ADB and Viet Nam Mark Tenth Anniversary of the Resumption of Operations in Viet Nam

Background
Timely Change in the focus of country strategy and program
Program objectives and priorities in Viet Nam
Some examples of ADB operations

1. Background

Viet Nam is one of the oldest members of ADB since its establishment in 1966. ADB resumed its operations in Viet Nam in 1993 together with other multilateral financial institutions. ADB has been actively assisting Viet Nam since then, with financial and knowledge resources, in its doi moi process in general and economic growth and poverty reduction in particular. By the end of 2002, ADB's assistance to Viet Nam totalled about $2.5 billion soft loans and about $92 million technical assistance (TA). Looking ahead, for the next 3 years, 2004-2006, ADB has developed a lending program of $975 million and $15 million of technical assistance (TA) grants.

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2. Timely Change in the focus of country strategy and program

ADB's Interim Country Operations Strategy (1993 - 1995) focused on the vast and urgent need for infrastructure rehabilitation particularly in transport (roads and ports), water (irrigation, flood protection and water supply) and power, ADB also focused on the longer-term development of the country, especially for the benefit of the larger part of population living in the rural areas, through a program for agriculture sector policy reforms.

In 1999, ADB made a significant shift in its operational strategy with a sharper and deeper focus on poverty reduction with the overall objective of freeing Asia and Pacific from poverty. The new poverty reduction strategy is based on three pillars:

propoor sustainable growth
inclusive social development
good governance

Other strategic development objectives - promoting economic growth, developing human resources, improving the status of women, and protecting the environment - are still integral to ADB's work, but they are pursued in ways that enhance overall poverty reduction.

To respond to the challenge of reducing poverty in the Asia and Pacific region, and to deliver its operations more effectively, ADB reorganized its internal organization and business practices in January 2002. At the heart of the new organizational structure are five regional departments dedicated to formulating and implementing country-focused programs and enhancing sub-regional cooperation. Under the new structure, ADB operations in Viet Nam are under the management of the Mekong Regional Department.

To accelerate the efficient use of the ADB assistance to Viet Nam and to strengthen the partnership between Viet Nam and ADB, ADB established its Viet Nam Resident Mission (VRM) in 1996. To respond more effectively to the increasing demand for its financial and knowledge resources, the role of the Mission has been continually expanded and nowadays among others already includes:

country strategy and programming
policy dialogue and support
portfolio management and administration of delegated projects
aid coordination and government, civil society and private relations
development resource center service to the public.

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3. Program objectives and priorities in Viet Nam

Since resumption of operations in 1993, ADB has provided 48 lending projects, amounting to about $2.7 billion, and 141 TA projects amounting for about $98 million, largely grants, to the Government. Agriculture and natural resources sector received the highest share of loans of about 32 percent of cumulative ADB lending, followed by the social infrastructure sector with about 26 percent. Transport and communications received 22.4 percent; energy 10.3 percent; finance 5.5 percent; industry and non-fuel minerals 4.9 percent. Since 1995, operations have expanded to the financial sector, human resource development through health and education, and rural development through credit, forestry, infrastructure, and crop diversification. Private sector operations have included a cement plant, a private university, a hospital, two power projects, and a venture capital fund for small and medium enterprises.

ADB approved its new Country Strategy and Program for Viet Nam on 17 January 2002 with focus on sustainable growth through rural and private sector development; inclusive social development by mainstreaming poverty, gender, and ethnic dimensions into relevant areas of assistance, particularly secondary education and health; and good governance, especially through public administration reform to enhance the efficiency of government service delivery to the people and businesses; selective support to legal system development and public financial management. The new strategy also focuses on poor provinces in the Central Region, to promote more balanced regional development through community-level livelihood projects and infrastructure expansion. The new strategy also embraces the importance of the mutual benefits for Viet Nam through cross-border trade, access to markets within the Greater Mekong Subregion (GMS), and support expansion of subregional tourism and subregional environmental protection. With the increasing role of the GMS cooperation, ADB is preparing a regional cooperation strategy and program for GMS for the first time, for Board discussion in early 2004.

To concretize the relationship and set common and monitorable poverty reduction and development targets, move it further, ADB and Viet Nam signed a Partnership Agreement for Poverty Reduction in 2002. On 28 August 2003, ADB Board of Directors endorsed the Country Strategy and Program Update for Viet Nam for 2004 - 2006, with a total lending assistance for Viet Nam of about $975 million for 2004 to 2006 and TA grants totalling $15 million to address Viet Nam's needs for capacity building, project preparation, sector analysis, and institutional development. This lending amount is based on annual commitments of 225 million from ADB concessional funds, the Asian Development Fund, and up to $100 million from its ordinary capital resources.

ADB's Annual Lending over the last ten years (as of end 2002)

ADF - Asian Development Fund; OCR - ordinary capital resource

Sectoral composition of ADB's Lending Assistance to Viet Nam

4. Some examples of ADB operations

(i) Physical Infrastructure: Through ADB's assistance 1160 km of highways have been completed, of which 1000km are Highway No.1, and more than 5,000 km of other roads. A total of 6.7 million people will be served with clean water through water supply and sanitation projects. In addition, a total of 200,000 hectares are irrigated under ADB financed projects.

(ii) Social Infrastructure: The Population and Family Planning Project supported the strengthening of primary health care system at the commune and district levels of 15 provinces, with emphasis on safe motherhood and more broadly for family health, and to improve population control services. The Lower Secondary Education Project has helped the improvement of the overall quality of lower secondary education in three broad areas: curriculum and materials, quality of teachers, and teacher training institutions. Access to lower secondary education was also increased by addressing the most pressing physical requirements, including schools and teaching equipments, in ten provinces. The emphasis of ADB operations has been also on the cross-country dimension of HIV/AIDS transmission. ADB incorporates education on AIDS prevention for workers engaged in the implementation of projects, particularly those linked to cross-border movement of people (for example the Phnom Penh-Ho Chi Minh City Highway and the East-West Corridor transport projects). In addition, regional assistance for Community Action for Preventing HIV/AIDS, approved in May 2001, aims at assisting Viet Nam, Lao PDR, and Cambodia in

behaviour change communication activities for host communities and mobile population
promoting the use of condoms through social marketing
care and management of sexually transmitted infection (STI).

(iii) Pro-poor sustainable economic growth: ADB coordinates closely with the Government and other donor partners in the preparation and implementation of the Comprehensive Poverty Reduction and Growth Strategy. A loan of $43.1 million for Central Region Livelihood Improvement was approved in 2001. The primary objective of the Project is to assist the Government of Viet Nam to ensure that about 350,000 poor in 139 uplands communes of Kon Tum, Thua Thien - Hue, Quang Tri and Quang Binh achieve sustainable livelihoods with an improved quality of life through a reduction in the incidence of poverty in the project area.

(iv) Good governance: ADB approved in January 2003 a program loan supporting implementation of the Public Administration Reform Master Plan, accompanied by three complementary grant technical assistance projects co-financed by New Zealand and France. The loan finances implementation of two of the Master Program's seven action areas, focusing on:

training and skills enhancement of public officials, and
modernizing the administrative system, including computerization and e-government initiatives.

The project will improve efficiency and reduce red tape, transaction costs, and corruption, to which the poor are the most exposed.

(v) Combating money laundering through development of the regulatory framework: In December 2002, ADB approved a TA for Capacity Building for Non-Bank Financial Institutions and the Capital Market. Among others, the TA will help the Government of Viet Nam establish an anti-money laundering (AML) system to fight against criminal activities in and outside of the financial sector. The TA will assist in drafting a decree on AML regulations, and drawing a master plan for establishing a financial intelligence unit in Viet Nam.

(vi) GMS Projects: To promote economic activities and to facilitate trade between and among GMS countries, ADB's projects help finance three economic corridors: the East-West Corridor in central Viet Nam, the Ho Chi Minh City - Phnom Phenh Highway, and Kunming-Haiphong. These projects do not only involve the rehabilitation of roads, but also facilitate discussions among GMS members on the cross-border arrangements. Project preparatory TA for GMS - Kunming-Haiphong corridor project - is underway. The TA is examining alternatives to suggest the optimum transport mode to connect Lao Cai, near the Peoples' Republic of China border, to Hai Phong. To promote sustainable tourism in the lower Mekong countries, the GMS Tourism Project, covering Viet Nam, Lao PDR, and Cambodia, was approved in 2002.

(vi) Markets for Poor: ADB has just commenced a participatory research and capacity building project in Viet Nam with the theme ''making markets work better for the poor". The project, with co-financing from the UK Government and parallel funding by the ADB Institute, Tokyo, covers Viet Nam in addition to Cambodia and Lao PDR. It aims at conducting policy research on how market mechanisms can be used to improve the situation of the poor, or the negative impact of markets and market failures can be mitigated.