Page 1 PROGRAM INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB4528 Operation Name Higher Education Development Policy Program Region EAST ASIA AND PACIFIC Sector Tertiary education (100%) Project ID P104694 Borrower(s) SOCIALIST REPUBLIC OF VIETNAM Implementing Agency Ministry of Education and Training 49 Dai Co. Hanoi Vietnam Tel: (84-4) 869-2479 Date PID Prepared March 3, 2009 Date of Appraisal Authorization March 16, 2009 Date of Board Approval May 28, 2009 1. Country and Sector Background Vietnam has experienced rapid and consistent growth and poverty reduction since launching its transition towards market mechanisms ( ô i m i) in 1986 . The ô i m i reforms strengthened individual land tenure security, permitted freer trade in agricultural products, and ensured provision of improved agricultural support services, resulting in a boom in farm production and exports and leading to a dramatic reduction in rural poverty. GDP growth has averaged over 7.5 percent over the past ten years. The poverty rate has declined from 58.1 percent in 1993 to 16.0 percent in 2006, and has continued to decline since. 1 Vietnam is also well on-track to achieve most of the Millennium Development Goals (MDGs). A key challenge is to maintain growth in the context of global integration and to address concerns of increasing inequality. Vietnam has pursued a trade-led growth strategy resulting in a steady increase in both exports and imports as a proportion of GDP. The accession to WTO in 2007 is driving further lib eralization of the economy. Economic integration is also increasing the country’s exposure to global economic volatility, requiring increasing sophistication of macro-economic management to respond to capital flows, inflation pressures and shocks in financial markets. Liberalization, while driving poverty reduction amongst all groups, has also resulted in increased inequality between rural and urban areas, and in particular amongst ethnic minorities whose poverty rate remains over 50 percent. The education sector in Vietnam has expanded rapidly, with the exponential growth in the upper levels of education, in particular higher education . The enrolment in colleges and universities has doubled from eight hundred thousands students in 2001 to more than 1.6 million students in 2008. This can be explained by: (i) the historical low gross enrolment rate (less than 10 percent); (ii) high demand for higher education as a result of higher returns to skills; and (iii) the government active policies in expanding the sub-sector. The aggressive policy of introducing cost-recovery in higher education has resulted in a rapid increase in the share of tuition fees in the total revenues of higher education institutions, sometime as high as 70 1 The more recent statistics are not directly comparable to the 1993 and 2006 figures, but the poverty reduction trend is continuing since 2006. See the poverty reduction section below. Page 2 percent. This strategy helped Vietnam to expand the sector rapidly without creating a heavy burden to the state budget. However, this may have strained the capacity to pay and put a significant risk to the quality of provision. There was a noticeable acceleration, starting around 2 001, of the Government’s drive towards relying on market mechanisms, building a multi-stakeholder economy and further integrating with the region and the world . The vision underlying this drive was articulated in several strategic plans and documents, including the Ten-Year Socio-Economic Development Strategy 2001-2010, the Five-Year Socio-Economic Development Plan (SEDP) 2001-2006 and the Comprehensive Poverty Reduction and Growth Strategy (CPRGS). These strategic plans and documents aimed at building a market economy with a socialist orientation. They built on the successes of the ô i m i (“renovation”) process initiated in the late 1980s, while also preserving the strong poverty focus which has characterized the reform process of Vietnam. 2. Operation Objectives The Higher Education Development Policy Program, along with the Second Higher Education Project (HEP2) and the New- Model Universities Project (NMUP), is designed to support the Government’s implementation of its “Socio-Economic Development Plan 2006-2010” (SEDP) and its “Higher Education Reform Agenda” (HERA) . In particular, HEDPP aims to strengthen governance, rationalize financing, improve the quality of teaching and research, improve accountability for performance, and enhance transparency in financial management within the higher education sector. The proposed operation would be the first in a programmatic series of three annual single-tranche Development Policy Credits (DPCs) to support the sustained implementation of the reform elements of this Government program . 3. Rationale for Bank Involvement The World Bank’s five-year Country Partnership Strategy (CPS) 2 supports the GOV’s “Five-Year Socio-Economic Development Plan 2006-2010.” Under CPS Pillar I, which aims to assist the Government in its transition to a market economy, the World Bank’s program will help to “develop a higher education system that produces graduates better suited to the new economy’s needs,” measured by changes in the proportion of students finding employment within six months of graduation by field of study. The project contributes directly to this objective by improving the quality of higher education in ways that enable central government and universities to: (i) produce graduates with the knowledge and skills that meet labor market demands, and (ii) support the national innovation system through relevant basic and applied research. 4. Financing This is the first of a series of three (3) annual single-tranche operations, each for US$50.0 million equivalent. There is no co-financing. 5. Institutional and Implementation Arrangements Implementation . MOET has established a Higher Education Development Program Unit 3 The Program Unit is led by the MOET’s Director of Higher Education and comprises eight other MOET staff each 2 Report No. 38236-VN, dated January 3, 2007. 3 Decision No. 3822/ Q /BGD T, dated July 10, 2008 and signed by Vice-Minister B ành Tiê n Long (complementing Decision No. 5587/ Q /BGD T, dated August 30, 2007 and signed by Vice-Minister Bành Tiê n Long ). Page 3 responsible for a different component of the program. The Program Unit can draw on HEP1 funds for the preparation, implementation, monitoring and evaluation of the operations in the HEDPP series. For each of the three operations (HEDPP1-3) making up the program series, the Program Unit is responsible for: (i) drafting the Government ’s Program Documents; (ii) monitoring and evaluating in an on-going way the progress towards meeting the agreed policy measures that figure as triggers and prior actions in the program policy matrix, (iii) collecting and submitting to the Bank documentation (e.g. plans, regulations, reports) that required for negotiations as proof that the agreed policy measures have been completed; (iv) monitoring the Government’s approval process and reporting on progress to MOET and the World Bank team; and (v) mobilizing Government to ensure high degree of readiness for Bank missions. Monitoring and evaluation . MOET’s Program Unit will have responsibility for monitoring both performance in implementing the program and progress in moving towards the program’s development objectives. The Government’s Program Document contains, in addition to the policy matrix, (i) a more detailed plan of steps for carrying out the measures set out in the matrix, and (ii) an operational timeline against which implementation progress can be assessed. Fiduciary aspects. With the DPL instrument, the MOET will use Government procurement procedures and Government financial management system in executing the HEDPP. To address fiduciary risks in the foreign exchange control environment, the Borrower will maintain a dedicated foreign currency deposit account (DA) for the proceeds of the Credit, and will report on the funds flow of the dedicated deposit account. The Government will, if deemed necessary by IDA, allow an independent external audit of the dedicated foreign currency deposit account (DA). 6. Benefits and Risks Benefits : Students access higher education more efficiently and equitably; students receive better quality and more relevant education services; graduates and employers refer to more transparent qualifications framework; Government and households hold higher education providers more accountable. Policy-related risk : MOET may have weak capacity in developing coherent policy. Mitigation : HEP2 provides for technical assistance aimed at building capacity. Institutional risk : MOET and HEIs may not be fully effective in applying the regulations to their full potential. Mitigation : NMUPs will provide a privileged locus for testing the full application of the new body of regulations and offering a demonstration effect for roll-out to other HEIs. Fiduciary risk : Weaknesses identified in the 2007 CFAA will likely take some time to remedy in the higher education sector. Mitigation : HEDPP includes an explicit strand of prior actions aimed at continuous improvement in financial management. 7. Poverty and Social Impacts and Environment Aspects Poverty and social impacts . Overall, HEDPP will contribute to increasing the skills of higher education graduates, development of research activities and other improvements in the higher education system which are all expected to have a positive economic return for the larger Vietnamese society. While HEDPP is not designed with a specific poverty reduction focused, the inclusion of a measure that charts the take-up of the Government’s pro-poor student loans scheme ensures a focus on access to higher education for disadvantaged youth. Beyond this, the emphasis on efficiency, quality, transparency and accountability will benefit all those who access the higher education system (including the poorest). Page 4 Environmental aspects . This operation raises no particular environmental issues. 8. Contact point: Contact: Jeffrey Waite Title: Lead Education Specialist Tel: 5777+384 / 84-4-3934-6600 Fax: Email: Jwaite@worldbank.org Location: Hanoi, Vietnam (IBRD) 9. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank.org Web: http://www.worldbank.org/infoshop