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Countries and Regions Country Partnership Strategies Document
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Country Strategy and Program 2002-2004: Socialist Republic of Viet Nam
Executive SummaryViet Nam's record in reducing poverty during the 1990s was impressive. Poverty incidence declined by over 20 percentage points between 1993 and 1998, with complementary gains in other quality of life indicators. Viet Nam has already exceeded some of the International Development Goals (IDGs), notably in poverty reduction and primary school enrollment. These achievements notwithstanding, with nearly 40 percent of the population remaining below the poverty line, and a significant proportion clustered just above it, poverty reduction remains a major challenge. The Government's development goals and poverty reduction targets are articulated in the Socioeconomic Development Strategy (SEDS) 2001-2010, various sector strategies, and the draft Comprehensive Poverty Reduction and Growth Strategy (CPRGS). Policymakers in Viet Nam are modifying the goals and targets to take into account Viet Nam's specific opportunities and constraints. The Government envisages that significant reduction in poverty can be achieved through rapid economic growth, social progress and equity, and development of a corruption-free and strong state apparatus. The approach as a whole is balanced, comprising not only a growth strategy, but also policies for social development, and reform of public institutions. However, stronger prioritization among numerous objectives and clear linkages between targets and policy actions will be necessary. The Government's target of reducing the poverty incidence by approximately 12 percentage points between 2001 and 2010 is ambitious. The medium-term growth target of 7.5 percent per year is also on the high side, given the slower growth performance in recent years and the deteriorating external environment. Viet Nam's rapid poverty-reducing growth from 1992 until the onset of the 1997 Asian financial crisis was induced by (i) a first generation of market-oriented reforms, particularly reforms of land-use rights that improved the incentive framework for farmers, and (ii) rapid foreign investment inflows as the economy opened up. Now the potential for growth from these early reforms has been exhausted. Further progress in poverty reduction will depend on generating broad-based labor-intensive growth and unlocking the potential for enhanced productivity in both the agriculture and nonagriculture sectors. This growth and employment generation pattern will require removing impediments to private sector development, increasing the pace of rural farm and nonfarm incomes, and building on progress in human capital development. Asian Development Bank (ADB) operations in Viet Nam resumed in 1993. The last country operational strategy study (COSS) for Viet Nam was prepared in 1995. While the focus was on growth with equity, the broad coverage of sectors and the geographic dispersion of the ensuing program diluted in some cases the development impact of ADB operations. Implementation also suffered initially because of executing agencies' lack of familiarity with ADB's approach and procedures. The proposed approach of the country strategy and program (CSP), which covers the period 2002-2004, is summarized in the Figure. The CSP will have the following thematic, sector, and geographic priorities, to ensure that growth reaches the poor: Figure: Viet Nam Country Strategy and Program at a Glance    
As a consequence of this focus, ADB will only become engaged peripherally and as needed in state-owned enterprise reform and trade liberalization issues. In education, continuation of ADB's role in vocational and technical education will be reassessed. In health, operations in the population subsector will be discontinued. The Government's CPRGS will provide the framework for aid coordination in support of poverty reduction. While Viet Nam is a comprehensive development framework (CDF) pilot country for the World Bank, the approach has been applied rather flexibly, through a number of active sector-level and cross-cutting partnerships. Stakeholder consultations held during CSP preparation, including some jointly organized with the World Bank, have led to a better understanding of the role of various agencies in the different sectors. ADB will continue to pursue overall and sector-level coordination through selective participation in partnerships and joint or parallel cofinancing. The CSP is designed around a base case lending program of $220 million for Asian Development Fund (ADF) resources (with ADF adjustments of plus/minus 20 percent depending on performance-based allocation outcomes), and an annual average of $60 million in ordinary capital resources lending. In addition, Greater Mekong Subregion (GMS) projects totaling $70 million are planned. Analysis shows that the debt service impact of modest amounts of ordinary capital resources borrowing is manageable. Approximately 5 percent of lending (7 percent of projects) will be core poverty operations, and 43 percent of both lending and projects will be poverty interventions. A base case scenario of $6 million was used to plan technical assistance operations to support the main areas of emphasis identified in the lending program. Several risks threaten Viet Nam's ability to achieve its development goals. The main risk is the deterioration in the external environment that has taken place after the targets were set. Lower economic growth rates, induced by external circumstances or by slippage in implementing structural reforms, would not be sufficient to achieve the desired poverty reduction. The Government's capacity to implement a complex and comprehensive strategy may also be limited. ADB's program is designed to help overcome these constraints and minimize the risks. To monitor progress in achieving Viet Nam's development goals and the linked progress in implementing the CSP, a two-tier performance monitoring system will be used. First, the Partnership Agreement between the Government and ADB, to be signed in early 2002, will focus on short-, medium-, and long-term goals, targets, and actions that ADB assistance is designed to support. Second, country-specific triggers comprising policy and process indicators will ensure consistency between the Government's efforts to improve the policy and institutional framework in key areas related to ADB operations and the ADF resource allocation process. Annual CSP updates will review, further detail, or revise the list of required actions, selecting relevant performance-based allocation triggers for the following year.
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