The Effects of Bilateral and Multilateral Official Development Assistance on Vietnam’s Economic Growth

Abstract

This study investigates the effects of bilateral and multilateral official development assistance on Vietnam’s economic growth from 1986 to 2022. Utilizing the autoregressive distributed lag (ARDL) bounds testing approach, our results show that in the shortrun, bilateral official development assistance has a significant positive influence on economic growth, whereas multilateral official development assistance has a significant negative influence on economic growth. However, the empirical findings reveal that both bilateral and multilateral official development assistance have no influence on economic growth in the longterm. Given that bilateral official development assistance has a significantly positive impact on economic growth in the shortrun, Vietnam should strengthen partnerships with donor countries. Tailoring projects to align with bilateral donors’ interests can lead to more effective interventions. In addition, multilateral official development assistance has been found to have a negative impact on economic growth in the shortrun, possibly due to complex approval and implementation processes. Therefore, the government should advocate for more flexible project requirements and reduce bureaucratic hurdles. Simplifying the approval process can help accelerate project implementation and enhance immediate economic benefits. Moreover, because official development assistance does not impact on economic growth in the longterm, Vietnam should focus on sustainable development strategies that reduce dependency on external aid. This includes investing in human capital, innovation, and technology to foster endogenous growth.