ADB Approves US$6.4 Million for Viet Nam's Poverty Reduction Program

MANILA, PHILIPPINES (9 December 2004) - ADB is supporting the Viet Nam Government's poverty reduction program, through a US$6.4 million program-based loan approved today.

The ADB program will work within the policy framework of the Poverty Reduction Support Credit III (PRSC III), a program funded by several development partners led by the World Bank in support of the Government's Comprehensive Poverty Reduction and Growth Strategy (CPRGS).

ADB support will focus on reducing structural weaknesses and improving the business environment for private sector development, promoting inclusive and environment-friendly development, and instituting a modern governance and public administration system.

Viet Nam continues to enjoy robust economic growth. In spite of the Asian financial crisis that began in 1997, GDP increased by 7.1% in 2003, and is expected to grow 7.5% in 2004 and 7.6% in 2005.

"Although the country has halved poverty in about 10 years, about 29% of its population is still poor - most living in the northern mountains, central highlands, and in pockets of the Red River and Mekong deltas," says Bradford Philips, Country Director at ADB's Viet Nam Resident Mission.

"Their remoteness makes it difficult to address poverty in these areas. Thus we need to take a carefully targeted approach in terms of planning and delivery to fight poverty."

In May 2002, the Government of Viet Nam embarked on putting into action the CPRGS, formulated with the support of the development assistance community, including ADB, and in consultation with stakeholders and civil society.

Overall, CPRGS progress has been significant, but important structural issues and social challenges remain, particularly regarding regional disparities, and reforms in state-owned enterprises (SOEs) and the financial sector.

The ADB program will strengthen Viet Nam's reform program on three fronts:

• Promote growth and create jobs by increasing internal and external competition, accelerating the divestment of SOE and state-owned commercial banks, and improving transparency and accountability in SOE operations and in the banking and the financial sector.
• Advance human development by increasing the budget for education and adopting higher quality education standards; increasing resources to cover the health care costs of the poor; developing mechanisms to complete the transfer of land-use rights to households, especially in upland and ethnic minority areas; and supporting measures to improve environmental and water resources management; and
• Increase transparency and accountability of public finances, promote simplified administrative procedures, and take measures to eliminate corruption as part of a broader effort to build modern governance.

"The PRSC provides ADB with an opportunity to advance policy dialogue in a well-coordinated manner with other development partners, and ensure that key policy issues for implementation of ADB operations in Viet Nam are adequately addressed," Mr. Philips adds.

ADB's loan will contribute to financing the adjustment costs in implementing the policy framework of the PRSC III program in support of the Government's deepened reform program for poverty reduction.

The loan comes from ADB's concessional Asian Development Fund, with 24-year term including a grace period of eight years. Interest is set at 1% per annum during the grace period and 1.5% per annum for the rest of the term. The fund will be fully utilized by 31 December 2005.

The State Bank of Viet Nam is the executing agency.

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