Countries and Regions

	Table of Contents
p. 5 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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IV. Operational Approach

A. Modalities of ADB Assistance

60. The proposed strategy will be implemented through a combination of lending, TA, ESW, and PSOs. In addition to project-specific considerations, the following guiding principles will be employed to implement the strategy.

61. Policy-Based Operations. Strong government ownership is crucial to the success of policy-based operations. Accordingly, ADB has selected for support the areas of agriculture, finance, and PAR, where the Government has shown strong commitment. Since past experience has shown that quick-disbursing program loans focusing on new legislation are prone to run into delays and implementation problems, future operations will adopt, where feasible, the sector development program approach.²⁶ More emphasis than in the past will be placed on harmonizing the legal framework and on implementation decrees and regulations as opposed to drafting new laws. Policy reforms at the sector level will be pursued through policy dialogue and through components of investment projects, particularly in the forestry, water resources management, and power sectors.

62. Project and Sector Lending. Greater development impact and closer implementation supervision will be pursued by focusing geographically approximately one third of lending operations on selected poor provinces within the Central Region following the approach outlined in para. 56. The proposed approach will require more interprovincial coordination, to ensure the appropriate selection of sector investments. Projects in the health, education, and power sectors will be designed with a national perspective, but priority for their physical investment component will also be given to the selected Central Region provinces, to the extent feasible.

63. Technical Assistance Operations. ADTA operations will be based on multiyear sequencing at the sector level (for example, cluster TA for PAR), and will take place wherever possible in the framework of multi-agency initiatives (e.g., joint assessment of legal needs, PAR support group, sector-level partnerships). Loan-related capacity-building TA will be considered when operations extend to new areas, particularly in the case of decentralized implementation. PPTAs will ensure that government information needs for feasibility analysis are met, and will define processing schedules mutually agreeable to the Government and ADB, to ensure clear agreement at critical decision points. The CSP has identified projects in the agriculture, credit, enterprise development, and secondary education sectors as prime candidates for reducing gender and ethnic disparities. To support this approach, PPTAs for these projects will have to pay special attention to how mainstreaming will be achieved, and to analyze issues and establish benefit monitoring and evaluation systems with the appropriate level of data disaggregation by gender and ethnicity.

64. Economic and Sector Work. Proposed ESW is described in para. 76 and Appendix 12. In addition to mobilizing intellectual inputs from ADB staff and international consultant resources, ADB will make efforts to tap the skills of local resource centers, such as government think tanks, research institutes, academic institutions, and private consulting firms, both to enhance the applicability and reduce the cost of producing relevant analyses and to organize workshops and publications (translated into Vietnamese) on topical issues.

65. Private Sector Operations and Risk Guarantees. In line with the Bank's private sector development strategies,²⁷ in Viet Nam, private sector operations will support broadening and deepening of capital markets and private participation in infrastructure provision. In catalyzing private investment in infrastructure, special consideration will be given to sectors where public sector operations can provide supporting policy dialogue (power and water supply and sanitation) or social services (higher education and health), that will allow Government resources to be redirected to the more basic types of education and health services. Since at present bottlenecks for build-operate-transfer (BOT) development stem mainly from regulatory requirements and Government's reservations at the entry stage, policy dialogue to address these issues will be pursued. Partial credit guarantees could be used to cover the later part of the repayment of long term infrastructure projects, and political risk guarantee to address "creeping expropriation" through ex-post introduction of taxes and fees, or breach of contract in case Government entities fail to provide inputs or purchase outputs as earlier agreed.

B. Participation of Civil Society, the Private Sector, and Local Governments

66. Consultations with all relevant stakeholders will continue to be practiced in all aspects of ADB operations. Country programming missions will continue to rely on consultations with private sector stakeholders and NGOs, when warranted through brief "issues papers" circulated in advance. Private sector inputs will be collected through the business forums that accompany consultative group meetings, and other consultation processes between the private sector and government. Inputs from the affected communities will be sought at the project design stage through field visits and field research. The views of NGOs and other aid agencies that have implemented projects with participatory components or in remote areas have proven invaluable in the past, and ADB will continue to solicit them systematically.

67. Recent years have seen an increase in decentralized project design, with a central ministry acting as the "umbrella agency" for prefeasibility assessment, but with provincial governments taking responsibility for feasibility study preparation and approval, and later for project implementation. This approach will continue, especially for area-based livelihood improvement, transport, and urban development projects in the Central Region. Geographic concentration will facilitate familiarity and ongoing consultation mechanisms with the local administrations.

68. To promote environmental sustainability of its operations, ADB will make a concerted effort to consult with provincial-level government environmental agencies and relevant NGOs in order to integrate environmental concerns in infrastructure investment, community-based livelihood projects, and urban development activities. To promote transparency and mitigate potential environmental impacts, ADB guidelines on Environmental Impact Assessments will continue to be carefully followed, particularly with regard to public consultations and public access to assessment reports.

C. Strengthening Government Capacity

69. The Government has a well-established mechanism for development planning through the five-year and annual planning process. Budget allocations, however, are still largely based on the annual cycle, rather than on a medium-term expenditure framework. Line ministries have played an increasingly active role in coordination of external assistance, through sector-level partnerships. Project implementation capacity is still uneven, and weaker in more remote provinces. ADB assistance will help address some of the systemic capacity issues through support for streamlining the mandates of key central agencies, separating service delivery and policy-making functions, and civil service reform at the national level. Dialogue among the relevant government ministries at the project design stage will be promoted, to help integrate the various stakeholder interests. In addition, capacity-building TA is selectively planned in areas of new operations or for local governments and executing agencies whose capacity is weaker. It is expected that other aid agencies will provide support for the improvement of public expenditure planning and management.

D. Aid Coordination

70. The Government's CPRGS, scheduled for completion by mid-2002, will provide the framework for aid coordination in support of poverty reduction. ADB has based preparation of the CSP on CPRGS drafts and outlines available to date, and will continue to cooperate with the Government and support the Poverty Task Force (PTF)²⁸ to advance analysis, strategy preparation, and programming in this area. Viet Nam is a comprehensive development framework pilot country for the World Bank. The approach, however, has been applied rather flexibly, through joint analytical work and sector-level partnerships, to avoid imposing excessive demands on the Government's time and resources. Consultations held during CSP preparation, including some at the sector level organized jointly with the World Bank, have led to an understanding of the role of various funding agencies in different sectors, summarized in Table 5 and discussed in more detail in Appendix 8. Sector-level coordination will be further pursued on an ongoing basis through the 23 existing "partnerships". ADB participation in sector partnerships will be selective, through active involvement as a "core group" partnership member in the sectors of more significant ADB involvement (agriculture; water resources; forestry; urban sector; SME and private sector development; education; health; PAR) while ADB will retain "observer status" in a second tier of sectors where involvement is expected to be lighter or indirect.

71. Attempts have been made in some sectors (notably forestry and water resource management for disaster mitigation) to promote sector-wide approaches. The general assessment is that, while coordinated approaches should be promoted, the situation is not quite ripe in Viet Nam for sector-wide approaches (Appendix 8). Besides participating in partnerships, ADB will promote sector-level coordination through joint or parallel cofinancing, building on past experience, which led to leveraging $458 million (25 percent of lending) since 1993. Cofinancing will be sought to promote joint approaches with key aid agencies and to mobilize grant resources in support of capacity building and institutional improvements related to both lending operations (where the Government is reluctant to borrow for the needed "software" components) and TA (given emerging constraints on ADB TA funds). ADB's strategy will focus on strengthening ties with a limited number of bilateral and United Nations (UN) aid agencies that (i) due to their own ODA policies have accorded Viet Nam priority status; (ii) have a reasonably large amount of resources or know-how, and actively seek cofinancing opportunities with multilateral agencies; and (iii) are active in sectors that ADB has prioritized. ADB will endeavor to mobilize $60 million-$90 million a year in joint and parallel cofinancing with a leveraging ratio of 20-30 percent.

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