Viet Nam: Financial Sector Deepening Program, Subprogram 1

Sovereign Project | 44251-013

Summary

Building on the Post Program Partnership Framework (P3F) of the previous financial sector program, the Financial Sector Deepening Program (FSDP) will support the Government's sector initiatives, to deepen the securities markets and develop related market infrastructure, to increase the role of non-bank financial sector in the financing of economic activity in Viet Nam. The proposed Subprogram 1 (SP1) of FSDP will focus on developing a well functioning money market, promoting a deeper and more liquid Government bond market, and building capacity within public institutions in accordance with the Government human resources development plan.

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Project Name Financial Sector Deepening Program, Subprogram 1
Project Number 44251-013
Country Viet Nam
Project Status Closed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3081-VIE: Financial Sector Deepening Program, Subprogram 1
Asian Development Fund US$ 45.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector

Finance - Finance sector development - Insurance and contractual savings - Money and capital markets

Gender Equity and Mainstreaming No gender elements
Description Building on the Post Program Partnership Framework (P3F) of the previous financial sector program, the Financial Sector Deepening Program (FSDP) will support the Government's sector initiatives, to deepen the securities markets and develop related market infrastructure, to increase the role of non-bank financial sector in the financing of economic activity in Viet Nam. The proposed Subprogram 1 (SP1) of FSDP will focus on developing a well functioning money market, promoting a deeper and more liquid Government bond market, and building capacity within public institutions in accordance with the Government human resources development plan.
Project Rationale and Linkage to Country/Regional Strategy

Past Engagement. For the last decade and a half, ADB has supported financial sector development in Viet Nam with three successive clusters of Financial Sector Program Loans (FSPL). FSPL I facilitated the introduction and adoption of basic concepts and systems integral to a market based financial system, established the foundations for a commercialized banking sector and key financial market infrastructure. FSPL II promoted the development of the non-bank financial sector by developing operational, regulatory and supervisory frameworks for capital markets and related infrastructure, promoting institutional investors, developing a legal framework for leasing, and introducing an anti-money laundering regime. FSPL III promoted a deeper financial sector by strengthening the operational, legal and regulatory environment for efficient and liquid capital markets. ADB programs and technical assistance have contributed to the emergence of a nascent yet fast growing financial sector capable of intermediating both domestic and foreign savings into productive activities.

Need for continuous financial sector reforms. Viet Nam has made significant progress in socioeconomic development under Do Moi, (economic renovation programs) and is well on the way to become a more mature middle-income country. The reforms under Do Moi (Phase 1 and 2) have produced faster rates of economic growth, and helped Viet Nam reach (lower) middle income status with income per capita of US$ 1200/person (2010). The country now aspires to reach a higher middle income status with income per capita of at least US$3000/person, and significantly improve human development and reduce poverty by 2020. To achieve these goals, the Government's Socio-Economic Development Strategy (SEDS) 2020 has laid out an encompassing plan to transform Viet Nam into a modern, productive, and equitable economy.

To support economic transformation envisaged under SEDS 2020, efficient and effective intermediation of savings from both domestic and foreign sources is crucial. Recognizing this, SEDS 2020 affirms that financial sector reforms are essential to support the country's progression towards a more productive and mature economy. Continuous financial sector reforms are also viewed as necessary for meeting the economic challenges of an increasingly open economy after accession to the World Trade Organization (WTO). Moreover, compared with low-income developing countries on the one hand, and high-income developed countries on the other, middle-income emerging market economies are the most vulnerable to financial crises and instability, the 2008 credit crisis in the United States notwithstanding. Hence, continuous financial sector reform becomes more critical as Viet Nam is migrating towards a higher middle income status. FSDP will support the Government of Viet Nam in undertaking further financial sector reforms in this new stage of economic development in Viet Nam.

Impact Sustained financing of investment activities from domestic and foreign sources
Project Outcome
Description of Outcome Expanded non-bank financing of investment activities.
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

A Well Functioning Money Market

A deepened and more liquid Government bond market

Improved Capacity of Public Institutions in the Financial Sector

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design Satisfactory
During Project Implementation To be updated
Responsible ADB Officer Stephen Schuster
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SERD
Executing Agencies
State Bank of VietnamADB@GOSBV.ORG47-49 Ly Thai To Street
Ha Noi, Viet Nam
Timetable
Concept Clearance 03 Oct 2012
Fact Finding 13 May 2013 to 17 May 2013
MRM 27 Sep 2013
Approval 06 Dec 2013
Last Review Mission -
Last PDS Update 25 Oct 2011

Loan 3081-VIE

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
06 Dec 2013 24 Jan 2014 23 May 2014 31 Mar 2014 31 Jul 2014 18 Aug 2014
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 45.00 Cumulative Contract Awards
ADB 45.00 06 Dec 2013 45.18 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 06 Dec 2013 45.18 0.00 100%

Safeguard Documents

See also: Safeguards

No documents found.

Evaluation Documents

See also: Independent Evaluation

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