Regions and Countries

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p. 2 of 4 BACK | NEXT I. Current Development Trends and Issues II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Assistance Levels

Country Strategy and Program 2005-2006: Socialist Republic of Viet Nam

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II. Implementation of the Country Strategy and Program

A. Progress in Poverty Reduction

9. The CPRGS Implementation Progress Report³ presented to the CG meeting at the end of 2003 paints a clear picture of improving economic and social conditions. Economic growth, estimated at 7.2-7.3% in 2003, has been accompanied by agricultural diversification, growing private-sector activity (73,000 new enterprises registered since 2000, and nearly 30,000 in 2003), implementation of trade liberalization commitments (only two quantitative import restrictions on crude oil and sugar remain), poverty reduction, and a decline from 15% in 1998 to 10.9% in 2002 in the more severe food poverty rate. The available gender-disaggregated data show that male-headed households in 2002 still had 2.7% higher expenditure levels, but no significant sex bias was present in literacy and school enrollment levels. Appendix 1, Table A1.1, shows the progress in achieving the Millennium Development Goals.

10. In the social area, education enrollment rates have increased, and three-shift classrooms largely eliminated. A $49-million health fund for the poor was created, covering almost 14 million people. Rural infrastructure has been provided to more than 2,300 poorest communes included in the government’s poverty reduction program (Program 135). The share of the 2001-2005 public investment program allocated to the northern mountains, the northern central region, and the central highlands increased to 24.3%—up from 20.3% during 1996– 2000—and budget allocations to the government’s five targeted programs more closely associated with poverty reduction were increased by 22% in 2003 compared to 2002. In the areas of governance and public administration reform, a 38% increase in the minimum wage for state employees and new regulations on civil servants promotion were issued in January 2003. Pilot one-stop shops for administrative services and lump-sum allocations to local governments were also successfully introduced.

11. In addition to describing the progress made, the report notes areas that still need improvements. They include more modest progress in SOE reform and equitization (only 250 SOEs changed ownership in the first 9 months of 2003); a wider development gap among regions (with the central highlands and north central region falling behind); low quality of education; social issues such as drug addiction and low compliance with traffic laws, resulting in a high accident rate; weak managerial capacity in public administration, particularly at the grassroots level; and an incomplete monitoring and evaluation system. Unequal workloads, limited roles in community life, and discriminatory practices continue to affect women. ADB, with other Poverty Task Force (PTF) partners, is currently supporting incorporation of the CPRGS into the annual provincial planning process.

B. Progress in the Country Strategy and Program Focus Areas

12. Progress has been made in implementing the CSP's strategic priorities:

1. Sustainable growth. The economy has grown steadily, with increased agricultural diversification and solid increase in the number of private enterprises. The December 2003 Business Forum reported a reduction in dual pricing and a unification of corporate income tax rates for domestic and foreign enterprises. Implementation of ADB’s Financial Sector Program II⁴ proceeded on schedule, and it is expected that the second tranche will be disbursed in the third quarter of 2004, leading to negotiation of subprograms II and III of the cluster. The first tranche of the Agriculture Sector Development Program was disbursed in December 2003, promoting reforms in research, extension, and market information. Good progress was made in the preparation, jointly with several ODA partners, of the SME Development program loan, which supports improved access to land and finance, licensing and regulations simplification, and strengthening of the industrial and technical standards regime. Private-sector operations approved in 2002 and under preparation supported expansion of private-sector participation in supplying competitively priced power.



2. Inclusive social development. Education and health coverage continued to improve. Net enrollment rates increased from 71.2% in school year 2000-01 to 78.1% in school year 2002-03 for lower secondary school; and from 33.6% to 37.9% for upper secondary. Graduation rates were above 90% for both lower and upper secondary. Infant mortality and malnutrition rates continued to decline, though unevenly among regions. Health insurance coverage significantly increased. ADB’s Upper Secondary Education loan—which supports curriculum development, textbooks, and facility improvement—was declared effective, and preparation continued for the Second Lower Secondary Education Development loan, in line with the primary role ADB plays in the secondary education subsector. The Health Care for the Poor in the Central Highlands loan project approved in 2004 will help improve health care and implement the health insurance scheme in one of the poorest regions of Viet Nam. ADB also assisted the Government in reallocating loan and technical assistance (TA) funds to deal with the prevention and consequences of SARS and avian flu, and is preparing follow-up interventions addressing national and international preventive health within the GMS. The government developed sector and local gender strategies, and a law on gender equity is planned for National Assembly consideration in 2005. An ADB TA supported preparation of the gender strategy for agriculture and rural development, and will help draft the gender equity law.



3. Good governance. Implementation of the public administration reform (PAR) master program continued, with ADB assistance through the program loan to Support Implementation of the PAR Master Program–Subprogram I and other aid agencies, including the United Nations Development Programme (UNDP). Many laws were passed; publication of the Official Gazette was accelerated; “one-stop shop” models for individuals and enterprises to access the public administration were established in 35 out of 64 provinces, with planned expansion nationwide; salaries and career progression in the civil service were improved and made more transparent; and implementation of grassroots democracy strengthened at the commune level. ADB’s program loan in support of PAR proceeded on track: the first tranche was disbursed in 2003, and completion of the second tranche is expected by the end of 2004.



4. Geographic focus on the central region. Poverty reduction has been slower in the central region. This issue requires continued attention. ADB’s Central Region Livelihood Improvement loan started implementation, and additional loans were approved for Central Region Urban Environmental Improvement and Health Care in the Central Highlands. Preparation is progressing for three additional loans: Forests for Livelihood Improvement in the Central Highlands; Central Region Transport Network, and Central Region Water Resources. Together, they will help address the multiple dimensions of poverty and development in the region, and improve the conditions of ethnic minorities.



5. Regional cooperation. Progress in road and port improvements, development of border economic zones, and single-stop customs inspections took place along the East-West and Phnom Penh-Ho Chi Minh City corridors. Feasibility studies for the Kunming-Haiphong corridor advanced, identifying an expressway and railway option. The new regional cooperation strategy and program (RCSP), approved in early 2004, now provides a systematic framework for regional cooperation.

C. Highlights in Coordination of External Funding and Partnership Arrangements

13. Some ODA partners recently updated their assistance strategies or plans. Japan confirmed at the December 2003 CG meeting a 10% increase in funding to Viet Nam for 2004, bringing their total assistance to $837 million. The 2004 World Bank Country Assistance Strategy Progress Report proposed a base-case program of $800 million in fiscal year 2004 (including carry-over) and $750 million in 2005 and 2006, with high-case scenarios of $900 million, and new operations in infrastructure, energy, the financial sector, and human and rural development. The United Kingdom’s Department for International Development (DFID) Country Assistance Plan 2004 also significantly increased assistance to Viet Nam (up to $70 million in fiscal year 2004-2005 and over $100 million in 2005-2006), emphasizing support to the economic and social transition and socially inclusive development through increased donor harmonization, cofinancing, and budget support.

14. ADB has regularly maintained close coordination with its development partners, to further improve the effectiveness, efficiency, and impact of ADB operations by mobilizing not only financial resources but also expertise from these partners. ADB co-chaired the Poverty Task Force (PTF); conducted two participatory provincial poverty and governance assessments in partnership with nongovernment organizations (NGOs); and supported incorporation of the CPRGS into provincial planning in the central highlands. ADB is leading the harmonization of implementation frameworks effort in the forestry sector. ADB actively participated in the policy discussions in preparation of the Poverty Reduction Support Credit (PRSC), cofinanced by the World Bank and other bilateral and multilateral ODA partners. While ADB financing of the PRSC is still under consideration, the Government and the ODA community welcomed ADB participation and contribution to the policy discussions.

15. ADB continues to pursue cofinancing and coordination opportunities. ADB coordinates with JBIC in selected infrastructure sectors. Cofinancing opportunities with Agence Française de Developpement (AFD) have been identified for urban development, rural infrastructure, SME development, power transmission and generation, and water resources. ADB will continue cooperation with AFD, Kreditanstalt für Wiederaufbau (KfW), and the governments of Italy, Denmark, and possibly Switzerland in the area of SME development; with the government of the Netherlands in forestry and water resources management; with the governments of Sweden and the Netherlands in coastal management. DFID is cofinancing a regional program to make markets work better for the poor. ADB will continue dialogue with the Government and commercial partners to identify and process commercially viable private sector investments. AFD and KfW recently joined the ADB-World Bank-Japan Bank for International Cooperation pilot initiative to harmonize procedures for procurement, financial management, portfolio management, and environmental and social safeguards set within the framework of the OECD Development Assistance Committee.

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