Development of Large-Scale Infrastructure for Growth and Poverty Reduction
September 25, 2003 (at Sofitel Plaza, Hanoi)

ADB Comments to the CPRGS Draft Infrastructure Chapter

By Alessandro Pio

The chapter presented at the 25 September workshop is a good start in the effort towards incorporating consideration of the role of large scale infrastructure for poverty reduction in the CPRGS. We would like to offer the following additional suggestions:

  1. Overall Structure of the Document

Sections 1 (The Roles of large Scale Infrastructure to Growth and Poverty Reduction) and III.3 (Policy Measures for Developing Large Scale Infrastructure) seem the most relevant for a strategic document, such as the CPRGS. On the other hand, in our opinion, the sections in between (Sections II and III.1 and III.2) are too detailed given the nature of the document

With regard to section I (The Roles of large Scale Infrastructure to Growth and Poverty Reduction), it would seem that the link between infrastructure and poverty reduction can be strengthened by incorporating some of the general framework contained in Prof. Ohno's study and some of the specific conclusions of the case studies which were presented at the workshop. The impact and its channels of transmission are mainly:

  • overall growth and subsequent redistribution;

  • direct impact on the project areas in terms of (a) improved welfare generated by the project, (b) employment during construction, (c) greater integration with the markets in the rest of Viet Nam and the international economy, and (d) better access to services.

Since these linkages and channels of distribution are fairly straight forward, the section should not be too long and should only briefly address them

Section II (Assessment of Current Infrastructure in Viet nam) could be shortened, focusing on some major achievements (including for example the table showing infrastructure by region; some of the outcome of the case studies; and the main problem areas, instead of having a detailed discussion sector by sector

  1. Adjustments to the Forward-Looking Strategic Section

For Section III (Policies, Measures to Develop large Scale Infrastructure for Economic Growth and Poverty Reduction), we would suggest reorienting its content from a description sector by sector of the main investment planned (which is already largely contained in the five year plan and sector plans) to a discussion of the criteria that would be used to (i) chose and (ii) finance infrastructure investments.

Regarding the choice among many different investment projects, we would suggest that in addition to economic criteria (such as rate of return; effect on the current budget of the operations and maintenance costs; and scope for cost recovery), social criteria such as poverty impact, impact on improving the infrastructure network beyond the project area, and distributional impact should be considered. Ideally, a system would be developed where, especially for large projects, a number of criteria would be considered, the projects would be ranked based on the most relevant criteria, and priority would be given to the best ranked investments, given the budget constraints. The table below gives an example

  Criterion 1 Criterion 2 Criterion 3  
Project 1        
Project 2        

Criteria could be developed and listed in the CPRGS. They could be for example:


  • Rate of return

  • Operations and Maintenance Costs

  • Cost Recovery Potential 

  • Etc. etc. ......


  • Poverty in Direct Impact Area

  • Likely Distributional Impact (who benefits in impact area)

  • Network/Linkage effects

  • Etc. etc. ......

Regarding the financing modalities, we would like to suggest that some discussion be devoted to the type of financing sources that would be used to finance different types of infrastructure. It would not be useful in a strategic document such as the CPRGS to specific say what amount or what source would be used for each sector or for each type of infrastructure, but it would be useful to lay out some of the criteria that would use fund allocation. For example, government budget would be expected to address to some extent all types of infrastructure, but the focus of private sources would be more on infrastructure that generates economic growth (and hence financial returns which will make private financing viable), while ODA may be directed to projects which combine growth and poverty objectives.

The Government may further give indications of trends to be encouraged within types of financing sources. For example, general budget revenues may be used for targeted poverty reduction activities, and bonds for larger economic infrastructure; large ODA suppliers (development banks) may be encouraged to focus on investment which combine growth and poverty, while smaller bilateral programs could be encourage to cofinance or finance the targeted poverty reduction components and capacity building and institutional activities necessary to develop the sectors. The table below shows a simplified graphic way of illustrating this concept.


  Pure Economic Growth Growth and Poverty Targeted Poverty
Government Budget XXXX XXXXX XXXXX
Domestic Private XXXXX XX
Foreign Private XXXXX

(larger number of X and darker shading shows greater intensity of use of the type of funds for the purpose)

It may also be useful in the paper to briefly refer to two additional topics:

  • The linkage between infrastructure investment and the services using that infrastructure. For example, development of transport services in a competitive manner can help keep down transportation costs once the infrastructure has been built, or management of peak flows (in roads and electricity) can maximize the economic benefits of a given investment)

  • The macroeconomic and fiscal implications of infrastructure development (particularly in light of the recent proposals to issue large amounts of bonds for this purpose).

  1. Structure of the Chapter

At present the discussion is concentrated in a separate chapter, which could be added to the CPRGS. Consideration could be given to blending the relevant sections into existing chapters of the CPRGS. If the second ("blending") option were chosen, it would be largely a matter of dividing the paper into "building blocks" and incorporating each building block into the CPRGS as appropriate. A possible example of how this could be done is shown in the table below:

CPRGS New Infrastructure Chapter
Part III section 3

Relationship between Growth and Poverty Reduction

Section 1

Roles of large scale infrastructure to Growth and Poverty Reduction

Part 1 section III

Achievements and Challenges

Section 11 (REDUCED)

Assessment of current infrastructure in Viet Nam

  • Achievements
  • Shortcomings
Part III NEW section IV

Developing the appropriate supporting infrastructure

Section III.1 and III.2 (REDUCED)

Policies, measures to develop large scale infrastructure for economic growth and poverty reduction, section 1 on "Overall Target" and section 2 on "Orientation for Large Scale Development"

Part IV section I - 3

Major Policies and Measures 3. Infrastructure Development

Section III.3

Policy Measures For Developing Large Infrastructure

Part V

Mobilizing and Allocating Resources

  • Criteria for prioritisation of infrastructure investment
  • Financing modalities
  • Fiscal and macroeconomic implications

[Agenda] [Summary in English] [Summary in Japanese]