by barge, while two-thirds of their rice for domestic markets isnow transported by trucks.) On the other hand, inland waterways continue to be the dominant mode fortransporting the rice for exports because they are more economical than land transport to carry bulkycommodities [the data from the Saigon Port]. (Rice transportation from Can Tho to HCMC costs
approximately VND35,000 ton by barge, compared to VND70,000 ton by trucks.)
In An Giang, easier land transport and the resultant efficiency gains in commodity distribution have opened
Determinants of the Use of Inland Waterways and Land Transportation
Land (trucks)
e.g. fruits, fish,
vegetables
Determinants• Perishable• Less heavy,and smaller
volume• Short distance[A] Ricefor export[C] High-quality
rice (fragrant) for
domestic market

Waterway(barge)e.g., fertilizer,
cementDeterminants[B] Rice fordomestic market• Non-perishable• Heavy andlarge volume• Long distancenew opportunities for rice farmers, promoting: (i) production of fragrant rice even in the poorer districts (e.g.,
Tri Ton, Thi Bien); (ii) diversification into commercial crops (e.g., hyacinth, vegetables) and fisheryproducts; and (iii) food processing industry using local products such as catfish, shrimp, tapioka (mainly
located along the Hau River and NH91, but some in remote districts). For example, the export of frozen
fishery products increased from 5,212 ton (1998) to 12,538 ton (2001) [Statistical Yearbook of An Giang
2002].
There is also a sign that producers of traditional rice varieties are (at least) not excluded from such efficiency gains,provided that their villages are linked to trunk roads via rural roads. Improved land transport has increased
collectors' visits to villages and improved farmers' access to processing and paddy storage facilities. This has helped
farmers to get market information and sell paddy at better prices.
Nevertheless, other factors are also important in prompting the positive changes. These include new
agricultural policies for diversification, agricultural research and extension and local entrepreneurship, andderegulation of distribution and transport services (as mentioned above). Rural roads (including bridges) arealso essential complement to the changes.
Source: Interview and field visit by the study team in October 2003.

55

Linking Economic Growth and Poverty Reduction

Tourism Development in Can Tho: Regional Economy Activation Effect
The impact of the My Thuan Bridge is easier to detect in tourism [see Figure 4-23]. Tourism in Can
Tho was relatively slow until 2000 but began to increase briskly in 2001. From 2000 to 2003, thenumber of tourists to Can Tho increased from about 189,000 to 272,000 (an annual growth rate of17%). This trend is still continuing in 2003. While all the progress cannot be attributed to the My
Thuan Bridge and the improved NH1, it appears that a critical reduction in traveling time has beenachieved. With the completion of the Can Tho Bridge in the future, a further rise in Can Tho tourism is
expected as the city will be within reach for day-trippers.
Figure 4-23: Tourism Development in Can Tho
Visitors(person-days)
350,000

Foreign

300,000

VietnameseTourist Spending(USD million)
Foreign ($40/day)

7

Vietnamese ($15/day)

6

250,000

5

200,000

4

150,000

3

100,000

2

50,000

1

0

0
20

20

20

19

19

19

19

19

02

01

00

99

98

97

96

95

94

02

01

00

99

98

97

96

95

94

19

20

20

20

19

19

19

19

19

19

Source: Statistical Yearbook of Can Tho.

Source: Elaborated by the study team, based on the information
provided by the Tourism Dept. of Can Tho Province.

Increased sales. During 2000-2002, the number of hotels increased from 39 to 53. During this period,
tourism turnover rose by 1.5 times. The results of interview survey with selected hotel managers28
confirm this trend. All the hotel managers stated that more guests are coming and that their hotels haveundergone expansion or upgrading. They stressed benefits from the NH1 rehabilitation and theconstruction of the My Thuan Bridge, stating that shorter travel time from hotels to main cities has
made it easier to attract both foreign and domestic tourists to the region and to conduct daily business,
including the procurement of commodities. Most hotels (except for a 4-star hotel which also uses
imported commodities) procure food, cosmetics, and furniture locally, or from the southern provinces.
Jobs and income generation. Tables 4-8 show the results of a questionnaire survey of the staff of thesehotels (totaling 23 staff). The results show a similar trend to the hotel staff survey in Quang Ninh (i.e.,the Ha Long Bay area). More than half of the interviewed staff noted that their salaries have increased.
The majority responded that their monthly income is important for the total income of their families.
A rough estimate (on the basis of the provincial tourism-related data and other available information)suggests that Can Tho created about 33,000 jobs during 1999-2002 in the tourism and transport sector[see Appendix for estimated job impact of bridge construction].

28

Based on interviews with the managers of five hotels in Can Tho (two 2-star hotels, two 3-star hotels, and one 4-star hotel),conducted by CONCETTI in June 2003.

56

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Table 4-8: Employee Survey at Selected Hotels in Can Tho
Current Position

Frequency

Room-serving staff

1

4.4%

Previous Job Experience
Farming2

Waiter/waitress

3

13.0%

Handicraft

1

4.4%

Chef

3

13.0%

Factrory employment

4

17.4%

Marketing staff

1

4.4%

Service626.1%

Administrative staff

5

21.7%

Government employee

5

21.7%

Manager2

8.7%

Others2

8.7%

Others8

34.8%

No job experience

2

8.7%

Total

23 100.0%

No anwer

1

4.35%

Total

23 100.0%*Others include receptionists, shop seller, guards
and laundry staff.

Academic Background

Frequency

Lower-secondary education

3

Upper-secondary education
Vocational education

How Does Income Change?

Frequency
8.7%

Frequency

13.0%

Significantly increased

6

26.1%

11

47.8%

More or less increased

9

39.1%

3

13.0%

Unchanged

6

26.1%
8.7%

Higher education

6

26.1%

Decreased

2

Total

23

100.0%

Total

23 100.0%

Source: CONCETTI (based on interview survey conducted in June 2003).

Impact of Bridge Construction and Future Prospects
The impact of the My Thuan Bridge should not be assessed in isolation or in the vicinity of theconstruction site only. As shown in the AusAID studies, the livelihoods of the neighboring
communities are strongly affected by business relocation and drastic changes in traffic modes andpatterns. But it is also important to consider the My Thuan Bridge more generally to be one crucial linkin improving land access between HCMC and the region south of the Hau River through Can Tho as
the gateway of its subregion. In this sense, the basic role of the My Thuan Bridge is the same as the
proposed Can Tho Bridge. By reducing travel time from 4.5-5 hours (previously) to 3.5 hours (with one
bridge) and further down to 3 hours (with two bridges), the nature and volume of the economic linkage
between the two centers will undergo a fundamental change. As the Can Tho economy is activated, its
effect will be felt throughout the Mekong Delta Region, including both the provinces through which
NH1 passes and in those through which it does not. Figure 4-24 shows this effect schematically.
Moreover, the effect of bridge construction over the Mekong River is nonlinear and synergetic, rather
than proportional. That is to say, the benefit of two bridges is not twice that of one bridge. This isbecause qualitative changes are brought about when a certain critical point is reached. For instance,
when the maximum travel time to get to a spot is x hours for an average tourist, the reduction of travel
time will have little effect if it remains over x hours. But when it is further reduced, there will be asudden boom in tourism and associated investment and job creation. Similar discontinuities can occur
in FDI attraction and marketing of agro products. In fact, there are clear signs that these activities havebeen stimulated since the completion of the My Thuan Bridge in May 2000. After new activities begin,
the economic structure and merchandise flows are not quite the same as before, and therefore cannot be
extrapolated from the past trend.
Another nonlinear factor to be reckoned with is complementarity among factors contributing toeconomic dynamism. The improvement of NH1 alone, including the construction of the My Thuan and(proposed) Can Tho Bridges, cannot have a full effect on the Delta economy unless other problems are
simultaneously removed. These include the upgrading of other infrastructure such as connecting roads
under local governments, river ports, airport, power supply, urban expansion, and industrial parks. In

57

Linking Economic Growth and Poverty Reduction

addition to such physical structures, good policy frameworks are also necessary. Only when these
conditions are met in proper balance can the region develop robustly without encountering newbottlenecks. Needless to say, the growth of the Mekong Delta region also depends on factors which arebeyond the control of the central and local governments, such as weather and global market situations.

Figure 4-24: Bridges and Highway Link Two Centers andActivate the Mekong Delta Economy

Mekong River Region

Can Tho2

1: My Thuan Bridge
2: Can Tho Bridge(Planned)

1

Hwy 1

Ho Chi Minh CityBy water

By land, water & air

National & Global Economy

4-3. Case Study 3: North-South 500kv Transmission LineThe availability and stability of the power supply is critically important for productive activities and theeconomic welfare of individuals. The improvement of the power infrastructure was indispensable insustaining Vietnam's high economic growth in the past, and will continue to be so in the future. During
the latter half of the 1990s, demand for electricity grew at 10-19% per year-much faster than the annual
growth rate of GDP. To sustain high economic growth at an annual average of 7.5% (as envisaged in thegovernment's strategy documents) for the next five years, Vietnam needs to increase its electricity
supply by about 9-11% annually.
Vietnam's power sector has a regional character, due to the geographic distribution of resources and thecountry's long, narrow shape. In the north, the system is dominated by hydropower, but there are alsosignificant reserves of coal, the country's second most important fuel for power generation. The south

Table 4-9: Historical Trend of Growth Rates of Real GDP and Electricity Sales
(%)
Year

85-90

90-95

96

97

98

99

GDP growthSaleselectricity

4.0

7.9

9.3

8.2

5.8

4.8

9.9

12.6

19.3

14.8

15.7

10.5

Source: Elaborated by the study team, based on World Bank [1998] Annex p.8,
EVN [2000] p.1.3 and GSO [2002] p.52.

58

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

has hydro capacity as well, but has had to rely on diesel-fired generation. The offshore gas fields of Bac
Ho and Nam Con Son provide the south with natural gas for power generation, but exploitation has
become active only in the late 1990s. The central region has the smallest population and limited
installed capacity in hydro and diesel-fired generation.
Before the construction of the 500kv Transmission Line, the north and the south had autonomous
power systems, and both regions transferred a small portion of generated electricity to the central
region. But these systems could not afford the rising demand for electricity, which corresponded toVietnam's rapid economic growth starting in 1992. The development and supply of new power
generation were urgently needed. This was achieved by the expansion of the Hoa Binh hydropower
plant in the north, with total capacity of 1,920MW (completed in April 1994), and the construction of
the North-South 500kv Transmission Line (also completed in 1994), which connects the north, central
and southern regions.

Box 4-9: North-South 500kv Transmission Line
Changing Electricity Transfer between Regions
The North-South 500kv Transmission Line was completed in 1994. By transferring low-cost, surplus
electricity generated by the Hoa Binh hydropower plant, the 500kv line supported the nationwide utilizationof the additional power capacity, particularly during 1994-98. At present, it provides system stability andshifts electricity between the north, central and southern regions at peak usage times.
Currently, Vietnam's integrated power system consists of : (i) transmission line with the length of 1,487km(bundle conductor 4x330m2); and (ii) five substations with a total capacity of 3,150 MVA (Hoa Binhsubstation/900 MVA, Ha Tinh substation/450 MVA, Da Nang substation/450 MVA, Pleiku substation/450
MVA, Phu Lam substation/900 MVA).The chart below shows how electricity transfer between regions
changed, with the construction of the 500kv Transmission Line.

Electricity Transfer between the North, the Central Region and the Southvia the 500kv Transmission Line
Before 500KV T/L

After 500KV T/L(1994~1998)

After 500KV T/L(1999-2000~)

North

North

North

Hydro

Hydro

Coal

Coal

Hydro
Coal

Central Region

Central Region

Central Region
500KV
T/L

500KV
T/L
South

South

Hydro

Hydro

DieselDiesel

South
Gas
Hydro
DieselSource: Prepared by the study team based on the information from Electricity of Vietnam (EVN).

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Linking Economic Growth and Poverty Reduction

Impact on Overall Economic Growth
The 500kv Transmission Line has contributed to mitigating power shortages in the central region andthe fast growing south (which often had to rely on costly diesel-fired generation). Upon commencementof operation in 1994, the demand for electricity in southern and central regions jumped by about 20%
per year.
Table 4-10: Annual Demand Growth of Electricity
(%)

1992

1993

1994

1995

1996

1997

North

5.4

6.8

12.1

16.0

14.0

12.8

Central

17.2

15.0

25.4

25.6

21.3

19.6

South

6.7

16.6

21.0

23.3

21.1

15.2

(GDP growth)

8.7

8.1

8.8

9.5

9.3

8.2

Source: Elaborated by the study team based on World Bank [1998], Annex 1.19-1.23.

Figure 4-25: Demand and Supply Balance of Electricity by Region
1998(Deficit)(Surplus)

1997
1996
1995
1993
1990

South
CentralNorth-3,000 -2,000 -1,000

(GWh)
0

1,000

2,000

3,000

4,000

Source: Elaborated from JBIC [2000], p.3-2, Table3.1.2.

The transfer of electricity from the north to the south continued until 1999-2000, when large-scale
exploitation of natural gas potential began in the south. As the map (p.63) shows, the capacity ofthermal power plants such as Phu My and Ba Ria was actively expanded in the late 1990s through theutilization of natural gas from offshore. As a result, at present electricity is transferred from the south tothe central region and the north—especially in the dry season when the load factor of hydropower
plants drops.
It is fair to conclude that the 500kv Transmission Line played a vital role in sustaining Vietnam's higheconomic growth in the 1990s, particularly in the south, the country's largest economic center [see Box4-10]. Even after the exploitation of new power sources in the south, it continues to be a principal
supplier of electricity to the central region and contributes to system stability by adjusting electricity
supply between regions in the dry season and at peak times. At the same time, considering the highcosts of transferring bulk power between the north and the south via the 500kv Transmission Line,future investments should be made based on the overall plan, so that generation capacity in the northand the south could roughly balance and satisfy the projected demand in each region29.
29

There are three on-going projects for increasing the capacity of the 500kv T/L: (i) the Diesel 500kv Pleiku-Phu lam power
station (partially financed by the World Bank); (ii) the Ha Tinh 500kv station (partially financed by SIDA); and (iii) the
Diesel 500kv Phu my-Nha be-Phu lam and the Nha be 500kv station (partially financed by JBIC)[EVN (2000) p.1-15].

60

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Box 4-10: Sustaining High Growth and Livelihood
The Contribution of Transferred Electricity
During the second half of the 1990s, the electricity transferred from the north to the central and southern
regions greatly contributed to sustaining high economic growth and improving the economic welfare of the
population.
World Bank data indicate that during 1996-97, this transferred electricity supported about 74% of the total
electricity demand in the central region (measured in terms of the total electricity required for the region tosatisfy industrial, residential, and service or other sector demand) and about 19% of the total electricity
demand in the south, respectively. The electricity transferred to the south satisfied more than 40% of theregion's industrial demand for electricity (including loss factors), during the same period [WB 1998].
The Vietnamese economy (GDP) recorded dynamic growth in 1996-97 at 8.8%. In particular, the GDP of thesouth grew very rapidly at 9.2% per year (annual average of the two years). The south generates about twothirds of national industrial GDP, and its industrial GDP grew at 14% in this period (annual average).

Regional Electricity Demand and Source(average of 1996-97)

Contribution to GDP by Region(average of 1996-97)(GWH)
Unit: mil. VND

Northern
RegionSupply North
CentralRegionNorth
28%

Supply Central
Supply South

Central16%Southern
Region
0

2,500

5,000

7,500

South
56%

10,000Notes: 1) North includes: Red River Delta, North East and North West; Central includes: North Central Coast, South
Central Coast and Central Highlands; and South includes: North East South and Mekong River Delta.
2) Demand is shown in terms of the total electricity demand required for region. Supply is shown in terms ofelectricity generated in (and transferred to) the region.
3) The data include loss factors.
Source: Prepared by the study team based on World Bank [1998], Volume II, Annex pp.20, 23-24. GDP data are base on GSO.

Expansion of the Electricity Network
As the graphs in the Map (p.62) show, there has been significant expansion of the 220kv transmission
lines and the capacity of substations for 220kv (MVA) since 1995. The progress was especially
impressive in the south. The south had a less developed electricity network in 1990 compared to thenorth, but the total length of the 220kv line surpassed the north by 1999. A similar trend can beobserved for the lower-capacity transmission lines and distribution lines. This indicates that electricity
transfer by the 500kv Transmission Line and the subsequent increase in power generation capacity inthe south allowed the rapid expansion of the electricity network.
Impact on firm production. As previously mentioned, no data (such as blackout rates) are available toindicate the degree of service improvements realized by the expansion of the electricity network in thesouth, but the following information from firms and local authorities gives a good picture of the61

Linking Economic Growth and Poverty Reduction

Electricity Network Improvement as of June 2003

Notes: Explantation of power plant is added only for completed, large scale and currently improved power plants.
Source: Prepared by the study team based on the map and data from the Vietnam Power Development Plan 2000-2010, Prospective
up to 2020, Main Body, pp.1.1-2.15. and figure 2.5 "Location Map of Existing 500-220 kv power system (Electricity of Vietnam)."62

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

positive impacts of network expansion in the south30.
First, power supply conditions in the south have improved substantially since 2000. Until around 1996,
there were scheduled blackouts (twice a week), and factories had to suspend their production lines. The
representative of one (Japanese) firm stated that the costs of factory investment were calculated
assuming 100% dependence on an independent power generator (according to a 1996 feasibility study).
At present, blackouts rarely occur (except for periodic maintenance), and independent power generation
is used as a secondary function only.
Second, industrial zones are starting to invest in their power supply systems to provide higher-voltage
power to the firms inside. The following examples are representative of the benefits.
Greater reliability of electricity supply: Vinh Loc Industrial Zone (located in HCMC) has been using
the EVN network since its establishment. The industrial zone has suffered from unstable power
supply for a long time because its power system was connected only to a 20MVA substation (which iscommonly used by the neighboring residential area). Thanks to the extension of the 220kw
transmission line to the area, the IZ authority is constructing two substations with 40MVA inside the
IZ to allow for power distribution of 22kv.
Reduced electricity tariff: Viet-Sing Industrial Zone (located in Bing Duong province) has its own
power generator as a main power source. Thanks to the expansion of a 220kv transmission line to the
nearby area, Viet-Sing IZ replaced its own generator with the EVN network in 2002. This has enabled
the IZ authority to distribute 22kv power, at cheaper tariff rates than before [see Table 4-11].

■■

Table 4-11: Electricity Tariff Reduction at Viet-Sing IZ
after Connecting to the EVN Network
BeforeAfter

Connecting fee(US$/kva)

High tension

19

19

Low tension

63

63

Contracted Charge(US$/kva)

High tension

2

1

Low tension

2

1

High tension
Escalation tariff(US$/kwh)

Low tension

0.0862 (Peak hour)
0.0810 (Off-peak hour)
0.115 (Peak hour)
0.110 (Off-peak hour)

0.08 (Peak hour)
0.075 (Off-peak hour)0.11 (Peak hour)
0.105 (Off-peak hour)

Source: Elaborated by the study team, based on the information provided by a tenant of Viet-Sing IZ.

Impact on rural electrification. Although no data are available on rural electrification rates before theconstruction of the 500kv Transmission Line, the information from a series of VLSS and VHLSS
provides insight on how the network expansion has benefited all the segments of the population.
As Figure 4-27 shows, in the south the percentage of households using electricity as the main sourceof lighting tripled from 1993 to 1998. The poorest group also benefited from the expansion of rural
electrification. The 1993 data are not available, but comparison of 1998 and 2002 data shows thatamong the lowest income group, the ratio of households using electricity increased from 54% to 72%.
This follows the overall trend of rural electrification during the same period; specifically thepercentage of households with electricity (62% in 1997 and 81% in 2002, as shown in Figure 3-4 ofChapter 3).

30

Based on information provided by Japanese firms operating in HCMC, industrial zones in and around HCMC, and therepresentatives of the Can Tho power company No.2 during a field survey by the authors in June 2003.

63

Linking Economic Growth and Poverty Reduction

Figure 4-26: Source of Lighting among
Lowest Income Group

Figure 4-27: Households Using Electricity
as a Source of Lighting by Region

100%
90%

Others

80%
70%

90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0

Gas, Oil,
Kerosene
lamps
Battery
lamp

60%
50%
40%
30%

Electricity

20%
10%

83.7

68.7
47.0

22.0

North

0%
19971998

2002

1993

Source: Elaborated by the study team, based on GSO [2000],
p.372 and GSO[2003b], p.4.

82.1

80.0*

South
1998

2002

Notes: * The decline from 1998 to 2000 in the North is attributed
to the change in regional classification. North Mountain
Mid Land [GSO 2000]is divided into Northeast andNorthwest [GSO 2003b]. The 1993 data are quoted fromthe World Bank [1998], p.112. The 1998 and 2002 data
are calculated from GSO [2000],p.372 and GSO[2003b], p.4 respectively.
Source: Elaborated by the study team, based on the World Bank
[1998], p.112, GSO[2000], p.372 and GSO[2003b], p.4.

Box 4-11: Progress in Rural Electrification
The Vietnamese government has strongly committed to the expansion of rural electrification. It prepared andapproved (Decision No.22) the Rural Electrification Master Plan in September 1997 and February 1999. The
national targets to expand electrification to 80% of the communes and 60% of the households in rural area by
the end of 2000 have already been achieved. In 2002, 96.4% of the communes and 81.9% of the households
in rural areas have been connected to electricity.
This achievement was made possible thanks to the overall expansion of the electricity network by thegovernment (EVN) together with the efforts of the people and local governments. The history of Can Tho
province in the Mekong Delta tells the dynamic process of rural electrification.
Sequence of Increased Generation, Transmission Capacity
and Rural Electrification in Can Tho Province
Substation anddistribution line wasconstructed bycommunes’ effort.

1992-1995: Local government
promulgated the policy which
enhanced the installation of
distribution lines to all commune
centers.

No enough capacity for supply. Later, added
capacity from Tri An Hydro power station
made it possible to supply all the existinglines.

1995- : Started toconstruct distributionlines from commune
center to hamlets.

1991- : Frequent power cuts again
1993/94- : Generation and transmission
capacity expanded.

Source: Elaborated by the study team, based on the interview with PC No.2, Can Tho Office [June 2003].

64

2002- :
Electricity available in:- 100% of communes,- 77% of rural
households.

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

4-4. Case 4: Accessibility and Road Network—Comparison of Hung Yen Province and Lai Chau
Province31
The two studies supported by DFID show different socio-economic impacts of the road network on
rural communities in Hung Yen and Lai Chau provinces. These provinces are included in the second
Rural Transport Project (hereinafter RT2), funded by the World Bank and DFID. The following are
based on the findings of: (i) a perception survey of "connectivity" in nine communes (four in Hung
Yen, and five in Lai Chau) [DFID 2003]; and (ii) a comparative analysis of selected socio-economic
and traffic data on the two provinces [TDSI/DFID 2003] [see Appendix for the methodology of thesesurveys].
Comparison of the poverty data on Hung Yen and Lai Chau provinces reveal the "dual nature" ofpoverty in Vietnam. Poverty is more widespread and entrenched in mountainous, remote and isolatedrural areas exemplified by Lai Chau province. The largest numbers of poor (close to the poverty line)
are located in the areas of highest population density, e.g., Hung Yen province. Put another way, themost poor in terms of depth of poverty are located in distinctly different areas to the most poor in termsof numbers.
Figure 4-28: Variation in Poverty “depth” and Poverty “density” in Vietnam
Lai Chau

Hung Yen

Source: IFPRI, IDS and ICARD [2003].

31

This section largely owes to the contribution by Dr. Simon Lucas (infrastructure adviser) and Mr. Vo Thanh Son (seniorprogram officer) of DFID/Vietnam.

65

Linking Economic Growth and Poverty Reduction

Inter-province Comparison
Hung Yen is located in the center of the Red River Delta with very good access to Hanoi and Hai Phong
Port via NH5. It takes just 45 minutes to drive from Hung Yen to Hanoi. The province has benefited
greatly from recent improvements to the national and provincial road network, which has provided
good access to major domestic markets. As noted before, the province has experienced substantial
industrial investment in recent years from both domestic and international companies.

Map of Lai Chau Province and Hung Yen Provinces(with surveyed and studied communes indicated)
SURVEYED PROVINCES ON ROAD INFRASTRUCTURE IMPACTS

The situation in Lai Chau province is very different. This province is located in the northern mountains,
two days drive from Hanoi. Despite some recent improvements in the road network, the remaining
work to connect all communes to the provincial and district road network is a daunting task. Hung Yen
is 18 times smaller, but has nearly twice the population of Lai Chau.
Table 4-12 shows the sharp contrast between the two provinces for selected socio-economic indicators.
It is obvious that Hung Yen is much more prosperous than Lai Chau. This is in part determined by the"economic distance"32 to markets of the two provinces, along with the availability of productive assets.
These factors also affect how much each province has benefited from the recent economic growth inVietnam. Lai Chau is not as attractive for investment as Hung Yen and is further hampered by limited
options for locally-based economic growth. Figure 4-29 illustrates income, perception and bicycle
ownership data for the two provinces (based on the results of the community perception survey), which
reinforce this point.

32"Economic distance" refers to the costs in time, money and effort required to move goods to market. Physical distance is justone aspect determining this alongside road condition, terrain and access, cost of transport services and other social factors.

66

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Table 4-12: Socio-economic Comparison between Hung Yen and Lai Chau
Criteria
Total area
Population
GDP*
Poverty rate**
Road density
Communes without roadaccess to center

Unit
km2
peoplemil.VND%
km/km2%

Hung Yen
923
1,105,268
3,702,607
5.7
4.4
0

Lai Chau
16,919641,186
1,158,789
37
0.128
5

Notes: 1) *Data for 2002.
2) **Data for for 2000, using Vietnam National Poverty Line.
Source: TDSI/DFID [2003].

Figure 4-29: Relative Income Levels Perceptions and Access to Basic Transport
Provincial Comparison
60.00%

300

50.00%

250
0.40

40.00%

200

30.00%

150

20.00%

100

10.00%

50

Monthly Income (1000 VnD)

Perception of improved
living standard andbicycle ownership(From unpublished TDSI road netwotk impact study 2003)

0.03

0.00%

0
Lai Chau Province

Hung Yen Province

Province
Households who have perceived a great improvement in living standard over last 5 yrs
Bicycle Ownership (Bicyles per Capita)
Income (Monthly per capita Income VnD 1,000)
Source: TDSI/DFID [2003].

Both Hung Yen and Lai Chau are involved in RT2. The roads built under this project have led to
improvements in physical access for certain areas of Lai Chau and to accompanying livelihood
improvements. The impacts in Hung Yen have been greater, both in terms of economic improvements
through increased access to transport services and social benefits, e.g., education and healthcare.
This inability to "access" the benefits of broader economic growth is a key issue for the future
development of Lai Chau. "Economic distance" and "connectivity" are certainly key factors. However,other "access" issues also exist. A large proportion of its population are from ethnic minority groups
who have difficulties accessing government services; the population is scattered; agricultural land is in
short supply; and education levels are low. Lai Chau is consequently less able to take full advantage ofthe opportunities that improved road access can bring.
The implication for policymakers is that unless investment in Lai Chau for both infrastructure and othersupporting interventions is increased, it will slip further behind Hung Yen, with its geographical andnatural resources advantages.

67

Linking Economic Growth and Poverty Reduction

Intra-province Comparison33
Given this contrasting picture from the inter-province comparison, it is also worthwhile to look at
commune comparisons within Hung Yen and Lai Chau provinces. These illustrate that beneath theaverage lie diverse and complex interactions that affect accessibility and opportunities for economic
growth within relatively small geographic distances.
Figure 4-30 shows the variations between communes in the same two provinces. The communes wereselected on the basis of their relative "connectivity" to trunk and rural roads. In particular, Hung Yen
province demonstrates high degrees of variation in commune income levels. Such variation appears tobe affected by differing "connectivity levels" to markets and services. (In Lai Chau, the levels ofcommune income are uniformly low.)
Figure 4-30: Relative Income Levels for Communes with Differing “Connectivity” to Markets andServices
Intra and Inter Province Variations in Income
Monthly per capita income levels(1,000 VnD)

350
300
Hung Yen Province
250
200
150

Lai Chau Province

100
50
0

La i C hau Pro vince

H ung Ye n Pr ovinc e

Commune incomes for different "access" levels
Average commune income

Average province income data

Source: TDSI/DFID [2003].

The following analysis provides insights on how differing "connectivity" affects the socio-economic
situations of each commune, even within the same province.
One better-off commune and one poorer commune have been selected from each province forcomparison. The results of both quantitative and qualitative surveys are then discussed in terms of therelative "connectivity" of each commune.

33

The selection of communes for intra-province comparison is intended to illustrate the role of roads in development and is
not a statistically valid impact assessment. From a limited sample of nine communes, 4 have been selected to illustrate therange of impacts and perceptions of the importance of the road network on the lives of the rural population.

68

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Hung Yen province commune comparison
Table 4-13: Hung Yen Province – Hung Long Commune vs. Tong Phan Commune
Criteria
Total Area
Population
No. of households
Average commune income
Percentage of poor HHs
No. of bicycle
No. of Motorbike
Relative distance to trunk
Relative road quality

Unithapeoplehousehold
VND 1000
%
Item
Item
-

Hung Long
446
3300
776
5010
6.96
850
245
Close
Fair

Tong Phan
775.96
7511
2031
2950
11.87
4800
250
Far
Bad

Source: TDSI/DFID [2003] (All data are for 2002).

Hung Long commune is in My Hao district close
to NH5 and has good links to both the highway
and district roads [see Map]. Tong Phan, on theother hand, is in Phu Cu district, closer to theprovincial town and NH39, but farther away fromindustrial zones. In general, road networks in bothcommunes have improved greatly over the last few
years.

Map of Studied Communes in Hung Yen Province
SURVEYED DISTRICTS AND COMMUNESON ROAD INFRASTRUCTURE IMPACTS
IN HUNG YEN PROVINCE

In Hung Long commune, the commune road thatlinks to NH5 and district road No.210 are mostimportant, as they connect to industrial zones
where most of the youngsters from the commune
are working. In Tong Phan, the commune roads
are also considered most important because they
provide links to schools and markets, such as in
Hung Yen and Hai Duong towns. Furthermore,commune roads are opening up many
opportunities for local people to start microbusinesses. In Tong Phan commune, village roads
are also considered very important, both for
agricultural production and shortcuts to thecommune center.
Local people in both communes expressed satisfaction with the national and provincial roads thatenable them to connect to markets, information, education, healthcare, and other services. The
improvements in road links have resulted in enormous changes in cropping patterns, as well increases
in the value of land. Commune roads are ranked very high in terms of usage and usefulness to local
livelihoods. However, noteveryone in the commune
If the road No 210 improved...
benefits from the improved
Mr. Quynh, the chairman of Hung Long commune said that if theaccess situation. In Hung Long
road No 210 improved in the near future, his commune will
Commune, for example, thebecome an industrial commune. No youth will do on the
better-off households are able tofields...The price of land in this area will increase, and many
make a profit from selling moreother changes...
produce and/or sending their
Hung Long commune, August 2003
sons and daughters to work in
newly established industrial zones.

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Linking Economic Growth and Poverty Reduction

People in Hung Long commune are very worried about road safety. Reasons vary, but narrow roads andunclear rules are commonly mentioned. Local people in both communes are also unhappy with roadmaintenance. The commune roads are often rough and quickly degrade. In Tong Phan commune local
people said that; "the commune is located very near national and provincial roads but it still seems to bea remote area because of a very bad commune road." However, people still rely heavily on those roads
for their livelihoods. Maintaining access is a key issue if transport investments are to continue making
positive impacts on local people's livelihoods.
My problem with the road
Mr. Hoang Van Tien, selling ice creams on his bicycle, he has practiced his small business for 3 months.
Before that, he raised livestock and cultivated rice as many people in his village. Every day, he buys 200
sticks of ice-creams from Tran Cao center and resell them within his commune, at the primary and secondary
school in the commune, and nearby communes or villages. If it is a sunny day, he can sell all of them off; if it
is a rainy day, he may not, so he has to travel to the Tran Cao center to deposit the ice creams to the agent
for the next day. No fee is charged on this circumstance. The trip from his house to Tran Cao center is about
3-4 km. Most of buyers are passer by and pupils in the schools. Each stick of ice cream costs him 120 VND
and he can resell at 200VND. So if no problem occurs, he can get 40,000 VND in turnover and therefore
earns 16,000 VND incomes. However, there are about 10 sticks melted or broken due to the road condition
that is very bad, so he loses 1,200 VND of capital and 800 VND of net income. So he really gets 14,000 VND
of net income. He also said that he some time had problem with the road: the pokes and rim of his bicycle
sometimes break. One time he and his bicycle with ice cream on the rack fell onto a river off the road. He
lost all ice creams
Tong Phan, August 2003

Lai Chau province commune comparison
Table 4-14 : Lai Chau Province — Na Son Commune vs. Ban Giang Commune
Criteria
Total Area
Population
No. of households
Average commune income
Percentage of poor HHs
Relative distance to trunk
Relative road quality

Unithapeoplehousehold
VND 1000%-

Ban Giang
3,598
2790
522
2281
34.09
Close
Fair

Na Son
9392
3646
591
762
42.3
Far
Poor

Source: TDSI/DFID [2003] (All data are for 2002).

Both Ban Giang and Na Son communes have experienced improvements in the commune roads thatlink them to provincial and district roads. Being connected to the wider road network has enabled local
people to diversify their crops and cropping structure, to sell and buy things more easily, to better
access schools, healthcare and water, and make social trips. In other words local people haveexperienced improvements in their physical capital through road construction, which have led to
improvements in human, social, and financial capital. They value the commune roads most because
they provide the key link to essential services.
In Na Son commune, the improved roads have had direct impacts on school attendance. Interestingly,
Ban Giang commune is farther away from the province center, but has benefited a lot from improved
road links to the district and provincial roads. Better trade links have also appeared. In contrast, Na Son
commune is very near Dien Bien town, the provincial center, but suffers from a poor commune roadlink. This has limited the opportunities for local people to connect to markets and social services.

70

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Map of Studied Communes in Lai Chau Province
SURVEYED DISTRICTS AND COMMUNESON ROAD INFRASTRUCTURE IMPACTS
IN LAI CHAU PROVINCE

Ms Nguyen Thi Ly and her husband Mr. Nguyen
Huu Hieu:
Both of them have been teaching in the commune’s
primary school since 1997. Before the roads were
improved, she had to go to pupils’ houses and invite
them to the school. Now children voluntarily go to
the school. Quality of education is better now,
number of pupils is increasing.
Na Son commune, August 2003

The poor and women, in Ban Giang
commune, particularly value thecommune roads on which they rely for
their daily life. The perceptions of
those who travel by foot are that there
are no direct impacts on their lives
from road improvements.
Again, local people are not happy withthe way roads are currently
maintained. Overall maintenance isbadly done and commune roads areoften covered with mud and are rough,preventing access.

Benefits within communes are not equitably
distributed. In both communes, the better-off
households are more likely to capture theopportunities to increase their income. They
have better means of transport and can apply
improved techniques to new crops. Thisimplies a need for more coordination in efforts
to improve roads and agricultural service
delivery so that the benefits can reach thepoorest.

Mr. Nguyen Thi Tam, an agent buying rice and maize:
She comes from the district center and hires a house and uses
it as a shop cum a house. Each year, she can buy up to 50
tones of maize, 10-20 tones of rice, and some tones of soyabeans. She and her 3 children use their bicycles, going to thevillages, via dirt roads, buying every kg of rice and maize. She
has to pay cash on carry because each family just sells a very
little grain. When her family has gathered enough grain, shecommunicates with the purchasing agent in the district. The
agent uses a big truck to carry grain from several commune
agents like her. There is one more agent like her in the Ban
Giang commune.
Ban Giang commune, August 2003

71

Linking Economic Growth and Poverty Reduction

4-5. Case Study 5: Reproductive Health Project, as National and/or Regional Programs Based on
Community Participation
Trunk roads (or large-scale infrastructure) constitute an indispensable part of the road network,
together with rural roads (or small-scale infrastructure) in improving user access to social services.
The importance of rural roads has been frequently analyzed, mainly as to how they facilitate physicalaccess to service points. However, physical access is only one of the determinants of user access tosocial services. Service quality, education (changing people's awareness of service needs) and costs
are also critically important34. Therefore, the role of the road network should be analyzed morecomprehensively, covering such aspects as: (i) ensuring physical access; (ii) improving the quality ofsocial service delivery; and (iii) providing education for users. The latter two especially require theeffective implementation of national and/or regional programs based on community participation.
Thus, special attention should be given to how the road network can contribute to establishing suchprograms.
Improving Social Service Delivery through Increased Mobility and Proximity
The JICA-supported Reproductive Health (RH) Project in Nghe An province is a good example tounderstand the role of various levels of roads in facilitating access to two types of services: (i) basic
health care, and (ii) IEC (information, education and communication) or dissemination activities aimed
at raising the awareness of community people [see Box 4-11 for the Project]. The findings frominterviews with the project team and the local authorities suggest that both trunk (national and interdistrict) and rural (inter-commune and inter-hamlet) roads respectively serve essential functions forthree of the four determinants mentioned above35. (Although the project itself is designed to focus on
reproductive health, the views expressed by the project team and the local authorities seem to be
relevant to the delivery of primary health services in general.)■■Trunk roads (national roads, including inter-provincial and inter-district roads): Well-serving trunk
roads are indispensable, particularly for service providers (and the project staff) to engage in aregional (or even national) health care program. Bad road conditions limit the mobility of healthstaff (at the Maternal Child Health and Family Planning (MCH/FP) center at provincial capital,
district health centers (DHCs) and commune health centers (CHCs)) and thus make it difficult toestablish and sustain the quality of services as well as educational activities for users. This, inturn, could affect the willingness of potential user access to services. Under the JICA-supported
RH project, trunk roads (i.e., NH 1, 7, 15, 48)—by connecting provincial capital (Vinh city) anddistrict capitals (where DHCs are located)—play a crucial role in transferring new skills andinformation to the lowest referral point of the system (through such activities as training andseminars), and in establishing a permanent quality control system (e.g., check up system ofactivities, or monitoring system).
Inter-commune roads: By connecting commune and district centers, this type of road serves
important functions for both service providers and users. First, easier travel between the district
capital and CHC facilitates: (i) the transfer of new skills and information to CHC, and (ii) theestablishment of a permanent quality control system. Second, for users, good access to DHC isvital for the treatment of emergency cases. For example, pregnant women in emergency obstetriccases must be immediately transported to DHC (or to higher-level hospitals when affordable). The

34

The World Bank [2001] points out five determinants (i.e., the quality of service, geographical access, education, income,and service price) and stresses the importance of the latter two for hospital-based and private health service. Although theanalysis here does not include these two (because of its primary focus on the road network and public health care system),they are important in the analysis of the effectiveness of overall health service, including access to private hospital andhealth care service, particularly by lower-income groups.
35
Based on the findings of a field visit by the study team to the Nghe An Province in June 2003.

72

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

establishment of a system for such emergency treatment is essential to reducing maternalmortality rates36. (In this regard, not only good transportation, but a comprehensive ambulancesystem is needed.)■Inter-hamlet roads: By connecting users and CHCs, this type of road serves core functions;
namely, (i) the provision of basic health care, such as contraceptive methods, pre-natal check-ups,
delivery attendance at CHCs; and (ii) access to information, for example, participation in IEC
seminars and consultation with health workers.

Box 4-12: The Vietnam Reproductive Health Project in Nghe An Province
The JICA-supported Reproductive Health (RH) Project started in June 1997 under collaboration withJapanese NGO, JOICFP. The project aims to improve the RH services in Nghe An province—which is one ofthe poorest provinces and lacks well-trained midwives at the commune level. In Phase I, the project covered
244 communes (8 districts) and provided assistance to all 244 CHCs based on an integral approach; i.e.,
retraining the staff members responsible for pregnancy care and delivery, providing basic medical equipment
and medical supply, and renovating CHC facilities, such as delivery rooms, toilets and shower rooms*.
Currently, the project is in Phase II (from September 2000 to August 2005). In Phase II, the project has
extended coverage to all 469 communes (in 19 districts) and pays greater attention to the quality of RH
services and client-friendly services. Building on the experiences accumulated in Phase I, the project
incorporates new elements including: (i) capacity building of community-based voluntary organizations andDHCs; (ii) strengthening of links with family planning-related activities such as training of health workers inpost-abortion counseling skills; after abortion and (iii) establishment of the Health Management Information
System.
Note: * Information on the Project is based on the JOICFP website[http://joicfp.or.jp/eng/where_j_operates/vietnam.html].

Figures 4-31, 4-32 and Boxes 4-13, 4-14 illustrate how different levels of roads can complement eachother in improving the provision of (or access to) information and services—from the viewpoint of both
service providers and users.

36

Maine [1997] points out the following three major causes for delay which contribute to the high likelihood of maternal
deaths: (i) delay in deciding to seek care; (ii) delays in reaching a treatment facility; and (iii) delay in receiving adequate
treatment at the facility. Inter-commune roads are vitally important to avoid the delay related to (ii).

73

Linking Economic Growth and Poverty Reduction

Figure 4-31: Road Network and the Project’s Activities
Follow-up Visit to CHC
In order to establish
Monitoring System

Inter-commune road
Impassable to 4-wheel vehicles.
2-wheel vehicles, boats, or travel
on foot necessary.

Inter-district road(i.e. No.1, 7, 48, 15)
4 wheel passable

CHC

S/C
W/U
Providing better
facilities andequipment

S/C
W/U

CHC

DHC
S/C
W/U
P/O
MCH/FPInterchange of Experience
i.e. RH Seminar
Traveling Seminarwith other provinces

Training and Seminar at
Vinh City
i.e. [commune level]
・CHC Staff
・W/U member[District level]
・DHC Staff

S/C. W/C

Note: P/O: Project Office, S/C: Steering Committee, W/U: Woman’s Union.
Sourse: Elaborated by the study team based on the field survey of June 2003.

Figure 4-32: Road Network and User Access to RH Service
Inter-hamlet road
(2 wheel, on foot, boat accessible)

HamletAccess to medical service

Inter-communal road
(2 wheel, on foot, boat accessible)

CHC

DHC

Contraceptive
MethodObstetric
Complications
AttendancePre-natal
Check-ups

Access to information

Consultation to
Health Worker

Delivery
AttendanceParticipation in IEC
Seminars

Source: Elaborated by the study team, based on the field survey of June 2003.

74

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

Box 4-13: Views of Service Providers
Establishing a region-wide, community-based program for RH service delivery“Leaving at 6:00 a.m. and being back to Vinh City at 18:00 to 19:00 pm, we continue to run 50200 km per day. From my experience with this project, I can affirm that the qualification of staff
working for the primary health care project with region-wide operation is "physical toughness."Today, we, myself and Japanese expert Ms. Watanabe continue to visit rural areas expecting that
this tough work would serve us as a diet” (Sekai to Jinko, 1998-5 p.43).
The Japanese expert mentioned here is a midwife. She visits different CHCs twice a week to meet with the
midwives of CHCs who have participated in training offered by the project. The project aims to establish amonitoring system for CHC midwives, who are trained by the staff of MCH/FP centers. While visiting CHCs,
the expert assists the midwives in solving difficulties in their practice of the skills acquired at training. In doingso, she also provides on-the-job training, monitoring skills of local staff members at MCH/FP centers and
DHCs who will be in charge of monitoring work later. The monitoring team uses car(s) of the MCH/FP centerfrom Vinh City to accessible points, and then has to use motor bikes, horses, small boats, or even walk in orderto reach many CHCs. The number of communes the expert visited reached 137 in Phase I and 70 in Phase II(as of June 2003). The expert stressed the importance of road improvement in facilitating her mobility, as
follows:“I visit communes in order to motivate the people. There have been major improvements in theroad network at all levels, especially inter-district roads. At the beginning of the project, we had toleave Vinh City at 5:00 and returned at 20:00-21:00, but now we can leave 6:00 and be back byaround 17:00-18:00. This makes us feel easier to visit communes. I think roads are vital for thedevelopment of a region-wide, community-based service delivery program. Especially trunk (note:inter-district), if trunk roads are good, further access is possible somehow. However, we should notforget the lower-level of roads (note: inter-commune, inter-hamlet roads). There are still a lots ofcommunes, where the access is really difficult, especially in the Mountainous Area*.”
Note: *10 out of 19 provinces are categorized as “Mountainous Areas,” of which 6 districts are designated as areas for thegovernment’s poverty-targeted program No. 135.

Box 4-14: Views of Users
Physical access to Reproductive Health Services
Will the improved quality of services (by the project) result in more frequent use of RH services at CHCs,
such as delivery attendance or pre-natal check-ups? The project expects that by the time of its completion,
the frequency of pre-natal check-ups in the plane district (note: the area where the physical access to CHCs
is relatively easier than in the mountainous area) would increase by more than three times on average*.
In June 2003, the author conducted a field visit to two communes in the Anh Son District (around 75km to
the west from Vinh City). The two communes are included in the project under Phase II. In one commune,
the attendance at CHC has increased, but in the other, no change has taken place. In the first commune, interhamlet roads were upgraded recently—from earthen to concrete paved, and two wheeled vehicle-passable.
In contrast, in the second commune, inter-hamlet roads remain earthen. The president of the People’s
Committee of the first commune stressed that thanks to the improvement of road conditions and service
quality, people’s access had been enhanced. His statement confirms the importance of rural roads for users
from two aspects: (i) improved physical access by better road conditions, and (ii) enhanced service quality ofthe project. The Japanese expert also said that: “if road improvement to CHCs had been included as acomponent, the impact of the project would have been even greater, by bringing (i) easier access;(ii) better service quality; and (iii) information, all together.”
Note: *JICA Project Document.

75

Linking Economic Growth and Poverty Reduction

4-6. Case Study 6: Effective Demand for Road Construction—An Example of National Highway
No.18
The ongoing project of National Highway No.18 (NH18) improvement is a good example of theeffective demand effect of infrastructure construction, especially direct job and income generation forseasonal workers. The JBIC-financed sections cover approximately 129km between the Noi Bai
International Airport (in Soc Son district, Hanoi city) and Cua Ong town (Quang Ninh province),
including the construction of the Pha Lai Bridge37. The construction work started in October 1999 andis to be completed by the end of 2003. As noted before, together with NH1 and NH5, the improvementof NH18 has helped to promote the dynamic development of these areas and northern Vietnam.
Creating Off-Farm Jobs and Income
In the construction of highways, a number of works can be carried out economically by locallyrecruited manual labor. These are simple works, such as route clearance, earth digging and piling,
manual transporting of materials, making road tallies, planting and maintaining grass. The employmentof local farmers for such unskilled works contributes to job and income generation in the surrounding
rural areas, particularly during off-farm seasons.
The construction works of NH 18 are divided into five bidding packages. Up to this point (as of
September 2003), the works have been largely completed, with the exception of the Noi Bai-Bac Ninhsection, where the construction started in January 2001 and is about 85% complete. According toestimates of the Project Management Unit (PMU No.18)38, 6,584 workers have been hired since theircommencement—including 2,934 skilled workers (normally, fixed-term assignment for the average
work period of 664 days) and 3,650 unskilled workers (temporary assignment for the average period of
31 days). Most of the unskilled workers are engaged in the NH18 construction works for 24 months or
longer, implying that many work repeatedly.
An interview survey with 26 seasonal workers (17 unskilled and 9 skilled) at the construction site of theNoi Bai-Bac Ninh section confirms the importance of seasonal construction works for rural
households39. As regular jobs, about half of the interviewed workers are engaged in farming and animalhusbandry (12 workers, or 46%), followed by factory employment. The majority of their families gain
income from farming and animal husbandry (24 families, multiple answers). Most of the workers (17)live in nearby provinces where NH18 passes (Bac Ninh, Hanoi), with the rest coming from various
provinces in the north (e.g., Hung Yen, Hai Duong, Hai Phong, Ha Thay, Thai Binh, Thanh Hoa, Cao
Bang and Phu Tho).
As figures 4-32~37 illustrate, further analysis of the 17 unskilled workers shows that: (i) off-farmactivities provide an important source of their family incomes (on average, accounting for 68% ofannual cash income of their households); (ii) income from the NH18 works occupies a significant shareof their family incomes; and (iii) thanks to the onset of NH18 construction, opportunities for off-farm
job and income have greatly increased. Two years ago, 11 of the 17 interviewed unskilled workers
spent only 1-3 months for off-farm jobs; now, all the unskilled workers (except 1 no answer) have been

37

The entire route of NH18 extends approximately 300km, of which 59km (Chi Linh-Bieu Nghi section) was improved during
1998-99 financed by Korea and 100km (Cua Ong-Mong Cai section) is yet to be improved.
38
Based on the interview with the PMU No.18 staff by the study team in September 2003 and additional information provided
through CONCETTI.
39
The interview survey was conducted by CONCETTI in September 2003. All the 26 interviewed workers are engaged inunskilled jobs. But, it turned out that 17 people are recruited as unskilled workers and that the remaining 9 people are skilledworkers who have been temporarily assigned to unskilled jobs during the standstill periods at the construction sites. The
works of the Noi Bai-Bac Ninh section have so far involved 1,200 unskilled workers (30 days per assignment) in addition to662 skilled workers.

76

Chapter 4. Linkages among Infrastructure, Growth andPoverty Reduction: Selected Case Analyses

involved in the construction works of NH18 for 4 months or longer (with 8 working for more than 12
months). These rural households use the resulting additional income for routine expenses, education,family savings, etc.

Figure 4-33: Main Sources of Monthly Income of Workersí Families (multiple answers)
Unit: Number of families

16

Farming and Animal Husbandry

24
8

Trading / Services

13
1

Factory Employment

322

Government Employment
Handycrafts 00Unskilled Workers
Total

1
5

10

15

20

25

30

Source: CONCETTI [2003b], based on interviews with 9 skilled and 17 unskilled workers(totaling 26 workers) at the Noi Bai-Bac Ninh section of NH 18 construction site.

Figure 4-35: Number of Months Working on
NH18 Construction– Unskilled Workers

Figure 4-34: Number of Months Working
Off- Farm (2 years ago)
– Unskilled Workers

7-9 months
6%(1 worker)

4-6 months
12 %(2 workers)

10-12 months
18%(3 workers)
19-24
months38%(6 workers)

25-30
1-3 months
months0%
6%(1 worker)

13-18
months6%(1 worker)

1-3 months
64 %(11 workers)

Source: CONCETTI [2003b], response was obtained
from 17 unskilled workers.

4-6 months
31%(5 workers)

10-12 months
13%(2 workers)

7-9 months
6%(1 worker)

Note: The construction of the Noi Bai-Bac Ninh ection
started in January 2001.
Source: CONCETTI [2003b], response was obtained
from 16 unskilled workers.

77

Linking Economic Growth and Poverty Reduction

Figure 4-36: Contribution of NH18 Seasonal Income to Family Monthly Income– Unskilled Workers
13%(2 workers)

6%(1 worker)
0-25%
26-50%
51-75%
76-100%43%(7 workers)

38%(6 workers)

Source: CONCETTI [2003b], response was obtained from 16 unskilled workers.

Figure 4-37: Use of NH18 Seasonal Income (multiple answers)
Unit: Number of workers

3
3

OthersUnskilled Workers
Total

8

Special Payments (School Tuitions)2

Inputs for Faming Activities

0

Repaying Debts

13

4

1
9

Family Savings

14

2
2

Purchase of Valuable Appliances

14

Routine Expenses

23
0

5

10

15

Source: CONCETTI [2003b]. The total data are based on interviews with 24 families. The data on
unskilled workers are based on 14 families among the total 24 interviewed families.

78

20

25

Chapter 5. Vietnam's Development Challenges andthe Role of Infrastructure
As Vietnam continues to make progress in improving the living standards, it must fine-tune its
development strategy to respond to new challenges. Industrial development needs to be further
promoted, with special consideration to Vietnam's accelerating global integration. As poverty incidence
declines, further reductions in poverty will increasingly depend on distributional issues. There is a needto cope with urban-rural disparity through rural development and also ensure that the poorest anddisadvantaged groups are not isolated in benefiting from the growth process. The future role of largescale infrastructure must be considered from these perspectives.
Three issues are particularly critical: (i) enhancing competitiveness in the globalized economy; (ii)promoting rural development, particularly by creating off-farm employment; and (iii) strengthening theeffectiveness of poverty-targeted measures. Infrastructure can play an important role in addressing thesechallenges. The analysis in the previous chapters suggests the effectiveness of linking different levels of
infrastructure ("network") and the usefulness of complementary policies and measures to maximize theimpacts of infrastructure development.

5-1. Enhancing Competitiveness in the Globalized Economy
Vietnam is located at the heart of dynamic East Asia. The country also has diligent and less expensive
labor force. To sustain rapid growth and strengthen industrial competitiveness, Vietnam's future
development strategy must be geared to maximize these advantages. Furthermore, Vietnam's
intermediate position—between China and ASEAN—presents a unique development potential from a
regional perspective.
There are four major changes that are currently and will significantly affect the Vietnamese economy in
the near future40.
Vietnam's pledge to join the ASEAN Free Trade Area (AFTA) and its commitment on tariff
reductions
The Vietnam-US bilateral trade agreement (USBTA)
Vietnam's accelerating WTO accession
China joining the WTO
■

■
■
■

In this way, Vietnam faces fierce competition in the global market through the accelerating trade andinvestment liberalization. As traditional barriers to market access decline, trade facilitation measures
have become more critical. In particular, the importance of multimodal transport has increased in termsof: (i) matching inland with maritime infrastructure, (ii) simplifying trade documentation; (iii)
developing an efficient freight forwarding industry; and (iv) developing an effective communications
system [Carruthers and Bajpai 2002]. Efficient infrastructure is a key element of trade logistics andfacilitation, and large-scale infrastructure can serve to strengthen the function of urban centers as
gateways for international trade.
Although Vietnam's infrastructure has greatly improved from the past, it still lags behind the standardsof neighboring East Asian countries—in terms of availability, cost, and quality. Thus, continued
progress in this area is indispensable [see Figure 5-1 for the costs of key infrastructure services inVietnam]. For example, a recent World Bank report notes that Vietnam's ports are among the highest
cost ports in the East Asian region. Although overall port, cargo handling trucking, and rail tariffs may

40

Quoted from MPI/JICA [2003].

79

Linking Economic Growth and Poverty Reduction

not be excessive, relative inefficiencies impose high costs in terms of inventory and unproductive timeof vessels and road vehicles [Krumm and Kharas 2003]. A recent survey on the investment climate also
confirms that investors perceive Vietnam's underdeveloped infrastructure as one of the majorbottlenecks.
At the same time, there are other investment bottlenecks, such as difficulty in procuring local parts,
problems with business practices and inconsistent FDI policies [see Table 5-1]. The benefits ofeconomic infrastructure cannot be fully achieved unless favorable policy and institutional environment
is put in place for trade and investment promotion41. It is thus necessary to take an integral approach to
improve the investment climate and treat infrastructure as part of a national strategy to strengthenindustrial competitiveness.
Figure 5-1: Costs of Key Infrastructure Services in Vietnam
Recently, there has been significant reduction in the costs of key infrastructure services in Vietnam. But, they arestill high by the standards of its East Asian neighbors.
Costs of Transportation in US Dollars(From factory to Yokohama Port by 40 feet container)

Business Cost Changes from 1998-2001

2000

9%

8%

1144 1084

870

697 675

540

500

7%
0
-7%

ore
gap
Sin
sia
one
Ind
sia
lay
Ma

-7%

-11%
-26%

Costs of International Phone Calls to Japanin US Dollars (3 minutes)

0.13

10
8.1

0.1

1188.5

1000

Cost of Electricity in US Dollars(per kWh)0.151500 1451

ina
Ch
es
pin
ilip
Ph
rea
Ko
ng
Ko
ng
Ho
d
ilan
Tha
m
tna
Vie
ar
anm
My

15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%

M
fo r o n th
w o ly w
rke agr ( esMoUS
e n n thD)
g in l yee w agr(
U S e foMD) rm a o n th
n a ly w
ge agr(
U S e foOD) r
( U f f ic e
SD re/m n ton
3th
Y o m in u / m 2)
k o teha ca
m a ll tPoo((ce w er U SD
n t/ c o
)
kw st
h
40 )
co fooYo ntai t
ko ner
ha to
ma

1600
1500

0.08

0.07 0.07

0.06

0.05

0.05

0.04 0.038 0.037

5
0.03

0

6.93

2.9

2.6 2.29
1.96 1.92

1.2

0.97 0.96

0

ng
Ko
ng
Ho
ore
gap
Sin
es
pin
ilip
Ph
sia
one
Ind

rea
Ko
d
ilan
Tha
sia
lay
Ma

ina
Ch
m
tna
Vie
ar
anm
My

sia
one
Ind
es
pin
ilip
Ph
d
ilan
Tha

rea
Ko
sia
lay
Ma

ina
Ch

m
tna
Vie
ore
gap
Sin
ar
anm
My
ng
Ko
ng
Ho

Source: JETRO [2002], The Twelfth Survey of Investment -Related Cost Comparison in Major Cities and Region in Asia.

41

The urgency to improve the policy environment for industrial promotion is stressed in the NEU-JICA Joint Research
Project (Vietnam's Industrialization Strategy in the Age of Globalization) http://www.neujica.org.vn/ or
http://www.grips.ac.jp/module/vietnam/.

80

Chapter 5. Vietnam's Development Challenges andthe Role of Infrastructure

Table 5-1: Assessment of Competitiveness in terms of Specific Factors Impacting FDISpecific characteristics
FDI Confidence index
Potential economic growth
Quality of infrastructure
Legal system (development,
transparency, instability)
Tax system (development,
transparency, instability)

Vietnam
2
3
1

China
4
4
2

Thailand3
2
4

Malaysia
32
4

Philippines
2

2

2

4

4

3

2

2

3

3

2

2

Political & Social stability
Foreign exchange rate control
and stability

4

3

3

3

2

2

3

2

2

2

Procurement of parts
Potential market access
Ease of doing business
Corruption perception

1
2
1
1

3
3
2
1

3
3
3
2

3
3
3
2

2
2
2
2

Note: Rankings are based on Price Water House Cooper’s calculations (Rank: 4 = most competitive, 1 = least competitive).
The calculation is made on the review of existing studies.
Source: MPI/JICA [2003].

The importance of infrastructure investment in enhancing the business climate has also beenemphasized in the Vietnam Business Forum42. The Infrastructure Paper prepared by the Infrastructure
Sub-Group (November 2002) pointed out that there is a substantial gap between what the government
needs to raise in money for infrastructure over the next few years and what it is able to raise frombudget and ODA sources. According to the paper, approximately 12% of GDP is required of which 3%
can be raised by the government and 2% from ODA sources, leaving a gap of 7% of GDP which
equates to US$2.1 billion per year. The magnitude of overall investment and funding requirements
points the need for prioritization and optimal use of diverse resources for infrastructure projects.
5-2. Promoting Rural Development
Poverty remains a largely rural phenomenon. There exists a large gap in living standards between allrural areas and the urban and peri-urban areas, and urban-rural inequality is expanding. About 80% of
the poor in Vietnam are farmers, the majority of whom have benefited from agricultural reforms overthe past 15-20 years. As noted in Chapter 3, the majority of gains in the agricultural sector have been
exhausted. The levels of income in rural areas are now constrained to levels very close to the poverty
line by land availability and production capacity. Consolidating and providing the impetus for the nextstage of income growth for the majority of the population will largely depend on the generation of offfarm employment. Empirical evidence suggests that there is quantifiable increase in incomes for rural
households by diversifying their income base and stresses the important role of infrastructure in rural
poverty reduction [see Box 5-1, Van de Walle et al. 2003].
The case analyses of regional economy activation in Hung Yen and Hai Duong provinces and the
Mekong Delta region demonstrate a vital role of trunk infrastructure in promoting income
diversification and off-farm employment. Infrastructure network (both large and small, trunk and rural)
is a key determinant for "economic distance" and "connectivity" to markets and services and serves as apre-condition for realizing poverty-reducing growth in rural areas. This is so particularly in the context
42

The Vietnam Business Forum was created in 1997 (initially as the Private Sector Forum), aimed at providing a policy
dialogue among the government, donors, and the private sector. Since 1998, it has been officially linked to the Consultative
Group Process. The meeting is chaired by the Minister of Planning and Investment, and Country Director of the World
Bank, and co-chaired by IFC. See http://www.vietnambusinessforum.org/.

81

Linking Economic Growth and Poverty Reduction

Box 5-1: Impact of Infrastructure on Rural Poverty Reduction
The Deolalikar [2001] study shows how infrastructure helps in the reduction of rural poverty from various
aspects:• Roads have very strong effects on income and living standards of households and their effects are mostpronounced in the poorest provinces;• The presence of a road in the community is a significant factor for a household to break out of poverty;• There is a strong association between the availability of roads and secondary school enrolments. The
strength of the association is strongest in provinces with low-living standards;• There is a strong positive effect between the presence of a road in a village and the utilization of
government hospitals and inter-communal polyclinics;• Both irrigation and road infrastructure have significant effects on the agricultural yield growth; and• There is a significant impact of roads on industrial output growth both in rich and poor areas (an output
elasticity of 0.15).
Source: Deolalikar [2001], “The Spatial Distribution of Public Spending on Roads in Vietnam and Its Implications,” September 27,
2001 (draft).

of Vietnam, where the majority of the population belongs to the "transient" poor and the creation ofincome "opportunities" through "trickle down" effects appears to be effective.
Inter- and Intra- Provincial Variations in Poverty
At the same time, it is necessary to recognize great variations in the poverty situations within rural
areas. As noted before, the poor and the rich are not static groups in Vietnam. Nevertheless, this should
not mask the fact that there exist certain groups (or the "chronic" poor) which are severely constrained
from participating in new economic opportunities. There may be a potential disconnection between
growth and poverty reduction, particularly for the poorest and most disadvantaged groups (and areas).
To ensure wider benefits and broad-based growth, it is important for the government and other agencies
to design effective poverty-targeting programs by using the resources generated by growth, including
revenue and redistribution policies.
Situated close to Hanoi and NH5 to Hai Phong Port, the rural population of Hung Yen has benefited
substantially from the growth of the region. In contrast, Lai Chau is in the remote Northwest ofVietnam and lacks basic infrastructure services and access to markets. The experience of RT2 shows thegreater impacts of rural road development in Hung Yen, both in terms of social and economic benefits.
Lai Chau is less able to take full advantage of the opportunities that improved road access can bring.
Moreover, the comparative analysis of Hung Yen and Lai Chau provinces shows varying abilities
among local government bodies in mobilizing resources for rural infrastructure [TDSI/DFID 2003]. In
Hung Yen, investment funds for capital construction have increased in the recent two years. In
particular, there has been a drastic increase in the funds from non-state sectors (exceeding 80% of thetotal investment funds in 2002). While transportation and communications account for small share of
the total investment funds (at only 5% in 2002), the province has mobilized various investment
resources to develop its rural transport network. On average, it has improved 360.8km every year
(equivalent to VND42.5 billion, or nearly US$2.7 million), in which combined investments from
central government, the province, and the RT2 project contribute to about 35%. The remaining 65%
comes from the contributions from commune budgets and the general public.
Lai Chau province has also experienced rapid increase in investment funds for capital construction inrecent years. But, state-investment accounts for 76% of the total investment funds. Investment fortransportation and communication is low and mainly comes from the central government budget. In thisprovince, 120 of the 141 poor communes receive support from the Program 135. (The poverty rate of82

Chapter 5. Vietnam's Development Challenges andthe Role of Infrastructure

these communes is 46.5% compared to 17.2% of the national average.) There remain 20 communes
without access roads to their centers.
Such inter- and intra-provincial variations in income and the resultant resource mobilization capacity
suggest a need for taking different approaches to rural road development-between the areas where the"transient" poor live and where the "chronic" poor are concentrated.

5-3. Strengthening the Effectiveness of Poverty-Targeting Measures
Public spending on roads, although still tilted in favor of better-off provinces, became more equal
during the second half of the 1990s. For example, the growth in real public spending on roads has
been more diffused. Between 1995 and 1999, the 15 provinces that accounted for 75% of the national
GDP increase accounted for only 31% of the national increase in public road spending [Deolaliker
2001].
Nevertheless, the study also finds that the poorest groups (and areas) continue to be disadvantaged by
the access to and the quality of road infrastructure, when looked from the perspective of the commune
or village levels. Evidence from the analysis of longitudinal VLSS data shows that during the period
1993-98: (i) while the access to motorable roads for the richest population quintile increased
substantially, such access for the poorest quintile shrank considerably; (ii) the poorest quintile aresubstantially disadvantaged relative to the richer (the second poorest and the above) in terms ofimpassability of the nearest road; and (iii) the richer quintiles have substantially higher access to quality
roads (asphalt or tar) than the poorest quintile. Also, a major difference exists between the poorest andthe second poorest quintiles regarding the speed of improvement of road infrastructure.
Therefore, there is still a need to design infrastructure projects and programs that target the "chronicpoor," mainly in remote areas, in order to avoid risks of reinforcing the poverty gaps evident from themost recent data. But, targeting infrastructure development in poor areas will not automatically benefit
the poor. Careful design is essential in order to ensure that the interventions benefit the poor in an
inclusive manner. In many cases this will require complementary interventions to ensure that the poor
can access the services provided by infrastructure. For example, if the poor cannot afford connection
fees or electrical equipment they will not benefit from grid extension, similarly if the poor have no

Figure 5-3: Average Number of Days per Year that
Nearest Road is Impassable by Per Capita
Expenditure Quintiles, 1993 and 1998

Poorest

3.0

Poorest25

Second
2.5

2.5

Third

2.3

Average Number of Days
Road is Impassable

Average Distance (kms.) to Nearest Road

Figure 5-2: Average Distance to Nearest
Motorable Road, by Per Capita Expenditure
Quintiles, 1993 and 1998

Fourth2.0Richest
1.5

1.5

1.6
1.4

1.3

1.2

1.0

1.0

1.0
0.5

0.5
0.0
1993

Second

23
21

Third

20

19

Fourth17 17Richest

15

14

13
11

10

9 9

5

0

1998

1993

Source: Deolalikar [2001].

83

1998

Linking Economic Growth and Poverty Reductionmeans of transport [see Figure 4-29, bicycle ownership figures in Lai Chau province] and there are no
public transport services, then the benefits of roads to the poorest will not be maximized.

5-4. The Role of Infrastructure in Poverty Reduction
The three channels for pro-poor growth will be of differing importance to the "chronic" poor in the
remote areas and the "transient" poor in the better-off areas. The "chronic" poor are unlikely to benefit
from economic growth directly. Consequently direct interventions aimed at improving local economic
opportunities (transfer of agricultural technology, rural roads, etc.) are the most appropriate to help
achieve equitable growth. In addition, social safety net or "policy" channel interventions should also be
adopted (e.g., subsidies, fiscal transfer, etc.) to redistribute the gains from growth in the wider economy
to poorer areas so that basic services are securely provided.
In the better-off areas (where there are large numbers of the "transient" poor), interventions that enable
poor households to improve their economic linkages with domestic and external markets and support
for non-farm diversification are most relevant. Put another way, to enable a "trickle down" to takeeffect, the formal economy needs to be made accessible to the poor. This is the most likely route forbringing the most benefit to the large segment of the population who have already benefited from
Vietnam's growth but now need to be assisted to make the next step from farm to non-farm, andinformal to formal employment.
Large-scale infrastructure (trunk roads and major power production) provides the foundations on which
economic growth for the formal, non-farm economy is built. And this paper has clearly demonstrated its
validity in the context of Vietnam. However, too much focus on large-scale investments, without
consideration to their links to the other areas, is likely to make growth inequitable as the richer sections ofsociety may capture the benefits (because they have access to the services that such infrastructure provides).
Small-scale infrastructure (rural roads, irrigation, rural electrification infrastructure etc.) is also a
proven, necessary but not sufficient, supporting measure for both "chronic" and "transient" poverty
reduction. It provides the basic access to services and economic opportunities that the poor require to
improve their livelihoods. Nevertheless, too much focus on small-scale infrastructure will only generate
local improvements and limit economic growth, as the poor will not be connected to growing domestic
and foreign markets.
Past experiences suggest dilemma of how to select small-scale, rural infrastructure projects, balancing
economic and social/poverty concerns [see Box 5-2]. This implies there is a scope for further
improvement in selection criteria, particularly for small-scale, rural infrastructure, taking account ofinter-and intra-provincial variations in the poverty situation in Vietnam.
To maximize the gains of each level of infrastructure requires a planned approach that adequately
invests in both areas and ensures "connectivity." One way of seeking balanced investment decisions(between growth and poverty reduction) might be to incorporate a "network" perspective into
investment planning and prioritization. The case studies presented earlier in this paper demonstrate theimportance of connecting remote areas with power grids, and trunk roads with feeder roads to achieve
poverty-reducing growth. Thus, greater attention should be paid to the synergy of networking between
large and small, trunk and rural infrastructure.

84

Chapter 5. Vietnam's Development Challenges andthe Role of Infrastructure

Box 5-2: Balancing Economic and Social/Poverty Concerns
Despite major progress in infrastructure development in Vietnam, the poorest quintile continues to bedisadvantaged by access to infrastructure service. There may be several reasons for such an outcome.
■

■

■

■

■

Lack of systematic consideration in infrastructure placement: Infrastructure locations, to a large extent, aredemand driven. For example, national electricity distribution grids are extended to areas where the demandfor electricity is high and the benefits exceed the financial cost. Under such a criterion the poor areas where
the demand for electricity is low have been left out.
Selection of infrastructure based on economic efficiency: Selection criteria for rural infrastructure can bedifferent from that of trunk infrastructure (which is mostly based on economic efficiency). For example,
consider the appraisal of two rural roads—one passing through a high-income area and another through a
low-income area—under budget restrictions. The road that passes through that area will have a higher
economic rate of return as the people in the high-income area will be willing to pay more for the benefits
they receive. Therefore, the road in the high-income area will attract the investment. The World Banksupported Rural Energy Project* seeks to expand electricity in 671 communes in 32 provinces through grid
extension. However, it will only extend in communes where at least 60% of the households confirm their
willingness to get connected and pay the connection charges. This may exclude the poorest communities.
Economies of scale in infrastructure provision: Due to the low indivisibility of infrastructure, it requires
economies of scale to justify establishment. This means that the areas with high population density are
more likely to get preference over low-density areas. In Vietnam, the proportion of poor people is higher insparsely populated areas. Results of an analysis that involves 61 provinces show that there exists significant
negative correlation between the rural population density and the proportion of poor households(correlation co-efficient of -0.40 with significance of 0.001). Therefore, the poor are further disadvantaged
given the failure to meet the necessary requirements of economies of scale.
Non-inclusion of the whole range of benefits: Non-inclusion of all types of benefits (e.g., economic, socialand environmental) in infrastructure appraisal process may disadvantage poorer communities. For example,
if a rural road connects to an isolated area that was without a reliable road connection, the social benefits(e.g., access to health, educational institutions, etc.) would be a significant portion of the overall benefits
unlike an area with good road connection. These benefits are not included in the conventional appraisal
process, as it is difficult to quantify and value them, or predict post-improvement benefit levels.
Higher spending capacity of well-off local governments: The better-off local government bodies(provincial, districts and communes) tend to invest more on transport infrastructure than their poorer
counterparts and demand lower community contributions.

Note: *The components of the World Bank-supported Rural Energy Project (US$150million) include: (i) electrification of 671
communes located in 32 provinces through grid extension; (ii) defining and establishing institutional mechanisms and strategy forrural electrification; and (iii) promoting the application of renewable energy sources in areas inaccessible to the national grids, andsupplementing grid power supply.
Source: DFID/Vietnam infrastructure team [2003].

85

Chapter 6. Issues for Future Strategic Planning of Infrastructure
Development and Aid Partnership
The final chapter highlights selected strategic issues which are important for the development oflarge-scale infrastructure. It also suggests required measures to maximize development impacts oflarge-scale infrastructure and how government-donor partnership can be further enhanced in thisregard. As this paper shows, the links and channels through which large-scale infrastructure
promotes economic growth and poverty reduction have been clearly established. The perceived
dichotomy between growth and poverty should be avoided because infrastructure provides aplatform for both. The government needs to articulate a shared vision for the role of infrastructure,under an overall development strategy.
On the basis of Vietnam's past experiences with infrastructure development, main issues can be broadlyclassified as follows: (i) complementarities between infrastructure, social investments and institutions;(ii) spatial dimension of infrastructure development; and (iii) policy and measures to maximize theeffectiveness of infrastructure investments (including fiscal and financial aspects, sectors policies, project
management etc.). These issues are important to ensure appropriate resource allocation and mobilization,
make inputs into large-scale infrastructure effective, and mitigate its possible negative impacts.

6-1. Complementarities among Infrastructure, Social Investment and Institutions
There exist close complementarities among infrastructure, social investment and institutions,although they are financially substitutable. First, human capital is essential to ensure thedevelopment effectiveness of infrastructure investment. Health and educational achievements
greatly affect the productivity of labor. These are important for agricultural productivity,
influencing the effectiveness of agricultural extension and technology transfer. Also, businessproductivity critically depends on the quality of factory workers and the managerial and technicalcapacity of skilled workers. Further integration into the world economy will increasingly
necessitate a skilled labor force. Although literacy rate in Vietnam is high compared to othercountries, the trained workforce is relatively small. Shortages of qualified workers, technicians andmanagers are already apparent in dynamic economic centers43.
Several provinces have already initiated efforts to address this problem. The northern four provinces(along NH5) have very active vocational training programs. For example, Hai Duong province has 23
vocational schools, supplying over 6,000 students per year. Nine of them were established during the last
two years. Notably, these new schools are run by private-local government's partnership. Hung Yen
province has 13 vocational schools, supplying 5,000 graduates per year. The recent expansion of training
programs in the two provinces is very impressive, and the newly invested foreign and domestic
enterprises benefit from the programs44. In the south, Binh Duong province has a technical training
center within the Viet-Sing IZ, with financial support from the private sector and the central government.
Second, there is a need to address the potentially negative environmental and social aspects ofinfrastructure projects. These include environmental impacts, resettlement, road safety issues, etc.

43

The local authorities of Can Tho province also state that the shortage of skilled, technical workers makes it difficult to fully
satisfy the demand from FDI firms. (Based on interview with the Department of Planning and Investment in Can Tho
province in June 2003.)
44
It is worth noting the generally high educational achievements of the population of the two provinces. Hai Duong and HungYen are among the first eight provinces of the country, which achieved universal secondary education in 2001. During the
war with the US, a number of higher educational institutions, including vocational schools, were evacuated from Hanoi tothe two provinces. Thus, there are enough secondary school graduates to be trained at vocational schools [JBIC/IDCJ 2003].

86Chapter 6. Issues for Future Strategic Planning of Infrastructure
Development and Aid Partnership

Proper safeguard measures must be taken throughout planning, construction, and operation of projects.
The Vietnamese government is mindful of these issues. For example, in the case of donor-supported
trunk road projects, the Ministry of Transport (i.e., Project Management Units and Regional RoadManagement Units) has been making serious efforts. The past experience suggests that requirements
under environmental assessment and resettlement action plans have been generally complied, consistent
with relevant laws and guidelines of the government and respective donors. The experience also showsthat if properly handled, the affected families (e.g., by relocation) could sufficiently enjoy benefits ofthe development of large-scale infrastructure [see Box 6-1]. However, the implementation ofresettlement and land acquisition has turned out to be very time-consuming, affecting the progress ofconstruction work.
The World Bank-supported post-evaluation study of the National Highway No.1 project points out thefurther need to strengthen the capacity of the ministry and responsible units in: (i) carrying out EIA
studies and monitor the implementation of mitigation measures during construction; (ii) identifying'bottlenecks' earlier, in the implementation of resettlement procedures and compensation payments, toavoid unnecessary delays; and (iii) improving the reporting of traffic accidents at both central and local
levels45. This point is important because the poor are more likely to be vulnerable to potentially adverse
consequences

Box 6-1: Social Impacts of National Highway No.1
As part of post-evaluation study of the World Bank-funded National Highway No.1 project, theenvironmental and social component of the project was assessed, by using key informant interviews (38respondents) and household survey (1,129 respondents—Hanoi-Vinh (164), HCMC-Can Tho (132), Hanoi
South Development Corridor (101), Vinh-Dong Ha (634), and Dong Ha- Quang Ngai (98)). The surveys
were conducted between January-May 2003.
The major findings of the surveys are as follows:
■
■

■

■

■

■

■

Most of the respondents claimed that their families have been compensated satisfactorily.
Most of the respondents who were relocated in resettlement sites declared that their present areas are better
than their original locations.
There has been a shift in income sources after six years, with a reduction in those engaged in farming andbusiness. There was a marked increase in the number of respondents now engaged in other sources of
livelihood.
Income levels have generally increased over the past six years. Most of the respondents has rated theirpresent level of income as "better than before" 1996.
Most of the respondents rated the overall impacts of the project as positive. Among the positive impacts
cited were reduction in travel time, improved access to facilities and services, and better opportunities forwork and other livelihood/business aspects.
About 39% of the total respondents mentioned two negative impacts of the road rehabilitation. These wereincreased noise from traffic and increased incidence of accidents.
Of the total respondents who availed of training programs under NH1, only a small percentage (16%) havefound suitable jobs after the training. The majority has found it difficult to find appropriate jobs.

Source: World Bank [2003a].

45

Based on the World Bank-supported post-evaluation study of NH 1, Project Monitoring and Evaluation Study: National
Highway No.1 Rehabilitation Projects (HRP1-HRP2), prepared for the World Bank, July 2003.

87

Linking Economic Growth and Poverty Reduction

Road safety is another example of emerging social problems, associated with infrastructure. Vietnam's
road safety situation has been deteriorating. The official estimates show fatality rate of over 14/10,000
vehicles, and road fatalities have been increasing at a rate of over 30% per year during the last several
years46. Recently improved infrastructure, rapid motorization, speed acceleration, and increasing traffic
densities (largely motorcycle users) are all contributing to a high level of road-related fatalities. The
growing social and economic costs of road accidents have made transport safety, especially road safety,
a high priority for the Vietnamese government.
Third, there exist institutional complementarities. There is a need to pay attention to not only physicalaspects, but also service and management aspects (such as pricing, competition, and accessibility by thepoor) of infrastructure development. The latter greatly affects the efficiency of infrastructure services,which are vital for industrial competitiveness. For example, efficient customs administration isindispensable to the functioning of port infrastructure. Traffic regulation and a proper system for
operations and maintenance are crucial for road infrastructure. Moreover, the quality of infrastructureservice and management determines how the benefits of improved infrastructure are distributed tosociety as a whole (including the poor). To maximize the impacts of large-scale infrastructure,
institutional reforms must be implemented in parallel.

6-2. Spatial Dimension of Infrastructure Development
Vietnam's development vision incorporates spatial dimension in a pro-active manner47. The underlying
assumption is to start from the highest potential region (s) in terms of human resources, location,
externalities, etc. and gradually move to the second highest potential region (s). It is expected thatgrowth in the first region would provide financial resources for the next. Growth diffusion in thenorthern provinces along transport corridors and the southeast provinces surrounding HCMC, as wellas dynamic prospects for Can Tho and the Mekong Delta region confirm that such approach based on
spatial dimension has been working in Vietnam so far.
To ensure rapid but equitable economic growth, it is necessary to continue efforts in developing anddeepening linkages between growth centers and adjoining rural areas—so that benefits of growth are
more widely spread. This implies infrastructure investments at the national, sub-national, and regional
levels, namely:
National transport (or inter-provincial) corridors themselves to link growth centers;
Sub-national and rural road network (provincial, district, and feeder roads) to connect growthcenter (s) and selected rural areas, so that transport corridors can reach out into remote areas;
andRegional road network to extend the above linkages even further to the neighboring countries in
the Greater Mekong Subregion (GMS)48.
■■■

The timing and sequencing of investments could greatly affect industrial location, the promotion anddiffusion of growth centers, and the effectiveness of national and/or regional programs of social service
delivery. As a result, these may determine the patterns of growth and poverty reduction and balanced

46

Because of underreporting, unofficial estimates of fatalities are significantly higher. The information of this section is basedon the findings of the World Bank mission on road safety, which visited Vietnam in June 2003.
47
Prakash [2003] notes the important implication of spatial dimension of infrastructure, because these investments are often
embedded in a fixed location.
48
The ADB has been actively supporting regional cooperation within the Greater Mekong Subregion (GMS), covering
Vietnam, Thailand, Cambodia, and Lao PDR. Priority or potential infrastructure projects (aimed at serving subregional
linkages) have already been identified, and some of them are under construction. These include: (i) the road from Hanoi toLang Son on the border with the People's Republic of China; (ii) the HCMC-Phnom Penh-Bangkok highway; (iii) EastWest transport corridor through Lao PDR connecting northeast Thailand and central Vietnam; and (iv) the road and railroute from Hanoi to La Cai.

88

Chapter 6. Issues for Future Strategic Planning of Infrastructure
Development and Aid Partnershipregional development. Such investments should be designed not only to maximize growth potential, butalso to link rural households and enterprises with new market and job opportunities arising from thegrowth.
As stated before, a notable feature of the poverty in Vietnam is that a large proportion of the
population is clustered around the poverty line. This places the country in a unique situation whereby
adoption of appropriate infrastructure strategies can substantially reduce poverty by connecting thepoor to the growth of the economy. The case of Hung Yen illustrates this positive effect. The well"connected" parts of the province have benefited far more from general economic growth than the lesswell connected. Consequently, it is essential to ensure that the areas in which there is a concentrationof poor people located near the "growth hubs" are well connected to these markets and non-farm
opportunities, if the "economic growth and trickle down" channel is to be effective for the "transient"poor.
At the same time, in view of prevailing inter-and intra-provincial variations in the poverty situation,
there is a need to: (i) address the poorer provinces funding shortfalls; and (ii) carefully design projects
and programs so that the interventions can benefit the "chronic" poor living in the poorest, remoteareas, in an inclusive manner.
To this end, there is a need for strategic planning and better coordination of infrastructure investments
at the national, sub-national, and regional levels, under the broadly shared development vision.
Investment decisions need to be based on transparent allocation criteria linked to an overall strategy
which maximizes the synergies of networking between different levels of infrastructure.

6-3. Policy and Measures to Maximize the Effectiveness of Infrastructure Investments
Provided that the above issues are fully taken into consideration, there is still a need to pay attention to
the issues specific to infrastructure investments and sector policies. Investments in large-scale
infrastructure have significant fiscal implications. Moreover, the quality of management and the levelsof productivity attained within the infrastructure sectors greatly affect the overall growth of economy[Willoughby 2003]. Thus, due consideration should be given to the issues of selection criteria,
financing, maintenance, and regulatory framework for infrastructure investments and operations, andso on.
To maximize the development impacts of infrastructure investments, continued capacity building
efforts are necessary in various areas-covering fiscal and financial aspects, sector policies, and project
management.
First, regarding budget formulation and fiscal management, the following measures are particularly
important to ensure appropriate resource allocation and overall revenue generation.
Improving a mechanism for prioritizing public investment projects and developing the Public
Investment Program (PIP), based on proper appraisal of economic and social benefits.
Strengthening the link between budget management and investment planning, so that sufficientrecurrent expenditure (for operations and maintenance) can be secured for the ongoing or newly
planned infrastructure investments.
Improving tax policy and the efficiency of tax administration so that fiscal sustainability can beensured in the longer-term and that fiscal revenues generated by growth can be appropriately
collected and spent for the objectives of equitable growth.
■■■

It is vitally important to establish proper project selection criteria, so that infrastructure investment canbe prioritized and planned, consistent with an overall development vision. This point is crucial
because future decisions on infrastructure investment will become more difficult, as the marginal89

Linking Economic Growth and Poverty Reduction

returns to investment tend to diminish with the progress in trunk infrastructure development. The
formulation of a Master Plan is useful in order to examine alternatives in the short, medium and longterm under budget constraints, and to ensure the consistency of investment at both the regional andsectoral levels.
The above selection criteria should take account of two aspects49: (i) the infrastructure "network," i.e.,
how to maximize synergy effects of different levels of infrastructure; and (ii) a proper balance ofeconomic vs. social and poverty concerns. Although further analysis is necessary, economic criteria
could include: rate of returns to investment, costs for operations and maintenance, cost reduction
potential, etc. Social and poverty criteria could include: direct impact on poverty reduction, likely
distributional impact, impact on improving infrastructure network beyond the project area, social andenvironmental impacts, etc. The specific weight of a given criteria could differ by project type, size,
location, etc. Ideally, it is suggested that a system be developed, where the proposed projects would be
ranked based on the most relevant criteria and priority be given to the best-ranked investments underthe budget constraints. This is far from easy task. Concerted efforts are needed to identify such criteria
and establish a practical mechanism for incorporating them in the PIP process.
Second, efforts should be made to gradually diversify the sources of infrastructure financing. As atypical developing country, Vietnam faces enormous demand for infrastructure investment [see Chapter
5]. Since public finance alone cannot satisfy all the resource requirements, efforts are needed tomobilize both public and private sector financing. At the same time, the lessons from the Asianfinancial crises suggest that sole reliance on private sector financing would not be realistic either50.
Thus, it is important to explore optimal use of diverse resources, identifying appropriate financing
sources for different types of infrastructure. Private finance should be fully utilized in investment where
the private sector can be attracted (e.g., in the form of BOT). On the other hand, in the areas where theprivate sector is unlikely to participate but which have significant implications for social and economic
development, public finance and ODA may be utilized51.
Vietnam's experiences suggest that particularly for a low-income country, public (and ODA) support at
the initial phases of large-scale infrastructure development is necessary, in order to accumulate theknow-how of infrastructure planning and operations and build confidence of potential investors. Thisshould help prepare for the subsequent phases of private sector participation in infrastructure. In thissense, the experience with the Phu My Thermal Power Plants offers a good example of "step-by step"
approach to the private sector participation in infrastructure [see Box 6-2]. It is also important toestablish a sound regulatory framework because this is a prerequisite for promoting privately-financed
infrastructure52.

49

These are based on suggestions by Dr. Simon Ellis (transport sector coordinator, World Bank) and Dr. Alessandro Pio(principal programs officer/economist/ADB) at the September 2003 workshop on large-scale infrastructure.
50
Despite a major emphasis placed on the private sector to handle infrastructure investment, private financing forinfrastructure plummeted to $58 billion in 2002 from $128 billion in 1997 (global figures).
51
Dr. Alessandro Pio (ADB) also suggested at the above workshop that: (i) government budget (e.g., fiscal revenues, bonds)
would be expected to address to some extent all types of infrastructure, but (ii) the focus of private sources would be moreon infrastructure that generates economic growth (and hence financial returns which will make private financing viable),(iii) while ODA may be directed to projects which combine growth and poverty objectives.
52
For example, the feasibility study of the My Thuan Bridge (1996) concluded a BOT option premature because of lack of theregulatory framework in Vietnam (based on the statement of a participant at the September 2003 workshop on large-scale
infrastructure (in Hanoi)).

90Chapter 6. Issues for Future Strategic Planning of Infrastructure
Development and Aid PartnershipBox 6-2: Combining ODA and Private Financing: Phu My Thermal Power Plant Complex
To meet a sharp increase in power demand in Southern Vietnam, a series of plans to construct power plants
and power stations in the Phu My area (about 75km from HCMC, located in the Ba Ria-Vung Tau province)
are underway. In 1994 JBIC provided the first ODA loan for the construction of the Phu My 1 Power Plant,
financing common facilities for water treatment and fire prevention. This project, in turn, has paved way for
subsequent financing from private sector. Now, the Phu My 2 Power Plant (the first private infrastructure
project in Vietnam) and further projects are being financed with private sector participation, including:• Phu My 2 Power Plant (phase II): Based on a 20-year build-operate-transfer (BOT), with the funding of
ADB and JBIC loans, and a private sector consortium under a World Bank-supported Partial Risk
Guarantee.
• Phu My 3 Power Plant: Based on a 23-year BOT contract, with the funding of ADB and JBIC loans,international commercial loans, and MIGA guarantee (for political risks).
Source: Japan News [2003], p.7, and World Bank/Vietnam website.

Third, regarding sector policies and infrastructure management, the following aspects are especially
useful to make inputs into large-scale infrastructure effective (the list is not exhaustive).
In transport, further efforts are required to:• Establish economically efficient and fiscally effective funding systems for road maintenance;• Design and implement a cost-effective urban transport strategy (which links specific urban
transport needs with the cities' role as engines of growth and gateways for international trade, andalso takes account of connectivity among urban, inter-urban, and rural transport network etc.);• Strengthen the management of resettlement issues; and• Establish an institutional mechanism for addressing road safety issues.
In power, there is a need to:• Improve the overall system efficiency, especially in view of the sector's large investment
requirements;• Enhance rural access to electricity, including the promotion of renewable energy;• Strengthen the managerial and administrative capacity of the sector institutions;• Strengthen the financial sustainability of the power sector; and• Minimize pollution and environmental degradation.
In addition, the overall policy and institutional environment is essential to realize the benefits ofinfrastructure investments.
As stated in the above (6-1), in light of potentially great impacts of large-scale infrastructure projects
on local residents, there is a need to take measures to mitigate their possible negative impacts.
Moreover, it is important for the government (and responsible agencies) to promote local participation
and raise their awareness of the projects during the planning and implementation stages. Suchmeasures should help them well prepared for new opportunities and changes that the projects should
bring.
In this connection, the AusAID-funded My Thuan Bridge Monitoring Program is an important effort
aimed at capacity building for "ex-post" monitoring of the traffic, economic, social, and environmental
effects of a large-scale infrastructure project [see Box 6-3].

91

Linking Economic Growth and Poverty Reduction

Box 6-3: My Thuan Bridge Monitoring Program
1. Why "(ex-post) Monitoring Program"? And what is the purpose of this program?
"(Ex-post) evaluation" is one of the stages of the project cycle, which is conducted after the project"completion" (typically, in the case of infrastructure projects) in order to measure the achievements andoutcomes of the project. This stage sometimes faces the difficulty in how to feedback the lessons learned.
The AusAID-funded, "My Thuan Bridge Monitoring Program" attempts to overcome such difficulty bymaking the ex-post "monitoring" part of the responsibility of the project implementation. By doing so, themonitoring program aims to ensure the sustainability of the bridge and the realization of its expected
benefits.
2. How the program conducted?
This is a three-year program. Between January 2001 and January 2003, five bi-annual monitoring reports
were prepared. In order to build the capacity of local researchers for conducting this kind of survey, theUniversity of Economics in Ho Chi Minh City was engaged by AusAID to implement the monitoring
program, with continuous assistance from an international consulting firm.
3. What has been measured?
The table below indicates the objectives, concrete indicators and sources of the baseline data used in the
program.
Table: My Thuan Bridge Monitoring Program
Objectives

Indicators(1) Comparing the situations
before and after the Bridge
construction.

• Traffic movement (including the volume oftraffic using the bridge, comparison of
actual and forecast traffic, and the origins
and destinations of traffic using the Bridge).

(2) Identifying the progress ineconomic and social
development of the
population concerned.

• Basic socio-economic data (population,
provincial GDP growth, etc.).
• Industrial zones in its immediate sphere of
influence.

(3) Establishing the success of
mitigation actions taken toameliorate potential negative
impacts of the bridge.

• People who were previously dependent on
the My Thuan ferry.
• Development along access roads to the My
Thuan Bridge (including sexualtransmission disease).
• Changes in access to social services.
• Environmental impacts (changes in waterand air quality, etc.).

(4) Establishing the potential forsustainability of the Bridge
and its beneficial impacts.

• Engineering maintenance.
• Safety of people and property.
• Financial sustainability.

Source of baseline• Feasibility study,
including the final
report andunpublishedtechnical working
papers prepared
during thefeasibility study.
• Other historical datacollected during themonitoring
program.

(5) Providing information that can be used for future transport planning (e.g., baseline for the Can Tho Bridge).
Source: Elaborated by the study team, based on AusAID [2003a] (interim report) and AusAID [2003b] (draft final report).

6-4. Government-Donor Partnership
Vietnam is a country where government-donor partnership (including NGOs) is active. As reviewed inthis paper, there are many areas where such partnership can be fruitful to achieve the effective andsustainable investments in large-scale infrastructure.
The primary objectives of investments in large-scale infrastructure are to help the creation and the
diffusion of growth. It creates economic and social opportunities through various linkages, directly and92

Chapter 6. Issues for Future Strategic Planning of Infrastructure
Development and Aid Partnershipindirectly. At the same time, complementary measures are necessary to further enhance the impacts oflarge-scale infrastructure—for example, by developing rural roads, investing in human capitals,enhancing the investment climate, and building capacity for project planning and selection,
maintenance and operations, institutional and sector policies. Furthermore, for those groups who areseverely constrained from participating in new opportunities created through growth, targetedinterventions are necessary. It is important to support such poverty-targeted programs and enhance theireffectiveness, as well.
Thus, infrastructure investments should be treated as integral part of the broader strategies forpromoting growth and poverty reduction. Aid partnership will be useful in supporting the government's
efforts in realizing all elements of the strategies, with each partner playing a complementary role basedon its strength(s) [see Box 6-4].

Box 6-4: Shared Development Vision toward Equitable Growth
Strategies and Policies for Promoting Growth and Poverty Reduction
Measures

Role oflarge-scale
infrastructure

Objectives
GrowthcreationX

Growthdiffusion

X

Direct poverty
reduction

Complementary Measures
Rural
roads

Human
capitalTargetedinterventions

Policy andinstitutions

X

X

X

X

X

X

X

X

X

Lastly, in implementing the above measures, it is essential that the diversity of aid modalities berecognized, according to the nature and the size of specific activities. For example, in the case ofinvestments in large-scale infrastructure, project-based management appears to be generally
appropriate. This is because these projects involve huge financial resources and require carefulmonitoring from engineering, social, and environmental aspects, and so on. The processes ofprocurement (often, international competitive bidding) and financial management provide opportunities
for the government (i.e., executing agencies) and donors to share and confirm these aspects53. The
situations can be different for targeted interventions, which are relatively small in size and can be more
effectively managed on the basis of programs.
Therefore, the "best mix" of aid modalities should be sought—consistent with the nature and the size ofinterventions—under a shared development vision and strategies for promoting growth and poverty
reduction.

53

In this regard, the ongoing effort on aid harmonization among 5 Banks merits important attention. This effort was initiallystarted among 3 Banks (the World Bank, ADB, and JBIC) actively involved in financing major infrastructure projects.

93Appendices• Integrating Poverty Impact Assessment in the Economic Analysis of Projects• A Framework for Assessing the Links between Rural Poverty and Infrastructure• Industrial Parks in Hanoi and its vicinity, and HCMC and its vicinity• Location of FDI and Domestic Enterprises• Linking Trunk and Feeder Roads — Public Transport System in Hung Yen• Rural Household Survey and Local Agricultural Market Survey• Direct Impacts of the Improvement of National Highway No.1 and theConstruction of the My Thuan Bridge• Impacts of Improved Land Transport on Rice Farmers — A Case of An Giang
Province• Impact Evaluation of Bridge Construction• DFID Study of Road Network Impacts on the Poor

Linking Economic Growth and Poverty Reduction

Integrating Poverty Impact Assessment in the Economic Analysis of Projects
It is important to make proper matching between types of intervention and methodologies for assessing
their poverty reduction impacts. A framework being practiced in the ADB is a useful point of reference,
because it recommends separate approaches to "core poverty" interventions and the other (non-targeted,"growth-oriented") interventions.
These approaches make up three tiers of interventions, as shown in the figure below [Prakash 2003].
* Direct approach: using the headcount and geographical quantitative methods.
* Distributional approach: emphasizing distributive benefits and using the poverty impact ratio as a toolof measurement.
* Indirect approach: focusing on economic benefits and using the cost-benefit analysis.
In the case of infrastructure, the direct approach is relevant to the provision of basic services and smallscale (or rural) infrastructure, because beneficiaries should be specific and easily identifiable. On theother hand, the indirect approach is more relevant for the provision of large-scale infrastructure,
because its poverty reduction impact is generally realized by economic growth. In recent years, there
have been attempts to incorporate the distributional approach into the indirect approach (as anextension of the standard cost-benefit analysis), by breaking down the benefits likely to accrue to thepoor. [See also Handbook for Integrating Poverty Impact Assessment in the Economic Analysis of
Projects, ADB 2001b.]
Figure: Loan Classification System: Approaches and Methods

Quantitative
method not
applicable
Provision of
BasicServices

Generating
Economic
Benefits

Headcount Approach

Geographical Approach

Poverty Impact
Analysis
Indirect
Cost-benefit Analysis
Quantitative
method not
applicable

Source: Brahm Prakash [2003], “Are Infrastructure Investment Poverty Reducing?” paper presented at the ADB
workshop, “Infrastructure Investment for Poverty Reduction: what do we know?” June 11, 2003.

96

Qualitative Approach

DirectPoverty Intervention

ProvidingDistributive
Benefits

Quantitative ApproachAppendices

A Framework for Assessing the Links between Rural Poverty and Infrastructure
Ali and Pernia [2003], focusing on rural poverty, propose a simple analytical framework for the links
between infrastructure and poverty reduction.
The figure below summarizes the links from infrastructure investments (areas of intervention) throughthree determinants (areas of influence) to the poor's wages and employment (direct channel), on the one
hand, and rural economic growth (indirect channel) that influences the supply and prices of basic
goods, on the other. The final links are to real income/consumption of the poor and, consequently,
poverty reduction (area of concern).
For example, a road investment could result in an increase in agricultural productivity, nonfarm
employment and productivity, directly raising the wages and employment of the poor and, hence, theireconomic welfare. This is the (direct) income distribution effect. In addition, higher productivity andexpanded employment lead to higher economic growth, affecting the supply and prices of goods and,thus, the poor's well-being. This is the (indirect) growth effect. Similar links can arise from irrigationand electricity investments.
Figure: Simple Analytical Framework Depicting the Links between Infrastructure and Poverty Reduction
Infrastructure Investment
Roads

Agricultural
productivity

IndirectchannelIrrigation

Non-agricultural
employment

Rural economic
growthElectricity

Area ofintervention

Non-agricultural
productivity

Areas ofinfluence

Wages and employmentof the poor

DirectchannelSupply and priceof basic goods

Rural income/consumption of the poor

Areas ofconcern

Poverty Reduction
Source: Ali and Pernia [2003], “Infrastructure and Poverty Reduction — What is the Connection?,” ERD Policy Brief Series
No.13, ADB. Quoted from pp.3-4.

97

Linking Economic Growth and Poverty Reduction

Industrial Parks in Hanoi and its vicinity, and HCMC and its vicinity
IPs in Hanoi and its vicinity
This map is compiled based on theavailable information as of August 2003,
and does not necessarily cover all theexisting Industrial Parks.

IPs in Ho Chi Minh City and its vicinity
This map is compiled based on the available information
as of August 2003, and does not necessarily cover all theexisting Industrial Parks.

98

Appendices

Location of FDI and Domestic Enterprises

99

Linking Economic Growth and Poverty Reduction

Linking Trunk and Feeder Roads — Public Transport System in Hung Yen
In Hung Yen province, the development of trunk infrastructure—combined with feeder roads—hascontributed to the expansion of public transport system. Public transport system in the Hung Yen
province is mainly served by bus. The inter-provincial bus operates to/from bus terminal located in theprovince center. In 2002, the number of passengers and passengers-km reached 1,790 thousand and12,000 thousand, respectively (at annual increase rates of 7%, 9% respectively). In addition,
unauthorized feeder buses (using minibus with 12-15 passenger capacity) operate in the province
primarily along feeder roads. These feeder buses are very popular among the people living along thebus routes such as farmers because of cheaper fare and flexible boarding/alighting at any points along
the bus routes.
The improved feeder bus system is greatly attributed to feeder roads development, which sometimes(even) preceded trunk roads improvement including NH5. The development of feeder roads has been
financed by various sources, including local budget, villagers' contributions, donor funds.

Map: National Highway No.5 and Connected Feeder RoadsThe Development of Road Network

Source: JBIC/IDCJ [2003].

100Appendices

Rural Household Survey and Local Agricultural Market Survey
Under the JBIC-financed post-evaluation study (JBIC/IDCJ study) on the impact assessment ofnorthern transport infrastructure projects (the upgrading of National Highway No.5 and the expansionof the Hai Phong Port), two types of rural surveys were carried out during February-March 2003. The
below summarize the methodology and main findings of these surveys.
1. Rural Household Survey
A rural household survey was conducted in rural households in Hung Yen and Hai Duong provinces.
These two provinces are located intermediary of NH5 and have been greatly affected by the upgradingof NH5. The majority of the population (85-90%) lives in the rural area. The number of surveyed
households is 206, located in six communes. Five communes are alongside, and one commune is awayfrom NH5. Within communes, sample households were selected from both poor and non-poor income
groups.
In each commune, 32-36 households were interviewed on the following topics.
• Profile of respondent and family• Change of land use• Change of income and major sources• Respondent's perception of the impact of NH5• Change of agricultural activities• Transport and access• Problems
Basic indicators of the surveyed communes and respondents are as follows:
Province/
District

Commune(HD: Hai Duong)(HY: Hung Yen)

( X: commune awayfrom NH5)HD

HY

Kim Thanh
Cam Giang
Ninh Giang
Van LamYen MyMy HaoLai VuCam Doai
An DucDinh Du
Giai Pham
Ban Yen
Nhan
Total/Average

General Indicators
Pop.

HH

4,825
3,628
4,972
7,123
5,519
8,752
34,819X

Respondents

No. of
HH
150
78
166
30
61
10

% of
HH
11.6%
9.1%
12.9%
1.7%
4.2%
0.5%

HH

1,292
859
1,283
1,843
1,452
2,208

Av.
Family
3.73
4.22
3.88
3.86
3.80
3.96

34
35
36
34
32
35

No.of
HH
0
2
4
0
1
2

Av.
Family
3.85
4.40
4.67
4.09
3.84
4.11

8,937

3.90

496

5.5%

206

9

4.17

Note: The JBIC/IDCJ team took account of the provincial authority's advice in selecting five communes (from largely affected area) and one
commune (from relatively unaffected area). After the initial interview survey in February 2003, the questionnaire was finalized.

2. Local Agricultural Market Survey
The local agricultural market survey (or local traders survey) was conducted to identify changes or any
impacts on marketing pattern. Four markets were selected from local wholesale market (i.e., Duong
Cai, Yen My, and Bac markets in Hung Yen and Man Sach market in Hai Duong). 54 traders wererandomly selected for interviews.
The traders were interviewed individually on the following topics.
• Profile of respondent• Change of products traded and their origins.
• Change of marketing channels• Change of people involved in trading• Impacts of NH5 upgrading on their business.

101

Linking Economic Growth and Poverty Reduction

MarketDistrict

Province

Respondents

Duong Cai
Yen MyBac
Nam SacTotal

Van LamYen MyMy HaoNam Sac

HY
HY
HY
HD

24
12
7
11
54

Coming from other provinces
Respondents
Name of province
2
Vin Phuc, Bac Ninh

13

Hung Yen

3. Main Findings from the Two Surveys
3-1. Rural Household Survey
Table: Number of Surveyed Households that Started New Economic Activities

An DucLai VuDinh Du
Giai Pham
Ban Yen Nhan
Cam Doai
Total
Share in HH thatstarted new activity
Share in total
surveyed HH

Fishery

Growing
vegetables,
flowers

Highquality
paddy

Commerce

6
3
4
2
5
7
27

3
0
0
3
5
0
11

0
0
0
0
0
0
0

2
1
15
5
9
4
36

2
2
2
2
11

12

18
9
24
12
21
13
97

28%

11%

0%

37%

11%

12%

100%

13%

5%

0%

17%

5%

6%

47%

Working inotherregions

Other
activities

3

4
5
3

Note: Data of 206 households of the survey.
Source: JBIC/IDCJ [July 2003].

Figure: Reasons for Increased Sales for the Surveyed Households
Number of HHs
More local retailers

160

More traders from other provinces

33

Improved traffic access to markets

15

More consumers in local markets

74

Other reasons

19
0

20

40

60

80

100 120 140 160

Note: Data of 188 households replied to the survey: more than one answer.
Source: Rural households survey by the study team.

102

180

Total

AppendicesFigure: Change in Frequency to Visit Cities
160
140
120
100
80
60
40
20
0

1997
2002

Often

Sometimes

RarelyNote: data of 200 households of the survey
Source: JBIC/IDCJ [2003], based on rural household survey in March 2003.

Figure: Main Purpose to Visit Cities
Number of HHs
77

Trade
11

Other business

25

Education

62

Health care

129

Leisure62

Others
0

20

40

60

80

100

120

140

Note: Data of 200 households of the survey, more than one answers.
Source: JBIC/IDCJ [2003], based on rural household survey in March 2003.

Figure: Views on the Upgrading of Highway No.5
50%

Narrow

55%

Dangerous to drive motorbike
Dangerous to cross

94%
83%

Difficult to crossConvenient
0%

88%
20%

40%

60%

Note: Data of 206 households of the survey, more than one answers.
Source: JBIC/IDCJ [2003], based on rural household survey in March 2003.

103

80%

100%

Linking Economic Growth and Poverty Reduction

3-2. Local Agricultural Market Survey
Tables: Change in Variety, Origin and Volume of
Products for Local Traders

Tables: Types of Products Increased for
Local Traders(1) Varieties of agri-products in the last 5 years(1) Increased products in the last 5 years

No. traders

Much more variety of products
More variety of products
No change
No answer
Total

12
16
19
3
50

No. traders

24%
32%
38%
6%
100%

(2) Products origin in the last 5 years

14
21
11
4
50

22
9
2
6
39

56%
23%
5%
15%
100%

(2) Procurement of products

No. tradersSignificantly diversified
More or less diversified
No change
No answer
Total

Vegetable
Meat
Fish
OthersTotal

No. traders

28%
42%
22%
8%
100%

Directly from farmers
Self-producing
Buy at local markets
From traders
Farmers come to sell
Other traders come to sell
Total

16
10
7
3
2
2
40

56%
23%
5%
15%
5%
5%
100%

(3) Volume of products sold in the last 5 years
No. traders

Increased
No increased
Total

14
40
54

26%
74%
100%

104

Source: JBIC/IDCJ, Impact Assessment ofTransport Infrastructure Projects inNorthern Vietnam —Final Report—[July2003].

Appendices

Direct Impacts of the Improvement of National Highway No.1
and the Construction of the My Thuan Bridge
1. Travel TimeThe improvement of NH1 and construction of the My Thuan Bridge reduced travel time between
Mekong Delta and HCMC by almost one-third. After the opening of the My Thuan bridge, time forcrossing Tien River was shortened from 31.6 minutes to 5.5 minutes. Since 31.6 minutes is the timerequired at normal traffic, time saving could be even larger at both off-peak (waiting for a fuller boat)and heavy traffic time [AusAID 2003]. The tables below show the reduction of travel time from 1998 to2003 (for both buses and trucks).
Table: Change in Bus Travel Time and Speed
1998

km

hours

kph

Table : Change in Truck Travel Time and Speed

2003

hours

kph

1998
%
increasein speed

HCMC to:2003

km Hours

kph

hours

kph

%
increasein speed

72

2.3

31.2

1.6

46.3

48

HCMC to:
72

2.2

33.2

1.5

47.8

44

My ThoVinh Long

136

3.5

38.5

2.7

51.2

33

Vinh Long

136

4.1

33.4

2.8

48.2

44

Can Tho

169

4.5

37.7

3.2

52.3

39

Can Tho

169

4.9

34.5

3.4

49.6

44

My ThoSource: Elaborated by the study team, based on World Bank [2003], p-3-10 Table 3.9 and Table 3.10.

2. Transport Fare
Two data on ferry tolls are available: one for September 1994, and the other for April 2000. (The latteris significantly lower than the first.) The comparison between former ferry tolls (the 1994 data) andcurrent My Thuan Bridge tolls shows that current tolls are much lower than the former one in realterms*. While comparison between former ferry tolls and current bridge tolls is not straightforward
because of changes in the categorization of vehicles, the same trend can be confirmed in a recent
interview survey on bus and truck companies, conducted by GRIPS-ALMEC in July 2003.
From 1998 to 2003, bus fares and freight rates between HCMC, Vinh Long and Can Tho have been
reduced only slightly. Such little change on prices seems to be related to the introduction of the higherquality buses during the same period, which brought the higher service quality for passengers, together
with the improved road conditions [World Bank 2003a].
Moreover, according to the GRIPS-ALMEC survey, thanks to reduced time and tolls, bus companies
have saved operation costs (by 14%, the average of six companies). However, such saving does notseem to be reflected in the bus fares. Thus, further analysis on pricing mechanism in transport services
would be needed.

* AusAID [2003b (p.20)]. The same report emphasizes the need to set fares to balance two objectives-ensuring optimal use of
the facility and generating sufficient revenue to meet long term needs [AusAID 2003b (p.62)].

105

Linking Economic Growth and Poverty Reduction

Table: Bus Fares From Mien Tay Terminal HCMC (VND)
HCMC to:km

1995-98

1999-2003

Class% Increase%Real Change*

My Thuan126

14,50017,000Class III S

17-1

20,000Class III C

23,000Class II

15

-2

14

-3

Vinh Long

Can Tho136

169

16,50023,500SL

27,000Class I

19,000Class III S

21,000Class III C

25,000Class II

26,000SL

28,000Class I

21,000>25 seats

24,000Class III S

33,00012-25 seats

27,000Class III C

38,0004-9 seats

32,000Class II

33,000SL

36,000Class IClass III S

State Large Bus Non AC

Class III C

Cooperative Light Bus Non AC

Class II

Cooperative Light Bus AC

SLState Light Bus Non AC

Class I

Cooperative Light Bus AC <5 years old*December 1996 to December 2002

Table: Market Freight Rates for Class 3* Goods
km

1998

2003

% Increase%Real Change*

Tan An47

My Tho72

80,00090,00013

890,000100,000

11Vinh Long

7

136

136,000

140,000

3-1

Can Tho169

160,000

160,000

0-4

HCMC to:

Source: Elaborated by the study team, based on World Bank [2003], p. 3-9, Table 3.8 (for the upper table) andp. 3-7, Table 3.6 (for the lower table).

3. Traffic Volume
During the latter half of 1990s, the growth rate of the Mekong Delta economy (GDP) was slower thanthat used to forecast traffic demand for NH1 and the My Thuan Bridge at the time of project appraisal.
One of the reasons for the slower growth rate is lower population growth (0.7% average per year during
1993-2000, which was a third of the original projection) due to in-migration to HCMC.
Table: GDP in Mekong Delta, Forecast and Actual
Growth in GDP (% pa)
Province

Forecast*

Actual1994-2000

2000-2015

1995-1999

1999-2000

Vinh Long

9

9.5

6.6

6.5

6.3

Can Tho

6

7.5

8.3

6.2

14.6

Mekong Delta Average

8

9

7.8

-

8.1

Note: *Forecast to occur in the absence of the My Thuan Bridge.
Source: Elaborated by the study team, based on AusAID [2003a], p.7, Table 2.3.

106

2000-2001

Appendices

Therefore, the growth of aggregate demand for travel in Mekong Delta was somewhat lower than theoriginal forecast.
Table: Road Transport Task in the Mekong Delta:
Average Annual Growth Rate (percent), Forecast and Actual
Freight

Passengers

1991-2000

1995-2000

2000-2015

1991-2000

1995-2000

2000-2015

Forecast

ActualForecast

Forecast

ActualForecast

13.5

9.9

4.1

14.3

6.5

4.4

Growth in transport task*

Note: *The transport task is defined as tonne-kilometers for freight movement and passenger-kilometers for passenger movement.
Source: Elaborated by the study team, based on the AusAID [2003b], p.19, Table 3.1.

On the other hand, the actual traffic of the My Thuan Bridge (across the Tien River) and Can Tho ferry(across the Hau River) did not follow this tendency. My Thuan bridge was opened to traffic in May
2000. The traffic volume after opening of the My Thuan Bridge greatly exceeded the original forecast(based on the traffic survey in 1994).
Table: Traffic at My Thuan Bridge, Forecast and Actual(average daily)
1999

2002

Forecast

Actual (ferry)

Forecast

Actual (bridge)

3,600

3,120 (-13%)

4,580

10,610 (+132%)

Other vehicles

5,370

3,410 (-36%)

6,770

9,480 (+40%)

Vehicle Occupants

46,36035,29064,73086,770 (+34%)

Motorcycles

Source: Elaborated by the study team, based on the AusAID [2003a], p.22, Table 3.4 and AusAID[2003b], p.35, Table 3.13.

The number of Can Tho ferry users also increased rapidly. The average annual growth rates of 2-3
wheels vehicle, vehicle and passengers between 1996 and 2002 were 28%, 14%, and 13% respectively.
The rehabilitated section of HCMC to Can Tho was opened to traffic in September 1999. The traffic on
Can Tho ferry sharply increased from 1999.
Figure: Traffic at Can Tho Ferry
No. of vehicles(thousand)No. of persons(thousand)

4000

14000

3500

12000

3000

10000

2500
Passengers

2000

2/3-wheel
Vehicles

8000
6000

1500

4000

1000

Vehicles

2000

500
0
year 1996

0
1997

1998

1999

2000

2001

Source: Elaborated by the study team, based on World Bank [2003a], p.G-2, Appendix G 1.

107

2002

Linking Economic Growth and Poverty Reduction

4. Analysis on Induced and/or Diverted Traffic"The benefits of reduced travel time and improved travel conditions compared with the congestion,
uncertainty, risks and capacity constraint associated with the former ferry service have been so
substantial that they have enabled a considerable amount of additional economic and social activity,
and attendant transport movement, to occur" [AusAID 2003a, (p.23)].
What are the reasons for the greater traffic movement on the My Thuan Bridge and Can Tho ferry?
Where does this induced traffic come from? The table shows passenger and freight movement captured
at the exit of HCMC on the NH1, based on the OD (origin/destination) surveys. The number ofpassengers between HCMC and An Giang, and the freight movement between HCMC and Vinh Long,
Can Tho and An Giang dramatically increased.
Table: Passenger and Freight Movement to/from HCMC 1999 and 2002
Mode

Vinh Long
1999
2002

Can Tho
1999
2002

An Giang
1999
2002

Passengers
/day

1,973

2,617
(+33%)

4,390

5,661
(+29%)

896

3,292(+267%)

Freight(tons/day)

582

2,215
(+281%)

1,244

4,130
(+232%)

140

1,649(+1,078%)

Source: VITRANSS [1999] and HOUTRANS[2002], established under JICA-supported Study on the National
Transport Development Strategy in the Socialist Republic of Vietnam and Study on the Urban Transport
Master Plan and Feasibility Study in HCM Metropolitan Area.

The data indicate that the improvement of NH1, together with opening of the My Thuan Bridge,
facilitated and stimulated the movement of passengers and freight between HCMC and Mekong Delta.
Therefore, it is fair to say that the two large-scale infrastructure projects created great opportunities forthe growth in Mekong Delta, by linking the region with the most dynamic economic center of thecountry, i.e., Ho Chi Minh City.
Moreover, the data suggest that An Giang is not isolated from economic links with HCMC—eventhough the area is not located along NH1. An Giang is connected from NH1 by three routes (see map):(i) NH1-Cao Lanh ferry-Vam Cong ferry; (ii) NH1-My Thuan Bridge-Vam Cong ferry; and (iii) NH1My Thuan Bridge-Can Tho ferry. According to the GRIPS-ALMEC survey, all of the four bus
companies operating the HCMC-An Giang route use the route (ii) and noted great benefits from theimproved NH1 and the construction of the My Thuan Bridge (especially the latter, thanks to the
reduced time and tolls).
Further analysis is needed to understand why traffic volume between HCMC to An Giang increased
drastically. But, at least, the data tell that the benefits of the two large-scale infrastructure projects havebeen spread to include the An Giang area.

108

Appendices

Impacts of Improved Land Transport on Rice Farmers—A Case of An Giang Province—
1. Issues
The Mekong Delta accounts for about 50% of national rice production and about 90% of the total rice
exports. An Giang province is one of the largest rice production areas in the Mekong Delta, and riceprovides a livelihood to the majority of poor people.
What is the nature of changes brought by improved land transport (particularly by the construction of
the My Thuan Bridge and the upgrading of NH1) on the distribution of farm products? Have benefits
from the changes been shared by small-scale rice farmers in remote An Giang province? This note
attempts to address these questions, based on the findings of a field visit by the GRIPS study team in
October 2003, which conducted a series of interviews with the government, local authorities, foodcompanies, and researchers in Hanoi, Ho Chi Minh City, and An Giang province. Special attention ispaid to small-scale rice farmers in An Giang province, the Mekong Delta.
2. How Land Transport Improvement has Contributed to the More Efficient Distribution of
Farm Products?
The physical improvement of road conditions, by shortening transportation time, has made landtransport (such as trucks) more attractive in commodity distribution. As shown in Chapter 4, the freight
movement between HCMC and An Giang province increased sharply after the improvement of NH1
and the opening of the My Thuan Bridge [see Figures 4-14 and 4-17].
The attractiveness of land transport has been further strengthened by the following three factors:
Government decision to deregulate freight services, which has prompted entry of new truck
operators into freight service market, thus lowering transportation costs
Diversification of distribution channel (For example, in case of rice for domestic market, traders
have started to own truck(s) and supply many kinds of rice directly to wholesalers in HCMC.)
Increased processing capacity within the region, promoting shift of the shipping place(s) of final
products from HCMC to the Mekong Delta (Taking an example of rice, paddy is processed andsometimes packaged for retail.)■■■

These changes have generally impacted distribution channels of various commodities. However, thedepth of impacts varies among commodities, when the use of waterways and land transport in the
Mekong Delta region is taken into account. Because the transportation by inland waterways takes time,
it is not suitable for carrying perishable products. It is more economical when transporting the larger
volume of products in longer distance. Thus, the choice of transport modes between waterways andland transport greatly depends on types of commodities, based on the consideration of the abovementioned factors.
Specific examples include:
Perishable products: land transport has been mainly used for carrying perishable products, such as
fruits, vegetables and fishery. An Giang province is widely known for its success in agricultural
diversification, promoting production and processing of these perishable product*.
Rice for domestic markets: To some extent, trucks have become a popular means of transportation
for rice for domestic markets (particularly, high-quality fragrant rice). This is because this product■■* The combination of agricultural diversification with rural industry in An Giang province is considered one of the threemodels of industrialization and modernization of agriculture and rural area in Mekong River Delta [GSO 2003c].

109

Linking Economic Growth and Poverty Reduction■

requires speedy handling and transaction in relatively small volume. (According to the Vietnam
Southern Food Corporation, 95% of the rice for exports is transported by barge, while two-thirdsof the rice for domestic markets is now transported by trucks.)
Rice for exports: The data provided by the Saigon Port shows that inland waterways continue tobe the dominant transportation mode for rice exports. This is largely because, at this moment, ricefor exports is transported in larger volume thus making inland waterways much cheaper than landtransport. It is also considered that waterways do not seriously damage the quality of products.
For example, rice transportation from Can Tho to HCMC costs approximately VND35,000 ton bybarge (taking more than 24 hours), compared to VND70,000 ton by trucks (taking 5-6 hours). One
barge can transport up to 300 ton of rice, while the size of trucks is normally limited to 7-11 ton.

Thus, it is fair to say that the construction of the My Thuan Bridge and the improvement of NH1,
together with complementary policy measures, has contributed to efficiency gains in commodity
distribution, particularly those suitable for land transportation.
Figure: Determinants of the Use of Inland Waterways and Land Transportation
Example of Current Rice Distribution
Land (trucks)
e.g., fruits, fish
Determinants
Perishable
Less heavy
and smaller
volumeShort distance[A] Ricefor export[C] High-quality
rice (fragrant) for
domestic market

Waterway (barge)e.g., fertilizer,
cementDeterminants
Non-perishable
Heavy and large
volumeLong distance

■

■

■

■

■

■

[B] Rice fordomestic market[A]: Exported rice is shipped from ports in HCMC, mostly carried via inland waterways.
[B]: Rice for domestic market is often carried by trucks, especially when transported from the provinces near
HCMC (north of Tien River, such as Long An, Tien Giang). It is normally carried in the smaller amount todifferent destination.
[C]: In the case of higher-value rice (e.g., fragrant rice), land transport is more frequently used because it
tends to be destined to particular contractors in smaller packages.

3. Distribution of Benefits
Have these changes been taking place in an inclusive manner? Answering this question requires athorough analysis of their distributional impacts on different segments of the population. But, thepreliminary findings suggest that easier land transport and the resultant efficiency gains in commodity
distribution have opened new opportunities for small-scale farmers in An Giang, who have been
traditionally engaged in paddy production only.
The local authorities, researchers, and food companies noted recent changes in farm production
including:
Production of fragrant rice even in the poorer districts (e.g., Tri Ton, Thi Bien).
Diversification into commercial crops (e.g., hyacinth, vegetables, fruits) and fishery products.
Promotion of food processing industry, using local products such as catfish, shrimp, tapioka(mainly located along the Hau River and NH91, but some in remote districts). For example, theexport of frozen fishery products rose from 5,212 ton (1998) to 12,538 ton (2001) [Statistical
Yearbook of An Giang 2002]. This in turn has contributed to the creation of off-farm jobs andincome.
■■■110

Appendices

Furthermore, there is a sign that producers of traditional rice varieties are (at least) not excluded fromsuch efficiency gains, provided that their villages are linked to trunk roads via rural roads. The
improved land transport has increased visits by collectors to villages and improved access by farmers toprocessing and paddy storage facilities. This has helped farmers to obtain market information and sell
paddy at better prices.
More specifically, the figure below explains examples of emerging opportunities for rice farmers (fordomestic market), according to three types (A, B, C) of rice distribution systems.
Figure: Rice (for Domestic Market) Marketing Channels
by Type of Buyers from Farmers Perspective[A] Collecting Merchant(e.g., wholesalers)[C] Direct Sales to Private
Rice Trading Company

Farmers

Farmers

Farmers

Collecting Merchants

Milling Agencies

Trading Companies(Milling & Polishing)

Milling Agencies(Milling)

Large Milling &Wholesalers in MRD

Wholesalers &Retailers

SOE(Polishing)Traders(e.g., SOE)

ExportImport[B] Private Rice Centers

Wholesalers at HCMC

Examples of new opportunities[A] Easier access to villages by local collectors facilitates competition among them. With better market
information, farmers can now sell paddy at better prices (e.g., by properly using their bargaining power).
[B] Easier access to processing (drying) and paddy storage facilities near farms helps to preserve the quality ofrice, which can result in better selling prices.
[C] In the poorer districts of An Giang Province (e.g., Tri Ton, Thih Bien), the production of fragrant rice has
begun taking advantage of their mountainous conditions. Paddy is to be processed and packaged in thesame place and directly transported by trucks to HCMC. This has been realized by strong leadership of local
community, supported by local research institutions and businesses.
Note: This typology is based on type of buyers from farmers’ perspective. There may be several different patterns in further steps of market
channels (the part in white background). [A] is the most traditional way of rice distribution.
Source: Elaborated by the study team based on the field survey of October 2003. In particular, [A] is based on hearing from SOE, [B] is fromwholesalers, and [C] from FDI rice trading companies.

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Linking Economic Growth and Poverty Reduction

4. Complementary Policies and Measures to Ensure Shared Benefits of Land Transport Improvement
As stated in the above, there are complementary factors that have promoted the positive changes
brought by improvement of the physical conditions of land transport. These include: (i) government
policies on the deregulation of freight and distribution services; and (ii) new agricultural policies topromote diversification (i.e., Decree No. 20 issued in September 2000), agricultural research andextension, and entrepreneurship of local people.
Particularly, in order to improve production and marketing activities for small-scale farmers, local
leadership has proven to be critical in mobilizing business (both local and HCMC) and technicalassistance by research institutions (such as An Giang University). Rural roads (including the
replacement of "monkey bridges" in the context of Mekong Delta) are also essential complement to thechanges.
At the same time, the more concrete analysis is required to identify: (i) commodity-specific bottlenecks
for production and distribution ("efficiency" concerns); and (ii) bottlenecks of small-scale producers inparticipating that new opportunities and measures to promote such participation ("equity" concerns). To
this end, it is necessary to conduct in-depth analysis of constraints faced by small-scale farmers bycommodity (such as rice) in the entire spectrum of production and distribution network and consider
necessary policies and measures to be taken, with due attention to the local context (including goodpractices in the region).
Source: Interview and field visit by the study team in October 2003.

112

Appendices

Impact Evaluation of Bridge Construction
Due to the nonlinearity and inseparability of impact, precise quantification of the effect of a single
infrastructure project in isolation is neither possible nor very meaningful. Clearly, the My Thuan Bridge
will have a significant and long-lasting impact on the Mekong Delta Region. But regional growthcannot be attributed solely—or even mainly—to the Bridge. An increasing freight movement backed bystrong agricultural and fishery production was visible even before the Bridge was constructed. But it ishardly deniable that the My Thuan Bridge accelerated this trend. Tourism also seems to have been
boosted by the Bridge.
Nevertheless, it is not entirely a futile exercise to calculate the employment impact of the My Thuan
Bridge, provided that the above caveats are duly recognized. By knowing the rough impact size, it
becomes possible to judge the cost effectiveness of such a project and make a comparison withalternative use of funds.
As official statistics is plagued with gaps, inconsistencies and ambiguity in definition and coverage, its
analysis must be treated with much care. Between 1999 and 2002, Can Tho province data show that the
number of tourism-related business establishments1 increased 23%, their gross turnover increased 53%,
and tourist visits increased 42%. Provincial data on transportation is much less satisfactory as many bus
and truck operators dropped out of official statistics in 2000-01 as a result of liberalization. Can Tho
Ferry traffic increased 63%. If we assume that, between 1999 and 2002, the size of the tourism andtransport sector grew 50% with the current estimated employment of 100,000 workers2, Can Tho hascreated 33,000 jobs over this period. If half of this is due to the My Thuan Bridge, an annual addition of
5,500 jobs can be attributed to it.
Another important source of job creation is domestic and foreign investment in industrial zones3.
Industrial zones in Can Tho Province now have created 13,000 jobs. If one-fifth of this is due to the My
Thuan Bridge, it translates to an annual addition of about 900 jobs since 2000. In the tourism andtransport sector, 6,400 jobs per year in Can Tho are attributable to the My Thuan Bridge.
The economic size (GDP) of the remaining provinces in the Mekong Delta Region is seven times thatof Can Tho. If we use the factor of 0.5 for these provinces since the Bridge impact may be weaker
there, the Mekong Delta Region as a whole can create 28,800 jobs per year, or 0.35% of the total jobs(including farming) and 1.43% of the non-farming jobs. As noted earlier, this is an extremely roughexercise based on many heroic assumptions. But the order of magnitude should be suggestive.

Table: Estimated Job Impact of the My Thuan Bridge(New jobs per year)
Tourism andIndustrial workers
TOTAL
Transport workers
Can Tho Province
5,500
900
6,400
Entire Mekong Delta
24,7504,050
28,800Includes the income multiplier effect but excludes jobs created through bridge construction.
Notes: 1 In 2002, they included 29,710 trade businesses, 8,053 hotels and restaurants, and three travel agencies. The first two
categories have similar average monthly sales of approximately $560, suggesting that they are indeed small. It is
possible that most of them cater to the local customer base rather than tourists, but they are all included because of theindirect multiplier effect (see below).
2 Authors’ estimate from the official employment data for the broadly defined “trade” sector.
3 The Can Tho province has Tra Noc I and II Industrial Zones. In addition, Hung Phu Industrial Zone, adjacent to the
Can Tho port, is being developed. All together, there are about 80 firms, many of which are Vietnamese enterprises
engaged in food processing and garment manufacturing. One-third of investment projects (measured by registeredcapital) came in or after 2000.

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Linking Economic Growth and Poverty Reduction

DFID Study of Road Network Impacts on the Poor
In order to provide complementary perspectives on the GRIPS study on the role of large-scale
infrastructure in economic growth and poverty reduction, UK/DFID commissioned a study on road
network impacts on the poor during July-October 2003.
The main objective of the DFID study is to examine the role of the level of connectivity or ruralcommunities into the transport network in promoting poverty reduction and growth, focusing on three
topics:How do rural populations perceive and rank the utility of rural roads, and what factors affectusage?
What are the identifiable differences between: (i) communities where rural roads are well-linked
to the provincial and national road network; and (ii) communities where there is no linkage?
What measures can be taken to promote more integrated approaches to road developmentimproving coordination, transport service development, etc.?
■■■

The study consists of: (i) qualitative, participatory field survey [DFID 2003]; and (ii) quantitative
survey (including a field survey and database/literature review) of road connectivity and its impact onrural poverty reduction. In both cases, field surveys were carried out in the same locations-fivecommunes in three districts of Lai Chau province and four communes in two districts of Hung Yen
province. These provinces are included in the second Rural Transport Project (RT2), funded by theWorld Bank and DFID.
The following summarize the methodology of the study.
1. Sampling Framework
Two provinces, Hung Yen and Lai Chau, have been selected. Hung Yen is a small province close to
Hanoi in flat, irrigated terrain. Its strategic transport infrastructure is relatively well-developed(including the fact that National Highway No.5 from Hanoi to Hai Phong passes through the province,
and it has a dense and extensive network of rural roads though much remains to be done to improvetheir standard and condition. Lai Chau is a large, remote, northern province far from Hanoi, in difficult
mountainous terrain. Its strategic transport infrastructure (national highways) remains under-developed,
the rural road system is limited in extent and generally of low standard and in poor condition.
At the district level, two districts in Hung Yen and three districts in Lai Chau have been sampled, torepresent different levels of strategic road (highways) connectivity. Then, two communes have beensurveyed in each of the two districts of Hung Yen and in two of the three districts of Lai Chau, torepresent different levels of rural road access. In addition, in Lai Chau, one commune without anaccess road has been selected. (The main features of road network conditions in the surveyed
communes are shown in the Table below.)
In sum, the sampling framework covers:
One commune without any road access
Four communes in a remote province (Lai Chau), but with four different levels of strategic andrural road access: (i) poor strategic and rural; (ii) poor strategic but good rural, (iii) goodstrategic but poor rural; (iv) good strategic and good rural.
Four communes in a well-located province (Hung Yen) but with different levels of strategic andrural road access, the same four cases as the above (i)-(iv).
■■■This allows a series of comparisons to be made, for both the participatory perception and quantitative
connectivity surveys.

114

Appendices• Between a remote, sparsely populated, "difficult" province and a densely populated province,well-connected into the strategic road network and close to Hanoi.
• Between the two provinces, four comparisons of communes with same characteristics of strategic
and rural road access.
• Within each province, between communes with different road access characteristics.

Table: Road Network Conditions in Surveyed Communes
Hung Yen Province

Province
Level

District
Level

Lai Chau Province

My HaoPhu CuTam Duong
Dien Bien Dong
Muong Te
District
District
Disrict
District
Dist.
Hung
Duong
Nhat
Tong
Ban
Na
Tam
Hang
Lia
Na
Son
Ta
Tong
Long
Quang
Quant
Phan
Giang
• Rural road network is good. High rural • Bad rural road network. Low rural road density, badroad density, road conditions are good. road conditions.
• Close to trunk, commercial and• Far from commercial and industrial center.
industrial center.
• Close to trunk(NH5),
commercial andindustrial center.

Commune Rural
roads
Level
are
“fair.”

Rural
roads are“good”(upgraded
in 2002,very badbefore).

• Far from trunks(NH5, NH39),
commercial, andindustrial center.
Ruralroads are“good”(by RT2).

Rural
roads
are
“bad.”• Close to trunk.
• Far fromcommercial andindustrial center.

• Far from• Far fromtrunks,trunks,commerci
commercial andal andindustrial
industrial
center.
center.

Ruralroad tocommunecenter is“fair.”

No road to
Road
Road
condition condition commune
center. It istotodifficult tocommunecommuneaccess.
center iscenter“poor.”
RT2 road is“poor.”
is fair.

Ruralroad tocommunecenter is“fair”(by RT2).

Source: TDSI/DFID [2003], Table “Appreciations of Conditional Approaches by Road.”

2. Participatory Field Survey(1) : To generate understanding of people's perceptions of the utility of the road network that servesthem(2) Methodology:
In the survey, a participatory method was used to invite ideas and perception from five focus
groups representing interests/groups within the commune: (i) the poor; (ii) the average income;(iii) the rich and businessmen; (iv) women in female-headed households; and (v) commune
cadres.
The above was complemented by in-depth discussions/interviews to develop case studies of theaccess circumstances of individual households. (In total, 45 focus group discussions and 90
individual discussions/interviews were conducted.)
The sequence of specific steps followed included: (i) mapping; (ii) ranking the importance ofroads (and reasons behind); (iii) ranking the satisfaction of road usage (and reasons behind); (vi)changes in infrastructure/socio-economic/environmental/ technological aspects of local residents
and community at large; and (v) perception of participants on the impact of road network on
poverty reduction and economic growth.
■

■

■

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Linking Economic Growth and Poverty Reduction

3. Quantitative Field Survey(1) Purpose: To examine the effects of different levels of, and changes in, connectivity on access toservices and facilities for rural communities and particularly the poor, and the broader impacts ofimproved access.
(2) Methodology:
The following base-data are collected at the provincial, district and commune levels.
Socio-economic situation
Connectivity and access situation: road network, road condition, transport services and costs,
availability of transport, key places to which people need to travel, map
Rural transport projects
In doing so, quantitative questionnaire interviews were carried out with a sample of households
covering household social and economic circumstances, and travel and transport patterns. Samplingframe:Lai Chau: For 4 communes with roads, 8 interviews at center, plus 6 in a remote village. For acommune without roads, 10 interviews around commune center.
■
■

■

■

Reference: Participatory Perception Study of Road Network Impact on Poverty Reduction and Growth [DFID 2003] and Road
Infrastructure Impacts on Poverty Reduction and Growth [TDSI/DFID 2003].

116

Appendices

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National Graduate Institute for Policy Studies
GRIPS Development Forum
2-2 Wakamatsu-cho, Shinjuku-ku, Tokyo162-8677 Japan
Phone. 03-3341-0525 Fax. 03-3341-0220
http://www.grips.ac.jp/forum/