October 25, 2006

Vietnam

Ownership

  1. Partners have operational national development strategies
  1. Coherent long-term vision with medium-term strategy derived from vision
  1. Policy formulation and public actions in Vietnam are guided by a range of well-developed and interconnected strategies and plans. The Government has articulated its development vision for the decade 2001-10 in its Socio-Economic Development Strategy (SEDS), which expresses a strong commitment to growth, poverty reduction and social equity. The SEDS, endorsed by the Ninth Party Congress in 2001, lays out a path of transition towards a market economy with socialist orientations. It commits Vietnam to full openness to the global economy over the coming decade, and the creation of a level playing field between state and private sectors. The SEDS emphasizes that the transition should be pro-poor and notes that this will require heavier investment in rural and lagging regions. It gives strong emphasis to poverty reduction and social equity, and a more modern system of governance.
  2. The specific actions needed to translate the SEDS into reality are described in the constitutionallyrequired five-year Socio-Economic Development Plan (SEDP) for 2006-10 as well as sectoral five year plans. In accordance with the Directive issued by the Prime Minister in September 2004 to guide its preparation, the 2006-10 SEDP serves both as a five-year plan for the Government and a Poverty Reduction Strategy (PRS) for external partners, integrating the fundamental principles that characterized the formulation of the Comprehensive Poverty Reduction and Growth Strategy (CPRGS), Vietnam’s first PRS. While it does not reiterate the details spelled out in sectoral and provincial development plans, the SEDP provides an overarching framework to ensure that sectoral andprovincial medium-term strategies are effectively implemented.[1]
  3. Sectoral medium-term development strategies detailing a large number of targets and indicators are prepared by all line ministries to operationalize the SEDS and other longer-term sectoral plans. These include, for example, five year plans for rural development, urban development, transport, energy, education, environment and health. These five year plans are complemented by specific strategies such as the Higher Education Reform Agenda 2020, the National Education for All (EFA) Action Plan for 2003-15, HIV/AIDS Strategy for 2010, as well as a 2006-08 National Action Plan for Avian Influenza. A 2020 strategy for developing urban infrastructure and a 2001-10 Public Administration Reform Master Plan are in place. In May and June 2005 respectively, the Government also adopted a 2010 Legal System Development Strategy and a 2020 Judicial Reform Strategy. The Government also undertook a redesign of the National Targeted Programs (NTPs) on Poverty Reduction for the period 2006-10, which are an integral part of the SEDP. They include the Hunger Eradication and Poverty Reduction Program, which is aimed at providing targeted assistance to poor households, andthe Program on Socio-economic Development for especially disadvantaged ethnic minority, mountainous, border, remote and isolated communes, also known as Program 135.
  4. Provinces and cities are required to formulate medium-term development plans every five years, describing policies to implement the SEDS and the SEDP.The Government is planning to establish a comprehensive facility for Strengthening Provincial Planning Reforms, which is expected to facilitate the integration of SEDP goals and principles into local socio-economic planning. Guidelines previously issued to roll out the CPRGS approach in provincial planning enabled the process to be launched in twenty provinces and the Government is planning to use these to scale up the roll-out of the SEDP approach in all provinces and cities by 2008.
  1. Country specific development targets with holistic, balanced, and well sequenced strategy
  1. The SEDP outlines an overall framework for economic growth and industrial development, aimed at guiding Vietnam into the group of middle-income countries by 2010, with a strong pro-poor focus. It aims at achieving sustainable development by focusing policies around an economic, a social, and an environmental pillar and identifies the key development challenges for Vietnam as 1) the need to improve the business environment; 2) the necessity to strengthen social inclusion; 3) the importance of strengthening natural resource and environmental management; and 4) the need to improve governance. Building on the objectives set out in the CPRGS, the SEDP sets clear targets, among others, for eliminating hunger and reducing poverty, developing a social security system and ensuring social equity and equality. The SEDP addresses cross-sectoral issues, such as gender equality and youth development. It also has a specific focus on ethnic minorities.
  2. The 2006-10 SEDP strives toward twelve2010 Vietnam Development Goals as did the CPRGS. These goals and targets are the results of substantial analytical work that was carried out under the coordination of a Poverty Task Forcewhich included the majority of Government members at the time of CPRGS formulation, four bilateral assistance agencies, four multilaterals partners, and four NGOs. The Task Force was established to coordinate detailed analysis of poverty in the country. The work drew on the MDGs, assessed their relevance alongside the goals and targets in the SEDS, sector strategies and five year plans, and selected those that most effectively captured progress in reducing poverty and promoting social equity. Some of the selected goals are outside the MDGs, but were added on the basis of their strategic importance for economic growth, poverty reduction and social equity. Good progress has been made towards achieving the targets of primary school attendance, universal education andreducing child mortality and malnutrition. However, greater emphasis would be needed in the health sector to address non-communicable diseases as well as new ones such as avian influenza and HIV/AIDS.
  1. Capacity and resources for implementation
  1. The Government is guided by the SEDP while preparing annual budgets.On the basis of the circular guiding the preparation of the 2006 budget, it has taken action to adopt a medium term perspective in budget preparation in order to allow for better prioritization of expenditures, improved overall efficiency of public spending, and stronger integration between capital and recurrent budgets. The Government adopted a 2006-08 MTEF and asked line ministries and provinces to prepare a budget framework for the period 2006-10, based on the SEDP. Sectoral MTEFs have been piloted in education, health, transport, agriculture and rural development, as well as in four provinces. Local authorities, especially Provincial Governments, are responsible for allocating almost half of the budget resources based on their own priorities. All budgets are eventually consolidated into the state budget. Based on the SEDSand maintained in the SEDP, the Government decided to increase the education share of the budget from 15 percent in 2000 to 18 percent in 2005 and 20 percent in 2010. Expenditures for education and training reached 17.1 percent of the national budget in 2004. It is expected that the final accounts for 2005 will show that the target amount of resources allocated to education has been met. A second phase of the Public Administration Reform Master Program is being launched, built around organizational restructuring, human resources management and salary reform, and simplified administrative procedures.
  1. Participation of national stakeholders in strategy formulation and implementation
  1. Country leaders across the executive have played a key role in shaping the SEDP. The Ministry of Planning and Investment (MPI) is responsible for preparing five-year plans, in collaboration with line ministries and provincial authorities. Each line ministry and province prepares a five-year plan to serve as an input to and support the implementation of the SEDP.
  2. The SEDP formulation builton extensive participation of a broad range of stakeholders. Three regional workshops and several consultations, including with poor communities in several sites, were organized by the Government to foster debate on the five-year plan; initial preparations were discussed at the meeting of the Poverty Task Force (PTF) held in April 2005. Information on the SEDP planning process was shared with external and domestic stakeholders during aConsultative Group (CG) meeting held in Hanoi in December 2005 and aWorld Bank-chaired gathering known as “the friends of the five-year plan”, held in September 2005. For the first time in 2006, the Government invited comments from the public on a draft political report prepared for the Tenth Party Congress.
  3. Civil society involvement in SEDP formulation has been significant, building on the approach adopted by MPI during CPRGS formulation and implementation, which emphasized the incorporation of views from outside the Government into planning processes. Local experts, academics and researchers, as well as international and local civil society organizations, assisted in drafting the SEDP. Consultation workshops with local NGOs were organized and their feedback presented in a report to the MPI. Significant efforts have been made by the Government to solicit the views of women, children and disabled people.
  4. Action has been taken to involve private sector representatives in policy formulation and implementation. The SEDP reflects some of the inputs provided by private sector representatives during some of the consultations and acknowledges the importance of the private sector as an engine for economic growth and job creation. Through the Vietnam Business Forum, jointly chaired by the MPI, the World Bank and IFC, the Government engaged in a dialogue with the private sector aimed at improving the legal and institutional framework for different enterprises. The Vietnam Business Forum meets regularly prior to semi-annual CG meetings and provides an opportunity for the business community to interact with the Government in a structured way. The last meeting of the Vietnam Business Forum took place inJune 2006.
  5. Parliamentary involvement in development planning and medium-term strategy implementation is strengthening. The National Assembly is constitutionally required to approve five-year plans. It discussed a draft of the SEDP in November 2005 and it approved the 2006-10 SEDP in June 2006. It did not examine the CPRGS in its plenary session, but it played an increasingly assertive role during CPRGS implementation by involving poor people directly in discussions on new legislation and in the implementation of several projects. AState Budget Lawwas approved in January 2004andreaffirms the constitutional power of the National Assembly to approve the overall budget, its composition and the allocations to line ministries, central agencies and to provincial and city level of government. Since thenParliament has been engaging in lively debates on the budgetary process and resource allocations, including links to the national strategy. The MTEF is not submitted to the National Assembly, either separately or as part of the Government’s yearly budget submission, but there has been considerable informal engagement and discussion with National Assembly members about the MTEF.

Alignment

  1. Reliable country systems
  1. The Government is making progress in its efforts to strengthen public financial management and budget execution. The 2004 State Budget Law, which is one of the cornerstones of the Public Financial Management Reform Program, streamlines budget execution processes by creating a single Treasury account, allows for improved monitoring of expenditures anddesignates the Treasury Department as the main agency charged with budget execution and financial management information.The Government has strengthened accountability by establishing the State Audit of Vietnam asan independent entity reporting directly to the National Assembly. It has issued a new Accounting Law, as well as accounting and auditing standards, and has made significant achievements in terms of information disclosure. Specifically, the entire 2005 planned and actual budgets, both at the central and district levels, were disclosed for the first time, including aggregate amounts for defense expenditure. An Inter-ministerial Steering Committeewhere the Vice Ministers of Education, Health, Transport and Agriculture are representedis responsible for coordinating implementation of the 2004 Public Expenditure Review/Integrated Financial Assessment (PER/IFA) recommendations. The Government has completed the overall design of an integrated Treasury and Budget Management Information System (TABMIS). The first phase of the TABMIS is expected to become operational in 2009.The World Bank Country Policy and Institutional Assessment (CPIA) performance criterion that assesses the quality of budgetary and financial management places Vietnam at 4 on a scale of 1 (very weak) to 6 (very strong).
  2. The Government passed a Procurement Law which became effective in April 2006.It includes improvements to the public procurement system, previously enacted in lower level legislation as well as new provisions to improve transparency and competition in public procurement.To support the implementation of the Law, an implementation Decree is currently being developed.As part of the effort aimed at strengthening public procurement, in September 2005 the MPI issued standardbidding documents for procurement of goods. Standard bidding documents for works are currently under development. Since April 2005, a Public Procurement Bulletin has been in official use forpublication of bidding opportunities and information on award of large contracts. An electronic version of the bulletin is currently being piloted.[2]The Government is planning to develop a public procurement monitoring system, based on the OECD/DAC guidelines and a baseline exercise will be conducted in 2006.
  3. The fight against corruption has gained momentum with the November 2005 approvalof an Anti-Corruption Law, which includes articles on asset declaration by high-ranking public servants, whistle-blowing and denunciation, conflicts of interest, outlawing of bribery and other related corruption crimes.There has recently been a well-publicized corruption scandal involving Government and possibly ODA funding for transport investments. The Government is taking firm actions against the officials allegedly involved in the corrupt activities and the scandal has contributed to reviving the debate on how to fight corruption and ensure efficient use of public and ODA funds.
  4. Government’s anti-corruption efforts were at the center stage of discussions at the Mid-Term CG Meeting held in June 2006. The Government made clear statements explaining the strong commitment to tackling corruption and describing the measures taken to investigate alleged corruption in ODA and Government-funded projects. It was recognized that corruption is damaging to the poor as well as to Vietnam’s image internationally and that it could affect levels of FDI and ODA available to Vietnam. Donors expressed support to the development of an anti-corruption strategy which could be supported by an actionable plan with a clear monitoring framework. This would allow the Government to demonstrate progress to the Vietnamese public and to foreign investors. Many of the most effective measures to combat corruption will come in the form of measures and actions that are not traditionally labeled as “anti-corruption”. As an example, CG delegates were impressed with the role that the media had played in bringing corruption cases to the public eye and encouraged the government to continue to view the media as an ally in the fight against corruption. While donors are facing greater pressures to demonstrate the integrity of ODA, there is a desire to do this using improved country systems rather than imposing controls from outside or adding additional layers of bureaucracy.
  5. Since May 2005 the National Assembly has been discussing the possibility of establishing a specialized anti-corruption agency, but its role is still to be defined in detail and a Decree is under preparation to establish the Anti-Corruption Steering Committee mandated in the Anti-Corruption Law. The Secretariat of the Steering Committee is expected to be in the Office of Government (OOG). The Government Inspectorate is in the process of preparing the decree on asset monitoring. The OOG and the State Inspectorate would however need strengthening to implement the Anti-Corruption Law.
  1. Aid flows are aligned on national priorities
  2. Government leadership of coordination
  1. Government leadership in overall coordination of development assistance is strong. MPI’s Foreign Economic Relations Department, in charge of coordinating interaction with both multilateral and bilateral partners, takes the lead in coordination. As the levels of ODA increase, the Government has urged external partners to enhance and align their ODA related reporting mechanism by using the newly implemented Development Assistance Database (DAD) Vietnam, build partnerships to ensure effective use of ODA funds and to reduce the management burden on the country’s administration. DADVietnam, which is implemented by MPI with UNDP support, includes project level information that has been collected by UNDP and annually published in the Development Cooperation Report since 1993.Backed up by internet technology, DAD is a user-friendly database designed to enhance the Government’s ability to coordinate and manage development assistance. To establish the strategic direction for ODA use over the coming five-year period, the Government is also developing a Strategic Framework for ODA Mobilization and Utilization 2006-10, which will identify guiding principles, priorities and criteria for ODA utilization in support of SEDP goals and targets. The Strategic Framework is currently being reviewed by the Prime Minister for approval.
  2. Annual CG meetings, which are held in Vietnam since 1999 and co-chaired by the MPI and the World Bank, support the close collaborationbetween the Government and external partners. The last CG meeting took place in December 2005 in Hanoi. Mid-year informal CGs have been held in Vietnam since 1998. Private sector and civil society also participate in CGs. Twenty-three Partnership Working Groups focus on thematic, sectoral, and geographic issues; they are chaired by Vietnamese authorities and meet regularly. To provide a regular forum for dialogue on issues regarding ODA effectiveness, a Partnership Group on Aid Effectiveness (PGAE), with broad representation of bilateral and multilateral development assistance agencies, including the Like-Minded Donor Group (LMDG: Australia, Canada, Denmark, Finland, Ireland, Germany, Netherlands, New Zealand, Norway, Sweden, Switzerland, and UK), the World Bank, the ADB, Japan, France, the EC, USAID and UN - has been established. The Government and external partners also lead a number of working groups aimed at fostering dialogue on budget support issues. There are also a number of donor coordination groupings including the Five Banks (ADB, AFD, JBIC, KfW, World Bank), harmonization activities among EC member states, the UN Development Group and NGO working groups.
  3. Partners’ assistance strategy alignment
  4. During the 2005 CG meeting, external partners agreed to align their development assistance strategies to the Government’s 2006-10 SEDP as its PRS.External partners supported the Government in preparing the SEDP in a results-based poverty-focused and participatory manner. The five major external partners are Japan, the World Bank, ADB, France and Denmark, accounting for approximately 86 percent of gross ODA in 2003-04. The IMF also provides technical assistance through its PRGF expired in 2004. Net ODA accounted for 4 percent of GNI in 2004.[3]The World Bank is formulating a 2006-10 Country Assistance Strategy in support of the SEDPand is discussing a joint assessment with other key external partners, including ADB, DFID and Japan. The ADB is finalizinga Country Strategy and Program for 2007-10which is aligned to the SEDP. The UN Development Assistance Framework 2006-10 supports the SEDP andwas approved in June 2005. UNDP, UNICEF and UNFPA have prepared Country Program Action Plans to implement the UNDAF. The EC is finalizing a new Country Strategy Paper to promote alignment with the 2006-10 SEDP. Many bilateral partners, including Belgium, Denmark, France, New Zealand and Switzerland, have aligned their strategy cycle with the SEDP and are currently developing new assistance strategies. Others are reviewing and updating current strategies to ensure that they are in line with the SEDP (Australia, Canada and Sweden).
  5. Partnership organization
  6. Action is being taken by development assistance agencies to increase their presence in the country to better manage their aid programs. As part of the Hanoi Core Statement, a localized version of the Paris Declaration on Aid Effectiveness, a survey was conducted in May 2006.Many external partners, including Denmark, DFID, EC, Netherlands, Sweden, UNDP and WHO, are fully decentralizedand all their assistance programs are managed by staff residing in Vietnam. The UN country team is piloting the establishment of one UN in Vietnam. The World Bank’s decision-making process is decentralized, with the Country Director based in Hanoi. As to ADB operations, more responsibilities have been decentralized to the Vietnam Resident Mission including policy dialogue, programming and project administration of about 40 percent of the portfolio. Japan has also strengthened its field-level decision-making by establishing ODA taskforces (Embassy of Japan, JICA, JBIC and JETRO), which have initiated field-based sectoral dialogues with their Vietnamese counterparts since 2004.
  1. Strengthen capacity by coordinated support

Coherent and coordinated capacity support