Vietnam: State Bank And World Bank Sign Credits And Grants Of 330 million US dollar (godt 2 milliarder DKR) Projects Aim At Bringing Power To Rural Villages And Modernizing Banks
Governor of the State Bank of Vietnam, H.E. Le Duc Thuy and World Banks Country Director for Vietnam Klaus Rohland, Friday signed two credit agreements: a 105 million US dollar to support the second Payment System and Bank modernization project, and a 220 million dollar for the second Rural Energy Project.
They also signed a grant fund of 5,25 million dollar from the Global Environment Facility (GEF) trust fund.
– The two new projects benefit greatly from the previous ones. The first Payment System and Bank modernization project has created a backbone for the nation-wide payment system and proved to be a break-through success. In the last three years, on average the Rural Energy I project has helped to provide electricity to one commune per day, thus providing electricity to over half a million new households, said Governor Le Duc.
– I believe that the two new projects will continue to achieve great success, contributing to Vietnams development through opening an appropriate way to manage and develop our monetary market and expedite the industrialization and modernization of rural areas, added he.
Klaus Rohland said: – These two new projects are symbolic of what we are trying to do in Vietnam. We want to help those in remote areas so they have the essential things to improve their life such as water and electricity. We want to help the Government in putting systems and structures in place, so money flows faster among business and consumers. We want to support Vietnams continuing efforts in making sure that growth is shared all over the country.
105 million US dollar To Continue Modernization Of Vietnams Banking Sector
The PSBM 2 is built squarely on the foundation laid by the first Payment System and Bank Modernization project. Under the first PSBM project valued at 49 million dollar, the payment system vastly improved the payment services in the economy by successfully reducing float, from up to 30 days in mid-1995 to less than 24 hours today, as well as accelerating circulation of funds and increasing efficiency of funds transmission, while providing convenience and service to users.
As further evidence of the positive effects of the system, it was originally designed to handle a target volume of 4.500 transactions per day and now handles over 10.000. In addition, the system was designed to connect 7 banks and now 51 are connected, all of which indicate the high need for these new and improved capabilities and services and reflect the demand from banking sector customers.
The project strengthened the institutional capabilities of participating banks and supported the installation of new modernized internal procedures, structures, customer services, and ultimately information management.
The new core banking systems have enabled the participating banks to adopt IAS-based accounting and financial reporting practices. The new systems have revolutionized the way bank officers perform their duties and have redefined their responsibilities accordingly. Parallel changes were also introduced to the infrastructure of the banking system and its legal and regulatory framework with long lasting results.
Despite these positive impacts, the first project, which closed in December 2003, was only a pilot project. The second Project is a response to the urgent need from:
– the State Bank of Vietnam to increase the capacity of Inter-bank Payment Systems processing centers to continue operating the system in a fast, reliable and safe manner; and
– the participating commercial banks to complete the roll-out of their new systems and add new functions to the systems to meet the increased demand for new products and services.
The Project is organized around two main components: Expansion of Inter-bank Payment Systems (IBPS) and Expansion of Core Banking Solutions (CBS).
The IBPS component will comprise about one-quarter of the total funding of the project and the vast majority of this funding will go towards the upgrading and installation of new hardware and software systems within the National Payment System Center and the five regional Payment Processing Centers to expand processing capabilities and strengthen the interconnectivity and security of the systems.
The remaining funds will support consultant services for legal and regulatory framework changes and for staff training, workshops and knowledge transfer. The IBPS component is expected to achieve tangible impacts immediately with a ten percent increase of additional coverage of the IBPS in terms of number of institutions and twenty percent increase in the volume and value of transactions handled by the IBPS by the second year of implementation.
The CBS Expansion component, which comprises about seventy-five percent of the total funding support of the project, will support four participating commercial banks to further strengthen operational efficiency and risk management, and to respond to increased market pressure for new products and services through new delivery channels such as internet and telephone banking.
Three of the participating banks comprise over sixty-six percent of the banking system by assets and thus, the benefits of the project will extend to the banking systems as a whole. As with the IBPS, the majority of the funds under this CBS component will be allocated for hardware and software systems upgrade, however there are also significant allocations for consultant support for implementation and training on the new systems.
The CBS component is expected to also have immediate positive results with an expected twenty percent increase in the number of bank branches using the new systems and a fifteen percent increase in the volume and value of transactions handled by these new systems.
The project is expected to be completed by 2009 and by this time, the IBPS and CBS components will contribute to the development of an appropriate banking system infrastructure, and strengthen commercial bank operations.
220 million US dollar To Continue Bringing Power To The Poor People In Rural Vietnam
The Rural Energy II project receive a 220 million dollar IDA credit and a grant fund of 5,25 million from the Global Environment Facility (GEF) trust fund. It aims at rehabilitating the rural electricity networks in over 1.200 communes in 30 provinces and also convert the present organizations to more efficient and effective management systems in the future.
It is expected that in the next seven years, the project will complete:
– major upgrading and/or expansion of rural power networks in about 1.200 communes;
– conversion of current ad-hoc local electricity management systems to local distribution utilities (LDUs) as legal entities recognized under Vietnamese law, to improve management of power distribution in rural areas, improve financial sustainability, and better enable future mobilization of private funds; and
– capacity building assistance for the LDUs, provincial authorities, participating regional power companies, and national authorities involved in the planning and regulation of rural electrification.
The project will secure efficient and reliable power supply for about 2,5 million households, representing more than half of those currently without electricity. The project will also enable supply of large increases in electric power for expanding productive uses in rural areas, alleviating a major constraint to local economic growth.
The second rural energy project will help rehabilitate existing distribution systems in rural areas so that the losses are cut down thus also reducing the electricity prices in the rural areas. It will help the local people in taking over the management of the local grids through the creation of rural electricity cooperatives or district level joint stock companies.
The joint stock companies will be run as businesses and provide further employment in the rural areas. In the first phase of this project, the six provinces participating have decided to form one joint stock company at the provincial level and 22 at the district level.
While this is a pilot project, if it is successful it will revolutionize the distribution network in the entire country providing low cost, good quality power to the rural areas for creation of new enterprises and employment opportunities.
The grant fund of 5,25 million dollar from GEF permits the development of an enhanced technical assistance program which will enable the regulatory reform to be broadened and deepened, reinforcing the incentives for LDUs to operate in a technically, commercially and financially efficient way.
Inclusion of GEF financing will deepen the efforts to ensure that the institutional and regulatory reforms take root and replicate best practice to other LDUs not included in the early phases of the project.
The Global Environment Facility (GEF) is a mechanism for providing new and additional grant and concessional funding to meet the agreed incremental costs of measures to achieve agreed global environmental benefits in the four focal areas – Climate change; Biological diversity; International waters; and Ozone layer depletion. GEF also supports the work of the global agreements to combat desertification and eliminate persistent organic pollutants.
The World Bank Group is one of GEFs implementing agencies and supports countries in preparing GEF co-financed projects and supervises their implementation. It plays the primary role in ensuring the development and management of investment projects.
The Bank draws upon its investment experience in eligible countries to promote investment opportunities and to mobilize private sector, bilateral, multilateral, and other government and non-government sector resources that are consistent with GEF objectives and national sustainable development strategies.
Since 1991, the World Bank Group has committed 1972 billion US dollar in GEF resources and 3.037 billion in Bank group co-financing for GEF projects in 80 countries. In addition to GEF and Bank resources, it has mobilized additional co-financing of 6.952 billion from other donors.
Access to electricity has increased rapidly in Vietnam, from around 51 per cent in 1996 to over 80 per cent at the household level in 2003, but there are still around 16 million people, representing about 3,5 million households, without access to electricity.
Moreover, the rural population that is connected suffers from low quality of service, including low voltage and poor reliability. Current systems, often developed by local people to provide rudimentary initial connections are simply unable to meet current and projected load requirements.
For more information about the project and other World Bank activities in Vietnam, please visit www.worldbank.org/vn
BACKGROUND
The World Bank strongly supports Vietnams efforts in attaining Vietnams localized Millennium Development Goals and targets.
– The World Bank provides three type of services to Vietnam: (1) design and financing of development projects; (2) analytical work, policy advice, and technical assistance; and (3) donor dialogue facilitation. In addition, every year the Bank co-chairs the Consultative Group (CG) meeting in which all donors gather to discuss the aid program for Vietnam.
– Since reengaging in Vietnam in 1993, the World Bank has supported 35 projects to help fight poverty in Vietnam through finance for agriculture, infrastructure, health programs, schools, and other essential needs.
– Since 1993, 5,3 billion dollar has been committed to Vietnam, of which over 2,7 billion has been disbursed. This makes Vietnam the largest IDA-only borrower in the world.
Kilde: www.worldbank.org
