Transcript Linking Economic Growth and Poverty Reduction -

Linking Economic Growth
and Poverty Reduction
--Large-Scale Infrastructure
in the Context of Vietnam’s CPRGS-GRIPS Development Forum
September 25, 2003
Objectives of the Study
• Analyze the role of large-scale infrastructure
in economic growth and poverty reduction in
the context of Vietnam.
• Focus on trunk infrastructure, benefiting
many (or more than one) provinces, in the
transport and power sectors.
– Core function as economic and industrial
infrastructure.
– Largely corresponding to “A” category of PIP.
Background and Process
• Contribute to the current GoV effort on
CPRGS expansion.
• Build on the government-donor partnership,
including:
– MPI, MoT, EVN, provincial authorities, etc.
– World Bank, ADB, Japan, UK/DFID, AusAID, etc.
– Consultation of draft Concept Paper with
interested parties. Also, distributed at mid-term CG
Meeting at Sapa (June 2003).
Topics for Discussion
1. Pro-poor growth?
2. Analytical framework for assessing the
role of large-scale infrastructure
3. Specific features of Vietnam
4. Case analyses -- Linkages among
infrastructure, growth and poverty
reduction
5. Implications for future strategic planning
and aid partnership in Vietnam
(1) Pro-Poor Growth?
• Broad consensus on the importance of
growth in reducing poverty--but,
inconclusive on the range of policy measures to
attain pro-poor growth.
• Recent discussions, narrowly focused
on direct poverty-targeting measures.
• Channels and linkages--many ways to cut
poverty, direct and indirect. Strategy should be
geared to each country.
Three Channels of Pro-Poor Growth
(1) Direct channel (impacting the poor directly)
--Basic health, education, sanitation, rural roads, etc.
(2) Market channel (growth helps poor via economic
linkages, or “trickle down”)
--Inter-sectoral and inter-regional labor migration (cf.
Chinese TVEs)
--Increasing demand (cf. proto-industrialization, multiplier
effect)
--Reinvestment (formal, informal and internal financing),
etc.
Three Channels (contd.)
(3) Policy channel (supplementing the market channel and
guiding the development process toward greater equality)
--Taxes, subsidies
--Fiscal transfer, public investment, infrastructure
--Micro and SME credit and other financial measures
--Proper design of trade and investment policies
--Pro-poor legal framework, etc.
Pro-Poor Infrastructure?
• Basic infrastructure: direct contribution to
poverty reduction through the direct channel.
• Large-scale infrastructure:
– Contributing to growth and poverty
reduction through the policy channel.
– Serving as a pre-condition for realizing the
market channel.
(2) Analytical Framework:
Distinct Features
The impacts of large-scale infrastructure:
• Broader and complex (beyond the project
site) -- compared to small-scale infrastructure -- through
linkages effects
• Need time to emerge fully, also depend on
supporting policies and the supply of other
infrastructure.
• Large expenditure flows.
• Mode of utilization and management matters.
Analytical Framework:
Linkage Effects
First-round impacts
1. Investment-inducement effect
2. Regional economy activation effect
3. Effective demand effect
4. Social dimension
Second-round impacts (broader and
more general)
1. Fiscal revenue and multiplier effect
Linkages among Large-Scale Infrastructure, Growth, and Poverty Reduction:
Hypothetical Illustration
Poverty Reduction
(1st Round Impacts)
Infrastructure Development
Improved
infrastructure
services
・Availability
・Cost reduction
・Time saving
・Reliability
Effective demand
of infrastructure
construction
(& operations)
Social Dimension
Improved access to basic
social/public services
with availability of
transport & power supply
Economic Dimension
Market creation/
expansion
・Increased incentives
to entry
・Opening up new
economic
opportunities
・Improved
productivity of
existing economic
activities
Procurement
・Materials
・Labor demand
Poverty Reduction
(Broader Impacts)
Sustainability
Improved
social
indicators
Fiscal channel:
Increased
revenues for:
Foreign residents/
travelers’ demand
New investment
・FDI
・Local
investment
Regional economy
activation
・Rural
・Urban
…via: agriculture,
off-farm business,
tourism, services,
manufacturing etc.
Growth
Employme
nt creation
Higher
Income
・Pro-poor
programs
・Infrastructure
・Recurrent
costs etc.
Private channel
(Trickle down)
・Investment
・Consumption
Rich’s Consumption Behavior and
the Income Multiplier
Simulation: Poor's Share in Income Increase
100%
80%
60%
Initial
impact on
40%
Poor
50:50
20%
0%
0
0.1
0.2
0.3
0.4
0.5
0.6
Rich's marginal propensity to consume on poor's goods
Rich
(3) Specific Features of Vietnam
• Rapid growth has been effective in reducing
poverty.
– Continued progress in poverty-reducing growth
(VLSS 1993, 1998, 2002).
• Growth had raised fiscal revenue, resulting in
higher public expenditure on infrastructure,
education and health etc.
– Increased aid flow (from mid-1990s) also helped
GoV effort.
Government Revenue and Expenditure
during 1986-2000
30.0%
25.0%
Expenditure
20.0%
15.0%
10.0%
5.0%
0.0%
Revenue
Fiscal
Balance
-5.0%
-10.0%
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000p
Specific Features of Vietnam
• Existence of social safety net (despite its
weaknesses) and re-distributive role of public
expenditure. [PER2000]
– Relatively high social indicators by low-income
country standards.
• A high proportion of the population is clustered
around the poverty line. The poor and non-poor
are not static groups. [VDR2000]
• Importance of creating economic
“opportunities” and “trickle-down” effects
through linkages.
Opportunities vs. Vulnerability
Histogram of per capita expenditures, 1998
Source: VDR 2000
(4) Case Analyses of Linkages
Large-scale infrastructure projects (selected from
those recently completed and under operation):
(1) Improvement of National Highway No.5 and
the expansion of Hai Phong Port (supported by
JBIC and Taiwan, completed in 2000).
(2) Construction of My Thuan Bridge and the
improvement of National Highway No.1
(supported by AusAID and World Bank, completed in 19992000).
Case Analyses of Linkages
(3) Power supply and regional electrification,
particularly by the construction of NorthSouth 500 kv Transmission Line (by GoV,
completed in 1994).
Complementary analyses:
(4) Reproductive health project in Nghe An
province (supported by JICA, ongoing)
(5) Connectivity study of rural roads, focusing
on Lai Chau and Hung Yen provinces
(DFID study underway) -- forthcoming.
Case 1: National Highway No.5 (NH5)
and Hai Phong Port
• Strengthened the Hanoi-Hai Phong northern
transport corridor, serving as arteries for traffic
flow of export and import, and domestic products.
– NH5: travel time between Ha Noi and Hai Phong halved
from 3.5-4 hours to 1.5-2 hours; and
– Hai Phong port: expanded and now equipped with
container-specialized port.
• Sharp increase in traffic volume: 1) NH5 -- doubling
during 1999-2003; 2) Hai Phong port -- container
cargo rising 50% from 2001 to 2002 alone.
Highways and Port Link Two Centers, Attracting
Investment and Diffusing Growth to Rural Areas
Red River Delta Region
Northern Transport Corridor
Ha Long Bay
Hwy 5
Hai Phong
Ha Noi
Hai Phong Port
By water
By land & air
National & Global Economy
NH 5 and Hai Phong Port:
Linkage Effects
1. Rapid industrial growth and FDI attraction
(--investment-inducement effect)
2. Agricultural diversification and off-farm
business expansion (--regional economy
activation effect)
3. Booming tourism in Ha Long Bay
(--regional economy activation effect)
FDI Inflow to the Four Provinces
along NH5 (1989-2002)
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
Registered Capital
Source: JBIC/IDCJ (2003)
Number of FDI
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
1989
0
FDI Impacts (Example)
• Four major IZs (Thang Long, Nomura-Hai Phong,
Noi Bai, Sai Dong B): 98 FDI projects (as of June
2003), two-thirds of which came in or after 2000.
• These industrial FDI firms:
– Account for 85% of FDI in the northern IZs, both in
number and registered capital.
– Employ about 14,000 workers (to be increased further).
• FDI firm perception:
– Nearly 90% of firms would not have come without two
transport facilities. [JBIC/IDCJ firm survey]
• Hung Yen: Major increase in FDI (15 of 23 projects
came in 2002).
Growth and Diversification of Rural Income
in Hung Yen and Hai Duong (1997-2002)
Unit: mil.VND
900
800
1997
700
2002
600
500
400
300
200
Source: Based on the survey on 206 rural households (JBIC/IDCJ 2003).
Farming
Others
Remittance
Factory
Real
estate
Handicraft
Fishery
Livestock
0
Commerce
100
Number of Tourists to Quang Ninh
(1995-2002)
Unit: thous. pers
2,500
International
tourist
Domestic tourist
2,000
1,500
1,000
500
Source: Statistical Yearbook of Quang Ninh
2002
2001
2000
1999
1998
1997
1996
1995
0
Turnover of Tourism in Quang Ninh
(1995-2001)
Unit: VND. mil
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
1995
Source: Statistical Yearbook of Quang Ninh
1999
2000
2001
Case 2: My Thuan Bridge and
National Highway No.1 (NH1)
• Changed the nature and volume of economic
linkage between two centers (HCMC and Can Tho),
opening up the Mekong Delta.
• Critical reduction in travel time between HCMC
and Mekong Delta cities.
– Time for crossing the Tien River cut from 32 to 5-6 min.
– Together with road improvement, travel time between
HCMC to Can Tho reduced from 4.5-5 to 3.5 hours (by
one-third).
• Sharp increase in traffic volume between HCMC
and Delta cities -- even where NH1 does not pass.
Bridges and Highway Link Two Centers and
Activate the Mekong Delta Economy
Mekong River Region
Can Tho
2
1: My Thuan Bridge
2: Can Tho Bridge
(Planned)
1
Hwy 1
By water
Ho Chi Minh City
By land, water & air
National & Global Economy
My Thuan Bridge and NH1:
Linkage Effects
1. Natural resources-based industrial
growth (--investment-inducement effect, cum
regional economy activation) :
Can To industrialization linked to domestic
investment and local economy
2. Tourism development in Can Tho
(--regional economy activation effect)
Industrial Production in West Mekong Delta
(at constant 1994 prices)
6000
Can Tho
5000
4000
3000
2000
2000
1998
1999
Kien Giang
Soc Trang
Ca Mau
Prel 2001
An Giang
Can Tho
Bac Lieu
1997
Source: GSO (2002)
1996
0
1995
1000
Agriculture Production in West Mekong Delta
(at constant 1994 prices)
Agriculture
6,000.00
An Giang
5,000.00
Can Tho
Kien Giang
4,000.00
3,000.00
2,000.00
1,000.00
2000
1999
1998
1997
1996
1995
0.00
Source: GSO (2002)
An Giang
Kien Giang
Can Tho
Soc Trang
Bac Lieu
Ca Mau
Fishery Production in West Mekong Delta
(at constant 1994 prices)
Fishery
4500
Ca Mau
4000
3500
Kien Giang
3000
2500
Bac Lieu
2000
1500
1000
500
2000
1998
1999
Kien Giang
Soc Trang
Ca Mau
Prel 2001
An Giang
Can Tho
Bac Lieu
1997
1996
Source: GSO (2002)
1995
0
Viet Foods Co. Ltd
(a private firm specializing in frozen shrimps, in Can Tho IZ)
Natural Resources-based
Industrialization (Example)
• Can Tho: Tra Noc I & II, Hung Phu IZ have about
80 firms (mostly domestic, 20 FDI). One-third of
FDI firms came in or after 2000.
[Source: CEPIZA]
– Domestic and FDI firms in IZs employ about 13,000
workers, at present.
– They benefit about 10,000 rural households for input
procurement etc.
• Other Delta provinces: participating in new
economic opportunities, taking advantages of their
resource potentials.
Number of Tourists to Can Tho
(person-days)
350,000
Foreign
300,000
Vietnamese
250,000
200,000
150,000
100,000
50,000
Source: Statistical Yearbook of Can Tho
2002
2001
2000
1999
1998
1997
1996
1995
1994
0
Turnover of Tourism in Can Tho
(US$ million)
Foreign ($40/day)
7
Vietnamese ($15/day)
6
5
4
3
2
1
Source: Statistical Yearbook of Can Tho
2002
2001
2000
1999
1998
1997
1996
1995
1994
0
Case 3: North-South 500 kv
Transmission Line (T/L)
• 1994 - 98: Transferred low-cost, surplus
electricity from the north to the south and
central region until:
– Capacity expansion of thermal power plants,
utilizing offshore natural gas (exploited in late
1990s).
• 1999/2000 - present: Provides system
stability by shifting electricity between
regions.
Electricity Transfer between
North, Central, and South
Before 500KV
T/L
After 500KV T/L
(1999/2000~ )
After 500 KV T/L
(1994~1998)
North
North
North
Hydro
Hydro
Hydro
Coal
Coal
Coal
Central
Region
Central
Region
Central
Region
South
Hydro
Diesel
500KV
T/L
South
500KV
T/L
South
Gas
Hydro
Hydro
Diesel
Diesel
Source: Prepared by the study team based on the information from Electricity of Vietnam (EVN).
North-South 500 kv T/L
Impacts (Examples)
• Overall impact on the economy: sustaining high
economic growth and improving livelihoods in
the latter half of the 1990s.
– Mitigated power shortages in the central region and
the fast-growing south (--real GDP growing at 9.2%,
average of 1996-97).
– Supported about 75% of electricity demand in the
central region, about 20% of the south (--equal to
approx. 40% of industrial demand for electricity).
[Data: based on WB 1998, average of 1996-97]
Annual Growth of Electricity
Demand by Region (%)
1992 1993 1994 1995 1996
North
5.4 6.8 12.1 16.0 14.0
Central 17.2 15.0 25.4 25.6 21.3
South
6.7 16.6 21.0 23.3 21.1
Real GDP 8.7 8.1 8.8 9.5 9.3
Growth
Source: World Bank (1998)
1997
12.8
19.6
15.2
8.2
North-South 500 kv T/L
Impacts (Examples)
• Improved power supply conditions since around
2000, through network expansion (e.g.,
substations, 220 kv line) -- Achieved together with
subsequent increase in generation capacity (e.g., Phu My, Ba Ria),
distribution and transmission.
– Firms (HCMC and its vicinity): cheaper and more
reliable power supply, after connecting with the EVN
network.
• Greater access to electricity in rural areas:
– Supporting the rural electrification program (1997- ).
Expansion of Electricity Network
Source: EVN
1600
1200
800
400
0
Year
3000
2000
1000
0
1990
1995
1999
Extension of 220kv trz(km)
Capacity of Sub-station for 220 kv(MVA)
Capacity of Sub-station
for 220kv (MVA)
Extension of 220kV trz
(km)
South
Households Using Electricity as
Source of Lighting by Region
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
83.7
68.7
47.0
22.0
North
Source: World Bank (1997),
GSO (2000), GSO (2003)
based on VLSS2002
82.1
80.0*
1993
South
1998
2002
Note: The 1998-2002 decrease in the north is attributed to changes in regional division.
Source of Lighting among
the Lowest-Income Group
100%
90%
Others
80%
70%
Gas, Oil,
Kerosene
lamps
Battery
lamp
60%
50%
40%
30%
Electricity
20%
10%
0%
19971998
2002
Source: GSO (2000), GSO (2003)
based on VLSS2002
(4)-4. Road Network and
User Access to Social Services
• Experience of the JICA-supported
Reproductive Health (RH) Project in Nghe An
province (ongoing, 1997- ): regional service delivery
program based on community participation, covering all 469
communes in the province.
• Findings of our field visit (June 2003):
– Importance of the strengthened function of road
network (i.e., with improved trunk roads) in
enhancing physical access, quality, and IEC of
service delivery programs.
Complementary Nature of
Different Levels of Roads.
• Trunk roads and inter-commune roads:
– Important for the productivity of service providers
(e.g., health workers at provincial MCH/FP, DHC, CHC,
and project staff), facilitating communication and
knowledge sharing and establishing a monitoring
system, etc.
• Inter-commune roads and inter-hamlet roads:
– Essential for both users and service providers to
ensure physical access to core health services (at
CHC) and information, and treat emergency cases
(at DHC).
Road Network and Project Activities
(Perspective from RH Service Providers)
Road Network and User Access to RH Service
Inter-hamlet roads
(by 2 wheel, on foot, boat)
Hamlet
Access to medical service
Inter-commual roads
(by 2 wheel, on foot, boat)
CHC
DHC
Commune
District
Contraceptive
Method
Pre-natal Checkups
Access to information
Consultation to
Health Worker
Delivery
Attendance
Participation to IEC
Seminar
Source: Elaborated by the study team, based on the field survey in June 2003.
Obstetric
Complications
Attendance
(4)-5. Synthesis
In Vietnam, trunk infrastructure in transport and
power has helped:
1. Creation of sources of growth.
2. Spreading of linkages between growth centers
and their surrounding rural areas.
•
•
•
Broad impacts: both direct and indirect.
Structural change in regional (and even national)
economy.
Initial impacts: not necessarily on the poorest group
(except for social service delivery)—but, “virtuous
cycle” emerging with increased purchasing power.
Synthesis
• Importance of complementary policies and
interventions.
– NH5 and port: other trunk roads (NH1, 10, 18),
feeder roads.
– NH1 and bridge: proposed Can Tho bridge?
– Electrification: central & local governments,
private sector, and communes (in generation,
distribution, and transmission)
– RH: social service delivery and infrastructure.
– FDI policy, education, agriculture extension, etc.
Synthesis
•
Potentially negative externalities:
1. Road safety.
2. Resettlement and land acquisition: Timeconsuming and delaying construction work.
-- but, the experiences also show that if properly
handled, affected families could enjoy benefits of
infrastructure development.
•
Importance of capacity building for social
and environmental monitoring.
(5) Future Strategic Planning and
Aid Partnership
Large-scale infrastructure as an integral part of
overall development strategy.
•
•
•
Importance of a shared vision toward equitable
growth, macroeconomic stability, and environmental
stability.
Need to pay attention to complementarities: with
policies, institutional aspects, and other investments,
etc.
Need to strengthen the link between large-scale
infrastructure investments and strategic planning.
Future Strategic Planning and
Aid Partnership
• Need for capacity building in investment
planning, sector policy, selection criteria,
financing, O&M, regulatory framework etc.
• Aid partnership to support GoV’s effort,
with each partner playing a complementary
role based on its strength(s).
– “Best mix” of policies, measures, aid programs
and projects—under a shared vision and
strategies.
Shared Development Vision
Strategies and Policies for Promoting Growth
and Poverty Reduction
Measures/
Objectives
Growth
Creation
Growth
Diffusion
Direct poverty
reduction
Large-scale
Infrastructure
Rural
roads
X
X
Human Targeted Capacity
capital interven- building
tions
X
X
X
X
X
X
X
X
X