Countries and Regions

	Table of Contents
p. 6 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

---

V. Three-Year Assistance Program

A. Funding Levels and Performance

72. Starting in 2002, the Asian Development Fund (ADF) lending level will be based on the performance-based allocation (PBA) system. Country-specific triggers covering macroeconomic, structural, and portfolio implementation issues will determine whether a low, base, or high-case lending scenario is applied (see paras. 77-78 and Appendix 11 for details). Consequently, the lending figures for 2002-2004 in the attached program should be regarded as indicative. The program envisages annual base case commitments of $220 million for ADF, subject to adjustments of up to plus or minus 20 percent, depending on PBA outcomes, and $60 million for ordinary capital resources (OCR) on average. Especially in the early years of PBA application, adjustments in lending level will be made by modifying the size of planned loans, and particularly sector and policy-based loans in areas related to country performance. GMS projects totaling $70 million are planned. Their funding will be supplementary to Viet Nam's country allocation, and subject to considerations of overall ADF allocation among GMS countries.

73. Initial analysis shows that the debt service impact of modest amounts of OCR borrowing is manageable and can be accommodated within the nonconcessional borrowing limits set by the IMF during negotiation of the last PRGF. Sectors and projects with a clear revenue generation capacity will be financed through OCR funds, to avoid crowding out other sectors that need more concessional terms and conditions. OCR will also be considered to augment the size of loans as needed, based on a case-by-case assessment. ODA loan and grant cofinancing and opportunities for commercial cofinancing and guarantees will be sought for appropriate projects.

B. Loan Program

74. The lending program has been designed to reflect the three strategic areas and the geographic focus identified in Section III. The proposed 2002-2004 lending program is presented in Appendix 10, and the project selection briefs and the TA concept papers are in Appendix 14. Approximately 5 percent of lending (7 percent of projects) will be core poverty operations, and 42 percent of lending (40 percent of projects) will be poverty interventions. Three policy-based operations totaling $285 million (of which $140 million come from OCR) will support further reforms in agriculture, the financial sector, and domestic private sector development. Project lending at the national level will focus on secondary education, health, and power transmission. Poorer provinces in the North Central Coast and Central Highlands areas will be the main focus of ADB operations in the Central Region, and four projects for $265 million will focus essentially on these areas.²⁹ Two loans, for $70 million, will support subregional cooperation, with emphasis on transport and tourism development.

C. Technical Assistance Program

75. The TA pipeline (Appendix 10) is designed to support the main areas of emphasis identified in the lending program. A base case scenario of $6 million was used to plan TA operations, subject to revisions. To strengthen the lending pipeline, two thirds of the TA allocation in 2002 and 2003 will be for PPTAs. The remaining ADTAs are all in support of planned lending operations, governance improvements, or background analysis to strengthen CSP implementation. TAs in support of governance and PAR will be designed and implemented using a "cluster" approach, to ensure consistency and appropriate sequencing. Given the large needs of Viet Nam for capacity building, sector analysis, and institutional development, cofinancing for TA operations and for capacity building and policy development under lending operations will be actively sought.

D. Economic and Sector Work (ESW)

76. ESW will be undertaken to fill existing gaps in poverty analysis, provide a foundation for policy dialogue, and undertake analytical and capacity-building support for the CSP (Appendix 12). Strategies for rural finance (including microfinance) and rural industrialization will complement further analysis to be undertaken on the general constraints to SME development. A rural development strategy, focused on the determinants of rural poverty, will complement the study of development needs of the Central Region and mechanisms for interprovincial coordination, leading to well-integrated poverty reduction operations in the Central Region. To promote private participation in infrastructure, the potential for power sector "unbundling" will be investigated. A transport sector strategy will be prepared, in addition to a road master plan for the Central Region. In the area of human development, the fundamentals for a financially sound and well-targeted social protection system will be studied with reference to health sector financing and, more broadly, through a review of the link between social safety nets and financial market development. The potential for promoting private-public partnerships in vocational and technical education will also be reviewed. ESW in the governance area will assess the financial implications of civil service reform and public administration restructuring. In addition, ADB will also undertake, as needed, demand-driven studies defined jointly with the Government and other development partners. A study on assessment and monitoring of poverty reduction in 2004 will take stock of the lessons learned during implementation of the CPRGS to lay the foundations for the next CSP.

Back IV. Operational Approach	Next VI. Performance Monitoring and Evaluation