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Annual Report 2001

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Viet Nam

Economic performance

GDP growth in Viet Nam in 2001 slowed to 5.8% from 6.1% in 2000, reflecting poor agriculture sector performance and weakening external demand. The agriculture sector’s growth rate declined to 2.3% in 2001 due to a poor rice crop and low world prices for agricultural goods. Industry sector growth in 2001 dropped slightly from the 2000 level to 9.7%, following the weakening external demand for manufactured exports, while services sector growth was maintained. Inflation, as measured by CPI, remained low in 2001. As of end-December, the percentage change in the CPI was 0.8%. The fall in world prices for agricultural commodities, particularly rice, and 2 years of bumper rice harvests, led to a decline in the food price index that was only partially offset by higher nonfood item prices in the CPI. The preliminary estimates of fiscal deficit, excluding grants and including onlending, was 4.9% of GDP in 2001. Higher-than-planned revenues are partly attributed to newly registered enterprises that were brought under the tax base. Total expenditures exceeded planned levels by about 4.0% due to higher wage expenditures and capital spending on infrastructure projects. Merchandise export growth decelerated to 6.5% in 2001, following the deterioration in the external environment. The dip in crude oil prices accounted for a large part of the decline. Agricultural exports remained depressed, particularly rice and coffee. Import growth also declined in 2001, growing by only 6.0%. Reflecting the sluggish by only 6.0%. Reflecting the sluggish growth of both exports and imports, the current account surplus dropped to 1.5% of GDP in 2001, compared with 1.6% in 2000. The bilateral trade agreement with the US was ratified by the National Assembly, and Viet Nam is now taking steps toward accession to the World Trade Organization. Total employment increased by 1.3% with nonstate employment growing by 1.5%, while state sector employment dropped by 0.6%. Urban unemployment fell slightly to 6.3% in the first 7 months of 2001 from 6.4% in 2000. Poverty incidence, as measured by the new national poverty line, declined from an estimated 17.2% at end-2000 to an estimated 16.0% at end-2001.

ADB operations

Operational strategy: ADB’s new country strategy and program was prepared in 2001. ADB loan operations in 2001 began to implement the transition from the 1995 operational strategy that emphasized policy reform, infrastructure rehabilitation, and human development to the new strategy. Two of the 2001 loans focused on livelihood improvement in poor districts of the central region and provincial towns development, both important components of the new strategy.

ADB’s future strategy for Viet Nam prioritizes sustainable growth through rural and private sector development; inclusive social development by adopting an integrated and main-streamed approach, and building the poverty, gender, and ethnic dimensions into relevant areas of assistance; good governance; and adapting a geographic focus on the central region to promote more balanced regional development and increase the development impact of ADB operations.

Policy dialogue: Policy dialogue with the Government evolved around the Government’s preparation of Viet Nam’s Socioeconomic Development Strategy for 2001–2010, adopted in April 2001, and the Comprehensive Poverty Reduction and Growth Strategy (CPRGS), scheduled for completion by mid-2002. ADB supported the effort through the Poverty Task Force, providing input for monitoring the CPRGS by adapting the International Development Goals to Viet Nam’s development vision and targets, with special attention to health and governance.

ADB supported policy dialogue in financial sector development, corporate governance, public administration reform, power sector institutional arrangements and tariff setting, and water resource management through a National Water Resource Council. A governance strategy for Viet Nam was finalized, and ADB supported—with other multilateral and bilateral funding agencies—the implementation of a joint Legal Needs Assessment that will develop an action plan for further legal reform in Viet Nam.

Loans and technical assistance: In 2001, ADB approved seven loans for six projects totaling $260.6 million in the fields of water resource management, water supply and sanitation, integrated livelihood improvement, and road improvement. These loans also include $17.5 million in two pioneering private sector projects in social infrastructure. ADB also approved 10 technical assistance projects totaling $8.4 million. Seven were advisory assistance for institutional support to the Office of the Government, fishing port management, project financial management through decentralization, enhancing the resettlement legal framework and institutional capacity, framework for microfinance development, road map for power sector reform, and capacity building for the central region's poverty reduction efforts. Three project preparatory assistance grants were for upper secondary education development, urban development in the central region, and livelihood improvement in the central highlands.

Project implementation: Since joining ADB in 1966, Viet Nam has received 50 loans, of which 34 were active at the end of 2001. Contract awards totaled $71.4 million, bringing the cumulative figure to $1.1 billion. The contract award ratio was 7.8%, lower than the ADB-wide average of 14.8%. Disbursements during the year totaled $176.2 million, bringing cumulative disbursements to $990.0 million. The disbursement ratio was 17.0%, lower than the ADB-wide average of 20.5%.

The Viet Nam Resident Mission (VRM) and the Government monitored the country portfolio performance through monthly project implementation meetings. The second joint country portfolio review by the Government, ADB, Japan Bank for International Cooperation, and World Bank was held in August. ADB’s 2001 country portfolio review with the Government was conducted in October and an action plan for further improving overall portfolio performance was prepared. The action plan will be monitored through the monthly project implementation meetings. VRM is playing an increasing role in country programming and in the administration of several loan and technical assistance projects.

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