Countries and Regions

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p. 3 of 7 BACK | NEXT Executive Summary I. Development Agenda II. Asian Development Bank Development Experience III. Asian Development Bank Strategy IV. Operational Approach V. Three-Year Assistance Program VI. Performance Monitoring and Evaluation

Country Strategy and Program 2002-2004: Socialist Republic of Viet Nam

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II. Asian Development Bank Development Experience

A. Factual Summary of ADB Assistance

33. Since operations resumed in 1993 and up to end-2000, ADB provided 32 loans amounting to $2.05 billion and 107 technical assistance (TA) grants for $74.4 million (Table 3).¹³ Under the first interim strategy (1993-1995), assistance focused on infrastructure rehabilitation in transport (roads and ports), water (irrigation, flood protection, and water supply) and power, and agriculture policy reform. Since 1995, operations have expanded to the financial sector, human resources development through health and education, and rural development through credit, forestry, infrastructure, and crop diversification. Private sector operations (PSOs) have included a cement plant, a build-operate-transfer (BOT) water treatment plant, a private university, and a hospital.

B. Portfolio Performance and Status

34. Implementation performance has improved over the years, along with the Government's familiarity with ADB procedures. Viet Nam's portfolio is relatively young, given that operations resumed only in 1993. This explains why disbursement and contract award ratios are still somewhat below ADB average.¹⁴ Most Viet Nam projects under implementation are rated satisfactory or highly satisfactory in implementation progress (81 percent) and achievement of development objectives (88 percent), but projects defined "at risk" have increased to 28 percent at end October 2001, largely due to start-up and implementation delays. So far, only two of the post-1993 loans have been closed. Both were classified as generally successful in the project completion reports.

35. Joint portfolio reviews with the World Bank and the Japan Bank for International Cooperation (JBIC) have been held in 1999 and 2001, to address common implementation problems. Issues that continue to require attention include start-up delays in loan signing, effectiveness, consultant selection, and staffing of project management units. Other problems include lengthy land acquisition procedures, resettlement and compensation processes, and centralized procedures for approval or minor adjustments of projects and contract awards. Counterpart funds are generally available, but disbursement procedures remain complex, and incomplete in the case of decentralized projects. Reform of Vietnamese ODA legislation, through Decree 17/CP of May 2001, addressed some of these issues by decentralizing approval authority and facilitating early appointment and funding of government project design and project implementation teams. ADB is supporting, through TA (i) harmonization of procedures on the ADB and government sides, to reduce processing delays; (ii) preparation of a new decree on resettlement to reconcile differences between national norms and the standards of international financing institutions; (iii) streamlining of disbursement procedures; and (iv) implementation of guidelines regulating SOE participation in procurement.

C. Summary Evaluation of ADB Assistance

36. While the 1993 interim operational strategy focused on infrastructure rehabilitation and support for policy reforms, the 1995 country operational strategy study (COSS) broadened the scope of ADB assistance, emphasizing "sustainable growth with equity". To promote growth, the COSS supported the creation of a stable macroeconomic environment through policy and institutional reform, and infrastructure development. Equity was pursued through human development and regional balance. Sustainability was to be ensured through environmental management in coastal, highland, and urban areas. The COSS underlined the need to develop linkages (i) between the three focal zones of Hanoi, Ho Chi Minh City, and Da Nang; (ii) between the three focal zones and surrounding rural areas; and (iii) with the Greater Mekong Subregion through transport corridors.

1. Relevance

37. Both strategies and the country assistance programs that implemented them were evaluated under the 1999 Viet Nam country assistance program evaluation (CAPE), which concluded that both were relevant to Viet Nam's development needs at the time. In the early years, infrastructure rehabilitation and support for a domestically owned agriculture reform program directly addressed critical bottlenecks. The emphasis on economic growth with macroeconomic stability of the 1995 COSS and subsequent program was also found relevant to achieve poverty reduction, given the low levels of per capita income. The 1995 COSS, however, was assessed as less focused, and the concept of "linkages" was not really translated into practice, except for GMS operations and the rehabilitation of Highway 1, the main north-south transport link. A broadening of the strategy and program was the result of both demand and supply trends: as Viet Nam emerged from the most pressing reform and rehabilitation needs, its demands for assistance in other sectors increased. At the same time, growing attention to cross-cutting concerns within ADB led to lending in the social and natural resource sectors. The CAPE recommended that the country strategy be more focused and selective.

2. Effectiveness and Efficiency

38. Program Lending. The CAPE found ADB's policy-based lending operations in agriculture and finance effective, because of the alignment with government reform priorities at the time. The first resulted in liberalization in agricultural input and output markets, land tenure reforms, and efficiency improvements in rural finance. The second helped establish the legal, regulatory, and supervisory framework for the banking system, and diversify the range of financial institutions, including initiation of a capital market. The efficiency of program lending was somewhat reduced because the predominant focus on the rapid passage of laws, decrees, and regulations (i) did not take into account the lengthy consultation process needed to bring about changes resulting in tranche disbursement delays; (ii) did not fully resolve inconsistencies between the new legal framework and existing regulations, at times causing slow and difficult implementation; and (iii) did not always provide assistance to design the needed regulations, requiring revisions and generating controversy when they had to be assessed for purposes of tranche release.

39. Project and Sector Lending. Effectiveness of projects and sector loans is in general good, with 88 percent of active projects ranked satisfactory or highly satisfactory in terms of achievement of development objectives. Impact has been difficult to measure for projects that provided small and medium-scale rural infrastructure in a large number of provinces. Geographic dispersion also negatively affected efficiency, requiring familiarization of a larger number of local authorities and staff with ADB procedures, and making supervision more costly or less frequent. Experience also shows that projects requiring coordination between departments or ministries and between provincial and central authorities are more prone to suffer from delays and coordination problems, since the public administration structure tends to be rather compartmentalized.

40. Technical Assistance. Sixty percent of postevaluated TAs and 94 percent of TAs with completion reports are ranked generally successful, and the rest partly successful. The CAPE found that those project preparatory TAs (PPTAs) and advisory TAs (ADTAs) that aimed at familiarizing government counterparts with ADB procedures and requirements were most effective. Generally, ADTAs were effective when the purpose was clearly defined, the skills and information to be transferred were concrete and limited in scope, and the goals were shared by both sides. On the other hand, ADTA for policy reform and capacity building was found less effective, especially in the case of isolated operations. The impact was also lower when training inputs were not linked to institutional changes, or when inadequate coordination in TA provided by different funding agencies resulted in conflicting policy advice. The Government has expressed some concern about the effectiveness of TA, including quality of project preparation, development impact of ADTAs, and level of ownership. Efficiency of TA can be improved by (i) greater interaction with the Government and other stakeholders during the TA design phase; (ii) fuller incorporation of the Government's information needs in PPTAs, to ensure a closer match between the ADB and government feasibility studies; (iii) clearer definition of ADTA outputs and deliverables; and (iv) greater use of local institutions that can deliver some of the required studies and training on a sustainable basis over the long term.

3. Major Sector Reviews: Success and Failures

41. Viet Nam's relatively young portfolio means that no loans and only a few TAs have been postevaluated. Nevertheless, sector and project reviews have highlighted several areas of success and potential for improvement (Table 4).

(i) Areas of Significant Progress

Progress had been achieved in coordination on geographic coverage, population control and reproductive health interventions, improvements in secondary education, and governance.

1. Clear coordination on geographic coverage allowed different aid agencies to respond effectively to development needs. This has been the case for rehabilitation of Highway 1 by ADB, World Bank, and JBIC, and for provision of water supply and sanitation to most provincial towns by a variety of funding agencies. Such coordination has been very effective for infrastructure rehabilitation, but less so when sector policies needed significant advancement (e.g., forestry).

2. Population control and reproductive health interventions have achieved remarkable impact by combining information and communication campaigns with supplies and service improvements.

3. Support for secondary education improvement has been expeditiously implemented, including emergency rehabilitation of flood-affected facilities, while it is still too early to assess progress in the area of vocational and technical education.

4. In the area of governance, support for policy development, project management training, PAR design, and retraining of legal officials has been found useful. Other interventions, however, have lacked the needed continuity and results have been less tangible.

(ii) Areas Where Progress Has Been Less Encouraging

Areas where there is scope for improvement include the incorporation of gender concerns in projects, water resources management, and private sector participation in infrastructure provision.

1. While ADB assistance to agriculture has supported sector modernization and poverty reduction, more attention should have been paid to the gender impact of projects, particularly in ensuring access to land, training, and credit for the growing share of women that compose the agricultural labor force.

2. Establishment of a national water resource council through ADB assistance has been a first step in the direction of integrated water management, but progress toward genuinely balancing the demands of agricultural, industrial, and urban users is still slow.

3. Road sector implementation progress has been affected by very low bids submitted by state enterprises, who later ran into problems in implementing contracts in a timely manner. Private sector involvement in construction and maintenance has been limited, and adequacy of budget allocations for road maintenance is becoming a serious concern.

4. Low tariffs in the power and water supply sectors have weakened the financial sustainability of sector utilities and discouraged private sector entry.

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