Document of The World Bank FOR OFFICIAL USE ONLY Report No. 65200-VN INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL FINANCE CORPORATION MULTILATERAL INVESTMENT GUARANTEE AGENCY COUNTRY PARTNERSHIP STRATEGY FOR THE SOCIALIST REPUBLIC OF VIETNAM FOR THE PERIOD FY12 - FY16 NOVEMBER 7, 2011 Vietnam Country Management Unit East Asia and Pacific Region The International Finance Corporation East Asia and Pacific Region The Multilateral Investment Guarantee Agency 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. The date of the last Country Partnership Strategy was February 1, 2007, and the date of the last Country Partnership Strategy Progress Report was December 21, 2009. CURRENCY EQUIVALENTS (Exchange rate as of October 2011) Currency Unit = Vietnamese Dong US$1.00 = 20,890 FISCAL YEAR January 1 - December 31 IDA and IBRD IFC MIGA Vice President James W. Adams Karin Finkelston Izumi Kobayashi Country Director/ Victoria Kwakwa Sergio Pimenta Kevin Lu Regional Director Task Team Myla Taylor Williams/ Leaders/Regional Simon Andrews Hal G. Bosher Mette Frost Bertelsen Manager The Vietnam Country Partnership Strategy was prepared under the guidance of Victoria Kwakwa, World Bank Country Director, and Simon Andrews, IFC Regional Manager, by a team led by Co-Task Team Leaders Myla Taylor Williams, Country Program Coordinator (EACVQ) and Mette Frost Bertelsen, Country Officer (EACVF). MIGA participation was led by Hal Bosher, Senior Underwriter (MIGA). Special thanks are extended to the Government of Vietnam CPS Core Team, Development Partners and Civil Society Organizations for their contributions. World Bank Group Core Team: Christian Bodewig (Senior Economist, EASHS), Quang Hong Doan (Senior Economist, EASPR), Steven Jaffee (Senior Rural Development Specialist, EASVS), Abhas Kumar Jha (Lead Urban Specialist EASIN), and Vinh Thanh Nguyen (Water and Sanitation Specialist, TWIEA). World Bank Group Contributors: Keiko Sato (Portfolio and Operations Manager), Jennifer Sara (Sector Manager), Toomas Palu (Country Sector Coordinator, HD), Deepak Mishra (Lead Economist), Sameer Goyal (Country Sector Coordinator, FPD), Dean Cira (Country Sector Coordinator, Urban), Paul Vallely (Country Sector Coordinator, Transport), Douglas Graham (Country Sector Coordinator, Environment), Beatriz Arizu de Jablonski (Acting Country Sector Coordinator, Energy), Pilar Larreamendy (Country Sector Coordinator, Social Development), James Anderson (Senior Governance Specialist), Huong Thi Lan Tran (Governance Specialist), Nguyen Thi Thuy Tran (Operations Analyst), Mai Thi Hong Bo (Partnerships Officer), Valerie Kozel (Senior Poverty Economist), Duc Minh Pham (Senior Economist), Dzung Huy Nguyen (Natural Disaster Management Operations Officer), Habib Nasser Rab (Senior Economist), Lan Van Nguyen, (Operations Officer, IFC), Quang Bao Lam (Senior Country Officer, IFC), Yuling Zhou (Lead Procurement Specialist), Robert Gilfoyle, (Senior Financial Management Specialist), Kien Trung Tran (Senior Procurement Specialist), Daniel Mont (Senior Human Development Economist), Nga Thi Quynh Dang (Trust Fund Coordinator), Viet Tuan Dinh (Senior Economist), Victoria Gyllerup (Senior Operations Officer), Thanh Thi Mai (Senior Education Specialist), Nga Nguyet Nguyen (Senior Economist), Ngan Hong Nguyen (Communications Officer), Chi Kim Tran (Public Information Associate), Moussoukoro Soukoule (Country Program Assistant), Phuong Minh Le (Senior Executive Assistant), Minh Thi Hoang Trinh (Team Assistant), Hoa Chau Nguyen (Team Assistant). ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities and Recovery ACP Agriculture Competitiveness Project GHG Greenhouse Gas ADB Asian Development Bank GNI Gross National Income ADF Asian Development Fund GPE Global Partnership for Education AEF Aid Effectiveness Forum GSO General Statistics Office AF Additional Financing GTAP Governance, Transparency and Anti- AFD Agence Française de Développement Corruption Plans AHIP Avian and Human Influenza Project GWh Gigawatt Hour ASEAN Association of South East Asian Nations HCFC Hydro chlorofluorocarbons AusAID Australian Agency for International HCMC Ho Chi Minh City Development HCS Hanoi Core Statement BOP Balance of Payments HIFU Ho Chi Minh City Investment Fund for CAS Country Assistance Strategy Urban Development CC Climate Change HPUTP Haiphong Urban Transport Project CDD Community Driven Development HUTP Hanoi Urban Transport Project CFAA Country Financial Accountability IAS International Accounting Standards Assessment IBRD International Bank for Reconstruction and CFC Chlorofluorocarbon Development CG Consultative Group ICA Investment Climate Assessment CIDA Canadian International Development ICR Implementation Completion Report Agency ICT Information and Communication CPPR Country Portfolio Performance Review Technology CPRGS Comprehensive Poverty Reduction and IDA International Development Association Growth Strategy IDF Institutional Development Fund CPRT Country Portfolio and Results Monitoring IEG Independent Evaluation Group Tool IFC International Finance Corporation CPS Country Partnership Strategy IFRS International Financial Reporting Standards CTF Clean Technology Fund ILO International Labor Organization CY Calendar Year IMF International Monetary Fund DFID Department for International Development INGO International Non-Government DO Development Objective Organization DPIP Danang Priority Investment Project IPSAS International Public Sector Accounting DPL Development Policy Loan Standards DPO Development Policy Operation ISR Implementation Status and Results Report EMCC Economic Management and JICA Japanese International Cooperation Competitiveness Credit Agency ESW Economic and Sector Work JPPR Joint Portfolio Performance Review EU European Union JSAN Joint Staff Advisory Note EVN Electricity of Vietnam JSDF Japan Social Development Fund FDI Foreign Direct Investment KEXIM Export-Import Bank of Korea FIRST Fostering Innovation through Research, KfW Kreditanstalt für Wiederaufbau Science, and Technology KTF Korean Trust Fund FLEG Forest Law Enforcement and Governance LIFSAP Livestock Competitiveness and Food FSAP Financial Sector Assessment Program Safety Project FSDP Forest Sector Development Project LNG Liquified Natural Gas FSQL Fundamental School Quality Levels MARD Ministry of Agriculture and Rural FTA Free Trade Agreement Development FY Fiscal Year M&E Monitoring & Evaluation GAC Governance and Anti-Corruption MDG Millennium Development Goal GDP Gross Domestic Product MDTF Multi-Donor Trust Fund GDVC General Department of Vietnam Customs MDTP Mekong Delta Transport Project GEF Global Environment Facility MDWMP Mekong Delta Water Management Project GFDRR Global Facility for Disaster Reduction MIC Middle Income Country MIGA Multilateral Investment Guarantee SARS Severe Acute Respiratory Syndrome Agency SAV State Audit of Vietnam MLF Microfinance Loan Fund SBV State Bank of Vietnam MOF Ministry of Finance SDR Special Drawing Right MOIT Ministry of Industry and Trade SEDP Socio-Economic Development Plan MOLISA Ministry of Labor, War Invalids and SEDS Socio-Economic Development Strategy Social Affairs SEIER System Efficiency Improvement, MONRE Ministry of Natural Resources and Equitization and Renewables Environment SEQAP School Education Quality Assurance MPI Ministry of Planning and Investment Program MSMEs Micro and Small-Medium Enterprises SIL Sector Investment Loan MTEF Medium-Term Expenditure Framework SME Small-Medium Enterprise MVA Megavolt-ampere SOCBs State-Owned Commercial Banks MW Megawatt SOE State-Owned Enterprise NDTP Northern Delta Transport Project SRB Sex Ratio at Birth NGO Non-Government Organization TA Technical Assistance NMPRP-2 Second Northern Mountains Poverty TABMIS Treasury and Budget Management Reduction Project Information System NPL Non-Performing Loans TBD To Be Determined NSIS National Statistical Indicators System TF Trust Fund NTP National Targeted Program TFLA Trade Facilitation and Logistics Audit OCR Ordinary Capital Resources UK United Kingdom ODA Official Development Assistance UN United Nations OECD Organization for Economic Co-operation US United States and Development USD United States Dollar OOG Office of Government UWS Urban Water Supply OSF ODA Strategic Framework UWSWP Urban Water Supply and Wastewater PCB Polychlorinated Biphenyl Project PCI Provincial Competitiveness Index VAS Vietnam Accounting System PEFA Public Expenditure and Financial VAT Value Added Tax Accountability VCIS Vietnam Customs Information System PER Public Expenditure Review VCGM Vietnam Competitive Generation Market PFM Public Financial Management VDR Vietnam Development Report PHRD Policy and Human Resources VHLSS Vietnam Household Living Standards Development Survey PIR Public Investment Reform VLAP Vietnam Land Administration Project PMU Project Management Unit VN Vietnam PPA Power Purchase Agreement VND Vietnamese Dong PPP Public-Private Partnership VSDS Vietnam Statistical Development Strategy PRSC Poverty Reduction Support Credit VSS Vietnam Social Security PSD Private Sector Development VWRAP Vietnam Water Resources Assistance RD Rural Distribution Project RDF Rural Development Fund WB World Bank RE2 Second Rural Energy Project WBG World Bank Group REDD Reduction of Emissions from WBI World Bank Institute Deforestation and Forest Degradation WTO World Trade Organization REDP Renewable Energy Development Project WWF World Wildlife Fund RETF Recipient-Executed Trust Fund RF3 Third Rural Finance Project RNIP Road Network Improvement Project ROSC Report on the Observance of Standards and Codes RSP Road Safety Project TABLE OF CONTENTS EXECUTIVE SUMMARY.................................................................................................................................... i I. COUNTRY CONTEXT ...................................................................................................................... 1 A. RECENT POLITICAL AND ECONOMIC DEVELOPMENTS ................................................................1 B. REGIONAL AND GLOBAL CONTEXT...................................................................................................2 C. MEDIUM-TERM ECONOMIC PROSPECTS ...........................................................................................3 II. DEVELOPMENT AGENDA ............................................................................................................. 4 A. COMPETITIVENESS ................................................................................................................................5 B. ENVIRONMENTAL AND NATURAL RESOURCE SUSTAINABILITY ..............................................5 C. POVERTY AND INEQUALITY ................................................................................................................6 D. VULNERABILITY ....................................................................................................................................8 E. GOVERNANCE .......................................................................................................................................10 III. GOVERNMENT PRIORITIES ....................................................................................................... 11 IV. VIETNAM-WORLD BANK GROUP PARTNERSHIP .................................................................. 12 A. LESSONS AND FEEDBACK ..................................................................................................................12 B. CPS PRINCIPLES OF ENGAGEMENT ..................................................................................................14 C. CPS ENGAGEMENT FRAMEWORK AND EXPECTED RESULTS ....................................................16 D. IMPLEMENTING THE FY12-FY16 CPS ................................................................................................28 E. DEVELOPMENT PARTNERSHIPS AND AID EFFECTIVENESS .......................................................31 V. RISKS ............................................................................................................................................... 33 ANNEX 1: RESULTS MATRIX ........................................................................................................................ 35 ANNEX 2: VIETNAM CPS FY07-FY11 COMPLETION REPORT ............................................................... 47 ANNEX 3: COUNTRY-AT-A-GLANCE (CAS ANNEX A2).......................................................................... 101 ANNEX 4: SELECTED INDICATORS OF BANK PORTFOLIO PERFORMANCE AND MANAGEMENT (CAS ANNEX B2) ........................................................................................................................... 104 ANNEX 5: INDICATIVE FY12-FY14 LENDING PROGRAM (CAS ANNEX B3) ...................................... 105 ANNEX 6: INDICATIVE FY12-FY14 AAA PROGRAM (CAS ANNEX B4) ................................................ 107 ANNEX 7: SOCIAL INDICATORS (CAS ANNEX B5) ................................................................................. 109 ANNEX 8: PROGRESS TOWARD THE MILLENNIUM DEVELOPMENT GOALS ................................ 110 ANNEX 9: GENDER IN VIETNAM ............................................................................................................... 111 ANNEX 10: KEY ECONOMIC INDICATORS (CAS ANNEX B6) ............................................................... 113 ANNEX 11: KEY EXPOSURE INDICATORS (CAS ANNEX B7) ................................................................ 115 ANNEX 12: OPERATIONS PORTFOLIO (IBRD/IDA AND GRANTS) (CAS ANNEX B8-WB) ................ 116 ANNEX 13: STATEMENT OF IFC’S HELD AND DISBURSED PORTFOLIO (CAS ANNEX B8-IFC) ... 119 ANNEX 14: VIETNAM COUNTRY SURVEY ............................................................................................... 120 ANNEX 15: STAKEHOLDER CONSULTATIONS ....................................................................................... 123 ANNEX 16: PUBLIC FINANCIAL MANAGEMENT IN VIETNAM ........................................................... 133 ANNEX 17: OVERVIEW OF MAIN TRUST FUNDS.................................................................................... 138 ANNEX 18: THE BANK’S DEVELOPMENT PARTNERSHIPS IN VIETNAM ......................................... 140 ANNEX 19: DEVELOPMENT PARTNER ACTIVITIES IN VIETNAM ..................................................... 142 ANNEX 20: STATISTICAL CAPACITY AND M&E SYSTEMS ................................................................. 146 ANNEX 21: COUNTRY FINANCING PARAMETERS ................................................................................ 148 TABLES TABLE 1: KEY ECONOMIC INDICATORS ........................................................................................................................4 FIGURES FIGURE 1: POVERTY TRENDS IN VIETNAM 1993-2008....................................................................................................7 FIGURE 2: VIETNAM CPS RESULTS OUTCOMES AND INDICATORS ...............................................................................18 BOXES BOX 1: URBANIZATION OPPORTUNITIES AND CHALLENGES ...........................................................................................9 BOX 2: MAINSTREAMING GOVERNANCE ......................................................................................................................19 BOX 3: EMPOWERING LOCAL WOMEN AND IMPROVING RURAL ROAD MAINTENANCE ...............................................19 BOX 4: EMCC TO SUCCEED PRSC SERIES ...................................................................................................................21 BOX 5: WORLD BANK‟S INFRASTRUCTURE STRATEGY IN VIETNAM ............................................................................22 BOX 6: ADDRESSING VIETNAM‟S REMAINING POVERTY AGENDA ...............................................................................27 BOX 7: ENSURING FIDUCIARY AND INSTITUTIONAL DEVELOPMENT ............................................................................28 BOX 8: FIDUCIARY RISKS .............................................................................................................................................29 EXECUTIVE SUMMARY 1. This is the World Bank Group’s first Country Partnership Strategy (CPS) for Vietnam since it became a lower middle-income country in 2009. Vietnam became IBRD-eligible in 2007 and received its first IBRD loan in 2009. The CPS will support implementation of Vietnam‟s new five-year Socio-Economic Development Plan (SEDP) for 2011-2015. It combines continuity from the previous CPS program with the introduction of some strategic shifts that will likely take more than one CPS period to yield significant change. These shifts are primarily intended to sharpen strategic focus within the Bank‟s program, enhance operational efficiency, and deliver development results faster. 2. Vietnam has achieved remarkable development success over the last 25 years. Reforms introduced in 1986 have transformed the country from a centrally planned to a more market oriented economy. This has spurred rapid growth (averaging 7.3 percent during 1990-2010) and significant poverty reduction. Vietnam‟s per capita income has increased more than eleven-fold to US$1,130 in 2010, and the poverty headcount ratio has fallen from 58 percent in 1993 to 14.5 percent in 2008. The country has already attained several of its original Millennium Development Goals (MDGs) and is likely to achieve a few more by 2015. There have been dramatic improvements in the welfare of the average Vietnamese citizen. 3. In recent years, however, Vietnam has found it more difficult to maintain high levels of growth with macroeconomic stability. This reflects in part its deeper integration into global markets with World Trade Organization (WTO) accession in 2007 and recent global crises. However, the more important explanation is a reliance on public investment, channeled largely through a weak state enterprise sector and financed by massive credit expansion, to drive growth. This has led to an accommodating macroeconomic policy stance, inefficient public investments and a high level of indebtedness in the state sector. Banking and financial sector risks have therefore become elevated. The economy has suffered episodes of macroeconomic instability with high levels of inflation, depreciation and instability of the currency, and signs of significant internal capital flight. Since early 2011, the Government has been implementing a comprehensive stabilization program (Resolution 11) which has begun to reestablish macroeconomic stability. A plenum of the Communist Party of Vietnam in October 2011 reaffirmed the Government‟s commitment to sustaining macroeconomic stability and set three aspects of economic restructuring as priorities for the next five years. These are restructuring of (i) public investment; (ii) the financial sector with focus on commercial banking system and financial institutions; and (iii) state-owned enterprises with focus on economic groups. Action on this will be important for tackling the structural drivers of macroeconomic instability and enhancing the economy‟s efficiency. 4. Vietnam’s aspirations to avoid the middle income trap and become a successful middle income country (MIC) will require strengthening the economy’s competitiveness. In addition to recent macroeconomic instability, the business environment is constrained by weak infrastructure, by high costs of interacting with Government agencies, and by a lack of adequate information on policy. Vietnam will also need to begin to build the basis for shifting to higher productivity, product and process innovation, and value addition as its low-cost labor advantage begins to dissipate. Developing a better educated workforce and strengthening its technology and innovation system will be critical for this. 5. Vietnam has relied on its abundant natural resources for growth, but has not always managed the environmental impacts properly. While the share of Vietnam‟s economic growth derived from its natural capital (e.g., fisheries, forestry, and mineral resources) will likely diminish with further industrialization, it will nonetheless remain an important source of growth and employment especially for the poor. Population growth, industrialization, urbanization, and major changes in patterns of rural development have contributed to deterioration of air and water quality and loss of biodiversity. Vietnam i relies on international rivers for 60 percent of its surface water flow. Dry-season water supply is under pressure, and climate change will exacerbate the situation. There is now strong recognition in Government of the need for a more sustainable use of natural resources and the environment. 6. Inequality in Vietnam is beginning to rise, and the pace of poverty reduction has inevitably slowed, with poverty increasingly concentrated in ethnic minority communities. Macroeconomic instability and adverse weather shocks have also increased household vulnerability. Development of Vietnam‟s systems for governance and accountability has lagged behind the country‟s broader development success, making it more difficult to address these challenges effectively. Progress on these issues – competitiveness, sustainability, persistent poverty and rising inequality, vulnerability, and governance – are critical for making progress on Vietnam‟s ambitious development aspirations in the medium and long term. Addressing them is at the core of both the Government‟s overall strategy and this CPS. 7. The Government’s development vision for the next decade is laid out in its Socio-Economic Development Strategy (SEDS) 2011-2020. The SEDS gives attention to structural reforms, environmental sustainability, social equity, and emerging issues of macroeconomic stability. It defines three “breakthrough areasâ€?: (i) promoting human resources/skills development (particularly skills for modern industry and innovation), (ii) improving market institutions, and (iii) infrastructure development. The overall goal is for Vietnam to lay the foundations for a modern, industrialized society by 2020. The SEDP 2011-2015, approved by the new National Assembly in November 2011, elaborates the objectives of the SEDS and identifies the specific measures and resources that are needed for its implementation. Aligned with the Government‟s overall strategic priorities and goals, the CPS will support the three breakthrough areas of the SEDS and SEDP of promoting human resources, improving market institutions, and advancing infrastructure development. 8. The CPS introduces several new principles of Bank engagement in Vietnam aimed at increasing the Bank’s impact: (i) sharpening strategic focus by reducing program dispersion through consolidation and greater selectivity; (ii) improving operational efficiency, including through the introduction of more systemic approaches, leveraging resources by strengthening policy dialogue and analytical and advisory services (AAA), through synergies with development partners, and across the World Bank Group (WBG); and (iii) accelerating implementation for more timely results. 9. Building on Vietnam's strong track record of growth and poverty reduction, the World Bank Group will partner with Vietnam in its effort to achieve success as a middle income country. The CPS program will support selected elements of the transitions required for this, notably, from an agrarian economy toward one that is more urban and industrialized; from a focus on quantity toward a greater focus on quality of production and service provision; and from a comparative advantage of low- cost labor, with low value added, to one with a growing share of innovation-led and higher value-added production and services. 10. The CPS program will support investments and policies organized into a strategic framework of three pillars and three cross-cutting themes. The pillars are: (i) strengthening Vietnam's competitiveness in the regional and global economy, (ii) increasing the sustainability of its development, and (iii) broadening access to opportunity. Key cross-cutting themes are (i) strengthening governance, (ii) supporting gender equity, and (ii) improving resilience in the face of external economic shocks, natural hazards and the impact of climate change. A wide range of instruments will be used, including results-based approaches, a series of development policy operations (DPOs) to succeed the Poverty Reduction Support Credit (PRSC) series concluding with the tenth operation in December 2011, regional IDA operations, and programmatic AAA. The Global Environment Facility (GEF), Recipient ii Executed Trust Funds (RETFs), and Institutional Development Fund grants (IDFs) for capacity building will complement IDA and IBRD resources. With new challenges emerging in the poverty agenda – e.g., rising inequality, urban poverty, and concentration of poverty in remote ethnic minority communities – the CPS includes a renewed commitment to poverty reduction, including through better understanding of Vietnam‟s shifting poverty dynamics, and to new targeted poverty interventions informed by this understanding. Governance and gender lenses will be applied to all operations at an early stage of preparation to seize opportunities for strengthening support in these areas. Resilience emerges as an important theme in light of Vietnam‟s greater vulnerability to shocks on several fronts: external shocks at both the macroeconomic and household level, and natural hazards and climate change. The CPS supports a strengthening of Vietnam‟s resilience on these specific issues in the respective pillars of the framework. 11. The challenge for the Vietnam program is to achieve results faster. Government is considering newer approaches such as results-based and output-based disbursement, in order to accelerate development results. Vietnam‟s National Targeted Programs (NTPs) may be useful vehicles for this. During the CPS period, the Bank and Government will work to assess underlying fiduciary systems capacity and to diversify lending instruments for faster development impact. The Bank will also continue to work jointly with the Ministry of Planning and Investment (MPI) and other donors to address systemic official development assistance (ODA) implementation issues and undertake analyses to learn from well- performing provinces and sectors. At the project level, the Bank and MPI are giving priority to improving project readiness for implementation, accelerating preparation, and managing the existing portfolio proactively. A more streamlined results framework of this CPS will serve as a management tool for the Bank‟s Vietnam Country Team. 12. Financing resources available to Vietnam during the new CPS period include an indicative FY12-FY14 IDA allocation of SDR 2.8 billion (equivalent to US$4.2 billion). This is the largest allocation to Vietnam under any IDA Replenishment, in light of Vietnam‟s strong performance and the overall increase under the IDA 16 Replenishment. As a blend country, Vietnam will also have access to modest IBRD resources. Proposed FY12-FY14 IBRD commitments total US$770 million. Most of the IBRD resources will be used to finance infrastructure investments. As Vietnam transitions to a more market-based economy with the private sector increasingly a driver of growth, IFC‟s program is expected to increase accordingly during the CPS period. MIGA is engaging more actively in Vietnam. Its new instrument in support of public-private partnerships (PPPs) could be useful for the Government to mobilize international financing for priority infrastructure projects. In addition to new IDA and IBRD commitments, resources available to Vietnam during the new CPS period include an undisbursed balance of US$5.7 billion (as of September 30, 2011) on the existing portfolio. 13. Trust Funds (TFs) play a major role in the Vietnam program. FY11 commitments and disbursements reached US$296 million and US$170 million, respectively. The sources of trust funds are expected to change as donors shift their attention to newer areas of support or start to scale down in Vietnam. Effective and efficient donor coordination will be important for minimizing gaps resulting from these shifts. Selection criteria for TFs have been developed and will be applied more systematically to ensure strategic alignment. 14. As several development partners will end ODA support to Vietnam during the next 5 years, the CPS will seek ways to support a smooth transition, including through offering financing vehicles for development partners as needed and as appropriate. Partnerships with other development partners, notably large donors such as the Asian Development Bank (ADB) and the Japanese International Cooperation Agency (JICA) and key bilateral collaborators such as the UK‟s Department for International Development (DFID) and the Australian Agency for International iii Development (AusAID), will be strengthened to enhance coordination and help Vietnam make further progress on its harmonization and broader aid effectiveness agenda. 15. Monitoring of CPS implementation and results will be done annually. Adjustments will be made to reflect emerging lessons. 16. There are three main risks to implementation of the CPS program. They are: (i) slowdown in the global economy, to be partially mitigated by continued dialogue with government agencies and stakeholders on how to build buffers to global shocks; (ii) heightened macroeconomic instability, to be partially mitigated by intensified and regular dialogue with Government in consultation with the International Monetary Fund (IMF), including a Financial Sector Assessment Program (FSAP); and (iii) implementation risks, to be partially mitigated by capacity building for public financial management (PFM) and procurement, work with Government on modernizing and simplifying the legal framework for management of Official Development Assistance (ODA), implementation of credible project governance and anti-corruption plans, and technical assistance to strengthen the capacity of Government entities and professions responsible for independent assurance. iv I. COUNTRY CONTEXT 1. Vietnam is a development success story. Political and economic reforms (Ä?ổi Má»›i) launched in 1986 have transformed Vietnam from one of the poorest countries in the world, with per capita income below US$100, to a lower middle income country within a quarter of a century. The poverty headcount ratio has fallen from 58 percent in 1993 to 14.5 percent in 2008, and most indicators of welfare have improved. Vietnam has already attained five of its ten original MDG targets and is well on the way to attaining two more by 2015 (see Annex 8). At the end of 2010, Vietnam‟s per capita income was US$ 1,130. Vietnam has also been applauded for the equity of its development, which has been better than most other comparators. The country is playing a more visible role on the regional and global stage, having successfully chaired the 2009 Annual Meetings of the Boards of Governors of the World Bank Group and the IMF, and carried out the Chairmanship of the Association of South East Asian Nations (ASEAN) in 2010. A. RECENT POLITICAL AND ECONOMIC DEVELOPMENTS 2. Vietnam’s most recent political transition (once every five years) formally began with the Eleventh Congress of the Communist Party of Vietnam in January 2011. This was followed by elections for local Peoples‟ Councils and for the National Assembly in May 2011 and finally the endorsement of a new Cabinet by the new National Assembly in its first meeting in August 2011. The process has also included discussion and agreement on the directions for Vietnam on politics, economic and social development, and on engagement with the region and the rest of the World. The Congress called for a more comprehensive approach to the country‟s renovation, decided to promote greater citizens‟ participation and unity within Vietnam, and to engage proactively in international integration. The Congress re-affirmed Vietnam‟s approach to state-led development, but also revised key policy documents to place greater emphasis on market processes and non-state ownership of economic assets. Prime Minister Nguyá»…n Tấn DÅ©ng has been re-appointed to a second term of office, while the Party General Secretary, the President, and the Chairman of the National Assembly have changed. 3. Over the last quarter of a century, Vietnam’s politics and society have gradually evolved towards greater openness and space for civil participation. Public discourse on a range of political, social, and economic issues has increased. Provisions are in place to require input by citizens in certain decisions at the grassroots level. The ability of the National Assembly to perform the role of a check and balance on the executive has strengthened. Despite this progress, greater openness and opportunity for citizens to participate in governance is needed to support Vietnam‟s long term vision of becoming a modern industrialized society. 4. In recent years, Vietnam has faced significant economic challenges, as it struggles to find its footing in a more integrated and turbulent world economy. Steady integration into the global economy since WTO accession in 2007 has brought a higher flow of foreign direct investment and increased exports. This integration has exposed Vietnam to increased commodity price volatility and financial turbulence in the global economy as well as the effects of growth slowdowns in North America and Europe. With its market-based institutions still not uniformly developed and a slowdown in the reform effort, the country has found it increasingly difficult to cope with this new economic environment. Consequently, the economy has experienced periodic episodes of macroeconomic instability involving high levels of inflation, depreciation of the currency, and significant internal capital flight. 5. The most recent episode of macroeconomic instability started in the second half of 2010, following delayed withdrawal of the fiscal and monetary stimulus measures introduced to deal with the impact of the global financial crisis. In August 2011, inflation reached a 33-month high of 23 1 percent, sovereign bond spreads hovered around 350-400 basis points, and foreign exchange cover was about two months of imports. The health of the banking sector has remained a source of concern, in part because of the build-up of contingent liabilities in state-owned enterprises (SOEs). 6. In early 2011, Government began implementing policy measures that have helped restore macroeconomic stability. The dong was devalued by 9.3 percent against the US dollar on February 11, 2011, and a stabilization package known as Resolution 11 was approved on February 24, 2011. It contains a wide range of monetary and fiscal policy actions, and commits Government to undertake several structural measures, including reforming SOEs, improving communication of policy measures, and better protecting the poor from the impacts of macroeconomic instability. Specific measures implemented since then include an increase of 600 basis points in the policy rate over a 7-month period, a significant reduction in the growth rate in credit and money supply for 2011 relative to 2010, a reduction in the fiscal deficit through higher revenue, and a cut in public investment expenditure. A modest cash subsidy for the poor against electricity price hikes has also been put in place. 7. The stabilization effort has delivered positive results. In October 2011 monthly inflation eased to 0.36 percent from an average of 1.73 percent in the first nine months of 2011, the lowest level since August 2010. Foreign exchange reserves are rising, and the exchange rate premium, as high as 11-12 percent during the early months of 2011, has been nearly eliminated. In the first seven months of 2011, the current account posted a US$1.3 billion surplus, compared to a deficit of US$3.2 billion during the same period last year, and the overall balance of payments (BOP) was reported to be in surplus by US$5 billion. There have been a number of equitizations1 of SOEs in the banking sector, and more are planned in the coming months. Government has also initiated a review of SOEs‟ cross-holdings in state-owned commercial banks. Economic growth has slowed but remains robust at 5.6 percent during the first half of 2011. 8. Implementation of Resolution 11 has had some shortcomings. For example, efforts to rein in the investment budget have not been sufficiently spelled out, a roadmap for SOE reform is not yet in place, and communication of macroeconomic data and policy decisions is still slow and hesitant. The pace of structural reforms has been somewhat slow, partly due to the fact that the country has been in a period of transition over the past 12 months, as part of its 5-year political cycle. Several important policy actions and pieces of new legislation were also deliberately held up until adoption of the new five year Socio-Economic Development Plan (2012-2016) expected in November of 2011. The stabilization achievements to date demonstrate Vietnam‟s ability to address its macroeconomic challenges. The government has indicated that it remains committed to implementing Resolution 11 and to supplementing it with further reforms in the months ahead to address the areas of weakness. This will be important for sustaining stability. B. REGIONAL AND GLOBAL CONTEXT2 9. As one of the most open economies in the world, Vietnam will continue to be considerably affected by regional and global events. International trade is equivalent to nearly 160 percent of Vietnam‟s gross domestic product (GDP). Since WTO accession, Vietnam has received more net foreign direct investment commitments than Indonesia, the Philippines and Thailand combined and the country‟s future is intricately linked to the health of its regional and global partners. Since the last global economic crisis, the external environment that Vietnam faces has evolved rapidly and brought new opportunities and challenges. 1 “Equitizationâ€? is a partial form of privatization used by the Vietnamese Government. 2 World Bank East Asia and Pacific Economic Update, 2011: Securing the Present, Shaping the Future 2 10. Vietnam has developed strong ties in the region, which have delivered important economic benefits. It became a member of ASEAN in 1995, and joined the Asia Pacific Economic Cooperation forum in 1998. Vietnam deepened regional integration efforts more recently by joining a series of Free Trade Agreements (FTAs) between ASEAN and Japan, China and Korea (ASEAN+1 FTAs). ASEAN membership, together with accession to the WTO in 2007, should promote a better outcome to trade negotiations for Vietnam than if it were to negotiate bilaterally with larger neighboring economies. Vietnam‟s exports to the US and EU markets have steadily increased, but East Asian economies still account for roughly 40 percent of Vietnam‟s exports and over 60 percent of its imports. In addition, around two-thirds of foreign investment in Vietnam is estimated to have come from East Asian countries.3 Vietnam is also active in regional efforts to coordinate the use and management of the vast resources of the Mekong River. 11. Serious tensions and risks persist in the post-crisis global economy. In the short run, these could derail the recovery to differing degrees. Continued very low interest rates in high-income countries could induce large and volatile flows of capital toward developing countries, including Vietnam, that contribute to destabilizing movements in exchange rates, food and commodity prices, and asset prices. In this environment, the growing integration of Vietnam‟s manufacturing and agricultural sectors into the global economy has exposed them to wider demand and price volatility. Longer-term risks center around the possibility that policy in the economies most directly hit by the crisis fail to shift focus from short- term crisis management toward measures that address the underlying structural issues that contributed to the crisis in the first place.4 C. MEDIUM-TERM ECONOMIC PROSPECTS 12. Stabilizing the economy is crucial to Vietnam’s medium-term growth prospects that otherwise remain strong. Further interest rate increases in October 2011 and the scaling back of growth and investment targets demonstrate the Government‟s continued focus on macroeconomic stabilization. The conclusions of the October 2011 Communist Party Plenum recognized the need for economic restructuring and identified restructuring of public investment, of SOEs and the financial sector, as priorities for the next five years. This suggests that the Government will take needed actions to return to a more sustainable macroeconomic environment while laying the foundations for greater efficiency and productivity to drive medium and longer-term growth. 13. Vietnam’s economy is expected to gradually return to a more stable macroeconomic environment and sustain moderate to high growth rate in the medium-term. The inflation rate, which peaked in August 2011, is expected to continue its downward trend in the coming months. As shown in Table 1, end-of-period inflation in expected to reach 19 percent by December 2011 and 9 percent by end of next year. The economy is expected to grow at 5.8 percent during 2011, slower than 2010, given the impact of stabilization measures. With robust flow of foreign direct investment (FDI) and planned restructuring of the economy, we expect industrial growth to remain relatively healthy in the medium-term. Similarly, the agriculture sector should continue to do well as global food prices are projected to remain high in the coming years. Overall, the growth rate of the economy is expected to gradually increase to 6.3 percent by 2013. Assumptions underpinning these projections include no major disruption to the global economy, steady progress on structural reforms, improved implementation of infrastructure projects, and continued support from development partners and foreign investors. In the 3 Nguyen Tien Dung, “Impacts of East Asian Integration: A CGE Analysis,â€? Vietnam National University. 4 Global Economic Prospects, World Bank, January 2011. 3 absence of these changes, growth could slow down but is unlikely to fall significantly below 5 percent – given the resilience of Vietnam‟s economy. TABLE 1: KEY ECONOMIC INDICATORS 2008 2009 2010/r 2011/e 2012/p 2013/p Output, Employment and Prices GDP (% change previous year) 6.3 5.3 6.8 5.8 6.1 6.3 Industrial production index (% change, previous year) 13.9 7.6 14.0 11.0 12.0 12.5 Unemployment rate (%, urban areas) 4.7 4.6 4.4 4.0 4.0 4.0 Consumer price index (% change, period-end) 19.9 6.5 11.8 19.0 9.0 7.0 Consumer price index (% change, annual average) 23.1 6.7 9.2 19.0 10.5 7.5 Fiscal Balance Official fiscal balance(% GDP, excluding off-budget items) 1.2 -5.1 -2.0 -1.1 -1.2 -1.2 General fiscal balance (% GDP, including off-budget items) -1.2 -9.0 -6.4 -3.9 -3.8 -3.6 Foreign Trade, BOP and External Debt Trade balance (BOP definition, $US billion) -12.8 -8.3 -7.1 -7.0 -8.0 -8.7 Exports of goods, ($US billion, fob) 62.7 57.1 72.2 90.6 105.4 122.3 Exports of goods (% change, previous year) 29.1 -8.9 26.4 25.5 16.3 16.1 Imports of goods, ($US billion, fob) 75.5 65.4 79.3 97.6 113.3 131.0 Imports of goods (% change, previous year) 28.1 13.3 21.2 23.1 16.1 15.6 Current account balance ($US billion ) -10.8 -6.1 -4.0 -4.5 -4.6 -5.1 as percent of GDP -11.9 -6.6 -3.9 -3.8 -3.5 -3.5 Foreign direct investment (net inflows, $US billion) 9.3 6.9 6.1 6.8 7.3 7.5 External debt ($US billion) 28.4 36.3 43.7 49.1 51.8 57.1 as percent of GDP 31.4 39.0 42.2 41.0 39.4 39.0 Debt service ratio (% exports of g&s) 2.6 4.5 3.2 3.0 3.2 3.2 Financial Markets Credit to the economy (% change, period-end) 25.4 39.6 32.4 14.0 15.0 15.0 Short-term interest rate (3-M deposits, period-end) 8.1 10.7 14.0 14.0 --- --- Stock market - VN index (Jul 2000 =100) 316 495 485 --- --- --- Source: General Statistics Office, State Bank of Vietnam, IMF and World Bank. e = estimate, p = projections. 14. Vietnam’s public debt is likely to remain sustainable if the current economic recovery continues and the authorities carry on the current fiscal tightening. The 2011 Debt Sustainability Analysis conducted by the Bank and the IMF shows public debt declining steadily from 52.8 percent of GDP in 2010, to 47.9 percent of GDP in 2015. The large fiscal deficits in 2009 and 2010 do not affect the overall debt sustainability significantly, as long as the government reverts to the pre-crisis levels of deficit in a few years as expected. A loss of access to non debt-creating capital inflows and a slowdown of exports could adversely affect Vietnam‟s debt dynamics. The standard assumptions applied for these shocks are severe, and unlikely to materialize. The largest source of uncertainty and hence, unquantifiable risk, to debt sustainability comes from implicit obligations which are not captured under public and publicly-guaranteed debt statistics. Neither a clear definition nor a reliable estimate of such liabilities is available, limiting the government‟s ability to manage associated risks. Contingent liabilities might arise from off-budget statutory funds such as health insurance fund, large SOEs, and weaknesses in the financial sector. Collecting reliable and up-to-date information on contingent liabilities and assessing their fiscal risks has become a priority for the Government and the Bank. II. DEVELOPMENT AGENDA 4 15. Vietnam has recently entered a new and higher phase of development. Achieving success will require addressing residual challenges from the past, including advancing its transition to market and tackling emerging issues related to middle income status as well as more global challenges such as climate change. The Bank agrees with the Government on the key challenges that need to be addressed over the next five years. These include economic competitiveness, sustainability of growth, pockets of persistent poverty and rising inequality, vulnerability, and governance. The Bank is confident that Vietnam can sustain past progress because of its policy priorities and its demonstrated performance. A. COMPETITIVENESS 16. Vietnam’s past rapid growth was made possible by improvements in competitiveness from earlier reforms and from progress in provision of economic infrastructure. Vietnam‟s remaining reform agenda is still significant, particularly as regards the state corporate sector, and infrastructure access and quality increasingly lags the requirements of rapid growth as does the development of labor force skills. These factors constrain further improvements in competitiveness. Vietnam‟s competitiveness was also derived primarily from low-cost labor and unsustainable use of its abundant natural resources. This advantage will inevitably diminish overtime. For Vietnam to sustain its high growth record and avoid the so-called “middle income trap,â€? further reforms and investments are needed to tackle remaining inefficiencies in the economy, and strengthen competitiveness. In addition, the bases for the economy‟s competitiveness will need to shift increasingly to higher productivity, product and process innovation, and value addition as its low-cost labor advantage dissipates. Macroeconomic stability, a sound and resilient financial sector, and continued improvements to the investment climate will be critical to fostering business development and competition. 17. The large SOE sector is an important part of Vietnam’s state-led economic model but has become a growing source of inefficiency, weak competitiveness, and a constraint to private enterprise development. SOEs own and absorb a far greater share of the country‟s assets (land) and factors (domestic credit) than their share in national output. With recent rapid credit growth, the sector has become highly leveraged, and a source of risk to the banking sector. State-owned commercial banks (SOCBs) dominate the banking system (approximately half of the system), the largest accounting for nearly one sixth of the system. Both their capital base and loan portfolio quality are weak. The special privileges extended to SOEs make it more difficult for the private sector, large enterprises and small- medium enterprises (SMEs) alike, to participate in certain key areas of the economy, thus inhibiting competition and associated productivity and efficiency gains. Weak corporate governance, limited transparency/disclosure standards, and a passive monitoring and oversight framework further compound the risks. Reforms are needed to remove inefficiencies, promote productivity of the SOE sector, and address weaknesses in the financial sector. 18. Considerable private investment will be needed to raise productivity and value addition in Vietnam’s industry and agriculture and to begin to shift the country’s core competency from natural resource utilization to innovation and knowledge-base industry and services. But the quality of Vietnam‟s infrastructure is low, and skilled labor is generally in short supply. Though access to electricity is widespread, power cuts are frequent in certain parts of the country. Other aspects of infrastructure quality, especially those related to transport and logistical services, also inhibit competitive investment. Vietnam has seen remarkable increases in enrolments at primary, secondary and tertiary levels but the quality of education needs to be strengthened and made more relevant to labor market needs. This will help address the limited availability of graduates with the right sets of skills and competencies for productive employment. Challenges in how the education system is structured and managed and the way its resources are spent must be addressed. B. ENVIRONMENTAL AND NATURAL RESOURCE SUSTAINABILITY 5 19. Vietnam’s economic growth has generated environmental risks. Population growth, industrialization, urbanization, and major changes in patterns of rural development have had adverse impacts. This is most obvious in water, air, and biodiversity. Water pollution is becoming more acute in many of the main rivers and coastal zones of the country, and this has a range of costs and impacts with regard to health, availability of clean water for industry and human use, and impacts on fisheries and conservation. Insufficient investment and lack of sustainable financing for critical urban investments in drainage, water supply, solid waste management, urban transport, and urban sanitation are rapidly contributing to water and air pollution in urban areas. Impacts on health due to suspended particulates and other pollutants are a growing concern for human health in Hanoi and Ho Chi Minh City 20. Natural habitats are declining. This loss of ecosystems, combined with poaching of wildlife, is leading to extinctions and loss of biodiversity, which also have economic consequences. To address these issues, institutional strengthening is needed in three areas: (i) systems and capacity to accurately measure the status of natural capital and economic returns; (ii) incorporation of environmental considerations into planning and decision making; and (iii) strengthening and enforcement of legal and regulatory frameworks. 21. Much of Vietnam’s past growth has been derived from its natural resource wealth. As Vietnam industrializes, its dependence on natural capital will diminish, yet for the foreseeable future a significant part of Vietnam‟s wealth generation will depend on its natural resources, and this is especially so for the poor. A recent review of the state of Vietnam‟s natural resources and their management identified several issues5. For example, marine capture fisheries, which contribute about 5 percent of Vietnam‟s GDP, are in decline, with decreasing yields and signs that some fisheries may be reaching tipping points into rapid decline. Rapid expansion in aquaculture has brought with it major challenges in environmental and disease management. Forest cover nationally is believed to be increasing slightly, yet there is also evidence of decrease in mature and native forests. Vietnam‟s wood processing industries rely heavily on imported raw materials and could be exacerbating deforestation in other countries within the region. Major challenges are emerging in relation to water resources management, with evidence of depletion of groundwater aquifers in the Mekong Delta and Central Highland regions and growing competition in water use among agriculture, aquaculture, conservation flows, industry, and human consumption. Vietnam relies on international rivers for 60 percent of its surface water flow, and planned or proposed upstream investments could substantially alter water and sediment flows. Dry-season water availability is already under pressure. Climate change will accentuate these effects. There are at present limited incentives for efficient water use and complex challenges of inter-provincial and other coordination of water resource management. C. POVERTY AND INEQUALITY 22. Vietnam has an impressive record of sustained rapid poverty reduction over the past 20 years. The poverty headcount (percent living below the poverty line) fell from 58 percent in 1993 to 14.5 percent in 20086 (Figure 1). Preliminary results from the 2010 Vietnam Household Living Standard Survey (VHLSS) suggest continued progress at reducing poverty. Poverty reduction has been accompanied by widespread access to basic services, including primary and lower secondary education, electricity, and clean water supply. Workers are moving out of agriculture into more highly paid employment in services, trade, and industry: in 2002, 56 percent of the labor force reported working in 5 Vietnam Development Report (VDR) 2011: ―Managing Natural Resourcesâ€? 6 Based on successive rounds of the Vietnam Household Living Standards Survey (VHLSS), carried out by the General Statistics Office (GSO). 6 agriculture, almost exclusively on their own farms; by 2010 the share of labor force in agriculture had fallen to 41 percent. Vietnam has already achieved five of its ten original MDG targets – those related to reduced poverty and hunger, gender equality in school enrollment, reduced maternal mortality, and malaria control. Two more – those related to universal primary education and reduced child mortality – are likely to be achieved. However, progress has been slower on the other three targets – those linked to ensuring environmental sustainability; access to hygienic sanitation in rural areas, despite good progress in ensuring access to clean drinking water, and reducing the HIV/AIDS prevalence rate, albeit low at 0.28 percent for all age groups in 2010 (see Annex 8). Figure 1: Poverty Trends in Vietnam 1993-2008 100 80 Poverty Rate (% poor) 60 40 20 0 1993 1998 2003 2008 Year of Survey Kinh/Hoa Ethnic Minority National 23. The impressive national averages mask differences across regions and social groups, and an emerging issue is signs of rising inequality. There is a large and growing gap in income and non- income indicators of well-being between the poorest households and the better off, as well as a persistent gap between different regions of the country and between urban and rural households. The rich-poor gap (ratio of average income in the richest 20 percent of the population to the poorest 20 percent of the 7 population) has risen from 8.1 in 2002 to 9.2 in 2010. Opportunities for the rural population are diminished by their more limited access to basic services and to financial, land, and information resources. Rural-urban migration, an important source of growth as people shift from less to more productive employment, is expanding the pressures on urban infrastructure and services, while employment in urban and peri-urban areas creates new vulnerabilities with less stable jobs and a rapidly rising cost of urban living. A significant share of the poor and vulnerable today resides in and around Vietnam‟s greater metropolitan areas. With rapid urbanization and a common use of eminent domain to meet the land demand for urban development, land acquisition and conversion can have considerable negative social impacts. 24. Poverty has become increasingly concentrated among ethnic minorities, who make up nearly 15 percent of the population. In 2008, 50 percent of minorities lived below the poverty line, compared to only 9 percent of Kinh-Hoa majorities. By 2010, ethnic minorities accounted for 65 percent of individuals in the poorest welfare decile, up from 53 percent in 2006. Children from minority households are less likely to attend school, particularly at upper secondary levels, which perpetuates low incomes and persistent poverty across generations. 7 Source: 2010 VHLSS. 7 25. Systemic changes in the human development sectors are needed to address Vietnam’s poverty agenda, as are further efforts to improve livelihood opportunities. A renewed effort is necessary to promote equality in outcomes for all, and to close wide and growing attainment and learning gaps between the poor and non-poor and between ethnic minorities and the Kinh majority. A more results-oriented education system can equip Vietnamese workers with the skills to take advantage of the new opportunities and manage the employment risks that come with a changing labor market, while social and health insurance can help to shield people better from the worst shocks impacting employment. Vietnam currently lacks a basic cash transfer program for the poor, which is an important gap in its poverty reduction and social assistance system. A strengthened social safety net can help the chronic poor, respond better to shocks (including natural hazards or shocks affecting domestic prices), and address household liquidity constraints that, inter alia, lead to early school drop-out. Cash transfers linked to education can thus be an important complementary tool to bridge the gaps in enrolment rates at every level.8 Moreover, further upgrades in basic infrastructure and public service delivery and access, including facilitating wider participation in labor and product markets, are needed to improve livelihood opportunities in rural areas and disadvantaged communities. 26. Vietnam has made substantial progress in closing some important gender gaps, but key challenges still remain (see Annex 9). No poverty gap exists between men and women in the overall population, although poverty among the elderly is disproportionately among widows. Net enrolment rates are higher for girls than for boys in primary and secondary education and women have slightly higher rates of tertiary enrolment. Employment rates for men and women aged 25-64 were fairly close at 93.8 percent and 87.8 percent, respectively.9 But there are gender gaps in wage levels, and women are less likely to have wage employment and more likely to be involved in own account work. Fifty six percent of men are engaged in wage employment compared to 37 percent of women, and estimates suggest that women in the informal economy earn 50 percent of male wages despite similar working hours, education levels, and seniority.10 There is also a large degree of occupational and industrial segregation across the labor force. Impressive improvements have been made in the areas of child and infant mortality. Gender based violence remains an important issue and is rising. D. VULNERABILITY 27. Vietnam is facing rising vulnerabilities. The country is more vulnerable to macroeconomic instability, and to the dual challenge of natural hazards and the impacts of climate change. Household vulnerability has therefore increased as well, especially with the rise in migration to urban areas and resulting changes in employment patterns. 28. Vietnam’s economy remains exposed to a number of external shocks and domestic policy risks. Deeper integration into the global economy coupled with a highly open economy has meant that global shocks are transmitted with full force into Vietnam‟s economy, with effects on household living standards and employment prospects. This implies more macroeconomic turbulence for Vietnam‟s economy. On the domestic front, Vietnam faces two major risks. One is its policy preference for growth over macroeconomic stability, giving rise to accommodating fiscal and monetary policy stances. The other is the gradual build-up of contingent liabilities in the system owing to the inefficiencies in the state- owned enterprises and their close links to the banking sector. 8 World Bank (2011), Vietnam: High Quality Education For All 9 2008 VHLSS 10 As found by Cling et al. (2010): “The Informal Economy in Vietnam. Study for the Labour Market Project‖ EU/MOLISA/ILO. 8 Box 1: Urbanization Opportunities and Challenges Vietnam has a low level of urbanization compared to many other countries in Asia, but its urban population has begun to grow. The country is in an incipient stage of urbanization, transitioning to an intermediate stage with rapid urbanization (currently 30 percent urban and 3.4 percent urban population growth per year). The urbanization process is running in tandem with strong economic growth. Nearly half of Vietnam‟s economic output is generated in its six largest urban centers (Hanoi, HCMC, Hai Phong, Da Nang, Can Tho and Baria-Vung Tau) with a total population of approximately 18.5 million people. Ho Chi Minh City and the Southeast region host nearly half (45 percent) of overall manufacturing production. However, heavy and fast growing (higher tech, higher value added) manufacturing activity is more intense in the Hanoi and the Red River Delta Region than in HCMC and the Southeast Region (55 percent and 39 percent, respectively). Industrialization is rapidly progressing in Hanoi and the Red River Delta region due to its proximity to the industrial bases in South China. While urbanization is likely to continue to bring strong benefits to Vietnam in terms of economic growth, greater economic opportunity, and higher productivity, Government will need to manage the trade-offs that will come with rapid urbanization. There is the potential of congestion costs, regional inequalities and rising land and housing prices. Urban poverty and its social impacts can increase, and secondary cities, often with less capacity, have the potential to grow rapidly. Vietnam‟s urban planning system continues to be overly based on design principles rather than facilitating the fluidity of land and housing markets and urban mobility. Nevertheless, cities still enjoy relatively good mobility, due in large part to the nearly universal use of the motorbike as the primary means of transportation and traditional highly mixed use land development patterns. But this is changing rapidly, and increased car use would eventually lead to gridlock as a result of current capacity and road designs. While there are plans for urban transport systems in most major cities, a near universal preference for personal transport will compete with plans for urban transit systems. 29. Household vulnerability is on the rise due to demographic changes and the recent period of economic turbulence and rising inflation. Farmers face volatile commodity prices, are exposed to frequent climate related shocks (floods, droughts, cold spells), and have been adversely affected by endemic animal diseases. Workers in urban areas, including many rural migrants, were hit by job losses and falling wages in late 2008 and 2009 as a result of the global financial crisis. While job opportunities have improved, fuel and food costs have risen sharply, and there are widespread concerns about potential increases in poverty in urban areas. Vietnam has various targeted poverty reduction and area-based infrastructure and livelihoods programs, some of which have remained unchanged for the last decade. As the country continues to grow and its economy changes, the measures included under these programs are at risk of becoming less relevant for addressing its changing poverty and vulnerability challenges. New solutions, including in social protection, will need to be developed, based on an updated understanding of Vietnam‟s poverty situation. 30. Located in the tropical monsoon area in South East Asia, Vietnam is one of the most hazard-prone areas in the Asia Pacific Region. Major storms, flood events, and other natural hazards result in annual economic losses equivalent to between 1 percent and 1.5 percent of GDP. Infrastructure and people are increasingly concentrated in vulnerable areas such as floodplains and coastal areas, suggesting that disaster-related losses will increase in the future. River plain flooding is extensive and prolonged throughout the wet season in the large deltas. Most of Vietnam‟s 2,360 rivers are short and steep, so that heavy rainfall in their basins produces brief but intense floods. Sizeable portions of the country, especially the Central Highlands and Central Coast, are subject to heavy rainfall. An average of six to eight typhoons or tropical storms of varying intensity strike Vietnam each year, with more frequent occurrences in the northern and central coastal region earlier in the season. Notable achievements in effective ex-post disaster response need to be matched by enhanced capacity in preparedness and risk reduction. 31. Climate change and variability are posing a serious challenge to development in Vietnam, with an array of complex and interrelated consequences for every sector of society. Current models 9 point to potentially significant impacts on economic activity and/or human health directly resulting from progressive temperature increases, changes in rainfall patterns, sustained sea level rise, and potential shifts in the frequency, severity, and geography of extreme weather events. These changes would have the greatest impacts on low-lying urban areas, coastal areas, river basins vulnerable to storm damage, and agricultural sectors. By the end of this century, a sea level rise of between 25 centimeters to 1 meter (from a baseline sea level as of 2000) is possible. The Ministry of Natural Resources and Environment (MONRE) has estimated that a sea level rise of 65 cm could inundate about 13 percent of the Mekong Delta. E. GOVERNANCE 32. Weaknesses in institutional capacity and public sector management continue to constrain Vietnam’s development. A key aspect of Vietnam‟s evolving institutional landscape is the move from a highly centralized hierarchical system consistent with central planning, to one where many decisions are decentralized. This devolution of authority has taken place along economic lines (to private economic entities), along geographical lines (to provinces and lower levels of government) and along functional lines (to hospitals, schools and other service providers). Capacity building at the local level has not kept pace with decentralization. 33. Improvements in basic public service delivery and access are especially needed for Vietnam’s poor, vulnerable, or otherwise disadvantaged people. Even where policies adopted by the central government reflect good international practice, implementation at the local level is often undermined by limited planning, implementation, and reporting capacities. Delivery capacity constraints are particularly evident in disadvantaged provinces where many of the most vulnerable Vietnamese citizens reside. 34. The accountability system in Vietnam still relies primarily on upward accountability through the hierarchy, resulting in a system that encourages excessive risk aversion. Officials rarely act without explicit authority to do so, as innovation and pro-activity may yield greater risks than benefits. From schools to hospitals, the need to strengthen accountability in a way that encourages innovation and performance is a running theme in Vietnam. Diversifying the accountability system toward mechanisms of downward accountability is being experimented with on a small scale. In addition, grievance redress mechanisms are underdeveloped. Moreover, with little awareness of legal rights and the lack of effective mechanisms to demand better services, the citizenry is not well placed to provide pressure from below. 35. Within the system of hierarchical accountability, the official channels face their own challenges. In the move to a more devolved system of governance, the system of accountability is shifting, but not in equal measure and not always in the most efficient form. 11 Decentralized structures for looking into corruption can put investigators in the difficult position of examining those with authority over their work. The courts are not widely used and provide little external oversight over the executive. The National Assembly, which has been playing an increasingly active role in external oversight, is nevertheless characterized by high turnover and with a majority of deputies simultaneously holding positions in government. 36. Vietnam has made progress in improving transparency, but challenges remain. With increasing penetration of the internet and other media, information and opinions are more widely available than ever. At the same time, it is difficult for Vietnamese citizens to access information from 11 This is the central theme of the Vietnam Development Report (VDR) 2010—Modern Institutions. 10 state bodies, and this in turn constrains public oversight of government-provided services and functions. Although several laws call for documents of various kinds to be public information, these documents are often difficult to obtain in practice. 37. Governance and corruption issues are openly discussed in Vietnam. While there are areas of progress, there is concern over corruption. The 2008 VHLSS Governance Module found that two of three respondents believed corruption to be a serious problem, and only a small percentage thought things were improving. This does not necessarily mean that corruption in all its forms is getting worse. For example, firms that participated in the World Bank‟s enterprise survey in 2005 and again in 2009 gave, on average, lower assessments of corruption as a problem when doing business, although the percentage saying they paid bribes and the amounts they reported paying did not decline12. The enterprise surveys show that unofficial payments are common in many sectors. When asked for innovative proposals for fighting corruption as part of Vietnam Innovation Day 2009, most proposals addressed imbalances in awareness and access to information. III. GOVERNMENT PRIORITIES 38. The Government’s development vision for the next decade, laid out in its SEDS 2011-2020, directly responds to all of the development challenges discussed above. The SEDS identifies key priorities for the country, including a long-term growth strategy that gives attention to structural reforms environmental sustainability, social equity, and emerging issues of macroeconomic stability to minimize short-term vulnerability and achieve sustained long-term growth. Three major “breakthrough areasâ€? are noted in the SEDS: (i) promoting human resources/skills development (particularly skills for modern industry and innovation), (ii) improving market institutions, and (iii) infrastructure development. The key challenges will be improved design of programs and better implementation. 39. The SEDS aims to maximize Vietnam’s long-term welfare through rapid growth in conjunction with sustainable development. Rapid growth is expected to be achieved not only through increased use of labor, natural resources, and capital, but also by relying more on an improved efficiency of resource utilization and allocation, and technical progress. The SEDS identifies three key determinants for sustainable development, namely macroeconomic stability, broad-based growth, and environmental sustainability. Institutional and policy changes are proposed to achieve the ultimate goal through completing the transition to a market economy and building modern state governance. 40. The overall goal of the SEDS is for Vietnam to lay the foundations for a modern, industrialized society by 2020. The strategy sets out directions for how Vietnam should continue the transformation from a largely agrarian society to an industrialized, modern nation. The document highlights some critical areas that will help Vietnam achieve this goal, including sustainable development, improvements in market institutions, and democracy. 41. A five-year Socio-Economic Development Plan (SEDP 2011-2015) was approved by the National Assembly in November 2011. It elaborates the objectives of the SEDS and identifies the specific measures and resources that are needed for its implementation. The SEDP 2011-2015 focuses on the broad range of policies needed to achieve high quality and sustainable economic growth. These include the need to restructure the economy to increase the share of high value-adding economic activities, improve the living standards of ethnic minority populations, strengthen environmental protection, and mitigate and prevent the adverse impacts of climate change. The Plan underlines the need 12 Source: World Bank enterprise surveys 11 to develop favorable conditions for the private sector and to gradually reduce the contribution of the state sector to GDP, while increasing the contribution from the private sector and FDI. Focusing on the same three breakthrough areas as the SEDS, the SEDP describes how these breakthroughs will be achieved in order to create a more competitive economy. The SEDP also outlines the importance of environmental protection, climate change mitigation, and adaption and building resilience to natural hazards. Compared to the SEDP 2006-2010, the new Plan reflects an increased awareness of the risks of environmental and natural resource degradation. The SEDP could have been clearer in two areas: (i) the importance of identifying explicit trade-offs in priorities and proposed policy measures, particularly in light of real resource constraints; and (ii) the need for greater coherence, integration and linkages between the national SEDP, provincial SEDPs, and sector plans being developed by the ministries. 42. Through a CPS program aligned with the overall strategic priorities and goals set out in the SEDP and SEDS, the World Bank Group will work with Government to address directly the development agenda set out above. The World Bank Group‟s engagement will support the three breakthrough areas of the SEDS and SEDP of promoting human resources, improving market institutions, and advancing infrastructure development. Following the cycle of the SEDP and thus the CPS, Vietnam is currently developing a new Strategic Framework for ODA for 2011-2015. The ODA Strategic Framework prioritizes how ODA resources are to be spent within each of the SEDP‟s three breakthrough areas. The Framework identifies priority targets from the SEDP in the areas of economic, social and environmental development which ODA should contribute to meeting. The Bank will contribute to reaching these targets through its existing portfolio, new operations, and analytical work organized around a CPS Results Framework aligned with SEDP and ODA Strategic Framework targets (see Annex 1). IV. VIETNAM-WORLD BANK GROUP PARTNERSHIP A. LESSONS AND FEEDBACK Lessons from the CPS Completion Report 43. The FY07-FY11 CPS Completion Report concludes that overall, the Vietnam program has delivered most of what was planned in the CPS, and the Bank has played a key supportive role in the development success of Vietnam (see Annex 2). As discussed above, Vietnam reached its key strategic objective (as outlined in the SEDP 2006-2010) of reaching middle income status by 2010. The country became IBRD eligible in 2007 and received its first IBRD loan in 2009. IFC activities increased considerably throughout the period. The process of building institutions for a modern market economy continued, albeit at a slower pace than anticipated in the CPS. 44. The Completion Report rates the program performance as moderately satisfactory. Across a range of engagement areas, the CPS program achieved results in line with expectations, however, in other areas, outcomes were only partially achieved due to delays or other obstacles. World Bank Group performance is rated as satisfactory. The Bank responded promptly and effectively to unexpected events, such as the food and global financial crises and is responding to emerging concerns such as climate change. IFC engagement maintained a strategic focus on the quality of the business environment and finance, while investments more than tripled towards the end of the period, with a particular focus on crisis response. Innovative components were introduced in the design of several Bank projects, thereby setting the foundation for enhanced impact. Delivery improved with a shorter lag between Board approval and effectiveness, but slow implementation (reflected in low disbursement ratios and extensions of project closing dates) remains an issue. 12 45. A number of recommendations for the next CPS have emerged from the Completion Report and have been directly factored into the design of the new CPS: (i) the WBG needs to respond to the emerging vulnerabilities and challenges in Vietnam; (ii) the WBG should maintain a demand-driven focus within a framework of selectivity that prioritizes the WBG‟s comparative advantages; (iii) the principles guiding selectivity need to be tightened to avoid diffusing the Bank‟s program too thinly; (iv) attention to implementation should be complemented with greater attention to program and project design; (v) attention should be given to decentralization issues; (vi) commitments on institutional reform should be credible and have as much government ownership as possible, while still pushing to move the agenda forward; (vii) engagement areas for second generation policy reforms should be chosen more selectively, as evidenced by challenges experienced with later operations in the PRSC series; and (viii) the results framework could be used more forcefully as a tool for setting strategic priorities and monitoring accountability. Feedback from Country Survey 46. In May and June 2010, 335 stakeholders in Vietnam participated in a Country Survey 13 (see Annex 14). More than half of respondents were from government, while other respondents represented academia, bilateral or multilateral agencies, non-government organizations (NGOs) and media, private sector, and the National Assembly. Respondents indicated that Vietnam‟s most important development priorities are governance, economic growth, and infrastructure development, while the highest priorities for Bank support are poverty reduction, governance, environment, infrastructure, climate change, and economic growth and integration.14 The survey results indicate positive attitudes toward the Bank and its work in Vietnam, with a favorable rating of 7.7 out of 10 for the Bank‟s overall effectiveness in the country, but they also point to areas for improvement. Results indicate that the Bank needs to further enhance its impact in the social sectors, governance, private sector development, climate change, and poverty reduction. The Bank‟s financing and knowledge services are seen to be its value added, while its weaknesses relate to inflexibility (e.g., making recommendations that do not take sufficient account of political realities or local conditions, and having bureaucratic policies and procedures). It is hoped that the Bank‟s decentralization in recent years will help to help to address these concerns by increasing the Bank‟s understanding of the local context and its responsiveness. Feedback from CPS Consultations 47. Stakeholder consultations on the new CPS were held at three stages aligned with key milestones in CPS preparation. The consultations were aimed at: (i) enhancing broad understanding and support for the CPS; (ii) engaging with stakeholders in line with the principles of the Paris Declaration and Hanoi Core Statement; and (iii) benefiting from the insights of a broad group of stakeholders with knowledge and understanding of the country context. The consultation process started upstream during CPS preparation. The first round of consultations was held in January 2011 (prior to initiating the drafting process), where the Bank convened a relatively small group of targeted counterparts with day-to-day experience of working with the Bank to elicit their views on key priority areas for the Bank in the next five years, how the Bank could address these areas and what it could do differently in the future. The second round was undertaken in June 2011, when stakeholders gave feedback on a CPS Concept Paper, and at the third round, held in October 2011, stakeholders commented on a draft of the CPS document (see Annex 15). 13 46 percent response rate. Country Surveys are conducted prior to preparation of each CPS in Vietnam. Like is the case for the CPS itself, the Country Survey follows a five-year cycle to align with the Government‟s five-year planning cycle. Survey questions are in multiple choice and ranking formats. 14 Priorities are listed in descending order. 13 B. CPS PRINCIPLES OF ENGAGEMENT 48. The Bank’s assistance to Vietnam has had considerable positive impact. However, a 15 combination of factors – rapid program growth in recent years, slow implementation at start-up, and the Bank‟s flat country program budget – has highlighted the need for the Bank to improve its business model for greater impact. The CPS program will therefore aim to: (i) sharpen strategic focus and reduce dispersion; (ii) improve operational efficiency; and (iii) accelerate implementation for more timely results. 49. The Bank’s strategic focus has been compromised by engagement across a large number of sectors and sub-sectors. Operational efficiency has not been maximized, given (i) significant reliance on a retail approach that channels the Bank‟s financing through a large number of traditional sector investment operations under implementation in all of Vietnam‟s 63 provinces,16 with inadequate attention to synergy of interventions at the provincial level; (ii) cumbersome project implementation arrangements involving the creation of several new implementing entities with each new project, with the result that during implementation the Bank has multiple sub-national entities as project counterparts; and (iii) an AAA program that does not adequately leverage Bank financing to influence Government policy and the way Government uses its own resources. Timely impact is impeded by long preparation and implementation periods for investment operations. This means significant opportunity cost of delayed results. As of August 31, 2011, the undisbursed portfolio was about US$5.8 billion, 48 percent of which was committed in FY08 or earlier. Delays can also lead to project cost escalation, which diverts resources from new initiatives to additional financing and reduces project rates of return. 50. To sharpen strategic focus and decrease dispersion, the Bank’s new CPS program will aim to gradually increase lending program consolidation, use more programmatic AAA, and introduce more selectivity. The average size of Vietnam‟s IDA-only operations increased only slightly from $109.3 million during IDA 14 to $115.2 million during IDA 15, peaking at $143.6 million in FY09. Achieving larger sized operations will require more wholesale approaches including working through Government programs. The ongoing shift to programmatic AAA will be continued to facilitate more strategic coherence within the AAA program. 51. Greater selectivity will be achieved through the application of clear criteria for inclusion in the program. Such criteria will include focusing on areas where: (i) the Bank has a real comparative advantage vis-à-vis other partners; (ii) the likelihood of sustainable impact through eventual replication without ODA funding is high; (iii) there is a track record of successful project implementation at the provincial level; and (iv) there are opportunities to leverage systemic and/or institutional change. The discipline needed for more selectivity will be facilitated by a more systematic and forward-looking engagement with Government to plan the lending program. 52. Selectivity will also be achieved over time through exit strategies, sequencing, and intra- WBG coordination. In some sectors the agenda is largely complete (e.g., rural electrification), and Bank support will be discontinued. Support will also be phased out in areas where the Bank has had consistent difficulties (e.g., large IT-based operations). Clearer division of responsibilities with IFC will also be important. For example, Bank support for private sector engagement in renewable energy will be phased out as the IFC program expands. Proper sequencing of support in some sectors will also help reduce 15 Vietnam has had an interesting pattern of implementation: a very slow pace during the first 24 months, and an average pace thereafter. 16 Of the 78 operations under implementation during the FY07-FY11 CPS period, 85 percent were sector investment credits or loans. 14 dispersion. For example, in the financial sector, towards the end of the CPS period for the World Bank the focus will move from financial infrastructure (e.g., payment systems) to access and market development issues. Finally, the Bank will work with Government to bring more competition in selecting provinces to participate in projects. Clear criteria will be used, including implementation performance of the existing portfolio at the provincial level. Given considerable current dispersion and lengthy implementation periods, the impact of this effort at greater selectivity will only become appreciably visible over time (likely beyond this new CPS period). 53. To improve operational efficiency, the CPS program will leverage the Bank’s resources through increased use of systemic and “wholesaleâ€? approaches in the Bank’s delivery of financing. In contrast to the more traditional approach of ring-fencing at the project level, systemic approaches would include support for Government programs such as Vietnam‟s NTPs, provincial level programs and strategically integrated (multi-sectoral) approaches to Bank assistance at the provincial level, increased use of financial intermediaries and programmatic approaches to lend to cities to meet their local infrastructure needs, and the introduction of results-based approaches to project design. This would provide greater opportunity to influence the way the governments (national and provincial) spend their own resources and also strengthen capacity needed to achieve and sustain a program‟s results. In addition, the Bank has begun discussions with Government on options for consolidating PMUs within provinces and line ministries. This could yield significant efficiency gains and more sustainable capacity.17 54. The Bank will intensify efforts to leverage its lending resources through strengthened policy dialogue and AAA that better inform the structural reform agenda to be supported by DPOs, as well as investment project design, especially in new areas of engagement. An effort will be made to identify and include in the AAA program issues that preoccupy policy makers on which the Bank has expertise. The Bank will seek more opportunities to partner with local think tanks and other Government agencies in such work in order to enhance chances of impact. Dissemination will be more systematic using strategic communication approaches and reaching beyond the executive to the legislative bodies and broader Vietnamese society. Growing priority will be given to just-in-time policy notes. This will call for flexible, nimble programming of AAA work. 55. The Bank will also leverage its resources by making more use of opportunities for synergies in the CPS program across the World Bank Group and with other development partners. Collaboration within the World Bank Group is expected to increase, as Vietnam continues its middle income transition and the role of the private sector continues to increase. IBRD and IFC will strengthen collaboration to complement respective programs, particularly in infrastructure, agribusiness, and the financial sector. Increased use of MIGA guarantees can offer reassurance for foreign investors, including investors into PPPs, especially those concerned about regulatory risks. MIGA is working to establish a long-term relationship with the Government in support of the PPP agenda. The Bank Group will also continue to leverage assistance through more strategic partnerships with other development partners such as our existing highly successful partnership with UK DFID on poverty, governance and climate change and the upcoming partnership with AusAID on infrastructure and Economic Reform. In addition, country-level IDA resources will be leveraged through two regional operations for natural resource management (water and biodiversity, respectively), in collaboration with other countries in Southeast Asia. 17 Bank-financed projects have spawned PMUs in all 63 provinces of Vietnam. The Sustainable Development program alone accounts for well over 200. 15 56. The program will also leverage support through various global and regional initiatives in which Vietnam is participating. Examples include the Water and Sanitation Program, the Global Program for Output-Based Aid, the Cities Alliance, and the initiatives related to disaster-resilient cities and agro-weather advisory services supported by the Global Fund for Disaster Reduction and Recovery (GFDRR). 57. WBI will contribute to the CPS program by focusing on addressing key capacity development needs in three areas: (i) Vietnam's transition to a more urban and industrialized economy, by supporting Government's efforts to strengthen planning and management of cities to promote more sustainable urban development as an engine of growth; (ii) strengthening governance and legislative institutional capacities through WBI‟s Parliamentary Strengthening Program; and (iii) health sector analysis, policy and reform. Additionally, WBI will leverage its south-south platforms to promote knowledge and experience sharing between Vietnam and other countries within and outside the East Asia and Pacific Region, such as the regional/multi-country Leadership Programs and distance and e-learning activities around WBI's core thematic areas. 58. To strengthen its impact, the Bank will continue efforts to accelerate implementation of the existing portfolio, with emphasis on improving project start-up for all new operations. These efforts will include continued collaboration between MPI and the Six Banks Group18 to address systemic ODA implementation issues, replication of good practices in well-performing provinces and sectors, and project-level initiatives with MPI. (See “Monitoring Program Implementationâ€? below.) C. CPS ENGAGEMENT FRAMEWORK AND EXPECTED RESULTS Strategic Engagement Overview 59. Building on Vietnam's strong track record of growth and poverty reduction, the World Bank Group will partner with Vietnam in its effort to achieve success as a middle income country. The CPS directly supports Government‟s 2011-2020 SEDS and 2011-2015 SEDP, and is guided by the key challenges set out above. The CPS program will support selected elements of this multi-faceted transition notably, from an agrarian economy toward one that is more urban and industrialized; from a focus on quantity toward a greater focus on quality of production and service provision; from a comparative advantage of low-cost labor, with low value added, to one with a growing share of innovation-led and higher value-added production and services and towards a greater role for market mechanisms in allocating capital and resources to an increasingly important private sector. In line with the thrust of the Government's five-year SEDP the CPS program will support investments and policies aimed at (i) strengthening Vietnam's competitiveness in the regional and global economy, (ii) increasing the sustainability of its development, and (iii) broadening access to economic and social opportunity. These three areas form the pillars of the strategic framework of the CPS. Three strategic themes cut across the three pillars. The CPS program will support efforts to (i) strengthen governance, (ii) promote gender equality, and (iii) improve resilience in the face of external economic and climatic shocks. (See Figure 2.) 18 The Six Banks Group consists of ADB, JICA, AFD, KfW, Korea EXIM and the World Bank. The Group jointly identifies and addresses implementation issues in collaboration with the Ministry of Planning and Investment. Progress is being made in common feasibility guidelines, mainstreaming of a common reporting framework, increasing the Ministry of Finance‟s cost norms for local consultants, piloting of advance procurement actions, and TA for contract management and procurement (the latter two with IDF funding). 16 ï‚· Pillar 1 on competitiveness will address: (a) Vietnam‟s vulnerability to macroeconomic instability which has structural roots in distortions in the SOE and financial sectors and in weaknesses in public financial management; (b) the low quality of key infrastructure services due to inefficiencies in power distribution and transmission and in water and transport sectors; (c) low value addition in Vietnamese production; and (d) weak innovation capacity and the related low skills base of the Vietnamese labor force. Accountability gaps exacerbated by decentralization and transparency in public financial management are among the governance challenges to be addressed under this pillar. ï‚· Pillar 2 on sustainability will focus on management of water resource and land; conservation of forests and biodiversity; pollution control and the related issue of low connectivity to sanitation systems; mitigation and adaptation measures in light of Vietnam‟s high vulnerability to climate change; and disaster risk management in light of the country‟s increasing exposure to risks posed by extreme weather events. The CPS program under this pillar will address governance weaknesses such as unclear and conflicting jurisdiction which undermines enforcement of environmental regulation, and limited access to information which undermines accountability. ï‚· Pillar 3 on opportunity will support the development and implementation of government policies to ensure that more citizens can benefit from the country‟s development as a MIC. This will involve efforts to address rising inequality, especially between ethnic minorities and the rest of Vietnam‟s population, and between urban and rural households; policy reform and institutional strengthening for social insurance and social safety nets to reduce vulnerability at the household level; weaknesses in basic public service delivery and access; and gender equality, a special theme for IDA 16. 60. Governance is being mainstreamed as a priority cutting across the three CPS pillars. The approach to mainstreaming will be based on the following three principles: (i) systematically leveraging the Bank‟s lending and analytical activities to support improved governance in Vietnam; (ii) improving project performance by better understanding and addressing in a meaningful (as opposed to mechanical) way the issues that pose governance risks to the achievement of projects‟ development outcomes; and (iii) sustaining the effort, including by making periodic adjustments if the approach is not working (see Box 2). This should lead to a more comprehensive approach to governance, as recommended in the CPS Completion Report. 61. Gender will be a second cross-cutting theme in the strategic framework of the CPS. The approach is informed by two recently completed initiatives. One is the Bank‟s internal assessment (a Country Gender Action Plan) of how it could address gender issues more effectively in the CPS program, and the other is the Vietnam Country Gender Assessment, conducted by the Bank in collaboration with other development partners and Government. (See Annex 9.) The Bank‟s support to gender in the CPS has four key elements: (i) to support Government in improving the implementation of the Law on Gender Equality and the National Strategy on Gender Equality, in part by building gender awareness and capacity within relevant ministries; (ii) to support the development of a national gender data system by building on the recent development of the National Gender Statistical Indicator System; (iii) to apply a gender lens to identify opportunities to integrate gender more systematically into Bank operations, as was done in the Third Rural Transport Project (see Box 3), including by making the systematic collection of data disaggregated by gender a guiding principle; and (iv) to help close the knowledge gap through quantitative and qualitative research on gender issues. All of these areas of action are cross-cutting in nature and impact. 17 Figure 2: Vietnam CPS Results Outcomes and Indicators WBG will partner with Vietnam in its effort to achieve success as a middle income country. Pillar 1: Pillar 2: Pillar 3: Competitiveness Sustainability Opportunity Outcome 1.1: Improved Economic Management and Business Environment Outcome 2.1: Improved Natural Resource Management (“Greenâ€?) 1. Macroeconomic Policy Framework: Sound macroeconomic framework maintained (yes/no) 12. Water resources: Increased water productivity in Outcome 3.1: Increased Opportunities for the pilot areas (%) Poor and Household Resilience to Shocks 2. Public Financial Management: Provinces using the integrated Treasury and Budget MIS (TABMIS) system 13. Land administration and management: Time 20 Livelihoods: Households in targeted areas (number) required for land related transactions - transfer (days) reporting improvements in accessibility to basic 14. Forest and biodiversity conservation: Targeted productive infrastructure (%) Financial Sector: smallholder plantation area certifiable according to 21.Social protection: TBD at time of CPS mid- 3.Individuals and firms listed in a public credit registry with international standards for sustainable forestry (%) term review information on their borrowing history from the past 5 years (%) 4. Domestic commercial banks with current financial and balance sheet data on their webpage (%) 5. Market-based Regulations: SOEs divested during the Outcome 2.2: Strengthened Environmental 2011-2015 (number) Protection and Management (“Cleanâ€?) Pollution reduction: Outcome 3.2: Improved Basic Public Service 15. Additional wastewater treated (m3/day) Delivery and Access Outcome 1.2: Improved Quality and Efficiency of 16. People with access to improved sanitation Basic Infrastructure: Infrastructure Services (number) 22. Rural households with access to (i) electricity in 6. Energy: Duration of interruptions in 500kV transmission 17. Climate change mitigation: CO2 emissions project provinces; (ii) an all-season road (%) system (minutes per 100 circuit km) reductions associated with investments supported (million tons) 23. People provided with access to improved water 7. Water: Reduced volume of water physically lost in selected sources (i) in rural areas in Mekong and Red River cities (m3/day) Delta; (ii) targeted urban areas (number) 8.Transport: Reduced transport times on targeted transport 24. Education: Grade 5 students achieving corridors independent learner status in math and Vietnamese Outcome 2.3: Enhanced Preparedness for Natural Hazards and Climate Change (“Resilientâ€?) in SEQAP provinces (disaggregated by gender) (%) 18. Disaster risk management: Targeted provinces 25. Health: Health insurance coverage among the Outcome 1.3: Increased Capacity for poort and near poor in targeted regions (%) Innovation and Value Addition and communes with disaster risk management plans (number) 9. Skills and Innovation Systems: Higher Education students benefitting from improved curriculum, facilities, laboratories and 19. Climate change adaptation: Coherent framework research activities through TRIG grants (number) for prioritization of climate change adaptation action in key sectors is available (Yes/No) Agriculture value chains and rural SMEs: 10. Farmers in targeted areas adopting good agricultural practices (number) 11. Additional jobs created as a result of investments supported (number) GOVERNANCE GENDER RESILIENCE 18 Box 2: Mainstreaming Governance Ensuring appropriate attention to governance across all pillars of the CPS program will require a combination of project, sector, and country-level approaches, with support from the Bank‟s Governance Hub in Bangkok: Project level: Teams will be encouraged to consider the basic questions of how the project might help advance governance (institutional capacity, transparency, accountability, participation, and anti-corruption) in Vietnam, as well as how governance issues may impact project effectiveness. There is no presumption that every project should address every problem, but the decision of whether and how to address governance issues should be a considered one. For each proposed project, Bank teams will be asked to consider early in the preparation process the following questions: ï‚· What are the key capacity constraints in this area of work? Is the Bank addressing them in other projects? Can the proposed project do more and if so, how? ï‚· What opportunities exist to enhance transparency through this project? Can the project be designed to exploit some of these opportunities and if so, how? ï‚· Are there opportunities to strengthen accountability and increase transparency vis-à-vis project beneficiaries and affected people through incorporation of incentives, periodic public reporting and information sharing, meaningful consultations, and feedback mechanisms into the proposed project‟s design? ï‚· Are there opportunities to empower project beneficiaries and affected people to participate in the proposed project and enhance the quality of outcomes? How will the Bank exploit such opportunities? ï‚· What are specific corruption risks for implementation, and what will the Bank do to help mitigate them? In this regard, the Bank‟s Operational Risk Assessment Framework will be a key tool. Sector level: While there is no presumption that every project should be a governance project, it is reasonable to expect each of the Bank‟s sector teams to integrate more fully governance thinking into their strategic engagement, for true mainstreaming. Key manifestations of weak governance in different sectors or sub-sectors and their causes will be analyzed to inform project design and policy dialogue. Based on this evolving analysis, a small number of priority activities where the Bank can have a meaningful impact will be identified and integrated into the Vietnam work program. Country level: The Country Team will annually review experience, success, and gaps in governance mainstreaming, and adjust course as necessary. Box 3: Empowering Local Women and Improving Rural Road Maintenance Transport challenges in rural areas include under-funding of road maintenance and difficulties in engaging local contractors for routine road maintenance in remote areas. During preparation of the Third Rural Transport Project (cofinanced with DFID), many poor women with seasonal farming responsibilities in ethnic minority communities expressed interest in actively participating as stewards of their local roads. The Bank and DFID launched an initiative to train them in engineering and road building practices and provided formal employment opportunities in road maintenance near their communities. More than 1,500 ethnic minority women have been trained, and many more eagerly await the opportunity. Across the rural road networks, 10-30 women are paid to maintain a 1-2 km section for three months. As a result, women have achieved increased economic power and greater voice in community decision-making and a more visible role in managing affairs at the household level. 62. With Vietnam’s vulnerability more evident since 2007, the need to strengthen the country’s resilience is now a strategic priority. The global crisis has exposed Vietnam‟s vulnerability to external shocks at both the macroeconomic and household level, and globally there is a heightened awareness of risks posed by climate change. Resilience is therefore a third theme cutting across all three CPS pillars, in the context of the macroeconomic policy framework and financial sector soundness (engagement areas under Pillar 1 – Competitiveness), climate change mitigation and adaptation (engagement areas under Pillar 2 – Sustainability), and social protection and facilitation of livelihoods for the poor (engagement areas under Pillar 3 – Opportunity). However, unlike governance and gender which have explicit indicators and milestones integrated into the results framework, resilience is captured in the results 19 framework through relevant indicators and milestones related to macroeconomic stability, social protection, natural disaster risk management, and response to climate change. Results Framework Pillar 1 – Competitiveness 63. Alignment with Government Strategy. Vietnam‟s SEDS 2011-2020 and the SEDP 2011-2015 emphasize needed “breakthroughsâ€? in relation to the development of market-based institutions, infrastructure, and more skilled human capital. Realizing the broad transformation processes highlighted in the SEDS will require equally transformative changes in the structure and performance of public administration, the business environment, and non-farm employment creation. The WBG‟s CPS program for the “Competitivenessâ€? pillar is well aligned with the SEDS and supports the Government‟s agenda for raising the quality of economic growth and economic management. Pillar 1 - CPS Outcomes / Areas of Engagement 1.1: Improved Economic 1.2: Improved quality and 1.3: Increased capacity for Management and Business efficiency of infrastructure innovation and value addition Environment services • Macro-Economic Policy • Energy • Skills and Innovations Systems Framework • Water • Agriculture Value Chains and • Public Financial Management • Transport Rural SMEs • Financial Sector • Market-based Regulations 64. Outcome 1.1: Improved economic management and business environment. The Bank, in coordination with the IMF, will continue to contribute to improvement of Vietnam‟s macroeconomic management through regular policy dialogue, a comprehensive assessment of the financial sector (FSAP), annual budget support operations and systemic AAA. The Bank will continue to support measures to improve PFM, notably modernization of revenue collection and reform of public expenditure management and oversight, and reforms to various public investment laws. Efforts will be made to address accountability gaps emerging from decentralization. The Bank and IFC will provide further support to strengthen financial sector soundness, enhance financial infrastructure and improve access to financial services, including through capital markets development. This will include facilitating further autonomy of the State Bank of Vietnam (SBV), strengthening the regulatory and supervisory framework, and building capacity for its effective implementation. IFC activities will focus on broadening and deepening Vietnam‟s financial markets as the main mechanism for capital allocation including engaging with top-tier and emerging top-tier financial institutions to strengthen their capital bases and attract international banking partners to strengthen and develop their long-term competiveness. The Bank will work closely with the IFC to address priority reforms including on the SOE-related issues of soft budget constraints and weak corporate governance. The Bank and IFC will strengthen dialogue with Government on SOE reform and respond with financial support for restructuring of the sector if requested. IFC will continue support to introduction of global standards of corporate governance and risk management, and in attracting world-class strategic partners and investors. Other governance issues to be addressed include transparency and disclosure of financial information. The Bank will work with the accounting and audit professional bodies and regulators to strengthen the quality of corporate financial reporting by following up on recommendations from the Report on the Observance of Standards and Codes (ROSC) on Account and Audit completed in 2009. IFC will continue to support improvement of the business environment through investment climate advisory service activities focused on regulatory reform and will support the 20 transition of the Vietnam Business Forum to a self sustainable platform for dialogue between Government and businesses. Box 4: EMCC to Succeed PRSC Series With the PRSC series expected to conclude with its tenth and final operation in December 2011, the Bank has, at the Government's request, initiated discussions on what could follow: a DPO series of Economic Management and Competitiveness Credits (EMCC). Like the PRSCs, the EMCCs would be multi-year, multi-donor operations starting in FY12 but, like the CPS, with a 5 (rather than 10) year time horizon. The series would focus on critical reforms to enhance competitiveness, central to sustained growth and poverty reduction in Vietnam. Strategic and analytical underpinnings for the EMCCs would be drawn from the SEDS 2011-20, the Competitiveness Pillar of the CPS, the National Competitiveness Report, and recent Vietnam Development Reports. Competitiveness is a function of many factors, but one of the lessons from the PRSC series is the importance of a focused reform agenda under one series of budget support operations. The EMCCs would therefore focus on reforms to strengthen (i) macroeconomic stability and (ii) institutions for public sector governance and private sector development. They might also address cross-cutting issues related to the policy framework for infrastructure and skills critical to enhancing competitiveness, to complement investment operations in these areas. 65. Outcome 1.2: Improved quality and efficiency of infrastructure services. Considerable challenges remain in improving the quality and efficiency of energy, water, transport-related, and other services. In the energy sector, through complementary DPOs and sector investment loans (SILs) the Bank will continue to support transmission and distribution with emphasis on issues of operational efficiency, market competition, and transparent and cost reflective electricity pricing, while the IFC will promote energy efficiency. The Bank will finance investments supporting efforts to improve quality and efficiency of water supply, as well as integrated urban development initiatives in larger cities, covering urban planning, municipal management and the integration of major infrastructure and basic services to make these cities more attractive venues for investment. Project design will be informed by ongoing programmatic AAA on urban development. WBI will support the program with capacity building in urban planning for city officials. Support for a more competitive transport sector will include financing for upgrading of the national road network, investments in urban transport infrastructure and mass transit systems, and technical assistance in the areas of trade facilitation, coastal shipping services, and logistics. Greater attention will be given to policies and tools for more effective road asset management, addressing poor project and contract management and developing institutional and regulatory frameworks for multi- modal transport. With Vietnam a priority for MIGA, its Asia hub in Singapore will facilitate deeper engagement. MIGA's Political Risk Insurance is particularly attractive to investors in the infrastructure sector, so MIGA will contribute to improved quality and efficiency of infrastructure services. In addition, MIGA will launch several new products, including guaranteeing Government‟s payment obligations related to PPPs for priority infrastructure projects. The CPS program will support Government‟s plan to scale up public investment by mobilizing private resources for infrastructure development, including through the establishment of a sustainable framework for and implementation of pilot PPP projects. IFC is providing advisory services on PPP transactions and will invest in infrastructure projects, including as an anchor investor in large-scale strategic industrial infrastructure projects. To mainstream governance in this pillar, accountability, participation, and transparency issues will be addressed based on risk level and entry points of specific sectors and projects. 21 Box 5: World Bank’s Infrastructure Strategy in Vietnam During the CPS period, the Bank‟s strategic priorities in the infrastructure sectors in Vietnam will be to: ï‚· Go beyond considerations of access to emphasize the improved quality of public energy, water, and transport services; ï‚· Enhance effective O&M systems for physical and operational sustainability in transport operations, household water supply, irrigation systems; ï‚· Connect the last remaining pockets of the population that lack access to basic services and economic opportunities through provision of rural water supply and sanitation, and rural access roads; ï‚· Fill the missing middle in the transport network by supporting provincial roads, and thereby link rural communities with district and provincial centers; ï‚· Generate quality growth by combining infrastructure investments with policy reforms (e.g., power sector reforms), and policy and capacity development support for the Ministry of Trade, Ministry of Construction, and selected cities; ï‚· Enhance resilience of infrastructure and productive assets to climate change and natural disasters; ï‚· Reduce the carbon footprint of Vietnam‟s economy by supporting renewable energy, energy efficiency, and cleaner technology options for urban transport; ï‚· Do more integrated urban development planning, linked to regional development 66. Outcome 1.3: Increased capacity for innovation and value addition. A central element of Vietnam‟s innovation agenda is strengthening labor market skills by reforming how the education and training system is managed. The program will include the last in a series of three Higher Education DPOs addressing university governance (including autonomy, accountability, and financing). Bank support will gradually shift from support for expansion of supply of infrastructure and inputs, towards strengthening the education system as a whole and factors that impact service delivery, with a focus on adjustments to the finance and governance systems. Programmatic analytical work will lay the foundation for this shift, with a focus on skills needed for economic growth and an assessment of the ability of Vietnam‟s education system to deliver needed competencies. This will include an examination of the structure of the education and training system and scope for improving governance by enhancing school autonomy and accountability of education providers for learning results, and opportunities to improve spending efficiency and make it responsive to labor market needs. Strengthening capacity for measuring outcomes in the education system through student learning assessments at all levels will also remain central to the program. A new area of engagement for the Bank will be support, through both AAA and investment lending, for reforms in Vietnam‟s innovation systems to modernize and expand capacity. Support will be provided via investment lending for innovations in selected industries where there is potential to benefit large numbers of the population, and for the development of business incubation programs that leverage regional and sectoral approaches to facilitate development of innovative enterprises. The Bank will collaborate with IFC to support development of micro, small, and medium enterprises and in building competitiveness in select industries. The Bank will remain engaged in promoting upgrades and value- addition in Vietnam‟s agriculture sector, including through support for public-private partnerships for technology transfer, and ongoing operations financing agricultural research, advisory services, and capacity building and incentives to raise product quality and ensure food safety. Bank-IFC collaboration will seek to strengthen the enabling environment and capacity for agro-industrial development. AAA work will therefore support policy and institutional reforms needed to accelerate and manage structural change in Vietnamese agriculture, agricultural services, and agribusiness. Part of the expected structural change would relate to the respective roles and forms of interaction among public, private, and collective entities in the sector. 22 Pillar 1 – Indicative World Bank Group Instruments DPOs: EMCC series, Power Sector Reform series, and Higher Education series SILs: Portfolio: Financial Sector Modernization and Information Management System, Public Financial Management, Tax Administration Reform, Third Rural Finance, Second Transmission and Distribution, System Efficiency Improvement, Trung Son Hydropower, Renewable Energy Development, Urban Water Supply, Danang Priority Investment, Urban Upgrading, Urban Water Supply and Wastewater, Local Development Investment Funds, Ho Chi Minh City (HCMC) Investment Fund, Project Preparation Facility, Road Network Improvement, Mekong Delta Transport, Northern Delta Transport, Expressway Development DaNang-Quang Ngai, Hanoi Urban Transport, Haiphong Urban Transport, Higher Education 2, School Education Quality, New Model University, Agriculture Competitiveness, Livestock Competitiveness and Food Safety, ICT development. Pipeline: Distribution Efficiency, Mekong Delta Urban Upgrading, Medium Cities Development, Danang Sustainable City Development, Road Asset Management, Dau Giay-Phan Thiet Expressway, Inclusive Innovation, Fostering Innovation through Science Research and Technology, Higher Education 3 AAA: Vietnam Development Reports, Programmatic Public Finance Reviews, FSAP, Science and Innovation; Programmatic AAA in Financial Sector, Infrastructure Finance, Agriculture, Skills and Education System, and Governance and Anti-Corruption; Global Knowledge Transfer, Country and Sub-National Financial Management Assessments, Vietnam Knowledge Platform, and Trade Facilitation and Logistics Assessment TFs: IDFs for Financial Management and Procurement Capacity Building, Multi-donor Trust Fund (MDTF) for Public Financial Management, MDTF for PFM, TFLA, FIRST Initiative for Financial Sector Capacity Building WBI: Training programs for MPs on legislative process and budget oversight IFC: Agricultural Competitiveness, Secured Transactions, Credit Bureau and Capital Markets, Better Work Vietnam, Tax Administration Simplification, Regulatory Simplification/Licensing Reform, PPP Advisory Pillar 2 – Sustainability 67. Alignment with Government Strategy. Vietnam‟s SEDS and SEDP point to the need to strengthen the protection of natural resources and the environment, to mainstream this in development planning, and to implement measures to address natural hazards and climate change. Growing recognition of Vietnam‟s vulnerability to extreme weather events and the country‟s growing contribution to greenhouse gas (GHG) emissions has led to the development of adaptation and mitigation strategies. The WBG's CPS program on "Sustainability" will assist the government and other stakeholders to translate this increased recognition in the SEDP/SEDS of risks associated with the environment, natural resource degradation, and weather/climate into improved strategies, improved governance arrangements, and priority investments. Pillar 2 - CPS Outcomes / Areas of Engagement 2.2: Strengthened 2.3: Enhanced preparedness 2.1: Improved natural resource environmental protection and for natural hazards and climate management management change • Water Resources • Pollution Reduction • Disaster Risk Management Management • Climate Change Mitigation • Climate Change Adaptation • Land Administration and Management •Forest and Biodiversity Conservation 68. Outcome 2.1: Improved natural resources management. The Bank‟s program related to water resources management will continue to provide support for the upgrading and extension of physical infrastructure (including for irrigation, urban drainage, and inland waterway transport). Increased 23 attention will be given to strengthening institutional arrangements and incentives for more efficient water use and greater financial sustainability of services. For example, support will be provided to pilot measures to improve on-farm water use efficiency, apply institutional models for improved irrigation and residential water supply delivery, and strengthen capacities for river basin, inter-provincial, and coordinated trans-boundary water resources management. Sector governance will be improved through development of water user organizations to make collective decisions on water use and mitigate potential conflicts. The program will include an investment operation to enhance biodiversity conservation in marine and coastal areas, promote sustainable fisheries management, and bring about improvements in aquaculture practices and governance. The Bank will continue to support improved governance through strengthening the transparency of Vietnam‟s system for land administration, while stepping up support related to land use planning and development of more efficient land markets in urban, peri-urban and rural areas. Support will continue in selected areas related to forestry and biodiversity conservation, including continued support to high-quality smallholder agro-forestry plantations, forest law enforcement and governance, Vietnam‟s readiness to participate in the Reduction of Emissions from Deforestation and Forest Degradation (REDD) Program, biodiversity conservation and other measures through the Vietnam Conservation Fund, and efforts to reduce the illegal trade of wildlife and timber products. Instruments will include GEF and regional IDA operations. 69. Outcome 2.2: Strengthened environmental protection and management. The Bank will support measures for pollution reduction and prevention from various sources in order to improve the physical environment, and mitigate adverse health and economic impacts. For example, the program will support the safe disposal of hospital waste, investments and capacity building for pollution control enforcement at selected industrial parks, the introduction of compressed natural gas public buses, improved systems for waste water and solid waste management, and measures to manage livestock waste and promote safer use of pesticides. GEF-funded programs will develop national capacity to manage polychlorinated biphenyls (PCBs) and Montreal Protocol projects to phase out the use of ozone-depleting substances with a focus on hydro chlorofluorocarbons (HCFCs) and methyl bromide. WBG support for climate change mitigation is strong on both the IFC and Bank side and will include policy dialogue, investments and a more specific focus on enhanced energy efficiency – including through the development of renewable energy sources, policy actions in the industrial sector, demand-side energy efficiency measures (including tariff reforms), providing capital lines and advisory services, as well as awareness raising and strengthening of the regulatory environment, and analysis of low-carbon growth strategies. The program will also support climate change mitigation measures in relation to transport, urban development, and agriculture. 70. Outcome 2.3: Enhanced preparedness for natural hazards and climate change. The Bank continues to fill a financing gap for post-disaster reconstruction, helping to improve prioritization of budgetary resources promoting the principle of “build back better.â€? The Bank‟s support will increasingly focus on strengthening capacities to anticipate and reduce the impact of extreme weather events. Hence, the Bank will support strengthening of hydro-meteorological services and early warning systems, investments to reduce storm and flood risks in highly vulnerable areas, scaling up of community-based disaster risk management, improvements in area-based and urban disaster risk planning and mapping, and agro-weather advisory services. Technical assistance will be provided to assist Government in developing a comprehensive disaster risk financing strategy. Through TFs and a series of DPOs, the Bank‟s program will support strengthening governance for addressing climate change through capacity building for climate change-related analysis, planning, and M&E in five targeted ministries, as well as for enhanced inter-ministerial coordination. It will support a series of studies pertaining to climate change 24 adaptation in various sectors, emphasizing the scope for „no regrets‟ types of measures19, while also assisting Government to better understand costs, benefits, risks, and alternatives to proposed investments. Pillar 2 – Indicative World Bank Group Instruments DPOs: Climate Change series, Power Sector Reform Series SILs: Portfolio: Water Resources, Mekong Delta Water Management, Forest Sector Development, Land Administration, HCMC Environmental Sanitation, Coastal Cities Sanitation, Urban Water Supply and Wastewater, Danang Priority Investment, Hospital Waste Management, Hanoi Urban Transport, Haiphong Urban Transport, Renewable Energy Development, Natural Disaster Risk Management, Avian Flu and Human Influenza Pipeline: Irrigation Modernization and Rehabilitation, Coastal Resources for Sustainable Development, Regional Wildlife Conservation, Mekong Delta Urban Upgrading, Medium Cities Development, HCMC Environment and Sanitation Phase 2, Danang Sustainable City Development, Industrial Pollution Control, Managing Natural Hazards AAA: Programmatic Climate Change AAA, Green Urban Transport, GHG Assessment for Danang TFs: GEF Critical Ecosystem Partnership, GEF PCB management, GEF Cleaner Production Energy Efficiency, Montreal Protocol National CFC & Halon Phaseout, Low Carbon Development Study TF, Eco2Cities, REDD Program, Capacity building in Key ministries for dealing with Climate Change, PHRD Disaster Management, AusAID Urban Resilience in Can ThoSpatial Dimensions of Urban Poverty, GFDRR WBI: Training program for MPs on climate change, and capacity building for urban planning for sustainability IFC: Energy Efficiency and Cleaner Production Financing, Environmental and Social Risk Management for the Financial Sector, Waste Management, Corporate Governance, Green Building Pillar 3 – Opportunity 71. Alignment with Government Strategy. The CPS program under the “Opportunityâ€? pillar is aligned with the strategic development agenda laid out in the SEDP and the SEDS, including efforts to create equal opportunities for access to resources for development, basic services, and social welfare in rural and urban areas, to continue with policies for sustainable poverty reduction (especially in the poorest districts and among ethnic minorities), and to improve the quality of social services. Recognizing the importance of skills to finding productive and stable employment, Government has made improving the quality of human resources one of the three break-through priorities of the SEDS. Government is in the process of adopting its first ever Social Protection Strategy which sets out strategic development directions for the period 2011-2020. These include efforts to promote stable and more productive employment, make the social insurance system more sustainable and expand its coverage, develop social assistance, and improve targeting and management of poverty reduction programs. Pillar 3 - CPS Outcomes / Areas of Engagement 3.1: Increased opportunities for the 3.2: Improved basic infrastructure poor and household resilience to and public service delivery and shocks access • Livelihoods • Basic Infrastructure • Social Protection • Education • Health 19 For example, adaptive management practices at household and community levels, efficiency gains, and infrastructure rehabilitation. 25 72. Outcome 3.1: Increased opportunities for the poor and household resilience to shocks. Building on insights from new poverty analysis, the Bank will support Government in its efforts to further strengthen poverty reduction and social protection policies, and to improve the livelihood and earning opportunities for the remaining poor and vulnerable, many of whom are ethnic minorities. Analytical work will be undertaken to underpin future investment lending focused on regions with very high rates of poverty, with support combining upgrades in basic productive infrastructure, measures to enhance/diversify livelihood opportunities, and additional measures emerging from the analysis/shocks. Programmatic AAA is underway in poverty analysis and M&E capacity building and social protection. Complementary support will be provided by both IFC and the Bank to strengthen financial inclusion and the provision of and access to micro-finance and other financial services for the urban and rural poor as well as rural micro enterprises and SMEs. IFC investment and advisory engagements will focus on: (i) supporting development of a viable commercial microfinance industry to improve access to finance for Vietnam‟s base of the pyramid and rural population; and (ii) increasing opportunities for the base of the pyramid by supporting investments with supply chains linkages into rural economies and by increasing private sector-oriented education. Informed by the ongoing AAA, the Bank will also step up its investment financing for further development of the social protection system, inter alia to establish linkages between assistance, insurance, and programs aimed at improving the earning opportunities of the working poor. The Bank anticipates this could involve the design of a new social assistance cash transfer program targeted at poor households. Bank support will also focus on reducing the risk of transmission of poverty from the current to the next generation by promoting better access of children from disadvantaged backgrounds to early childhood education and development services. Recognizing the growing challenge of population aging in Vietnam, the program will contribute to Government‟s efforts to enhance the financial sustainability, fairness and coverage of the contributory social insurance system as well as to develop mechanisms to expand coverage of workers, including in the informal sector. It will support Government‟s efforts to expand coverage and utilization of health insurance, in particular by the poor and the near-poor. Given their importance in driving vulnerability to shocks, food security will be a focus of analytical work and policy advice. Access to information and ability to exercise rights as provided by law will be critical for success in expanding opportunity. The CPS program will therefore strive for more open access to official information and support Government‟s efforts to strengthen capacity for and awareness of citizen‟s rights. 73. Outcome 3.2: Improved basic infrastructure and public service delivery and access. The program will continue to support the provision of basic infrastructure and related services in rural and urban areas. Continued support will be provided through financing of investments in rural areas to connect communities to basic access and improved all-weather roads and strengthen the management and maintenance of the rural road network in provinces throughout northern and central Vietnam. Efforts will continue to sustainably increase access to water supply and sanitation services (including through results- based approaches), and upgrade the living conditions in poor urban neighborhoods. With an ongoing investment operation the Bank will continue to support improvement of learning outcomes and education completion for primary education students, particularly disadvantaged primary education students, through co-financing of the Government‟s full-day schooling reform program and the promotion of greater school readiness. Measurement of the quality of service delivery and learning outcomes through student assessments will be central to these efforts. The Bank will also continue to support Government‟s efforts to expand health insurance coverage among the near-poor, as well as efforts to improve the delivery of health services, including through a planned investment operation aimed at improving governance of the health sector. Bank support will transition from traditional essential infrastructure investment and a single issue disease project approach towards national level engagement in policy and institutional capacity strengthening support, including on quality management (See Box 6). 26 Box 6: Addressing Vietnam’s Remaining Poverty Agenda In light of remaining as well as new poverty challenges, Vietnam is working to reframe its strategy to reduce poverty, vulnerability, and inequality with the specific aim of (i) ensuring more rapid progress for those left behind, with particular focus on ethnic minority households; (ii) consolidating gains and ensuring sustainable progress for lower income households and the near poor; and (iii) addressing new challenges, including rising inequality across regions and social groups, new vulnerabilities, and challenges linked to rapid urbanization and an emerging group of urban poor and vulnerable households. The Bank launched a Programmatic Poverty Assessment for Vietnam in FY11, working in collaboration with country partners and building on a strong and ongoing program of technical assistance and capacity building for data collection and poverty analysis. The Programmatic Poverty Assessment aims to stimulate debate and new thinking in Vietnam on a second generation of poverty issues more relevant for Vietnam‟s emerging middle income economy and rapidly changing social and cultural environment. The findings of the assessment will inform the development of the Bank‟s future program. The Bank‟s operational program in Vietnam will retain a strong focus on helping Vietnam address its remaining and new poverty challenges as a middle income country. First, there will be several interventions with a direct poverty reduction objective. Second, many World Bank-supported sectoral interventions will be targeted to the poor and near-poor and to remote regions and regions with high ethnic minority poverty. For example, regional health projects will continue to finance subsidized access to health insurance for the near-poor and thus address one of the major shocks that risk pushing vulnerable households back into poverty. Education interventions supporting full-day schooling or early childhood education and school readiness will be targeted to poorer regions, typically with high ethnic minority population shares, and attempt to provide opportunities for the next generation to escape poverty. Equally, rural and urban infrastructure interventions will focus on poor communities and neighborhoods and aim to help provide access to basic services and markets for the poor and disadvantaged. Pillar 3 – Indicative World Bank Group Instruments SILs: Portfolio: Second Northern Mountains Poverty Reduction, Third Rural Finance, Second Rural Energy, Rural Distribution, Third Rural Transport, Mekong Delta Transport, Red River Delta Rural Water, Mekong Delta Water, Urban Water Supply, Urban Upgrading, Danang Priority Investment, Coastal Cities Sanitation, Urban Water Supply and Wastewater, ICT Development, School Education Quality Assurance, Regional Health Projects (Mekong, Northern Upland, Central North), HIV/AIDS Prevention, Inclusive Innovation Pipeline: Social Protection Systems, Central Highlands Poverty, School Readiness Promotion,* Mekong Delta Urban Upgrading, Medium Cities Development, Danang Sustainable City Development, Rural Sanitation and Water Supply,* Health Sector Governance Strengthening, North East and Red River Delta Regional Health* AAA: Programmatic AAA in the areas of Poverty Reduction, Social Protection, Skills and Education System, and Health; Quality Education for All Policy Dialogue TFs: Governance and Poverty Policy Analysis and Advice Programme TF (GAPAP), Japan Social Development Fund (JSDF) for Quality Education for Ethnic Minority Children, GPE New School Project, Nordic TF on Human Rights IFC: Microfinance: Capacity Building to MFIs, Payment Systems, Mobile Banking. Coffee Farmer Training Center (with ECOM) * Results-based or output-based approach operations 74. The IFC’s program for promoting inclusive economic growth is aligned with the opportunity pillar. Investment and advisory engagements will focus on: (i) supporting the development of a viable commercial microfinance industry to improve access to finance for Vietnam‟s base of the pyramid and rural population; and (ii) increasing opportunities for the base of the pyramid to participate in Vietnam‟s growth by supporting investments with supply chains linkages into rural economies and by increasing private sector-oriented education. 27 D. IMPLEMENTING THE FY12-FY16 CPS Implementation Challenges 75. The main challenge for Vietnam program implementation is to achieve results faster. This has become more pronounced with the recent growth in the program. For the IFC, one of the main challenges to implementation is the fact that private sector in Vietnam is still relatively small and underdeveloped. Considerable capacity building is required in areas of corporate governance, capital efficiency, and professionalization of management. IFC is addressing this by seeking to engage with leading private sector groups and entrepreneurs to help them tackle these constraints and set standards for Vietnam‟s emerging private sector. For the Bank, while the quality of portfolio implementation continues to be satisfactory as evidenced by the review of Implementation Completion Reports (ICRs) by the World Bank‟s Independent Evaluation Group (IEG),20 the country would benefit significantly if implementation of its investment program were accelerated and development objectives achieved at a much faster pace. Government has renewed its efforts by: (a) revising its ODA implementation regulations, and (b) working even more closely with development partners to sharpen the focus of ODA. Newer approaches to operations, such as results-based and output-based disbursement, are being discussed. Vietnam‟s National Target Programs (in place for the past several years to reduce poverty and improve the quality of basic services such as rural water supply, education, and health) may be useful vehicles for these new approaches. During the CPS period, the Bank and Government will work to assess underlying fiduciary systems capacity and to diversify lending instruments for faster development impact. 76. Capacity at sub-national levels is weak across a range of skills. These include technical, project management, and fiduciary skills (procurement and financial management – see Box 7). There is also a lack of depth of quality suppliers and service providers. For the Bank‟s portfolio, these capacity constraints are evident in procurement delays, quality of project management oversight, weaknesses in financial management (reporting and internal controls) and safeguards, and civil works contract administration. Box 7: Ensuring Fiduciary and Institutional Development The use of country systems is a key indicator of the Paris Declaration as adopted in Vietnam through the Hanoi Core Statement (HCS). Currently around 58 percent of Bank funds are disbursed through the government public financial management (PFM) systems, exceeding the HCS target of 50 percent. This is largely due to financing via the Bank‟s development policy lending which is in the form of direct budget support and fully relies on the country PFM systems. Most PMUs are formally integrated into the country system in that they are managed by a senior government official accountable to the responsible line agency, comprised of seconded, functional department staff, and primarily subject to Vietnamese laws on public investment management. While almost all Bank-financed investment projects are off-budget, they are reported to the national legislature, and elements of the government system – such as budget execution procedures for counterpart funds, expenditure verification by State Treasury, government accounting classifications, controls and “cost norms,â€? and interim reporting using the Aligned Monitoring Tool – are employed whenever feasible. In addition, because the World Bank projects are funded outside the country‟s treasury system, Bank resources are consistently tracked using designated or special accounts. Separate annual financial statements are required and are subject to audit by independent audit firms. The Bank aims to support strengthening of country fiduciary systems and increase their use. Program-based and results-based operations are being discussed with Government. Efforts will also be made to engage the State Audit of Vietnam as auditor, particularly in cases where project design or procurement is not complex. 20 All of the 35 ICRs of Vietnam operations reviewed by IEG have been rated satisfactory or moderately satisfactory for development outcome, with zero disconnect vis-à-vis the final ISRs. This is the strongest evaluation record of any IDA borrower. 28 77. During the CPS period, the Bank will continue to work jointly with MPI and other donors to address systemic ODA implementation issues. This work will include: (i) support for revision of Decree 131, adopted in 2006 as the main legal framework for management of ODA in Vietnam; (ii) continued implementation of the Six Banks‟ 12-point Joint Action Plan; (iii) a study of options for streamlining project management unit (PMU) arrangements; and (iv) continued analytical work and support for the development of national fiduciary and safeguards capacities. This support will include (i) PFM capacity building, including the ongoing Bank-financed PFM operation and the related multi-donor TF, IDF grants, and with the planned introduction of results-based and output-based financing; and (ii) procurement capacity building, including through continued policy dialogue with relevant government authorities and the Six Banks, ongoing and planned IDF grants, TA for development of bidders‟ protest mechanisms, and governance and anti-corruption (GAC) action plans for high-risk projects. 78. The Bank is also undertaking analyses to learn from well-performing provinces and sectors. Provincial governments are now charged with more responsibility in managing investment operations. Despite limited capacity, some provinces manage the portfolio better than their peers. A recent initiative to focus the portfolio review at the provincial level has produced a number of lessons that will be shared with other provinces, and additional provincial-level portfolio reviews will be conducted. The portfolio‟s performance also differs by sector, with some sectors having a good record of faster and quality results. Lessons are now being studied and will also be applied to improve the overall portfolio. Box 8: Fiduciary Risks As noted in the CPS Completion Report (Annex 2) and also discussed in Annex 16, Vietnam has made good progress in establishing a sound public financial management (PFM) system and is committed to addressing the remaining PFM reform agenda. The level of project financial management performance across the Bank‟s investment lending portfolio exhibits some weaknesses, particularly in decentralized and geographically dispersed projects. Lack of coordination between project management units and relevant government agencies contributes to implementation delays, and follow-up of audit issues can be slow. Partly this reflects the fact that Vietnam‟s public procurement legal framework falls short of internationally accepted standards and acknowledged good practices. In addition, many implementing agencies still lack the necessary capacity. A number of issues have been noted, including dominance of dependent SOEs in the market, frequent occurrences of conflict of interest, weak contract management, collusion, and local authorities' insistence on following government procurement procedures or implementing "dual" procedures under Bank-financed projects. This situation leads to procurement delays, irregularities, and non-compliance. During the CPS period, the Bank will continue to support progress on the PFM and procurement reform agenda, build institutional capacity, and improve aid effectiveness. Ongoing capacity building in financial management and procurement will be conducted for government agencies, project staff, and audit firms to reinforce the Bank‟s requirements and to address cross-cutting issues identified during Bank prior and post reviews and audits. Bank risk-based and joint fiduciary supervisions will continue to be conducted and measures incorporated in project arrangements to mitigate fiduciary risks. 79. At the project level, MPI and the Bank are giving priority to improving projects’ readiness for implementation, accelerating their preparation, and managing the existing portfolio proactively. Readiness, in terms of detailed design, procurement and PMU arrangements, is being jointly assessed through systematic reviews of the lending pipeline. Implementation of the Bank-financed Project Preparation TA Facility needs to be improved to make financing for project preparation available in a timely manner. Proactive management of the existing portfolio includes (i) major restructuring and partial cancellation, not necessarily limited to problem projects, with the aim of faster implementation and therefore development impact; (ii) a high-level review meeting between the Bank and Government semi- annually, with the Prime Minister‟s Office directing the agreed follow-up actions; (iii) provincial portfolio reviews in a selected number of provinces; (iv) sectoral portfolio reviews with line ministries; and (v) a realistic assessment of the implementation progress, downgrading of project ratings in Implementation 29 Status and Results Reports (ISRs) if deemed necessary, and allocation of additional supervision resources if needed to improve implementation. IDA, IBRD, and IFC Resources 80. An indicative IDA 16 allocation21 of about SDR 2.8 billion22 (equivalent to US$4.2 billion) would be available to support Vietnam’s economic and social development in FY12-FY14. This would be the largest IDA allocation to Vietnam of any IDA Replenishment, reflecting Vietnam‟s strong performance as well as the increase in overall IDA resources mobilized for IDA 16 compared with IDA 15. Vietnam could also receive additional IDA resources through its participation in IDA regional projects. The share of DPOs in the FY12-FY14 IDA program is currently estimated at about 25 percent and could rise if policy reform momentum increases. 81. Proposed FY12-FY14 IBRD commitments total US$770 million, of which around US$280 million is planned for two DPOs, and the balance for SILs. Most of these resources would likely support infrastructure development. FY15-FY16 IBRD commitments are anticipated to be in the range of US$300 million to US$550 million for SILs, and an additional $100 million to US$150 million for DPOs. Actual commitment volumes in the FY13-FY16 period are indicative only and will be determined annually, depending on how government demand and macroeconomic policy and performance evolve in the course of the CPS period, and on IBRD‟s lending capacity and demand from other borrowers. While the current preference of the Ministry of Finance is to allocate IBRD resources to revenue-generating sectors, this is expected to change over the medium and longer term to allow Vietnam to base its funding and expenditure decisions on economic rather than financial rates of return. To facilitate Vietnam‟s transition to IBRD, the Bank‟s Treasury will be providing several types of training to government officials early in the CPS period. An indicative IDA and IBRD lending program for FY12-FY14 is shown in Annex 5. 82. In FY11, IFC’s commitments in Vietnam reached US$ 700 million and mobilization reached more than US$200 million. It is expected that IFC‟s portfolio for both investment and advisory services will continue to increase throughout the CPS period. 83. Infrastructure will likely continue to account for the largest share of Bank lending (especially IBRD), given the vast infrastructure needs for supporting Vietnam’s rapid growth. The IFC also expects infrastructure to become an increasingly big part of its portfolio as the private sector plays a more important role in building and financing infrastructure. In addition to infrastructure, the IDA program will also support Vietnam‟s unfinished structural reform agenda, human development, natural resource management, and measures to address climate change. FY15-FY16 lending plans will be elaborated in the CPS Progress Report in mid-FY14. Monitoring CPS Implementation 84. The results framework of this CPS will serve as a management tool for the Bank’s Vietnam Country Team. Its design is streamlined to make it a useful monitoring tool. Progress towards achievement of the CPS outcomes will be monitored annually. The review will be facilitated by the Country Portfolio and Results Monitoring Tool (CPRT), a web-based system for monitoring progress 21 For IDA16 allocations, only FY12 allocation is firm, and allocations in FY13-14 are indicative and can change depending on total IDA resources available in FY13 and 14, the IDA resource allocation process, and exchange rate changes between the SDR and the dollar. 22 Of which 3 percent is assumed to be hard-term IDA. 30 toward CPS outcomes. The CPRT is populated with data from ISRs and the Bank‟s existing information systems, and can therefore provide real-time links between the lending portfolio performance and AAA to progress toward CPS outcomes. For the data forming the basis of these progress reviews to be current, the Country Team will ensure timely updates of ISR results indicators. Trust Fund Program and Strategy 85. Trust Funds are a very important financing source for the Bank’s country program in Vietnam. A significant part of trust fund resources are used to support Bank investment projects and policy operations through co-financing, project preparation, and background analytical work (see Annex 17). Trust funds also play an important role in knowledge transfers to Vietnam by supporting joint analytical work with Vietnamese research institutions and think tanks, capacity building, and training activities. Trust funds also help the country pilot innovative ideas such as the JSDF Trust Fund on Early Childhood Care and Development, and provide emergency support such as for Avian Influenza. TFs can thus help to leverage Bank resources further and are used as a unique platform for donors to provide joint assistance, e.g., the PRSC series. 86. The sources of trust funds are expected to change as Vietnam develops, and donors shift their attention to newer areas of support or start to scale down in Vietnam. Some donors have recently expressed their intention to shift their focus to emerging issues such as climate change, while others are scaling down or exiting Vietnam over the next several years. Development partners and the Bank are carefully reviewing the impacts of such a shift for Vietnam's SEDP through the work of developing the new ODA Strategic Framework. At the same time, the shift calls for even stronger attention to the effectiveness of aid. To this effect, the Aid Effectiveness Forum and other partnership groups have been working closely with the Ministry of Planning and Investment to intensify the synergy among the development partners' programs. 87. Implementation of the Vietnam trust fund portfolio has been successful, but some improvements are needed. These include more strategic alignment and realistic assessment of the time needed for implementation and achievement of results. Selection criteria have been developed and will be applied to TFs more systematically by the Bank‟s country team, and TFs will be included in portfolio performance reviews. Vietnam is central to the regional efforts to improve the way mobilize and utilize TFs. E. DEVELOPMENT PARTNERSHIPS AND AID EFFECTIVENESS 88. Vietnam is not an aid dependent country – in 2010, ODA accounted for less than 5 percent of the country’s gross national income (GNI) (see Annex 3) – but there is no question that the country has used ODA effectively in support of its development. With Vietnam‟s new status as a lower middle income country, several development partners have announced plans to scale down their activities or exit the country within the next 3-5 years. Other partners have indicated that they will gradually transform their relations with Vietnam to focus more on trade and commercial activities, including FDI from private companies originating in donor countries. This CPS period will therefore witness a transformation of Vietnam‟s ODA landscape to a smaller number of traditional development partners, and less grant and highly concessional resources. The Bank will work with Government to ensure that this transition is smooth and where appropriate, offer co-financing opportunities for partners who may find this useful as they reduce their field presence. The Bank will also begin planning for continuing important parts of its program for which donor funding might end during the CPS period. 89. The planned exit of several development partners does not diminish the importance of continuing to improve coordination among partners and strengthen harmonization with 31 Government programs, approaches, and procedures. Vietnam has made significant progress in coordination and harmonization, as the first country to localize the Paris Declaration in 2005 resulting in the Hanoi Core Statement. A recent evaluation of the Hanoi Core Statement identifies some of the reasons for success, including strong national ownership, impressive poverty reduction records (giving development partners the confidence that their money is well spent), absence of aid dependency (making donor conditionalities ineffective) and a limited timeframe for ODA (making the Government eager to spend the resources well). As the timeframe for both the Paris Declaration and the Hanoi Core Statement draw to a close, the Bank is supporting the Government in the development of the next round of Aid Effectiveness initiatives. 90. Vietnam’s apex partnership forum is the Consultative Group (CG). The Bank and Government co-host the annual CG Meeting (in Hanoi) and mid-year CG (in a province). Nearly all multilateral and bilateral donors participate as do international NGOs. Development partners are discussing with Government how to transform the CG from a resource mobilization forum to a forum for more effective high level policy dialogue. In conjunction with the CG, the Government and donors also co-host the Aid Effectiveness Forum, the Vietnam Business Forum, and the Anti-Corruption Dialogue. The Vietnam Business Forum, co-chaired by the Government and IFC, will continue to be an important platform for dialogue between the Government and the private sector on private sector development and regulatory reform issues. It is also an important forum for development of Vietnam‟s local chambers of commerce and business associations. After several years of IFC funding, this forum will transition to one led and funded by private sector participants. This transition is expected to be completed by January 2012. 91. The Bank is also actively involved in a number of other donor/government coordination fora in Vietnam. These include the Aid Effectiveness Forum, the majority of Vietnam‟s 18 currently active Sectoral and International Partnership Groups, and the Six Banks Group (See Annex 18). The PRSC series has also continued to serve as an important vehicle for both policy dialogue and donor coordination. As the PRSC series comes to an end, the Bank is committed to making the successor operations take on a strong role in donor coordination around policy reform in the next CPS period. A special effort will be made to strengthen coordination and partnership with other large development partners in Vietnam, notably the ADB and JICA. This will be done through regular consultations and exchange of information on strategy and programming and by inviting ADB and JICA to provide inputs and comments at various stages in preparation of projects in areas where they are actively engaged. The Bank will ensure that in joint areas of activity with ADB and JICA, and indeed with other development partners, the Bank‟s value addition is clearly established and will seek to coordinate messages to Government on related policy issues. The Bank will also continue its close collaboration with the UN in shared engagement areas and through joint support for capacity building. 92. Government is taking two initiatives to improve aid effectiveness and harmonization. One is the development of a new ODA Strategic Framework (OSF) for 2011-2015. The OSF is aimed at laying out the Government‟s policies and guidelines for the mobilization, management, and utilization of ODA and less concessional loans in the context of the country‟s newly attained MIC status. The OSF is expected to be approved by the Prime Minister in November 2011. The other initiative is the ongoing revision of Decree 131 on management and utilization of ODA, led by MPI. The Bank is actively supporting this process through provision of technical assistance. 93. The World Bank continues to have a fruitful and open relationship with civil society. Beside the regular dialogues and consultations with CSOs on Bank policies and projects, and engagement with CSOs on project implementation, The Bank has been providing financial and technical resources, including the Vietnam Innovation Day and the Civil Society Fund, to CSOs to promote innovation at 32 grassroots level. The Bank will find opportunities to facilitate stronger participation of civil society in various mechanisms for dialogue between development partners and Government. V. RISKS Slowdown in the Global Economy 94. Since its accession to the World Trade Organization in 2007, Vietnam has become highly exposed to regional and global economic shocks. It is highly integrated with the rest of the world, with international trade constituting nearly 160 percent of its GDP and foreign direct investment and remittances together adding up to as much as 20 percent of GDP. A global recession or a period of prolonged growth slowdown could have a dramatic impact on Vietnam‟s exports and industrial output, as was demonstrated during the 2009 global economic crisis. 95. Unlike in 2009, when the Government responded with a large and timely stimulus package to stave off an economic crisis, the fiscal headroom is now limited. Therefore, if such a scenario were to materialize, it could lead to a slowdown in implementation of the CPS program for several reasons, including a shortage of counterpart funds resulting in diversion of Government funds from investment operations in the CPS program aimed at supporting long-term growth. Since the factors driving the risk of contagion are external and on a global scale, risk management measures include continued dialogue with Government agencies aimed at building better buffers against global shocks through improved domestic policy and economic management (e.g., increased foreign exchange reserves and more fiscal space to be able to finance a stimulus if needed), strengthened debt management capacity (a Debt Management Performance Assessment report for Vietnam is under preparation), and improved public financial management practices (a Public Expenditure and Financial Accountability self-assessment is also underway). Heightened Macroeconomic Instability 96. During the past five years Vietnam has been experiencing recurring episodes of macroeconomic instability, fueled by external shocks and rooted in structural distortions in the economy. Recent growth has been driven by factor accumulation financed by easy credit generating inefficiencies of investments, highly leveraged SOEs, doubtful portfolio quality in the banking sector, and rising risks of financial sector instability. With the country in a political transition during the past 12 months, Government initially found it difficult to undertake tough measures to stabilize the economy, such as cutting back on public investments or keeping real interest rates positive, as such measures would have adversely affected the bottom line of the corporate sector and increased the non-performing loans of the banks. As a result, there was a significant build-up of contingent liabilities in the system. However, this risk has eased following the completion of the political transition and appointment of a new administration that is keen to address many of the outstanding structural problems. 97. Addressing these structural problems will take time, and continued macroeconomic instability is therefore a possibility during the next CPS period. Continued high inflation would increase Bank-financed project costs and therefore also the need for additional financing operations to ensure that project development objectives can be met. This would divert IDA resources from planned operations and put some program objectives at risk. In addition, macroeconomic instability could compromise the impact of poverty reduction efforts under the CPS program. The FSAP planned for 2012 will help identify financial sector vulnerabilities and structural weaknesses more comprehensively and can form the basis of a detailed reform program to make the financial sector more resilient in the long term. 33 98. Dialogue with Government, in close collaboration with the IMF, will be stepped up during the next CPS period. Regular monitoring and analysis of macroeconomic and financial indicators, including debt sustainability analysis and encouragement for greater accountability and transparency in macroeconomic and financial management, will remain a core part of the Bank‟s engagement. There will also be ongoing support to Government to address medium-term structural distortions in the economy through investment and development policy lending, and analytical and advisory services. At the request of the Ministry of Finance, the Bank is preparing a Debt Management Performance Assessment report and a Reform Plan Mission is scheduled in December 2011. An FSAP planned for 2012 will help identify financial sector vulnerabilities as a basis for further World Bank Group support. Implementation Risks 99. Timely development impact of the Bank’s portfolio is at risk mainly due to the slow implementation of investment operations. As discussed above, the Bank is working closely with Government to improve the ODA management system, strengthen the procurement legal framework as well as implementation capacity, and address project-level issues jointly with the Ministry of Planning and Investment on a systematic basis. 100. A relatively good legal framework on anti-corruption is in place, but implementation needs to be strengthened. Conflicts of interest are widespread, and oversight institutions such as the Judiciary, National Assembly, and State Audit are not fully independent from the Executive. During the CPS period, the Bank will continue a multi-pronged approach to managing this systemic risk to the CPS program. This approach will include: (i) continued technical assistance to State Audit, the Government Inspectorate, and the National Assembly to strengthen assurance and oversight; (ii) policy dialogue on measures to improve transparency in public administration, reduce risk of corruption, and improve systems of prevention and detection of collusive and corruptive practices; and (iii) internal audit capacity building in the Finance Ministry‟s Inspectorate, as well as other ministries and agencies, with a focus on risk-based audits and effective implementation of audit recommendations. 101. A specific risk to implementation of the Bank’s portfolio is project-level corruption, given the fiduciary capacity constraints and systemic corruption risks discussed above. In addition to fiduciary mitigation measures (see Box 8 above), the country team will ensure that project governance and anti-corruption plans are credible and implemented fully. Progress in implementation of these plans will be monitored and measures agreed to address any gaps. Internal audit functions and capacity building will continue to be incorporated in all projects when feasible. Efforts to strengthen institutional governance and systematically take advantage of opportunities to enhance transparency, accountability and citizens‟ participation in projects should also help reduce corruption risks. The Bank will prepare sector-specific governance assessments to better understand the key challenges affecting sector efficiency and inform project design. These measures will become more critical as the Bank moves to design projects with greater reliance on country systems. 102. A CPS Progress Report will be prepared in mid-FY14, as a mid-term review of CPS implementation. It will assess progress to date toward achievement of CPS outcomes as gauged by indicators and milestones in the CPS results framework, and incorporate adjustments as needed to the strategy and program in light of changed circumstances, including (but not limited to) a slowdown in the global economy, heightened macroeconomic instability, and implementation issues. 34 ANNEX 1: RESULTS MATRIX CPS Outcome Indicators Milestones World Bank Group Program (indicative) Pillar 1: Competitiveness SEDP indicators: GDP annual growth of 7.5-8%; inflation in secure limit; labor productivity increased by 50%; Total Factor Productivity; energy loss over GDP reduced to 2.5-3%;annual export turnover growth of 12.1%; average rate of capital mobilization for State budget reaches 25.1-25.4%;38% urbanization rate; 55% trained labor rate;300 students over 10,000 people; real income in 2015 will be 2-2.5 times that of 2010; urban unemployment rate reduced to approx. 4% Outcome 1.1: Improved Economic Management and Business Environment SEDS Goal 1: Improve Market Institutions in Accordance with a Socialist Oriented Market Economy, Ensure Macroeconomic Stability, and Effectively Mobilize and Utilize Resources 1, 3 1. Sound macroeconomic Macro-Economic Policy Framework Ongoing: framework maintained as Fin Sector Modern & Info Mgnt System (FY09) (P088759) - Policy dialogue with Government stakeholders (SBV, MOF, MPI) informed by Public Financial Management Reform (FY03) (P075399) evidenced by (i) moderate credit the Bank’s regular macroeconomic monitoring and reporting Tax Administration Modernization (FY08) (P099376) growth and strengthened loan - Debt sustainability analysis conducted jointly with IMF annually Rural Finance 3 (FY08) (P100916) portfolio; (ii) fiscal consolidation - Debt Management Performance Assessment conducted by 2012 and input IFC Vietnam Licensing Simplification (2009-2012) provided to Government Debt strategy IFC Capital Market Phase I (2008-2013) through more efficient investment and improved - Modern approaches to management of public debt and SOE liabilities Pipeline: revenue effort. 3 adopted including (i) integrated recording of debt; and (ii) processes for PRSC 10 (FY12) identification and analysis of fiscal risks by 2013 (PFM) EMCC 1 (FY13) Baseline: - Annual analytical EMCC report on promoting reforms to address binding EMCC 2 (FY14) (i) 31 % annual credit growth IFC Tax Simplification for MSMEs (2012-2016) constraints to competitiveness rate (2008-2019 average) IFC Capital Market Phase II (2012-2016) - Vietnam Knowledge Platform with Government and civil society established IFC Credit Bureau Phase II (ii) fiscal deficit 5.5 % of GDP to promote dialogue on economic management by 2013 IFC Collateral Registry Phase II per year (2008-2010 average) Public Financial Management 1 IFC Microfinance (2012-2016) Target: - Prioritized Implementation Plan adopted by end 2012 for the Financial (i) <20% annual credit growth Development Strategy (2011-20) AAA: Programmatic Public Finance Reviews, Country and rate (FY12-FY16 average) Sub-National Financial Management Assessments, - Treasury and Budget Management Information System (TABMIS) developed Vietnam Development Reports, Vietnam Knowledge (ii) fiscal deficit less than 4 % with enhanced functions by 2013 (PFM) Platform, FSAP, Taking Stock, Programmatic Financial of GDP per year (FY12-16 - TSA implemented in all Banks serving Treasury by 2013 (PFM) Sector AAA, Enhancing Roles of MSMEs, Programmatic average) Governance and Anti-Corruption TA, Capital Market - Robust Internal Audit function to strengthen internal controls in MOF and at Development, WBI Training programs for MP’s on least three key line ministries established by 2013 legislative process and budget oversight - Vietnamese Standards on Auditing updated to align with International 2. Provinces using the integrated 1 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Governance 2 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Gender 3 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Resilience 35 CPS Outcome Indicators Milestones World Bank Group Program (indicative) Treasury and Budget Standards on Auditing by 2013 Trust Funds: MDTF for Economic Management and Management Information System - Simplified procedures and strengthened IT systems for tax administration Competitiveness Credit, MDTF to Support Public Financial (TABMIS) 1 Management Modernization 2, Cofinancing RETFs to PRSC resulting in increased share of VAT refund requests processed within 15 days 10, Financial Sector Modernization and Info Management Baseline: 30 (2010) from 67% in 2009 to 90% in 2013 and tax audits resulting in additional tax System, Tax Admin Modernization Target: 63 (2015) assessments of 70% by 2013 (Tax Administration Project) - VAT registration threshold introduced, Risk-based Audit applied resulting in $19 mil savings for micro and small-medium enterprises (MSMEs) by 2015 (IFC) - Simplified accounting regimes for Business Households, SMEs resulting in tax registered businesses increase from 37% to 47% by 2015 (IFC) 3. Individuals and firms listed in a - Programmatic Public Finance reviews conducted by 2013 public credit registry with - First Public Expenditure and Financial Accountability (PEFA) assessment information on their borrowing completed to serve as baseline for monitoring PFM progress by 2013 history from the past 5 years Financial Sector Baseline: 29.8 % (2011) - FSAP conducted by December 2012 Target: 40% (2015) - Technical specifications for the modernized IT database system at SBV completed by 2013 (Financial Sector Modernization and Info Management 4. Domestic commercial banks System have current financial and - Strategy for Public Credit Registry completed by 2013 (TA) balance sheet data on their webpage 1 - Enhanced framework for credit risk management adopted using both Baseline: 49% (2011) quantitative and qualitative criteria by 2013 (PRSC 10, Financial Sector TA) Target: 74% (2015) - All financing institutions participating in rural finance program compliant with 1 accreditation scheme (RF3) - Risk management system for two main state owned commercial banks improved by 2013 (RF3) - Best practice on bond trading and bond issuance introduced by 2013 (IFC) 5. SOEs divested during the 2011- - Action plan to improve government bond market in place by 2013 (PRSC) 2015 period - 7 banks with Annual Reports prepared by International Financial Reporting Baseline: 0 (2010) 1 Standards (IFRS) by 2013 up from 5 banks in 2011 Target: 450 (2015) 1 Market-based Regulations - Time bound plan to separate state-ownership rights from regulatory function 1 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Governance 2 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Gender 3 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Resilience 36 CPS Outcome Indicators Milestones World Bank Group Program (indicative) in SOEs in place by 2013 (PRSC 10) - Vietnam Development Report (VDR) on SOE published - MOF publishes every six months a report on SOEs operational performance - 30 licenses/permits cut-down or simplified by 2013 (IFC) - 20% reduction in compliance costs for MSMEs by 2012 (IFC) Outcome 1.2: Improved Quality and Efficiency of Infrastructure Services SEDS Goal 5: Quickly Develop Infrastructures, Especially Transportation Infrastructures Energy Ongoing 6. Duration of interruptions in - No single electricity generation company owning more than 40 percent of Transmission and Distribution 2 (FY06+AF FY11) (P084871) 500kV transmission system per 1 System Efficiency Improvement, Equitization & capacity by 2015 (Power Sector DPO) Renewables (FY02+AF FY10) 100 circuit km - Contracts for 90% of demand for non build-operate-transfer generation Trung Son Hydropower Project (FY11) (P084773) Baseline: 15.43 minutes (2010) based on pricing methodologies and standard format published by MOIT by Renewable Energy Development (FY09) (P103238) Target: 13% improvement 1 (2015) 2014 (Power Sector DPO) Pipeline - Scada Energy Management System in place by June 2014 (TD2) Power Sector Reform DPO2 (FY12) - 502 km 500kV and 180 km 220kV transmission lines constructed in Mekong Power Sector Reform DPO3 (FY14) Delta, HCMC area and greater Hanoi area by June 2014 (TD2) Distribution Efficiency (FY13) (P125996) - Expansion of transformer capacity by 2500+3370 MVA (500/220) and 2625 Trust Funds: Cofinancing to Renewable Energy MVA 220/110) by June 2014 (TD2) - Procurement of 260 MW Trung Son dam main contracts completed by 2013 7. Reduced volume of water Water Ongoing physically lost from water supply - Water companies supported have a working ratio of less than 0.90 (UWSW) Urban Water Supply (FY05) (P073763) system in selected cities 1 Urban Water Sup & Wastewater (FY11) (P119077) - Database of water utility performance published by 2014 (UWSW) Local Development Investment (FY10) (P094055) (i) in HCMC - Non-revenue water reduction program implemented in HCMC (UWS) HCMC Investment Fund (FY07) (P104848) Baseline: 27,300 m3/day (2011) Pipeline Target: 125,000 m3/day Mekong Delta Urban Upgrading (FY12) (P113904) (2015) Medium Cities Development (FY12) (P116398) Danang Sustainable City Dev (FY14) (P123384) Trust Funds: Cofinancing to Urban Upgrading 1 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Governance 2 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Gender 3 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Resilience 37 CPS Outcome Indicators Milestones World Bank Group Program (indicative) 8. Reduced transport times on Transport Ongoing targeted transport corridors: - 336 km of national roads and short bridges improved and 850 km maintained Road Network Improvement (FY04) (P059663) (i) Road Network Improvement Mekong Delta Transport (FY07) (P083588) by 2013 (RNIP + MDTP) Northern Delta Transport (FY08) (P095129) Program - 250 km of Mekong Delta waterways and 200 km waterways between Quang Expressway Danang- Quang Ngai (FY11) (P106235) Baseline: Details available sep. Ninh -Viet Tri and Hanoi-Lach Giang improved by 2013 (NDTP & MDTP) Project Preparation Facility (FY10) (P118610) Target: 15% decrease (2012) Danang Priority Investment (FY08) (P086508) - Major arterial urban roads constructed in Danang (7 km), Hanoi (5 km) and Hanoi Urban Transport (FY10) (P083581) nd (ii) Hanoi 2 Ring Road Haiphong (10 km) by 2014 (DPIP, HUTP, HPUTP) Haiphong Urban Transport (FY11) (P111548) Baseline: 28 min (2011) - Contract awarded for Danang – Quang Ngai Expressway and concession Road Safety (FY05) (P085080) Target: 22 min (2015) awarded for Dau Giay – Phan Tiet Expressway by 2013 - 50 black spots on 600 km of road treated for improved road safety by 2013 Pipeline (iii) National Highway 91 (MDTP) (RSP) Mekong Delta Transport AF (FY13) (P126605) Road Asset Management (FY14) (P123961) Baseline: TBD by June 2012 - Governance in transport sector review completed by 2013 and Governance Dau Giay – Phan Tiet Expressway (FY14) (P123961) Target: TBD by June 2012 and Transparency Action Plans for transport projects satisfactorily 1 implemented AAA TFLA, Programmatic Infrastructure Finance - Trade facilitation and logistics audit (TFLA) conducted by 2013 Trust Funds: TF Infrastructure Policy and Sector Support, cofinancing RETFs to Rural Transport 3, Mekong Delta Transport, GEF – Hanoi Urban Transport Outcome 1.3: Increased Capacity for Innovation and Value Addition SEDS Goal 3: Comprehensively Develop Agriculture Towards Modernity, Efficiency and Sustainability SEDS Goal 4: Strongly Develop Service Industries, Especially Services That Offer High Value, Great Potentials and Enhanced Competitiveness SEDS Goal 9: Improve the Quality of Human Resource, Reform Comprehensively, and Rapidly Develop in the Areas of Education and Training 9. Higher Education students Skills and Innovation Systems Ongoing benefitting from improved - 300 curricula revised, 20,000 staff receiving training, 95 laboratories/libraries Higher Education 2 (FY07) (P079665) curriculum, facilities, laboratories School Education Quality Assurance (FY09) (P091747) upgraded etc. by 2013 (HE2) New Model University (FY10) (P110693) and research activities through - Vietnamese-German Model University established with an updated charter Agriculture Competitiveness (FY09) (P108885) TRIG grants (number) by 2013 (NMUP) 1 Rural Finance 3 (FY08) (P100916) Baseline: 200,000 (2010) Livestock Comp & Food Safety (FY10) (P090723) - Government research institute conversion to semi-autonomous status Target: 250,000 (2013) 1 ICT development (FY06) (P079344) according to agreed roadmap (FIRST) - Workforce benchmarking and employer surveys completed by 2013 - 100% of higher education institutions disclosing information on the Pipeline institution's staff, academic programs, finances and expected learning Higher Education DPO 3 (FY13) (P116354) 1 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Governance 2 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Gender 3 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Resilience 38 CPS Outcome Indicators Milestones World Bank Group Program (indicative) 1 outcomes on their websites by 2013 (up from 90% in 2010) Private Higher Educ Loan Fund (FY14) (P117395) - Technology innovation fund pilot initiated (FIRST), challenge fund launched Higher Education 3 (FY14) Inclusive Innovation (FY13) (P121643) for at least one area (Inclusive Innovation Project) and virtual incubation pilot Fostering Innovation through Research, Science and program implemented by 2013 (TA) Technology (FY13) (P117394) - Policy and plan to establish a multi-tiered higher education structure specifying roles of AAA: Programmatic Skills and Education System, Science different types of higher education institutions operating under different and Innovation AAA, Programmatic Agriculture 1 Competitiveness Bank-OECD ownership models by 2013 10. Farmers in targeted areas joint innovation review of Vietnam, Global Knowledge adopting good agricultural - Decrees supporting the implementation of the Law on Gender Equality and Transfer,Agro-industry Strategy 2 practices (number) the National Strategy on Gender Equality developed Baseline: 0 (2011) Agriculture Value Chains and Rural SMEs Trust Funds: Business Incubation and Green Technology, - 50,000 farmers trained in new farming practices and 50,000 smallholder Russian TF Educational Quality Assessment, Cofinancing to Target: 23,500 (2015) Second Higher Education, cofinancing to Agricultural producers benefiting from critical infrastructure by 2013 (ACP) Competitiveness, KTF – Workforce Development 11. Additional jobs created as a - 40% of slaughterhouses supported by the project operation at the national result of investments supported hygienic standards (LIFSAP) Baseline: 32,142 (2011) - Cumulative investments made by rural enterprises under rural finance project Target: 100,000 (2015) reach $270 million by 2013 (RF3) - 43,600 SME borrowers from the Rural Development Fund by 2013 (RF3) - Vietnam SME Development Plan and Roadmap for 2015 developed by 2012 1 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Governance 2 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Gender 3 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Resilience 39 CPS Outcome Indicators Milestones World Bank Group Program (indicative) Pillar 2: Sustainability SEDP indicators: 42.5% forest coverage in 2015;70% of industrialized and export processing zones with wastewater treatment plants, 85% solid waste collection rate; 85% medical waste collection rate; 80% severe environment polluters regulated Outcome 2.1: Improved natural resources management (“Greenâ€?) SEDS Goal 11: Protect and Improve Quality of the Environment, Proactively and Effectively Respond to Climate Change, as well as Prevent and Fend off Natural Disasters. 12. Increased water productivity Water Resources Management Ongoing in pilot areas - 2 provinces have water resources management plans that consider impacts Water Resources (FY04) (P065898) Baseline: TBD at start of Forest Sector Development + GEF(FY05) (P066051) on upstream development and climate change by 2013 (MDWMP) Mekong Delta Water Management (FY11) (P113949) MDWM project - Irrigation management transfer piloted in three schemes and irrigation Land Administration Project (FY08) (P096418) Target: 20% improvement modernization principles introduced in six large schemes by 2013 (VWRAP) (2015) Pipeline - Primary and secondary canals rehabilitated in the Mekong Delta to improve conveyance and storage capacity by 2013 (MDWMP) Forest Sector Development AF (FY12) (P126542) Coastal Resources for Sust. Devlop. (FY12) P124702) - Coastal and marine database systems provide regular and reliable data for Irrigation Modernization and Rehabilitation (FY15) fisheries planning and management by 2015 (CRSDPl) Regional Mekong Water Resources (FY13) - 1,000 coastal farmers and fishermen trained in good aquaculture/agriculture Regional Wildlife Protection (FY13) practices and in sustainable near shore capture fisheries through co- management arrangements by 2015 (Coastal Resources for Sustainable AAA: Programmatic Governance and Anti-Corruption TA 13. Time required for land related Development Project) 1 Trust Funds: REDD Program, Vietnam Conservation Fund, 1 Land Administration and Management transactions - transfer Cofinancing to Land Administration, Forestry TF, GEF Baseline: 44 days (2007) - 86 district land administration offices operational by 2013 (VLAP) Critical Ecosystem Partnership Target: 10 days (2015) - 1,696,000 ha of cadastral mapping available in digital form by 2013 (VLAP) - 3,000,000 Land Use Right Certificates in line with Land Law issued by 2013 14. Targeted smallholder (VLAP) plantation area certifiable Forest and Biodiversity Conservation according to international standards for sustainable - 8,000 Ha of additional smallholder plantation area supported (FSDP AF) 1 forestry - Management effectiveness of Special Use Forests will improve as measured Baseline: 0% (2010) by Management Effectiveness Tracking Tool by 2013 (FSDP) Target: 50% (2013) - Drivers of deforestation study completed by 2013 (REDD Program) 1 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Governance 2 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Gender 3 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Resilience 40 CPS Outcome Indicators Milestones World Bank Group Program (indicative) Outcome 2.2: Strengthened Environmental Protection and Management (“Cleanâ€?) SEDS Goal 11: Protect and Improve Quality of the Environment, Proactively and Effectively Respond to Climate Change, as well as Prevent and Fend off Natural Disasters. 15. Additional wastewater Pollution reduction Ongoing treated (m3/day) - 8.40 km wastewater interceptor and 59.5 km of sewers completed in HCMC HCMC Environmental Sanitation (FY01) (P052037) Coastal Cities Sanitation (FY07) (P082295) Baseline: 0 (2011) by 2013 (HCMC Environmental Sanitation+Vietnam Urban Upgrading Projects) Urban Water Sup & Wastewater (FY11) (P119077) Target: 14,200 (2015) - Completion of the drainage, wastewater collection and wastewater Danang Priority Investment (FY08) (P086508) treatment plants in Nha Trang, Quy Nhon and Dong Hoi by 2014 (CCSP) Urban Upgrading (FY04) (P070197) 16. People with access to - Danang wastewater treatment plant constructed by 2014 (DPIP) Local Development Investment (FY10) (P094055) improved sanitation (number) HCMC Investment Fund (FY07) (P104848) - 150 km of drainage constructed in low income urban areas completed and Baseline: 680,000 (2011) Project Preparation Facility (FY10) (P118610) 4,144 ha benefitting from improved drainage coverage and flood protection Hospital Waste Management (FY11) (P119090) Target: 2,500,000 (2015) measures by 2013 (Vietnam Urban Upgrading Project, UWSWP) - Inventories of PCBs are carried out in all regions by 2014 (GEF PCB) Pipeline - Feasibility studies completed for central effluent treatment plants for Mekong Delta Urban Upgrading (FY12) (P113904) supported industrial parks by 2013 (Industrial Pollution Control Project) Medium Cities Development (FY12) (P116398) Danang Sustainable City Dev (FY14) (P123384) - Compliance with the CFC, MBr, HCFC and Halon phaseout schedule stipulated HCMC Env. & Sanitation 2 (FY14) (P127978) in the Montreal Protocol Industrial Pollution Control (FY13) - 30 health care waste management plans approved by regulatory authority by Northern Mountains (FY14) 2013 (Hospital Waste Management Support Project) Trust funds: GEF PCB Management Project (FY09)(P099460), Cofinancing to Urban Upgrading, GEF – Coastal Cities Environmental Sanitation, GEF – Coastal Cities Project, National CFC and Halon Phase-out Plan, Preparation for HCFC Phaseout Project Stage 1 17. CO2 emissions reductions Climate Change Mitigation Ongoing compared to business as usual - Action plan to improve energy efficiency in key industry launched by 2014 Hanoi Urban Transport (FY10) (P083581) scenario associated with Haiphong Urban Transport (FY11) (P111548) (GEF Clean Production and Energy Efficiency) Renewable Energy Development (FY09) (P103238) investments - Demand side management/demand load control regulation established by IFC E&S Risk Management for Banking Sector (2011-2014) Baseline: 0 2013 (Power Sector DPO) IFC Energy Efficiency Loans and Technical Assistance to Target: 1.5 million tons (WB) Local Banks (2008-2013) - Regulations establishing roadmap for energy efficiency measures and + 1 million tons (IFC) (2015) IFC Equity investments in energy related industries (2012) operationalize benchmarking in key energy-intensive industrial sectors by Dec 2013 (CC DPO) 1 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Governance 2 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Gender 3 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Resilience 41 CPS Outcome Indicators Milestones World Bank Group Program (indicative) - Regulation on environmental and social risk management for banking sector Pipeline issued by SBV by 2013 (IFC) Power Sector Reform DPO2 (FY12) Climate Change DPO 1 (FY12) (P122667) - Integrated urban transport plans for HCMC and Haiphong by 2013 Distribution Efficiency (FY13) (P125996) (Eco2Cities) Climate Change DPO 2 (FY13) - Bus Rapid Transit System developed in three Hanoi corridors by 2015 (HUTP) Power Sector Reform DPO 3 (FY14) - Line 2 Bus Services in Haiphong (3,400 passengers/day) upgraded by 2015 Climate Change DPO 3 (FY14) Danang Sustainable City Dev (FY14) (P123384) (HPUTP) - Reference scenario for low carbon development endorsed (CC DPO) AAA: GHG Assessment for Danang, Green Urban - 400 MW of renewable energy capacity installed by 2013 (REDP) Transport, Programmatic Climate Change AAA - Climate innovation center to support adoption of green technology in private Trust Funds: GEF Clean Prod & Energy Effic (FY12) sector established by 2013 (P116846), Vietnam Climate Change Partnership, Eco2Cities, Business Incubation and Green Technology, Integrated Planning for Urban and Transport in HCMC Outcome 2.3: Enhanced Preparedness for Natural Hazards and Climate Change (“Resilientâ€?) 3 SEDS Goal 11: Protect and Improve Quality of the Environment, Proactively and Effectively Respond to Climate Change, as well as Prevent and Fend off Natural Disasters. 3 18. Targeted provinces and Disaster Risk Management Ongoing communes with disaster risk - Law on Natural Disaster Prevention and Mitigation finalized for adoption by Water Resources (FY04) (P065898) management plans 3 Natural Disaster Risk Management (FY06 + AF FY10) 2013 (CC DPO) Baseline: 0 provinces (P073361) - 95% of completed sub-projects withstanding subsequent disaster events of Northern Mountains Poverty Reduction 2 (FY10) 0 communes same type up to the intensity of a 1-in-30 year event by 2013 (Natural (P113493) (2011) Disaster Risk Management Project) Avian Flu and Human Influenza (FY07 +AF) (P101608) Target: 10 provinces - National level design standards for mainstreaming disaster risk reduction into 100 communes Pipeline transport infrastructure investments by 2013 (GFDRR) (2015) Climate Change DPO 1 (FY12) (P122667) - Business Plan for Hydro-Met Sector adopted by 2013 (Managing Natural Managing Natural Hazards (FY12) (P118783) Hazards) Climate Change DPO 2 (FY13) - Dam safety guidelines prepared and emergency preparedness plans for 10 Climate Change DPO 3 (FY14) irrigation dams available by 2013 (VWRAP) - Identification of gaps for improving Early Warning Systems by 2013 (GFDRR) AAA: Programmatic Climate Change AAA - M&E system for National Strategy on Disaster Risk Management established 1 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Governance 2 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Gender 3 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Resilience 42 CPS Outcome Indicators Milestones World Bank Group Program (indicative) 19. Coherent framework for by 2013 (GFDRR) Trust funds: Eco2Cities, Disaster Risk Financing Strategy prioritization of climate change - Multisectoral Avian Influenza simulation exercises conducted and reviewed at (GFDRR), Agricultural Risk Management Information adaptation action in key sectors is System (GFDRR), Vietnam Climate Change Partnership, district level in selected provinces (AHIP AF) 3 Cofinancing TFs to Natural Disaster Mitigation, GFDRR – available Climate Change Adaptation 3 Disaster Risk Management Capacity Building Program, AHI Baseline: No (2011) - Adaptation methodology to guide prioritization finalized and application Control and Preparedness TFs, cofinancing TFs to Natural Target: Yes (2015) Disaster Risk Management, Urban Resilience in CanTho initiated by 2013 (CC DPO) (AusAID) - Coordinated program with statutory framework for integrated water management in place by 2013 (CC DPO) - National coordination platform for Disaster Risk Reduction and Climate Change Adaptation established by 2013 (CC DPO) - Five key ministries update climate change preparedness/response strategies based on improved analysis, clearer prioritization and time-framing, and clearer delineation of the roles and responsibilities of different stakeholders by 2013 (Vietnam CC Partnership TF) - Climate change adaptation studies completed Pillar 3: Opportunity SEDP indicators: Average poor household rate reduced by 2-3% per annum; Human Development Index will stay at advanced medium level; 8 doctors per 10,000 people; 30 sick-beds per 10,000 people; 96% rural population provided with hygienic water; 98% urban population provided with hygienic water Outcome 3.1: Increased Opportunities for the Poor and Household Resilience to Shocks 3 SEDS Goal 3: Develop Geographic Regions Harmoniously and Sustainably, and Build Urban and Rural Areas That Meet Our New Standards 3 20. Households in targeted areas Livelihoods Ongoing reporting improvements in - 100 pilot livelihoods subprojects are up and running (NMPRP-2) Northern Mountains Poverty 2 (FY10) (P113493) accessibility to basic productive Rural Finance 3 (FY08) (P100916) - 60% of women and ethnic minorities satisfied with public representation and Road Safety (FY05) (P085080) infrastructure (%) service delivery in targeted Northern Mountains communes (NMPRP-2) 2 Urban Upgrading (FY04) (P070197) Baseline: n/a (2011) - A national database on poor/near-poor households maintained and available Target: 60 % (2015) Pipeline on timely basis for usage by relevant ministries, agencies for targeting, monitoring and evaluating purposes 1 Social Protection Systems (FY13) (P123960) 2 Coastal Resources for Sust. Develop. (FY12) (P124702) - Full implementation of national gender indicator system by 2013 Central Highlands Poverty (FY14) (P128072) -Elaboration of a multi-sector poverty reduction program for Central Highlands School Readiness Promotion (FY12) (P117393) by 2013 (Central Highlands Poverty) Mekong Delta Urban Upgrading (FY12) (P113904) 1 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Governance 2 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Gender 3 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Resilience 43 CPS Outcome Indicators Milestones World Bank Group Program (indicative) - 16,000 micro-finance sub-loans to first time borrowers by 2013 with more IFC Microfinance (2012-2016) 2 IFC Vietnam Better Work Phase II (2012-2013) than 40% of microfinance sub-loans to women borrowers (RF3) - More than 40,000 loans made for house improvements for poor households 2 AAA: Programmatic Poverty Assessment, MOLISA M&E (disaggregated by gender of household head) by 2013 (VUUP) Support, Programmatic Social Protection 3 Social Protection - Design of a Social Protection program to be piloted completed by 2013 Trust Funds: - National Assembly adopts amendments to the social insurance law based on Gender issues in Labor and Social Protection during Vietnam’s transition to a MIC 21. Social Protection indicator input from World Bank TA by 2013 (to be established by CPS Progress - Fatality rates on targeted corridors reduced from 8.3 to 6 per 100 million Report) vehicle km by 2013 (Road safety) - Improved working conditions and labor relations for 500,000 workers by 2014 (IFC) Outcome 3.2: Improved basic infrastructure and public service delivery SEDS Goal 8: Firmly Develop Healthcare and Improve the Quality of Medical Provision to the People SEDS Goal 9. Improve the Quality of Human Resource, Reform Comprehensively, and Rapidly Develop in the Areas of Education and Training 22. Rural households with access Basic Infrastructure Ongoing to - 32,000 km of low voltage lines and 32,000 km of medium voltage lines and Rural Energy 2 (FY05+ AF FY09) (P074688+ GEF) (i) electricity in project provinces Rural Distribution (FY08) (P099211) 1,706 km of distribution lines rehabilitated or constructed in project areas by Rural Transport 3 (FY06) (P075407) Baseline: 87.3 % (2011) 2014 (RE2+RD) Mekong Delta Transport (FY07) (P083588) Target: 90 % (2014) - 900 MVA transformer capacity in rural grids installed and more than 250,000 Red River Delta Rural Water (FY06) (P077287) KVA distribution substations rehabilitated or constructed by 2014 (RD+RE2) Mekong Delta Water (FY11) (P113949) (ii) an all-season road Urban Water Supply (FY05) (P073763) - 3000 km of rural road constructed or rehabilitated by 2014 and 315 km of Baseline: 78 % (2010) Danang Priority Investment (FY08) (P086508) Target: 81 % (2014) road improved to all-weather standard and 58 km of waterways improved by Urban Upgrading (FY04) (P070197) 2013 in Mekong Delta (Third Rural Transport Project+MDTP) Coastal Cities Sanitation (FY07) (P082295) 23. People provided with access - 20 rural communities in Red River Delta that have functioning, well operated Urban Water Sup & Wastewater (FY11) (P119077) to improved water sources Project Preparation Facility (FY10) (P118610) and maintained water supply schemes by 2013 (Red River Delta Rural Water) ICT Development (FY06) (P079344) (i) in rural areas in Red River and - 25 rural water supply systems constructed and expanded by 2013 (MDWMP) Mekong Deltas Baseline: 0 (2009) - 16,275 new piped household water connections by 2013 (UWSWP+ Target: 1,100,000 (2015) Danang+Mekong Delta Urban Upgrading Project) - Basic infrastructure for e-government established in MIC, GSO, Hanoi and 1 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Governance 2 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Gender 3 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Resilience 44 CPS Outcome Indicators Milestones World Bank Group Program (indicative) 1 (ii) in targeted urban areas Danang by 2013 (ICT) Pipeline Baseline: 393,000 (2011) - At least 1500 ethnic minority women effectively carrying out road Rural Transport 3 AF (FY12) (P113498) Target: 1,121,000 (2015) 2 Rural Sanitation and Water Supply (FY14) (P127435) maintenance and erosion prevention by 2013 (Third Rural Transport Project) Mekong Delta Urban Upgrading (FY12) (P113904) Medium Cities Development (FY12) (P116398) Danang Sustainable City Dev (FY14) (P123384) Northern Mountains (FY14) Regional Mekong Water Resources (FY13) Mekong Delta Transport AF (FY13) (P126605) AAA: Rural Broadband TA, Programmatic Governance and Anti-Corruption TA Trust Funds: Cofinancing RETFs to Rural Distribution, Rural Transport 3, Mekong Delta Transport, Coastal Cities Sanitation 24. Grade 5 students achieving Education Ongoing independent learner status - Students receiving at least 30 periods per week in SEQAP provinces reach Mekong Regional Health Support (FY06) (P079663) (SEQAP provinces) (disaggregated Northern Upland Health Support (FY08) (P082672) 57% by 2015, up from 48% in 2010 (SEQAP) 2 Central North Region Health (FY10) (P095275) by gender) - 23% of principals/vice-principals receiving at least 5 days of training per year Hospital Waste Management (FY11) (P119090) (i) in Vietnamese by 2012, up from 19% in 2010 (SEQAP) HIV/AIDS Prevention (FY05) (P082604) Baseline: 55.8% in 2007 School Education Quality Assurance (FY09) (P091747) - 70% of schools in SEQAP provinces with at least 1 toilet cubicle on site by Target:66% in 2015 Project Preparation Facility (FY10) (P118610) 2015, up from 56% in 2010 (SEQAP) (ii) in math Road Safety (FY05) (P085080) Baseline: 70.5% in 2007 - Active learning material developed for two primary grades by 2013 (GPE-New Avian and Human Influenza (FY07 + AF) (P101608) Target: 80% in 2015 School Project) - Baseline school readiness assessment completed by 2013 (School Readiness Pipeline 25. Health insurance coverage Promotion Project) North East and Red River Delta Regional Health (FY13) Health Sector Governance (FY14) among the poor and near poor Health 3 School Readiness Promotion (FY12) (P117393) (%) --Different options for health insurance payment mechanism developed by (i) Poor 3 2013 AAA: Quality Education for All Policy Dialogue, Baseline: - Share of district hospitals in claims reimbursed by health insurance is 44% or Programmatic Skills and Education System, Programmatic 29% Mekong (2008) more by 2013 (Central North Region Health Project) Health AAA, Programmatic Poverty Assessment Target: - 80% of eligible provincial district health staff have successfully completed 90% Mekong (2012) 1 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Governance 2 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Gender 3 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Resilience 45 CPS Outcome Indicators Milestones World Bank Group Program (indicative) training provided (Northern Upland Health Support Project + Mekong Trust Funds: (ii) Near poor Regional Health Support Project + Central North Region Health Project) AHI Control and Prevention TFs, HIV/AIDS Prevention TF, Baseline: (2008) HIV AIDS Return on Investment, EC-financed Vietnam - 70% of district hospitals provide full set of health services according to Health Care Support to the Poor of the Northern Uplands 7% Mekong national norms by 2014, up from 51% in2010 (Northern Upland Health and Central Highlands, JSDF – Improving Quality Basic 10% Central North Support Project) Education for Ethnic Minority Children in three 20.4% Northern Upland - 100 district hospitals and district prevention health centers constructed, disadvantaged provinces, cofinancing to Mekong Health Target: (2015) Support, IDF – Improving Effectiveness and Sustainability 50% Mekong (2012) renovated and/or equipped by 2014 (Northern Upland Health Support Project of Social Health Insurance, KTF – Vietnam Health System 40% Central North + Central North Region Health Project + Avian and Human Influenza Project) Governance Strengthening, HRBF – Developing Results 70% Northern Upland - 70 standard tests can be performed by preventive health centers by 2012 focused Health Care financing mechanisms in Vietnam, (Mekong Regional Health Support Project) GPE-New School Project (P120867) 1 - Review of health sector governance by 2013 - 90% of provinces prepare high quality HIV/AIDS Provincial Action plans and establish adequate M&E systems by 2013 (HIV) 1 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Governance 2 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Gender 3 Outcomes, Areas of Engagement, Indicators and Milestones that are related to cross-cutting theme Resilience 46 ANNEX 2: VIETNAM CPS FY07-FY11 COMPLETION REPORT Date of CPS Board Discussion: February 1, 2007 (Report No. 38236-VN) Date of Progress Report: November 24, 2009 (Report No. 51659-VN) Period Covered by the CPS Completion Report: July 2007 to June 2011 CPS Completion Report prepared by: Luis Alvaro Sanchez, Consultant Mette Frost Bertelsen, Country Officer, EACVF Under the guidance of: Myla Taylor Williams, Country Program Coordinator, EACVQ Victoria Kwakwa, Country Director, EACVF With inputs from members of the Vietnam Country Team EXECUTIVE SUMMARY During the 2007-2011 CPS period, Vietnam attained lower middle-income status, continued to reduce poverty, and advanced institutional reform in line with the strategic objectives set out in Vietnam’s Socio-Economic Development Plan (SEDP) 2006-2010. The country became IBRD eligible in 2007 and received its first IBRD loan in 2009. By the end of the CPS period, three key challenges have emerged: (i) the sustainability of growth in the face of increased vulnerability to macroeconomic instability and adverse climatic shocks; (ii) concerns about its quality of growth in the face of unreliable infrastructure, and (iii) a slowdown in poverty reduction, particularly in remote ethnic minority communities. The Country Team rates aggregate progress toward achieving CPS outcomes as moderately satisfactory. Across the broad range of engagement areas, the CPS program achieved results in line with expectations, without reversals or deficiencies. However, program delivery fell somewhat short of the ambitious and broad institutional transformation goals set out in the CPS. With hindsight, the expectations for institutional transformation did not take the constraints of the political economy and less favorable external environment of the country fully into account. One aspect of the reform agenda, the share of SOEs in GDP, has indeed declined during the CPS period. Nonetheless, the broader transformation of the role of the State in the economy from producer to regulator (the overall objective of the CPS) has not been completed. The reasons for this are complex and relate to factors of ideology, political economy, and the government‟s concept of a socialist market economy, which reserves considerable powers of leadership and intervention for the state. However, a combination of analytical work, technical assistance and policy dialogue has set the basis, albeit with some delay, for delivering second generation institutional reform in the next CPS, but priority areas will need to be selected with care. The Country Team rates World Bank Group performance as satisfactory. The WBG program grew in scope and size, aided by the greater availability of IDA and IBRD resources. The Bank responded promptly and effectively to unexpected events, such as the food and global financial crises, and is responding to emerging concerns such as climate change. Access to IBRD resources financed budget support in 2009 and 2010 that helped the authorities soften the impact of the external crisis. IFC engagement maintained a strategic focus on the quality of the business environment and finance, while investments more than tripled towards the end of the period. Innovative components were introduced in the design of several projects, thereby setting the foundation for greater future impact. Delivery improved with a shorter lag between Board approval and effectiveness, but slow implementation (reflected in low disbursement ratios and widespread extensions of project closing dates) remains an issue. The Bank continues to be one of Vietnam‟s key development partners delivering results across a broad range of engagement areas in collaboration with others. 47 1. DEVELOPMENT OUTCOMES 2. The 2007-2011 CPS was implemented during a period of continued economic growth despite various external shocks, including the global financial crisis, enormous volatility in commodity prices, and several damaging typhoons. In 2009, Vietnam reached a per capita income of USD1,010 (World Bank Atlas methodology), thereby surpassing the USD 1000 per capita target set for 2010 in the SEDP, and crossing the Bank‟s threshold for (lower) middle income country status. 3. Vietnam’s economy grew at an average of 6.7 percent per annum in real terms over the 2007-2010 period. The 2008 global crisis hit Vietnam when the economy had stabilized after a period of overheating in 2007, resulting from massive capital inflows. Facing a decline in foreign direct investment (FDI) commitments and expecting sluggish external demand for exports in the wake of the global crisis, the government shifted policies toward supporting growth. Monetary policy was loosened and a sizable fiscal package (5 percent of GDP) was executed. As a result, Vietnam‟s real GDP grew by 5.3 percent in 2009, one of the better performances in developing Asia, but lower than Vietnam‟s growth rate of 6.3 percent in 2008, and also its lowest since 2000. Robust growth in manufacturing supported by resilient external demand for Vietnam‟s exports also helped support growth in 2009. By 2010, growth had recovered to 6.8 percent, partly on the back of a commodity price surge, strong export performance, and continued loosening of monetary policies during the last quarter of 2010. 4. Indicators of Vietnam’s ability to create an enabling business environment have improved. According to the 2011 Doing Business Database, Vietnam was the fastest reformer in South East Asia from 2005 to 2010, ranked 78 of 183 economies in 201123. Nevertheless, Vietnam is in one of the most competitive regions in the world and ranks lower than most of its neighbors. Its improved ranking also masks great variation across different aspects of the business environment. For example, Vietnam scores very well on access to credit and contract enforcement, but very poorly on protecting investors and collecting taxes, and implementation of reform is slow. Issues such as corruption, red tape, and lack of transparency are still high on the list of investors‟ concerns. Despite some signs of modernization and an emerging trend of urbanization, structural transformation of the economy has not been profound. Vietnam has continued to rely on exports of agricultural, mineral and other commodities and of light manufactured goods featuring low value addition and use of low skilled workers. 5. Vietnam’s integration into the global economy deepened, but there are concerns about the quality of growth and efficiency of public investment. Exports expanded briskly from $47.6 billion in 2007 to $71.6 billion in 2010. An increase in FDI helped the country‟s integration into the regional and the global economy. Food and agricultural products continue to be major drivers of exports. Yet, many of Vietnam‟s export products are sold at lower prices than those of major competitors due to low or uneven quality and the virtual absence of recognized brands or geographical indicators. This has constrained translation of Vietnam‟s enormous agricultural export growth into a significant increase in wealth among the majority of farmers. Furthermore, in some cases (e.g., aquatic products) this export expansion has been accompanied by insufficient attention to adverse environmental impacts. In addition, growth has been underpinned by high levels of public and private investment (42 percent of GDP in 2010, of which 16 percent is public and 26 percent private), and the high Incremental Capital Output Ratios are raising concerns about the effectiveness of public investment, in particular. 23 The 2010 World Competitiveness Report ranks Vietnam above many other countries with higher per capita incomes. The 2009 IFC Enterprise Survey positions Vietnam well with comparator countries in the world. 48 6. The positive trend in reducing poverty continued, even if the pace slowed. Vietnam is widely acknowledged for its high and sustained poverty reduction. Poverty fell from 58.1 percent of the population in 1993, to 28.9 percent in 2002, and to only 14.5 percent by 2008. Early estimates from the 2010 Vietnam Household Living Standards Survey (VHLSS) suggest that poverty is continuing to fall, albeit at a slower rate than the first half of the 2000s. It is increasingly concentrated in remote rural areas and among certain social groups (especially ethnic minority populations). The slower pace of poverty reduction reflects the increasing challenges of reaching core poverty groups largely disconnected from the economy and its sources of growth. There are growing concerns about poverty and, in particular, vulnerability in Vietnam‟s cities and peri-urban areas due to a rising urban population (including a heavy influx of migrant workers), increasing demand for urban services, and a continuing rise in the cost of living. Urban issues are emerging as one of the priority concerns for the authorities. 7. Awareness of environmental and climate-related risks has increased. The basic institutional and legal framework for environmental protection has been laid out, partly through the Amended Law on Environmental Protection, effective in 2006, and the National Environmental Protection Strategy up to 2010 and related vision for 2020. In addition, the Government adopted its National Target Program to Respond to Climate Change in December of 2008. Various sector strategies have addressed environmental or climate change concerns such as those related to water, natural disaster management, and energy. This institutional strengthening sets a more solid basis for addressing the mounting environmental vulnerabilities that include continued degradation of natural resources, the impact of pollution on human health, and weak monitoring systems and enforcement of rules. However, despite the growing awareness of environmental issues, it remains to be seen whether the legal and regulatory changes will be effectively implemented. 8. Macroeconomic volatility has emerged as a major concern. The direction of macroeconomic policy has undergone various adjustments over the CPS period. The Government initially aimed at stabilizing the economy as inflation peaked at 20 percent in 2008 (with food prices increasing by 28 percent that year). As the global financial crisis hit, the focus turned to accommodation in early 2009, switched again but briefly to stabilization at the end of 2009, reversing to accommodation again by the middle of 2010, driven by political transition in 2010-2011. Inflationary pressures followed the inflow of external resources that came in after the WTO accession and put pressure on the country‟s absorptive capacity. In addition, the food crisis and the global financial crisis required countervailing policies which, while successful in meeting short-term objectives, induced volatility in the macroeconomic environment. In addition, while the government has avoided major crises in the difficult environment during the past few years, the instability revealed weaknesses in the fiscal strength of the State Owned Enterprise (SOE) sector, most clearly illustrated by the recent problems of Vinashin, the shipbuilding economic group. The country‟s credit rating was downgraded by Fitch and Moody‟s as well as S&P in 2010. The immediate priority for the country is to address the risks to macroeconomic stability and, in doing so, re-establish the confidence of the markets and build buffers that may cushion the impact of future adverse shocks. The Government recognizes this and has taken an important step in this direction by adopting Resolution 11, which lays out a plan to tackle the recent macro-economic instability and also address some of the underlying drivers of recurring instability. The measures adopted under the Resolution 11 have started to show results towards regaining Vietnam‟s macroeconomic stability, but issues remain in relation to the investment budget, reforms of the state-owned enterprises and measures on better communication with the market. Therefore, initial success notwithstanding, there are reasons to remain vigilant and avoid premature withdrawal of the stabilization measures. II. PROGRAM PERFORMANCE 9. The commitments made in the CPS and related results matrix - as amended by the CPS Progress Report in 2009 - form the basis for assessing the contribution of the CPS program to the achievement of Vietnam’s development objectives. Appendix 1 takes detailed stock of the achievement of results and 49 identifies the corresponding delivery instruments and lessons learned for each outcome area. The main findings from this stocktaking are discussed below. Details are presented in Appendix 1. A. Pillar 1: Improving the Business Environment 10. The CPS period saw a number of improvements in the business environment. A simplification of rules for businesses fostered a rapid increase in small and medium enterprises (SMEs). Furthermore, the share of the SOE sector in the economy declined marginally with the equitization24 of close to 1,000 public enterprises. IFC advisory services, with the support of a multi-donor Trust Fund, worked with the authorities on promoting business procedure simplification. The Bank focused on simplifying procedures and improving compliance in tax and customs that led to greater client satisfaction, as shown in recent surveys. In addition, innovation is beginning to receive greater attention as part of a strategy for greater involvement in private sector development, broadening its scope beyond a focus on Doing Business indicators. 11. However, the governance of SOEs remains a concern for the quality of the business environment. The State Capital Investment Corporation created to enhance the governance of the remaining public enterprises does not cover the large economic groups, whose increasing importance is raising concerns about an uneven playing field for the state and private corporate sectors and concerns about risks to fiscal and financial sustainability. Improving the governance of SOEs has been a fixture of the PRSC dialogue; the slow progress reflects the government‟s policy stance that the large economic groups are important vehicles for competing in a WTO environment. 12. The CPS scaled up engagement in higher education and human capital development as part of the effort to support greater competitiveness. The first operation in the Higher Education DPO series supported the development and implementation of an adequate institutional framework for improved higher education, which the Second Higher Education DPO and the New Model Universities Project will support further. The IFC has also been actively involved in human capital development through its advisory work, including through raising the capacity of trainers and supervisors in garment and corporate governance activities and through financial services. 13. The program delivered solid results in the financial sector within the limits imposed by a slow- moving institutional agenda. The 2010 revisions of the laws on Credit Institutions and on the State Bank should allow Vietnam to address concerns about the strength and sustainability of the financial sector. Preparation of these laws was aided by technical assistance (IDF grant and FIRST Initiative) and analytical work that also supported changes in regulations on loan classification and provision, prudential ratios for the safer operation of commercial banks, and disclosure and supervision. Although these laws came later than expected, efforts are making headway at transforming the way SBV, the Credit Information Center and Deposit Insurance of Vietnam conduct their core functions. In addition, progress in improving the inter-bank payment system has provided a technical and institutional platform for fast, timely and safer clearance and settlement of financial transactions among banks and between regions. The IFC made good progress on promoting moveable asset collateral registries to allow micro-borrowers and SMEs to post moveable assets as collateral. In addition, they provided support to improve the institutional framework for access to finance for SMEs and micro-borrowers. Nevertheless, as the owner of five large financial groups, the state remains a dominant player in finance, and efforts to improve the governance of large economic groups would benefit the stability of the financial sector. A Financial Sector Assessment Program (FSAP) was not carried out as intended during the CPS period, but the Government has now agreed to undertake an FSAP. 24 “Equitizationâ€? is a partial form of privatization used by the Vietnamese Government. 50 14. IFC increased its commitments in Vietnam from USD62 million in FY07 to over USD1 billion in FY11, including their asset management business. Trade finance over the five-year period totaled USD970 million. It implemented a counter-cyclical strategy that helped clients withstand the market volatility, and its active involvement in the financial sector is contributing to improving governance. As a result of Vietnam‟s financial crisis in 2007 and the global crisis and economic downturn that followed in 2008, other lenders and financiers withdrew from Vietnam, investment slowed, exports declined, and the government shifted to expansionary fiscal and monetary policies. IFC launched the Global Trade Finance program in Vietnam, providing guarantees to banks for trade related deals on a per-transaction basis, and access to trade finance through an extensive global network of bank partners. Focused mainly on the top tier banks, the program has been an important source of long-term liquidity, with over USD500 million lent to SMEs over the past three years. The IFC has also introduced the sector to new financial products in nascent or underserved markets, such as SME and energy efficiency financing. As the banking sector sought to strengthen its capital base in 2009 and 2010, the IFC engaged top-tier banks to place equity and long-term capital, and supported the transition of the sector to more market-oriented decision-making and governance practices. The IFC complemented investment activities by scaling up advisory services delivered to the financial sector, with a focus on risk mitigation, financial infrastructure sustainability, and support to banks to standardize the short-term loan process as they shifted away from longer-term lending. IFC established the Corporate Governance project in 2008, which aims to improve financial performance (reduced costs of capital, higher valuations, and/or improved loan terms), and operational efficiency (improved operations and/or clearer roles) by promoting better corporate governance practices among companies in Vietnam. In 2010, IFC launched an energy efficiency financing program proving capital, and advisory services to help banks develop new lending products. 15. The CPS contributed to agricultural and rural development through excellent results in increasing access to credit, especially for women25, and improvements in the efficiency and transparency of the land administration system. In agriculture, the Bank‟s efforts are now increasingly focusing on increased efficiency, sustainability and value addition in agricultural supply chains. 16. Vietnam has increased generation capacity and reliability while taking the first steps towards broader sector reform supported by the Bank group’s financial as well as advisory engagement. Investments in transmission and distribution have helped expand the electricity network and its reliability through reduced technical losses, which jointly with tariff realignment have improved the financial soundness of the main public sector energy holding company (EVN) and enabled it to expand capacity, nearly reaching the goal of doubling capacity. In addition, a process of improving the institutional foundation in energy has been initiated, with the separation of the transmission, distribution and generation assets and the creation of a dispatch center. This achievement should help deliver reliable and cost-efficient electricity over the long term.26 17. Increased Bank support in the transport sector has financed investments, quality improvements, and institutional innovation to improve governance. The program has progressed well on the development objectives in the Road Network Improvement Project on improving the road network, as well as on addressing challenges in implementation of agreements under the Resettlement Action Plan. The Bank has furthermore responded positively to the Government‟s request to provide complementary financing for broadening Highway I, the main corridor linking South and North. Dialogue and technical assistance under the Road Safety Project are contributing to a lower incidence of traffic accidents. Investments to upgrade multimodal transportation along the two main river deltas (the Mekong River and the Red River) are on track to expand the length of the waterways and the highways. Sector work and policy dialogue have supported several initiatives geared towards (a) sustainable financing, including work to assist the Ministry of Transport with drafting a decree to establish a 25 The assistance has been delivered by the Rural Finance II and now Rural Finance III. 26 The Bank supported the development of this institutional agenda through the PRSC series and recently through the first Power Sector Development DPL. 51 Road Maintenance Fund, (b) assistance to develop an expressway network in Vietnam, setting out guidance on key financing, regulatory and institutional issues for the organization of the expressway sector in Vietnam, and (c) a study on Urban Transportation Investment in Medium-sized Cities in Vietnam, which prepared a strategic framework for small and medium-sized cities in Vietnam to support the development of sustainable urban transportation infrastructure. Lastly, improving sector governance is receiving increased attention, and to reduce risks of malfeasance the Bank has introduced the use of Technical Audits and Governance, Transparency and Anti-corruption Plans (GTAP) on all transport projects. 18. Gaps in provision of water and sanitation services are being reduced in urban areas. Access to potable water as well as the number of households with septic tanks stand around 75 percent (up from 58 percent in 2006) in urban centers in 2009. I n the big cities, over 90 percent of the population has access to potable water. In addition, there was good progress, supported by the Bank, in developing the legal and regulatory framework for: (i) water supply, by moving towards a commercial orientation, and (ii) sanitation, through introducing the „polluter pays‟ principle as well as cost recovery. Analytical work on urban issues has been taking stock of the rising urban challenges that affect the quality of life as well as competitiveness in line with the emerging Government priority on urban development. 19. The reliability and adequacy of infrastructure remain a concern, despite recent gains. The reliability of energy, the quality of water, the reliability and efficiency of transport networks, and the demand- responsiveness and effectiveness of public agricultural support services are often ranked as some of the main constraints to competiveness and quality of life. The full amount of resources needed to close these gaps far exceeds what is available from the public sector, so participation of the private sector remains an important component of any strategy that seeks greater efficiency of investments and resource mobilization. However, the progress towards the stated CPS objective to involve the private sector in financing and management of new infrastructure has been limited to pilot initiatives. Both the World Bank and the IFC have been preparing to play active roles in engaging the private sector in infrastructure through public-private partnerships. IFC has invested in two port projects as Public-Private Partnerships (PPPs) and has also been advising on the Nghi Son 2 power plant PPP, all of which have been successful examples of private sector participation in infrastructure and go beyond pilot projects. However, work is still needed in terms of convincing the government to recognize these as models for further PPP development. B. Pillar 2: Strengthening Social Inclusion 20. Rural areas are more connected to markets and services, and rural populations are on average closer to roads and have greater access to electricity. The percentage of the rural population with access to safe water has also increased (from 62 percent in 2005 to 83 percent in 2011). The CPS contribution came through a series of operations that maintained continuity with the previous CPS. Some of the operations are exemplary and innovative, such as the Rural Energy series, which IEG considers a source of valuable lessons for other countries. The Community Driven Development (CDD) approach used with the poorest communities has proven an effective instrument for outreach, as seen e.g. through the recently completed Community Based Rural Infrastructure Project. The Red River Delta Rural Water Supply project, which has increased access to water supply, introduced cost recovery and sustainable delivery models for rural water supply as well as microfinance for sanitation. 21. Coverage of affordable quality health care services and primary education has continued to increase in both rural and urban areas. The CPS program contributed to major progress towards full-day schooling. Uniform performance standards for teachers are in place, building on efforts under the previous CPS. National tests show improvements in the performance of primary students and tuition in secondary and tertiary education is being introduced to better reflect market conditions and enhance policies to protect the poor. While retaining its focus on improving quality, work in education is expanding to cover primary education for disabled 52 children and pre-school education. Analytical work contributed to the government‟s 2020 education strategy. The major concern lies with the governance of the education system and informal practices that require parents to make additional contributions to school and teachers. On health, the Bank supported the authorities in drawing operational and policy lessons. This led to a revised Health Strategy by law in 2008. All citizens are now eligible for health insurance coverage, with the national budget supporting the participation of the poor and the informal sector. In addition, the law establishes a framework for national standards and a unified licensing system for health care practitioners. Effective coverage of health insurance, including for the poor and the near- poor increased from 43.8 percent in 2008 to an unofficial estimate of 62 percent today. Additional Bank contributions have centered on improving health services and enhancing access to and quality of these services as well as supporting regional blood transfusion centers and safe practices in relation to HIV/AIDS. 22. Ethnic minorities in rural areas are more integrated into development processes, but big challenges remain. The Bank and several development partners have supported the government‟s priority of empowering ethnic minorities first through self-standing operations and more recently through a collective DPO series (the P-135), which supports a Government program in providing basic infrastructure to poor communities by bringing improvements to different aspects of the planning and implementation of the program. Reviews of the first Northern Mountain Poverty Reduction Project identified the sustainability of the communal investments as a risk and therefore the P-135 also emphasized the need to finance maintenance in order to achieve sustainability. Less progress was achieved under the program‟s livelihoods support activities. The Government has recently designed the scope and institutional responsibilities under a new National Target Program on Poverty Reduction. It is anticipated that many of the reforms adopted under P-135 will be carried over in the implementation of the new program. While continued refinements in the approach to infrastructure planning, development and maintenance are anticipated, questions remain as to the best approaches to broaden livelihood opportunities available to ethnic minority communities. 23. Increased attention was given to the development of a comprehensive social protection system. Building on the 2008 Vietnam Development Report (VDR) on Social Protection and a policy note assessing Vietnam's social safety net in 2010, the Bank and the Government of Vietnam deepened their policy dialogue on strengthening both the pension and social assistance systems. On pensions, the Bank has been providing technical assistance for planned revisions to the Social Insurance Law, including on (a) extending pension coverage to the informal sector; (b) enhancing the fiscal sustainability of the pension system and the administrative capacity and fund management practices of Vietnam Social Security (VSS); and (c) introducing a unified beneficiary identification number for VSS programs. Moreover, the Bank and VSS have been exploring options for supporting administrative reforms in VSS, though a final decision has not been reached. On social assistance, policy dialogue has been initiated on strengthening the social safety net through the possible introduction of a cash transfer program to address chronic poverty and help the poor and vulnerable better respond to shocks. 24. Vietnam has made good progress in addressing gender disparities. Less progress has been made in mainstreaming gender into the Bank program. A gender equality law is in place and under the PRSC series, efforts were made at unifying the legal framework on gender. The country ranks relatively well on gender issues, with major progress being made over the last decade. Nevertheless, gender gaps remain in relation to the forced retirement age as well as employment and wage levels, especially in the informal economy. 53 C. Pillar 3: Strengthening Natural Resource and Environmental Management 27 25. The Bank has worked with the Government on a wide range of analytical work that raised the awareness of the nature and scope of environmental challenges and the capacity to meet them. The 2011 VDR focuses on managing natural resources and a country-specific climate change strategy for the Bank has been produced. These two products and related work form a basis from which to provide greater coherence to ongoing and forthcoming activities on a wide range of concerns from forestry to water management, land degradation, natural risk prevention, rising urban pollution and global warming. The Bank has been scaling up support in this area through investment and technical assistance. 26. Progress in sustaining and managing natural resources (especially forest and water) includes an improved institutional setting and achievement of targeted objectives on the ground. The direct support on forestry is helping form smallholder plantations that meet international standards for sustainable forestry, but little data is available on progress in the forestry sector. Through the PRSC series, the CPS has supported the development of linkages between the protective and economic functions of forests as well as developing guidelines for forest development. In addition, it has helped clarify the responsibilities for integrated rural basin management and the issuance of guidelines for the efficient use of water resources. Support for water resource management has been included in a range of Bank operations. Less progress has been made in the overall protection of critical natural habitats, but a range of small GEF-financed projects contributed to protection of selected key protected areas. The Bank furthermore provided TA to the Ministry of Natural Resources and Environment (MONRE) to support their development of a national strategy on Climate Change, currently in draft form. 27. Ambitious programs for redressing the gaps in the management of household sanitation (and less so industrial pollution) as well as for renewable energy are underway. The CPS program has been actively involved in addressing the gaps in household sanitation with good progress on (a) the legal and regulatory framework and (b) increasing coverage, considering the low base from which the work started. A lending program is in place to meet remaining challenges. In addition, initiatives on industrial pollution included a rich program of analytical work carried out jointly with the Government and preparation of an IDA credit on industrial pollution (planned for FY13). Industrial wastewater treatment still needs significant attention, as less than 30 percent of the wastewater from industrial parks is treated in centralized facilities. Progress toward a lower-intensity carbon economy was made through investments in energy demand side management and renewable energy development. Achievements thus far include removing barriers to small scale (up to 30MW) renewable energy development, the issuance of a standardized “no negotiationsâ€? Power Purchase Agreement (PPA) and an avoided-cost tariff formula for small renewable projects to connect to the grid. The target of 200MW renewable capacity has been met (doubled) by the end of the CPS period. 28. During the CPS, both the Government and the Bank increased attention to climate change adaptation and mitigation, thus forming the basis for a fuller agenda in the next CPS. The Vietnam Program recently developed a Climate Change Strategy, which reports on the Bank‟s involvement in a range of investments and analytical work on adaptation and mitigation during the CPS period. Attention to innovation and partnerships has been a key feature of Bank engagement. Efforts under the Montreal Protocol Project supported the government in phasing out chlorofluorocarbons (CFCs) through promoting the use of non-ozone depleting substances. In April 2011, the Vietnam Government, through the Bank‟s support, also obtained the 27 Initially the CPS focused on two result clusters: (a) “Better sustaining and managing natural resourcesâ€? and (b) “Improved management effectiveness of household and industrial pollution.â€? The CPS Progress Report from 2009 added a third results cluster on “Improved climate change adaptation and mitigation.â€? 54 Montreal Protocol Multilateral Funds in phasing out hydro chlorofluorocarbons (HCFCs). A Clean Technology Fund (CTF) was approved and an innovative carbon finance program launched. D. Pillar 4: Improving Governance 29. The CPS program built on an ongoing agenda of: (a) improving public financial management (PFM), (b) more participatory approaches as a way of modernizing planning towards development objectives, and (c) lowering corruption in key services. Towards the end of the CPS period, the attention to sector governance was broadening the scope of the engagement, following a more thematic approach. The 2010 VDR on Modern Institutions examined (a) the process of devolution of power to lower levels of government and (b) and the changing accountability system. The 2010 VDR confirms the significant progress that Vietnam has made in governance over the long haul, but notes disconnects between devolution and accountability that have opened a wedge, which is creating opportunities for corruption. 30. Good progress has been made on the public financial management agenda. Some of the achievements include piloting an Integrated Chart of Accounts in central ministries and over half the provinces and publishing budget execution information in a timely manner. Contributors to the achievements are the Financial Management Project, a multi-donor Trust Fund on Public Financial Management, and the PRSC series. Existing evaluations of long-term progress in the area of PFM and budget processes have been positive, as can be seen in the IEG review of the first eight PRSC operations, the recently concluded Country Financial Accountability Assessment (CFAA)/Country Procurement Assessment Report, and the 2010 VDR28. However, gaps are likely to remain at the level of medium term planning, procurement, internal audit, reporting and the modernization of fiscal practices at the provincial and communal levels. The government is conducting a PEFA self-assessment to support the current agenda, identify gaps, lay out the work ahead and contribute to the preparation of the new State Budget Law. The Bank is providing the necessary guidance and quality assurance support to the government during the process. 31. During the 2009 global crisis, the CPS scaled up efforts to improve the institutional set-up for selecting and implementing public investment. The policy content of the Public Investment Reform (PIR) DPO to help the country mitigate the impact of the global crisis focused on improving the institutional basis for public investment, thus responding to a recurrent concern of the authorities and the development community regarding the effectiveness of public investment. The PIR has successfully supported legislative amendments (Land, Procurement Law, Investment Law, Construction Law and Enterprise Law) to overhaul the fragmented and overlapping regulatory framework, although there is still uncertainty regarding the possible approval of the Law on Public Investment linked to the second DPO operation. In addition, the Project Preparation Technical Assistance Facility Project has been put in place to support efforts to ensure readiness for implementation and quality of such investment. Neither the PIR nor the Project Preparation Project was considered in the initial CPS design but provide good examples of the readiness of the program to address emerging challenges. 32. Pilot efforts at introducing participatory planning and execution have been successful. Vietnam‟s forceful decentralization drive has transferred considerable power to local authorities in the management and use of public resources. In this context, the CPS program supported more participatory approaches to planning and execution with success, through several CDD operations and the P-135 DPO. With hindsight, however, the World Bank could have engaged more forcefully with the decentralization process in terms of increasing capacity and strengthening accountability, a weakness noted in the 2010 VDR on Modern Institutions. The lack of good quality data in support of planning, monitoring and evaluation remains an additional weak point. 28 Like in many other countries, the Vietnam process of pushing for reforms through the PFM program has been lengthy, but the program has nevertheless been viewed as delivering substantial improvements over the long haul. 55 33. Understanding of the scope of administrative corruption increased, but the impact of anti- corruption measures is somewhat unclear. The 2010 VDR on Modern Institutions finds that administrative corruption is substantial as indicated by surveys. However, overall corruption is assessed by respondents as having remained at the same level or decreased slightly, with some indicators improving and others deteriorating. Thus, the emphasis on reducing administrative corruption is on the right track, as in the customs and tax projects as has been mentioned under pillar 129. Issues such as asset declaration, undertaking compliance audits for public procurement, and overall support for selected aspects of the Government‟s Anti- Corruption Strategy received attention through the PRSC and progress has been made, although the lack of a supporting monitoring system to track the impact of the implementation to some extent impairs assessment of the effectiveness of these efforts. The pace of implementation of the Law on Corruption Prevention and Control has been slow. III. BANK GROUP PERFORMANCE A. Design 34. The SEDP 2006-2010 laid out a path of transition towards a socialist market economy and foresaw Vietnam reaching middle-income country status by 2010. The WBG anchored the 2007-2011 CPS on the SEDP, a strategy it judged satisfactory in facing the challenges of continued growth and poverty reduction30. The 2007 VDR, Aiming High, laid out the analytical underpinnings of the CPS strategy. The CPS maintained the focus of the previous CAS on: (a) improving the business environment, (b) social service delivery, and (c) governance. It added the need to address environment challenges as a fourth pillar, thus aligning with the four pillars of the SEDP. The commitment to improving the CPS program performance emphasized: (a) higher disbursement ratios, (b) shorter preparation and effectiveness lags, and (c) timely delivery of results by reducing project extensions. The design of the results framework took into account the lessons learned from the Completion Report of the FY01-F06 CAS, linking the results more tightly with the interventions. The FY07-FY11 CPS had a carry-over program of 37 operations under implementation. The PRSC series remained the main instrument of policy dialogue31. It is assessed that the design of the CPS, including the alignment with the four pillars used in the SEDP worked relatively well. However, the CPS design could have benefitted from having the selectivity criteria set much more tightly. Nonetheless, the CPS was implemented during a period of rapidly growing engagement, and accommodating certain emerging needs was essential in supporting the country. B. Implementation 35. Commitments exceeded expectations under the CPS, driven by larger IDA allocations and access to IBRD financing. The Bank committed a total of USD4,471 million with annual commitments increasing from USD710 million in FY07 to USD2,348 million in FY11, of which around USD1,068 million came from IBRD funding. As of the end of FY11, USD5,518 million of IDA resources had been committed for disbursement. IFC commitments totaled USD1,800 million over the 5 year period, including commitments through their asset management business. 29 The Customs Project was cancelled in FY11 before completion, for reasons shown under Outcome 1.1 in Appendix 1, which also includes lessons learned in relation to the cancellation. 30 The IMF-World Bank Joint Staff Advisory Note (JSAN), discussed by the Board on December 5, 2006. 31 The SEDP 2006-2010 made direct and clear statements regarding the regional development orientation of the plan. To a considerable extent these orientations have been driving the demand for assistance from the Bank and other development partners. With hindsight, the CPS could have paid more explicit attention to these orientations. 56 36. Alignment of the CPS program with national priorities has been an important driver of results. With a focus on infrastructure and regional/local interventions, the CPS program successfully reflects the Government‟s political priority to seek expansion of services and opportunities across the national territory. In fact, by the end of FY11, 80 percent of the portfolio by sectors was concentrated in energy (22 percent), transport (23 percent), urban (21 percent) and rural development (14 percent). In addition, a good share of the CPS program is targeted towards provincial and local levels, with a focus on poverty. Historically, alignment with national priorities has contributed to Vietnam‟s good performance, as seen by the fact that all Bank projects completed in Vietnam have been rated as satisfactory or moderately satisfactory (See Appendix 4). Looking only at this CPS period, the program exhibits a similar performance up to now: of 18 Bank operations completed between 2006 and 2010, 12 were rated as satisfactory and 6 as moderately satisfactory. Alignment of IFC's program has fitted and supported how the private sector has developed - focusing on financial institutions - both building their capital bases and also taking them into new product areas (SME financing, housing lending, energy efficiency lending) and developing the institutional infrastructure required to improve access to finance. Later in the five-year period, IFC responded to the global financial crisis by rolling out its Global Trade Finance Program, providing USD970 million of liquidity to Vietnam's exporters as other financial institutions withdrew. 37. The program has seen an increase in the stock of commitments and some improvements in delivery. The Bank disbursed USD4,695 million during the CPS period, going from USD475 million in FY07 to USD1,170 in FY11. There has been some increase in disbursement rates of SILs from 12.7 percent in FY07, although the FY10 disbursement ratio of 18.8 percent could not be sustained in FY11, which ended with a disbursement rate of 14.9 percent. Funds disbursed under SILs increased from USD374 million in FY07 to USD653 million in FY11. The program has seen a rising stock of commitments and a larger share of budget support operations. While the slight increase in the disbursement ratio is due in part to the greater maturity of the projects under implementation, the Country Team has also focused more attention on the Bank‟s portfolio, including through joint high level reviews of problematic and at-risk projects. Furthermore, an Action Plan was developed in the realm of the Six Banks Group as a result of the Joint Portfolio Performance Review 32, which focuses on reducing common impediments or barriers to implementation, but it is not yet clear to what extend this has had a significant impact on implementation. The time lag between loan approvals and effectiveness was reduced from 7.6 months in FY07 to 2.6 months in FY11. However, the average lag/delay of 2 years in implementing projects identified in the 2007 Portfolio Review remains the same. The number of extended projects went from 4 projects in FY07 to 9 projects in FY11. Some of the extensions have provided additional financing to cover cost increases, especially as a result of high inflation in 2009. However, implementation is still delayed by inadequate readiness for implementation at the point of effectiveness as well as by problematic procurement practices. IFC's portfolio performed well during the financial crisis, with restructurings associated with project-specific issues rather than macroeconomic conditions. 38. Greater attention to upstream design and innovation is planting seeds for enhanced effectiveness and impact. On the Bank side, the design of the P-135 DPO as a budget support operation was path-breaking by linking disbursements to institutional changes needed to improve delivery of this national program rather than disbursing against program expenditures. The Project Preparation Technical Assistance Facility Project is another example of focusing on design to facilitate implementation. The shift towards sector DPO programs has been accompanied by institutional deepening. On the IFC side, an emphasis on aligning strategy and project design between IFC's investment and advisory business has paid off. Much of the work IFC has done to develop the public goods of institutional infrastructure and a framework for private sector development (the 32 The Bank participates in a Joint Portfolio Performance Review (JPPR) with the Six Banks Group and Government every two years. A nine-point action plan was developed to improve the effectiveness of ODA project implementation, and endorsed under a Prime Minister Decision in July 2008. The Sixth JPPR was finalized in November 2009. Implementation progress, jointly monitored under the leadership of MPI, has been uneven to date, with progress on procurement unremarkable. The last Country Program Portfolio Review (CPPR) was undertaken in FY08. 57 Vietnam Business Forum, the Vietnam Bond Market Association, the Bank Training Center, various regulatory and tax reform projects, and the Vietnam Corporate Governance Forum) has provided IFC with credibility and presence as a partner for both the private sector and government in Vietnam's economic development. Furthermore, IFC's ability to combine investment capital and advisory services at the investment level has allowed IFC to develop game-changing interactions such as IFC's investment in Vietinbank, the first major equitization to be completed after the global financial crisis, and the development of the energy efficiency lending market. 39. The WBG program has been responding to unforeseen circumstances and emerging challenges. The Bank provided timely support to Vietnam to address the impact of the 2008/2009 global financial crisis. In the absence of an IMF program, the Bank was a key interlocutor on policy issues, including fiscal policy. Additional funding from IBRD sources allowed the government to take an anti-cyclical fiscal stance. The program is now responding to emerging risks such as increased macro-economic volatility through intense policy dialogue and analytical work. For IFC, the financial crisis also allowed the institution to play a counter- cyclical role, providing funding and advice at a time when global financial institutions were reducing their exposure to Vietnam. IFC was able to roll out new products that unexpectedly met huge demand, such as the Global Trade Finance Program, which is expected to lead to the development of other short-term lending products to increase access to finance for rural and agricultural borrowers. IFC's decentralization, placing decision-making and execution capacity closer to the client and giving client relationship managers a greater role and voice in developing and executing business has been key in IFC understanding its countercyclical role and building its program in Vietnam and identifying the right partners to engage with during a time of financial crisis. 40. The Bank program expanded and broadened its coverage. While it was to respond to the emerging needs, the expansion is of concern as well. The number of operations in place increased from 39 by the end of FY06 to 50 by the end of FY11, and the average size of the new loans has expanded partly due to the increased 33 use of DPOs . The administrative cost of a growing portfolio and lending pipeline is putting pressure on other parts of the program, notably AAA. 41. As intended in the CPS, the PRSC series was the main instrument for policy dialogue between the Government, the Bank and other members of the development community. The PRSC maintained a flexible approach within the range of CPS areas of engagement, with the emphasis on supporting the policy reform process while nurturing strategic breakthroughs. When breakthroughs occurred, deepening of the policy reforms shifted to budget support operations such as in higher education, energy, and public investment 34. An IEG evaluation found the contribution of the first eight PRSC operations to development outcomes as well as to the Bank performance satisfactory. In addition, the PRSC series brought together a large group of development partners (varying from 3 to 11) who contributed 43 percent of total resources of PRSCs 1-9. The PRSC series overall has received favorable reviews, but towards the end of the series it has been raised whether the operations focused too much on „process‟ and too little on „action‟, a point that should be considered when designing the new policy lending series to take the place of the PRSC. 42. The CPS continued the practice of producing a yearly flagship publication, the Vietnam Development Report (VDR) jointly with other members of the donor community. The Bank delivered a strong AAA program despite budget pressure. The VDRs are appreciated by the government and development partners.35 Although nominally the production of these reports absorbs a small amount of resources, a good 33 The average size of SILs also increased considerably, from USD130 million in FY07 to USD271 million in FY11 (excluding AF). 34 The share of DPLs and additional financing increased from 34% in FY07 to 64% in FY10, but then decreased again to 31% in FY11. 35 Aiming High (2007), Social Assistance (2008); Capital Matters (2009); Modern Institutions (2010) and Natural Resources Management (2011). 58 share of the other Economic and Sector Work (ESW) feeds into these reports. Arguably, in the process, traditional ESW such as public expenditure reviews and sector analysis to inform on key priorities such as competitiveness (agriculture, technology), volatility, structural transformation, and fiscal and financial sustainability has declined. The shift to programmatic AAA announced by the CPS Progress Report has been initiated with support for major pieces of work, including on urbanization, poverty, and food security. IV. KEY LESSONS AND RECOMMENDATIONS 43. The Vietnam program continued its strong record of development impact across a broad range of areas, with 32 completed projects for which all available development outcome ratings were either Satisfactory (S) or Moderately Satisfactory (MS) (See Appendix 4). The World Bank Group‟s partnership with the authorities and the development community is strong. As Vietnam has become a lower middle income country and is seeking to become a modern industrialized economy, new challenges are emerging that call for the WBG to adjust its business model. Innovations in delivery practices combined with a continued strong partnership with the authorities should allow for a gradual readjustment of the program. 44. The WBG needs to respond to the emerging vulnerabilities and challenges in Vietnam with adequate policy and technical support as well as financial resources. The WBG has already begun to address macroeconomic, environment, climate change and urban vulnerabilities jointly with the national goal of increasing the sophistication of the economy through AAA and some operations. To strengthen the response, the WBG must close the gaps that remain from the past CPS (SOE corporate governance, private sector development, etc.). 45. The WBG should maintain a demand-driven focus within a framework of selectivity that prioritizes those areas where the WBG can contribute the most to meeting current challenges for Vietnam. As noted, alignment with national priorities has helped the quality of program implementation. At the same time, the potential areas of new engagement have been increasing and the tendency is for a further expansion to new areas. The WBG needs to carefully select what it supports and how to achieve the best results, including by continuing to support the “unfinishedâ€? agenda in relation to poverty reduction and provision of basic social services and infrastructure to the most disadvantaged. 46. The principles guiding selectivity need to be tightened to avoid diffusing the Bank’s program too thinly. A selectivity strategy could focus, for instance, on transferring mature programs to the budget, with the Bank supporting well designed new areas of engagement with clear exit strategies for capacity building. Certain criteria should be met for an operation to be added to the Bank‟s Vietnam program. 47. Attention to implementation should be complemented with greater attention to program and project design. Downstream attention to implementation has yielded results, and efforts should continue. However, they should be complemented by greater attention to design and selection of instruments. Such efforts have already been initiated and the Country Team will continue its focus on improving design and exploring alternative delivery approaches that accelerate the delivery of intended results. 48. Commitments on institutional reform should be credible while still pushing to move the agenda forward. The CPS committed its support to a major institutional transformation of the country as the basis for delivering and sustaining middle income status. The institutional attainments, while notable, fell short of expectations, in part because of the breadth of the agenda. The coming strategy should take a more realistic and strategic view of the targets for institutional reform, identifying to the extent possible such targets in dialogue with government. Rather than making unilateral commitments that lack credible backing from the counterpart, the WBG should maintain and strengthen an advocacy dialogue through AAA and other instruments that inform 59 the authorities and the country about institutional options. The outcome of this dialogue can then be introduced into the program gradually as agreements are reached. 49. One of the lessons coming out of the PRSC series (the later operations) and the recent PIR operations is that strong Government ownership of the reform program is even more important as Vietnam undertakes second generation reforms which are more complex and tend to take longer. Engagement areas for policy reforms should be chosen more selectively as there are limited resources to tackle increasingly complex challenges. Adequate time should be invested to build a strong dialogue underpinned by solid analytical work with the aim of strengthening Government ownership of reforms. 50. Attention should be given to decentralization issues, including the emerging challenges of urban development. According to the 2010 VDR on Modern Institutions, the transfer of fiscal resources and implementation power has created a wedge between control and accountability at the local level, which can affect effectiveness and open opportunities for corruption. At the same time, a large portion of the investment program of the Bank is implemented at the local level in line with Central Government preferences, while the urban development challenges are mounting. The new CPS could evaluate possibilities for supporting capacity building at the local level, beginning perhaps with a needs assessment that takes stock of the status and impact of the decentralization experience and the performance of the Bank program on the ground. It may also seek to contribute to addressing the wedge between the allocation of responsibilities and the structure of accountability at the local level. 51. IFC and the Bank should focus on developing sector-specific strategies that combine the strengths of both institutions. This is increasingly important as Vietnam looks to address the infrastructure gap, the impact of growth and industrialization on the environment and looks to integrate the rural economy and populations into Vietnam's economic growth. For example, in infrastructure, the two organizations bring more to the table combined than any other development finance institution. 52. The results framework could be used more regularly as a tool for setting strategic priorities and monitoring accountability. While the CPS results framework was more aligned with the program than the previous CAS framework, it was broad and extensive, but, most importantly did not take account of the likelihood of delivery or monitoring and information requirements. The lack of periodic reviews, in the context of recurrent monitoring, disconnected the results framework from the program and discouraged ownership from the team. A results framework must, to the extent possible, allow the tracking of progress in program delivery, and eventually evaluation. Initially, the results framework must be grounded on those elements of the program that are mature and likely to be delivered. The results framework can be updated periodically to reflect the evolution of the program. Updating is most relevant when strategies cover a longer period of time, which is the case of Vietnam. Lastly, the results approach should be consistent across instruments, and not only be applied in the CPS. 60 APPENDIX 1: SUMMARY OF VIETNAM 2007-2011 CPS PROGRAM Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) PILLAR I: BUSINESS DEVELOPMENT 1.1 Improved business Status: Partially Achieved Support for strengthening the business environment was highly relevant, particularly in the post-WTO climate and stronger accession world. Reports are that the quality of the competitiveness Justification for Status: the achievements include business environment improved, with a partial continued equitization, enactment of the Enterprise Law, support from the CPS program. With hindsight, strengthening of tertiary education institutions and higher accession to WTO contributed to a higher volatility levels of credit channeled to agriculture. With the number of the economy, given the limited capacity of the of higher education graduates rapidly increasing, the economy to absorb capital inflows. In addition, the focus of the Bank program has been on improving the creation of the Large Economic Groups to quality of tertiary education and building on the strengthen the competitive position of the country is achievements and lessons learned from completed in fact creating an uneven playing field between operations. public and private actors. These events emerged after the design of the CPS, and the PRSC series However, the privatization of large state-owned has taken the issues on board, albeit only towards enterprises is behind schedule, Vietnam is not yet fully the end of the CPS period. These events show the recognized as a market economy and a comprehensive need for a partnership strategy to be flexible enough competitiveness agenda has yet to be fully articulated. to react promptly to emerging circumstances that may impair the sustainability of the macro- economic environment, the quality of the business environment and the CPS program itself. The state remains a dominant player in finance, as the owner of five large financial groups; two of which have been equitized, but none of which have Details on progress made under each outcome strategic international partners. The link between indicator: the public banks and the large economic groups has Increase in non-state enterprises satisfied Lending: heightened concerns, given that the international with legal and regulatory framework, as PRSC 6-9 crisis has evidenced cracks in the balance sheets of measured through Investment Climate some of the large economic groups, the extent of Assessments (ICAs) AAA: which has yet to be fully determined and disclosed. PSD Competitiveness and Innovation Therefore efforts to tighten the governance of large  Satisfaction with the legal and regulatory  An ICA was undertaken in 2006 and was never VDR 2007: Aiming High economic groups would increase the stability of the environment published for various reasons. The possibility of financial sector undertaking another ICA is currently being explored Customs Modernization Project Cancelation:  Equitization of enterprises with 100% state  1,205 enterprises with 100% state ownership (2010) The Customs Modernization Project was terminated ownership: on April 4, 2011 at the client‟s request after having Baseline (2006): 2100 enterprises (with disbursed USD1.8 million, or 2.6 percent of the 100% state ownership) allocated credit amount. In contrast to slow disbursement due to significant consultant Target (2010): 1000 enterprises recruitment delays leading to procurement delays for Vietnam Customs Information System (VCIS)  Model privatizations of large SOEs  None have been undertaken and control equipment components, the institutional Strengthened export orientation Lending: development components of the project showed 61 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) PRSC 6-9, good implementation progress. Results achieved  Ratio of exports to GDP:  71% (2010) Agricultural Competitiveness project against institutional development performance indicators have been extremely positive. A Baseline (2005): 69% AAA: significant portion of the technical assistance Target (2010): 72% VDR 2007: Aiming High, Vietnam WTO included in the project design has been delivered to Accession (FY07), WTO AAA (FY08), PSD good effect. Importantly, a comprehensive analysis Competitiveness & Innovation (FY10) and reengineering of business processes based on  WTO commitments met on time  26 countries, including Japan, Australia, Germany and the implementation of globally agreed standards has New Zealand have granted market economy status to been completed and draft bidding documents for the Vietnam, before the end of 12-year period agreed in procurement of the VCIS prepared. Initial progress WTO accession negotiations. However, a few major in operational modernization was strengthened by a developed economies are yet to officially grant completed legal assessment and project activities Vietnam market status. There has only been limited focused on organizational restructuring and progress in meeting retail trade commitments. strengthening. The preparation of a comprehensive More efficient customs procedures for Lending: training strategy was completed and is being used imports Customs Modernization (cancelled in FY11, already. before completion)  Average import customs clearance times  Average customs clearance times at ports have been However, around the time of the Mid Term Review for commercial shipments at ports reduced significantly to 14 hours equivalent of a 75% AAA: key counterparts became concerned about the reduced: reduction (2011) VDR 2007: Aiming High possibility that procurement could not be Baseline (2004): 57 hours completed and achieve full implementation process Target (2010): 32 hours for the VCIS within an allowable extension of the closing date and began exploring alternative options Improved employability of graduates with Lending: that could accelerate VCIS implementation and advanced degrees Second Higher Education Project and DPO, increase long term sustainability. The GDVC New Model Universities informally advised that it was considering a number of options including the possibility of directly  Ratio of doctorate-qualified professors to  n/a AAA: acquiring a suitable operational VCIS from a graduate students in universities (public TF for education quality assessment via neighboring country as part of a possible bilateral and non-public): standardized tests, VN Skills for Growth – cooperation arrangement. The Mid-Term Review Target (2010): 1:25 mission advised the GDVC that the Bank‟s Tertiary Education (FY07) procurement rules would not allow the IDA credit IDFs and Trust Funds > USD1 million: to be used to support direct contracting of a major Second Higher Education Project Co-financing IT system such as the VCIS. The mission also Improved rural business climate, as indicated Lending: stressed that experience elsewhere suggested such in rural ICAs Rural Finance II and III; an approach might take considerable time to Agriculture Competitiveness Project; finalize and could incur a number of other risks that P-135 DPOs might ultimately delay implementation  Improved rural business climate  Rural ICA not undertaken significantly. Given the above context, and based on a review of various project restructuring options  Access to sustainable, rural finance  70% with key counterparts, the Mid-Term Review increased. Coverage of formal rural credit mission recommended that counterparts consider services increased : either continuing implementation through extending Baseline (2000): 50% the project by another 3-5 years to ensure sufficient  At least 30-35% of new loans issued to time for full and effective deployment or  Percentage of end-borrowers who are women under the terminating the project as implemented to date. On women Microfinance Loan Fund (MLF): 42.2% December 6, 2010, the State Bank of Vietnam, on 62 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) behalf of the Borrower, notified the Bank of its intention to terminate the project and the remaining Note: The Second Rural Finance Project financed over credit was cancelled. The termination occurred 400,000 sub-projects, facilitated total investment of before the due credit closing date thus allowing the USD740 million equivalent, and created over 255,000 cancelled funds to revert to the Vietnam IDA new jobs. 37% of the end-borrowers under that project program. are women. As of January 31, 2011 the Third Rural Finance Project: Number of sub-projects financed: Among number of lessons learned (to be discussed 30,784; of which 15,969 by the Rural Development Fund in more detail in the ICR) is the need for additional (RDF), 14,815 by MLF. Total investment generated by attention to project ownership and leadership the Project: USD 118 million. Number of new jobs performance by the beneficiary, and the overly created by RDF: 32,142 optimistic disbursement schedule developed during Continuing to support foreign investment project approval. The initial 5-year implementation through MIGA’s insurance facility for plan with relatively linear disbursement schedule investors concerned about political risk. clearly proved to be overly optimistic, given the borrowers limited experience, the need for a two  MIGA involvement in Vietnam;  Still limited MIGA involvement. By the end of the CPS stage procurement process and the need to period, MIGA is planning to step up their engagement undertake complex business process reengineering in Vietnam in the near future. prior to developing detailed bidding documents for Enhanced accounting and auditing Lending: the major ICT procurement. These problems could professions for better corporate financial PRSC 6-9 have been identified sooner and preventive reporting measures taken including increased supervision AAA: frequency and intensity and the timing of the ROSC (Accounting & Audit) delayed Mid-Term Review being conducted closer  Completion of Reports on the Observance  ROSC A&A assessment completed in FY09. It was to the initial schedule. Some project management of Standards and Codes (ROSC) agreed in 2010 not to publish final draft report. pro-activeness was, however, constrained by lack of Accounting & Audit (A&A) assessment Discussions with government counterparts to develop a adequate budget to manage such a high risk project. and implementation of its Country Action Plan based on the ROSC A&A Increased attention to the cumulative impact of recommendations recommendations are ongoing. procurement delays may have allowed the project to be identified and included in the problem portfolio earlier and therefore drawn additional management attention to the status of the project. 1.2. Financial system more Status: Partially Achieved The pace of implementation of the strategy has efficient, stable and been slow, showing that the CPS seems to have responsive to the needs of Justification for Status: overestimated the progress that could have been Key achievements include passage of fundamental made. A similar observation was made regarding business and households legislation on the Central Bank and credit institutions, the previous CPS. The recommendation is to partial equitization of state owned banks and develop more realistic expectations of what can be modernization of the banking payments infrastructure. accomplished during the CPS period and to focus Financial deepening has also improved with fast growth attention on a few key priorities. in credit over the past few years. However, the laws were approved with a delay and hence some of the follow-up Note: A Financial Markets Institutional actions could not be undertaken within the CPS period. Development Project was under preparation but Also there is concern about the health of the banking dropped in FY10 system given the very rapid credit growth equality of data 63 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) on the financial sector indicators and concerns regarding the sector‟s exposure to SOEs/large economic groups (the health of many of which is also of considerable concern). Furthermore, there has been limited progress on involving the private sector in the financing of infrastructure. Details on progress made under each outcome indicator: SBV transformed into modern central bank Lending: responsible for independent monetary policy PRSC 6-9, Payment System & Bank and bank supervision Modernization II, Financial Sector Modernization & Info Management System  SBV Transformed in a modern central  Revised SBV Law and Revised Credit Institutions Law AAA: bank had been approved by mid- 2010 and both are effective Financial Sector Strategy, Policy Banks as of January, 2011. Implementation is underway. Reform, Support to SBV, ROSC (Accounting & Audit)  SBV strengthened through management  The financial sector modernization and information IDF and Trust Funds > US1 million: information system and revised structure of management system project for the modernization of IDF for Capacity Strengthening of the Vietnam regional branches SBV, the Credit Information Center and the Deposit Association of Certified Public Accountants, Insurance of Vietnam became effective in late July IDF for Strengthening Accounting Capacity of 2009. As the project is implemented, the institutional State-Owned Banks, IDF for Development of framework, information management and business Legal Foundation of Vietnam‟s Banking System engineering, etc will be strengthened.  Pilot Interbank Payments System expanded  Interbank Payment System has been significantly expanded under the Payment System and Bank Modernization Project II. Average volume and value of transactions in 2008 increased three and six times respectively compared to 2005.  Action plan for necessary regulatory  An FSAP has not yet been undertaken. However, it has overhaul, based on Financial Sector been agreed with the Government and is planned to be Assessment Program (FSAP)/ROSC undertaken in the near future. finding Financial sector corporate governance Lending: strengthened. PRSCs, Payment System & Bank Modernization II, Financial Sector  3 of 5 State-Owned Commercial Banks  2 of 5 SOCBs have been equitized. Modernization & Info Management System, (SOCBs) equitized HCMC Investment Fund, Local Development Investment Fund, Rural Finance II, III  The share of Non-Performing Loans  NPLs ratio (Vietnam Accounting System (VAS)) was (NPLs) in total banking credit to decline: 2.3% as of September 2010. The IAS/IFRS based NPL AAA: 64 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) Baseline (2005/6): 8-10% numbers are not reported by SBV. Various estimations Financial Sector Strategy, Policy Banks Target (2010): less than 5% (by rating agencies and accounting firms) place Reform, Support to SBV (including on AML), International Accounting Standards (IAS)/International ROSC (Accounting & Audit), Financial Reporting Standards (IFRS) NPLs to be 3-5 times VAS NPLs for individual banks IDF and Trust Funds > US1 million: IDF for Capacity Strengthening of the Vietnam  Revised Central Bank and Credit  The Revised SBV and Revised Credit Institutions Law Association of Certified Public Accountants, Institutions law to provide profit was delayed, but approval in mid- 2010. It sets a basis IDF for Strengthening Accounting Capacity of orientation and full autonomy to SOCBs upon which to begin working on improving the State-Owned Banks, IDF for Development of passed by 2008. governance of financial institutions. Legal Foundation of Vietnam‟s Banking System Private share of total financing of Note: There is no reliable statistics regarding the share of Lending: infrastructure increased private financing for infrastructure. The WB AAA on PRSC 6-9, Water Supply Dev, HIFU and LDIFs Infrastructure Financing in Vietnam produced in December 2008 noted that there is limited private sector AAA: participation in infrastructure and Vietnam has yet to Bond Market Development Roadmap, Financial establish a comprehensive institutional framework that Sector Strategy provides transparent, consistent and clear rules of the game for the private sector to participate in the delivery IDF and Trust Funds > US1 million: and financing of infrastructure. IDF for Capacity Strengthening of the Vietnam Association of Certified Public Accountants, IDF for Strengthening Accounting Capacity of  Municipal financial markets and non-  Developed with support of the HIFU (HCMC) and State-Owned Banks, IDF for Development of subsidized lending facilities developed in Local Development Investment Funds (water) Legal Foundation of Vietnam‟s Banking System selected jurisdictions (HCMC) or lines of business (Water)  Bond market development road map issued  Delayed. The bond market roadmap is expected to be by 2007 issued with PRSC 10 in FY12 1.3. More Efficient and Status: Achieved The institutional breakthrough in the energy sector was followed by a sector specific DPO to firm up Reliable Provision of the achievements. The dialogue around the PRSC Infrastructure Services Justification for Status: Major progress has been made provided the entry point. The lesson would seem to in the institutional transformation of the energy sector, be that the DPL follows rather than leads policy while at the same time increasing capacity and financial reform. Hence the relevance of up-fronting policy sustainability. The agenda on transport has supported dialogue supported by quality AAA in those areas building the basic core network in the country and is on that constrain growth and quality of life outcomes. track; although more work is needed in terms of solid logistics. Availability of water in urban areas has Considerable attention has been given to urban increased, with over 90 percent coverage in large urban development through a wide range of operations on centers. Although infrastructure has kept up with water, sanitation, transport and environment; an demand, it remains a major constraint to continued emerging trend upon which to build greater synergy economic growth, and the participation of the private across urban interventions is seeking to improve the sector in construction, management and finance was strategic and management capacity of urban centers below the original expectations set under the CPS. (e.g. Vietnam Urban Upgrading Project and Danang Priority Infrastructure Investment Project). Details on progress made under each outcome 65 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) indicator: Efficient and reliable provision of urban Lending: infrastructure services (water, wastewater Three Cities Sanitation, Urban Upgrading, and sanitation, telecommunications): HCMC Environmental Sanitation, Danang Increasing consumer satisfaction with Priority Infrastructure Development, Coastal municipal services provided, and rising Cities Environmental Sanitation, Water Supply consumer willingness to pay for urban Development, VN-HIFU Development Local infrastructure services Development Investment Fund, Urban Water Supply and Waste Water, Coastal Cities (GEF), Increased share of urban households with ICT Development improved access to water supply and sanitation services: AAA: Regional Development & Urbanization, Urban Water Supply: Urban Water Supply: Sanitation Management for Urban Areas Baseline (2006): 58% average with 70% with improved access : 90-95% in cities and 50-60% improved access: 75% in big cities and in small towns IDF and Trust Funds > US1 million: 20-30% in small towns) Urban Upgrading co-financing, Urban Water Supply Development II Project TA, TFs on Coastal Cities Environmental Sanitation Urban Sanitation: Urban Sanitation: Households with toilets: 68% Households with septic tanks: 76% (higher rates in cities) Wastewater collected and treated: 9% Note: Different definitions are used to measure water supply and sanitation in different settings, which makes is difficult to assess these indicators completely accurately Improvements in efficiency and cost-  The cost recovery in the water supply sector is higher recovery for target urban utilities than sanitation due to low tariffs and increased costs (for construction and O&M) Improved capacity of cities and towns to  A benchmarking for water supply companies has been plan, manage and maintain urban carried out. A similar exercise is to be implemented on investments WW and SW management Power demand met in adequate quantity and Lending: acceptable quality, and improved commercial System Energy, Equitization and Renewables; and financial efficiency of the energy sector, Rural Energy 2, Rural Distribution, as evidenced by: Cost reflective electricity Transmission and Distribution 2, Renewable tariffs for different consumer categories Energy, Trung Son Hydropower, Power Sector DPO  Increase Generation capacity:  Generation capacity (at the end of 2010) was 21,542 Baseline (2005): 12,000MW MW, a little below target mostly due to delay in AAA: Target (2010): 25,000 MW construction of new power plants, affected by TA for VN Energy Efficient Program 66 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) insufficient investment and delay in land clearance and compensation. The surge in equipment costs and IDF and Trust Funds > US1 million: financing during 2008-2009 contributed both to System Efficiency Improvement, Equitization, investment shortage and construction delay (EVN and Renewables Project TA, Demand-Side statistics) Management and Energy Efficiency Project TA, Hydroelectric Power Project Preparation, Rural Energy II Performance improvements in EVN and Lending: affiliated or successor power companies Power Sector Reform DPL, Rural Energy 2, Rural Distribution, Trung Son Hydropower,  EVN self financing ratio >25%, debt  EVN‟s financial performance has improved compared Equitization and Renewables service coverage >1.5 times, debt: equity during the CPS period but is still somewhat Transmission and Distribution II ratio 70:30 unsatisfactory. The company still makes net losses, although significantly less than a few years ago. The AAA: GoV has recently updated and increased electricity TA for VN Energy Efficient Program tariff every year as required in PM Decision 21 (2009), however generation costs also increased significantly IDF and Trust Funds > US1 million: due to larger demand growth and drought in recent System Efficiency Improvement, Equitization, years. The government recognizes that in addition to and Renewables Project TA, Demand-Side completion of tariff reform to follow market principle, Management and Energy Efficiency Project TA, it is essential to focus on energy efficiency and saving, Rural Energy II demand response/control to reduce the fast demand growth  Single-buyer electricity market in place  Pilot for single buyer Competitive Generation Market with an independent regulator and (VCGM) is being completed, to start in the second half unbundled sector players of 2011 and full VCGM to start in 2012. Development of regulations and market rules, consultation and approval took longer than expected, but has resulted in greater consensus and understanding and international good practice regulations adapted to Vietnam conditions. Increased diversity in ownership of Lending: generation and distribution with net fixed PRSC 6-9, Power Sector Reform DPO, System power assets in non-EVN ownership Efficiency Improvement, Equitization, increased from 20% in 2005 to >30% by Renewable Energy 2010  Gas operations under regulation and open  The development of new gas fields has not kept pace AAA: to private sector participation, and with trends in natural gas demand and there are TA for VN Energy Efficient Program, VN Gas sufficient gas supply for power and growing concerns about the sufficiency of gas supply to sector Development industrial use existing gas-fired generators and other users. The Chevron deal, meanwhile, has been a break-through, as IDF and Trust Funds > US1 million: it will enable the development of power plants in the O System Efficiency Improvement, Equitization, Mon complex based on the reserves from the Gulf of and Renewables Project TA, Demand-Side Thailand. However, full build-out of the O Mon Management and Energy Efficiency Project TA, 67 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) complex will utilize all of the gas from those Chevron- Rural Energy II operated fields. In part because of the tight domestic supply outlook, The Government is accelerating its consideration of liquefied natural gas import (LNG) options, and has asked the Bank to provide technical assistance on the current state of the East Asian LNG market, and on sitting possibilities for LNG terminals. The agreement to start work on gas market development has been included as a PRSC prior action. Reduced logistics and transport costs and Lending: improved mobility of cargo and freight: a. Northern Delta Transport, Mekong Delta Cost per ton kilometer of inland transport Transport, Mekong Transport & Flood (road and waterway) reduced, b. Ship to door Protection, Rural Transport III, Road Network transhipment times in selected hubs reduced Improvement IDF and Trust Funds > US1 million:  Lengths of waterways improved in Red  Preparation work is delayed. 539 km waterways were Although there were no transport specific Trust River and Delta designed and are under procurement Fund, DIFID Funded Infrastructure Policy and Baseline: 0 Sector TF included the transport sector amongst Target (2013): 539 km its components.  Lengths of waterways improved in  29 km (2011, Mekong Infrastructure Development Mekong Delta Project) Baseline: 0 Target (2011): 401 km  Lengths of highways improved in Mekong  22 km (Mekong Infrastructure Development Project) Delta Baseline: 0 Target (2011): 98 km Transport Medium Term Expenditure AAA: Framework (MTEF) with prioritized Infrastructure Policy/Regulatory Reform investments within budget constraints Transport sector MTEF‟s prepared for 2007, 2008, 2010 Trust Funds > US1 million: Added indicator: Annual MTEF prepared and 2011. Infrastructure Policy and Sector Co-financing for Transport sector starting 2007 TFs to Rural Transport III, Mekong Delta Transport Infrastructure Development Co- financing PILLAR II: STRENGTHEN SOCIAL INCLUSION 2.1. Better access to markets Status: Achieved The positive results are driven by mature programs, especially in rural roads and rural energy. and basic social services for Therefore, it may be appropriate to take account of the rural poor Justification for Status: following the successful efforts the maturity of the program and the track record in during the previous strategy, the WB and other committing to results, while taking a more tentative development partners continued to support government approach in new areas of engagement. efforts to increase the availability of basic infrastructure 68 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) services in rural areas, specially roads and electricity. Today access to electricity in rural areas is almost universal and about 80% of the population has access to roads. Progress has also been made in increasing rural access to quality (potable) water and sanitation services, although a significant gap still remains for rural poor. Details on progress made under each outcome indicator: Average traveling time to district centers in Lending: targeted rural areas is reduced Rural Transport III Community-based Rural Infrastructure, P-135 DPOs, Northern Mountain Poverty Reduction  Households in targeted  81% (Third Rural Transport) communities/villages with access to IDF and Trust Funds > USD1 million: motorized transport services for hire DFID funded a client executed TF to support increased : the Rural Transport 3 Project Baseline (2006): 79% Third Rural Transport Project co-financing Target (2011): 84% Increase in the proportion of rural Lending: households with access to electricity and Rural Energy II, System Efficiency information services Improvement, Equitization & Renewables, Rural Distribution  Rural Electrification rate increases:  96.3% at household level, exceeding the target of 94% AAA: Rural Electrification Impact Studies Baseline (2005): 88% by 2010 (EVN statistics) Target (2010): 94% IDF and Trust Funds > USD1 million: Rural Distribution Co-financing  Investment in distribution, maintained at  Investment in distribution 2005-2010 was VND22,220 >$300 million/year between 2005 and billion (about USD275 million/year at 2007 exchange 2010 rate) 1,000 LDUs with an efficiency index of 100 (index calculated based on improvement in billing, collection rates, technical efficiency etc.) by 2010  Improved planning and institutional  Key lessons drawn for planning and institutional Lending: arrangement of rural ICT investment arrangement of rural ICT investment. Implementation ICT Development under preparation. AAA: ICT Development Increase in the number of targeted poor Lending: households using improved water supplies Red River Delta Rural Water Supply, Mekong and sanitation services Delta Water Resource Management for Rural Development 69 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets)  Percentage of rural population with access  83% of the rural population has access to hygienic to water increased: water but only 42% uses water that meets the national Baseline (2005): 62% quality standard of clean water by the Ministry of Health standards  Rural Water Supply and Sanitation  4 rural water supply and sanitation enterprises Enterprises established established as pilots (under Red River Delta Rural Water Supply & Sanitation Project) 2.2. Better coverage of Status: Partially Achieved Again, the positive results are driven by mature programs, especially in health and education. It will affordable quality health be important to focus the future engagement on care services and primary Justification for Status: Achievements include the consolidating results as well as moving towards approval of a revised Health Law that the CPS program more focus on quality in both education and health education for poor and near supported and that has facilitated access to health and to scale up the policy dialogue and institutional poor insurance now estimated to cover 62 percent of the support where possible. The social assistance population (above the 55 percent target). However, agenda introduced towards the end of the CPS missing data on key health indicators and health insurance period is proving relatively difficult to manage, but coverage makes it difficult to conclude with certainty nonetheless important to pursue further. whether the outcome has been fully achieved. The road safety statistics are improving. The HIV/AIDS program shows increased use of preventive methods. However, there is a slight increase in HIV/AIDS incidences Details on progress made under each outcome indicator: Percentage of poor and others using and Lending: expressing satisfaction with health services Mekong Regional Health Support, Northern increased from 25% in 2005 to 50% in 2010 Upland Health, Central North Health Support  Coverage of health insurance: AAA: Baseline (2005): 28%  Unofficial sources put coverage at 62% at the end of VN Health Issues Paper Target (2010): 50% the CPS period (last official numbers from 2008: VN Health Policy Notes 43.8%) VN Implementing Health Insurance Law (FY09)  Proportion of communes with doctors  65.9% (from 2008, no newer data available by mid- Health Systems Strengthening Support (FY11) and facilities of Ministry of Health: 2011) Health Sector Reform TA Baseline (2005): 68% IDF and Trust Funds > USD1 million: Target (2010 ): 80% Mekong Health Support Project co-financing, Healthcare Support to the Poor of the Northern Uplands and Central Highlands, IDF for Improving Effectiveness and Sustainability of Social Health Insurance, IDF for Developing Results Focused Health Care Financing Mechanisms in Vietnam Reduced traffic accidents and fatalities Lending: Road Safety Project  National Road Safety Strategy adopted  First draft of the Performance Based National Road 70 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) specifying achievable performance targets Safety strategy was submitted to the Government for and a financing plan by end-2009 review. Groups at risk of contracting HIV/AIDS in Lending: participating provinces reporting safer HIV/AIDS Prevention injection practices AAA:  Percentage of at risk groups in  85.9% (2010) HIV/AIDS Strategy participating provinces reporting safer injection practices: IDF and Trust Funds > USD1 million: Baseline (2005): 20% DFID HIV/AIDS Prevention Co-financing Target (2010): 60%  Percentage of at risk groups in  93.6% (2010) participating provinces reporting condom use: Baseline (2008): 93.3%  HIV/AIDS prevalence rate among 15-49  0.44% (2010) age group: Baseline (2007): 0.41%  Health workers and communities report  There is no evidence that stigma and discrimination reduced stigma and discrimination related have been reduced; however, there is no specific to HIV/AIDS, as measured in bi-annual evaluation among health workers, no questionnaire on surveys. stigma and discrimination towards at risk groups. There is no comprehensive, specific strategy on reduction of stigma and discrimination. Primary student completion rate increased in Lending: targeted, disadvantaged districts and for School Education Quality Assurance, Primary ethnic minorities and women, at least Education for Disadvantaged Children corresponding to national rates AAA:  Proportion of primary students in full-  36.5% Nationwide (2009/2010) High Quality Basic Education for All, day program: Constraint Assessment-Bottleneck Baseline (2005): 25% Nationwide IDF and Trust Funds > USD1 million: Target (2010): 50% Nationwide Basic Education in Vietnam, Primary Education for Disadvantaged Children, TF to Support Basic Education in Vietnam, Improving Quality Baseline (2005): 9% in districts in lowest  19,09% in the lowest quintile (2009/2010) Basic Education of Ethnic Minority Children in quintile Three Disadvantaged Provinces Primary Target (2010): 27% in districts in lowest Teachers Co-financing, Upper Secondary quintile Education Enhancement Project  Primary education completion rate nationwide:  Percentage of school children aged 14 complete Baseline (2005): 72% primary education levels in targeted, disadvantaged 71 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) Target (2010): 86% districts increased to 96% against the national rate of 94.1% (2010)  (Percentage of girls aged 14 complete primary education is 95.9% in the targeted districts against national rate of 93.9% (2010)) Grade 5 learning outcomes improved, by Lending: halving the proportion of pupils below the School Education Quality Assurance, Primary functional reading level from 11% in 2001 to Education for Disadvantaged Children 5% in 2010, with at least a corresponding improvement for students in the lowest socio- AAA: economic level High Quality Basic Education for All, Constraint Assessment-Bottleneck  Percentage of Grade 5 pupils below the  9.7% (figures are from 2007 and target is assessed to functional reading level: have been met, but no new data available by mid- IDF and Trust Funds > USD1 million: Baseline (2001): 11% 2011) Basic Education in Vietnam, Primary Education Target (2010): 5% for Disadvantaged Children, TF to Support Basic Education in Vietnam, Improving Quality  Primary school FSQL Index increased Basic Education of Ethnic Minority Children in nationwide and in districts in the lowest Three Disadvantaged Provinces, JSDF TF on quintile: Early Childhood Care and Development. Baseline (2005): 67 nationwide Target (2010): 80 nation-wide  71.4 Nationwide (2010) Baseline (2005): 61 in districts of the lowest quintiles;  68.3 in districts in the lowest quintile (2010) Target (2010): 80 percent of the lowest quintile 2.3. Ethnic minorities in Status: Partially achieved rural areas more fully integrated into development Justification for Status: Programs supporting greater empowerment of ethnic minorities are most mostly on processes target; however, poverty reduction amongst ethnic minority groups lags behind reduction in the general population. Details on progress made under each outcome indicator: Under-5 mortality gap for ethnic minorities Lending: reduced 2nd P135-Phase I, Northern Mountains Poverty 72 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) Reduction  Under-5 mortality rate gap between  Data not available regions: AAA: Baseline (2006): 62.6/1,000 live births in Social & Land Conflict Management, Crisis Northern Upland/ Central Highland and Impact Analysis & Social Protection Policy 7.9/1,000 live births and the Delta Monitoring Regions IDF and Trust Funds > USD1 million:  Effective criteria for poverty targeting,  Criteria for budget allocation were set up at every 2nd P135 Co-financing both for men and women, under new P135-2 province guiding allocation to be more pro- Program 135 agreed by 2008 poor. Output was fully achieved.  Effective and comprehensive M&E system  M&E system for P135-2 was designed and installed, for Program 135 in place. streamlining underway. P135-2 was the first national program that has an M&E system in place though not all provinces have been able to run it due to technical issues. Thus, this output was partially achieved Control over public expenditure resources Lending: decentralized to communes 2nd P135-Phase II, 2nd Northern Mountains Poverty Reduction  100% of Zone 3 communes and poorest  86.1% of Zone 3 communes and 96.3% of poorest IDF and Trust Funds > USD1 million: villages in Zone 2 communes act as villages in Zone 2 communes act as investment 2nd P135 Co-financing investment owners in Program 135 – owners (2010) Phase 2: Baseline (2005): 15% Target (2010): 100% Increase in forestland allocated to ethnic Lending: minorities Coastal Wetlands Protection and Management , Forest Sector Development  Share of ethnic minority households to  68.4%36 (2008, no newer data available) which forest land allocated: AAA: Baseline (2004): 38.5% Forest Sector Support II, Social & Land Target (2011) : 75% Conflict Management IDF and Trust Funds > USD1 million: 36 These figures indicate substantial progress, but it should be noted that they include forest land allocated under forest protection and plantation contracts, and some studies indicate that forest land allocation does not necessarily lead to improvement in livelihoods. 73 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) 2nd P135 Co-financing  Average forest area allocation to ethnic  16,556 square meters7(2008, no newer data available) minority households: Baseline (2004): 9,626 square meters Target (2011): 18,000 square meters 2.4. Improved policies and Status: Partially achieved While the program has indeed focused on improving policies and infrastructure to address the infrastructure to address the needs of urban poor and thereby indirectly migrants needs of urban poor and Justification for Status: Based on reaching the intended in urban areas, the program has not tracked possible improvements in water and sanitation in targeted low- improvements in access to services specifically for migrants income urban areas. However, the program did not track migrants. Thus, for purposes of results measuring, it improvements in access to social and public services by would have been advisable to not include migrants the urban poor and migrants. specifically in the outcome. However, the focus of this outcome area on urban poor reflects the current Details on progress made under each outcome priorities of the government well and might be an indicator: area which the government would like to see scaled Increase in the number of targeted urban Lending: up in the next CPS period. poor that use basic water supply and Three Cities Sanitation, Urban Upgrading, sanitation services Urban Water Supply Development , Coastal Cities Sanitation, Priority Infrastructure  On-site improvement of targeted slum  95% of targeted low-income areas met minimum Investment, Local Development Infrastructure areas; standards (under the Urban Water Development Fund, PRSC 9-10, HCMC Environmental Baseline (2005): 75% with housing Project, 2011) Sanitation, Urban Water Supply and Waste meeting minimum Government standards; Water Target (2010): 100% AAA:  Housing improvement and sanitation  Over 54.000 home improvement and sanitation loans Regional Development & Urbanization loans issued to low-income urban issued. The repayment rate is about 98% (2011, under Infrastructure Policy/Regulatory Reform, residents in target cities the Urban Water Development Project) Medium Cities Transport, Sanitation Management for Urban Areas IDF and Trust Funds > USD1 million: Coastal Cities Environmental Sanitation Project co-financing, Urban Upgrading Co-financing Increase in number of unregistered migrants that use basic public services  Design and implement improved  Data on provision of services for migrants NA regulation for the provision of basic services, regardless of migrant status 2.5. Vulnerability to natural Status: Partially achieved disasters and other shocks reduced Justification for Status: The CPS program‟s support to 74 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) reducing the vulnerability to natural disasters and other shocks has lead to preliminary progress in institution building, but the full impact will only visible be during the next CPS period. Details on progress made under each outcome indicator: Reduce annual costs of damages from floods Lending: and storms 2006-2010, compared to 2001- Coastal Wetlands Protection and Management, 2005 Natural Disaster Risk Management Mekong Transport and Flood Protection  Reduced annual cost of damages  Information on the costs and damages from floods and storms unavailable AAA:  Strategy and action plan for natural  Strategy approved in November 2007 VDR 2010: Modern Institutions, Agriculture disaster risk management approved and Rural Economic & Sector Work, Prioritizing Climate Change Investments, VDR 2011 – Natural Resources & Environmental  Targeted community populations  Targeted communities reporting improved early Management, GFDRR TA for Disaster reporting improved early warning of warning is not yet available Mitigation and Preparedness floods and storms IDF and Trust Funds > USD1 million:  Forecasting flood with 80% preciseness  Flood forecasting earlier than 24 hours is not yet JSDF for Innovative Approaches to on Red River 48 hours in advance, on available but is in progress. Community-Based Disaster Risk Management, Mekong River 3-5 days in advance Natural Disaster Risk Management Project co- financing Improved natural disaster preparedness at Lending: the commune level Natural Disaster Risk Management  Number of Safer Commune Plans  10 Safer Commune Plans prepared as of Aug. 2008, AAA: prepared: under the Natural Disaster Risk Management Project VDR 2010: Modern Institutions, Agriculture Baseline (2005): 0 (no newer data available) and Rural Economic & Sector Work, Target (2010) : 30 Prioritizing Climate Change Investments, VDR 2011 – Natural Resources & Environmental Management, GFDRR TA for Disaster Mitigation and Preparedness IDF and Trust Funds > USD1 million: JSDF for Innovative Approaches to Community-Based Disaster Risk Management, Natural Disaster Risk Management Project co- financing, Natural Disasters Mitigation PHRD co-financing Strengthened bio-security at farm level Lending: Livestock Competitiveness and Food Safety  Improved veterinary services, including  Training of veterinarians and meat inspectors surveillance, control and protection supported by the Livestock Competitiveness and Food AAA: 75 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) capacity Safety Project is being revised to reflect changing Agriculture and Rural Economic & Sector Work needs and new regulation. IDF and Trust Funds > USD1 million: Smallholder Recovery Assistance from Avian Influenza and Vigilance against further Outbreaks. Avian and Human Influenza Control and Prevention, Avian and Human Influenza Control and Preparedness. 2.6 Modernized Social Status: Partially Achieved Security Justification for Status: Analytical Work on Social Security carried out in 2008 set the basis for a new dialogue and new policy initiatives. However, the Social Security Modernization Project, which has been in the pipeline for several years, is still not delivered. Discussions are ongoing on whether the project can move ahead. Details on progress made under each outcome indicator: Added outcome: Policy framework in place Lending: for effective and financially sustainable PRSCs 6-9 social security system AAA:  Adopt Social Insurance Law making the  Completed under PRSCs 6-7. Social Security Reform TA, Social Security system financially viable and extending its Modernization TA coverage IDF and Trust Funds > USD1 million:  Prepare a strategic plan to ensure  Completed under PRSC 8. IDF for Capacity Building for Analysis of Wage prudential and effective investment of and Social Insurance Policies social security funds  Added output: Introduce single social  Not yet introduced insurance number for all targeted benefits and social insurance programs 76 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) Modernization program for social security Lending: system administration developed and PRSC series implementation initiated AAA:  Improve efficiency, performance, and  Approach are still in early stages of design in the Social Security Reform TA, Social Security accountability of administration of the context of preparation of the Social Security Modernization TA social security system Modernization Project, but progress in project preparation has been slow due in part to the limited IDF and Trust Funds > USD1 million: experience of the implementing agency in preparing IDF for Capacity Building for Analysis of Wage Bank projects and Social Insurance Policies Policy framework in place for expanded Lending: coverage of workers PRSC 6-7  Introduce voluntary pension program for  Completed under PRSC 6-7 AAA: farmers and informal sector Social Security Reform TA, Social Security Modernization TA IDF and Trust Funds > USD1 million: IDF for Capacity Building for Analysis of Wage and Social Insurance Policies PILLAR III: MORE SUSTAINABLE MANAGEMENT OF NATURAL RESOURCES, AND REDUCED ENVIRONMENTAL DEGRADATION 3.1. Better sustaining and Status: Partially achieved managing natural resources Justification for Status: There has been significant progress under the Land Administration Project, which has made it easier for people to access land titles. There has furthermore been improvement in terms of combining forest protection with sustained livelihood and poverty reduction; less progress however has been seen in relation to the protection of critical natural habitats. Also there are concerns about the transparency in the allocation of land titles. Details on progress made under each outcome indicator: Households in buffer zone communities less Lending: dependent on unsustainable harvesting of Coastal Wetlands Protection and Management, forests in buffer zones for their livelihoods Forest Sector Development (IDA & GEF), Chu Yang Sin National Park (GEF)  Improve detection of and strengthened  Forestry Law Enforcement and Governance (FLEG) suppression of illegal forest activities country assessment completed and training delivered. AAA: 77 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) MOU with Lao PDR on cross-border collaboration; Forest Sector Support II, Social & Land MOU with Thailand underway. Conflict Management, VDR 2011 – Natural Resources & Environment Management  Poverty rate in vulnerable communes reduced 38% IDF and Trust Funds > USD1 million:  Increase in household income in buffer compared with project start. Forest Sector Development Project co- zone communities financing, First and Second TF for Forests co-  4,662 and 1,214 ha of new mangroves planted in financing,  Expansion of area under protection forest protection zones and buffer zones, respectively; contracts 34,395 ha put under protection contracts; Increased coverage of critical natural Lending: habitats in protected areas Coastal Wetlands Protection and Management, Forest Sector Development (IDA & GEF), Chu  Protected Areas coverage:  6.25% percent (from 2011 VDR) Yang Sin National Park (GEF), Green Corridor Baseline (2005): 5.5% Project (GEF), Pu Luong Cuc Phuong Protected Area Project (JSDF)  Percentage of forest area that is closed  No available data by the end of the CPS period, but canopy forest: strong indication of continuing decline of closed AAA: Baseline (2005): 5 percent canopy forests, even while total forest cover is Forest Sector Support II, Social & Land 2008: 3.8 percent increasing Conflict Management, VDR 2011 – Natural Resources & Environment Management IDF and Trust Funds > USD1 million:  Biodiversity conservation mainstreamed  Biodiversity conservation mainstreamed in the forest Forest Sector Development Project co- and fishery sector development strategies for 2006-10 financing, First and Second TF for Forests co- and their action plans and implemented under the financing, Coastal Wetlands Protection and Forest Sector Development Project (FSDP), Coastal Management and Development Co-financing Wetland Development Project, and GEFs.  Expansion of Marine Protected Area system and wetlands under protection  No remarkable expansion of Marine Protected Areas (as well as Special Use Forests) in terms of their number and area. No changes observed in overall quality of management of Marine Protected Areas (or Special Use Forests) Reform of State Forest Enterprises (SFEs) Lending: accelerated Land Administration  Improved allocation, titling and  Some improvements made on pilot basis supported AAA: management of production forestland with Vietnam Conservation Fund/FSDP grants (51) Social & Land Conflict Management, VDR coming out of SFE reform and GEFs. An update and policy recommendations are 2011: Natural Resources & Environment under preparation under FLEG study. Management  About 1 million ha of underused forest land has been reallocated from SFEs. However its allocation to 78 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) households and local business is slow and lacks transparency. Nationally, percentage of forest land allocated to households increased from 27% in 2006 to 28-29% in 2008 (23,000 ha under FSDP for the plantation of 22788 ha of forest as of Dec 2008). However, this percentage remains very low in Central Highlands, i.e. 2.5% and 3%. Lower transaction cost and higher Lending: satisfaction among end users of improved Forest Sector Development Project land administration AAA:  Nationwide, the percentage of provincial  31 provincial land registration offices established, Social & Land Conflict Management, VDR land registration offices with fully equivalent to 49% of all provinces. However, the 2011: Natural Resources & Environment operational one-door service provision development of a database and the purchase of Management increased: equipment have not yet been concluded. No District Baseline (2005) 2% Land Registration Offices are operational, but are Target (2010): 50% pending the users‟ service training and „down and up‟ links. 196 commune level access points are operational, equipped with computers and other office equipment, but without up-link and staff training (2011)  It is estimated the percentage doubled in 2008 from  Increase percentage of households 16% in 2004 (15% for agricultural land and 18% for whose land use right certificates are resident land). However, the indicator was not under the names of either a woman or included in the 2010 VHLSS and therefore no new both spouses data is available River basin management organizations Lending: allocating water resources more effectively Water Resources Assistance, Mekong Delta Water Resource Management for Rural  Number of river basins with operational  The number of River Basin Management Development inter-provincial management Organizations increased from 3 in 2006 to 4 at present. However, as was the case at time of the Progress AAA: Report, in general they still operate ineffectively if at VDR 2011 – Natural Resources & Environment all. Management 3.2. Improved management Status: Partially achieved effectiveness of household and industrial pollution Justification for Status: The CPS program has made good progress on the legal and regulatory framework and cost recovery in the area of household sanitation as well as some progress on increasing the coverage rates, considering the low base from which the work started. In addition, analytical work on industrial pollution was carried out jointly with the Government and preparation of an FY13 lending operation was initiated. However, 79 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) indicators were not met in this area and less than 30 percent of the wastewater from industrial parks is treated in centralized facilities. Progress toward a lower-intensity carbon economy was made through investments in energy demand side management and renewable energy development. In renewable energy, targets were surpassed for several indicators. Details on progress made under each outcome indicator: Reduced pollution from domestic wastewater Lending: Three Cities Sanitation, Coastal Cities  Percentage of wastewater flows from  Less than 10% of urban wastewater flows subject to at Environmental Sanitation (IDA & GEF), cities that is subject to at least primary least primary treatment (2011) HCMC Environment and Sanitation, HIFU, treatment: Water Supply & Wastewater Baseline (2005): 0 Target (2010): 40% AAA: Sanitation Management for Urban Areas, , VN Sanitation Management for Urban Areas (FY10) IDF and Trust Funds > USD1 million: IDF for Improving the Institutional Capacity for Water Pollution Control Use of wastewater treatment and solid waste Lending: services increase in target cities Three Cities Sanitation, Urban Upgrading, HCMC Environmental Sanitation, Coastal  Average cost-recovery of wastewater  In general the solid waste tariffs are in better shape Cities Environmental Sanitation (IDA & GEF), treatment and solid waste collection with the cost recovery around 60-80%. For the waste Water Supply & Wastewater, Hospital Waste services increased water sector, it is necessary to distinguish between the Management environmental protection charge (up to 10% of water bill, defined by Decree 67, not fully applied) and the AAA: waste water fee (based on a full cost recovery Sanitation Management for Urban Areas, VN approach as defined in Decree 88, applied in some Wastewater Decree (FY07) cities with as-built waste water facilities). It is noted that the cost recovery in waste water is less than 10% IDF and Trust Funds > USD1 million: IDF for Improving the Institutional Capacity for Water Pollution Control Reduced traffic congestion and related air Lending: pollution in urban areas with increased use Hanoi Urban Transport (GEF) of public transportation systems AAA:  Improved public bus transport system in  Detailed design for Hanoi Bus Rapid Transit in VN – Promote Strategic Urban Planning Hanoi progress, construction to be completed by end 2012  Construction of 15km of Bus Rapid 80 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) Transit by end 2013  Not relevant  Development of Air Quality Management  Work is ongoing for Air Quality Management System System for Hanoi by end 2013 for Hanoi, to be completed by end 2013. Improve safe collection and disposal of PCB Lending: oils from 0 (2005) to 57 % (2010) of PCB PCB Management (GEF) oils. Overall PCB waste is quantified (2010). AAA  Safe collection and disposal of PBC oils  Updated information not available Many analytical studies carried out as part of  PCB management system in place for  The GEF-financed project to improve management of preparation of PCB project Vietnam for priority areas PCBs began in 2010 and will continue until 2014 by which time needed management systems will be in IDF and Trust Funds > USD1 million: place IDF for PCB Management  70% industrial zones with wastewater  Current levels of treatment of industrial wastewater Lending: treatment systems and 100% of new have not changed significantly and remain at about industries apply clean technology 30% (as was the case at the time of the Progress report). An IDA-financed project on Industrial IDF and Trust Funds > USD1 million: Pollution control is under preparation and will address National CFC and Halon Phase-out Plan, IDF this problem during the period of the next CPS. on Water Pollution Control 100 percent of investment projects have Lending: environmental and social assessments of PRSC, PIR I international standards, and all sectoral plans and regional programs contain strategic environmental assessments. AAA: (policy dialogue), TA on Urban Planning Law  Policies and procedures on public  Articles 8, 20 and 21 in the new Urban Planning Law participation and consultation developed issued on June 17, 2009 by Standing Committee of and in use for key sectors National Assembly requires public participation and consultation, providing the rights and responsibilities of all stakeholders included in urban planning design process and guidelines for the progress of public consultation. Technical support was provided to MONRE on land valuation and revision of the Land Law along with relevant decrees and guidelines relating to involuntary resettlement and the development of Vietnam‟s capacity for implementing them. The Government issued a decree to mandate the timely preparation, public consultation and review of an Environment Impact Assessment (SIA) and a Strategic Environmental Assessment (SEA) Improved energy system efficiency, with Lending: electricity losses reduced to about 10% in Transmission and Distribution, Rural 2010 from 12% in 2005 Distribution System Energy, Equitization & Renewables, Demand-Side Management &  Peak demand and electricity consumption  The ICR for the DSM and Energy Efficiency Project Energy (GEF), 2nd Rural Energy (GEF), reduced by 120MW and 500GWh indicates total peak load demand reduction of 310 MW Renewable Energy Development, Clean 81 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) through DSM activities by 2010 and energy saving of 2506 GWH (direct and indirect Production & Energy Efficiency (GEF) effects), exceeding the target. (Draft ICR report, 2011) AAA:  By the end of 2009, the T&D losses stood at 9.6%. TA for Vietnam Energy Efficiency Program However, in 2010, power T&D losses slightly increased to 10.25% against the target of 10% . Some distribution corporations did not meet the targets because they are taking over low voltage distribution networks from poor performing local distribution units. (EVN statistics, 2011) Increased capacity and utilization of Lending: renewable energy System Energy, Equitization & Renewables, Renewable Energy Development,  A 200MW increment of renewable  About 400 MW increment of renewable energy contributing capacity to grid in 2010 contributing to grid from 2005 to 2010, exceeding the AAA: target. During 2009-2010 only, 250 MW of grid TA for Vietnam Energy Efficiency Program (?) connected renewable energy generation was added to the system during 2009-2010 and 400 MW are under construction. (EVN and MOIT statistics, 2011)  1 million CERs contracted for SAdelivery  As of 2010, 26 CDM projects were registered out of by 2010 124 submitted projects. The registration rate remain low compared with other countries (22% versus average of 36.7%) (JICA report, 2010) 3.3 Improved Climate Status: Partially Achieved Change Adaptation and Migration Justification for Status: This outcome was only introduced at the time of the Progress Report in late 2009 and therefore there has been limited time to achieve the goals. The progress in terms of sectoral and provincial climate change adaptation strategies is uneven. Studies on climate change have been completed and the Bank has supported the development of a first draft of a government strategy on Climate Change at the very end of the CPS period. The Government has developed a National Target Program to address climate change concerns. The Bank has also scaled up engagement in climate change (including the development of a climate change strategy) and is preparing a DLP series with the first operation planned for early FY12. Progress has furthermore been made in energy (including in alternative energy and loss reductions). 82 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) Details on progress made under each outcome indicator: Strengthened government capacity to address Lending: challenges posed by climate change Many lending operations of the Bank cover adaptation and mitigation priorities (see the Vietnam Climate Change Strategy for more  Sectoral and provincial climate change  Government capacity has improved but only some complete discussion). adaptation strategies (required under the sectors and provinces have developed climate change NTP-Climate Change) prepared by 2011, adaptation strategies. The Bank supported the AAA: and priorities included reflect adequate development of the first draft of a national climate World Bank Climate Change Strategy for economic cost-benefit analyses. change strategy at the very end of the CPS period. Vietnam, Climate Change Scale-Up Mekong However, the Government is still slow to take action in Delta, Water Supply and Sanitation Responses various key policy areas. This will be addressed under to Climate Change, EACC, AAA work on forthcoming World Bank Climate Change DPO. Impacts of Climate Change on Urban Drainage Systems and Climate, Disaster Resilient Cities  Analyses on the economic costs of adaptation were work in Hanoi, Can Tho and Dong Hoi and undertaken in a number of sectors, with Bank support, corresponding national tool kit for Local and were completed by 2011 Resilience Action Planning, and many other analytical studies PILLAR IV: STRENGTHENED GOVERNANCE SYSTEMS 4.1 Improved effectiveness Status: Partially achieved The progress of the PFM reform agenda has been positive but the pace extremely gradual so that even of public financial though the bulk of the goals on the PFM agenda is management; with better Justification for Status: The Public Financial expected to be met over the long-haul, some of the Management (PFM) program is expected to deliver the narrower goals set under the CPS will be not be met budget planning, execution, anticipated key outcomes, but with a lag despite until on during the next CPS. The progress expected and accountability and considerable supporting technical assistance. From a long- within the coming period can hopefully help term perspective implementation of the PFM agenda has advance the use-of-country-systems agenda, where revenue collection made substantive progress. progress has been limited. Support for the implementation of the anti-corruption agenda has been weaker, limited to tracking actions under the PRSC. Elements to access their impact are not available. The 201o Moderns Institutions VDR took a long view of the institutional development and identified weak points providing an effective Details on progress made under each outcome platform for dialogue in the country on institutions indicator: and governance issues. Timely and consistent in year budget Lending: execution information available to line Public Financial Management Reform, PRSC 9 ministries, provinces donors and the public AAA: VDR 2010: “Institutions Matterâ€?, GAC  Treasury and Budget Management  TABMIS piloted in Central State Treasury, Ministry of Implementation, Support to SEDP Preparation, Information System (TABMIS) Finance, and thirty five provinces (expectedly 63 Support to National Development Strategy 83 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) implemented at central and local level provinces by end of 2011) treasury and finance offices, piloted in IDF and Trust Funds > USD1 million: selected spending units: Public Financial Management Reform Project Baseline (2007): None co-financing Target (2011): Implementation throughout government  Quarterly budget execution information posted on the web 45 days after quarter-end (2011)  In-year budget execution information available to line ministries, provinces, donors and the public in a timely and consistent manner: Baseline (2007): None Target (2011): Quarterly reporting of disaggregated data  Establishment of PFM performance  Efforts are underway. A baseline self-assessment by Lending: indicators the Government on Public Expenditure and Financial PRSC 9, Public Financial Management Reform Accountability (PEFA) indicators is underway and expected to be concluded in late 2011 AAA: VDR 2010: “Institutions Matterâ€?, GAC Implementation, Support to SEDP Preparation, Support to National Development Strategy IDF and Trust Funds > USD1 million: Public Financial Management Reform Project co-financing Better processes for linking plan and budget, Lending: prioritizing expenditure and integrating PRSC 9, Public Financial Management Reform, capital and recurrent expenditure in major Public Investment Reform (PIR) I public spending sectors AAA:  MTEF mainstreamed  Medium-Term Fiscal Framework (MTFFs) and VDR 2010 – Institutions, GAC Implementation, Baseline (2006): Pilots launched Medium-Term Expenditure Framework (MTEFs) Support to SEDP Preparation, Target (2012): MTEF institutionalization launched in transport, health, education, agriculture, Support to National Development Strategy, through the new State Budget Law is planning and finance. These are carried out in four expected in 2012 provinces on a pilot basis. IDF and Trust Funds > USD1 million: Public Financial Management Reform Project co-financing, IDF for Facilitating Ministry of Health Stewardship Role Public sector accounting standards meeting Lending: international standards PRSC 9, Public Financial Management Reform  Public sector accounting standards and  2011: Not done. Efforts underway to develop a AAA: regulations adopted and mechanism for roadmap to adopt international public sector accounting VDR 2010 – Institutions, GAC Implementation, regular compliance monitoring and update standards (IPSAS), with plan to adopt the IPSAS cash Support to SEDP Preparation, established and implemented accounting standards in late 2011 Support to National Development Strategy Baseline (2007): Not done. Target (2011): Adopted for cash IDF and Trust Funds > USD1 million: 84 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) accounting. Public Financial Management Reform Project co-financing, IDF for Capacity Strengthening for the Vietnam Association of Certified Public Accountants, IDF for Introduction of International Public Sector Accounting Standards. Improved tax revenue collection with Ongoing lending operations: strengthened compliance of tax PRSC 9, Tax Administration Modernization administration AAA:  Streamlined/simplified tax processes  Requirements for business process reengineering VDR 2010 – Institutions, GAC Implementation, including registration, collection and exercise defined and included in bidding documents for payment and establishment of service Integrated Tax Administration Information System. IDF and Trust Funds > USD1 million: culture in tax offices (a long-term process, Reengineering of business processes will be combined Tax Admin Modernization Co-financing the first stages of which are within this with computerization of new processes. It is expected CPS period). that the actual re-engineering process will start in 2013 Baseline (2007): No systematic and will be completed by the end of 2014. examination of business procedures aimed at simplifying business procedures Target (2011): List of requirements to change business procedures completed. Beyond 2013: Develop IT system to meet requirements and ultimately roll-out the new system. Public procurement managed more Lending: transparently at the central and local levels PRSC 9, Public Investment Reform (PIR) as evidenced by: Improvements in the performance of the Public Procurement AAA: System, as evidenced by progress on VDR 2010 – Institutions, GAC Implementation OECD/DAC indicators and the government’s M&E system IDF and Trust Funds > USD1 million: Public Financial Management Reform Project  Public procurement managed more  Compliance and performance indicators are now co-financing, IDF for Capacity Strengthening transparently at the central and local levels incorporated in annual procurement audits carried out for the Vietnam Association of Certified Public by the Inspectorate. PPA is in process of hiring Accountants. IDF for Strengthening Baseline (2007): Assessment of National consultants for (i) developing the national standards and Implementation Monitoring and Evaluation of Procurement System using OECD/DAC manual for procurement audits; (ii) updating the the Public Procurement System Baseline Information System Bench marking assessment of the legal framework for public Tool completed in February 2007. procurement using OECD/DAC benchmarking tool. Procurement Compliance and Performance Indicator system based on OECD/DAC Significant gaps remain between Vietnam‟s public developed and piloted. procurement system and international good practice Target (2011): M&E system in place. Added outcome: Improved government-to- IDF and Trust Funds > USD1 million: business services through online delivery IDF for Public Procurement Reform 85 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets)  E-procurement bulletin in operation:  e-Procurement Bulletin established and well known in Baseline (2007): Basic e-Procurement the industry, with mandatory posting of procurement Bulletin website in place and operational plans, bidding opportunities and contract award Target (2011): Enhance and complete information. e-Procurement Bulletin had been updated putting e-Procurement Bulletin in place, with to the daily Public Procurement Review Newspaper supporting regulatory framework available both online and in hard copies.  Business-related e-services have become operational at  Business-related e-services (e.g., business varying degree in some ministries (Ministry of Industry registration, e-procurement, and business- and Trade, MOF, etc) and localities (HCMC, Danang, related data dissemination) available in Haiphong, etc) and are being piloted in other Danang, Hanoi, and HCMC ministries/provinces. MPI/PPA has been piloting a national e-Tendering system with the participation of several large domestic corporations (e.g. VNPT, EVN, etc) 4.2. Modernized planning Status: Partially achieved Vietnam has fielded and is implementing a very ambitious decentralization strategy. The CPS could towards development have supported these efforts more as part of a objectives, with more Justification for Status: It is assessed that this status is strategy to modernize planning, given the role of the local authorities in delivering outcomes. participatory approaches partially achieved based on the delivery of P-135 where local participation is a key element and partial progress on the Hanoi Core Statement. As one of the first countries to localize the Paris Declaration, Vietnam showed great will to modernize planning and aid effectiveness. There has been progress in improving aid effectiveness since 2005, but some development partners had expected more results. Remaining challenges include the lack of capacity for strategic policy making and planning at sub-national level and a lack of clarity on what exactly is needed to change current aid practices. Details on progress made under each outcome indicator: Proportion of local development projects Lending: with strong participation of local people in Community-based Rural Infrastructure supervision Development, 2nd P135-Phase II, Northern Mountains Poverty Reduction 1&2, Rural  Share of communes and villages in  86.1% of Zone 3 communes and 96.3% of poorest Transport III, PRSC 9-10 Program 135 that have acted as investment villages in Zone 2 communes (2010) owners for program investments increased AAA: VDR 2010 – Institutions, GAC Implementation, Baseline (2005): 15% Support to SEDP Preparation, Support to National Development Strategy, Social & Land Target (2010): 100% Conflict Management IDF and Trust Funds > USD1 million: 86 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) JSDF grant for Empowering Farmers for Participatory Irrigation Management, 2nd P135 Co-financing Management of ODA strengthened and Lending: aligned to the Government budget PRSC 9, Public Investment Reform (PIR) DPOs  World Bank Hanoi Core Statement targets IDF and Trust Funds > USD1 million: on aide effectiveness achieved Comprehensive Capacity Building to Strengthen ODA Management, IDF on Strengthening Ownership (HCS indicator 1):  Ownership/Operational Development Strategies: B Portfolio Management at Ministry of Planning Baseline (2005): B and Investment. Co-financing TFs to PRSC 5- Target (2011): A 10, IDF for Capacity Building for Strengthening the Regulatory Framework for the Management Performance assessment framework: of Investment., IDF for Capacity Building for Baseline (2005): C  Results-Oriented Framework: B the Management of Construction Contracts Target (2011): A Note: Vietnam has successfully met the 2010 target for about half of the alignment indicators. The remaining half show either progress or no change. Vietnam has made great progress on the targets on the indicators for managing results and mutual accountability Needs-based planning and budgeting used in Lending: education sector Primary Education for Disadvantaged Children  Fundamental School Quality Levels  A fully decentralized needs-based planning model AAA: (FSQL) used as the benchmark in (based on “fundamental school quality levelsâ€? is now High Quality Basic Education for All prioritizing resources by schools, districts implemented throughout the primary school sector. and provinces. The “fundamental school quality levelsâ€? tool is used IDF and Trust Funds > USD1 million: as a matter of national policy for targeting resources to IDF for Result-based Management for Vietnam the most needy schools based on the real needs. Education Managers. 4.3. Reduced incidence of Status: Partially Achieved While this outcome area is extremely important for the country to address, it is a rather difficult one to corruption in key services measure progress in as well as to attribute the Justification for Status: Given the presence of Bank‟s contribution. It is worth taking into administrative corruption, the work on tax and customs consideration when designing the results framework procedures simplification has been highly relevant. for the coming CPS. It is furthermore recommended However, the Customs Project has been cancelled because that the next CPS will not limit the concept of of severe complications (See Lessons learned under governance to PFM, financial transparency and Outcome 1.1) Progress has been made in highlighting the unofficial payments in tax and customs. Rather, the relevance of external control, and targets were reached in definition of governance should be broadened to terms of asset declarations for individuals and firms. include transparency, accountability and However, progress on transparency of government information and be treated as truly cross-cutting financial information and auditing has been limited. The rather than having a separate section in the results PCI indicators on bribe paying among firms show some framework. signs of improvement, but methodology and indicators 87 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) have been changed slightly since previous surveys. Details on progress made under each outcome indicator: Increased transparency of government Lending: financial information and strengthened audit Public Financial Management Reform, Customs functions Modernization (cancelled before termination),  Marginal improvements since 2007. Government ICT, Tax Administration, PRSC 9-10, Public  Government accounts and financial reports accounts are now published, and audit reports of key Investment Reform DPO 1-2 audited by SAV and the financial cases have been the subject of intensive public debates at statements and audit reports made the National Assembly, although there remains much AAA: available to the public in a timely manner: room for improvement in the comprehensiveness and VDR 2010 – Institutions, GAC Implementation, Baseline (2007): Government accounts timeliness of publishing of audit reports. Support to SEDP Preparation, Support to made public at aggregate level only, and National Development Strategy audited by SAV. Individual audit reports not published. Audit reports of aggregate IDF and Trust Funds > USD1 million: budget published within 18 months. Governance and Poverty Policy Analysis and Government financial statements not Advice Program, Public Financial Management produced. Reform Co-financing, TFs to support Public Target (2011): Government accounts Financial Management Modernization, Co- made public including routinely publishing financing TFs to PRSC 5-10, IDF for Capacity of individual audit reports. Audit reports Strengthening for the Vietnam Association of of aggregate budget published within 9 Certified Public Accountants, IDF for Internal months. Government financial statements Audit Capacity Building for Ministry of Finance piloted. Inspectorate, IDF for Strengthening Procurement Audit Decreased prevalence of petty corruption in Lending: the delivery of public services as evidenced in Public Financial Management Reform, Customs surveys of enterprises and households Modernization (cancelled in FY11, before termination), ICT, Tax Administration, PRSC 9-  A risk management system in place for For Tax Administration: 10, Public Investment Reform DPO 1-2 Custom Administration and Tax  Pilot exercises for risk-based audit selection launched administration (a long-term process, the in HCMC and Hanoi. Modeling and development of a AAA: first stages of which are within the CPS risk scoring methodology for case selection for desk VDR 2010 – Institutions, GAC Implementation, period). and field audit is currently ongoing. Support to SEDP Preparation, Support to Baseline (2007): Risk Management Unit in National Development Strategy place For Customs: Target (2011): First rudimentary risk  A legal framework for application of risk management IDF and Trust Funds > USD1 million: management system in place is developed, and risk management organization on Governance and Poverty Policy Analysis and three levels in customs administration is established Advice Program, Poverty Analysis and Policy (Headquarters Risk Management Unit, Risk Advice Support, Public Financial Management Management Divisions at regional level and Risk Reform Co-financing, TFs to support Public Management Teams at Customs sub-department Financial Management Modernization, IDF for level). Capacity Strengthening for the Vietnam Association of Certified Public Accountants  Client perception and satisfaction with customs  Proportion of importers and exporters performance has been improved significantly: 53.5% 88 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) saying they are satisfied with customs of the clients are satisfied with customs service and performance: agree that: Baseline (2005): 33.9% • Customs and import–export rules and regulations Target (2011): 55% are clear and transparent; • Implementation of customs procedures is clear and simple; • Time for customs procedures completion is quick; • Customs staff has adequate capacity to meet job requirements; and • Customs staff attitude is reasonable; and costs are reasonable  22.8% of businesses pay bribes during registration (PCI, 2010) (note: methodology and design changed from previous PCIs and therefore result does not  PCI panel survey of enterprises, match original indicator completely) percentage saying it is common to pay unofficial payments:  22.3% of business say they pay bribes to avoid taxes Baseline (2006): 69.8% and regulation being a major obstacle (PCI, 2008) (Note: indicator not included in the 2010 PCI)  Percentage saying they pay bribes to avoid taxes and regulations being a major  34.6% of firms say they pay bribe when seeking to obstacle: acquire government contracts (PCI, 2010) Baseline (2006): 39.1%  Percentage of firms who say they pay commissions to get contracts with the state: Baseline (2006): 59.1% Increase in the proportion of high ranking Lending: public servants that declare their asset in Public Financial Management Reform, Customs accordance with the anti-corruption law Modernization (cancelled before termination), ICT, Tax Administration, PRSC 9, Public  High ranking public servants that declare  Target achieved: 105,070 people (97%) declared the Investment Reform DPO 1-2 their asset in accordance with the anti- first time, 514,525 people (96%) continued corruption law declaration, 100% agencies participated (2010) AAA: Baseline (2007): 0 people, 0 agencies VDR 2010 – Institutions, GAC Implementation, Target (2011): more people; 100% of Support to SEDP Preparation, Support to agencies National Development Strategy Trust Funds > USD1 million: Governance and Poverty Policy Analysis and Advice Program, Poverty Analysis and Policy Advice Support, Public Financial Management Reform co-financing, TFs to support Public Financial Management Modernization, IDF for 89 Self-Evaluation Summary of Vietnam CPS Program CPS Outcome/Cluster of Outcomes and Status And Evaluation Summary Lending and non-lending Activities that Lessons and suggestions for the new CPS Outcome Indicators (baselines and contributed to the outcome targets) Capacity Strengthening for the Vietnam Association of Certified Public Accountants Added outcome: Improved transparency and Lending: efficiency of selected public services in ICT Development Danang and Hanoi  More public services available online  Online applications of priority public services are AAA: under procurement in Danang and Hanoi (e.g. vehicle VDR 2010 – Institutions, GAC Implementation, registration, driver license, business registration) Support to SEDP Preparation, Support to National Development Strategy  Design for CoST pilot program completed in 2010 and IDF and Trust Funds > USD1 million:  Construction Industry Transparency pilot implementation completed in early 2011 ahead of Governance and Poverty Policy Analysis and (CoST): Indicators: time. Governance, Transparency and Anti-Corruption Advice Program, Poverty Analysis and Policy Framework included in Northern Delta Transport Advice Support, Public Financial Management Infrastructure Projects and now standard in large Reform Co-financing, TFs to support Public transport projects. Hence also included in Haiphong Financial Management Modernization, IDF for Urban Transport and Da Nang – Quang Nai Capacity Strengthening for the Vietnam Expressway Project. Association of Certified Public Accountants 90 APPENDIX 2: PLANNED LENDING PROGRAM AND ACTUAL DELIVERIES (FY07 – FY11) CAS PLANS (January 3, 2007) STATUS37 FY Project USD(M) USD(M) IBRD IDA IBRD IDA Year 2007 Program 135 - Phase II 50.0 Program 135 - Phase II 50.0 Avian & Human Influenza Control 20.0 Avian & Human Influenza Control 20.0 Higher Education II 60.0 Higher Education II 59.4 Coastal Cities Environmental Sanitation 124.7 Coastal Cities Environmental Sanitation 124.7 Mekong Transport Infrastructure Development 207.0 Mekong Transport Infrastructure Development 207.7 PRSC 6 150.0 PRSC 6 175.0 Mekong Transport/Flood Protection-Supplementary 15.0 Mekong Transport/Flood Protection-Supplementary 25.0 Financing Financing Hanoi Urban Transport 131.8 Additional Actual Projects 50.0 Tax Administration Reform 80.0 HIFU Development GEF-Hanoi Urban Transport 10.9 Subtotal 849.4 Subtotal 711.8 Year 2008 Land Administration 50.0 Land Administration 75.0 Northern Delta Transport Development 150.0 Northern Delta Transport Development 170.0 Northern Upland Health Support 60.0 Northern Upland Health Support 60.0 Rural Distribution Project 107.0 Rural Distribution Project 150.0 Rural Finance III 100.0 Rural Finance III 200.0 Danang Priority Infrastructure Development 100.0 Danang Priority Infrastructure Development 152.4 PRSC 7 150.0 PRSC 7 150.0 Agriculture Competitiveness 55.0 Additional Actual Projects Financial Sector Modern. & Info. Management 60.0 Hanoi Urban Transport (moved from FY07) 155.2 Local Development Investment Fund 150.0 Tax Administration Reform (moved from FY07) 80.0 Livestock Competitiveness & Food Safety 65.0 GEF-Hanoi Urban Transport (moved from FY07) 9.8 GEF-Coastal Cities 2.7 GEF-PCB Management 13.4 GEF-Integrated Protected Area/Landscape 5.0 37 Actual, Dropped, or forwarded to a different FY 91 CAS PLANS (January 3, 2007) STATUS37 FY Project USD(M) USD(M) IBRD IDA IBRD IDA Subtotal 1,068.1 Subtotal 1,202.4 Year 2009 Renewable Energy Development 100.0 Renewable Energy Development 202.0 School Education Quality Assurance 45.0 School Education Quality Assurance 127.0 Second Program 135 - Phase 2 50.0 Second Program 135 - Phase 2 100.0 PRSC 8 150.0 PRSC 8 350.0 Second Water Supply Development (FY11) 110.0 Additional Actual Projects Hydropower Development 150.0 Agriculture Competitiveness (moved from FY08) 59.8 Social Security Reform 100.0 Financial Sector Modern. & Info. Management 60.0 Natural Disaster APL 2 64.0 (moved from FY08) Red River Delta Rural Water Supply & Sanitation 96.0 GEF-Coastal Cities (moved from FY08) 5.4 APL 2 GEF-PCB Management (moved from FY08) 7.0 Rural Energy II - Additional Financing 200.0 Higher Education Reform Support (DPL) 50.0 Subtotal 865.0 Subtotal 1,161.2 Subtotal FY07-FY09 2,782.5 Subtotal FY07-FY09 3,075.4 PROGRESS REPORT PLANS (November 24, 2009) STATUS Year 2010 Local Development Investment Funds 190.0 Local Development Investment Funds 190.0 Urban Upgrading - Additional Financing 160.0 Urban Upgrading - Additional Financing 160.0 Livestock Competitiveness and Food Safety 65.0 Livestock Competitiveness and Food Safety 65.0 Second Northern Mountain Poverty Reduction 150.0 Second Northern Mountain Poverty Reduction 150.0 Natural Disaster Risk Management-AF 50.0 Natural Disaster Risk Management-AF 75.0 HCM Environment & Sanitation AF 92.0 HCM Environment & Sanitation AF 90.0 RRD RWSSP - AF 65.0 RRD RWSSP - AF 65.3 PRSC 9 150.0 PRSC 9 150.0 Central North Health Support 65.0 Central North Health Support 65.0 Power Sector Reform DPL 200.0 116.0 Power Sector Reform DPL 200.0 111.8 Project Preparation TA 75.0 Project Preparation TA 100.0 Public Investment Reform 1 500.0 Public Investment Reform 1 500.0 SEIER - Additional Financing 5.0 SEIER - Additional Financing 26.5 New-Model Universities 50.0 100.0 New-Model Universities 180.4 Second Higher Education DPO 50.0 Subtotal 750.0 1,333.0 Subtotal 700.0 1,429.0 Year 2011 Trung Son Hydro Power Development 330.0 Trung Son Hydro Power Development 330.0 92 CAS PLANS (January 3, 2007) STATUS37 FY Project USD(M) USD(M) IBRD IDA IBRD IDA Third Program 135 -Phase 2 100.0 Third Program 135 -Phase 2 50.0 Haiphong Urban Transport Project 150.0 Haiphong Urban Transport Project 175.0 Hospital Waste Management 150.0 Hospital Waste Management 150.0 PRSC 10 150.0 PRSC 10 Second Public Investment Reform 500.0 Second Public Investment Reform 87.0 263.0 Urban Water Supply & Waste Water 50.0 100.0 Urban Water Supply & Waste Water 200.0 Third Higher Education DPO 50.0 Additional Actual Projects Social Security Reform 100.0 Second Higher Education DPO (moved from FY10) 50.0 Road Network Improvement –AF 230.0 PFMRP - Additional Financing 14.0 Industrial Pollution Control 50.0 Transmission & Distribution II-AF 180.0 Public- Private Partnership Pilot 100.0 120.0 Mekong Delta Integrated Rural Development 160.0 Development of Highland Region and Selected 120.0 Coastal Cities Environment-AF 65.0 Central Province Expressway Development 471.0 143.0 Avian and Human Influenza Protection AF 10.0 Subtotal 980.0 1,320.0 Subtotal 1,068.0 1,280.0 Subtotal ( FY10-FY11) 1,730.0 2,653.0 Subtotal ( FY10-FY11) 1,768.0 2,709.0 Total FY (FY07-FY11) 1,730.0 5,435.5 Total FY (FY07-FY11) 1,768.0 5,784.4 93 APPENDIX 3: PLANNED NON LENDING SERVICES AND ACTUAL DELIVERIES (FY07-FY11) CPS PLANS (January 3, 2007) STATUS38 Year 2007 Technical Assistance to the State Bank of Vietnam Economic Sector Works Financial Sector Development Investment Climate Assessment (ICA) Capital Markets Monitoring and Assistance Skills for Growth-Tertiary Education Vietnam Development Report – Capital Mobilization (2008_ Financial Sector Assessment Program (FSAP) Post WTO accession (WBI, MDTF financed study Country Gender Assessment (CGA) Investment Climate Assessment/Private Sector development Country Social Analysis Infrastructure Strategy/ Related subsector studies &TA Environment Monitor CY06: River Basin Pollution Private Public Partnership for Energy, Transport, water Vietnam Development Report 2007 Ministry of Transport SOE reform issues Health Financing and Strategy Work Vietnam Food Safety and Agricultural Health Action Plan Skills for Growth & Tertiary Education Technical Assistance Development Information Center (VDIC) Poverty and Social Impact Assessment Wastewater Decree Country Social Analysis CA: Vietnam -CDS in Medium-Size Cities Country Gender Assessment/Gender Portfolio Analysis Health Issues Paper Vietnam Development Report – Social Sector Issues (FY09) Policy Note on SP Social Security Reform/Social Protection Vietnam WTO Accession Health Issue Paper Ecological Design Strategy in Haiphong Trade Strategic environment Analysis/Country Environment Analysis Strategic Environmental Assessment Forest Sector Support/PER/Forest Policy/Law Enforcement and Social Security Reform Governance Annual Environment Monitor Report Vietnam Development Report – Natural Resources (FY10) Safeguard Strengthening for Energy Program Water Resources Sector Review Land Policy Dialogues/Nom-Market Land allocation/Land and Credit in Vietnam WBI-Strategic Environmental Assessment Vietnam Development Report – Roadmap for 2010 (FY07) Vietnam Development Report: Governance (FY06) 38 Actual , Dropped, or Forwarded to a different FY 94 CPS PLANS (January 3, 2007) STATUS38 Corporate Governance WBI - Parliamentary and Media Program National Policy Academy Support Public Expenditure Review/Integrated Fiduciary Assessment TA on Public Sector Accounting Standards, State Treasury & State Audit of Vietnam TA for Public Procurement (Implementation of Law, IDF for Public Procurement M&E Capacity Building Program for MPI and ODA Management Anti-Corruption Diagnostic Study/Evolving Relationship between Government and Society Year 2008 NA Economic Sector Works Priority Infrastructure Investment Water Resources Sector Review Country Environment Analysis Medium Cities Transport Strategy Study Land Policy Stocktaking Improving knowledge and statistics on women Health Policy Notes CFAA 2007 Vietnam Development Report 2008 Vietnam's Capital Markets Technical Assistance ESMAP- Gas Master Plan Land Policy Dialogue Early Childhood Care and Development Tax Policy Reform Promote Strategic Urban Planning FIRST: Regulation and Guidance for Management Sustainable Regional Master Plans Social Safeguard Policy support WTO Vietnam Infrastructure Finance Capacity Building for Mon. FS Stability MoT Policy advice Rural Development Strategy Social Security Reform 95 CPS PLANS (January 3, 2007) STATUS38 Year 2009 NA Economic Sector Works Expressway Investment Strategy CA: Vietnam- preparation for Danang Urban Plan Vietnam Development Report 2009 Vietnam A&A ROSC FY09 Cluster-Social & Land Conflict Management FY09 Cluster-Policy for Financing Infrastructure PPPs Technical Assistance FIRST: Establishing a national Association of People's Credit Funds FIRST: International Standard for Supervising Insurance Sector FIRST: Study for Establishing Centre of Security Depository FIRST: Regulation and Guidance for Management of Investment Funds Quang Nam Integrated Development Carbon Finance Assist TA Gas Sector Development Framework Social Security Reform Tax Policy Reform Public Financial Management Reform GAC Implementation Support to PPI Reform in Vietnam VN-Implementing Health Insurance Law VN-Social Security Modernization TA PROGRESS REPORT PLANS (September 24, 2009) STATUS Year t 2010 Economic Sector Works Economic Sector Works Forest Sector Support II Forest Sector Support II Bond Market Development Roadmap Bond Market Development Roadmap High Quality Basic Education for All Constraint Assessment-Bottleneck Constraint Assessment-Bottleneck Vietnam Development Report 2010 Vietnam Development Report 2010 - Institutions Vietnam Financial Sector Strategy Financial Sector Strategy Medium Cities Transport (MOC) Infrastructure Policy/Regulatory Reform * Sanitation Management for Urban Areas Regional Development & Urbanization * Policy for Financing Infra PPPs II Medium Cities Transport PSD Competitiveness and Innovation Agriculture and Rural Economic & Sector Work * Sanitation Management for Urban Areas 96 CPS PLANS (January 3, 2007) STATUS38 Policy for Financing Infrastructure PPPs II * Policy Banks Reform PSD Competitiveness and Innovation Social Safety Net Needs Assessment Social & Land Conflict Management * Infrastructure Policy/Regulatory Reform * Vietnam Financial Impact Assessment 2 Fuel Efficiency & Trade Facilitation Technical Assistance Technical Assistance Rural Electrification Impact Studies HIV/AIDS Strategy HIV/AIDS strategy and policy dialogue Hydro Safeguards TA Provincial/Local ICT Development TA for Renewable Energy Development GAC Implementation TA for Vietnam Energy Efficiency Program Support to SEDP Preparation Provincial/Local ICT Development Support to National Development Strategy Prioritizing Climate Change Investments * Vietnam Social Safety Net Assessment Support to SBV FY10 Cluster Social & Land management GAC Implementation * Support to SEDP Preparation * Additional Actual Products: Support to National Development Strategy Finance & Enterprise Sector Policy Notes Vietnam Virtual Learning Program Social Accountability in Large Infrastructure Health Sector Reform TA * Vietnam Financial Investigations Course Future Power Generation IBRD Transition TA Year t 2011 Economic Sector Works Economic Sector Works Education for All/Inclusive Education Program * FY09 Cluster-Regional Development & Urbanization (moved from FY10) Education Business Development Program * Cluster-Agriculture and Rural ESW (moved from FY10) Health Financing/Gov't Program (hospital autonomy) * Policy Banks Reform (moved from FY10) Vietnam Development Report 2011 - Nat. Res. & Env. Mgt. High Quality Education for All Crisis Impact Analysis & Social Protection Policy Monitoring Vietnam Development Report 2011 Technical Assistance Technical Assistance Support to SEDP Preparation * Rural Elect. Impact Studies (moved from FY10) Infrastructure Policy/Regulatory Reform * Hydro Safeguards TA (moved from FY10) Agriculture and Rural Economic & Sector Work * TA for Renewable Energy Development (moved from FY10) Regional Development & Urbanization * TA for Vietnam Energy Efficiency Program (moved from FY10) 97 CPS PLANS (January 3, 2007) STATUS38 Prioritizing Climate Change Investments * FY09 Cluster-Prioritizing Climate Change Investment (moved from Social & Land Conflict Management * FY10) Health Sector Reform TA * Support to SBV (moved from FY10) Vietnam Virtual Learning Program (moved from FY10) Urban Environment MOC & ACVN FIRST #7040: Enhancing Deposit Insurance (cancelled) READ Health Systems Strengthening Support FSAP Preparatory TA GAC Implementation SBV on-site examination manual Rural Broadband Strategy Phase I Health Systems Strengthening Program II Country Systems in Rural WSS Workshop: Toolkit for PPPs for Highways Additional Actual Projects: Vietnam - ICR ROSC Update Climate Change Scale-up Mekong Delta Transport Sector Portfolio Assessment Enhancing role of MSMEs in Vietnam Country Gender Action Plan & Assessment * Programmatic AAA 98 APPENDIX 4: FY07-FY11 PROJECT CLOSURES AND OUTCOME RATINGS ( as of June 30, 2011) ICR IEG Age Original Actual Outcome Outcome Net No Project (yrs) Approval Date Closing Date Closing Date Rating Rating Disconnect39 Projects closed in FY07 0% 7.5 1 Rural Energy 6.6 30-May-00 30-Jun-04 31-Dec-06 S S 0 2 Agriculture Diversification 8.5 23-Jun-98 31-Dec-04 31-Dec-06 S S 0 3 PRSC 5 na 22-Jun-06 31-Dec-06 31-Dec-06 S S 0 4 National Health Support 10.8 16-Jan-96 4-Oct-03 31-Oct-06 MS MS 0 5 Transmission, Distribution 9.4 20-Jan-98 30-Jun-02 30-Jun-07 S S 0 6 Avian Influenza Emergency 2.9 3-Aug-04 31-Dec-06 30-Jun-07 S S 0 7 Higher Education 8.8 27-Aug-98 30-Jun-05 30-Jun-07 S MS 0 8 Primary Teacher Dev. 5.5 20-Dec-01 31-Dec-05 30-Jun-07 HS S 0 Projects closed in FY08 7.9 1 Northern Mountains Pov. Reduction 6.2 25-Oct-01 31-Dec-07 31-Dec-07 S S 0 2 Coastal Wetlands Protection and Mngt 7.8 23-Nov-99 30-Sep-06 31-Aug-07 MS S 0 3 Mekong Delta Water Resources 8.7 4-May-99 30-Jun-05 31-Dec-07 S S 0 4 3 Cities Sanitation 9.1 18-May-99 30-Jun-05 30-Jun-08 S MS 0 5 Program 135 - Phase II na 21-Mar-07 31-Dec-07 31-Dec-07 MS 6 PRSC 6 na 21-Jun-07 31-Dec-07 31-Dec-07 na na Projects closed in FY09 6.0 1 PRSC 7 na 26-Jun-08 31-Dec-08 31-Dec-08 na na 2 Targeted Budget Support for EFA 4.0 28-Jun-05 30-Jun-09 30-Jun-09 MS MS 0 3 Comm-based Rural Infrastructure 8.0 26-Jun-01 31-Dec-07 30-Jun-09 S MS 0 No Project Age Approval Date Original Actual ICR IEG Net 39 For SILs only. 99 (yrs) Closing Date Closing Date Outcome Outcome Disconnect40 Rating Rating Projects closed in FY10 7.4 1 Regional Blood Transfusion Centers 7.5 16-Apr-02 31-Mar-08 30-Sep-09 MS MS 0 2 Rural Finance II 7.3 30-May-02 30-Sep-08 30-Sep-09 S S 0 3 Second Program 135 - Phase 2 na 21-May-09 31-Dec-09 31-Dec-09 na na 4 Higher Education Reform Support (DPL) na 23-Jun-09 31-Dec-09 31-Dec-09 na na 5 PRSC 8 na 26-Jun-09 31-Dec-09 31-Dec-09 na na 6 GEF - Demand Side Management & Energy na 24-Jun-03 30-Jun-07 30-Jun-10 S 7 Public Investment Reform DPL na 22-Dec-09 30-Sep-10 na na Projects closed in FY11 7.5 1 Power Sector Reform na 6-Apr-10 31-Aug-11 na na 2 GEF - SEIER na 25-Jun-02 30-Jun-08 31-Dec-10 na na 3 Primary Educ. for Disad. Children 7.7 6-May-03 31-Dec-09 31-Dec-10 S 4 PRSC 9 na 24-Jun-10 31-Dec-10 na na 5 Custom Modernization 5.6 10-Nov-05 30-Jun-11 6 Mekong Transport and Flood Protection 10.5 20-Dec-00 30-Jun-06 30-Jun-11 7 Second Higher Education DPL na 30-Nov-10 30-Jun-11 na na 8 Second Payment System & Bank Modern. 6.3 10-Mar-05 30-Jun-10 30-Jun-11 40 For SILs only. 100 ANNEX 3: COUNTRY-AT-A-GLANCE (CAS ANNEX A2) Vietnam at a glance /1 8/31 1 East Lo wer Ke y D e v e lo pm e nt Indic a t o rs A sia & middle Vietnam P acific inco me Age distribution, 2009 ( 2 0 10 ) Male Female P o pulatio n, mid-year (millio ns) 88.4 1,944 3,81 1 75-79 Surface area (tho usand sq. km) 331 16,302 31,898 60-64 P o pulatio n gro wth (%) 1.2 0.7 1.2 Urban po pulatio n (% o f to tal po pulatio n) 28 45 41 45-49 30-34 GNI (A tlas metho d, US$ billio ns) 99.9 6,149 8,846 15-19 GNI per capita (A tlas metho d, US$ ) ,1 1 30 3,163 2,321 GNI per capita (P P P , internatio nal $ ) 2,910 6,026 4,784 0-4 6 4 2 0 2 4 6 GDP gro wth (%) 6.8 7.4 7.1 percent of total population GDP per capita gro wth (%) 5.5 6.6 5.9 ( m o s t re c e nt e s t im a t e , 2 0 0 4 – 2 0 10 ) .25 P o verty headco unt ratio at $ 1 a day (P P P , %) 13 17 .. Under-5 mortality rate (per 1,000) P o verty headco unt ratio at $ 2.00 a day (P P P , %) 38 39 .. Life expectancy at birth (years) 75 72 68 60 Infant mo rtality (per 1,000 live births) 20 21 43 Child malnutritio n (% o f children under 5) 20 9 24 50 40 5 A dult literacy, male (% o f ages 1 and o lder) 95 96 87 30 5 A dult literacy, female (% o f ages 1 and o lder) 91 91 74 Gro ss primary enro llment, male (% o f age gro up) 102 1 11 109 20 Gro ss primary enro llment, female (% o f age gro up) 100 1 12 105 10 0 A ccess to an impro ved water so urce (% o f po pulatio n) 94 88 86 A ccess to impro ved sanitatio n facilities (% o f po pulatio n) 75 59 50 1990 1995 2000 2009 Vietnam East Asia & Pacific a N e t A id F lo ws 19 8 0 19 9 0 2000 2 0 10 (US$ millio ns) Net ODA and o fficial aid 228 181 1,681 3,744 Growth of GDP and GDP per capita (%) To p 3 do no rs (in 2008): Japan 4 1 924 ,1 1 91 12 France 15 12 53 143 10 Germany 0 16 33 1 12 8 6 A id (% o f GNI) .. 3.0 5.5 4.0 A id per capita (US$ ) 4 3 22 43 4 2 Lo ng- T e rm E c o no m ic T re nds 0 95 05 Co nsumer prices (annual % change) .. 36.4 -1.6 9.2 GDP implicit deflato r (annual % change) .. 42.1 3.4 1 1 .9 GDP GDP per capita Exchange rate (annual average, lo cal per US$ ) 0.6 6,482.8 4,1 1 67.8 9,1 1 26.0 Terms o f trade index (2000 = 100) .. 88 100 127 19 8 0 – 9 0 19 9 0 – 2 0 0 0 2 0 0 0 – 10 (average annual gro wth %) P o pulatio n, mid-year (millio ns) 53.7 66.2 77.6 88.4 2.1 1.6 1.3 GDP (US$ millio ns) .. 6,472 ,1 31 73 103,572 4.6 7.9 7.5 (% o f GDP ) A griculture .. 38.7 24.5 20.6 2.8 4.3 3.7 Industry .. 22.7 36.7 41.1 4.4 1 1 .9 9.3 M anufacturing .. 12.3 18.6 19.7 1.9 1 1 .2 10.9 Services .. 38.6 38.7 38.3 7.1 7.5 7.5 Ho useho ld final co nsumptio n expenditure .. 84.3 66.4 64.9 .. 5.1 7.7 General go v't final co nsumptio n expenditure .. 12.3 6.4 6.5 .. 3.2 7.9 Gro ss capital fo rmatio n .. 12.6 29.6 38.9 .. 19.8 12.0 Expo rts o f go o ds and services .. 36.0 55.0 77.5 .. 19.2 1 1 .2 Impo rts o f go o ds and services .. 45.3 57.5 87.8 .. 19.5 13.2 Gro ss savings .. -2.3 30.5 32.7 0 No te: Figures in italics are fo r years o ther than tho se specified. 201 data are preliminary. Gro up data are fo r 2009. .. indicates data are no t available. a. A id data are fo r 2009. Develo pment Eco no mics, Develo pment Data Gro up (DECDG). 101 Vietnam B a la nc e o f P a ym e nt s a nd T ra de 2000 2 0 10 Governance indicators, 2000 and 2009 (US$ millio ns) To tal merchandise expo rts (fo b) 14,483 72,191 To tal merchandise impo rts (cif) 15,637 84,801 Voice and accountability Net trade in go o ds and services -173 -7,948 Political stability Current acco unt balance ,1 1 08 -3,999 Regulatory quality as a % o f GDP 3.6 -3.9 Rule of law Wo rkers' remittances and co mpensatio n o f emplo yees (receipts) 2,000 6,626 Control of corruption Reserves, including go ld 3,030 12,400 0 25 50 75 100 2009 Country's percentile rank (0-100) C e nt ra l G o v e rnm e nt F ina nc e higher values imply better ratings 2000 (% o f GDP ) Source: Kaufmann-Kraay-Mastruzzi, World Bank Current revenue (including grants) 20.4 26.2 Tax revenue .. .. Current expenditure 15.9 21.2 T e c hno lo gy a nd Inf ra s t ruc t ure 2000 2009 Overall surplus/deficit -2.0 -6.5 P aved ro ads (% o f to tal) 25.1 47.6 Highest marginal tax rate (%) Fixed line and mo bile pho ne Individual 50 35 00 subscribers (per 1 peo ple) 4 137 Co rpo rate 33 25 High techno lo gy expo rts (% o f manufactured expo rts) 1 1 .0 4.9 E xt e rna l D e bt a nd R e s o urc e F lo ws E nv iro nm e nt (US$ millio ns) To tal debt o utstanding and disbursed 12,823 43,797 A gricultural land (% o f land area) 28 32 To tal debt service 1,309 2,766 Fo rest area (% o f land area) 37.7 44.5 Debt relief (HIP C, M DRI) – – Terrestrial pro tected areas (% o f land area) .. .. To tal debt (% o f GDP ) 41.1 42.3 Freshwater reso urces per capita (cu. meters) 4,508 4,221 To tal debt service (% o f expo rts) 7.5 3.5 Freshwater withdrawal (billio n cubic meters) .. 82.0 Fo reign direct investment (net inflo ws) 1,298 7,600 CO2 emissio ns per capita (mt) 0.69 1.3 P o rtfo lio equity (net inflo ws) .. 128 GDP per unit o f energy use (2005 P P P $ per kg o f o il equivalent) 3.3 3.7 Composition of total external debt, 2009 Energy use per capita (kg o f o il equivalent) 477 689 Short-term, IBRD, 0 IDA, 6,270 6,645 Wo rld B a nk G ro up po rt f o lio 2000 2009 IMF, 83 Private, 4,172 (US$ millio ns) Other multi- IB RD lateral, 10,010 To tal debt o utstanding and disbursed – – Disbursements – – P rincipal repayments – – Bilateral, 11,566 Interest payments – – US$ millions IDA To tal debt o utstanding and disbursed ,1 3 11 6,270 Disbursements 174 1,206 P riv a t e S e c t o r D e v e lo pm e nt 2000 2 0 10 To tal debt service 9 87 Time required to start a business (days) – 44 IFC (fiscal year) Co st to start a business (% o f GNI per capita) – 12.1 To tal disbursed and o utstanding po rtfo lio 223 156 Time required to register pro perty (days) – 57 o f which IFC o wn acco unt 107 153 Disbursements fo r IFC o wn acco unt 25 24 Ranked as a majo r co nstraint to business 2000 2 0 10 P o rtfo lio sales, prepayments and (% o f managers surveyed who agreed) repayments fo r IFC o wn acco unt 18 40 A ccess to /co st o f financing .. 40.5 A ccess to land .. 25.9 M IGA Gro ss expo sure 46 95 Sto ck market capitalizatio n (% o f GDP ) 0.4 19.7 New guarantees 10 0 B ank capital to asset ratio (%) .. .. 0 No te: Figures in italics are fo r years o ther than tho se specified. 201 data are preliminary. /1 8/31 1 .. indicates data are no t available. – indicates o bservatio n is no t applicable. Develo pment Eco no mics, Develo pment Data Gro up (DECDG). 102 Millennium Development Goals Vietnam With selected targets to achieve b etween 1990 and 2015 (estimate clo sest to date sho wn, +/- 2 years) V ie t na m G o a l 1: ha lv e t he ra t e s f o r e xt re m e po v e rt y a nd m a lnut rit io n 19 9 0 19 9 5 2000 2009 .25 P o verty headco unt ratio at $ 1 a day (P P P , % o f po pulatio n) .. 63.7 40.1 13.1 P o verty headco unt ratio at natio nal po verty line (% o f po pulatio n) .. 58.1 28.9 14.5 Share o f inco me o r co nsumptio n to the po o rest qunitile (%) .. 7.8 7.5 7.3 P revalence o f malnutritio n (% o f children under 5) 40.7 40.6 26.7 20.2 G o a l 2 : e ns ure t ha t c hildre n a re a ble t o c o m ple t e prim a ry s c ho o ling P rimary scho o l enro llment (net, %) .. .. 95 88 P rimary co mpletio n rate (% o f relevant age gro up) .. .. 96 .. Seco ndary scho o l enro llment (gro ss, %) 35 .. 65 .. Yo uth literacy rate (% o f peo ple ages 1 5-24) 94 .. 95 97 G o a l 3 : e lim ina t e ge nde r dis pa rit y in e duc a t io n a nd e m po we r wo m e n Ratio o f girls to bo ys in primary and seco ndary educatio n (%) .. .. 93 .. Wo men emplo yed in the no nagricultural secto r (% o f no nagricultural emplo yment) .. 41 41 .. P ro po rtio n o f seats held by wo men in natio nal parliament (%) 18 19 26 26 G o a l 4 : re duc e unde r- 5 m o rt a lit y by t wo - t hirds Under-5 mo rtality rate (per 1 ,000) 55 44 29 24 Infant mo rtality rate (per 1,000 live births) 39 33 24 20 M easles immunizatio n (pro po rtio n o f o ne-year o lds immunized, %) 88 95 97 97 G o a l 5 : re duc e m a t e rna l m o rt a lit y by t hre e - f o urt hs M aternal mo rtality ratio (mo deled estimate, per 1 00,000 live births) 170 120 91 56 B irths attended by skilled health staff (% o f to tal) .. 77 68 88 Co ntraceptive prevalence (% o f wo men ages 1 5-49) 53 65 74 80 G o a l 6 : ha lt a nd be gin t o re v e rs e t he s pre a d o f H IV / A ID S a nd o t he r m a jo r dis e a s e s P revalence o f HIV (% o f po pulatio n ages 1 5-49) 0.1 0.1 0.2 0.4 Incidence o f tuberculo sis (per 100,000 peo ple) 204 204 204 200 Tuberculo sis case detectio n rate (%, all fo rms) 37 37 56 54 G o a l 7 : ha lv e t he pro po rt io n o f pe o ple wit ho ut s us t a ina ble a c c e s s t o ba s ic ne e ds A ccess to an impro ved water so urce (% o f po pulatio n) 58 68 79 94 A ccess to impro ved sanitatio n facilities (% o f po pulatio n) 35 47 57 75 Fo rest area (% o f land area) 28.8 .. 37.7 44.5 Terrestrial pro tected areas (% o f land area) .. .. .. .. CO2 emissio ns (metric to ns per capita) 0.3 0.4 0.7 1.3 GDP per unit o f energy use (co nstant 2005 P P P $ per kg o f o il equivalent) 2.5 2.9 3.3 3.7 G o a l 8 : de v e lo p a glo ba l pa rt ne rs hip f o r de v e lo pm e nt 00 Telepho ne mainlines (per 1 peo ple) 0.1 1 .1 3.3 35.2 00 M o bile pho ne subscribers (per 1 peo ple) 0.0 0.0 1.0 01 1 .5 00 Internet users (per 1 peo ple) 0.0 0.0 0.3 27.5 00 P erso nal co mputers (per 1 peo ple) 0.0 0.1 0.8 9.6 Education indicators (%) Measles immunization (% of 1-year ICT indicators (per 100 people) olds) 100 100 150 75 75 100 50 50 25 50 25 0 2000 2005 2009 0 0 1990 1995 2000 2009 2000 2005 2009 Primary net enrollment ratio Fixed + mobile subscribers Ratio of girls to boys in primary & secondary Vietnam East Asia & Pacific education Internet users No te: Figures in italics are fo r years o ther than tho se specified. .. indicates data are no t available. /1 8/31 1 Develo pment Eco no mics, Develo pment Data Gro up (DECDG). 103 ANNEX 4: SELECTED INDICATORS OF BANK PORTFORLIO PERFORMANCE AND MANAGEMENT (CAS ANNEX B2) As Of Date 9/30/2011 Indicator 2009 2010 2011 2012 Portfolio Assessment a Number of Projects Under Implementation 46 48 50 51 b Average Implementation Period (years) 3.7 4.1 4.2 4.7 a, c Percent of Problem Projects by Number 10.9 6.3 6.0 9.4 a, c Percent of Problem Projects by Amount 11.2 5.0 5.3 6.3 a, d Percent of Projects at Risk by Number 10.9 8.3 6.0 9.4 a, d Percent of Projects at Risk by Amount 11.2 6.8 5.3 6.3 e Disbursement Ratio (%) 14.8 18.6 14.9 2.8 Portfolio Management CPPR/JPPR during the year (yes/no) No Yes No Yes Supervision Resources (total US$’000) 3,402 3,501 3,884 3,735 Average Supervision (US$’000/project) 66.7 61.4 60.7 66.7 Memorandum Item Since FY 97 Last Five FYs Proj Eval by IEG by Number 38 16 Proj Eval by IEG by Amt (US$ millions) 3,482.2 1,351.1 % of IEG Projects Rated U or HU by Number 0.0 0.0 % of IEG Projects Rated U or HU by Amt 0.0 0.0 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. FY12 is as of September 30, 2011 * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 104 ANNEX 5: INDICATIVE FY12-FY14 LENDING PROGRAM (CAS ANNEX B3)41 Vietnam Product Title FY12 FY13 FY14 PILLAR 1: COMPETITIVENESS Outcome 1.1: Improved Economic Management and Business Environment PRSC 10 ï?? EMCC 1 ï?? EMCC 2 ï?? Outcome 1.2: Improved Quality and Efficiency of Infrastructure Services Power Sector Development DPO 2 ï?? Mekong Delta Transport Additional Financing ï?? Distribution Efficiency ï?? Power Sector Development DPO 3 ï?? Road Asset Management ï?? Dau Giay-Phan Thiet Expressway ï?? Outcome 1.3: Increased Capacity for Innovation and Value Addition Inclusive Innovation ï?? Higher Education DPO 3 ï?? Fostering Innovation through Science Research and ï?? Technology Private Higher Education Loan Fund ï?? Higher Education 3 ï?? PILLAR 2: SUSTAINABILITY Outcome 2.1: Improved Natural Resource Management (“Greenâ€?) Forest Sector Development Additional Financing ï?? Coastal Resources for Sustainable Development ï?? Regional Wildlife Conservation ï?? Regional Mekong Water Resources ï?? Irrigation Modernization and Rehabilitation - Phase 1 ï?? Outcome 2.2: Strengthened Environmental Protection and Management (“Cleanâ€?) Industrial Pollution Control ï?? HCMC Environment and Sanitation Phase 2 ï?? Danang Sustainable City Development ï?? Mekong Delta Urban Upgrading ï?? 41 The FY15-FY16 lending program for Vietnam will be elaborated in the Vietnam CPS Progress Report, to be issued in FY14. 105 Product Title FY12 FY13 FY14 Medium Cities Development ï?? Outcome 2.3: Enhanced Preparedness for Natural Hazards and Climate Change (“Resilientâ€?) Climate Change DPO 1 ï?? Climate Change DPO 2 ï?? Managing Natural Hazards ï?? Climate Change DPO 3 ï?? PILLAR 3: OPPORTUNITY Outcome 3.1: Increased Opportunities for the Poor and Household Resilience to Shocks Social Protection Systems ï?? Central Highland Poverty ï?? School Readiness Promotion ï?? Outcome 3.2: Improved Basic Public Service Delivery and Access Rural Transport 3 Additional Financing ï?? North East and Red River Delta Regional Health System ï?? Support Rural Sanitation & Water Supply ï?? Health Sector Governance Strengthening ï?? Northern Mountains ï?? 106 ANNEX 6: INDICATIVE FY12-FY14 AAA PROGRAM (CAS ANNEX B4)42 Vietnam Product Title Fiscal Year PILLAR 1: COMPETITIVENESS 2012 2013 2014 Outcome 1.1: Improved Economic Management and Business Environment Vietnam Knowledge Platform ï?? ï?? ï?? FSAP ï?? ï?? Programmatic Financial Sector AAA ï?? ï?? ï?? Financial Sector Soundness ï?? Country and Sub-National Financial Management ï?? ï?? Assessments VDR 2012 ï?? Enhancing Roles of MSMEs ï?? ï?? VDR 2013 ï?? ï?? Taking Stock/Macro Monitoring ï?? ï?? ï?? Programmatic Governance and Anti-Corruption TA ï?? ï?? ï?? Programmatic Public Finance Reviews (by sector) ï?? ï?? ï?? VDR 2014 ï?? ï?? Outcome 1.2 Improved Quality and Efficiency of Infrastructure Services Programmatic Infrastructure Finance ï?? ï?? ï?? Trade Facilitation and Logistics Assessment ï?? ï?? ï?? Outcome 1.3 Increased Capacity for Innovation and Value Addition Programmatic Skills and Education System ï?? ï?? Programmatic Agriculture Competitiveness ï?? ï?? ï?? Developing Knowledge Partnership ï?? ï?? ï?? Global Knowledge Transfer ï?? Science and Innovation ï?? PILLAR 2: SUSTAINABILITY 2012 2013 2014 Outcome 2.1: Improved Natural Resource Management (“Greenâ€?) Programmatic Governance and Anti-Corruption TA ï?? ï?? ï?? Outcome 2.2 Strengthened Environmental Protection and Management (“Cleanâ€?) 42 This annex shows analytical work funded by the Bank‟s administrative budget. See Annex 1 for complementary work supported by trust funds. The FY15-FY16 AAA program for Vietnam will be elaborated in the Vietnam CPS Progress Report, to be issued in FY14. 107 Product Title Fiscal Year PILLAR 1: COMPETITIVENESS 2012 2013 2014 Green Urban Transport ï?? ï?? ï?? GHG Assessment for Danang ï?? Outcome 2.3 Enhanced Preparedness for Natural Hazards and Climate Change (“Resilientâ€?) Programmatic Climate Change ï?? ï?? ï?? PILLAR 3: OPPORTUNITY 2012 2013 2014 Outcome 3.1 Increased Opportunities for the Poor and Household Resilience to Shocks Programmatic Social Protection ï?? ï?? Outcome 3.2 Improved Basic Public Service Delivery and Access Programmatic Health AAA ï?? ï?? Programmatic Poverty Assessment ï?? ï?? ï?? Quality Education for All Policy Dialogue ï?? ï?? ï?? Programmatic Skills and Education System ï?? ï?? Rural Broadband TA ï?? Programmatic Governance and Anti-Corruption TA ï?? ï?? ï?? 108 ANNEX 7: SOCIAL INDICATORS (CAS ANNEX B5) Vietnam Social Indicators Latest single year Same region/income group East Low er- Asia & m iddle- 1980-85 1990-95 2003-11 Pacific incom e POPULATION Total population, mid-year (millions) 58.9 73.0 87.3 1,943.8 3,810.8 Grow th rate (% annual average for period) 1.8 2.0 1.3 0.8 1.2 Urban population (% of population) 19.6 22.2 28.3 45.0 40.9 Total fertility rate (births per w oman) 4.2 2.9 2.0 1.9 2.5 POVERTY (% of population) National headcount index .. 58.1 14.5 .. .. Urban headcount index .. 25.1 3.3 .. .. Rural headcount index .. 66.4 18.7 .. .. INCOME GNI per capita (US$) .. 250 1,130 3,163 2,321 Consumer price index (2000=100) .. 67 208 126 130 Food price index (2000=100) .. 64 334 .. .. INCOME/CONSUMPTION DISTRIBUTION Gini index .. 35.7 38.3 .. .. Low est quintile (% of income or consumption) .. 7.8 6.7 .. .. Highest quintile (% of income or consumption) .. 44.0 46.4 .. .. SOCIAL INDICATORS Public expenditure Health (% of GDP) .. 1.8 2.8 2.2 2.1 Education (% of GDP) .. .. 5.3 3.3 4.1 Net prim ary school enrollm ent rate (% of age group) Total 91 87 92 .. 87 Male .. 88 92 .. 88 Female .. 86 92 .. 86 Access to an im proved w ater source (% of population) Total .. 68 94 88 86 Urban .. 91 99 96 94 Rural .. 62 92 81 81 Im m unization rate (% of children ages 12-23 months) Measles 19 95 97 91 79 DPT 42 93 96 93 79 Child malnutrition (% under 5 years) 47 41 20 9 24 Life expectancy at birth (years) Total 61 69 75 72 68 Male 59 68 73 71 66 Female 63 71 77 74 70 Mortality Infant (per 1,000 live births) 41 33 20 21 43 Under 5 (per 1,000) 58 44 24 26 57 Adult (15-59) Male (per 1,000 population) 262 215 134 158 201 Female (per 1,000 population) 204 153 88 99 136 Maternal (modeled, per 100,000 live births) .. 120 56 89 230 Births attended by skilled health staff (%) .. .. 88 89 66 Note: 0 or 0.0 means zero or less than half the unit show n. Net enrollment rate: break in series betw een 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months w ho received vaccinations before one year of age or at any time before the survey. World Development Indicators database, World Bank - 15 April 2011. 109 ANNEX 8: PROGRESS TOWARD THE MILLENNIUM DEVELOPMENT GOALS Goal 1 Eradicate extreme poverty and hunger Progress Status Target Reduce by half the proportion of Poverty reduced by three-quarters between 1990 and 2008 Already 1 people living in poverty between 1990 achieved and 2015 Target Reduce by half the proportion who Proportion reduced by more than two thirds between 1993 Already 2 suffer from hunger between 1990 and and 2008 achieved 2015 Goal 2 Achieve universal primary education Progress Status Target Ensure that, by 2015, children In 2009, net enrolment in primary school was 97 percent Likely to 3 everywhere, boys and girls alike, will and 88.5 percent of children who enter primary school be be able to complete a full course of complete five years of primary education. Of these, over achieved primary schooling 90 percent continue to lower secondary education, (no significant differences between regions or between urban and rural areas. Goal 3 Promote gender equality Progress Status Target Ratio of girls to boys in primary, Girls now represent 48.2 percent of students enrolled at Already 4 secondary and tertiary education by primary level, 48.1 percent at lower secondary level, and achieved 2015 49.1 percent at upper secondary level. Goal 4 Reduce child mortality Progress Status Target Reduce by two thirds the mortality rate Reduced by 58 percent between 1990 and 2009 (down Likely to 5 among children under five between from 58 to 24.4 per 1000). The infant mortality rate was be 1990 and 2015 reduced from 44.4 per 1,000 live births in 1990 to 16 in achieved 2009. Goal 5 Improve maternal health Progress Status Target Reduce maternal mortality by three Fell by 70 percent from 233 per 100,000 births in 1990 to Already 6 quarters, between 1990 and 2015 69 in 2009 achieved Goal 6 Combat HIV/AIDS and other diseases Progress Status Target Halt and begin to reverse the spread of Despite progress in some areas and great efforts by the Uncertai 7 HIV/AIDS by 2015 Government to address HIV over the past ten years, the n HIV prevalence rate continues to increase. The HIV prevalence rate is estimated at 0.28 percent for all age groups in 2010. Target Halt and begin to reverse the incidence Impressive progress on prevention and control of malaria Already 8 of malaria and other major diseases by shows that Viet Nam has already achieved the MDG achieved 2015 target on malaria control. Viet Nam is also acknowledged to have done a good job in controlling other epidemics such as SARS, H5N1 and H1N1. Goal 7 Ensure environmental sustainability Progress Status Target Integrate the principles of sustainable Viet Nam has shown strong commitment to environmental Uncertai 9 development into country policies and concerns at the international and policy level, and n program; reverse loss of environmental significant achievements have been made in relation to resources MDG 7. For example, forest coverage has increased from 27.8 percent in 1990 to about 40 percent in 2010. Target Reduce by half the proportion of Today, about 83 percent of the rural population has access Uncertai 10 people without sustainable access to to safe water, up from 30 percent in 1990. On sanitation, n safe drinking water and basic sanitation less progress - overall poor conditions and lack of by 2015 hygiene. For instance, only 18 percent of rural households, 12 percent of rural schools and 37 percent of commune health stations have hygienic latrines which meet the Ministry of Health standards Source: United Nations, Vietnam (based on data available August 2011) 110 ANNEX 9: GENDER IN VIETNAM As noted in chapter I, Vietnam has made substantial progress on gender equality. Health outcomes have improved dramatically. Infant mortality dropped from 44 percent in 1990 to only 16 percent in 2009, with no differences between boy and girl infants. The decrease in maternal mortality is equally impressive, falling from 233 to 69 deaths per 100,000 live births from 1990 to 2009. Similar success has been achieved in school enrolment, where the gender gap has been eliminated, and has actually reversed slightly for tertiary education. There are still gaps in employment and wages, but they have lessened, and overall no difference exists in male and female poverty rates. Compared to other countries in the region, Vietnam has a high rate of women in the National Assembly of about 27 percent. Nevertheless, important challenges related to gender remain across sectors. These challenges – in the areas of health, education, employment, and participation – are in some cases more subtle but that does not mean they are not profound. Moreover, they cannot be addressed simply by relying upon a continuation of Vietnam‟s recent impressive economic growth. These challenges include: ï‚· Poverty - Older women, especially in rural areas, are overrepresented among the poor. The major gender difference in regards to poverty has to do with widows, who are both poorer and more numerous than widowers. This points to one key difference between men and women, namely power over assets. For example, even though a 2003 Land Law began a successful effort to include women on LTCs, as of 2008 the majority of LTCs still do not include the woman‟s name. And while women do have avenues for obtaining credit, access to larger funds often requires the kind of collateral that LTCs can provide. ï‚· Education - Gender education gaps still exists among certain ethnic minority groups, and among the majority Kinh population there is actually a small reverse gender gap. Also, there is a significant degree of segregation of men and women in their fields of study, which is connected to significant segregation in terms of occupation and industry of employment, as well. Another concern is that educational materials still promote gender stereotypes. ï‚· Health - Women still have less health insurance coverage than men, and they also continue to be victims of gender based violence. Over 30 percent have experienced physical abuse, and over 50 percent emotional abuse. Another major concern is the rise in sex ratio at birth (SRB) from 106 male births for every 100 female births in 1999 (the approximate biological norm) to 111 in 2006. SRBs are highest for higher income groups with better access to sonograms and sex selected abortions. For higher parity births among the richest quintile, the SRB is 133.1. So this situation -- which is associated with increased trafficking and violence -- might worsen with economic development. In terms of men‟s health, males have much higher rates of HIV and AIDS, smoking, and drinking. ï‚· Employment - Women‟s wages are now about 75 percent of men‟s according to the 2009 Labor Force Survey, and women are still highly segregated by both industry and occupation. Women are also in more vulnerable jobs, for example, own-account work and unpaid family labor. In fact, during the recent economic crisis, women disproportionately left wage employment for more vulnerable jobs. Women also receive less vocational training, and undertake a disproportionate amount of unpaid work, which is seen as a barrier not only to employment, but also to civic participation. ï‚· Lower wages, a bigger gender wage gap, and far worse working conditions prevail in small informal family-run enterprises and among casual labor. Particularly disadvantaged are migrant women, widows, older women, ethnic minorities, and women with disabilities. Many of these women are landless or lost their land to industrial parks and urbanization. These are the women who are least 111 able to access the opportunities generated by Vietnam‟s integration into the informal economy. Many are also unable to take advantage of targeted training or employment schemes intended for the poor. ï‚· Participation –There are still signs that women do not have an equal voice in the public sphere – for example, low rates of representation in party committees. But, women‟s ability to participate in public decision-making processes goes beyond the formal political and policy domain. The Grassroots Democracy Decree (Decree 79) was intended to provide a framework to promote democratic participation at the local level and to emphasize decentralizing decision-making within development programs to achieve a closer fit between needs and design. In fact, involving women in development projects and programs has provided a widely used route to increasing their participation in public life. Still, participatory poverty monitoring points out that many of the barriers that women face higher up in the public sector are also encountered at the grassroots level. Even with all these challenges, it is important to acknowledge Vietnam’s efforts in regards to gender equality. Vietnam has recently enacted laws on gender equality and against domestic violence, and this year adopted a national strategy on gender equality. The successes in the areas of health, education, employment, and participation are significant, and should be used as a platform to expand gender equality even further by addressing the more complicated issues that remain. Vietnam’s transition to a middle income country would be assisted by a flexible and trained citizenry that could contribute to the economy and civic life of the nation in the most efficient way possible. To that end, the World Bank plans to: - Support the Government of Vietnam in improving the implementation of the Law on Gender Equality and the National Strategy on Gender Equality in part by building gender awareness and capacity within relevant ministries, by devoting appropriate resources, and by working to build systems of accountability. - Support the development of a gender data system by building on the recent development of the National Gender Statistical Indicator System. - Apply a gender lens to Bank projects to take advantage of opportunities to improve project design and implementation by incorporating the voices, talents, and concerns of both women and men. - Close the knowledge gap through quantitative and qualitative data on gender issues. This includes research on cultures and norm and assessing the value of unpaid work in the home. 112 ANNEX 10: KEY ECONOMIC INDICATORS (CAS ANNEX B6) Actual Estimate Projected Indicator 2006 2007 2008 2009 2010 2011 2012 2013 2014 National accounts (as % of GDP)a Gross domestic products 100 100 100 100 100 100 100 100 100 Agriculture 20.4 20.4 22.2 20.9 20.6 20.2 19.8 19.4 19.1 Industry 41.5 41.5 39.8 40.2 41.1 41.7 41.4 41.2 41.1 Services 38.1 38.2 37.9 38.8 38.3 38.1 38.8 39.4 39.8 Total consumption 69.4 70.9 75.5 72.2 71.4 70.7 70.4 70.4 70.8 Gross domestic fixed investment 33.4 38.3 34.6 34.5 35.6 32.8 33.0 33.0 32.4 Government 15.3 14.2 11.7 14.0 13.5 12.1 12.1 12.0 11.8 Private 18.1 24.0 22.9 20.5 22.0 20.7 21.0 20.9 20.6 Exports (GNFS)b 73.7 76.8 77.2 67.4 76.9 82.9 87.8 91.4 95.1 Imports (GNFS)b 78.3 92.6 92.4 77.6 84.6 89.5 94.5 97.8 101.4 Gross domestic saving 31.7 28.2 24.5 27.8 28.6 29.3 29.6 29.6 29.2 Gross national saving 36.7 37.4 29.4 23.8 32.7 32.1 32.4 31.4 30.1 Memorandum items Gross domestic products 61 71 90 93 104 120 131 146 163 (US$ billion at current prices) GNI per capita 690 780 910 1010 1130 1225 1322 1445 1578 Real annual growth rate (%) Gross domestic products at market prices 8.2 8.5 6.3 5.3 6.8 5.8 6.1 6.3 6.5 Gross national income 7.9 7.7 6.1 4.7 6.3 5.7 5.9 5.6 6.1 Real annual per capita growth rate (%) Gross domestic products at market prices 7.0 7.3 5.2 4.2 5.7 4.6 5.0 5.2 5.4 Total consumption 4.4 15.4 7.9 1.2 4.8 4.4 3.9 4.0 4.1 Private consumption 6.6 16.2 8.1 0.7 4.2 4.1 3.9 3.9 4.1 Balance of Payments (US$ billion) Exports (GNFS) 44.9 54.6 69.7 62.8 79.7 99.3 115.4 133.8 154.9 Merchandise (FOB) 39.8 48.6 62.7 57.1 72.2 90.6 105.4 122.3 141.8 Imports (GNFS) 47.7 65.8 83.4 72.3 87.6 107.3 124.1 143.2 165.1 Merchandise (FOB) 42.6 58.9 75.5 65.4 79.3 97.6 113.3 131.0 151.3 Resource balance -2.8 -11.3 -13.7 -9.5 -7.9 -8.0 -8.8 -9.4 -10.2 Net current transfer 4.1 6.4 7.3 6.5 8.6 8.3 9.4 9.9 10.0 Current account balance -0.2 -7.0 -10.8 -6.1 -4.0 -4.5 -4.6 -5.1 -5.6 Net private foreign direct investment 3.6 12.8 8.7 6.8 8.5 8.4 9.0 9.2 9.4 Long-term loan (net) 1.0 2.0 1.0 4.5 2.1 1.9 1.7 1.5 1.8 Official 0.8 1.6 0.8 3.6 1.7 1.5 1.3 1.2 1.4 Private 0.2 0.4 0.2 0.9 0.4 0.4 0.3 0.3 0.4 Other capital (net, including E&O) -0.2 2.4 1.6 -13.4 -10.4 -2.9 2.3 2.4 2.5 Change in the reserves -4.3 -10.2 -0.5 8.2 3.8 -2.9 -8.3 -8.0 -8.1 Memorandum items Resources balance (% of GDP) -4.6 -15.9 -15.2 -10.4 -10.3 -6.6 -6.7 -6.4 -6.2 Nominal annual growth rate Merchandise exports (FOB) 22.8 21.9 29.1 -8.9 26.4 25.5 16.3 16.1 16.0 Primary 21.0 17.8 23.7 -25.0 12.7 12.8 7.3 8.8 8.2 Manufactures 26.0 30.1 26.8 -5.4 31.4 32.5 19.0 17.6 17.2 Merchandise imports (FOB) 21.4 39.6 28.1 -13.3 21.2 23.1 16.1 15.6 15.5 Public Finance (as % of GDP at market prices) 113 Actual Estimate Projected Indicator 2006 2007 2008 2009 2010 2011 2012 2013 2014 Current revenues 27.0 26.1 26.7 24.5 26.2 25.4 25.8 24.9 24.5 Current expenditures 18.5 20.3 19.7 20.9 21.2 21.5 22.1 21.5 21.4 Current account balance/ surplus (+) or deficit (-) 8.5 5.9 7.1 3.6 5.0 3.9 3.7 3.3 3.1 Capital expenditures 8.9 8.4 8.3 12.6 11.5 7.7 7.5 6.9 6.3 Overall fiscal balance / surplus (+) or deficit (-) -0.4 -2.5 -1.2 -9.0 -6.4 -3.9 -3.8 -3.6 -3.2 Foreign financing 1.5 1.6 1.7 3.6 3.4 2.4 2.5 2.1 1.8 Monetary indicators M2/GDP 94.7 117.9 109.2 126.1 140.8 130.0 130.4 130.2 130.2 Growth of M2 (%, year on year) 33.6 46.1 20.3 29.0 33.3 15.0 14.5 14.0 14.0 Private sector credit growth/total credit growth (%) 136 103 110 129 174 116 122 123 126 Price indices (2000=100) Merchandise export price index 140.4 150.5 187.9 165.5 183.2 208.1 233.1 256.4 276.9 Merchandise import price index 124.5 130.9 154.7 136.8 144.4 157.8 172.0 186.6 199.7 Merchandise term of trade index 112.8 115.0 121.4 121.0 126.9 131.9 135.5 137.4 138.7 Real effective exchange rate (US$/LCU)/c 96.9 106 125.8 115.9 114.0 … … … … Consumer price index (annual average, % change) 7.5 8.3 23.1 6.7 9.2 19.0 10.5 7.5 6.0 GDP deflators (% change) 7.3 8.2 22.1 6.0 11.9 17.8 7.6 7.4 7.0 a. GDP at factor cost b. “GNFSâ€? denotes “goods and nonfactor services.â€? c. “LCUâ€? denotes “local currency units.â€? 114 ANNEX 11: KEY EXPOSURE INDICATORS (CAS ANNEX B7) Actual Estimate Projected Indicator 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total debt outstanding and disbursed (TDO) (US$m)/a 19,190 23,100 28,400 36,336 43,707 49,113 51,801 57,093 62,686 Net disbursements (US$m) 1,272 3,998 5,303 8,897 5,684 5,589 4,523 4,360 5,246 Total debt service (TDS) (US$m) 1,337 1,686 2,033 3,062 2,763 3,241 4,011 4,520 4,912 Debt and debt service indicators (%) TDO/XGSb 39.4 38.0 37.1 52.8 49.7 45.8 41.6 39.8 38.1 TDO/GDP 31.5 32.5 31.4 39.0 42.2 41.0 39.4 39.0 38.5 TDS/XGS 2.7 2.8 2.6 4.5 3.2 3.0 3.2 3.2 3.0 Concessional/TDO 73.4 72.7 71.9 75.2 71.8 72.7 72.8 72.6 72.3 IBRD exposure indicators (%) IBRD DS/public DS .. .. .. .. 0.0 0.2 0.2 0.2 0.2 c Preferred creditor DS/public DS (%)/ 57.0 57.0 61.6 60.4 48.4 53.9 52.8 58.2 60.6 IBRD DS/XGS .. .. .. .. 0.0 0.0 0.0 0.0 0.0 IBRD TDO (US$m) .. .. .. .. 700 803 925 1,133 1,506 Of which present value of guarantees (US$m) .. .. .. .. .. .. .. .. .. Share of IBRD portfolio (%) .. .. .. .. 1.6 1.6 1.8 2.0 2.4 IDA TDO (US$m) 3,593 4,609 5,074 6,270 7,010 8,423 9,815 11,388 13,127 IFC (US$m) 75 70 144 152 335 737 .. .. .. Loans 51 33 96 131 313 659 .. .. .. Equity and quasi-equity /d 24 38 48 21 22 78 .. .. .. MIGA MIGA guarantees (US$m) 128.6 113.7 106.4 99.3 .. .. .. .. .. a. Includes public and publicly guaranteed debt, private non-guaranteed, use of IMF credits and net short-term capital b. “XGSâ€? denotes exports of goods and services, including workers‟ remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes equity and quasi-equity types of both loan and equity instruments. 115 ANNEX 12: OPERATIONS PORTFOLIO (IBRD/IDA AND GRANTS) (CAS ANNEX B8-WB) Operations Portfolio (IBRD/IDA and Grants) As of 10/18/2011 Closed Projects 55 IBRD/IDA * Total Disbursed (Active) 2,291.35 of which has been repaid 2.03 Total Disbursed (Closed) 4,301.91 of which has been repaid 256.29 Total Disbursed (Active + Closed) 6,593.26 of which has been repaid 258.32 Total Undisbursed (Active) 5,683.55 Total Undisbursed (Closed) 0.00 Total Undisbursed (Active + Closed) 5,683.55 Active Projects Difference Between Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements a/ Project Development Implementation Frm Project Name Objectives Progress FY IBRD IDA Grant Cancel. Undisb. Orig. ID Rev'd Pillar 1: Competitiveness Outcome 1.1: Improved Economic Management and Business Environment P088759 Fin Sector Modern and Info Management System S S 2009 60 58.54982 1.6720186 P075399 Public Financial Management Reform Proj. S MS 2003 68.33 36.45263 14.868496 P099376 Tax Administration Modernization Project MS MU 2008 80 80.76432 61.570768 P120946 VN-Public Investment Reform 2 # # 2011 87.3 262.7 355.0411 116 Outcome 1.2: Improved Quality and Efficiency of Infrastructure Services P066396 VN-SYSTEM ENERGY, EQUITIZATION & RENEWAB S S 2002 251.51 29.15395 -46.36726 -46.3673 P084871 VN-TRANS & DISTRIB 2 S S 2006 180 200 243.7289 50.530534 P084773 VN-Trung Son Hydropower Project S S 2011 330 329.175 6.0983333 P104848 VN-HIFU DEVELOPMENT S S 2007 50 32.48178 30.165728 7.832395 P094055 VN-Local Development Investment (LDIFP) S MS 2010 190 186.2396 39.217819 P118610 VN-Project Preparation TA Facility S MS 2010 100 98.56328 3.4333333 P059663 VN-ROAD NETWORK IMPROVEMT MS S 2004 225.26 70.98782 53.27343 P083588 VN-MKG DELTA TRANSPORT INFRA DEV MS MS 2007 207.7 166.0636 63.572378 30.29233 P095129 VN-Northern Delta Transport Dev MS MU 2008 170 164.9817 42.59387 P106235 VN-EXPRESSWAY DEVEL Danang- Quang Ngai S S 2011 470.49 143.01 614.6565 P083581 VN-HANOI URBAN TRANSPORT MU MU 2008 155.21 146.1646 99.043062 P111548 VN-Haiphong Urban Transport Project S S 2011 175 179.2988 -0.600315 Outcome 1.3: Increased Capacity for Innovation and Value Addition P079665 VN-2ND HIGHER EDUCATION S S 2007 59.4 20.73511 17.901004 P110693 VN New Model University S S 2010 180.4 191.5046 7.4833333 P100916 VN-Third Rural Finance Project S S 2008 200 77.03553 43.636268 P108885 VN - Agriculture Competitiveness Project S MS 2009 59.8 47.98946 22.073829 P090723 VN-Livestock Competitiveness & Food Safety S S 2010 65.26 63.43572 30.211872 Pillar 2: Sustainability Outcome 2.1: Improved Natural Resources Managements (“Greenâ€?) P065898 VIETNAM WATER RESOURCES ASSISTANCE S S 2004 157.8 38.79902 31.920575 P066051 VN - Forest Sector Development Project S S 2005 39.5 12.18804 9.3114251 P074414 VN - GEF Forest Sector Development Proj S S 2005 9 4.270614 4.2706142 4.270614 P113949 VN-Mekong Delta Water Mgmt for Rural Dev S S 2011 160 162.679 1.33E-06 P096418 VN-Land Administration Project U MU 2008 75 64.07193 32.088256 Outcome 2.2: Strengthened Environmental Protection and Management (“Cleanâ€?) P052037 VN-HCMC ENVMTL SANIT. S MS 2001 256.34 90.03299 -31.73038 -21.6822 P082295 VN-COASTAL CITIES ENVMT SANIT. S S 2007 190 156.7753 24.484295 P090374 VN-GEF-IF-Coastal Cities # MS 2009 5.35 3.852836 P119090 Hospital Waste Management Support S S 2011 150 152.6558 117 P085393 VN-GEF-Hanoi Urban Transport Dev MU MU 2008 9.8 8.70522 6.4552197 P083593 VN - National CFC & Halon Phase out Pr S MS 2006 1.26 0.576604 -0.52168 P099460 VN-GEF-PCB Management Project S MS 2009 7 6.215326 1.7153265 Outcome 2.3: Enhanced Preparedness for Natural Hazards and Climate Change (“Resilientâ€?) P073361 VN -Natural Disaster Risk Management Project S MS 2006 161 64.46116 -19.25942 P101608 VN-Avian & Human Influenza Control &Prep S MS 2007 30 10.92884 0.3804324 P103238 VN-Renewable Energy Development Project S S 2009 202 202.9488 57.504836 P116846 VN-GEF-Clean Production & Energy Efficiency # # 2012 2.374407 Pillar 3: Opportunity Outcome 3.1: Increased Opportunities for the Poor and Household Resilience to Shocks P117610 VN - Third Program 135 Phase 2 Support S S 2011 50 50.91403 P113493 VN-2nd Northern Mountains Poverty Reduction MS MS 2010 150 139.734 4.2165506 P085080 VN-ROAD SAFETY MS MS 2005 31.73 18.66172 17.687345 8.114024 P082604 VN-HIV/AIDS Prevention Project S S 2005 35 2.249634 2.1057792 Outcome 3.2: Improved Basic Infrastructure and Public Service Delivery P079663 VN-Mekong Regional Health Support Project S S 2006 70 7.719909 -15.31786 P082672 VN-Northern Upland Health Support Project MS MS 2008 60 44.26232 -8.482388 P095275 VN-Central North Region Health Support S S 2010 65 60.9244 P091747 VN-School Education Quality Assurance MS MS 2009 127 121.7471 23.959157 P074688 VN-RURAL ENERGY 2 S S 2005 420 198.1727 -30.26948 P080074 VN-GEF-RURAL ENERGY 2 S S 2005 5.25 3.469092 -1.580908 P099211 VN-Rural Distribution Project S S 2008 150 56.39972 -14.13037 P075407 VN-Rural Transport 3 S S 2006 106.25 38.42951 26.24102 18.66403 P070197 VN-URBAN UPGRADING S MS 2004 382.47 265.1926 54.009342 P073763 VN-WATER SUPPLY DEV. MS MS 2005 112.64 68.5769 59.411335 P077287 VN-RRD RWSS S S 2006 111.14 65.50264 -3.811181 P086508 VN-Priority Infra Investment S S 2008 152.438 124.5617 14.378192 P119077 VN-Urban Water Supply and Wastewater S S 2011 200 200.603 0.6666667 P079344 VN -ICT Development MS MS 2006 93.72 5.98 71.35484 69.873192 70.45295 Overall Result 1067.79 6642.61 40.03 5.98 5710.641 850.80396 71.57684 Supervision ratings: HS = highly satisfactory; S = satisfactory; MS = moderately satisfactory; MU = moderately unsatisfactory; U = unsatisfactory; HU = highly unsatisfactory 118 ANNEX 13: STATEMENT OF IFC’S HELD AND DISBURSED PORTFOLIO (CAS ANNEX B8-IFC) Amounts in US Dollar Millions Accounting Date as of : 09/30/2011 Commitment Institution LN ET QL + QE GT RM ALL ALL LN ET QL + QE GT RM ALL ALL Cmtd - Cmtd - Cmtd - Cmtd Cmtd - Cmtd - Cmtd - Out - Out - Out - Out - Out - Out - Fiscal Year Short Name Out - IFC IFC IFC IFC - IFC IFC IFC Part IFC IFC IFC IFC IFC Part 2003/ 2007/ 2008/ 2010/ 2011 ACB-Vietnam 0 0 0 5.00 0 5.00 0 0 0 0 5.00 0 5.00 0.00 2009/ 2010/ 2011/ 2012 An Binh Bank 0 0 38.02 39.24 0 77.25 0 0 0 38.02 27.85 0 65.87 0.00 2008/ 2009/ 2010 Antara 7.00 0.16 0 0 0 7.16 7.00 7.00 0.15 0 0 0 7.15 7.00 2011 CICT 38.75 0 0 0 0 38.75 0 12.28 0 0 0 0 12.28 0.00 2002 CyberSoft 0 0.00 0 0 0 0.00 0 0 0.00 0 0 0 0.00 0.00 2003 Dragon Capital 0 0 1.05 0 0 1.05 0 0 0 1.05 0 0 1.05 0.00 2005 Khai Vy 1.55 0 0 0 0 1.55 0 1.55 0 0 0 0 1.55 0.00 2011 LienVietBank 0 0 0 4.74 0 4.74 0 0 0 0 4.74 0 4.74 0.00 2010 Masan Group 0 0 36.65 0 0 36.65 0 0 0 36.48 0 0 36.48 0.00 1999/ 2009 Nghi Son Cement 34.44 0 0 0 0 34.44 25.48 34.44 0 0 0 0 34.44 25.48 2011/ 2012 OCB Vietnam 0 0 0 5.00 0 5.00 0 0 0 0 5.00 0 5.00 0.00 2006/ 2010 Paul Maitland 10.00 0 0 0 0 10.00 0 10.00 0 0 0 0 10.00 0.00 2009 Paynet 0 0.00 1.18 0 0 1.18 0 0 0.00 1.18 0 0 1.18 0.00 2011 Piaggio Vietnam 21.65 0 0 0 0 21.65 0 0 0 0 0 0 0 0.00 2002/ 2006/ 2008 SABCO 18.33 0 0 0 0 18.33 0 18.33 0 0 0 0 18.33 0.00 2010 SN Power Sing 0 0 1.00 0 0 1.00 0 0 0 0 0 0 0 0.00 2009 SSIT 70.00 0 0 0 0 70.00 0 28.25 0 0 0 0 28.25 0.00 2003/ 2004/ 2005/ 2006/ 2007/ Sacombank 18.00 0 0 99.18 0 117.19 0 18.00 0 0 79.18 0 97.19 0.00 2008/ 2009/ 2010/ 2011/ 2012 2011 TVS IBank 0 0 5.00 0 0 5.00 0 0 0 4.00 0 0 4.00 0.00 2008/ 2009/ 2010/ 2011/ 2012 Techcombank 31.68 0 0 184.84 0 216.52 0 31.68 0 0 184.84 0 216.52 0.00 2011 Thien Minh Group 0 0 10.68 0 0 10.68 0 0 0 10.68 0 0 10.68 0.00 2012 Tien Phong Bank 0 0 0 0.00 0 0.00 0 0 0 0 0 0 0 0.00 2011 VECO 0 9.00 0 0 0 9.00 0 0 0 0 0 0 0 0.00 2002/ 2003/ 2007 VEIL 0 15.45 0 0 0 15.45 0 0 15.45 0 0 0 15.45 0.00 2008 VI Fund I 0 6.93 0 0 0 6.93 0 0 6.65 0 0 0 6.65 0.00 2008/ 2009/ 2010/ 2011 Vietnam Exim 0 0 0 59.14 0 59.14 0 0 0 0 59.14 0 59.14 0.00 2009/ 2011 Vietnam VIB 0 0 0 5.00 0 5.00 0 0 0 0 5.00 0 5.00 0.00 2011 Vietinbank 0 55.63 0 0 0 55.63 0 0 55.63 0 0 0 55.63 0.00 Total Portfolio 251.41 87.16 93.58 402.15 0 834.30 32.48 161.55 77.89 91.41 #### 0 701.61 32.48 119 ANNEX 14: VIETNAM COUNTRY SURVEY (May-June 2010) Methodology In May-June 2010, 725 stakeholders of the World Bank in Vietnam were invited to provide their opinions on the Bank’s assistance to the country by participating in a country survey, the first one in Vietnam since FY06. A total of 335 stakeholders participated in the survey (a 46 percent response rate). The majority of respondents (71 percent) were from Hanoi. More than half (56 percent) were from government. Other respondents were more fragmented: academia (10 percent), bilateral or multilateral agencies (8 percent), NGOs (6 percent), media (6 percent), private sector (2 percent), and National Assembly Delegates (1 percent). The survey used a mail-in questionnaire in which respondents were asked to indicate their overall attitudes toward the Bank, the importance of specific areas of the Bank’s work, and the Bank’s effectiveness in those areas. They were also asked to indicate their level of agreement with a series of statements about the way the World Bank does business. Respondents were also asked about general issues facing Vietnam, the Bank‟s future role, and the Bank‟s communication and outreach. The questionnaire was broken into seven sections: 1. Background Information: The first section asked respondents for their current position, specialization, familiarity, and geographic location. 2. General Issues facing Vietnam: Respondents were asked to indicate what they thought were the most important development priorities and to rate their optimism for the next generation in Vietnam. 3. Overall Attitudes toward the World Bank: Respondents were asked to rate the Bank‟s overall effectiveness, their agreement with various statements regarding the Bank‟s programs, poverty mission, relationships, and collaborations in Vietnam. Respondents were also asked to indicate what they felt were the Bank‟s greatest values and greatest weaknesses in its work and with which groups the Bank should work more. 4. The Work of the World Bank: Respondents were asked to rate their level of importance and the Bank‟s level of effectiveness across seventeen areas in which the Bank was involved, such as helping to reduce poverty and helping to bring about economic growth. 5. The Way the World Bank does Business: Respondents were asked to rate the Bank‟s level of effectiveness in the way it does business, including the Bank‟s knowledge, personal relationships, collaborations, and poverty mission. 6. Communication and Outreach: Respondents were asked to indicate where they get information about development issues in Vietnam. 7. The Future of the World Bank in Vietnam: Respondents were asked to rate the extent to which the Bank will play a significant role in Vietnam‟s development and to indicate what the Bank could do to make itself of greater value in Vietnam. 120 Findings (i) Priorities for Vietnam and Bank Support Respondents indicated that governance was the most important development priority for Vietnam. It was rated as the most or second most important priority for Vietnam by 47 percent of respondents, a significantly larger share than for other priorities. Those with the highest ratings after governance were economic growth (27 percent), infrastructure (21 percent), reducing corruption (17 percent), and improving the effectiveness of the law and justice system (also 17 percent). As for priorities for Bank support in Vietnam, respondents gave the highest mean rating to helping reduce poverty (8.4 on a 10-point scale with 1 being not at all and 10 being very important). This was followed by encouraging greater transparency in governance (8.1), ensuring that attention is paid to the environmental impact of Bank supported programs and strategies (8.1), helping to strengthen infrastructure development (8.1), helping to lay the foundation to integrate Vietnam into the global economy (8.0), help Vietnam adapt to/avert risk of climate change (8.0), helping to bring about economic growth (8.0), and safeguarding against corruption in Bank-funded projects with its procurement rules (7.9). The survey data indicate a gap between the relative perceived importance of development priorities for Vietnam and priorities for Bank support in Vietnam in three areas: poverty reduction, economic growth, and climate change. Poverty reduction is rated the most important out of 17 areas for the Bank to be involved in, but seventh out of 20 in its importance for Vietnam. Economic growth is the reverse: fifth out of 17 areas for the Bank to be involved in, but second among 20 areas important for Vietnam. One could infer from this that respondents know the Bank's mission is poverty reduction, and while they feel economic growth will continue to reduce poverty in Vietnam, and/or keep it from reversing its downward trend, they look to the Bank to help address the needs of the long-term poor who are less able to access the benefits of growth. Climate change is ranked fourth in importance out of 17 areas for the Bank to be involved in, but eleventh out of 20 in its importance for Vietnam. A possible interpretation is that climate change is considered a longer term issue that Government cannot tackle on its own, and the donor community, including the Bank, should therefore take the lead. (ii) The Bank’s Effectiveness Across all respondents, the Bank’s overall effectiveness in Vietnam received a mean rating of 7.7 (the same as in the FY06 survey), with 1 being very unfavorable and 10 being very favorable. Respondents from government, academia, media, other organizations, and NGOs had significantly higher ratings for the Bank‟s overall effectiveness in Vietnam than respondents from bilateral or multilateral agencies and private sector. Respondents saw the Bank as most effective in helping to reduce poverty, integrate Vietnam into the global economy, strengthening infrastructure development, and paying attention to the environmental impact of Bank programs, with all of these areas receiving mean ratings of 7.4 on the 10-point scale. Interestingly, respondents rated the Bank’s effectiveness in a given area on average below the area’s importance, which indicates the Bank needs to enhance even further its impact in priority areas. These "effectiveness gaps" are widest for the following work areas of the Bank, in descending order (i.e., the first work area in the list has the widest gap): ï‚· helping to strengthen the education sector ï‚· helping to strengthen the health sector ï‚· encouraging greater transparency in governance 121 ï‚· helping to strengthen the private sector ï‚· helping Vietnam adapt to/avert risk of climate change ï‚· safeguarding against corruption in projects/programs that the Bank funds with its procurement rules ï‚· helping to strengthen the regulatory framework ï‚· helping to reduce poverty (iii) The Bank’s Value Added Respondents indicated that the Bank’s greatest value to Vietnam was its financial resources (56 percent ranked this the Bank’s greatest or second greatest value), followed by knowledge (45 percent), implementation capacity (34 percent), and technical advice (31 percent). But if one considers the Bank‟s knowledge (studies and analyses), technical advice, and ability to build implementation capacity as various aspects of the “Knowledge Bank,â€? then their combined scores significantly exceed that of financial resources as the Bank‟s greatest added value, and in fact exceed 50 percent. And if votes for greatest and second greatest value are combined, the “Knowledge Bank" received nearly twice as many votes as financial resources. This indicates it will be very important that the Bank bring cutting edge skills and provide global knowledge to its engagement in Vietnam. The competitiveness of the Bank‟s financing terms will no doubt also be important, especially as IBRD accounts for a growing share of Vietnam's new commitments and as IDA 16 terms become less favorable for blend countries. (iv) The Bank’s Weaknesses and Collaboration with Stakeholders Areas deemed to be the Bank's greatest weaknesses all had to do with inflexibility. Listed in descending order of respondents‟ votes, these weaknesses are: imposing technocratic solutions without regard to political realities, not exploring alternative policy options, failing to adapt global knowledge to local conditions, and being too bureaucratic in its operational policies and procedures were also considered to be weaknesses of the Bank. Over half of all respondents indicated that the Bank should work more with others in Vietnam, in addition to partnership with the national government. Specifically, the Bank should work more with beneficiaries (59 percent of respondents), the donor community (40 percent), the private sector (35 percent), NGOs (23 percent), and the National Assembly (22 percent). 122 ANNEX 15: STAKEHOLDER CONSULTATIONS Stakeholder consultations on the CPS FY12-FY16 are being held at three stages aligned with key milestones in CPS preparation: before drafting, at the Concept stage and at the Corporate Review stage. The consultations have been aimed at: (i) enhancing broad ownership of the CPS; (ii) engaging with stakeholders in line with the principles of the Paris Declaration and Hanoi Core Statement; and (iii) benefiting from the insights of a broad group of stakeholders with knowledge and understanding of the country context. The consultation process for the CPS FY12-FY16 started with a round of consultations before the drafting process was initiated. The main participants have been the Government, where participants are from central government (Government‟s Core CPS Team with members from SBV, the Ministry of Finance (MOF), the Office of Government (OOG), and MPI, line ministries and other counterpart agencies), local government, and the National Assembly; civil society, where participants include international NGOs/local NGOs and CSOs, academia, ethnic minority groups, disability groups, women‟s groups, media, international and local private sector; and Development Partners, including multilateral and bilateral donors. Consultation Round 1: Visioning Workshop, January 2011 A CPS visioning consultation workshop was held with stakeholders in January 2011. The workshop was designed to engage the diverse group of stakeholders in discussions of key priority areas for the World Bank in a proactive and interactive manner. Participants identified and discussed what they thought the Bank‟s five key priority areas should be during the next five years and their rationale: ï‚· Macro-economic Development: Many participants mentioned the important role of the Bank in supporting the Government‟s efforts to secure macroeconomic stability. The Bank is seen as an important advisor and provider of independent analytical research and forecasts (conducted when possible in cooperation with relevant research institutions). Particular issues for the Bank to focus on included advice on a new economic model, reform of the SOE sector, and re-organizing the economic information/data system. ï‚· Infrastructure: Practically all participants agreed that infrastructure development should remain a top priority for the Bank. Within the area of infrastructure, focus was mostly on transport (urban transport, rural roads, and expressways were mentioned), but energy was also highlighted as very important. ï‚· Strengthening Human Resources: As a new middle income country, Vietnam is in need of human resources of high quality to intensify the socio-economic development efforts. Three areas were specifically highlighted as important for the Bank to support in relation to human resources: higher education, vocational training and capacity building ï‚· Climate change and natural disaster prevention The Bank can provide relevant international experience and lessons and help Vietnam with the development of strategies and actions for prevention of and dealing with natural disasters as well as approaches to climate change mitigation and adaptation. ï‚· Governance and Anti-Corruption: Practically all non-governmental participants saw governance and anti-corruption as a crucial area for the Bank to support. Corruption is seen as a major impediment to development. Government participants did not mention the issue of corruption, but several did nevertheless underline the need for a strengthening of institutions and the importance of the World Bank supporting the Government in this area. The Bank sought feedback on its perceived areas of comparative advantage. Some of the areas mentioned were: (i) the level of resources the Bank brings to the table – e.g., for financing large scale infrastructure, (ii) its global and regional perspective, (iii) its close and productive relationship with 123 the Government, and (iv) its ability to take a leading role in donor coordination due to its staff size, broad engagement across many sectors, and close relationship with the Government. Participants also discussed and exchanged ideas on what areas the Bank should approach differently in the future: ï‚· Sustainability and quality of growth: With the new MIC status, both the Government and the Bank will need to focus more on building increased sustainability and increasing the quality of growth. ï‚· Country ownership/systems and financing modalities: A number of government participants felt the Bank should promote more country ownership by moving towards the use of country systems, especially on procurement, as the slow rate of disbursement of Bank projects is seen as the greatest source of frustration in relation to their cooperation with the World Bank. Interestingly though, several of the non-government participants encouraged the World Bank to promote a more efficient and transparent use of public resources and cautioned the Bank against relying too much on country systems. ï‚· Improvement of Program Management Capacity and Aid Effectiveness: With other donors slowly phasing out, many participants found that the Bank should play a more active role both in supporting improvement of program management capacity on the Government side and in taking forward the aid effectiveness and donor coordination agenda. ï‚· More independence in policy advice: While the close relationship between the World Bank and the Government of Vietnam was mentioned as one of the Bank‟s comparative advantages, some participants also felt that the new development context of Vietnam requires the Bank to adopt a more independent voice with the Government in policy advice, debate and research. The workshop demonstrated quite different perspectives between government, donor, and non-government participants. While in general Government emphasizes the importance of the Bank as a source of infrastructure financing, other groups look to the Bank as a development institution. Within Government, different agencies also expressed different needs - some ministries put heavy emphasis on large infrastructure while other agencies would like to see more DPOs/budget support. Nearly all non- Government representatives emphasized the 'knowledge' bank aspects and the importance of the bank as a critical, independent reviewer and adviser on economic and other policies. While some (mostly Government) emphasized the need for more infrastructure, others (non-government) emphasized issues with the quality and maintenance of infrastructure and how it is prioritized and financed. All agreed on the importance of improving human capital, but there was a difference in views as to whether emphasis should be put on higher education vs. vocational training. With respect to higher education, the importance of governance and accountability issues rather than bricks and mortar was emphasized by some. Several non-government representatives noted that the efficiency of the state sector is a major challenge although the appropriate role for the World Bank in supporting this is less clear. Some non- government participants noted that the current Bank portfolio was perhaps spread out a bit too thinly. 124 Consultation Round 2: Three Sessions on CPS Concept Paper, June 2011 On June 6th, 2011, The World Bank hosted three separate rounds of consultations with the WBG‟s most important stakeholders in Vietnam on the CPS Concept Paper43 and its proposed strategic directions. Below are the main points from each session. Government of Vietnam SEDP and SEDS ï‚· The connection to the SEDP and SEDS was not as visible in the CPS Concept Note as the government would like to see, and they hoped to see further alignment with the Plan and Strategy moving forward. It was, however, appreciated that all three break-through areas of the SEDP and SEDS (infrastructure, human resources/skills development, and improving market institutions) were reflected clearly in the CPS – mainly through the first pillar on competitiveness, but this should be noted more clearly in the strategy. Comparative Advantages and Division of Labor ï‚· Government (MPI) underlined the importance of the Bank (as well as other donors) clarifying their comparative advantages. This will help facilitate division of labor among donors and in relation to the Government‟s own programs. Government flagged the need to take a fresh look at aid modalities and said they would be interested in how the Bank sees various new options. The new ODA Strategic Framework is an important step in terms of coordination, and the importance of ensuring a high level of alignment between the two documents was underlined. Background Diagnostics ï‚· It was also noted that it would be useful with more analysis of the regional and global context and what this context means for Vietnam. Government also encouraged the Bank to be more frank when assessing the weaknesses of government policies and the reasons behind and added that this would be the most useful way for Vietnam to learn as the country moves forward. The area flagged as the most important to include was more analysis on the risks for Vietnam in terms of falling into the so-called middle income trap and possible tools for Vietnam to avoid it. The World Bank Group‟s global experience makes it highly relevant in advising the government on this theme. Implications of MIC Status ï‚· The Vice-Minister raised the questions of whether Vietnam is truly ready to act as a MIC and whether the WB is ready to support Vietnam as a MIC and not the Low Income Country it was in the past. The new roles of both Vietnam and the WB were discussed: roles that demand the Government gradually take on a more active leadership and the Bank slowly start to move away from being primarily a source of money and to being more valued for its knowledge products, ideas, and policy advice. Views on Overall CPS Framework ï‚· Overall, most government representatives expressed satisfaction with the Concept Note and the proposed strategic directions. However, several participants noted that while the objective of “enhancing the quality of growthâ€? was capturing an important aspect, it was missing the notion of sustainability of growth and that sustainability should not be seen as only pertaining to the environment but rather be included in the overall objective. MPI and others noted that the term 43 One session with Government (including representatives from MPI, OOG, SBV and MOF as well as from line ministries and the National Assembly), one session with local civil society (including NGOs, media and the private sector) and one session with development partners (including bilateral and multilateral donors and international NGOs). 125 “equality of opportunityâ€? was not appropriate and suggested “social inclusionâ€? instead (as was used in the previous CPS and SEDP). In addition, it was noted that it is more important to address access to basic services in remote areas and for vulnerable groups than to focus on economic inequality. ï‚· While some participants welcomed the idea of having a pillar that addresses resilience to shocks and how to manage risks, others felt it was difficult to understand the idea behind the fourth pillar and that it would be better not to separate climate change mitigation and adaptation into two different pillars. The same was mentioned for social protection, which some participants preferred to have in just one pillar.44 Participants agreed governance and anti-corruption are a very important issue and that having it as a cross-cutting theme was a good idea. IBRD and IDA ï‚· Government thought it would be useful to have a road map of the transition from IDA to IBRD and to have more firm information about the timeline for decreasing IDA volumes. Private and Public ï‚· Many participants raised the issue of PPPs and what role this will play in Vietnam in the future. This was an area where the need for both World Bank and IFC support was highlighted and especially transport, energy and health were flagged as possible sectors for PPPs. As Vietnam moves forward, a clearer definition of government‟s role versus that of the private sector will be needed. In relation to transport (but relevant for all other sectors as well), it was flagged that the need for resources are huge and as both the national budget and aid flows only cover a small portion of those investment needs, it is extremely important to improve the efficiency of both public and private investments. Project Design and Procedures ï‚· Several line ministries raised the problems related to WB procedures and difficult project designs. It was discussed how to bring down preparation time and whether procedures could be simplified and more could be left to the country itself rather than having to be done by Bank staff or expensive international consultants. Dispersion ï‚· The session included discussions about whether the WB program is too dispersed and would benefit from more selectivity, or whether it is rather an asset for the Bank to be active in all sectors and thus that selectivity is not something the WB should strive for at this point. It was underlined that it was important to make sure that a greater selectivity would not happen at the expense of promoting social inclusion and protection of the most poor and vulnerable groups. It was also mentioned that perhaps it would be better to aim at reducing dispersion through a stronger regional focus rather than through thematic selectivity. ï‚· A few participants requested an increased support to National Target Programs and noted that an analysis of comparative advantages among donors in relation to the NTPs would be useful. Some participants felt it would be more useful to discuss how best to approach the question of division of labor rather than focusing on whether the Bank is too dispersed or not. 44 As a result of the feedback, the Bank team subsequently decided to make resilience a cross-cutting theme rather than a free- standing pillar. 126 Local Civil Society Oversight Mechanism and Bigger Role for Civil Society ï‚· One of the points that came out strongly was the idea of creating an oversight mechanism for civil society to monitor and supervise both government agencies and the private sector to help in the battle against inefficient use of public funds, poor service delivery and corruption in both the public and private sector. It was also noted that such an oversight mechanism would be extremely important in relation to fighting pollution and natural recourse degradation, and that domestic and international enterprises should be monitored to ensure greater environmental sustainability in the future. In general, the importance of broadening the participation of civil society to be part of discussions and debates about the future path of the country and how to tackle challenges ahead was underlined by many participants. The Bank was encouraged to promote a more active role for civil society in the future aid architecture (e.g., involving NGOs more in project design, as well as implementation and evaluation). Governance and Anti-Corruption ï‚· Many organizations mentioned the need for strengthening governance issues in both the public and private sector. Efficient use of funds, transparency, social accountability and access to information were mentioned as important issues. There was general concern about the systemic, inherent nature of corruption which was perceived as being widespread at all levels. The World Bank Group was encouraged to come out with a stronger position in the CPS on governance and anti-corruption and to be more concrete about the Bank‟s plans to address them. Environment and Natural Resources ï‚· Environmental and natural resource degradation was flagged by almost all organizations as one of the most serious issues facing Vietnam. While it was appreciated that the CPS Concept Note proposes a separate pillar for addressing environmental and natural resource concerns, it was felt that international donors could do more to promote this area and should scale up their activities in this field. The focus should be on improving governance in relation to managing natural resources and possibly to create a civil society oversight mechanism. Bank More Critical ï‚· It was mentioned that the Government and its achievements are praised a lot in the Concept Paper and while it was recognized that this was merited to some extend as well as necessary in some respects, it was also underlined that it is increasingly important for the Bank to be more critical of the Government in some areas, in the context of an equal and more mature relationship between Government and the Bank. Views on Overall CPS Framework ï‚· Most participants agreed that the overall framework suggested - including the four proposed pillars and overarching objective - seemed appropriate. It was however noted that the interesting part is how the pillars are implemented and what more concretely will be “filled intoâ€? each, which has not yet been clearly defined at this concept stage. While the Bank was commended for making governance a cross-cutting theme, it was not clear enough how the Bank would tackle governance issues. It was also difficult to see which areas are being scaled down, which areas are new for the Bank, and what are the Bank‟s comparative advantages. Private Sector ï‚· Several participants highlighted the need for more support on PPPs in various sectors. It was noted that the WBG could be clearer in how it envisions addressing the private sector. While some participants promoted a more prominent role for the private sector in Vietnam because of its capacity to create employment and innovation, others cautioned against focusing blindly on private sector development 127 as a solution to everything. The importance of promoting better governance of SOEs was furthermore highlighted. Development Partners Infrastructure ï‚· It was mentioned that infrastructure is still posing a huge challenge for Vietnam and that the Bank as one of the largest donors and providers of credits has an important role to play in supporting the government in building proper infrastructure and services. One of the key challenges lies in the balance between infrastructure “hardwareâ€? and “softwareâ€? – and while the hardware is important, the software such as for example road maintenance, infrastructure sustainability, power sector reform, etc, should not be neglected. Environment and Natural Resources ï‚· Many participants stressed the importance of breaking the current trend of extensive exploitation of the environment and natural resources and it is necessary to see donors like the Bank move more from talk to concrete action. Comparative Advantages and Division of Labor ï‚· Many donors raised the need for the Bank (as well as other donors) to be clearer about their comparative advantages and division of labor. This includes looking into whether donors could join efforts in various areas in order to reduce the number of PDOs, PMUs, and have common supervision missions. ï‚· With Vietnam having reached MIC status, some donors are starting to phase out and/or leave the country. Remaining donors will need to take into consideration any possible gaps that arise as a result of other donors leaving. Views on Overall CPS Framework ï‚· Most participants found that the proposed overall framework seemed broadly appropriate but that the interesting part would be to see how the Bank more concretely shapes the program within the four pillars. Several donors mentioned that the terminology used by the WB as well as the visions and objectives are closely related to their own, which should hopefully facilitate collaboration. Several donors expressed their appreciation of a pillar dedicated to equal opportunity. One participant raised the importance of making sure that poverty reduction is at the core of everything the Bank does and therefore an integral part of all four pillars, thus cautioning against limiting poverty reduction to just being a subtheme of pillar 3. The related issue of rising inequality was flagged as a very important issue to address as well. Participants welcomed the idea of focusing a pillar on managing risks and building resilience, but concerns were raised as to how to ensure that the most poor and vulnerable groups are reached under this pillar as well as under pillar 2. ï‚· Several participants commended the Bank for making governance a cross-cutting theme but noted that governance should come out more strongly in the document. Transparency was mentioned as one of the key elements and a concrete entry point to address governance issues. In addition, gender should come out more strongly in the strategy, preferably as a cross-cutting theme. Some of the recent work undertaken by the Bank in cooperation with other donors in relation to the Gender Assessment is very good and should be shown more directly. Civil Society ï‚· It would be important to include civil society and flag its important role in development in the strategy. It was noted that during the current WB Country Director‟s tenure, cooperation with CSOs has increased, but the international NGOs would like to see this cooperation deepen further. It was 128 furthermore raised that there should be a mechanism for more direct civil society involvement or monitoring in all phases of new operations in order to ensure greater sustainability. Policy Dialogue ï‚· Several donors raised the question of how to strengthen policy dialogue with the government. While good progress was made with the PRSC, there is room for further improvement. Donors were looking forward to learning more about the Bank‟s plans for the EMCC series of DPOs, to see what strategic opportunities it opens for them to engage in specific policy areas together with the Bank. Consultation Round 3: Three sessions on Draft CPS, October 2011 On October 5th and 6th, 2011, the World Bank hosted the last of round CPS consultations. Like with the second round, three separate sessions were held with the most important stakeholders – this time on the draft CPS that was also shared for the internal WBG Corporate Review. In general, there was broad support for the draft CPS and the proposed framework and principles of engagement from all three groups. The following is a summary of the points raised: Government Government Priorities ï‚· Government underlined the importance of avoiding fragmentation. Support should especially be directed towards support for the SEDS/SEDP breakthrough areas and look at a few transformative interventions. Infrastructure needs are most pertinent for Vietnam as a MIC, especially transport. The WBG should direct a lot of resources to that. ï‚· Government would like to see an increase in the estimated IDA and IBRD resources, as financing needs are large. ï‚· Government and especially SBV expressed keen interest in getting guidance through analytical work and policy advice on how to avoid the so-called middle income trap and would like to see that included more in the WB program for the new CPS period. ï‚· The balance between different instruments was discussed and it was raised that DPOs makes it difficult for the Bank to see and assess the direct impact of the money allocated, which is one of the advantages of investment loan. ï‚· The importance of strong donor coordination and division of labor was underlined – especially between the three largest donors in Vietnam: ADB, JICA and the WBG. ï‚· The need for both Government and the WBG to address the bottle necks in human development was underlined and new initiatives outlined in the CPS in that area were appreciated. It was questioned why the WB does not support vocational training. ï‚· The WB was commended by the Ministry of Agriculture and Rural Development (MARD) for being strong on policy advice, reforms, legal support, etc. and would like specific support in preparing for a number of laws/bills coming up in the coming time within MARD‟s areas of responsibility. They would furthermore like to see the areas of food security policy and agricultural competitiveness scaled up further. The Ministry of Natural Resources and Environment (MONRE) also expressed interest in more support on pollution control. Framework ï‚· The pillar framework was seen as well-aligned with both the SEDS and SEDP. ï‚· MARD underlined the importance that agriculture plays in terms of strengthening the Country‟s competitiveness and would like to see it come out stronger in Pillar 1. 129 ï‚· The General Inspectorate welcomed the emphasis in the CPS on Governance and found that the right issues had been raised. However, they requested the WBG to be more specific about what the mainstreaming really means in terms of actual actions. ï‚· MPI was interested in knowing whether all three pillars are seen by the WBG as equally important or if one is prioritized over others. ï‚· MPI suggested that in order to make sure that government agencies have the capacity to address governance, reform issues and institutional capacity improvements; it would be useful for the Bank to commit an amount of money every year that is earmarked for capacity building and strengthening of governance, etc., within Government agencies. Development Partners Diagnostics ï‚· It was raised that the first chapter of the draft CPS was missing the political context (and while it was recognized that there is a limit as to how much the WBG can go into this, a bit more analysis of the political situation would be appreciated). This could focus on the pace of reforms as well as the sometimes limited space for dialogue. The same was raised for the risk section – here the Bank suggests more dialogue with Government as the main mitigation measure, but what if that does not help? Comparative advantages/Division of Labor ï‚· It was pointed out that more analysis of how the strategy will facilitate the gradual phasing out of other donors would be useful (e.g., in water and sanitation and agricultural/rural development). In addition, more TA in PFM would make the phasing out less abrupt/damaging. ï‚· There were a number of questions and comments about comparative advantages. The Bank was asked how it identified its own comparative advantages (as this was also a difficult exercise for other donors). There were also questions about whether the WBG has explicit agreements with other development partners on division of labor – e.g. in terms of specific sectors and/or geographical areas? In relation to this, it was agreed that the WB should meet urgently with both the UN and with ADB and JICA to discuss division of labor, and how to avoid overlaps and exploit synergies. ï‚· On a related note, it was pointed out that it would be interesting with a more explicit discussion throughout document and especially under each of the pillars on what the WBG can add in the different engagement areas – not just in terms technical support, but also policy advice. ï‚· It was noted that it is not clear in the document how the WBG sees the role of elected representatives of civil society, the National Assembly, etc. Principles of Engagement ï‚· It was pointed out that while the Principles of Engagement of the draft CPS say that the WB will be more selective moving forward, it is actually hard to see this selectivity in the description of the program ï‚· In relation to the above point, the Bank was also asked for what criteria it uses to select to engage in (or disengage from) a certain sector – of course this would presumably be based on comparative advantages, but are there other criteria? For example, the WB was asked whether it uses the progress (or lack thereof) on the MDGs as a criteria for engagement/exit? ï‚· The WB was asked to nuance the statement that it will consolidate and move towards larger projects, as it was pointed out that large projects is no guarantee of a more efficient and effective implementation. ï‚· A point was made regarding how to build in incentives and disincentives in project implementation; i.e., deliberately moving funds from provinces that do poorly to better performing provinces. It was noted that this is already being done to some extent, so the Bank should: a) be more explicit about this 130 approach in the document, and b) apply it more consistently and openly in the future and think more about how to how to support good performers. This also links to new results-based approaches. ï‚· It was noted that the Bank on previous occasions has mentioned that it would aim at having more DPOs in the future, yet the draft CPS goes more into describing support for NTPs, Additional Financing of existing projects, etc., and does not go much into describing concrete examples of possible future DPOs. Thus, the storyline is not clear on where the Bank will do what and why in terms of instruments. Framework ï‚· It was noted that it would be interesting with more information about how the WBG will support Vietnam in terms of positioning itself in the region, e.g., as part of ASEAN, etc. This is especially relevant in relation to the competitiveness pillar but would be useful throughout the document. ï‚· Outcome 1.1 aims at “Improved Economic Management and Business Environmentâ€?. The WBG was asked how it will actually make this happen with all the continuing difficulties and lack of progress on SOEs and in the financial sector – is this outcome too optimistic? ï‚· The Bank was requested to make it clearer why resilience is cross-cutting – what does it mean to have resilience as a cross-cutting theme, as it is applied in a different way in each pillar. Governance is more straight-forward as a cross-cutting theme as it will be applied more uniformly across the pillars ï‚· The strong focus on governance was welcomed, but it was noted that it was not completely clear how the WBG will mainstream governance more concretely - how will it be applied in practice? ï‚· It was furthermore raised that gender seemed somewhat misplaced under opportunity pillar as it cuts across all 3 pillars. Implementing the CPS ï‚· There were a number of comments addressing the issue of implementing the CPS and the resources available for this implementation. A clarification of why Vietnam has the highest IDA allocation ever for the next 3 years was requested, since Vietnam is now a MIC and it would be more logical for IDA resources to decrease. In relation to this, it was also noted that it could be seen as paradoxical that Vietnam has such a high allocation of IDA at the same time as the draft CPS notes that USD 5.8 billion are undisbursed and implementation is slow. This makes the story line a bit weak. It seems that less IDA would be easier, give more incentive for selectivity as well as for more speedy disbursement, and it would mean less undisbursed future resources. The WB was asked whether it should not consider telling the Government that IDA allocation does not have to be used fully (especially if implementation does not improve?) Finally, there was also interest in seeing more information about where the WBG is heading with regards to IBRD, IDA and IFC funds in the medium (and if possible, longer) term. Civil Society Role of civil society ï‚· Some frustration was expressed about the position and role of civil society in Vietnam by civil society representatives. ï‚· In relation to the above, some participants also felt that the draft CPS did include enough on the role of civil society – in Vietnamese society as a whole and in implementing the CPS – civil society organizations should have more important role in preparation, implementation and M&E of projects. ï‚· It was noted that while it is positive that there is now more of a focus on national ownership in the debate about aid and development, national ownership should not be defined narrowly as only meaning government ownership but should also be referring to citizen ownership. ï‚· In addition, the Bank was requested to be more vocal in general (and more explicit in the CPS) about the important role it can play as an advocate for a bigger space for civil society – the Bank should use its position to push for more space and dialogue for civil society. 131 Diagnostics & Framework ï‚· The Bank was commended for being more frank on various issues, such as governance and the macro- economic situation than previous CPS‟s. ï‚· Some concerns were raised about debt sustainability and whether this should be flagged more in the CPS as a potential risk. It was also noted that the Bank might want to mention in the CPS that economic instability could have some impact on social situation, which emphasizes the need to urgently address issues such as rising inflation, corruption, etc., in order to avoid a decrease in public trust. ï‚· Additional questions were raised to the WBG, such as: (i) whether it would be useful to include low case-high case scenarios in the CPS for the macroeconomic situation, (ii) whether the Bank should have a specific strategy for Mekong Region (like ADB), and whether the Bank is addressing poverty among ethnic minorities enough and in the right way in the CPS. Cash transfers might help, but other barriers are just as important for ethnic minorities (language, prejudice, self perceptions, learning outcomes and motivation in education, etc.). 132 ANNEX 16: PUBLIC FINANCIAL MANAGEMENT IN VIETNAM Overview Over the past decade, Vietnam has made strides in establishing a sound public financial management system. With the adoption of the first organic budget law in 1996 and its revision in 2002, a legal framework for public resource management has been put in place. A centralized treasury system is being set up with branches extending from the center to all provinces and districts to provide basic essential financial services to all government agencies. Steady progress has been achieved in making the budget more predictable and pro-poor, and the budgeting process more transparent and participatory. Substantial efforts have also been made in recent years to improve transparency in the use of public resources through disclosure of information on detailed government spending as well as expenditure policies, regulations and procedures. There is strong ownership in the Vietnamese Government of the PFM reform agenda. MOF is currently engaged, as are other Ministries, in developing a reform strategy for 2011-2020. The strategy aims at (i) maintenance of stability of public finances within the broader economy; (ii) improved effectiveness of public sector expenditure in achieving policy and service delivery; (iii) development of effective influence by government over key finance markets; and (iv) effective and efficient resource mobilization to finance public expenditures. Support to the implementation of reforms is coordinated through the PFM partnership group which overarches the activities of government, donors, and working groups, meeting half yearly to discuss progress. There is ongoing effort among donors to directly align their support with the mainstreaming government‟s strategies and plans. PFM remains in the center of Public Sector reforms. Other focus areas are organizational restructuring, pay and employment reform, and institutional development. The PFM reforms hinge on seven priorities: budget management, revenue management, debt management, SOE fiscal risk management, financial market supervision and government bond market development, public asset management, and price management. The overall conclusion of the latest Country Financial Accountability Assessment (CFAA 2007) stated that PFM arrangements and their implementation and performance pose a moderate risk that funds will not be properly controlled or used for intended purposes. The CFAA proposed a set of recommendations to help the government design and continue implementing reforms and capacity building programs to modernize and strengthen PFM and enhance transparency and accountability arrangements in support of sound economic management and improved governance. Even though a series of analytical work, such as Public Expenditure Review (PER) or CFAA, have been undertaken every three to four years, progress and impact of the PFM reforms and development initiatives can only be measured by establishing an official monitoring framework, and baseline performance measures. The Public Expenditure and Financial Accountability (PEFA) measurement framework provides a recognized measurement of the performance of the public financial management of government. Similarly, the Debt Management Performance Assessment (DeMPA), adapted from the PEFA framework, but is focused on debt management issues, would provide a baseline assessment of debt management capacity. Although the government has agreed in principle to introducing these measurement frameworks through pilot self-assessment process in 2011 (PEFA) and 2012 (DeMPA), no firm decision on detailed timeframe and commitment of resources have been made. Within the MOF, the number of technically-qualified and experienced managerial staff needs to be increased to meet the reform challenges of the Ministry. Support is needed for Capacity building across sectors and sub-national government to implement decentralized PFM reforms. 133 Recent Developments and the Way Ahead PFM legal and institutional framework. The CFAA reported that since 2004, implementation of the 2002 State Budget Law and the 2005 Accounting Law has progressed and a State Audit Law has been enacted. However, it also noted that some confusion and overlap in budget responsibilities remain in the budgeting system which is limiting the participation of sectors in resource planning, budgeting and budget management and confuses accountabilities between the national and sub-national levels. Furthermore with the redevelopment of the government accounting systems and regimes, the Accounting Law is no longer adequate and needs revision, and the basis for accounting needs to be better defined, however there is no clear plan at that this time to revise the Accounting Law. The State Budget Law will be revised and re-submitted to the National Assembly in 2012, expectedly including a number of critical changes to state administration in Vietnam such as enhanced decentralization to sub-national government and adjusted fiscal authority of central vis-à-vis sub-national tiers of government in budget approval. PFM information systems. The Treasury and Budgetary Management Information System (TABMIS) will progressively address difficulties in monitoring a fully-consolidated budget as well as the fiscal position. TABMIS has been developed since 2007, piloted in 2009, and recently rolled-out to MOF and treasuries and financial agencies in 35 out of 63 provinces. Fifteen largest spending line-ministries are getting ready to use TABMIS to conduct budget allocations for 2011. It is expected that the system will become fully operational in 2012 upon its nationwide roll-out. TABMIS will provide the capability to record and control commitments, improve cash management and arrears management, and strengthen expenditure management and controls. There are initial staged plans for TABMIS consolidation and expansion, in both terms of both functionality and coverage, towards the Integrated/Government Financial Management Information System (IFMIS). Public accounting regulations. In parallel with TABMIS project, a unified Treasury and Budgetary Chart of Accounts has been developed to provide consistency of classification of revenues and expenditures in budgeting, accounting and reporting with expenditures classified on an administrative, economic and functional basis. This will facilitate accurate and timely financial reporting, and the flow of budgetary information between government ministries provinces and the public. For future TABMIS expansion, development of a unified and uniform chart of accounts for the public sector (including the Spending Units) is now envisaged. A staged roadmap for adoption of the International Public Sector Accounting Standards (IPSAS) is also being developed to align government accounting regimes and practices with international standards. Budget development and execution. Vietnam‟s budget coverage is reasonably comprehensive but still incomplete compared to international practices. Budget gaps arise from the lack of clarity in the state budget coverage of user fees and charges of many service delivery units, lack of integration or disclosure of the financial positions of public financial funds, untimely and sometimes inadequate incorporation of donor financing, and off-budget government bonds. Budget execution variations arise from such practices as revenue underestimation particularly for crude oil revenues, keeping the state accounts open after year end with post year expenditures recorded against previous year unused budgets, and over implementing construction and development plans. Separate preparation of the recurrent and capital investment budgets hampers effective management of resources and the composition of public expenditure remains unbalanced. Public expenditure is planned annually and also for medium-term over five year periods but the linkage between the two remains weak. The ongoing revision of the State Budget Law introduces Medium-Term Fiscal and Expenditure Framework, to be mainstreamed in the annual budget cycle. There are also initial discussions on reforming budget planning toward output- and program-based budget elaboration. 134 Off-budget-balance expenditures, i.e., expenditures not counted in the calculation of the budget deficit, include government bonds issued to finance infrastructure projects and education facilities, recapitalization of entities such as the Vietnam Development Bank or the Vietnam Social Policy Bank, and borrowings by sub-national governments and their affiliated entities such as local development funds. However, these so-called off-budget expenditures in Vietnam can be considered on-budget in several respects. They are included in the budget that is reviewed and approved by the National Assembly, and their execution was done through the Treasury and subject to the same disclosures and scrutiny as standard budget expenditures. There are attempts under the ongoing revision of the State Budget Law to adjust budget structure and coverage to be more in line with the international norms. Contingent liabilities might be arising from these “off-budget-balance expendituresâ€? and other implicit sources. A systemic definition and a reliable estimate of such contingent liabilities are not available, which limits the government‟s ability to manage such risks properly. More broadly, as Vietnam is reaching middle-income status, it will need to engage more long-term finance from both domestic and external sources. Under the recently improved debt management, initial attention from the government on risk management and monitoring of contingent liabilities has been observed. Given the recent default of one of the largest state owned Economic Groups (Vinashin), MOF is planning to strengthen monitoring of fiscal risks from the SOEs. However, although considered as the country‟s lead agency for national and public debt management, MOF has not yet prepared an inventory of government contingent liabilities from various sources, due to lack of necessary legal framework, poor data availability and limited assessment capacity. Revenue administration. Customs controls are still considered low in productivity, inconsistent and vulnerable to corruption. The Customs administration will need to change significantly, shifting its mindset from a culture of domestic protection and control of all transactions to one that facilitates foreign trade and promotes private sector development. The tax administration is also characterized by low compliance and vulnerability towards corruption. Five areas of tax administration have been identified as in need of special attention: (1) the fragmentation of the legal framework related to tax administration; (2) the absence of effective coordination and information-sharing between the tax administration and other government agencies; (3) taxpayers‟ lack of knowledge about the tax laws and compliance procedures; (4) inadequate professional skills and training of tax administration; and (5) information technology system which is lagging behind the requirements of a modern tax administration. In addition, tax laws and policies will need further reforms to broaden the tax base, and to reduce the number of rates and exemptions. Reforms in the management of revenue are progressing with clearer allocation rules and decentralized responsibilities; however classification of revenue in line with international standards needs to be introduced, and enhanced consultation on revenue targets is needed to improve the quality of revenue budgets. Public debt management has improved both in terms of legal framework and institutional arrangements. The Debt Management Department was established in May 2009 with the role of a modern debt management office under the MOF. Although not all of the tasks relating to public debt management have been consolidated to this Department, the organizational structure of the department is similar to the debt management office according to international practices, with 6 divisions functioning as front office, one division performing the middle office functions, and one division performing the back office functions. Meanwhile, the first-ever Law on public debt management was approved by the National Assembly in June 2009 and came into effect in 2010. The Law introduced substantial reforms in managing and monitoring comprehensively public debt and government commitments (including domestic sub-national debts and on-lending), and addressing many weaknesses in the public debt management in Vietnam. A series of guiding decrees were adopted in 2010 to facilitate the implementation of the law. Special attention is now paid to strengthening risk management and developing forward-looking debt management strategy and program. 135 Financial market supervision and the government bond market. At present, many agencies participate in financial market supervision, leading to overlapping responsibilities and ineffective management and supervision. There is a need to consolidate market supervision functions into a single agency and to separate state management and supervision functions. Vietnam‟s government bond market is still small scale, low liquidity, and the maturity structure is skewed toward short-term. The number of market participants is relatively small and supporting infrastructure, such as depository, clearing and information systems, is yet to be developed. Therefore, considerable efforts are required to develop a full-fledged government bond market and coordinate it with development of related markets such as capital, security and real estate. A bond market development roadmap is being prepared towards these visions. The government’s PFM reform program highlights that state assets budget resources and human resources need to be managed in an integrated way for efficient and effective service delivery, and reforms are being gradually introduced. The legal framework and market principles in asset management were recently adopted under the Law on State Asset Management. The requirements for management reporting systems are being defined, but reform in this area has been slow. Initially, attention is needed for developing consistent and comprehensive asset accounting and asset management policies in line with international standards and practices. Further study will be carried out in 2011 to determine the most appropriate solutions to address the government‟s accounting and asset management requirements. Independent scrutiny of PFM has significantly increased, with external oversight of budgetary affairs by the National Assembly and the recently independent State Audit of Vietnam (SAV). The functional committees and deputies of the National Assembly, and the local People‟s Committees have been given greater prominence in examining, decision-making and oversight of the state budget. There is steady expansion of external audit coverage and quality, and legislative oversight. Encouragingly, the SAV audit report was made public for the first time in 2006, and regularly since, triggering serious debates where are broadcasted live on the usage of state budgets. However, the capacity of these institutions, especially the SAV, is limiting the coverage and scope of audits. It is difficult for the SAV to manage the increasing workload including compulsory audit for 100 percent of SOEs, and to consider the move towards performance audit. Significantly, the SAV has recently approved an ambitious and comprehensive strategy to 2020 (with accompanying implementation plan to 2015) aimed at upgrading its capacity across the key areas of organizational and legal framework, human resources, audit planning and methodologies (including performance audit), information technology, and external relations. The country’s public financial management system has a range of internal oversight mechanisms. In the past, the focus was on inspection rather than systematic review to provide regular and timely feedback to the management on the use of public resources. Internal auditing is an important element of a sound public financial management system, which helps increase effectiveness, efficiency and financial control. This issue becomes even more important if the government intends to decentralize further to the local levels. The legal and institutional frameworks for the organization and operation of internal audit are being developed. Although implementation will be challenging, this has been a very encouraging step towards establishing a sound internal audit system in Vietnam in the coming years. Vietnam has increased its level of fiscal transparency. Budget plans and budget execution accounts are being made available publicly, and there is increasing compliance with reporting regulations. However there is still room for improvement, particularly in relation to consistency in quality of reports and their timeliness. The draft budget plan should be disclosed before National Assembly‟s approval. To enhance the quality of financial reporting, consistency between budget and accounting classifications 136 needs to be maintained. The number of budget execution reports needs to be rationalized. Content and presentation of financial information needs to be improved in line with existing government regulations in the publicly available budget execution reports to make them more informative. Enabled by TABMIS, MOF has committed to, by 2013, publish monthly and more disaggregated budget execution reports on MOF website 15 days after month end, as opposed to the current practice of publicize quarterly and aggregated report 45 days after quarter end. In addition, the government is establishing a State Accounting General function, and working toward producing and issuing annual financial statements, including cash and asset information, in line with international practices. The annual final accounts need to be issued faster than the current 18 months, e.g. 9 months, after year end to enhance their relevance to the discussions on the budget of the subsequent year. Good progress has been made in establishing legislation and the environment for greater financial accountability and transparency of financial information. Regulations on financial disclosures of the State Budget Law, Accounting Law and State Audit Law have been issued increasing the scope and range of required disclosures by entities at all levels of government. Information is being made available on public accessible websites. However, implementation remains the challenge. To further increase transparency, the content of budget documentation and the final accounts could be enhanced by including analysis, explanations and information in line with international practices. Disclosure of financial information, particularly spending at unit level should be actively monitored to ensure compliance with the enhanced disclosure requirements. Published financial reports should be timely, and a calendar for disclosures issued publicly. 137 ANNEX 17: OVERVIEW OF MAIN TRUST FUNDS Vietnam is one of the biggest users of Trust Funds (TFs) in the World Bank. During FY07- FY11, the total amount committed through TFs in Vietnam reached US$726 million, including almost US$700 million for project related activities (project preparation, cofinancing, GEFs, JSDF, and TA for projects), US$15 million for non-lending TA, US$4.7 million for Institutional Development Fund (IDF) activities, and US$2.3 million for Economic and Sector Work. In FY10, the Vietnam Program reached US$100 million in Trust Fund disbursements, ranking 7th in the Bank after Afghanistan, West Bank and Gaza, Ethiopia, China, Indonesia, and Sudan in terms of TF disbursements. In FY11, committed and disbursed amounts from Trust Funds reached US$296 million, and US$170 million, respectively, in Vietnam. Trust Funds by Activity from FY07-FY11 (Amounts in $ mil) Closed Active Total No. Amount No. Amount No. Amount IBRD/IDA Project Related 17 $400.50 43 $204.90 60 $605.40 GEF & Mont. Protocol 5 $11.60 7 $39.70 12 $51.30 Free Standing Capacity Bldg a/ 11 $19.10 6 $27.80 17 $46.90 Institutional Dev. Fund 12 $3.30 7 $1.50 19 $4.80 Econ. & Sector Work 6 $1.60 12 $4.30 18 $5.90 Non-Lending TA 12 $2.20 17 $13.40 29 $15.60 Others b/ 7 $1.60 5 $3.00 12 $4.60 Total 70 $439.90 97 $294.60 167 $734.50 a/ Includes Global Partnership Programs and Regional Programmatic TFs implemented in Vietnam b/ Included activities such as intensive supervision of grant funded activities Source: FY07-FY11Q2 CFP Database and FY11Q3-4 SAP Data Trust Funds are used effectively in support of the Government’s development agenda through the Bank’s Country Program. The instrument is also used as a platform for development partners to work together to achieve common goals. Trust Fund resources are used to support Bank investment lending as well as policy operations. A noteworthy example has been the joint financing of the PRSC series. For PRSCs 1 - 10, more than 14 development partners in Vietnam have joined forces to support the Government‟s efforts to improve public management, financial sector strengthening, poverty reduction policy measures, etc. The total financing mobilized through PRSCs 1-9 has amounted to US$1.219 billion from Development Partners combined with US$1.475 billion from the Bank side, for a total of US$2.694 billion. In addition to the resources that TFs have brought to the country, the joint financing mechanism has also provided a platform for the Government and Development Partners to discuss critical policy issues. Trust Funds also support the Government in strengthening their fiduciary capacity. IDFs have among other things been used for public financial management regulatory work, supporting the public procurement framework and strengthening internal audit, some of the key areas of concern for both Development Partners and the Bank. In addition, IDFs have provided a platform for joint work between the Bank and other donors (such as the working groups under the Six Bank Initiative). Trust Funds have furthermore provided emergency support for Avian Influenza, and piloting of new approaches for helping disadvantaged children learn better to name just a few examples. During the CPS period, the use of trust funds will shift in accordance with the new ODA Strategic Framework being developed by Government. With Vietnam having recently become a middle income country and with several donors presenting exit plans for their aid programs or shifting their focus from more traditional engagement areas to emerging issues such as climate change and governance, the Government has intensified efforts to utilize its ODA resources more effectively. Trust 138 fund availability to the Government through the World Bank will also be affected by this shift. In the context of discussions around the new ODA Strategic Framework, the World Bank is working with other development partners on how to sharpen Trust Fund mobilization for the country in this changing aid environment and ensure that Trust Funds continue to be available to support Vietnam. Key Active Trust Funds in Vietnam Mekong Delta Transport Infrastructure Development Project (US$34.7 million): This Australia- financed TF co-finances the Mekong Delta Transport Infrastructure Development Project. The project development objective is to assist the recipient in relieving key bottlenecks of the main transport corridors in the Mekong Delta region and improving access of the poor to those corridors. The grant finances Part C of the project – connecting the Poor to the Supply Corridors. Third Rural Transport Project (US$39.7 million for two grants): These TFs funded by DFID co- finance the Third Rural Transport Project. The objective of the project is to assist Vietnam in improving the access (including reducing the costs of access) of rural communities to markets, non-farm economic opportunities and social services. HIV/AIDS Prevention Project (US$27.7 million): This DFID-financed TF co-finances the HIV/AIDS Prevention Project which is to assist the recipient in establishing and maintaining national, provincial and local policies and capacity to design, implement and evaluate information and service delivery programs designed to halt the transmission of HIV/AIDS among vulnerable populations and between vulnerable populations and the general population, thereby assisting the recipient in the implementation of its National Strategy on HIV/AIDS Prevention and Control. Vietnam Health Care Support to the Poor of the Northern Uplands and Central Highlands (US$16.2 million). The objective of this TF financed by the European Commission is to increase coverage of essential health services particularly at the commune level, and to improve health service planning, particularly at the district level in the project Provinces. Governance and Poverty Policy Analysis and Advice Program (US$7.3 million). This DFID-financed TF supports the Bank in advising the clients on evidence-based policy making and implementation. Through the enhanced WB activities and support, the Vietnamese government's social inclusion and governance agenda are expected to be further promoted. GAPAP has four goals: (a) Strengthened Bank interaction and advice in a range of Vietnamese institutions for data collection, analysis and monitoring of critical governance and poverty challenges over the next 5 years; (b) Well informed policy analyses for discussions with clients on governance and poverty; (c) Critical inputs to the Government on improving transparency, accountability and social inclusion. This includes advice to the Government on performance monitoring; and (d) Broadened and strengthened dialogue through PRSCs 7 - 10 on governance and results. Multi-donor Trust Fund (MDTF) to support Public Financial Management Modernization in Vietnam (US$7.1 million): This MDTF is financed by six donors: AusAID, the Canadian International Development Agency (CIDA), the Danish International Development Agency , the EC, the Netherlands Development Organization, and the Swiss State Secretariat for Economic Affairs. The TF helps strengthen the recipient‟s capacity to implement selected reforms and in managing a technical assistance program. It also helps conducting analytical and diagnostic works in the seven key areas, including budget management, budget revenue management, debt management, financial market supervision and bond market development, corporate finance management, public asset management, and price control. 139 ANNEX 18: THE BANK’S DEVELOPMENT PARTNERSHIPS IN VIETNAM In addition to the semi-annual Consultative Group meetings and related events, the Bank actively participates in the Aid Effectiveness Forum (AEF).45 This is an important vehicle for making aid more predictable, coordinated, and effective. Partners now include the National Assembly Office, Sectoral Partnership Groups, International Support Groups, mass organizations and professional associations, international NGOs, and other development actors. The AEF has two main objectives: (i) achieving the commitments and targets set out in Hanoi Core Statement on Aid Effectiveness; and (ii) contributing to the development of new aid partnerships. The Bank continues to be engaged with Vietnam’s 18 currently active Sectoral and International Partnership Groups. Their effectiveness and engagement vary, as do their contributions to the formulation and implementation of sectoral development strategies and plans. There is a general sense that the groups could be made more efficient and effective, and AEF has initiated a comprehensive mapping exercise in order to demonstrate how they function and what impact they have. While the Bank will not be highly active in all the Partnership Groups, it will take a more active role in selected groups in the new CPS period and contribute to making these Partnership fora more relevant and meaningful. There has been considerable progress in coordination and streamlining of procedures within the “Six Banks Groupâ€? in Vietnam. This partner group consists of the Bank, ADB, JICA, Kreditanstalt für Wiederaufbau (KfW), Agence Française de Développement (AFD), and the Export- Import Bank of Korea (KEXIM).46 The Six Banks Group has been actively engaged in the recent multi- country evaluation of the Paris Declaration/Hanoi Core Statement. Its members are also co-chairing the AEF‟s thematic groups on public procurement (ADB), financial management (the Bank), social impact assessment (ADB), and environmental impact assessment (the Bank). The Six Banks Group has been working with Government on several key areas such as drafting the forthcoming Public Investment Law (a key element of the Public Investment Reform Program supported by the Bank); reforming administrative cost norms; strengthening the public-private partnership framework, country systems in public procurement, financial management, and social and environmental impact assessments; and reviewing the structure of Vietnam‟s PMUs. A number of analyses on the use of ODA and less concessional financing in the transition period have been conducted with support from the Bank, ADB, and JICA. The Bank furthermore participates in a Joint Portfolio Performance Review (JPPR) with the Six Banks Group and Government every two years and is currently preparing for the next JPPR scheduled for late 2011. The PRSC has been an extremely important long standing platform for partnerships for the Bank. With its ten consecutive budget support operations, the PRSC was the vehicle for an unprecedented partnership involving 14 development partners and more than 15 ministries and agencies. The series supported wide ranging reforms and was rated highly on policy dialogue and impact by independent evaluations. It mobilized around US$ 1,500 million from the World Bank and around US$ 1,100 from development partners. While addressing some of the weaknesses of especially the later rounds of the PRSC, the Bank will seek to build on the success of the series and replicate the main idea in the successor operation, the EMCC. The EMCC will focus on macroeconomic stability and supporting institutions that promote the business environment and public sector governance. While the focus of this new 45 The AEF, formed in 2010, succeeded the Partnership Group on Aid Effectiveness. 46 JICA and The World Bank represent the Six Banks Group in the AEF‟s Executive Committee. 140 platform will therefore not be as broad as the PRSC series, the Bank hopes that it will continue to be a vehicle for successful partnerships. The Bank has a number of very important bilateral partnerships. One of our most important bilateral partners in Vietnam is DFID, who the Bank collaborates with across several operations in the areas of HIV/AIDS, rural transport; poverty, governance, gender and most recently CC (see Annex 20). Also worth mentioning is an increasingly important and broad partnership with Australia in the fields of infrastructure and economic reform (Annex 20). The Bank will seek ways to explore more such strategic partnerships moving forward. Vietnam’s recent status as MIC means that some bilateral donors are starting to phase out. While this will also lead to a gradual phasing out of some of the Bank‟s current partners, at the same time, it will open up for possibilities for more “silentâ€? partnerships with some of the development partners, who will be scaling down their physical presence in Vietnam some time ahead of terminating their financial presence in the country. The Bank needs to explore the possibility for such mutually beneficial partnerships in coming years. Many of bilateral donors as well as a number of international NGOs are engaged in a variety of innovative and interesting small operations in Vietnam. The Bank will seek ways to use these operations as “incubatorsâ€? for ideas and innovations and learning. The Bank is thus interested in building new partnerships with some of these donors and NGOs to scale up successful small operations that use innovative approaches and ideas in the Bank‟s own program. 141 ANNEX 19: DEVELOPMENT PARTNER ACTIVITIES IN VIETNAM Development Activities Financing Areas of Partner Collaboration with the Bank ADB ADB's Country Strategy and Program is consistent Vietnam receives both Structural Reform with Vietnam‟s development priorities. ADB's strategy resources from the Asian Issues through PRSCs, focuses on business-led, pro-poor economic growth, Development Fund (ADF) and Gender, Infrastructure, and its complementary themes of (i) social equity and Ordinary Capital Resources Health, Water balanced development and (ii) the environment. (OCR). The total proposed ADF lending program for 2011–2012, including one-third Greater Mekong Sub-region (GMS) share, is $755 million. The OCR indicative planning figure (IPF) is $860 million per annum during 2011–2012. Australia Australia ODA focuses on: supporting inclusive Country program estimate Program 135 Phase II growth, improving access to markets for the rural poor, 2011-12: $102.4 million (P135-II) Structural stimulating regional trade by supporting major reform issues through infrastructure projects, strengthening access to water PRSCs, Transport, and sanitation services, helping mitigate climate Education change challenges, strengthening Vietnam's human resource foundation, joining Vietnam's effort in strengthening the health system to combat HIV, emerging infectious diseases and ensuring sustainable health service delivery, providing rural development assistance, supporting a range of community level activities, strengthening governance of institutions, supporting regional programs that address high priority economic and trans-boundary development challenges. A new program strategy is currently under development. Belgium Belgian renewed cooperation with Vietnam places The 2011-2015 cooperation emphasis on the reform of the governmental program between Belgium and administration and on water and sanitary facilities. Vietnam will have a budget of 60 million Euros Canada Canadian CIDA's current programming responds to the Structural Reform Government of Vietnam's poverty reduction priorities Issues through PRSCs, and focuses on improving the enabling environment for Trade, Education, investment and on supporting rural enterprise Public Finance development and agricultural productivity. Management, agriculture and rural development Denmark The Danish assistance will contribute to poverty Denmark‟s pledge for 2011 is Structural Reform reduction in Vietnam through strengthened support for US$56.43 million Issues through PRSCs, reforms including reforms aimed at improving good Urban Development, governance and the fight against corruption as well as Rural Development, continued support for pro-poor economic growth and Public Finance human resource development. Management, Environment 142 Development Activities Financing Areas of Partner Collaboration with the Bank EC According to the EC Country Strategy Paper 2007 - An indicative amount of EURO Structural Reform 2013, EC will mainly provide support to two-focal 304 million has been allocated Issues through PRSCs, sectors, namely support for Vietnam's SEDP and for the implementation of the Health, Education, support to the health sector. EC assistance in these two CSP through two successive Forestry, Financial focal sectors will be complemented by actions in the Multi-annual Indicative Sector, Public Finance field of trade-related assistance, support to the EC- Programmes which will be Management Vietnam strategic dialogue and various thematic and allocated EURO 160 million regional programs. (2007-2010) and EURO 144 million (2011-2013) respectively. Finland Finland's strategy 2006-2015 focuses on two thematic Finland pledged a total of 53.5 Innovation, priority areas: i)â€?Information Society and Knowledge million Euros for Vietnam for Environment Forestry, Economy,â€? and ii) Climate Change and Environment, three years from 2009 - 2011 including water supply and sanitation and forestry. France/AFD AFD‟s action within the framework of the SEDP is France pledged USD 221 Structural Reform based on 4 cornerstones for this period: (i) To develop million for Vietnam for 2011 Issues through PRSCs, and modernize financial, banking and non-banking Urban Development, sectors; (ii) To support decentralization and local Agriculture authorities, (iii) To adapt urban infrastructure and public market services; (iv) To promote a new dynamic in rural economies Germany/KfW Germany's strategy concentrates on three priority areas: Germany has pledged nearly Structural Reform (i) Sustainable Economic Development and vocational 300 million Euro for Vietnam Issues through PRSCs, training; (ii) Environmental policy, protection, for 2011 - 2012 Health, Education, sustainable use of natural resources, and urban Public Sector Reform development; and (iii) Health IMF IMF provides support for: (i) tax policy and Tax, Public administration, (ii) public expenditure management and Expenditure fiscal transparency, (iii) monetary and foreign Management, Banking exchange operations, central banking, bank reform, restructuring and supervision, economic Macroeconomic statistics/GDDs, and other areas (policy advisory, Stability training, and technical assistance). Japan Japanese support to Vietnam focuses on i) promoting Japan pledged USD 1,760 Structural Reform growth, ii) improving social and natural environment, million to Vietnam for 2011 Issues through PRSCs, and iii) supporting institutional strengthening. Infrastructure, Rural Development, Education, Health, Banking, Environment Korea Korea's assistance strategy for Vietnam focuses on $3 billion in ODA for Vietnam promoting sustainable growth, training human in the 2011-2015 period resources, improving infrastructure, and developing rural areas Luxembourg Luxembourg's Indicative Cooperation Program 2011 - The implementation of the 2015 targets (ii) poverty reduction, (ii) responding to current Program is based on an the needs of a middle income country, (iii) key indicative amount of 42 Million economic areas through institutional capacity building Euros over a5-year period. and human resource development in the banking and finance sector, and (iv) the hospitality and tourism industry. 143 Development Activities Financing Areas of Partner Collaboration with the Bank The The Dutch bilateral development activities will be The Netherlands pledged Structural Reform Netherlands clustered around two major priorities: (i) growth and US$30.59 million to Vietnam Issues through PRSCs, distribution, and (ii) sustainability, energy and climate. for 2011 Forestry, Rural Development Norway Norway's support to Vietnam focuses on: environment, US$10 million for 2011 Structural Reform climate change, sustainable development and human Issues through PRSCs, rights, including workers' rights Rural Development, Education and Public Finance Management Spain The Spanish Agency for International Development US$40 million was pledged for Structural Reform Cooperation has the following priority areas in Vietnam for 2011 Issues through PRSC Vietnam: (i) fighting poverty; (ii) gender in development; (iii) environment and rural development; (iv) UN Reform, and (v) governance Sweden During the strategy period of 2009 - 2013, Sweden‟s Sweden's pledge for 2011 is Structural Reform regular development cooperation with Vietnam is to be US$18.03 million Issues through PRSCs, phased out via a selective cooperation. The overall goal Governance and Anti- of both the phase-out and the selective cooperation is corruption enhanced democratic governance, greater respect for human rights, and environmentally sustainable development. Key areas of cooperation during the strategy period, therefore, are human rights and democracy, and environment and climate change. Switzerland The 2007-2011 cooperation strategy concentrates on 3 US$28.9 million pledged for Urban Development, main areas: (i) governance; (ii) Rural livelihoods and 2011 Public Finance natural resource management; and (iii) economic Management development with special focus on private sector development UK The UK has committed to continuing its support to DFID is preparing for Structural Reform Vietnam during the last five years of the 10-year Vietnam's graduation in 2016. Issues through PRSCs, Development Partnership Arrangement (2011-2016). It will provide 70 million GBP Poverty Reduction, This support is predicated on continued commitment for the next five years Rural Transport, Rural by the Government of Vietnam to poverty reduction; Development, improved public financial management and anti- Education, corruption; and respect for human rights, including Governance, domestic accountability. HIV/AIDS, Public Finance Management, Climate Change UN Agencies In Vietnam, the UN has been a strong partner in A total of US$ 140.19 was Poverty Reduction, providing social protection services to the Vietnamese pledged for Vietnam for 2011 PAR, Structural issues people, with particular focus on the most vulnerable through PRSCs, groups such as migrants, people with HIV/AIDS, and Governance, Gender, ethnic minorities. The UN has also supported cross- HIV/AIDs, cutting initiatives relating to HIV, gender mainstreaming, and rights-based development, including youth-related work. US USAID has worked with the Government of Vietnam US$ 141.62 was pledged for HIV/AIDS in areas of economic growth, prevention and treatment Vietnam for 2011 of HIV/AIDS, and vulnerable groups' access to educational and other social services 144 Development Activities Financing Areas of Partner Collaboration with the Bank International Non-Government Organizations (INGOs) Oxfam GB Oxfam's focus in Vietnam is on education, sustainable Post WTO issues, livelihoods, gender equality, disaster preparedness, and Education, Gender, climate change adaptation. Poverty Assessment, Social Analytical Work CARE Since 1989, CARE in Vietnam has worked with Rural Development, International Vietnamese partners throughout the country to Poverty and implement over 160 different projects in three Livelihoods programming areas: (i) emergency & CBDRM program; (ii) rural development & natural resource management; and (iii) health, HIV/AIDS, AI & social programs. Plan in Plan works to help marginalized children across Child-Centered Vietnam Vietnam, especially those from the ethnic minorities in Community the mountainous regions. Its main priorities are to Development reduce the malnutrition rate, improve health care and provide quality of basic education to children in 17 provinces from the north to the Central Highlands. SNV SNV began working in Vietnam in 1995 and is Forest Management, (Netherlands focusing on two impact areas: (i) increased production, Market access for the Development employment and equitable income opportunities, and poor Organization) (ii) improved access, coverage and quality of basic services. SNV advisory work focuses on renewable energy, smallholder cash crops, forest products, pro- poor sustainable tourism, and water, sanitation and hygiene. Save the Save the Children UK's strategy focuses on programs Child Poverty, Early Children - UK supporting Vietnam's micro-finance, education, HIV, Childhood Care and reproductive health, disaster response and preparedness Development, HIV/AIDS WWF World Wildlife Fund‟s (WWF's) priority conservation Environmental programs in Vietnam includes: (i) the Forest Conservation and Conservation Programme; (ii) the Marine and Coastal Management of Conservation Programme; (iii) the Species Natural Resources Conservation Programme; (iv) the Environmental Education Programme; (v) the Environmental Education Programme: and (v) policy work in Vietnam IUCN IUCN Vietnam‟s mission to influence, encourage, and Marine conservation assist Vietnam‟s biodiversity conservation and equitable sustainable use of natural resources for improving its people‟s quality of life BirdLife BirdLife International in Indochina seeks to promote Environmental the conservation of habitats, sites and species. Conservation East Meets The East Meets West program in Vietnam supports: Rural Water Supply West education; combating sexual trafficking, closing the and Sanitation gap in school infrastructure, medical and health care programs for children, and clean water & sanitation 145 ANNEX 20: STATISTICAL CAPACITY AND M&E SYSTEMS Vietnam’s monitoring and evaluation (M&E) system was developed during the years of the centrally planned economy and inherited the typical characteristics of this economic model. It emphasizes inputs and outputs. At the core of the system is a set of cost and technical norms that are developed by the Ministry of Finance and line ministries. The norms are reviewed and updated regularly by the relevant agencies through a time-consuming process. As a result, these norms are often out of date due to rapid changes in technology and volatility of prices in a market economy. Another salient feature of Vietnam’s M&E system is its focus on responsibilities of individual agencies, with little attention paid to inter-agency issues. M&E is commonly carried out by regular administrative reports and short inspection visits, both of which tend to emphasize issues within a given agency‟s administrative borders. Strategically important inter-agency issues are commonly dealt with by inter-ministerial committees, which merely play a coordinating role with limited influence on resource allocation and use. As a result, the majority of development outcomes which commonly go beyond a given agency‟s boundaries are either not the main objective of the M&E, or their monitored progress does not inform policy actions for strategic coherence. Support for planning reform has been a priority of the Bank policy dialogue, especially with the formulation and implementation of the Comprehensive Poverty Reduction and Growth Strategy (CPRGS) since 2001. It has also been a high priority for other donors over the past ten years. The Bank coordinated donors‟ support in the formulation of the SEDP 2006-10 and provided direct TA, including a series of trainings for MPI, line ministries, and selected provinces; and participation in MPI‟s drafting team for the M&E framework. ADB and the UNDP also provided resources. Vietnam has taken a number of steps to strengthen use of M&E information and to move towards the use of results-based approaches to planning. The country‟s 2006-2010 SEDP sought to establish a comprehensive set of indicators within a logical framework. The results-based approach was also piloted in a number of provinces and line ministries. It introduces the use of outcome indicators derived from the MDGs as well as from the country-specific Vietnam Development Goals outlined in Vietnam‟s CPRGS. These indicators are not widely used due to the absence of an official mandate as well as in some cases limited quality and availability of data. The regulatory foundation for the reform of the M&E system was introduced with the issuance of the Investment M&E Decree in 2009 and its implementation Circulars in 2010. In addition, the Ministry of Planning and Investment is preparing a Planning Decree which is expected to institutionalize many aspects of a results-based M&E system. However, the M&E framework is actually not being used for monitoring SEDP performance, as the framework was seen by some ministries as a result of technical donor assistance that was only institutionalized by MPI but lacked the legal status or authority to guide other ministries or provinces. Donors have mainly relied on the PRSC matrix Three major lessons can be drawn from the previous initiative on strengthening the M&E framework for SEDP: i) There is a need to support statistical capacity beyond the National Statistical Indicators System (NSIS); ii) M&E strengthening support should be selective and focused on ensuring that gradual institutional capacity is developed and integrated into the government operation process; and iii) It is important to ensure involvement of a wide range of stakeholders in the process. On the first point, in order to strengthen statistical capacity for the M&E system in Vietnam it is necessary to provide support beyond just NSIS/General Statistics Office (GSO) to also include line ministries and, when possible, provincial agencies. Three main sources of information have been identified for a strengthened M&E system: (i) information produced by GSO as part of the NSIS; (ii) information produced from reporting systems by line ministries and provincial agencies; and 146 (iii) additional information to be obtained by supplementary surveys. Vietnam has put considerable effort into developing a strong statistical agency for household surveys and censuses to inform its national statistical indicator system. But it has faced challenges in relation to timely release of data and adequate dissemination and transparency. Also, at times there has been a disconnect between user needs and data production. Regular nationwide data for a number of important areas such as environmental management and governance are yet to be collected. There is also significant room for quality improvement of data collected by line ministries and provincial agencies, given the existence of different methodologies and definitions of various indicators. Vietnam has recently drawn up the Vietnam Statistical Development Strategy (VSDS). While the strategy is being used to draw up action plans that will hopefully serve as a guide to donors wishing to support the development of the national data system, the VSDS concentrates mostly on GSO, and not on the line ministries‟ administrative data. The future support on statistical capacity should thus be directed towards supporting better coordination between government agencies (including line ministries and provinces), and especially between GSO and the rest of the agencies in sharing and making data available in a timely manner (including budget information and survey raw data). This needs to be supported both by the government‟s legal framework (on sharing information and making raw data available for analytical work to support policy formulation) and by continued support from donors (supporting both GSO and other government agencies). As noted above, the second lesson focuses on the need for M&E strengthening to be selective and focused to ensure gradual institutional capacity being developed and integrated into the government operation process. The country‟s planning system should become more strategic, with a clearer vision of how government can achieve its objectives, as well as focusing on a smaller number of high-level indicators. The selectiveness could be done in several ways (at sectoral level, in a few selected key programs/projects, etc.). The focus should be on improving the quality of monitoring and reporting, and to eventually incorporate a strengthening of evaluation capacity, when the M&E information produced would be sufficient to support evaluations. Good M&E work from donor-funded projects could also be scaled up to sectoral projects/programs that are government funded. The final lesson is that increased dialogue among the stakeholders is key to converging demand and supply sides. The Ministry of Finance is an important example of this. MOF currently focuses on building capacity for its core fiscal policy management functions and is not an advocate for using strengthened results-based M&E in its decisions and processes. However, MOF‟s utilization of M&E information would greatly strengthen M&E efforts within the country. Therefore, other M&E champions and key stakeholders should engage MOF and address the need for the agency to assess the performance of public spending and utilize M&E information in allocating fiscal resources. There is also a need for improved coordination between GSO and MOLISA on poverty monitoring and targeting. Similarly, engagement by other important key stakeholders, including overseers/ legislators (MOF, MPI, the National Assembly, the State Audit, etc), and civil society is also important to the process. Bank support has continued during formulation of the SEDP 2011-15, albeit with reduced scope compared to support provided for the SEDP 2006-2010 M&E Framework. Support focused on development of results-based M&E, assessment of the implementation of the SEDP 2006-2010 using its M&E framework, and drafting of the Planning Decree. The Bank has also supported the development of the VSDS via a grant from the Trust Fund on Statistical Capacity Building – in addition to programmatic support on the Vietnam Household Living Standards Survey, the Labor Force Survey, and other data instruments. The Bank also currently serves on the Technical Advisory Board to the VSDS. The Bank will continue to include impact evaluation as part of project design, in order to help mainstream capacity building for M&E and demand and meaningful applications for national statistical systems, learning from the lessons drawn from previous experiences to improve future interventions. 147 ANNEX 21: COUNTRY FINANCING PARAMETERS The country financing parameters for Vietnam set out below have been approved by the Regional Vice President, East Asia and Pacific, and are being posted on the Bank‟s internal website. Item Parameter Remarks/Explanation Cost sharing. Limit on the proportion of 100 percent In Vietnam, this policy is being individual project costs that the Bank may applied in a targeted fashion, focusing finance primarily on interventions in social sectors, poorer provinces, and decentralized projects. The Government will continue to finance its share as deemed necessary. Recurrent cost financing. Any limits that NONE In Vietnam, financing of recurrent would apply to the overall amount of costs continues to be on a highly recurrent expenditures that the Bank may selective basis and within a sound and finance. sustainable fiscal framework. Local cost financing. Are the requirements Yes for Bank financing of local expenditures met, namely that: (i) financing requirements for the country‟s development program would exceed the public sector‟s own resource (e.g., from taxation and other revenues) and expected domestic borrowing; and (ii) the financing of foreign expenditures alone would not enable the Bank to assist in the financing of individual projects Taxes and duties. Are there any taxes and NONE None of the taxes and duties in duties that the Bank would not finance? Vietnam is judged to be excessive. Date: August 2011 148 IBRD 33511R1 102°E 104°E To 106°E 108°E 110°E To Babao Kunming To VIETNA M Kaiyuan To Tiandong CHINA Ha Giang Cao Bang 4 PROVINCE CAPITALS 5 To Lao Cai Re Nanning Lai Chau Town 1 d 9 NATIONAL CAPITAL 3 Bac Can 8 22°N 22°N To RIVERS Tuyen Quang 10 Lang Son Hepu Bla 7 Thai 2 c k Yen Bai Nguyen MAIN ROADS 13 Dien Son La Viet Tri 12 Vinh Yen 14 RAILROADS Bien Phu 11 Bac Giang 15 6 Bac Ninh To HANOI 17 Hai Duong Ha Long PROVINCE BOUNDARIES Muang Xai Hoa Binh 16 18 19 Hai Phong 21 Hung Yen 20 INTERNATIONAL BOUNDARIES Ha Nam 22 23 Thai Binh Nam Dinh Ninh Binh 25 Ma 24 20°N 26 20°N To PROVINCES: Luang 1 Lai Chau 32 Da Nang LAO Prabang Thanh Hoa 2 3 Dien Bien Lao Cai 33 34 Quang Nam Quang Ngai P EOPLE'S PEOPLE'S 27 Gulf 4 Ha Giang 35 Kon Tum D EM . REP. of Hainan I. (China) 5 Cao Bang 36 Gia Lai A Vinh Tonk in 6 Son La 37 Binh Dinh 7 Yen Bai 38 Phu Yen n Ha Tinh n 8 Tu Yen Quang 39 Dac Lac 28 a a a 9 Bac Can 40 Dac Nong 18°N 18 To 18°N Khammouan m m m 10 Lang Son 41 Khanh Hoa 11 Phu Tho 42 Binh Phuoc 12 Vinh Phuc 43 Lam Dong Dong Hoi C 29 13 Thai Nguyen 44 Ninh Thuan o 14 Bac Giang 45 Tay Ninh r d d d 15 Quang Ninh 46 Binh Duong Dong Ha To il 16 Ha Noi 47 Dong Nai Savannakhet 30 17 Bac Ninh 48 Binh Thuan THA ILA ND Hue lll e e e 18 Hung Yen 49 T.P. Ho Chi Minh r 19 Hai Duong 50 Ba Ria-Vung Tau 31 32 Da Nang a a a 20 Hai Phong 51 Long An 16°N 16°N 21 Hoa Binh 52 Tien Giang 22 Ha Nam 53 Dong Thap Tam Ky 33 23 Thai Binh 54 Ben Tre 24 Ninh Binh 55 An Giang Quang Ngai 25 Nam Dinh 56 Vinh Long 34 26 Thanh Hoa 57 Tra Vinh Ngoc Linh (3143 m) 27 Nghe An 58 Kien Giang 35 Kon Tum 28 Ha Tinh 59 Can Tho 29 Quang Binh 60 Hau Giang 37 30 Quang Tri 61 Soc Trang 14°N Cent ral Central 14°N Pleiku 31 Thua Thien Hue 62 Bac Lieu 36 Quy Nhon 63 Ca Mau Highlands 38 Tuy Hoa CAMBODIA 39 Buon Ma Thuot 41 40 Nha Trang Gia Nghia 12°N To Da Lat 12°N Kampong Cham 42 To Dong Xoai 43 44 Kampong Chhnang Phan Rang- 45 Thap Cham Mekong Tay Ninh 47 Thu Dau46 Mot 48 Bien Hoa Gu l f 51 49 Ho Chi Minh City Phan Thiet 53 of 55 Cao Lanh Tan An 50 Th a i l a n d Long Xuyen 52 My Tho Vung Tau Phu Vinh Long Ben Tre VIETNAM Quoc 59 56 10°N Rach Gia Can Tho 54 10°N lta 58 60 Tra Vinh Vi Thanh 57 De This map was produced by 61 Soc Trang the Map Design Unit of The g World Bank. The boundaries, 62 n ko Bac Lieu colors, denominations and Me Ca Mau any other information shown 0 50 100 150 200 Kilometers on this map do not imply, on 63 the part of The World Bank Group, any judgment on the legal status of any territory, 0 50 100 150 Miles or any endorsement or acceptance of such boundaries. 104°E 106°E 108°E JANUARY 2010