Document of The World Bank FOR OFFICIAL USE ONLY Report No. 64923-VN INTERNATIONAL DEVELOPMENT ASSOCIATION PROGRAM DOCUMENT FOR A PROPOSED CREDIT IN THE AMOUNT OF SDR 94.6 MILLION (US$150.0 MILLION EQUIVALENT) TO THE SOCIALIST REPUBLIC OF VIETNAM FOR A TENTH POVERTY REDUCTION SUPPORT CREDIT November 14, 2011 Poverty Reduction and Economic Management Department Vietnam Country Management Department East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No. 64923-VN
INTERNATIONAL DEVELOPMENT ASSOCIATION
PROGRAM DOCUMENT
FOR A PROPOSED CREDIT
IN THE AMOUNT OF SDR 94.6 MILLION
(US$150.0 MILLION EQUIVALENT)
TO THE
SOCIALIST REPUBLIC OF VIETNAM
FOR A
TENTH POVERTY REDUCTION SUPPORT CREDIT
November 14, 2011
Poverty Reduction and Economic Management Department
Vietnam Country Management Department
East Asia and Pacific Region
This document has a restricted distribution and may be used by recipients only in the performance of their official
duties. Its contents may not otherwise be disclosed without World Bank authorization.
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VIETNAM - GOVERNMENT FISCAL YEAR
January 1 – December 31
CURRENCY EQUIVALENTS
(Exchange Rate Effective as of November 2011)
Currency Unit = Vietnamese Dong
US$1.00 = 20,890
WEIGHTS AND MEASURES Metric system
ABBREVIATIONS AND ACRONYMS
ASEAN Association of South East Asian Nations MOF Ministry of Finance
CFAA Country Financial Accountability
Assessment
MOH Ministry of Health
CIC Credit Information Center MOIT Ministry of Industry and Trade
CPAR Country Procurement Assessment Review MOJ Ministry of Justice
CPRGS Comprehensive Poverty Reduction and
Growth Strategy
MOLISA Ministry of Labor, War Invalids, and Social
Affairs
CPS Country Partnership Strategy MONRE Ministry of Natural Resources and
Environment
DA Deposit Account MPI Ministry of Planning and Investment
DP Development Partner NGO Non-Governmental Organization
DPL Development Policy Lending NTP National Target Program
FDI Foreign Direct Investment PER-IFA Public Expenditure Review-Integrated
Fiduciary Assessment
FIRST Financial Sector Reform and Strengthening
Initiative
PPP Public-Private Partnership
FY Fiscal Year PRSC Poverty Reduction Support Credit
GDP Gross Domestic Product QEA Quality at Entry Assessment
GSO General Statistic Office ROC Regional Operations Committee
HCMC Ho Chi Minh City SAV State Audit of Vietnam
IBRD International Bank for Reconstruction and
Development
SBV State Bank of Vietnam
ICR Implementation Completion Report SDR Special Drawing Rights
IDA International Development Association SEDP Socio-Economic Development Plan
IEG Independent Evaluation Group SME Small and Medium Enterprise
IFC International Finance Corporation SOCB State-Owned Commercial Bank
ILSSA Institute of Labor, Science and Social Affairs SOE State-Owned Enterprise
IMF International Monetary Fund VASS Vietnam Academy of Social Sciences
IPSAS International Public Sector Accounting
Standards
VDR Vietnam Development Report
LDP Letter of Development Policy VHLSS Vietnam Household Living Standards
Survey
M&E Monitoring and Evaluation VSS Vietnam Social Security
MDG Millennium Development Goal WTO World Trade Organization
MOET Ministry of Education and Training
Vice President:
Country Director:
Sector Director:
Task Team Leader:
James W. Adams, EAPVP
Victoria Kwakwa, EACVF
Ahmad Ahsan (Acting), EASPR
Keiko Kubota, EASPR
SOCIALIST REPUBLIC OF VIETNAM
TENTH POVERTY REDUCTION SUPPORT CREDIT (PRSC 10)
TABLE OF CONTENTS
CREDIT AND PROGRAM SUMMARY .................................................................................................. i
I. INTRODUCTION ......................................................................................................................... 1 II. COUNTRY CONTEXT ................................................................................................................ 2
RECENT ECONOMIC TRENDS .................................................................................... 2 THE GOVERNMENT‟S POLICY RESPONSE .............................................................. 4 MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY ............................ 5 POVERTY REDUCTION ................................................................................................ 8
III. THE GOVERNMENT’S PROGRAM AND PARTICIPATORY PROCESSES .................... 9 IV. BANK SUPPORT TO THE GOVERNMENT’S PROGRAM .................................................. 11
LINK TO CPS ................................................................................................................... 11 COLLABORATION WITH THE IMF AND OTHER DONORS .................................... 12 RELATIONSHIP TO OTHER BANK OPERATIONS .................................................... 13 LESSONS LEARNED ...................................................................................................... 14 ANALYTICAL UNDERPINNINGS ................................................................................ 16
V. THE PROPOSED OPERATION ................................................................................................. 18 OPERATION DESCRIPTION ......................................................................................... 18 POLICY AREAS .............................................................................................................. 19
VI. OPERATION IMPLEMENTATION .......................................................................................... 25 POVERTY AND SOCIAL IMPACTS ............................................................................. 25 ENVIRONMENTAL ASPECTS ...................................................................................... 26 IMPLEMENTATION, MONITORING AND EVALUATION ....................................... 27 FIDUCIARY ASPECTS ................................................................................................... 28 DISBURSEMENT ............................................................................................................ 29 RISKS AND RISK MITIGATION ................................................................................... 29
ANNEXES
ANNEX 1: Letter of Development Policy ............................................................................................. 31 ANNEX 2 : PRSC 6-10 Policy Matrix ................................................................................................... 34 ANNEX 3: Monitoring Progress Towards Outcome Indicators ............................................................ 43 ANNEX 4 : Supporting Documentation for prior and policy actions under PRSC10 ............................ 48 ANNEX 5 : Public Financial Management in Vietnam .......................................................................... 52 ANNEX 6: Environmental Assessment ................................................................................................. 57 ANNEX 7 : Fund Relations Note ........................................................................................................... 60 ANNEX 8 : At –A-Glance Table ............................................................................................................ 62
MAP
LIST OF TABLES
Table 1: Key Economic Indicators .......................................................................................................................... 3 Table 2: Government Budgetary Operations ( Percent of GDP) ............................................................................. 6 Table 3: Development Partners Co-Financing PRSC Operations .......................................................................... 12 Table 4: Assessment of Prior Actions for PRSC 10 .............................................................................................. 21
LIST OF FIGURES
Figure 1: Poverty Trends in Vietnam ...................................................................................................................... 8 Figure 2: Regional Dimensions of Poverty ............................................................................................................. 9
LIST OF BOXES
Box 1: Participatory Process for the Government‟s Socio-Economic Development Plan 2006-2010 ................... 10 Box 2: Good Practice Principles for Conditionality .............................................................................................. 25
The PRSC 10 Credit was prepared by an IDA team consisting of:
Core Team: Keiko Kubota (Task Team Leader), Thang-Long Ton, Quyen Hoang Vu (Economists), Nuong
World Bank 250 100 100 100 100 175 150 350 150 150
Total 295 131 216 220 256 371 305 503 297 TBA
Notes: Figures are in US$ million. (e) estimate, (p) projections, subject to approval.
1 The financing for the PRSC Secretariat are provided by DFID (PRSCs 4-5), Switzerland (PRSCs 5-6), World Bank
(PRSC 6), AusAID (PRSC 7), CIDA (PRSC 8), JICA and World Bank (PRSC 10).
2 PRSC 1 operation was in two tranches: World Bank financing were $150 million and $100 million, and co-
financiers‟ contributions were $22 million and $23 million for the two tranches, respectively.
3 In addition, Japan also contributed a parallel-finance in the amount of Japanese Yen 47.9 billion to support the
government‟s stimulus efforts.
4 ADB‟s finance will support both PRSC 9 and 10 operations.
42. The PRSC operations serve as an aid harmonization platform, supported by a large number
of development partners. Over the years, many partners participated in the policy dialogue through
PRSC series, with the number of partners providing financing peaking at 11 for PRSCs 6 and 7.
PRSC 10 is expected to have seven co-financiers (Table 3). The PRSC operations are a vehicle for
development partners to follow a large number of policy areas even with a small number of staff.
They are also a common forum to raise issues or concerns with the government, allowing an easier
access to large number of ministries and agencies than would have been possible if the partner was
acting alone. The development partners typically engaged selectively in policy areas, based on their
interests and technical capacity on the ground. Many of the development partners provided TA around
the PRSC policy dialogue, which proved particularly effective in highly technical and complex areas.
The role of co-financiers evolved over time from providers of financing to partners engaged in the
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preparation of the operations and the policy dialogue with the government. This coordination also
reduced the transaction costs for the government ministries and agencies.
43. The volume of resources mobilized so far is significant. About US$2.6 billion have been
committed in budget support over the first nine PRSC operations. The total amount could rise to close
to US$3 billion with the tenth operation. However, when compared with the national budget, the
PRSC operations amount to less than 2 percent of public expenditures, which means that Vietnam is
not aid-dependent, and chooses to engage in dialogue with the donors more for the knowledge and
expertise brought to the table. This fact raises the bar for the policy dialogue, giving prominence to its
analytical underpinnings.
RELATIONSHIP TO OTHER BANK OPERATIONS
44. The CPS 2007-11 is organized around the pillars of the SEDP, with the policy dialogue to
help implement Vietnamese reform program. The PRSCs are the apex of the policy dialogue, while
sector development policy operations (DPOs) delve deeper into sector-specific dialogue. Policies
affecting multiple sectors are typically addressed under PRSC, whereas sector-specific or more
detailed ones are treated under sectoral DPOs. A program comprising investment lending, analytical
work, and technical assistance supports implementation at the sectoral level. There is a
complementarily between the different components of the partnership program. The overall direction
of the policy dialogue is informed by the analytical work. Concrete policy measures are often made
possible by preparatory TA work. Investment credits and loans also provide an opportunity to pilot
new initiatives and approaches, which are then scaled up through the policy dialogue. The reforms
supported by the latter, in turn, enhance the effectiveness of sectoral investments.
45. Nine PRSC operations have supported the implementation of Vietnam‟s reform agenda so
far. PRSC 1, a two-tranche credit, was approved by the Board in June 2001. Its focus was mainly on
the structural reform agenda. The second tranche of PRSC 1 was released in December 2002. PRSC
2, a one-tranche operation like all its successors, was approved in June 2003. This operation was
aligned with the Comprehensive Poverty Reduction and Growth Strategy (CPRGS) of the
Government, which made it possible to broaden considerably the range of reforms supported. In
addition to the mainly structural aspects covered by PRSC 1, this second credit included various policy
actions aimed at keeping development inclusive and building modern governance. PRSCs 3 to 5 were
approved in June 2004, 2005 and 2006 respectively and had a broad sectoral coverage. The sixth
PRSC, approved in 2007, launched the second series in the program. The seventh, eighth and ninth
PRSCs were approved in June 2008, June 2009 and June 2010, respectively. The operations in the
second cycle added natural resource management and the environment to the program.
46. When there is a need for a more focused sector policy dialogue, sector DPOs complement
the PRSCs, as is the case with the series of Program 135 Phase 2 Operations (Cr 4274-VN, Cr 4580-
VN, and Cr 4918-VN), Higher Education Development Policy Programs (Cr 4604-VN, Cr 4786-VN),
Public Investment Reform DPL (Ln 7838-VN), Power Sector Development Policy Operations (Cr
4711-VN and Ln 7868-VN), and Climate Change Development Policy Operation (P122667, under
preparation). For example, Program 135 Phase 2 supports the government‟s National Targeted
Program for “Socio-economic development in communes facing extreme hardship in ethnic minority
and mountainous areas” is focused on reducing poverty at grassroots level, targeting the ethnic
minorities in particular. The program is focused on direct poverty reduction using community-based
approach, whereas PRSCs seek strategic policy reforms that would have broader but perhaps more
indirect impacts on poverty reduction. Some of the policy issues that were originally included on the
reform agenda at the beginning of this PRSC cycle are transferred to sectoral DPOs once a strategic
policy decision has been made. For example, the separation of power transmission and generation
assets and the regrouping of transmission assets under a single National Power Transmission
Corporation had been accomplished under previous PRSCs, as had been the adoption of a pricing
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system for electricity from renewable energy. Follow-up issues are now being addressed through the
Power Sector DPOs.
47. Several of the investment projects and AAA products are particularly complementary to the
PRSCs. The Financial Sector Modernization and Information Management System Project (Cr. 4505)
is focused on SBV, Deposit Insurance and Credit Information Center (CIC) capacity building and the
Rural Finance III project supports capacity development for enhanced supervision of microfinance
institutions. A Financial Sector Reform and Strengthening (FIRST) Initiative grant is supporting CIC
in developing strategy, business plan and training programs. Ongoing AAA and related work is
supporting SBV in revising several regulations in line with new Law on Credit Institution and closer to
international standards (including regulation relating to disclosure of financial statistics) (P117058 and
P128859) as well as working with MOF in looking at options for making operations of policy banks
more effective (P118933). Bank-Fund teams are also developing a plan to support preparatory work
for the FSAP scheduled for end 2012. All these efforts work hand-in-hand with the PRSCs‟ efforts to
modernize the central bank, increase disclosures of relevant financial information, and contribute to
the development of the financial sector in general.
48. In the education sector, the Bank's lending operations and non-lending activities
complement the PRSC‟s focus on fundamental education strategy and policies in the areas of quality,
equity and accountability. Investment lending supports the development and implementation of
standards-based approaches to education delivery, especially to disadvantaged groups of children
(Primary Education for Disadvantaged Children Project (P044803) and School Education Quality
Assurance Project (P091747)) and the exercise of autonomy combined with accountability at higher
levels of the education sector (First and Second Higher Education Projects (Cr 4606-VN and Cr 4786-
VN)). The two sectoral development policy operations complement the PRSC series by delivering a
more comprehensive set of higher education reforms than can be delivered through the multi-sectoral
PRSC instrument, notably in the areas of governance, financing, quality assurance and public financial
management.
49. The World Bank‟s lending program has been complemented with IBRD resources starting
in FY2010 after the Progress Report of the Country Partnership Strategy was discussed by the Board
of Executive Directors in December 2009. The financing priorities for IDA and IBRD include energy,
transport, tertiary education, financial, water, urban, and health sectors. Three IBRD-IDA blend and
three IBRD operations have been approved so far: Power Sector Development Policy Operation (Cr
4711-VN and Ln 7868-VN), Trung Son Hydropower project (Ln 8041-VN), additional financing for
Second Transmission and Distribution project (Ln 8026-VN), Public Investment Reform DPLs (Ln
7838-VN; Cr 4944-VN and Ln 8053-VN), and Da Nang- Quang Ngai Expressway Development
Project (Ln 8049-VN and Cr 4942.VN).
LESSONS LEARNED
50. One of the lessons learned from the previous cycle of operations is the need to have a
comprehensive approach to economic reform for several reasons. First, there are linkages between
policy actions across sectors, so that a piecemeal approach would end up being less effective. For
instance, improving the delivery of social services requires an appropriate balancing of government
finances, in addition to the understanding from the demand-side. Good public financial management
is an essential ingredient to improved results in health and education sectors. Another example is the
inter-linkages between the anti-corruption dialogue and improving business environment. As different
ministries and agencies are in charge of these agenda, an overarching framework is useful in
addressing the underlying issues holistically.
51. Second, there are differences in readiness to embrace reforms in different areas. The reform
program is government-driven, with the window of opportunities difficult to predict. As a result, it is
useful to accumulate various technical building blocks necessary across the policy spectrum, so that
ambitious reforms can be supported without delay whenever the opportunity arises.
15
52. Third, the PRSCs serve as a framework for interaction between the government and the
development partner community. When coordinating the numerous partners with different interests,
excessive selectivity has proven impractical. In addition, it could also represent a lost opportunity, as
the large number of partners translates into a wider range of technical expertise than when IDA is
acting alone. Hence, the policy matrix tended to contain large number of items at the beginning of
each operation. The policy matrix narrows down somewhat over the course of preparing the
operations, as the dialogue evolves and the readiness of the government counterparts becomes clearer.
53. Drawing on these lessons, this cycle of PRSC operations was designed to be
comprehensive, covering 17 sectors. This design was well-suited to address the challenges at the time
it was conceived. However, the development needs evolve over time, especially for a rapidly
transforming country like Vietnam. After 10 years of multi-sectoral policy reforms, there are fewer
reforms that are simple technically and politically. As the remaining time in the cycle declined, the
range of reforms that could reasonably be expected to be completed within the operations‟ timeframe
decreased. The donor coordination aspect of the PRSCs has also evolved. The country‟s success has
led some of the development partners to start withdrawing or reducing their assistance to Vietnam.
Some agencies, including the World Bank, have started to give less concessional financing. Some of
the partners switched their focus on more specialized policy-based operations depending on their
interest, as the number of such operations increased. The number of co-financiers also peaked at 11
for PRSCs 6 and 7. Consequently, the later operations in the cycle have fewer benchmarks, although
the number of triggers (prior actions) stayed about the same.
54. A lesson from later operations in the cycle is that strengthening the Government‟s
ownership of the reform program is even more important when the reforms are more difficult, tend to
take longer, and often consist of making choices when all the options have pros and cons.
Interventions by development partners are effective only if the government is convinced of their
utility. While all policy reforms supported by PRSCs are Government-owned, in the sense that no
policy reform is discussed unless it is in the Government‟s work program, some areas are more
conducive to policy dialogue because the state management agency has good capacity and open to new
ideas, well–coordinated within itself, and there are less controversy in the direction of reforms.
Everything takes time in Vietnam due to the country‟s consensus-based decision making. Due to the
diffused power structure, major breakthroughs are extremely unlikely in the short term. Vietnam is
also a country of planners, and all policies must have a legal framework consisting of a law, decree(s),
circular(s) and guidelines, incorporated in a sector strategy, master plan, roadmap, action plan and
implementation schedule prepared at both central and local levels of governments. It generally takes
at least a few years from conception of an idea to implementation, and it is not always clear at which
point of time interventions are most useful and effective. For example, when a review of the past
strategy is undertaken may be the time the Government is more open to new ideas, and hence, the
most effective time to intervene, even though conducting reviews is normally not considered a policy
reform per se.
55. Furthermore, the instinct for secrecy is still pervasive among officials, and some
government officials consider a subject matter not ready for discussion until the piece of legal
document under preparation was ready for submission to the highest authority (usually the Prime
Minister) after having gone through the lengthy consultation and approval process, at which point, the
policy dialogue on the subject matter would be too late. Some were reluctant to share the legal
documents under preparation, which reduced the depth of policy dialogue. Having the right
counterpart is particularly important in this context, as departments within a ministry do not always
share information, so are not necessarily aware of what others are doing. For new policy initiatives, an
official with sufficient level of authority is needed, but for complex reforms, an official with good
command of technical details is needed. Securing the right counterpart has not always been easy, but
it is one of the most important ingredients to fruitful reform efforts.
16
56. In the future, the engagement areas for policy reforms should be chosen more selectively as
there are limited resources to tackle increasingly complex challenges. The foremost criteria for
selection need to be whether the Government‟s is motivated to undertake the reforms and wishes to
have engagement of development partners, not how desirable the reforms are. Ownership will also
help ensure that the dialogue will take place with the right counterpart. The timeframe allotted for a
policy reform should be a few years. It should also be taken into account that policy dialogue can be
useful at an early stage of reform, even if the dialogue does not culminate in adoption of a legal
document (such as decrees and circulars) within the operation‟s preparation timeframe.
ANALYTICAL UNDERPINNINGS
57. The Vietnam Development Report (VDR) 2007, titled Aiming High, provides the main
underpinnings for the current PRSC series. The preparation of this report was built on the analytical
work done over the first PRSC cycle, on structural reforms (as summarized in the VDR 2006 titled
Business), institutional modernization (VDR 2005, titled Governance) and on social inclusion (VDR
2004 titled Poverty). The process was led by the World Bank with a large number of development
partners participating, several of them contributing extensive inputs. Participants included the co-
financiers of the first PRSC series as well as other development partners, including the United Nations
agencies and international non-governmental organizations. A reviewing committee of recognized
Vietnamese experts and policy-makers advised on each of the policy areas and on the overall thrust of
the report.
58. A new series of VDRs goes more in depth into each of the four pillars of the SEDP 2006-
2010. The first volume in this series, the VDR 2008 titled Social Protection, examines the challenges
remaining in relation to poverty alleviation, with a focus on the plight of ethnic minorities. While
representing only 14 percent of the Vietnamese population, ethnic minorities account for a large share
of the poor. Even though their poverty rates have been declining steadily in recent years, the gap with
the Kinh majority has not narrowed, and some ethnic groups remain especially deprived. The VDR
2008 also analyzes the structural shifts affecting the Vietnamese society, resulting from the
demographic transition and rural-to-urban migration, and the change in the nature of the shocks
experienced by Vietnamese households, from greater exposure to international fluctuations to the
growing importance of communicable diseases. These shifts and shocks have important implications
for the design of public policies and programs, supporting the development of more institutional social
protection mechanisms and the transition to a risk-based approach and demand-side financing in the
case of the health sector.
59. The VDR 2009 titled Capital Matters focuses on constraints to the mobilization of
resources for accumulation and on the efficiency of investments by both public and private sectors.
Some of those constraints are common to many developing countries, whereas others are more
specific to the transition from planned to market economy. The report reviews the operation of the
main channels used to mobilize resources for investment in Vietnam, including tax revenues, bond
issuance, equity, and ODA. In the case of public investments, it identifies weaknesses in the selection,
appraisal and implementation of projects. Some of those weaknesses result from the different speed at
which decentralization, public financial management and environmental policies have progressed in
recent years. Special attention is devoted to state capital, and the potential risks created by weak
corporate governance in SOEs, conflicts of interest in the Government between ownership and
regulation, and the ability of large groups of SOEs to control financial institutions, thus undoing
previous efforts to harden the budget constraint.
60. The policy dialogue in governance pillar is underpinned by various analytical work
including the VDR 2010 titled Modern Institutions, which explores the devolution of power from the
central government apparatus to various institutions, including local governments, service delivery
units, legal and judiciary systems and institutions of oversight, the latter including entities as varied as
the National Assembly, mass media and official bodies investigative bodies. It analyses the
17
mechanism of accountability for these institutions. The focus of the report is the outcomes perceived
by citizens and private sector. It also profiles the governance module added to the 2008 Vietnam
Household Living Standards Survey (VHLSS). Several of the central themes of the VDR relate
directly to the current operation, especially the issue of access to information of all sorts, strengthening
the roles of oversight entities to enhance accountability, and reforming public administration.
61. The VDR 2012 will deal with the challenges of creating a market economy appropriate for
Vietnam‟s current status as a middle-income country. Some of the issues to be covered include the
role of the state-owned enterprises, effectiveness of price controls and management, the need for
greater transparency in the policy-making process and reducing institutional fragmentation in order to
effectively implement government policies. The report is under preparation, and the preliminary
findings are helping the Bank and the development partners to anchor their policy dialogue in new
evidence and analysis.
62. In addition to VDRs, sector-specific analytical work underpins policy dialogue in that
sector. For example, the policy dialogue in the energy sector is informed by extensive analytical work
over the past ten years. Recent analytical work includes support for the preparation and passing of the
Electricity Law (2004) and the Roadmap for Reform of the Electricity Sector (2006), Electricity
Licenses (2006 and 2007), Conceptual Design of Competitive Generation Market (2008), Framework
for Thermal BOT Tenders (ongoing), Development of Market Rules for the Competitive Generation
Market (ongoing), and Grid Code and Distribution Code and Metering Code (ongoing). Work on
restructuring of the electricity sector includes Restructuring the Power Transmission Business (2005),
Equitization of the Power Sector (2006), a policy note on Restructuring for the Competitive
Generation Market (2008). Pricing studies include on the Bulk Power, Distribution Margin, and Retail
Tariff Design study (2005), Retail Tariff Methodology (2008), Tariff Calculation Model (ongoing),
and Transmission Pricing Methodology (ongoing). The Bank has also reviewed energy plans and
planning processes, particularly Power Master Development Plan No.6 (2006) and the Gas Master
Plan for Southern Vietnam (2008). In addition, Vietnam Gas Sector Development Framework was
completed in 2010.
63. Gender issues have been studied from various angles. Recent analytical work
underpinning the policy dialogue include Women Retirement Age Increase Gender Equity Dimension
(2008), a study funded by the World Bank and authored by the Institute of Labor, Science and Social
Affairs (ILSSA)6, and Socio-Economic Impacts of WTO Accession on Rural Women (2009) authored
by ILSSA, UNIFEM, and AUSAID.
64. A Public Expenditure Review/ Integrated Fiduciary Assessment (PER-IFA) and a Country
Fiduciary Accountability Assessment (CFAA) were carried out in 2005 and 2007, respectively. While
noting the progress made, they pointed out areas that are in need of further improvements. These
include the process of budget development, accessibility of financial information, and accounting and
auditing framework. These recommendations form the basis for policy dialogue conducted through
the PRSC series.
6 ILSSA is a research institute associated with MOLISA.
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V. THE PROPOSED OPERATION
OPERATION DESCRIPTION
65. The proposed credit concludes the cycle of operations which supported the set of reforms
carried out under the framework of SEDP 2006-10. A new 10-year Socio-economic Development
Strategy for 2011-2020 and 5-year SEDP for 2011-2015 are expected to be adopted this year, taking
stock of the implementation during the last phase and laying out the strategies and plans to achieve the
goals in coming years. This cycle of PRSCs accompanied the last SEDP (2006-10), serving as a well-
established mechanism to provide a coordinated financial and technical assistance from development
partners in the past. It is also serving as a framework to take stock of the effectiveness of development
partner activities, and to design the new partnership modality beyond PRSCs.
66. The policy matrix for PRSCs 6-10 was developed at the beginning of this cycle, using the
SEDP 2006-2010 and other strategic documents as well as analytical work as the basis for selection.
Throughout this series of operations, some of the policy actions are adjusted as new issues arose, new
studies become available, or the original plan became no longer applicable (the summary of all policy
reforms supported under PRSCs 6-10 is in Annex 2).
67. The policy matrix for every PRSC operation contains two types of policy actions. The first
type is “triggers,” which are deemed to be more strategic, because of their potential impact on
development outcomes over time. The triggers are selected during the previous PRSC operation, and
are reported in the minutes of the negotiations (PRSC 9 in this case). The “triggers” are not rigid
conditions but represent a collective understanding of measures addressing immediate concerns (for
example, enhancing public disclosure and communication of SBV policies and banking sector
statistics), and medium-term structural reforms to be initiated now as a priority (for example,
formulating a roadmap to improve corporate and government bond markets to foster financial and
economic growth).
68. In addition to the triggers, the policy matrix also contains other reforms undertaken by the
government. This broader set of actions, or “benchmarks,” does not represent the use of
conditionality, but reflects the breadth and scope of the reforms being undertaken by the government
of Vietnam, and is a way to engage in the substances of the reforms. By providing a more
comprehensive picture of developments in each policy area, this matrix allows a better understanding
of the progress being made in the reform program. This year, the engagement areas were narrowed
down to pave the way for a smooth transition to the successor operations. Concretely, policy reforms
were included in the matrix for the proposed operation only if they are: a continuation or completion
of those which were already under discussion in previous PRSC operations, as are the case for the
gender and health triggers, or; of highly strategic importance which are deemed to influence the
medium-term economic landscape, such as the banking sector strategy, even though reforms are
unlikely to be completed within the timeframe of this operation.
69. The technical meetings are coordinated by the PRSC Coordination Unit at the SBV. The
Coordination Unit reports to the Steering Committee for the PRSC process, which is chaired by the
first Deputy Prime Minister. The Coordination Unit identifies the relevant line ministry or government
agency for each proposed policy action. The technical meetings with those ministries and agencies
provide an opportunity to go into the specifics of each action, to comment on draft policy documents,
and to agree on a time frame for their completion. As a result of these technical meetings, some
measures are deemed completed, some may be consolidated, and others may be postponed. Pending
issues regarding policy actions which are considered of strategic importance (either in terms of content
or timing) can be raised to the attention of the Steering Committee.
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POLICY AREAS
70. The PRSCs 6-10 address four pillars of the SEDP 2006-10, namely business development,
social inclusion, natural resource management, and modern governance. The eleven triggers chosen
for PRSC 10 were somewhat unevenly distributed across the four pillars, reflecting the important
reforms that are deemed feasible during the timeframe of the proposed operation. The triggers are
aimed high enough so that they are challenging, with the recognition that not all triggers will be met
fully, while others might be exceeded. It is worth noting that the PRSC series in Vietnam is the third
best performer out of 27 PRSC countries reviewed world-wide by IEG (2009) with the lowest number
and percentage of triggers relaxed.7 The achieved triggers are presented as “prior actions” whereas
those that were not met fully during the operation‟s timeframe are followed up through subsequent
operations and other channels.
71. The prior actions and benchmarks are discussed briefly below by pillars, and assessment of
achieving the prior actions is summarized in table 4 below.
Pillar I: Business development
72. The Prime Minister has issued a regulation to expedite equitization of state-owned
enterprises, and MPI has submitted to the Prime Minister a review of the state-owned Economic
Group model. Improving the corporate governance of state-owned Economic Groups has become a
topic of intense national debate recently due in part to problems of an over-leveraged shipbuilding
SOE. Academics and members of national assembly demanded increased oversight of SOEs and
greater disclosure of financial information regarding their operations. Some were concerned about the
low return on investments while others demanded more transparency in implicit and explicit benefits
that SOEs receive. The government‟s initial reaction seemed to be that of exerting more control to the
point of examining every external loan and investment decision made by SOEs, at least in the short-
run. The government has acknowledged that the strategy of pursuing economies of scale through
Economic Groups, which was adopted a few years ago, was in need of reconsideration. To this end,
the Prime Minister commissioned a review of Economic Group model (Prime Minister‟s Notice No.
25/TB-VPC dated February 25, 2011) as an important first step towards revision of the medium-term
strategy. While the study and debates are ongoing, the consensus on the new direction has not yet
emerged, partly because major policy decisions were put on hold during the prolonged political
transition period between end of 2010 and 2011Q3. Hence, the original trigger “develop a time-bound
plan to separate the exercising of the state-ownership rights from regulatory function in Economic
Groups and large General Corporations” was deemed unattainable within this operation‟s timeframe.
A draft plan is in a preliminary stage, and still requires consultation with all stakeholders. In Vietnam,
a consensus forged through a lengthy consultation process is critical for successful implementation,
and the more polemic the reform agenda, the longer the process tends to take. In the framework of the
proposed operation, policy dialogue continued at technical level, and discussions were held on merits
of different SOE models in the world, and the corresponding regulatory and governance framework
needed to make them successful. At the same time, the operation supported the more technical aspects
of reforms, such as reducing the size of state sector and introduction of foreign expertise through
expedited equitization, enhanced accountability and more informed decision-making through
increased disclosure. The operation also supported the government in reforms to manage better
potential fiscal and balance-of-payments risks emanating from SOEs through better monitoring of
external debt contracted by SOEs and strengthening the assessment of enterprises‟ ability to service
the debt. It is the team‟s assessment that the Decree 59/2011/ND-CP removing bottlenecks to
equitization, together with the review of the Economic Group model, and the government‟s new
willingness to share the review, which was considered too sensitive a year ago, constitute a solid
progress in state sector reform.
7 IEG (2009) p26. It refers to 86 PRSCs in 27 countries implemented during FY 01-08 (corresponding to
PRSCs 1-7 in Vietnam).
20
73. SBV has issued a regulation to enhance public disclosure and communication of
SBV’s policies and banking sector statistics. The SBV issued Circular 35/2011/TT-NHNN dated
November 11, 2011 stipulating disclosure of standard banking sector statistics and monetary policies.
Such information is expected to help the public understand the policy regime, check whether the
bank‟s actions match the regime, and pass judgment on its performance. With the new circular,
Vietnam comes closer to meeting the IMF data dissemination standards for presentation and release of
central bank data relating to coverage, periodicity, timeliness of data and access by the public.
Important information such as financial soundness indicators and summary banking sector statistics
will be made public on a regular basis. The Circular is explicit about the periodicity and the
departments in charge of making the information available, which are critical in smooth
implementation. Greater transparency and availability of information would allow decisions to be
better informed, while better accountability imposes firmer discipline on decision-makers. Together,
they can contribute to higher-quality decisions in central banks. In preparing the circular, the SBV
consulted widely among the stakeholders, which bodes well for successful implementation.
74. MOF has formulated a time-bound roadmap to improve corporate and government
bond markets to foster financial and economic growth. MOF is formulating a roadmap for
developing the government and corporate bond markets to help finance the country‟s development
needs. It is intended to be a living document which will be adjusted as necessary. Parts of it, for
example, the issuance of government bond decree, are already being executed. The roadmap translates
the bond market development strategy into concrete actions, with the aim of diversifying sources of
funds in the context of declining concessional funds, uncertain external financial environment, and the
need to reduce reliance on bank credits for long-term projects. In the short term, actions include
improving the debt management capacity, upgrading the existing laws and regulations to international
standards, and arranging systematic auction calendar and reducing the auction frequency. In the
medium term, it plans to centralize supervisory unit of corporate bonds, develop multi-tier trading for
the secondary market, and introduce new laws and regulations to promote bond related activities. The
formulation of the roadmap was supported by two Technical Assistance programs administered by the
World Bank (multi-donor trust fund) and Asian Development Bank.
75. The Prime Minister has adopted a Gas Master Plan to 2015 with Visions to 2025,
including a time-bound instruction to MOIT to prepare a Gas Market Reform Roadmap to 2020
for consideration by the Prime Minister. According to Vietnam Gas Sector Development
Framework (2009), Vietnam needs to increase electricity supply to meet its rapidly growing demand.
As an important step towards increasing the supply, and moving to clean sources of energy while
doing so, the Prime Minister adopted a Gas Master Plan8 in April 2011. The Plan stipulates that the
Ministry of Industry and Trade is to “conduct and coordinate with relevant ministries and agencies to
develop and promulgate a reasonable gas pricing policy to make the pricing system flexible, option for
gas price mixing to ensure financial incentives for investment in gas field development especially the
small, deep water, offshore fields and the high CO2 content fields, etc., and also to ensure the
competitiveness of gas against other alternative fuels, to develop a roadmap of gas market reform for
the prior-2020 period.” The Plan takes a highly advisable step of seeking to develop a market for gas
before the next phase of sector reform (a wholesale generation market) is due to be completed in 2014.
76. In addition to the four prior actions discussed above, the dialogue in the business
development pillar also addressed diverse issues in the areas of global integration, and state and
financial sectors. Policy reforms were introduced to facilitate trade through establishment of national
single window, strengthen risk management of contingent liabilities arising from SOEs, improve
monitoring of external private debt flows, and to enhance the banking sector health through
development of the sector strategy. The policy dialogue on the regulation pertaining to loan
classifications at commercial banks, which started during the previous operation, is still ongoing.
8 Master plans are important legal document in Vietnam, which require detailed stakeholder consultations
and ministerial as well as government-wide review process.
21
Commercial banks have suffered during the global economic crisis and recent macroeconomic
turbulence in Vietnam, and as a consequence, not all of them appear to be ready to implement the
rigorous risk assessment that will be required under the new regulation. SBV is well aware of the
importance of enhancing the soundness of its banking sector, but is trying to avoid imposing undue
stress while commercial banks cope with the difficult period.
Table 4: Prior Actions for PRSC 10
Sector Prior Action
Pillar I: Business development
State sector
reform The Prime Minister has issued a regulation to expedite equitization of state-owned enterprises, and
MPI has submitted to the Prime Minister a review of the state-owned Economic Group model
(substitutes the negotiated trigger)
Financial sector
reform SBV has issued a regulation to enhance public disclosure and communication of SBV‟s policies and
banking sector statistics
Private Sector
Development MOF has formulated a time-bound roadmap to improve corporate and government bond markets to
foster financial and economic growth
Infrastructure The Prime Minister has adopted a Gas Master Plan to 2015 with Visions to 2025, including a time-
bound instruction to MOIT to prepare a Gas Market Reform Roadmap for consideration by the Prime
Minister
Pillar II: Social inclusion
Education MOET has issued a regulation to institutionalize regular nationwide assessments of student learning
outcomes at primary and secondary levels
(modified from the original trigger)
Health MOH has issued a regulation to establish a centralized database as a step towards unifying the
national licensing system of healthcare professionals
(modified from the original trigger)
Gender The Prime Minister has adopted a set of national gender development indicators and criteria for sex-
disaggregation in the national statistics
Pillar III: Natural resources
Environment MPI has issued technical guidelines for the application of strategic environmental assessments in the
process of socio-economic development planning
Pillar IV: Modern governance
Public
Financial
Management
MOF has started an annual exercise of publishing the synthesis report based on financial statements of
state-owned Economic Groups and General Corporations
(substitutes the negotiated trigger)
Public
Administration
Reform
The Prime Minister has adopted a Public Administration Reform Master Program for 2011-2020, and
MOHA has started piloting a results-oriented monitoring and evaluation system
(modified from the original trigger)
Fighting
Corruption
GI has developed a framework for monitoring progress on the implementation and results of efforts to
prevent and combat corruption
Pillar II: Social Inclusion
77. MOET has issued a regulation to institutionalize regular nationwide assessments of
student learning outcomes at primary and secondary levels. In the light of Vietnam becoming a
middle-income country, there is increasing attention both by public and the government to students‟
22
learning, in addition to enrolment and completion, as a means to assess effectiveness and efficiency of
the education system. Improved assessment is an integral part of the Education sector strategy for
2011-20, the formulation of which was supported by PRSC 8, and which is expected to be approved
after the adoption of SEDS 2011-20 and SEDP 2011-15. This operation supported the issuance of
circular (issued on November 3, 2011), which improves testing and assessment to monitor and
evaluate curriculum reform. Better assessments of learning outcomes could be used to improve
efficiencies, and improve return on sector investments. The prior action was slightly modified from
the originally negotiated trigger, as “participation in international assessment programs” was taken
out; Ministry of Education and Training (MOET) wished to concentrate on institutionalizing regular
nationwide assessments first, and continue with ad hoc participation in international assessments for
the time being. This policy reform complements the reforms supported by the previous operation in
expanding full-day schooling for all children. The stakeholder consultations of the draft cost estimates
for full-day schooling launched are still on-going.
78. MOH has issued a regulation to establish a centralized database as a step towards
unifying the national licensing system of healthcare professionals. Ministry of Health (MOH) is in
the process of issuing a series of implementing decrees and circulars for the Law on Examination and
Treatment. Following up on PRSC 9, this operation supported MOH in preparing and issuing an
implementing decree 87/2011/ND-CP (dated September 27, 2011) and Circular 41/2011/TT-BYT
(dated November 14, 2011). The latter stipulates a centralized database, a critical ingredient for a
unified licensing system. The issuance of these decree and circular was a priority to start the licensing,
and the implementation experience is expected to feed into the drafting of other legal documents that
will complete the regulatory framework for the unified licensing system. Elements that still need to be
addressed include standardized handling of complaints of professional misconduct, inspections and
disciplinary actions thereof, centralized mechanism to enforce compliance with the law and
regulations. The issuance of the decree and circular is assessed to represent a significant progress in
the reform process.
79. The Prime Minister has adopted a set of national gender development indicators and
criteria for sex-disaggregation in the national statistics. This prior action follows up on the
dialogue carried out under PRSC 9. An inventory study of available gender-related data which also
identified gaps and areas of concern was financed by the World Bank in 2009. The study also provided
information on how these data align with current international gender indices. General Statistics
Office (GSO) has included several gender equality indicators in its new set of national indicators
under the expanded National Statistical Indicator System, which was approved in June 2010.9
National Gender Strategy was adopted in December 2010. The system of more than 100 national
gender development indicators was prepared by the GSO, in extensive consultation with ministries,
agencies and other stakeholders which would use the statistics, and was adopted by the Prime
Minister‟s Decision 56/2011/QD-TTg on October 14, 2011.
80. In addition to the three triggers discussed above, the dialogue in the social inclusion pillar
supported a reform in establishing performance indicators for the health insurance fund, one of the
largest statutory funds, and exploring the ways to publish them with accompanying analysis.
Pillar III: Natural Resources
81. MPI has issued technical guidelines for the application of strategic environmental
assessments in the process of socio-economic development planning. The Law on Environmental
Protection (2005) stipulates the requirement for conducting Strategic Environmental Assessment
(SEA) for strategic policies, programs and plans. One of the guiding regulations issued to implement
the Law, Decree 04/2008/ND-CP, contains provision for obligatory application of SEA in the
development of socio-economic Master Plans. Although the SEA concept and requirement have been
9 Decision 43/2010/QD-TTg dated 2/6/2010.
23
introduced in the government legislation for some time, systematic application to the planning
processes remains a challenge. The major constraint for the application of SEA at present is the lack of
technical guidelines and regulation on financing mechanism. Despite the regulation to allocate 3
percent of the total budget for developing or revising socio-economic Master Plan, it remains unclear
how to use these funds. As the new cycle for socio-economic Master Plans began in 2011, the
adoption of specific SEA technical guidelines for this process would help ensure environmental
sustainability in Vietnam‟s economic development planning. To this effect, MPI will issue the
guidelines by end October 2011, prepared in collaboration with Ministry of Natural Resources and
Environment after extensive consultations with the potential users to make the guidelines user-
friendly. Decree 29/2011/ND-CP issued April 18, 2011 stipulates the use of these guidelines.
Pillar IV: Modern Governance
82. MOF has started an annual exercise of publishing the synthesis report based on
financial statements of state-owned Economic Groups and General Corporations. This prior
action replaces the originally negotiated trigger for public financial management discussed in the next
paragraph. A default by a large SOE served as an acute reminder to the government that poor
performance of SOEs has fiscal implications. It could take a form of recapitalization of an enterprise
or bailing out enterprises that are unable to meet their debt service obligations, or less dramatically, of
lower (or negative) profit than if the enterprises were performing well. In response, Ministry of
Finance (MOF) is revising Decision 224/2006/QD-TTg (dated October 6, 2006), which regulates the
responsibilities of the regulator, owner, and managers of the state-owned enterprises, with the aim of
strengthening monitoring, reporting and assessment of SOE performance. In addition, as a mechanism
to enhance accountability of SOEs as well as in the spirit of better access to information, MOF will
publish the annual report on SOE performance prepared for the National Assembly; the first report
will be posted on its website before November 10, 2011 and subsequent reports will be published in 4th
quarter every year. This report is based on the audited financial statement filed each year by the
SOEs.
83. “Enhance the management of transport infrastructure assets through decentralization and
adoption of financial mechanisms for investment, operation and maintenance” was the original
negotiated trigger in the public financial management area. Regulations on management of transport
infrastructure assets are of strategic importance, as transport infrastructure is a critical input to socio-
economic development of Vietnam. The regulation is expected to cover a wide range of policies
related to infrastructure, from budget allocation, investment, management, to maintenance. Main
objectives include further decentralization of management responsibilities from central to local levels,
improved fund mobilization for investment in infrastructure, and improved financial mechanisms
guiding rational utilization, fee collection and maintenance of transport infrastructure assets, which
allows recovery of both capital and maintenance costs in transport projects. MOF started to review the
current practice and existing regulations, and found that due to complexities of the task, drafting the
decree would take longer than expected. MOF now expects to complete the draft in 2012. The
authorities and the task team have therefore agreed to allow necessary time to complete the decree.
84. The Prime Minister has adopted a Public Administration Reform Master Program
for 2011-2020, and MOHA has started piloting a results-oriented monitoring and evaluation
system. This prior action follows up on the dialogue conducted under the previous operation on the
comprehensive and analytical review of the Public Administration Reform Master Program 2001-
2010. The review served as the basis for developing the Public Administration Reform (PAR) Master
Program 2011-2020, which focuses on six areas: (i) institutional reform covering the legal and policy
framework, clarification of land and property ownership rights, state enterprise reform, etc.; (ii) reform
of administrative procedures focusing on improving the business environment, streamlining
administrative procedures, and strengthening the process of feedback and dialogue with the business
community and the population; (iii) organizational reform of the state administrative apparatus calling
for functional reviews, appropriate decentralization, and improvement of the operation of one-stop
24
shops; (iv) civil service reform aiming at improving the professionalism of civil servants, and
strengthening accountability and meritocracy within the civil service, and reforming the salary system;
(v) reform of public finances covering mechanisms for using state funds and budget allocations; and
(vi) administrative modernization covers the expansion of information technology in state agencies,
expand on-line services, etc. As a ten year program, the PAR Master Program 2011-2020 focuses on
the priority goals and objectives of public administration reform, rather than the details of
implementation. While it covers much of the same ground as the previous PAR Master Plan, it is
more specific in its objectives, suggests clearer deliverables, and also contains responsibilities for
implementation at central and local levels. The PAR Master Program, prepared by the Ministry of
Home Affairs, has been submitted for the Prime Minister‟s approval in October 2011. An
accompanying results-based M&E system has been developed with TA from UNDP, and is now in the
final stages of preparations to start piloting. The lessons learned from the pilot exercise will be
incorporated into the design, and the roll out to the whole country is expected in 2012. The original
trigger expected adoption of the results-oriented M&E system, and the prior action will need to be
modified to reflect the current status.
34. GI has developed a framework for monitoring progress on the implementation and
results of efforts to prevent and combat corruption. The government‟s anti-corruption strategy
tasks the Government Inspectorate (GI) with developing a system of indicators to track corruption and
anti-corruption. It represents the first time that the government has set out a formal framework to
assess progress regularly on reducing corruption based on a set of indicators. The monitoring
framework attempts to measure both the scale and the nature of corruption. In the framework, the
scale of corruption refers to both the frequency of corrupt acts in various areas of state management,
and the extent of damages caused to the state, to enterprises, and to citizens. The nature of corruption
refers to the severity of corruption (i.e., the frequency of the most serious corruption offenses), the
structure and organization of corruption, links with other crimes, etc. The monitoring framework calls
for the regular (annual) collecting of more than three dozen different indicators through sociological
surveys and administrative data collection. The circular on corruption reporting sets out the details of
the administrative reporting at regular intervals from ministries, ministerial-level agencies, provinces
and cities and state economic corporations. Reporting covers the activities to train and raise
awareness, efforts to implement codes of conduct, results of inspections, complaints and
denunciations, and so forth. The circular on the M&E framework also calls for evaluation of
anticorruption efforts, based on the criteria such as the proportion of corruption cases detected and
resolved. The framework that has been developed is complex and full implementation will be
challenging. Nevertheless, it represents an important milestone in the government‟s efforts to track
progress on anticorruption and to generate accountability for those results. It is expected that this prior
action will exceed the originally negotiated trigger, as the monitoring mechanism is expected to be
formalized by a circular by November 2011.
35. In addition to the prior actions discussed above, the current operation continued to follow
up on introducing internal audit to the country, a policy reform supported under the previous
operation. During the period covered under this operation, the State Audit of Vietnam (SAV), the
entity assigned the responsibility for internal audit by the existing Law on State Audit, finalized the
draft decree on internal audit. Not all of the best practice recommendations were incorporated in the
draft decree, partly reflecting the constraints imposed by the current legal framework, which assigns
the SAV, an independent entity reporting to the National Assembly, the task of internal audit, which
should belong to the government. For example, rather than putting Inspectorates of the ministries and
agencies in charge of internal audit, the decree assigns some responsibilities for internal audit to SAV.
The issuance of the decree is expected by end 2011.
25
Box 2: Good Practice Principles for Conditionality
Stakeholder consultations were held in February 2009 in Hanoi in the context of world-wide review of DPL
evaluations, conducted by OPCS.
Ownership. There is general agreement across the stakeholder groups that the PRSC series have been firmly
rooted in the government‟s own reform agenda, as expressed first through the CPRGS and then the SEDP. In
both the donor and NGO consultations, participants mentioned that this was “best practice.”
Harmonization. Alignment to the CPRGS and the SEDP helped development partners work more coherently
in support of government outcomes. There was general acknowledgement that the PRSC operation was a
complex one, bringing together multiple ministries and donors. Government participants were particularly
appreciative of donor efforts to coordinate assistance around the SEDP and PRSC. There was still concern
over the current framework for accountability, i.e., the PRSC framework being similar, but not identical, to the
SEDP monitoring framework. There were views that donors should resist the temptation to use independent
monitoring mechanisms. Inputs from NGOs emphasized how accountability works in practice, outlining the
need to engage alternative and independent viewpoints. Donors also emphasized how harmonization could be
improved, suggesting a more structured approach to engagement in the PRSC process. This would enable
“newcomers” to the process (which grows annually in terms of number of participants) to understand better
their roles and obligations.
Customization. The general sense was of that the process had become increasingly tailored to the country
priorities. The need to balance the wish to promote desirable reforms and the respect for the country‟s
priorities, perhaps described as “the art of the possible,” was recognized. A repetitive theme refers to building
the analytical capacity within the Government, so that the Government, rather than development partners, can
lead the process of determining which actions should be prioritized in the agreements. Currently the
prioritization and sequencing of actions and triggers was undertaken more by donors than by the Government,
although the Government owns the broad agenda from which the PRSC operations are derived.
Criticality. The size of the policy matrices is relatively large, but is being reduced, balancing criticality with
an active policy dialogue across the reform agenda. A multi-sector, multi-agency, multi-donor operation is
likely to need a spread of “benchmarks” in order to keep the operation inclusive and motivating for all
participants. While this number of benchmarks is higher than in other countries, it is justifiable in Vietnam, as
the Bank and all co-financiers use the same policy matrix to decide on their level of support, thereby providing
a single harmonized platform for the policy dialogue and disbursements.
Transparency and predictability. Both predictability and transparency had increased over recent years. The
PRSC process has led to disbursements to the budget on an annual basis, thus meeting the objective of aligning
aid to domestic budget cycles. Since PRSC 2, commitments were made in June of each year, which is the time
when the preparation of the budget starts. The budget is approved by the National Assembly towards November,
for the following calendar year. The submission to the National Assembly already factors in the amount of
resources expected from PRSCs. Although the World Bank inputs were predictable, there was less predictability
over the timing and level of co-financier resources that would be available. Not all donors were able to commit
to financing beyond the current years and as levels of co-financing increase, this adds an element of uncertainty
into the operation.
VI. OPERATION IMPLEMENTATION
POVERTY AND SOCIAL IMPACTS
36. The reforms supported by the PRSC series have led to a transformation of the Vietnamese
economy, including an increased reliance on market mechanisms and growing integration into the
world economy. Vietnam‟s rapid economic growth and resilience during the recent crises are a
testimony to the soundness of the program. This rapid transformation, however, has had large social
impacts: greater economic fluctuations from increased integration with world markets, potential
financial instability due to exposure to capital flows, growing inequality as agglomeration effects play
out and the economic hubs of the country sail ahead, and possible vulnerabilities as market
mechanisms develop throughout the social sectors. The poor are also disproportionately affected by
26
internal shocks, such as natural disasters and communicable diseases. The PRSC operations address
these concerns through various policy-level measures such as strengthening and extending the
coverage of the pension programs and health insurance, improving the quality of health service by
reforming the way health care providers are licensed, ensuring environmental assessments are
undertaken during the planning processes, introducing reforms to strengthen the stability of the
banking sector, and improving the monitoring of capital flows, and developing policies to mitigate
potential adverse effects of integration.
37. There are winners and losers in any reform process, and the reforms supported by this
series of PRSCs seek to create an institutional and regulatory framework that is conducive to
economic growth with enhanced social protection, while leaving grassroots efforts to reduce poverty
to other complementary operations such as Program 135 operations (Cr 4274-VN, Cr 4580-VN, and
Cr 4918-VN) and Northern Mountain Poverty Reduction Projects I and II (Cr 3572-VN and Cr 4698-
VN), which deal more specifically with reducing poverty among ethnic minorities. The country‟s
rapid rate of overall poverty reduction bears witness to their success. The reforms supported by each
PRSC are assessed to ensure that they do not adversely affect poor and vulnerable groups. The
proposed operation supports strengthening protection of the population at large through policy actions
such as monitoring implementation of the gender equality law, analyzing and disclosing health
insurance operations, and measures designed to improve education service delivery. Development of
bond market and SOE reforms are examples of actions aimed at improving economic efficiency and
stability. The agenda to improve governance would also benefit the poor, as they suffer
disproportionately from corruption and inadequate public services.
38. Assessing the wider social impacts of a transformation of this magnitude is challenging.
Good tools exist to assess the consequences of trade liberalization, an important component in earlier
phases of the PRSC cycle. However, a retrospective assessment of the studies conducted at the time
concludes that they were not able to foresee the actual consequences. In a similar vein, more recent
attempts to identify ex ante winners and losers from the WTO accession have proven inconclusive.
The WTO accession matters because it brings competition in services, raises standards or increases
financial openness, and none of this can be easily captured with the tools at disposal. A review of a
dozen studies based on computable general equilibrium models and almost as many sectoral studies
(reported in VDR 2006 Doing Business) shows that few results are robust across the studies,
suggesting a high sensitivity to the methodology and assumptions used. To fill this gap, increasing
emphasis has been put on monitoring and evaluation in all areas of the program (linked to the M&E
framework in the SEDP). A broad review of social protection issues was conducted under VDR 2007
Social Protection and the Vietnam Academy of Social Sciences (VASS) completed a comprehensive
poverty report in 2010.
39. The Social Protection VDR and more recent VASS Poverty Assessment updated Vietnam‟s
poverty assessment. The reports identify the main shifts and shocks being faced by the Vietnamese
economy through a period of fundamental transformation, rather than dealing with potentially adverse
impacts on a policy-by-policy basis. Identifying the right set of policy responses is challenging.
Historically the Government has deployed mechanisms to ensure the participation of the poor and
near-poor in universal programs, such as exemption of school fees and waiver of health insurance
premium (under the National Targeted Program for Poverty Reduction), and increasing spending on
local infrastructure and services in poorer regions of the country, such as the Program 135 and the 61
Poor Districts Program. More recently, the Government has been experimenting with cash transfer
programs.
ENVIRONMENTAL ASPECTS
40. As required under Operations Policy 8.60, the task team determined if there are significant
effects on the country‟s environment, forests, and other natural resources. “Significant effects” are
27
defined as “environmental changes of sufficient magnitude, duration, and intensity as to have non-
negligible effects on the natural resource base and on human welfare.10
”
41. Each policy trigger and benchmark was reviewed to determine if there were negative,
positive environmental consequences of if they were neutral in terms of its expected impacts. The
results of the analysis are included in Annex 6. Of the 14 prior actions and benchmarks reviewed,
none were found to have a potential negative impact, three an environmental positive benefit, and the
rest had no environmental implications. The most important of the positive benefits identified, are
those associated with the promotion of strategic environmental assessment (SEA) in development
planning. It is important to also note that under the World Bank‟s parallel DPO on Public Investment
Reform-2 (Cr 4944-VN and Ln 8053-VN), the Government has engaged to carry out a number of
regulatory reforms and capacity building initiatives in the areas of environmental impact assessment
(EIA) and SEA.
IMPLEMENTATION, MONITORING AND EVALUATION
42. The PRSC operations have been included in a number of evaluations of budget support
operations, policy lending, and application of good principles in conditionality. A Quality at Entry
Assessment (QEA) for the first PRSC cycle was conducted shortly after the approval of PRSC 2. The
QEA rated the proposed series as highly satisfactory in terms of its strategic relevance and approach
and to its poverty reduction and social inclusion aspects. All other dimensions were considered
satisfactory. A review of Implementation Completion Reports (ICRs) by the Independent Evaluation
Group (IEG) reached similar conclusions. Based on the relevance and achievements under most
objectives, the overall outcome of the first PRSC cycle was rated satisfactory. Another assessment
was conducted after PRSC 4, as a part of a broader evaluation of general budget support,
commissioned by 24 donors and conducted by the University of Birmingham in seven countries. This
assessment showcased Vietnam as a successful example of government-donor collaboration, with
strong impact on policies. The assessment for Vietnam was updated after PRSC 5 by the same
research team, by then working in a consulting firm (Mokoro). This update was financed by the
World Bank as an input for the preparation of the current PRSC cycle. The updated assessment
concluded that PRSCs were effective at supporting policy reforms, at linking policy and budgets, at
strengthening financial management, and at helping harmonization. The inclusiveness of process was
highly valued. At the same time, PRSC operations were judged less effective at supporting policy
breakthroughs and at helping policy implementation. Poverty Reduction Support Credits – an
evaluation of World Bank support by the Independent Evaluation Group (2009) found Vietnam‟s
PRSC series were well-aligned with country‟s development strategy, contributed to a dialogue around
the budget and other mechanisms as tools to promote pro-poor policy objectives, and served
exceptionally well as a focal point for donor coordination.
43. Another independent evaluation, similar to the Mokoro report and covering all ten PRSC
operations, was conducted in 2011 jointly by the government and interested development partners led
by the European Union. It found PRSCs effective in coordinating ministries and participating
development partners, but they were more effective in some areas, such as financial sector, than
others, such as public administration reform. The evaluation reported that the participants from both
the authorities and partners found the series improved in later operations, as both sides gained
experience, and the program design and implementation, such as the size of the policy action matrix
and timely sharing of relevant documents, were modified to adapt to the changing circumstances.
44. To monitor progress in the implementation of the reform agenda in the PRSCs 6-10, a set
of development indicators was selected when PRSC 6 (2007) was prepared. The indicators were
chosen based on the monitoring framework for the Socio-Economic Development Plan (SEDP), but
10
World Bank Toolkit “Assessing the Environmental, Forest, and other Natural Resource Aspects of
Development Policy Lending” (World Bank, 2008).
28
are fewer in number. In the case of governance, the set of indicators goes beyond the SEDP
monitoring framework. This was an area where the experience in monitoring was limited, and the use
of enterprise and household surveys, as opposed to administrative self-reporting, was not yet common.
The set of indicators was modified to reflect the changes made to the policy matrix (which was also
established during the preparation of PRSC 6) as the reforms supported under PRSCs 6-10 evolved
due to opportunities and changes in priorities (Annex 3).
45. At the beginning of this PRSC cycle, it was deemed impractical to monitor the progress
towards development outcomes on an annual basis because collecting and processing survey data take
time, and policy reforms are unlikely to yield outcomes immediately. The Board of Executive
Directors approved that the assessments be done twice during this PRSC cycle, towards the middle of
the cycle and at the end of it. A midterm review of the progress towards development outcomes was
conducted during the preparation of PRSC 9.
46. Mid-term review found that overall progress had been made towards achieving the
development outcomes. Poverty Reduction Support Credits are designed to be holistic with a caveat
that causal relationship between policy actions and improved indicators cannot be established.
Evaluating the impact of socio-economic policies is always difficult, because policies are not
implemented in a vacuum, and there are many other factors at play. It is not easy to assess which part
of the change in a broad development indicator is due to a specific policy as the channels through
which outcomes can be produced are diverse, and causes and effects do not always have a linear one-
to-one relationship. Any convincing analysis requires a credible counterfactual to appraise what
would have happened in the absence of the policy being evaluated, but such a study was considered
outside the scope of the PRSC operations in Vietnam.
47. End of program review is planned at the time of Implementation Completion Report
(planned for FY13). The latest available information is reported in the Annex 3.
FIDUCIARY ASPECTS
48. Public Financial Management. Vietnam‟s public financial management (PFM)
environment is considered adequate to support this operation. The most recent Country Financial
Accountability Assessment conducted in 2007 concluded that „the financial management risk to proper
use, control and reporting of funds that are managed through the Vietnam public financial
management systems is assessed as moderate.‟ The approved State Budget is published on the
Ministry of Finance (MOF) website just before the start of the Fiscal Year. It includes information on:
aggregate revenue and spending; budget financing; planned spending by government function; and
domestic revenue sources. MOF publishes quarterly budget execution reports, which include
information on spending at central, provincial, and district level, and estimated revenue collection.
Audited financial statements are published eighteen months after the end of the FY. The Government
has maintained strong ownership of the PFM reform agenda and continues to lead a coordinated
reform program in consultation with the development partners. While the financial management and
accountability systems of the government have improved, the risks arising from weak implementation
and compliance remain. The quality and extent of independent audit oversight can be further
strengthened by updating the audit strategies and methodologies of the State Audit of Vietnam to align
with international practices, and through the development of an effective internal audit function, which
currently is only at an embryonic stage in Vietnam. A detailed discussion on the state of PFM in
Vietnam is in Annex 5.
49. Foreign Exchange Environment. An IMF safeguards assessment has not been conducted in
Vietnam. This assessment would provide information about the foreign exchange control environment
of the SBV and integrity of financial information. The SBV is subject to auditing by SAV on an
annual basis, however under the current laws the audited financial statements and audit reports of SBV
are not made public. Notwithstanding these factors, IDA understands, following recent discussions
29
with the IMF, that there are no serious concerns with the SBV‟s foreign exchange control
environment.
50. Deposit account (DA). To address the potential residual fiduciary risks related to the
foreign exchange control environment, the Borrower will open and maintain a dedicated DA at SBV in
US dollars for the Borrower‟s use once the Credit is approved by the Board. The DA will form part of
the country's official foreign reserves. An equivalent amount in Vietnamese Dong will be credited to
an account of the government available to finance budgeted expenditures. If after deposit in the DA,
the proceeds of the Credit or any part thereof are used for ineligible purposes, as defined in the
Financing Agreement, IDA will request the Borrower to refund the amount directly to IDA. Amounts
refunded to IDA shall be cancelled.
51. Reporting & Auditing. Through SBV, the Borrower will report the exact sum received into
the DA, ensure that all withdrawals are for “eligible” expenditures, indicate to IDA details of the
Treasury account to which the Vietnamese dong equivalent of the Credit proceeds will be credited,
and submit a report on receipts and disbursements for the DA. The Government will, if considered
necessary by IDA, allow an independent external audit of the dedicated foreign currency DA.
DISBURSEMENT
52. The Credit will follow IDA disbursement procedures for development policy lending
operations, and the Credit proceeds will be disbursed in compliance with the stipulated release
conditions. Various measures have been taken to ensure that the overall fiduciary policies and
institutions are adequate to proceed with support from IDA and other development partners.
Analytical underpinnings for the operation include the 2002 Country Procurement Assessment Review
(CPAR), the 2005 PER-IFA and the CFAA (2007). Disbursement will not be linked to any specific
purchases and no procurement requirements will have to be satisfied.
RISKS AND RISK MITIGATION
53. The short term risk is premature loosening of monetary and fiscal policies will risk
repeating the recent pattern of recurring instability. Vigorous implementation of fiscal consolidation
and structural reforms such as reform of the state-owned enterprises and the financial sectors should
help Vietnam return to a more sustainable macroeconomic environment while laying the foundations
for greater efficiency and productivity to drive medium and longer term growth. The Bank is engaged
with the government in on-going discussion on both informal and formal basis, such as its engagement
in the consultative group meetings and ad hoc Prime Minister‟s Roundtables, jointly with the IMF. An
ongoing technical assistance project helps strengthen capacity for managing public finance. The
dialogue carried out through PRSC series seeks to enhance the quality and effectiveness of financial
sector regulation and supervision, and to enhance information disclosure and effective communication
of macroeconomic policies.
54. There is also a risk of that Vietnam will not be able to continue financing its development
needs as concessional financing begins to decline. The authorities are acutely aware of it, and are also
newly conscious that SOEs could undermine government‟s finances and macroeconomic stability.
Medium-term debt sustainability is tackled through development of capital markets to diversify the
sources of funds and to reduce maturity mismatches, and better monitoring and assessment of external
debt flow. The authorities have invited the World Bank team to conduct a Debt Management
Performance Assessment (DeMPA) in preparation for stepping up its capacity. Reviewing of the state
sector is also underway, and steps are being taken to strengthen monitoring and management of SOE
finances.
55. The longer term risk is that Vietnam will fail to address governance issues in a systematic
and fundamental way. Accountability, especially downwards, access to information, fighting
corruption are challenges for all countries at varying levels, and Vietnam needs to continue decisively
30
the reform process on which it has embarked. As the Vietnam Development Report 2010 Modern
Institutions has shown, improving governance requires increasing transparency at various levels. This
area receives special attention in the proposed operation, including actions to improve transparency in
public administration, strengthen the role of oversight entities and establish framework for monitoring
the fight against corruption.
56. Vietnam is at a crossroads. The authorities have managed to weather the external shocks
with increasing skillfulness, and have delivered impressive poverty reduction results. Although the
country has attained the lower middle-income status, there are still difficult challenges ahead, and
there will be less external support in the form of concessional financing. It is time for the authorities
and the development partners to prepare the medium-term engagement plan which is most suited for
the country at this crossroads. The World Bank is prepared to accompany the authorities in this
transition through an array of complementary programs and projects, while ensuring that its overall
partnership strategy remains well coordinated within the Bank and with other development partners.
The proposed operation is important for the country in completing the ongoing agenda, and in entering
the new phase with a strong momentum for reform.
31
ANNEX 1: Letter of Development Policy
32
33
34
ANNEX 2 : PRSC 6-10 Policy Matrix
Area PRSCs 6-9 PRSC 10
Pillar I: Business Environment
Global
integration
Grant trading and distribution rights to all foreign firms in line with
international commitments
Issue regulations to guide the intellectual property law with adequate
enforcement mechanisms
Establish consultation and information gathering mechanisms to
identify the social and environmental impacts of WTO accession
Harmonize agricultural health and food safety regulatory tools with
international standards in line with the SPS agreement
Tackle the infringement of copyrights and trademarks on a commercial
scale in line with TRIP Agreement
Set up M&E framework for the implementation of government policies
post-WTO accession
Make commercial scale infringements of patent, trademark rights and
rights of design a crime
Improve competition and efficiency of the pharmaceutical sector through
prevention of unfair commercial use of trial data
Adopt a plan for industrial and trade Adopt
Master Plan for national single window to
facilitate trade by simplifying transit-related
regulatory requirements
State sector
reform Further restrict list of sectors where 100-percent state ownership is
to be retained
Use share auctions as the main mechanism for equitization, and allow
foreign strategic investors
Classify all SOEs according to performance and publish the results
The State Capital Investment Corporation (SCIC) to begin receiving state
ownership rights in equitized SOEs from ministries and provinces.
Assess scope and nature of lending and other transactions among
affiliated parties in Economic Groups and General Corporations
Strengthen financial management of SOEs and their investments in
other entities, defining the level of such investments
Transfer state ownership rights in equitized SOCBs and selected General
Corporations to SCIC
The Recipient has issued regulations on state-owned economic
groups for better corporate governance and setting limits for cross
share holding
Separate the exercise of ownership rights from the regulatory function in
The Prime Minister has issued a
regulation to expedite equitization of
state-owned enterprises, and MPI has
submitted to the Prime Minister a review
of the state-owned Economic Group
model
35
Area PRSCs 6-9 PRSC 10
unequitized SOEs
Ensure competition and transparency in the sale of state capital in
equitization process
Financial
sector reform Require public disclosure of financial statements of SOCBs in line
with internationally accepted standards
Increase equity stake allowed to foreign strategic investors in commercial
banks
Approve equitization plans allowing participation of strategic
investors for two SOCBs and complete the equitization of one of
them Issue a road map to enhance bank supervision, including off-site
supervision and risk-management tools
Enhance the role of the banks‟ boards of directors and introduce fit-and-
proper tests in line with international best practices
Prepare revised law on State Bank of Vietnam focusing its mandate
on and enhancing its autonomy in regard to monetary policy and
financial sector stability Improve monitoring of foreign indirect investment by strengthening
prudential rules and supervision for custodians and brokers
Adopt a contingency plan to address potential adverse effects stemming
from the global financial crisis on banking sector
Complete equitization of one SOCB, and make progress in soliciting
participation of strategic investors
The Recipient has finalized regulations to better assess commercial
banks’ portfolio risks, enhance public disclosure, and strengthen
supervision
Develop a medium-term strategy for Vietnam Development Bank
Revise regulation to facilitate bank resolution and restructuring
Improve regulations on securities to foster development of domestic
capital market
SBV has issued a regulation to enhance
public disclosure and communication of
SBV’s policies and banking sector
statistics Formulate a Banking Sector Strategy 2011-
2020 with the aim of enhancing the
soundenss and stability of the financial
sector and to promote comeptition
Private sector
development
Introduce investment climate monitoring tool as part of annual enterprise
survey
Reduce processing times and rationalize fee structure for business
registration
Clarify authority on investment certificates and conditional sectors, and
standardize related documentation
Issue guidelines to foreign investors transitioning to new Investment and
Enterprise laws
MOF has formulated a time-bound
roadmap to improve corporate and
government bond markets to foster
financial and economic growth
36
Area PRSCs 6-9 PRSC 10
Establish consultative mechanism to streamline licenses and oversee
implementation of new investment-enterprise regime
Establish single-window mechanism for businesses to cover registration,
tax, and seal formalities in selected provinces
Simplify enterprise registration including by unifying tax and business
identification numbers and streamlining seal carving procedures
Rationalize incentives related to Enterprise Income Tax and simplify tax
procedures for household businesses
Raise the cap on shareholdings by single foreign investors in unlisted
companies
Issue regulation on agricultural extension in disadvantaged areas to
promote poverty reduction
Promote SME development through revising regulations, formulating an
action plan for supporting industries, and improving coordination among
responsible ministries
Establish national business registry with unique number for business,
tax, statistics, and seal agencies
Improve disclosure requirements of audited financial information of
public companies
Adopt regulation on disclosure of financial risks in the financial
statements of enterprises and banks
Infrastructure Decentralize investment ownership to better integrate capital and
recurrent budgets in the road transport sector
Clarify contract specifications, investor qualifications and treatment
of unsolicited proposals for BOT projects
Adopt wastewater charges based on cost recovery, with provisions to
protect the poor
Adopt market-based pricing systems to estimate the costs of state-
funded civil engineering investments
Separate power transmission and generation assets and regroup
transmission assets under a single National Power Transmission
Corporation
Introduce modern principles of transparency and corporate governance in
provincial infrastructure funds
Reduce traffic fatalities through strengthened enforcement and improved
education programs
Facilitate access to driver training and testing and provide financial
support to purchase special vehicles for people living with disabilities
Prime Minister has adopted a Gas Master
Plan to 2015 with Visions to 2025,
including a time-bound instruction to
MOIT to prepare a Gas Market Reform
Roadmap to 2020 for consideration by
the Prime Minister
37
Area PRSCs 6-9 PRSC 10
Adopt a pricing system for electricity from renewable energy and
provide incentives for government procurement of energy-efficient
equipment
Revise the road law to improve traffic safety through inter alia better
standards and strengthened supervision of commercial vehicle operators
Strengthen legal framework and institutional capacity of the National
Transport Safety Committee (NTSC)
Pillar II: Social inclusion
Education Extend performance standards for primary teachers nationwide,
including evidence-based assessments
Adopt transparent criteria to decide on university admission quotas on a
pilot basis
Revise tuition fees at secondary and tertiary levels, better reflecting
market conditions, and enhance policies to protect the poor
Issue roadmap for education information system to strengthen education
management
Formulate education development strategy to 2020 focusing on
equity of learning outcomes and relevance of contents
The Recipient has produced cost estimates and initiated public
consultation on full-day schooling for primary education
Issue an action plan for conducting assessment for primary and secondary
education for 2010
MOET has issued a regulation to
institutionalize regular nationwide
assessments of student learning outcomes
at primary and secondary levels
Health Adopt HIV/AIDS law and prepare action plans to scale up harm
reduction, fight stigma and discrimination
Improve budgetary balance between health infrastructure, human
resources, subsidies and preventive care
Submit health insurance law which better pools risks and allows
improved incentives in payment to service providers
Increase the health insurance premium paid on behalf of the poor and
partially subsidize the near-poor
Regulate safe treatment of solid waste discharge by hospitals in line with
international practices
Enhance treatment of medical waste discharged by hospitals at both
central and local levels
The Recipient has adopted a law establishing a framework for
national standards and a unified licensing system for all health care
practitioners
MOH has issued a regulation to establish
a centralized database as a step towards
unifying the national licensing system of
healthcare professionals
Prepare a summary report of health
insurance revenues and expenditures, and
key coverage and utilization performance
indicators for publication
38
Area PRSCs 6-9 PRSC 10
Develop action plan and guidelines for treatment on waste and water
discharged by health care facilities, revising healthcare cost standard to
secure appropriate budget for the treatment
Social
protection
Adopt Social Insurance Law making the system financially viable and
extending its coverage
Introduce voluntary pension program for farmers and informal
sector, allowing for support for the poor to participate in the
program
Adjust safety net for redundant SOE workers to cover state-owned
plantations and farms
Prepare a strategic plan to ensure prudential and effective
investment of social security funds
Update official poverty line(s) to reflect current conditions, agree on a
methodology to update lines on a regular basis to reflect changes in the
cost of living
Gender Unify legal framework to address gender disparities and increase
women’s participation in decision making
Determine institutional responsibilities for the implementation of the
Gender Equality Law and monitoring gender equality
Create legal framework for domestic violence prevention and control
Operationalize the Anti-Domestic Violence Law by adopting action plan
and issuing guiding regulation
Issue regulation to assign institutional responsibilities and allocate budget
for implementing measures in ensuring gender equality
Inter-ministerial circulars to be issued for implementing domestic
violence law by key responsible agencies, including establishment of
reporting system, supporting services to victims and clear measures for
behavior change in place
The Prime Minister has adopted a set of
national gender development indicators
and criteria for sex-disaggregation in the
national statistics
Pillar III: Natural Resources Land and
forests Issue strategy to strengthen linkages between protective and
economic functions of forests, and promote local ownership
Clarify resettlement and compensation process in cases without land-use
certificates, and mechanisms for handling complaints
Issue guidelines for forest development based on participatory land-
use planning and independent monitoring Transfer SFE land to local authorities for reallocation to households,
ethnic minority groups and private enterprises with focus on poor areas
39
Area PRSCs 6-9 PRSC 10
Water and
sanitation Allocate institutional responsibilities for integrated river basin
management Adopt natural disaster mitigation strategy with attention to non-structural
measures and guidelines for provincial and ministerial action plans
Issue regulations to ensure financial sustainability of irrigation services
and provide financial relief for poor farmers
Allocate institutional responsibilities to develop a unified national
sanitation strategy
Adopt a national action plan for information, education and
communication for personal hygiene, safe water and environment
sanitation
The Recipient has developed a proposal to continue the current NTP
for rural water supply and sanitation, which focuses on promotion of
rural sanitation and addresses personal hygiene
Introduce a regular and transparent nation-wide monitoring system for
urban sanitation to deliver information on state and development of the
sector
Environment Mandate public consultation on environmental impact assessments
commune level with public feedback incorporated in report to relevant
authorities
Strengthen incentives for solid waste management using economic
instruments
Approve national target program on adaptation to climate change
and allocate institutional responsibilities for its implementation Adopt regulations for performance contracts for sewerage and drainage at
local levels
Adopt legal framework for biodiversity protection to clearly delineate
and better administer protected areas, and to improve community
consultation process
The Recipient has issued technical guidelines for efficient use of
water resources to complement the irrigation services fee waiver
policy
Issue regulations on national environmental data collection, and collect
the data
MPI has issued technical guidelines for
the application of strategic environmental
assessments in the process of socio-
economic development planning
Pillar IV: Modern governance
Planning
processes Allocate state capital expenditure transparently, using criteria like
population, poverty and ethnicity
Adopt regulations for master and regional plans specifying issues,
process, agency responsibility, and require disclosure
40
Area PRSCs 6-9 PRSC 10
Establish criteria for selecting public investment projects and
mechanisms to monitor their financing and implementation
Establish list of indicators, data sources and reporting mechanism for
monitoring of SEDP
Establish a legal framework for strengthening urban planning and urban
infrastructure management
Public
financial
management
Disclose results of audits conducted by the SAV and its annual audit
plan
Publish report on budget execution for current year and budget plan for
forthcoming year, on an annual basis
Issue regulations for periodic disclosure of external public debt and its
composition
Implement regulation to guide the establishment and issuance of
benchmark government bonds
Consolidate administration procedures for all taxes into a single law,
modernizing assessment and enforcement methods
Issue regulations on content and timing of disclosure of SAV reports,
including audit reports of individual entities
Revise the investment laws to improve efficiency in state capital
expenditures and strengthen the management of public investment
projects
Conduct mid-term review of the SEDP and strengthen result-based
approach in M&E framework for planning
Formulate public debt management law consolidating the
management of domestic and external debt
Conduct public financial management reforms including commitment
accounting, vendor management and new chart of accounts
Adopt procedures for annual audit plan ensuring sufficient frequency and
adequate provincial coverage
The Recipient has formulated a regulation for internal audit
development and implementation and defining organizational
responsibilities
Strengthen the legal framework for taxing the use of non-agricultural land
and the capital gains to increase efficiency and equity, and dissuade
speculation
MOF has started the annual exercise of
publishing the synthesis report based on
financial statements of State-owned
Economic Groups and General
Corporations
41
Area PRSCs 6-9 PRSC 10
Legal
development Establish separate legal, judicial, economic, and budget committees
to strengthen the National Assembly’s supervisory role Simplify and broaden access to legal aid for marginalized and vulnerable
groups
Adopt policies to encourage the participation of non-state establishments
in the delivery of public services
Create a facilitating legal framework for the establishment and operation
of economic collaborative groups and social and charity funds
Enhance the responsibility of enterprises vis-à-vis consumers and
strengthen the handling of consumer complaints
Establish the National Bar Association, with governing documents
and structures approved by the community of lawyers
Simplify the procedures, strengthen the management, and improve the
monitoring and complaints system of civil judgments execution
Increase the systematic and widely accessible publication of court
judgments, beginning with Supreme People‟s Court cassation
Develop effective legal framework on consumer protection
Public
administration
reform
Extend One-Stop-Shop (OSS) to all ministries and agencies and
introduce inter-linked OSS to further simplify administrative procedures
Adopt principles of competition, merit-orientation and transparency in
the recruitment, appointment, promotion and dismissal of civil servants
Dissociate civil service pay structure from minimum wage setting
widening the range of minimum wages
Formulate common standards for IT applications and e-government
interfaces at central and provincial levels
Develop indicators for monitoring and evaluating the implementation of
PAR and provision of public administrative services
The Recipient has issued regulation and developed pilot schemes to
strengthen competition, merit orientation, and transparency in the
recruitment, appointment, and promotion of civil servants
The Prime Minister has adopted a Public
Administration Reform Master Program
for 2011-2020, and MOHA has started
piloting a results-oriented monitoring and
evaluation system
Fighting
corruption Operationalize Steering Committee against corruption with power to
suspend high level officials if suspected
Disclose results of investigations against corruption for cases overseen by
the Government Inspectorate
Establish legal framework to protect and reward whistle blowing on
corrupt activities
Implement asset declaration requirement in regard to senior officials
and their immediate families, with penalties for non-compliance
Introduce mandatory rotation for sensitive government positions and
GI has developed a framework for
monitoring progress on the
implementation and results of efforts to
prevent and combat corruption
42
Area PRSCs 6-9 PRSC 10
payment of government salaries through bank accounts
Issue a comprehensive anti-corruption strategy, setting out preventive,
demand-side, and sector-specific solutions, and monitoring mechanisms
The Recipient has (a) carried out annual procurement compliance
and performance audits of projects funded by state budget; (b) made
public the findings of selected audits; (c) adopted a pilot procurement
code of ethics for participants; and (d) launched an open access
electronic bidding system
Develop an enabling legal framework to protect and reward witnesses
and whistle-blowers
Improve reporting system to strengthen implementation of asset
declaration
* Boldface indicates prior actions.
43
ANNEX 3: Monitoring Progress Towards Outcome Indicators
Area Indicator Definition Source Baseline
(year)
Update
(year)
Most recent
(year) Target*
Pillar I: Business development
Global
integration 1. Openness to trade
Merchandise exports as a proportion
of GDP and merchandise imports as
a proportion of GDP
GSO
61%
69%
(2005)
61.3%
71.5%
(2009)
69.7%
81.9%
(2010)
Above
70%
for both
2. FDI Inflows Inflows of FDI (as recorded in BoP) BOP (SBV)
$2,315
million
(2006)
$6,550
million
(2007)
$6,900
million
(2009)
Three times
the baseline
State sector
reform
3. State Economic
activities in National
accounts
Share of state sector in Gross
Domestic Product
Statistical
yearbook (GSO)
38.4 %
(2005)
35.9%
(2007)
35.1%
(2008)
Below
33.3%
4. State investments
in SOEs as share of
total investment
Share of state investments in total
investments, where total is defined
as state, non-state and FDI
Statistical
yearbook (GSO)
47.1%
(2005)
37.2%
(2007)
33.9%
(2008)
Below
33.3%
Financial sector
reform
5. Quality of loan
portfolio
Required provisioning for possible
non performance in all outstanding
credit
SBV 6-9%
2.8%
(Sept
2008)
2.22%
(Feb 2011)
Less than
5%
6. Number of banks
using qualitative
criteria for borrowers
Banks following the qualitative
criteria (international standards) for
loan classification
SBV 0 3
(July 2011) 5
Private sector
development
7. Employment in
private enterprises
Number of paid employees in non-
state enterprises, excluding
collective enterprises
GSO (Annual
Enterprise Survey)
4.04
million
(2005)
4.8 million
(2006)
5.0
million
(2009)
More than
5 million
8. Private domestic
investment As a proportion of total investment GSO
30%
(2001-
2005)
33.9%
(2009)
36.1%
(2010) 35.3%
44
Infrastructure
9. Competitive
electricity generation
Electricity generated by non-EVN
entities excluding diesel and small
hydropower stations
MOIT 14.5%
(2004)
26.0%
(2008)
35.7%
(2010)
Twice the
baseline
10. Traffic accidents
Number of fatalities reduced with
better traffic management and better
road development
National Traffic
Safety Committee
27,933 (2002)
14,643
(2005)
12,800
(2008)
11,500
(2010)
Half the
baseline
Pillar II: Social inclusion
Education 11. Poor children
attending school
Net enrollment rate of poor children
in primary, lower- and upper-
secondary schools
GSO (VHLSS)
88.7%
43.1%
9.3%
(1998)
91.9%
78.0%
27.7%
(2006)
90.7%
77.8%
31.2%
(2008)
Above
90%
75%
33%
(2010)
12. Learning
outcomes in primary
school
Proportion of Grade 5 students
below functional reading level
Learning outcome
surveys done in
2001, 2007, and
2010
11%
(2001)
9.7%
(2007)
Below 10%
by 2020
Health
13. Poor people with
free health insurance
Proportion of people below the new
national poverty line who have been
provided with free health insurance
GSO (VHLSS) 42%
(2004)
49%
(Kinh/
Chinese)
78%
(ethnic
minorities)
(2006)
37.7%
(Kinh/
Chinese)
63.6%
(ethnic
minorities)
(2008)
100%
(2020)
14. Use of modern
health care facilities
by the poor
Average annualized contacts with
hospitals for the poorest quintiles GSO (VHLSS)
0.15
(2004)
0.18
(2006)
0.23
(2008)
Above
0.3
Social protection 15. Poverty among
ethnic minorities
Proportion of ethnic minorities
below the new Vietnam poverty line GSO (VHLSS)
61%
(2004)
52%
(2006)
50.3%
(2008) 50%
45
16. Contributors
towards old-age
pensions
Includes both the compulsory and
the voluntary schemes. In percent of
the labor force
VSS, GSO, Social
Insurance
Department
(MOLISA)
16%
(2006)
19%
(2008)
20%
(Mar 2011)
Above
22%
Gender
17. Leadership
positions held by
women
Proportion of female delegates at
the National Assembly. As a share
of total
MOHA 27%
(2006)
24.4%
(2011)
Above 30%
(1)
18. Asset ownership
among women
Proportion of land use certificates
held in the name of both spouses or a
female person
GSO (VHLSS) 30%
(2004)
35%
(2008) Above 40%
Pillar III: Natural resources
Land and forests
19. Forest land
allocated to local
communities
Proportion of forest land allocated to
local people and communities, for (i)
all of Vietnam and the (ii) Central
Highlands
MONRE
(i) 25%
(ii) 2%
(2005)
(i) 21% (2)
(ii) 3%
(2008)
Above
(i) 30%
(ii) 5%
20. Issuance of Land-
Use Certificate
Share of land Land Use Right and
House and Land-Attached Assets
Ownership Certificate (LURHOC)
was issued; area of land with
LURHOC;
MONRE
(i) 79.9%
(ii) 413,060
ha
(2008)
Above
(i) 85%
(ii) 450,000
ha
Water
21. Population with
access to improved or
clean water
Includes urban and rural population.
Includes all improved water sources
excluding all hand dug wells
GSO (VHLSS)
Urban: 82%
Rural: 48%
(2004)
Urban:
83%
Rural:
52%
(2006)
Urban: 89%
Rural: 60%
(2008)
Above
Urban: 90%
Rural: 60%
22. River basins with
inter-provincial
management
Number of river basins with inter-
provincial water allocation
procedures established and
operational
MONRE 3
(2006)
4
(2008)
Above
4
Environment 23. Quality of surface
water
Biological Oxygen Demand (BOD 5)
in major river basins (i.Nhue-Day, ii.
Cau, and iii. Dong Nai)(3)
CEM
i. 35
ii. 11
iii. 14
(2005)
i. 8
ii. 3
iii. 9
(2008)
i. 9
ii. 5
iii. 12
(2009)
average
reduction of
50% from
the base year
46
24. Protection of bio-
diverse wetlands
Number of wetlands of international
importance (26 by Ramsar criteria)
included in the protected area system
MARD 2
(2006)
2
(2008) 4 or more
Pillar IV: Modern governance
Planning
processes
25. Provincial
screening of public
investment
Number of provinces that have
issued guidelines for screening
public investment projects at the pre-
appraisal stage, including sound cost
benefit analysis
MPI None
(2006)
None
(2008)
None
(2010) 2 or more
26. Provinces
adopting modern
planning principles
Proportion of provinces using a
participatory approach to planning in
the preparation of their annual plans
and adopt a results-based monitoring
approach
MPI 3
(2006)
10
(2007)
18
(2010) 20 or more
Public financial
management
27. Use of modern
budget management
system
Provinces using the integrated
Treasury and Budget Management
Information System live
PFM 0
(2006)
35
(2010)
Above 45
(2011)
28. Public debt and
public guarantees
Ratio of public debt to GDP,
inclusive of publicly guaranteed debt
at all levels of government
MOF 43.5%
(2006)
44%
(2008)
below the
threshold of
55%
Legal
development
29. Consultation in
the law-making
process
Percentage of draft laws and
ordinances posted in the National
Assembly website for comments.
Office of
National
Assembly
0
(2006)
100% of
laws;
87.5%
ordinances
(2008)
100% of
laws; 90%
of
ordinances
30. Fraction of civil
judgments enforced
Number of civil judgments enforced
in percentage of all those subject to
enforcement
MOJ
(Department of
Civil Judgment
enforcement)
45%
(2006)
51%
(2008) Above 50%
47
Public
administration
reform
31. Provinces with e-
government
interfaces
Percentage of provinces with an
online guidance and services for
businesses
OCG
State
Administrative
management
computerization
72 and 2%
(2006)
80 and 13%
(2008)
Above 90
and 10%
32. Provincial
departments with one
stop shop model
Proportion of provincial
departments that have adopted the
one stop shop model
MOHA 67%
(2006)
73%
(2007)
82% (4)
(March
2009)
Above 80%
Fighting
corruption
33. Proportion of
entrepreneurs that see
corruption as a
binding constraint to
business
Fraction of enterprises who say
corruption is a major or very severe
obstacle; Fraction of enterprises who
say corruption is no obstacle.
World Bank
Enterprise
Surveys 2005
and 2009, panel
firms (5)
Major or very
severe
obstacle=16
% (2005); No
obstacle=
40% (2005)
Major or
very severe
obstacle=5%
(2009); No
obstacle=
74% (2009)
Below 5%;
Above 75%
34. Asset declaration
by civil servants
Number of (i) provinces and (ii)
central level ministries in full
compliance with asset declaration
regulations and (iii) number of
declarations verified(6)
GI
Annual Anti-
corruption
reports
None
(2007)
(i) 17/43
(ii) 7/63
(iii) 0
(2008)
(i) 24/43
(ii) 32/63
(iii) 788
(2009)
(i) 27/43
(ii) 42/63
(iii) 1000
(2010)
Notes: * Target values are for 2011 unless otherwise noted.
1. Elections are held every 5 years. In 2006 elections, 33 percent of candidates were women (currently checking the share of female candidates in the
2011 elections). The target is from the 5 year National Plan.
2. Forest area is expanding, so the lower share does not necessarily represent a regression. The share should be calculated using 2005 forestry area as the
denominator for all years (if no new forests are under SFE or allocated to communes). The share of land transferred to economic entities and local
communities is 39 percent.
3. Source: CEM report 2010.
4. This figure is from March 2009 (993 out of 1213, the newest information dated 11/9/2009), while the previous years are from January 2007 and January
2008, respectively. There was a difficulty arising from Hanoi and Ha Tay merging in early 2009. The MOHA official said he thought this figure was
too high -- his guess was around 80 percent.
5. Response categories were identical. Questions were very similar. 2005: "Please tell us if any of the following issues are a problem for the operation
and growth of your business. If an issue poses a problem, please judge its severity as an obstacle on a four-point scale where: 0 = No obstacle 1 =
Minor obstacle 2 = Moderate obstacle 3 = Major obstacle 4 = Very Severe Obstacle." 2009: "As I list some factors that can affect the current
operations of a business, please look at this card and tell me if you think that each factor is No Obstacle, a Minor Obstacle, a Moderate Obstacle, a
Major Obstacle, or a Very Severe Obstacle to the current operations of this establishment." Samples are identical since the responses of panel firms are
reported. N=239.
6. Reported as of August annually. Source: Anticorruption report No. 135/BC-CP dated September 19, 2008, report No. 103/BC-CP dated September 1,
2010.
48
ANNEX 4 : Supporting Documentation for Prior and Policy Actions under PRSC 10
Pillar I: Business development
Area Benchmark / Prior Action Supporting Documentation
Global
integration
Adopt Master Plan for national
single window to facilitate
trade by simplifying transit-
related regulatory requirements
Decision 2599/QĐ-BCĐASW dated October 21, 2009
to introduce the Master Plan and the Road Map 2008-
2012 – concept and guidance to the ministries and
agencies
Decision 1263/QĐ-TTg dated September 16, 2008 to
set up NSW Steering Committee chaired by MOF to
coordinate all activities
Decision 1616/QĐ-BCT dated March 31, 2010
approving the plan for simplifying administrative
procedures under MOIT
National Single Window (NSW) Master Plan (MOIT)
State sector
reform The Prime Minister has
issued a regulation to
expedite equitization of state-
owned enterprises, and MPI
has submitted to the Prime
Minister a review of the
State-owned Economic
Group model
Draft of time-bound plan to separate state ownership
exercising authority from regulatory functions signed
off by Minister of MPI and submitted to the
Government through MPI Official Document No.
7732/BC-BKHĐT dated November 09, 2011 to the
Prime Minister
Resolution 10/NQ-CP dated February 23, 2010
promulgating the Government‟s program of action for
realization of the National Assembly‟s Resolution No.
42/2009/QH12 on enhancement of the effect and
effectiveness of implementation of policies and laws
on management and use of state capital and assets at
state run groups or corporations
MPI's Official Letter No. 61/BKHĐT-VP dated 11
February 2011 asking CIEM to delay work on draft
Plan to the last quarter of 2011
Decree 59/2011/NĐ-CP was issued on July 18, 2011
replacing Decree 109/2007/ND-CP on SOE
equitization
Comprehensive report on Evaluating corporate
governance of SOEs and supervision of state economic
groups and policy recommendations under BWTO
Prime Minister‟s Notice No. 25/TB-VPC dated
February 25, 2011 assigns NSCERD to conduct a
preliminary review of the state economic groups
Research on SOE ownership policies by EDA
49
Pillar I: Business development
Area Benchmark / Prior Action Supporting Documentation
Financial
sector reform SBV has issued a regulation
to enhance public disclosure
and communication of SBV’s
policies and banking sector
statistics
Circular 21/2010/TT-NHNN dated October 08, 2010
on the Statistic reporting applicable to units of the
State Bank and credit institutions, foreign bank‟s
General gov't final consumption expenditure .. 12.3 6.4 6.5 .. 3.2 7.9
Gross capital formation .. 12.6 29.6 38.9 .. 19.8 12.0
Exports o f goods and services .. 36.0 55.0 77.5 .. 19.2 11.2
Imports of goods and services .. 45.3 57.5 87.8 .. 19.5 13.2
Gross savings .. -2.3 30.5 32.7
Note: Figures in italics are for years other than those specified. 2010 data are preliminary. Group data are for 2009. .. indicates data are not available.
a. A id data are for 2009.
Development Economics, Development Data Group (DECDG).
(average annual growth %)
(% of GDP)
10 5 0 5 10
0-4
15-19
30-34
45-49
60-64
75-79
percent of total population
Age distribution, 2009
Male Female
0
10
20
30
40
50
60
1990 1995 2000 2009
Vietnam East Asia & Pacific
Under-5 mortality rate (per 1,000)
0
2
4
6
8
10
12
95 05
GDP GDP per capita
Growth of GDP and GDP per capita (%)
63
Vietnam
B alance o f P ayments and T rade 2000 2010
(US$ millions)
Total merchandise exports (fob) 14,483 72,191
Total merchandise imports (cif) 15,637 84,801
Net trade in goods and services -173 -7,948
Current account balance 1,108 -3,999
as a % of GDP 3.6 -3.9
Workers' remittances and
compensation of employees (receipts) 2,000 6,626
Reserves, including gold 3,030 12,400
C entral Go vernment F inance
(% of GDP)
Current revenue (including grants) 20.4 26.2
Tax revenue .. ..
Current expenditure 15.9 21.2
T echno lo gy and Infrastructure 2000 2009
Overall surplus/deficit -2.0 -6.5
Paved roads (% of to tal) 25.1 47.6
Highest marginal tax rate (%) Fixed line and mobile phone