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Country Assistance Plans - Viet Nam :
I. Country Performance Assessment
D. Governance: Sound Development Management
22. Through the Doi Moi renovation, Viet Nam has made steady progress in the transition
from a command economy to a market-oriented one. The country has been implementing
policy, legal, and institutional changes to achieve its objective of integrating with the regional
and the global economies. This transition and renovation process has involved many difficult
and complex challenges, which have been further accentuated by the Asian crisis in 1997.
23. In the areas of national development management and administration, among the major
institutional challenges that need to be addressed further are the following:
First, Vietnam needs to clarify and rationalize the role of the State in the context of the Doi
Moi renovation, and to establish an affordable, effective public service with clear boundaries
defining the work of ministries, sub-national units, and state-owned business enterprises.
There is a need for clearly defined processes for coordination, policy making and
management within the government, and for decentralization and participation. Progress to
date in this area includes reduction in the number of ministries from 27 to 23 in 1997; initial
streamlining of administrative procedures at the central and local level; establishment of an
Administrative Court and promulgation of a Civil Servant Statute; stepped up efforts to
combat corruption; setting of a target to reduce the size of the state administrative personnel
by 15 per cent; and introduction in May 1998 of a Grassroots Democracy Decree (Decree
29) to promote democracy and participation at the commune level. The Prime Minister
established a “hot-line” to receive business complaints; several ministries now also have
internal units for tackling grievances and corruption, in addition to the General State
Inspectorate. The Government recognizes the need to further streamline the existing
administrative machinery; to introduce new management and remuneration systems; and to
enhance capacity at the central and provincial levels, human resource management, and
leadership in the implementation of the reform process. A review of public administration
reform aimed at setting the priority agenda over the next few years is currently underway.
Second, Vietnam needs an effective system of public financial management to increase
efficiency in the use of public funds, to improve transparency and to forge a closer link
between policy, planning, budgeting, and spending. The regional financial crisis highlighted
the importance of a healthy banking system, transparent and accountable state budget
procedures, and strong anti-corruption mechanisms. The publication of the State Budget in
June 1999 and of the 1997 Final Accounts was an important milestone towards increased
fiscal transparency, and additional recommendations on public financial management are
expected from the ongoing Public Expenditure Review. Other important steps included
various decrees clarifying the role of government agencies in external debt management
and processes for managing fees and revenues raised and spent by government agencies.
Similar positive steps have been taken to improve fiscal transparency in the banking sector.
A related area of concern is the need to improve project implementation performance for
both the domestic and externally financed component of the public investment program.
Third, Vietnam needs to continue establishing, and building its capacity for the enforcement
of a sound legal and regulatory framework that provides justice for all. The objectives are to
create a sound business investment environment, and to protect the rights of all citizens,
including weak and disadvantaged groups of society. Since the enactment of the 1992
Constitution, considerable progress has been made in improving legal and professional
education, in legal drafting, in professionalization of the judiciary, and in improving access to
information on laws and legal processes. However, the legal framework is still
underdeveloped and legal institutions still face capability constraints. A comprehensive legal
system needs analysis is under preparation.
24. The experience of Viet Nam and other countries points out that growth and human
development do not automatically trickle down to benefit the poor. Equality needs to be created,
the empowerment of the poor targeted, structures that create poverty need to be corrected. The
quality of governance at the central and local level and the governance relations in
administration and society are often the crucial link to make poverty reduction effective. Good
governance for poverty reduction comprises – among others – (i) focusing poverty reduction
resources and creating accountability in the use of public funds in the interests of the poor; (ii)
building national capacities for pro-poor policy formulation and implementation; (iii) improving
administration and private sector participation for better services delivery to the poor; (iv) shifting
decision making nearer to the poor and helping the poor to organize themselves; (v) preventing
corruption, as the reduction in informal charges disproportionately improves access of the poor
to public services; (vi) strengthening the rule of law with clearly pro-poor enforcement
procedures; and (vii) involving in a participatory way a diversified range of stakeholders
representing the poor.
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