Document of The World Bank
FOR OFFICIAL, USE ONLY Public Disclosure Authorized
Report No. 45613-VN
INTERNATIONAL DEVELOPMENT ASSOCIATION
PROGRAM DOCUMENT
FOR A PROPOSED CREDIT
INTHE AMOUNT OF SDR 66.9 MILLION (EQUIVALENT TO US$lOO MILLION)
Public Disclosure Authorized TO THE SOCIALIST REPUBLIC OF VIETNAM
FOR A PROPOSED SECOND
PROGRAM 135 PHASE 2 SUPPORT OPERATION
FOR COMMUNES FACING EXTREME HARDSHIP IN ETHNIC MINORITY AND
MOUNTAINOUS AREAS
April 21,2009 Public Disclosure Authorized
Vietnam Sustainable Development Unit Sustainable Development Department East Asia and Pacific Region
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized VIETNAM- GOVERNMENT FISCALYEAR January 1 -December 31
CURRENCY EQUIVALENTS (Exchange Rate Effective as ofMarch 3 1,2009)
Currency Unit Vietnamese Dong US$1.oo 16,963
Weights and Measures Metric System
ABBREVIATION AND ACRONYMS
AusAID Australian Agency for International Development CAS Country Assistance Strategy CBRIP Community-Based Rural Infrastructure Project CDD Community-Driven Development CEM Committee for Ethnic Minorities CFAA Country Financial Accountability Assessment CPRGS Comprehensive Poverty Reduction and Growth Strategy CPS Country Partnership Strategy CSA Internal Control Self-Assessment CYXXXX Calendar Year xxxx DA Delegate Assembly DFA Development Financing Agreement DFID Department for International Development (UK) DPC1 First Development Policy Credit in Support of Program DPC2 Second Development Policy Credit - current operation DPC3 Third Development Policy Credit - proposed follow-on operation DSA Debt Sustainability Assessment FDI Foreign Direct Investment FYxxxx Fiscal Year xxxx GDP Gross Domestic Product GNP Gross National Product Government Government of Vietnam GSO General Statistical Office HEPR-JC Hunger Eradication and Poverty Reduction-Job Creation Program IDA International Development Association ICR Implementation Completion Report IEMA Institute for Ethnic Minority Affairs IFAD International Fund for Agricultural Development IFC International Finance Corporation ILSSA Institute ofLabor, Science and Social Affairs IMF International Monetary Fund fishAID Irish Agency for International Development LDP Letter of Development Policy M&E Monitoring and Evaluation MARD Ministry of Agriculture and Rural Development MDG Millennium Development Goal MIS Management Information System MOC Ministry of Construction .. 11 FOR OFFICIAL USE ONLY
MOF Ministry of Finance MOHA Ministry of Home Affairs MOLISA Ministry of Labor, Invalids and Social Affairs MPI Ministry of Planning and Investment MTEF Medium-Tern Expenditure Framework MTR Mid-Term Review NGO Nongovernmental Agency NMPRP Northern Mountains Poverty Reduction Project N-PL Non-Performing Loans NTP National Target Program O&M Operation and Maintenance ODA Official Development Assistance P135-2 Program 135 for Socio-economic Development in Communes Facing Extreme Hardship in Ethnic Minority and Mountainous Areas, Second Phase PAR Public Administration Reform PC Partnership Committee PM&E Participatory Monitoring and Evaluation PER-IFA Public Expenditure Review - Integrated Fiduciary Assessment PHRD Policy and Human Resources Development Trust Fund (Japan) PPC Provincial People’s Committee PRSC Poverty Reduction Support Credit PSIA Poverty and Social Impact Analysis SAV State Audit of Vietnam SBV State Bank of Vietnam SEDP Socio-Economic Development Plan SDR Special Drawing Rights STV State Treasury of Vietnam TA Technical Assistance UNDP UnitedNations Development Program VDGs Vietnam Development Goals VHLSS Vietnam Household Living Standards Survey WTO World Trade Organization
Vice President: James W. Adams, EAPVP Country Director: Victoria Kwakwa, EACVF Sector Director: John Roome, EASSD Sector Manager: Hoonae Kim, EASVS Task Team Leader: Steven N. Schonberger, EASRE Co-Task Team Leader: Son Thanh Vo, EASVS
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.
VIETNAM PROPOSED FIRST PROGRAM 135 PHASE 2 SUPPORT
TABLE OF CONTENTS
CREDIT AND PROGRAM SUMMARY ...... v I. INTRODUCTION ...... 1 I1. COUNTRY CONTEXT...... 2
PROGRESS IN POVERTY REDUCTION ...... 7 111. GOVERNMENT’S PROGRAM...... 11 Iv. BANK SUPPORT TO GOVERNMENT’S PROGRAM ...... 14
LINK TO CASKPS ...... 14 COLLABORATION WITH OTHER DONORS ...... 14 RELATIONSHIP TO OTHER BANK OPERATIONS ...... 15 LESSONS LEARNED...... 16 ANALYTICAL UNDERPINNINGS ...... 18 V . THE PROPOSED OPERATION...... 19
OPERATION DESCRIPTION ...... 19 VI. OPERATION IMPLEMENTATION ...... 28
POVERTY AND SOCIAL IMPACT ...... 28 IMPLEMENTATION, MONITORING AND EVALUATION ...... 29 RISK AND RISK MANAGEMENT ...... 31 DISBURSEMENT, REPORTING AND AUDITING ARRANGEMENTS ...... 35 ENVIRONMENTAL ASPECTS ...... 36
ANNEXES
ANNEX 1: LETTER OF DEVELOPMENT POLICY ...... 38 ANNEX 2: OVERALL GOVERNMENT DEVELOPMENT PROGRAM...... -53 ANNEX 3 : OPERATION POLICY MATRE ...... 60 ANNEX 4: AIDE MEMOIRE ON JOINT MID-TERM REVIEW OF PROGRAM 135-11 BY GOVERNMENT AND DEVELOPMENT PARTNERS ...... 66 ANNEX 5: REVISED TA MATRIX ...... 87 ANNEX 6: FUND RELATIONS NOTE...... -97 ANNEX 7: COUNTRY AT A GLANCE...... 10 1
IBRD Map 33511R
iv
CREDIT AND PROGRAM SUMMARY
VIETNAM PROPOSED SECOND PROGRAM I35 PHASE 2 SUPPORT CREDIT
Borrower The Socialist Republic ofVietnam
Implementing Agencies Committee for Ethnic Minorities (CEM), Ministry ofPlanning and Investment (MPI), Ministry ofFinance (MOF), Ministry of Agriculture and Rural Development (MARD), Selected Provincial People’s Committees (PPCs). Financing Data SDR 66.9 million (US$lOO.O million equivalent) Standard IDA terms (40-year maturity with 1O-year grace period) Operation Type Second tranche in a programmatic series ofthree single-tranche development policy lending operations Main Policy Areas The proposed operation will support strengthened policies and their implementation as regards the primary public support program targeted to poor, remote ethnic minority communities. Specific policy areas include those related to: (i) poverty targeting; (ii) decentralization, participation and empowerment; (iii) fiduciary transparency and accountability; and (iv) monitoring and evaluation. Key Outcome Policy Area 1: Poverty Targeting: Indicators Provinces with criteria for allocating resources amongst communes which favor poorer communes. Baseline (DPCl): 0, (DPC2): 42, Target: 47
Policy Area 2: Decentralization, Participation & Empowerment: Percentage ofP 135-2 communes which serve as investment owners for at least a significant share ofprogram investments. Baseline (DPCl): 30%, (DPC2): 60%, Target: 100%
Policy Area 3: Fiduciary Transparency and Accountability: Ensure adequate oversight over public funds through independent audits, covering both operational and financial aspects, as indicated by public disclosure ofaudit results at national and local levels, and documentation offollow up actions taken. Baseline (DPCl): No operational audits conducted in VN by State Audit Authority for a National Targeted Program. (DPC2): Financial and operational audit carried and publically disclosed out covering ten provinces and follow up action reports for eight provinces covered by 2007 audit. Target: Financial and operational audit carried out covering at least 18 provinces and publically disclosed and follow-up actions
V reports for 14 provinces covered by 2009 audit.
Policy Area 4: Monitoring and Evaluation Randomized survey approach with baseline and control group and citizen report cards used to assess progress and beneficiary satisfaction to inform program improvements Baseline (DPCI): No use ofcitizen report card or other participatory tools (DPC2): Baseline survey and introduction ofcitizen report cards used to identify areas for program strengthening, Target: End of project survey and citizen report cards used as key elements of final evaluation report The Program Development Objective is to improve the results of Objective and one ofVietnam’s National Target Programs for poverty Contribution to CAS reduction, the “Program for Socio-Economic Development in Communes Facing Extreme Hardship in Ethnic Minority and Mountainous Areas (2006-2010)”, known as “Program 135 Phase 2” (or P135-2), through strengthening the four, main policy areas.
The proposed operation is fully aligned with the Bank’s Country Partnership Strategy 2007-201 1 which is based on Government’s Socio-Economic Development Plan (2006-20 10). The proposed operation specifically supports the “Strengthen Social Inclusion” pillar and particularly the outcomes of “better access to services and infrastructure for the rural poor”, and “ethnic minorities in rural areas more fully integrated into development processes”. The proposed operation provides the platform for working directly with Government in reviewing and improving the procedures and implementation ofGovernment’s main poverty reduction program, including the transfer ofexperience from much smaller, donor supported programs working with ethnic minority communities in Vietnam such as the recently closed Northern Mountains Poverty Reduction Project (Cr. 3 572-VN) co-financed with DFID, and Community Based Rural Infi-astructure Project (Cr. 3532-VN), and programs supported by AusAid, Finland and IFAD. Risks and Risk Capacity constraints at commune level slow down transfer of Mitigation ownership from districts, mitigated through accelerated, decentralized capacity building and TA support through UNDP, Finland, AusAID and Ireland. Reputational and operational risks from local level corruption in use ofresources mitigated by introduction ofmore rigorous auditing and strengthened transparency and social accountability mechanisms. IOueration ID Number P 107062
vi PROGRAM DOCUMENT FOR A PROPOSED SECOND CREDIT TO THE SOCIALIST REPUBLIC OF VIETNAM IN SUPPORT OF GOVERNMENT’S PROGRAM 135 PHASE 2
I. INTRODUCTION
1. The proposed operation would support implementation of agreed policy and institutional actions based on the November 2008 mid-term review, to improve progress towards agreed outcomes for one ofVietnam’s principal National Target Programs (NTP) for poverty reduction: the re-designed ‘Program for Socio-Economic Development in Communes Facing Extreme Hardship in Ethnic Minority and Mountainous Areas (2006-2010)’, known more familiarly in Vietnam as ‘Program 135, Phase 2’ (P135-2). P135-2 and the particular policy areas that are the focus ofthe proposed series ofoperations are judged to represent the best available entry points to a wider, emerging agenda for systemic change in the way NTPs in Vietnam are conceived and implemented. This reform agenda aims broadly to promote informed participation and civic engagement at community level in the Government’s targeted public investment programs, as well as improved targeting, fiduciary management, transparency and monitoring and evaluation, as primary means to improve the results of these programs - in many cases by transferring and mainstreaming approaches successfully piloted under smaller-scale, donor financed investment projects working in the same program areas. It has important implications for the prospects that NTPs will contribute as intended in the next five years to narrowing the persistent poverty gap between lagging areas and population groups (notably ethnic minorities) and the rest of the country.
2. The proposed operation would be the second of a proposed three Development Policy Credits (DPCs) over the life of P135-2 (2006-2010) to support the sustained implementation of the reform elements of this Government program in support of achievement of the agreed program outcomes. As more than 24 months have passed since the approval ofthe first operation (DPCl) by the Board of Executive Directors on March 21, 2007 and the submission of this operation (DPC2) to the Board of Executive Directors, the series is considered to have lapsed and an Implementation Completion Report (ICR) is under preparation. The initial lessons learned fkom the ICR assessment are reflected in the discussion ofprogress of P135-2 to date in this program document, and have been taken into consideration in the design ofthe revised policy matrix for the program.
3. The three DPCs are inter-related as follows:
0 DPCl (US $50 million equivalent) supported those critical aspects of the reform agenda which provided the framework for a program consistent with the agreed outcomes. The prior actions in this case were primarily policy and institutional actions already shown to deliver results through strengthening community-level ownership over the planning, execution, management and construction supervision, and operation and maintenance ofbasic infrastructure investments; 0 DPC2 (US $100 million equivalent) will support additional actions that were anticipated at the initiation of the program and which were identified as needing additional emphasis to advance the reform agenda, based on the first two years of implementation and the recent mid-term review due to the need for additional
1 clarity or delays in implementation. The prior actions include revised policy and supporting procedures in key areas such as production support and competitiveness oflocal procurement to permit more effective implementation by provinces, districts and communes, as well as strengthening ofthe monitoring and oversight functions at the central level;
0 DPC3 (US $50 million equivalent) would support further policy actions, including those identified through the November 2008 mid-term review process, focused on strengthening implementation at the subnational level of the reforms supported under DPCl and DPC2 and to accelerate progress towards results in the final years ofthe program.
4. The operation policy matrix or results framework (Annex 3) describes the main areas of the programmatic reform agenda in question, identifies the relevant prior actions for the proposed Credit (DPC2), as well as indicative policy benchmarks for purposes of monitoring progress towards the agreed outcomes. The policy actions under DPCl are also indicated, as are policy triggers for the preparation ofthe next DPC operation. Selected benchmarks in the years (CY2007 and CY2010) are used to support the overall joint monitoring process, and as triggers for separate disbursement by some participating bilateral donors.
5. The series of policy-based lending operations provides a powerful vehicle for donor coordination around a programmatic reform agenda. Consistent with the Hanoi Core Statement on Aid Effectiveness (Vietnam's localized version of the Paris Declaration), the Government of Vietnam and donor community are agreed that policy-based budget support, complemented by parallel technical assistance (TA), provides the most appropriate financing modality to help bring about these strategic outcomes for which P135-2 provides the best available entry point. The proposed operation has been jointly prepared by three bilateral donors (Australia, Finland and Ireland) who are providing parallel financing and TA through bilateral agreements with Government of Vietnam. IFAD and UNDP are also providing parallel TA support. These agencies co-finance in parallel through bilateral agreements with the Government of Vietnam. All co-financiers use a common operation policy matrix or results framework as a basis for disbursement, including those who disburse annually, including the alternate years between the IDA-supported operations.
11. COUNTRY CONTEXT
6. Vietnam has experienced rapid and consistent growth and poverty reduction since launching its transition towards market mechanisms (d6i mei) in 1986. The d6i m0i reforms strengthened individual land tenure security, permitted freer trade in agricultural products, and ensured provision ofimproved agricultural support services, resulting in a boom in farm production and exports and leading to a dramatic reduction in rural poverty. GDP growth has averaged over 7.5 percent over the past ten years. The poverty rate has declined from 58.1 percent in 1993 to 16.0 percent in 2006, and has continued to decline since.' Vietnam is also well on-track to achieve most of the Millennium Development Goals (MDGs).
The more recent statistics are not directly comparable to the 1993 and 2006 figures, but the poverty reduction trend is continuing since 2006. See the poverty reduction section below. 2 7. A key challenge is to maintain growth in the context of global integration and to address concerns of increasing inequality. Vietnam has pursued a trade-led growth strategy resulting in a steady increase in both exports and imports as a proportion of GDP. The accession to WTO in 2007 is driving further liberalization of the economy. Economic integration is also increasing the country’s exposure to global economic volatility, requiring increasing sophistication of macro-economic management to respond to capital flows, inflation pressures and shocks in financial markets. Liberalization, while driving poverty reduction amongst all groups, has also resulted in increased inequality between rural and urban areas, and in particular amongst ethnic minorities whose poverty rate remains over 50 percent.
RECENT ECONOMIC DEVELOPMENTS
8. Having weathered a domestic crisis in early 2008, Vietnam is now looking to navigate the global crisis with the effectiveness demonstrated in facing previous economic challenges. In late 2007 and early 2008, the country was confronted with the economic overheating resulting from massive capital inflows. Accession to the WTO, in early 2007, had reassured investors about the government’s commitment to economic reform. Over the year, the capital account surplus reached $17 billion, whereas remittances (which have a strong investment component in Vietnam) were close to $7 billion. By comparison, GDP was around $70 billion in 2007. Attempts to sterilize these inflows were not able to prevent a boom in banking credit, an acceleration of inflation, a ballooning trade deficit and asset price bubbles.
9. A determined reaction by the government from March 2008 onwards (the “eight groups of measures”) succeeded in stabilizing the economy. In spite of surging world prices of food and oil, a tight monetary policy and some measure of fiscal restraint abruptly ended up the asset price bubbles and brought down inflation from more than 3 percent per month to nil in barely six months. Combined with a more active management oftrade policy, and a strict enforcement of the foreign exchange market, the stabilization package also succeeded in reducing the trade deficit to manageable levels. The overall economic situation was still fragile around May 2008, when markets were nervous about a possible balance of payment crisis. There were also concerns about the health of the banking system, and especially about the quality of loans for real estate and urban development. However, it gradually became apparent that the stabilization package was working and tensions eased.
10. The stabilization package did take a toll on economic activity, with the second quarter of 2008 recording one of the lowest growth rates in years. At 6.2 percent, GDP growth for the entire 2008 was about 2 percentage points below potential. Most sectors did reasonably well, and approvals for foreign direct investment (FDI) projects continued on the rise, reaching a record $64 billion for the year as a whole, compared to a $90 billion GDP. FDI disbursements also increased, by 19.4 percent, reaching almost 10 percent of GDP. But the construction sector had its worst performance since the East Asian crisis, squeezed between frozen or declining property prices, high interest rates and high international prices for cement and steel. In the second half of2008, the financial crisis originating in the United States affected foreign demand. The international prices of commodities exported by Vietnam were on a declining trend since the third quarter, export orders for garments and other industrial products collapsed in the fourth quarter, and a slowdown in manufacturing
3 became noticeable. While job losses are difficult to quantify precisely, they remain modest compared to the size ofthe labor force but are significant in some ofthe large industrial parks.
11, The government reacted swiftly to this second economic shock, shifting gear from stabilization to supporting economic activity (the “five groups of measures”) in November 2008. The immediate components of this reaction included cutting payments of enterprise income tax, deferring payments of personal income tax, and providing a cash handout to poor households on the occasion of the Lunar New Year. However, the most decisive move concerned monetary policy. This was seen as an urgent priority given the risk of economic activity suffering disproportionately from the combination of very high lending interest rates (around 21 percent by August 2008), a very rapid deceleration of inflation (there was actually deflation in the last quarter of 2008) and the slowdown in the demand for exports. The main policy rate was brought down by 7 percentage points over a short period of time, a credit guarantee scheme was established for small and medium enterprises, and an interest rate subsidy of4 percentage points was introduced for borrowing for working capital. In practice, the interest rate subsidy scheme amounted to a renegotiation of the debts of enterprises which could prove that they had viable operating plans. At only 3 percent for the first quarter of2009, the net growth ofbanking credit remains modest.
2005 2006 2007 2008e/ 2009p/’ 2010p/ 2011 p/ Output, Employment and Prices GDP (YOchange previous year) 8.4 8.2 8.5 6.2 5.5 6.5 7.0 Industrial production index (percent change, previous year) 17.2 17.0 17.1 14.6 9.5 13.7 15.2 Unemployment rate (percent, urban areas) 5.3 4.8 4.6 4.7 6.5 5.0 5.0 Consumer price index (percent change, period-end) 8.8 6.7 12.6 19.9 6.0 5.0 4.5 Public Sector Ofticial fiscal balance (percent of GDP) -0.1 1.1 -2.2 -1.6 -4.0 -3.6 -3.1 General fiscal balance (including off-budget items) -4.5 -1.1 -5.3 -4.7 -8.1 -6.5 -5.9 Total public debt (accumulated, percent of GDP) 44.5 44.1 46.3 44.4 46.8 49.3 51.1 Foreign Trade, BOP and External Debt Trade balance (BOP definition, $US million) -2,439 -2,776 -10,360 -12,782 -4,746 -5,211 -5,358 Exports of goods, ($US million, fob) 32,447 39,826 48,561 62,685 57,890 65,635 75,485 Exports of goods (percent change, previous year) 22.5 22.7 21.9 29.1 -7.6 13.4 15.0 Imports of goods, ($US million, fob) 34,886 42,602 58,921 75,467 62,636 70,846 80,843 Imports of goods (percent change, previous year) 15.7 22.1 38.3 28.1 -17.0 13.1 14.1 Current account balance ($US million ) -497 -163 -6,992 -9,136 -5,196 -5,061 -4,708 Current account balance (percent GDP) -0.9 -0.3 -9.8 -10.2 -5.6 -5.1 -4.4 Foreign direct investment (BOP inflows, US billion) 2.0 2.4 6.6 8.1 3.8 4.7 5.5 Total external debt -DOD- ($US billion) 17.2 19.1 23.7 26.8 29.0 31.2 33.5 Total external debt -DOD- (percent of GDP) 32.5 31.4 33.3 29.8 31.5 31.7 31.6 Debt service ratio (percent of exports of goods and services) 5.4 5.0 4.6 3.5 5.0 4.5 4.5 Reserves, including gold ($US billion) 8.6 11.5 21.6 23.0 22.4 23.6 26.2 Reserves (in weeks of imports of goods and services) 11.3 12.5 16.6 14.3 16.6 15.6 15.3 Financial Markets Credit to the economy (percent change, period-end) 31.7 25.4 53.9 25.4 22 20 20 Short-term interest rate (3-M deposits, period-end) 7.8 7.9 7.4 8.1 6.5 5.0 4.0 Stock market - VN index (Jul2000 =loo) 308 752 972 316 ___ -__ -__ Source: GSO, SBV, IMF and World Bank. e = estimate, p = provisional
4 12. Thanks to the stabilization effort of early 2008, the Vietnamese economy in a better position to weather the global crisis than it would have been a year ago. At the beginning of 2009, the balance of trade is roughly in equilibrium. The slowdown in FDI inflows has resulted in a decline in imports of capital goods and intermediate inputs, whereas a tighter enforcement of exchange rate and trade policies has led to a decline in imports of consumption goods. In barely one year, Vietnam moved from a monthly trade deficit in excess of $3 billion to a modest surplus. Given the expected resilience of remittances, this implies a halving of the current account deficit compared to 2008, and should result in more manageable pressure on the exchange rate. Despite substantial real appreciation in 2008, the government is committed to allowing only a modest depreciation ofthe dong in 2009.
13. The banking sector is in a stronger position as well. Quantitative indicators of the quality of their portfolio, based on days in arrears and rollovers, indicate that the fraction of non-performing loans (NPLs) has been declining since October 2008, when the monetary policy easing started. Qualitative indicators, based on debtor risk, suggest a higher level of NPLs, but do not provide reliable information regarding its trend. The State Bank ofVietnam (SBV) upgraded its supervision efforts, including through on-site supervision, and raised minimum capital requirements. The interest rate subsidy scheme, which has mainly benefitted private enterprises, should contribute to keeping bank portfolios healthy. By the end of 2008 all commercial banks, including the small joint stock banks most exposed to the real estate sector, had raised their capital to the new minimum levels. Stress tests suggest that most banks would remain solvable even if the share ofNPLs increased substantially.
MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY
14. While the negative growth faced by other countries is not currently anticipated, growth is slowing. GDP increased by 3.1 percent in the first quarter of 2009, compared to the same period in 2008. This is about 4 percentage points below trend (the average for first quarter growth over the last few years has been 7.2 percent). However, the decline for the entire year should be smaller. Growth in agriculture, which still accounts for 20.3 percent of total GDP, was basically nil in the first quarter, mainly due to floods in the North of the country. Its recovery during the remaining of the year, possibly to 3-4 percent, could add close to 1 percentage point to annual GDP growth. Also, the outcome ofthe first quarter does not yet reflect the impact ofthe stimulus package. About 1 percent of (annual) GDP has been committed to the package so far, and the final figure for the year could be substantially higher. The General Statistics Office forecasts GDP growth for the entire 2009 to be in the range of 4.8 to 5.6 percent, which seems plausible in light of current trends. Based on available data, the World Bank forecast for GDP growth in 2009 is 5.5 percent; however, this will be updated as new data on trade, FDI commitments, as well as survey data on industrial parks whose performance accounts for quite an important part of growth, become available. Other organizations forecast lower growth rates, but none anticipates a recession.
15. Sales abroad are more sluggish than in the past. Exports grew by 2.4 percent in the first quarter of 2009, compared to the same period in 2008. Part of the slowdown in the growth of exports is due to the low price of oil, an important source of foreign exchange for Vietnam. The decline in the value ofoil exports will be amplified later in the year, even if oil prices increase, as the first refinery starts production. On the other hand, agricultural exports are holding well, and there are indications that export orders for garments and footwear are recovering from the depths of late 2008. There were also record sales of gold and precious
5 stones, exceeding $2 billion in the first three months of2009. In 2008, Vietnam had been the largest importer ofgold in the world, out ofconcerns about inflation going out of control. As the economy stabilized the flow is now being reversed.
16. Sustaining economic growth during the remainder of 2009 will require a stronger reliance on domestic demand. Export performance is bound to deteriorate in the coming months, if nothing else because the reference period in 2008 will include months with extraordinarily high commodity prices. There are encouraging signs that the policy measures adopted so far are leading to a regain in activity in construction, which could make up for some of the expected decline in manufacturing. But monetary policy may soon be reaching its limits, and the next phase of the stimulus package is expected to focus on scaling up critically important public investments, especially in energy and transport. Infrastructure bottlenecks remain an important obstacle to the long-term development of the Vietnamese economy. Because infrastructure projects are to a large extent construction projects, and construction is a labor-intensive activity, shifting the focus of the stimulus package from monetary to fiscal policy seems appropriate at this point.
17. Vietnam has sufficient debt space to finance a fiscal stimulus policy. A recent debt sustainability analysis suggests that its external debt position is robust, even taking the global financial crisis into account. The total public external debt is estimated to stand at 25 percent of GDP (30 percent including the private sector) at end of 2008. With nearly two-thirds of this debt contracted on highly concessional terms, the ratio of debt service to exports is projected to remain at or below 5 percent in the coming years. Stress tests show that the main risks for debt management would be a large (30 percent) and sustained depreciation of the dong, and an unexpected large borrowing by Government on non-concessional terms. As neither of these situations is anticipated, Vietnam is considered as a country at low risk of debt default. Total public debt also remains manageable. In the absence of a large fiscal stimulus policy, it is expected to increase from its current 47.5 percent ofGDP to 50.7 percent by 2012.
18. The main constraint to support a more active fiscal stance stems from finance rather than from debt sustainability. Before factoring in the stimulus package, the official budget deficit was expected to reach 4 percent of GDP, about the same as in 2008. The cost of the measures actually adopted so far amount to 1-2 percent of GDP. Because tax cuts and postponements feature prominently among those measures, the revised (on-budget) deficit would be around 5-6 percent of GDP. However, there has also been a range of relatively unspecific announcements about increased budget support for critically important infrastructure projects and to sustain rural demand. If all these announcements were to materialize, the overall budget deficit would be substantially higher, perhaps exceeding one- tenth of the country’s GDP. However, the prudent stance taken by the government on debt issuance so far suggests that this is unlikely. Recent bond issuances have failed to find takers, however, due to the government’s reluctance to offer interest rates which are seen as attractive enough by the market. Because of this prudent stance, finance is likely to determine the size ofthe stimulus package, rather than the other way around.
19. Accelerated disbursement of overseas development assistance (ODA) is critical to ensure prudent and sustainable financing of the stimulus package. The overheating of late 2007 and early 2008 had exposed important weaknesses in capital accumulation. Lack of coordination among provinces and sectors had led to a potentially costly duplication ofpublic
6 investments and resulted in insufficient consideration to their environmental impacts. Large state-owned enterprises (SOEs) had taken advantage of their liquidity to venture into real estate and financial investments, further fueling the ongoing asset price bubbles. A still weak management of the project cycle had led to projects with dubious returns and poor implementation. Several measures have been adopted since then to improve investment efficiency, especially by capping investments by SOEs out of their core businesses and preventing them from controlling financial institutions. However, in the absence of resources to finance further spending in infrastructure, an increased reliance in SOEs and a more limited attention to investment efficiency can be expected. This risk makes the contribution of quick- disbursing ODA all the more important at this point
PROGRESS IN POVERTY REDUCTION
20. Poverty rates continue to fall in Vietnam even in the context of broader economic slowdown. Based on data from household expenditures, poverty has fallen dramatically between 1993 and 2006, both in rural and urban areas. Over a 13 year period, Vietnam has seen 42 percent of the population (equivalent to about 35 million people) move above the poverty line. In 2006, 16 percent ofthe population remained below the poverty line, falling to an estimated 14.5 percent in 2007 and a forecast 12.8 percent in 2008. Simulation analysis suggests that even under a scenario of reduced growth in 2008 and 2009 below the recent average of 8.2 percent increase in GDP per year, overall levels of poverty are likely to continue to fall, albeit at a slower rate than in recent years.
21. Poverty reduction has been particularly rapid in rural areas. Rural areas still account for the bulk of the poor in Vietnam, but between 2004 and 2006, poverty reduction has been more rapid in rural than in urban areas (Table 2). Over this period the depth of poverty, or poverty gap, has been reduced from 4.7 to 3.8 percent overall, with no decline in urban areas, but a decline from 6.1 to 4.9 percent in rural areas.
7 Table 2: Poverty Trends
POVERTY INDICATORS I 1993 1998 2002 2004 2006
Overall 58.1 37.4 28.9 19.5 16.0 Urban 25.1 9.2 6.6 3.6 3.9 Rural 66.4 45.5 35.6 25.0 20.4 Kinh and Hoa ethnic group 53.9 31.1 23.1 13.5 10.3 Ethnic minorities 86.4 75.2 69.3 60.7 52.3
Food Poverty Overall 24.9 15.0 10.9 7.4 6.7 Urban 7.9 2.5 1.9 0.8 1.2 Rural 29.1 18.6 13.6 9.7 8.7 Kinh and Hoa ethnic group 20.8 10.6 6.5 3.5 3.2 Ethnic minorities 52.0 41.8 41.5 34.2 29.2
Poverty Gap Overall 18.5 9.5 6.9 4.7 3.8 Urban 6.4 1.7 1.3 0.7 0.7 Rural 21.5 11.8 8.7 6.1 4.9 Kinh and Hoa ethnic group 16.0 7.1 4.7 2.6 2.0 Ethnic minorities 34.7 24.2 22.8 19.2 15.4
Source: Based on GSO data.
22. These impressive achievements sit alongside much slower progress for ethnic minorities. The recent trends in poverty in Vietnam demonstrate keenly that growth alone cannot tackle all the problems ofpoverty and social exclusion. Progress has been more rapid for the majority Kinh and Hoa ethnic group population groups, even when they live in remote and mountainous areas. In 2006, only 10 percent of the majority group was living in poverty, compared to 52 percent ofthe ethnic minorities. While accounting for about 14 percent ofthe total population, ethnic minorities currently account for 44 percent ofthe poor and 59 percent of the hungry. Their level of deprivation is also more severe than for other groups. As of 2006, the poverty gap for ethnic minorities was 15.4 percent, while that for poor Kinh people was only 2.0 percent. And while only 3 percent of the Kinh are food-poor, almost 30 percent of ethnic minority people live below a food poverty line. Though there is higher density of poverty in the delta regions than in the mountains, the lowland poor are clustered quite close to the poverty line. Sustained aggregate growth rates of 7-8 percent per annum are likely to lift these people out of poverty. The high poverty gaps for ethnic minorities - particularly those living the North West, the Central Highlands, and the South Central Coast Regions - suggest that high national growth rates are unlikely to be sufficient to tackle poverty that is driven by geography or ethnicity. Moreover, recent global economic developments have reduced expectations ofgrowth in the Vietnamese economy over the next few years.
8 23. Recent, geographically disaggregated analysis, confirms the particular challenge of reducing poverty amongst ethnic minority communities. Recent analysis which permits poverty estimation at the district level2, shows that while area focused programs, such as P 135-2 appear to contribute to consistently strong rates ofpoverty reduction in all regions, in all but two regions (Red River Delta and North East South Regions), poverty reduction has proceeded more rapidly amongst the Kinh/Hoa groups than amongst ethnic minorities (Table 3). This suggests that Government’s poverty programs need to supplement geographic targeting with specific efforts to engage ethnic minority groups in the selection and utilization ofsupport activities.
Table 3: Regional Poverty Changes in P135 Districts for KinWHoa and Ethnic Minorities, 1999-2006
Households Kin/Hoa Households Ethnic Minority 1999 2006 Difference 1999 2006 Difference Poverty Poverty Poverty Poverty Rate Rate Rate Rate Region Red River Delta 0.33 0.1 1 -0.22 0.62 0.22 -0.40 North East 0.48 0.15 -0.33 0.64 0.49 -0.15 North West 0.63 0.14 -0.49 0.91 0.63 -0.29 North Central Coast 0.47 0.28 -0.19 0.67 0.61 -0.06 South Central Coast 0.41 0.13 -0.28 0.97 0.78 -0.20 Central Highlands 0.33 0.14 -0.20 0.89 0.74 -0.16 North East South 0.22 0.07 -0.15 0.91 0.54 -0.36 Mekong River Delta 0.43 0.1 1 -0.32 0.58 0.32 -0.26
24. The factors accounting for higher poverty rates amongst ethnic minorities are not clear-cut. Poverty rates have fallen rapidly for Kinh and Hoa ethnic group regardless ofthe region they live in, and improvements in access to infrastructure and services is reaching all areas of the country, though ethnic minorities do have slightly lower access rates to all weather roads compared to Kinh and Hoa ethnic group (76 compared to 91 percent) and travel time to primary schools (2.7 kilometers compared to 1.6 kilometers). However, there are significant differences with regards to travel time to market (32 minutes for ethnic minorities compared to 9 minutes for Kinh and Hoa ethnic group), access to improved water sources (55 percent compared to 87 percent), and access to improved sanitation (7 percent compared to 43 percent). While ethnic minorities on average have land holdings for annual crops on average twice as large as those ofKinh and Hoa ethnic group, these are often oflower soil quality and on sloping land which supports only one crop per year as compared with the lowland holdings of the Kinh and Hoa ethnic group which can support two to three crops annually. In the case of perennial crops which are an important source of cash income, there is little difference in the size ofholdings. In terms of use of credit, there is little differentiation; about one third of
These tables were based on comparisons ofpeople living in P135 districts in 1999 and 2006, using poverty maps that enable small area estimation. These maps link census data with more detailed data on poverty available in the VHLSS. The poverty map for 1999 is based on the 1999 Population Census and the 1998 VHLSS. The poverty map for 2006 is based on the 2006 Agricultural Census and the 2006 VHLSS. Because this map uses the agricultural census and not the full census, poverty rate comparisons are only made for people living in rural areas.
9 ethnic minority households took loans from the formal financial sector in 2006, compared to one quarter of Kinh and Hoa ethnic group, with formal finance accounting for 70 percent of the total borrowing for both groups.
25. Similarly for social services, the gap between ethnic minorities and Kinh and Hoa ethnic group has declined or remained constant. Both groups have seen the proportion of adults who have not completed primary education drop by around 30 percent over the past 13 years. Over the same period, the proportion of adults who completed lower secondary education rose slightly faster for ethnic minorities than for the Kinh and Hoa ethnic group. In the case ofaccess to health care, ethnic minorities, who significantly lagged the Kinh and Hoa ethnic group ten years ago, now are much more likely (78 percent compared to 49 percent) to have health insurance and free healthcare cards.
26. Programs targeted to ethnic minorities must take into account the differences amongst ethnic minorities. The cultural communities of Vietnam are diverse, officially comprising 54 ethnic groups and encompassing seven major language families. The largest minority group, the Tay, has nearly 1.5 million members, while the smallest, the 0 Du, has barely 300. Poverty reduction varies considerably amongst ethnic minority groups. Ethnic minority groups based in the lowlands (Khmer and Cham) have seen dramatic rates ofpoverty reduction, and groups who tend to be valley-dwelling rice farmers in the Northern Mountains (Tay, Thai, Muong and Nung) have also seen significant reduction in poverty. But other groups in the Northern Mountains, the Central Highlands and the South and North Central Costs remain extremely poor. Similarly, agricultural production systems and land use practices vary significantly amongst ethnic minority groups, requiring a differentiated approach to applied agricultural research and farming systems development to increase productivity and economic returns from upland agriculture. In addition, some groups have less well-developed social linkages to labor and product markets outside their communities. Accordingly, programs targeted to ethnic minority communities must take care not to assume a monolithic approach in terms of communications, community engagement and technology transfer.
27. Schooling and language skills appear to be an important factor. Ethnic minority people have on average 2.5 fewer years of schooling. Compounding this is the fact that their returns on schooling might be lower for several reasons: they tend to start school later, repeat or drop out of grades more often, receive lower quality education, and have more difficulty absorbing that education because oflanguage barriers. Whether language is the main problem or whether it is the result ofother social factors - culture or discrimination - is unclear. But it is true that the non-Kinh population that does not speak Vietnamese is among the poorest.
28. Many communities face difficulties in linking social capital to formal administrative processes. Access to microcredit programs and having a voice in community participation is significantly improved with membership in various community based associations - like those for farmers, women and youth. Because they started off with higher rates ofpoverty and also with a history of social exclusion, ethnic minority people may face barriers to inclusion. P 135-2 explicitly supports strengthened participation through investments in communications, capacity building and devolution ofinvestment management to the local level to change attitudes of both the communities themselves and of the local administrations which in some cases perceive cultural reticence as symptomatic of lack of education or laziness.
10 29. Land allocation - both for cropland and forest areas also appears to be another critical issue. Often land allocation at the local level was based on the recipient’s perceived ability to be productive, which meant having access to capital and labor which may have resulted in many ethnic minorities receiving little land or land oflower quality. Forestry land is disproportionately used by ethnic minorities, but a number of policies have centered on environmental protection which have made it more difficult for ethnic minorities to use their land productively. Agricultural extension programs have generally not been able to effectively promote land use and farming systems which integrate environmental sustainability and livelihood improvements while recognizing the multiple, sustainable uses of forest that could benefit the ethnic minority poor.
111. GOVERNMENT’S PROGRAM
30. The Five-Year Socio-Economic Development Plan 2006-2010 (SEDP) incorporates the main elements of a poverty reduction strategy. Following Directive 33 of the Prime Minister, the SEDP for 2006-201 0 was drafted according to the same principles that had governed the preparation of the previous Comprehensive Growth and Poverty Reduction Strategy, including the preparation of a clear results-based monitoring framework for the SEDP. Accordingly, the Bank and other donors use the SEDP 2006-2010 as a basis for their development assistance to Vietnam over the same period.
31. Government uses its national targeted programs (NTPs) focused on poverty reduction as the primary instruments for channeling resources in support of the poverty reduction strategy. Essentially, the national poverty reduction programs consist of various combinations of ‘policies’ and ‘mechanisms’ that are brought together to target particular population groups and/or geographical areas. They provide the primary means through which supplementary resources from the national State Budget are redistributed to ‘top-up’ and boost implementation and impacts of these targeted policies and mechanisms. The poverty reduction programs should not, therefore, be considered as ‘programs’ in the conventional sense (i.e. of having a unified management structure and system). All NTPs are designed around a number of ‘projects’ which are designated to different sectors or sub-sectors to manage and implement. In the poverty reduction NTPs, these projects are assigned to different ministries, provincial departments and sector agencies, whereas the other NTPs (in education, rural water supply and sanitation etc.) are based within particular line agencies.
32. As an integral part of the SEDP, Government revamped the poverty reduction NTPs in order to help address the distinct challenges facing communities living in the poorest and most remote areas of the country. More specifically, and of most direct relevance to the proposed operation, Phase 2 of the Program for Socio-Economic Development in Communes Facing Extreme Hardship in Ethnic Minority and Mountainous Areas (more commonly known as Program 135) has been redesigned on the basis of lessons from evaluations of Phase 1, implemented over 1998-2005; lessons from parallel, donor- supported initiatives; and an exceptionally thorough process of consultation throughout 2006 involving key ministries and central agencies in at least ten major workshops, each of the participating provinces in at least three consultation workshops organized on a regional basis, and extensive field studies conducted in a number ofprovinces.
33. P135-2 is an important policy instrument for the national government to address regional disparities in access to basic services and engaging markets and administrative
11 processes which impede social and physical mobility. P135-2 encourages approaches at the provincial level which reflect an understanding of the need to ensure the strengthening of human capital consistent with enhanced labor mobility, while simultaneously acknowledging that these mobility enhancing efforts need to be complemented by support to the many ethnic minority groups which have important ties to their current geographic locations and therefore prefer to seek improved livelihoods in situ. The objectives of P135-2, as expressed in the Government’s approved program document3 are: (a) to facilitate significant improvement in production knowledge and to accelerate a shift toward higher value-added commodities; (b) to sustainably improve the socio-cultural life of people living in communes facing extreme hardship in ethnic minority and mountainous areas, in order to narrow the gap in living standards among Vietnam’s regions and ethnic groups; and (c) by 2010, to eradicate hunger in the targeted areas and to reduce the poverty rate to below 30%, according to the Government’s new poverty line4. The program, in conjunction with other NTPs, recognizes the need to reduce the economic distance faced by these communities by ensuring provision of essential services such as water, sanitation, education and health care, while also supporting infrastructure to improve access to markets, as well as labor-intensive activities - such as agriculture, agro-processing and handicrafts - which can be efficiently carried out in dispersed locations.
34. P135-2 complements other policies and programs focused on poverty reduction and the needs of ethnic minority communities. According to Decision No.7, a core principle for P135-2 is to effectively integrate the program with the implementation of other policies and programs in the same areas. Components that are included in P135-2 (and those which are not) are furthermore determined by the existence of the other NTPs which have complementary sets of policies and interventions. This relates, in particular, to the measures that are included under Component 4 of P135-2: support for living conditions of poor households (improved access to essential social services). The interventions that are funded under this component are essentially designed to provide additionally to other policy areas and programs focused on improving labour mobility, such as the Education National Targeted Program, while the other major NTP for Poverty Reduction (under the Ministry of Labor, Invalids and Social Affairs, MOLISA) primarily follows a household-based targeting strategy for the provision of social and financial services to poor households on a nationwide basis. P135-2 is distinct in its geographical targeting and concentration of additional resources on ethnic minorities and remote communes and villages. Government has recently initiated the 61 Poorest Districts Program which supplements resources in many of the same districts covered by P135-2, drawing upon the mechanisms and experience under P 135-2 and in which CEM is to take a key role in ensuring compatibility of investment planning and procurement procedures.
35. Another key feature of P135-2 is its support to decentralization and implementation of Government’s “Grassroots Democracy”, Decree. Over the last decade a range of policy measures have been introduced which aim to enhance the autonomy and accountability of local government in Vietnam. These decentralization reforms constitute an integral part of the overall Program of Administrative Reform (PAR) for the period 2001 to 20105. Associated with this, revisions to the State Budget Law (in 1996 and 2002) increased
Approved under Prime Minister’s Decision No.7/2006/QD-TTg, dated January 10,2006. Defined under the Prime Minister’s Decision No. 170/2005/QD-TTg7dated July 8,2005. Decision No.136/2001/QD-TTg of September 17,2001, promulgating the overall program on state administrative reform for the 2001-2010 periods. 12 the role of provincial government in terms of implementing socio-economic development plans and national programs, together with responsibilities for investment management. The legislation on Grassroots Democracy (introduced in 1998 and updated in 2003 and 2007)6 aims to enhance the accountability oflocal government authorities and agencies, and provides the mechanism through which citizens can participate in planning and supervising activities of the executive through both direct and representative means. Strengthening the grassroots administrations has also been an integral part of the PAR program and related legislation. In 2002 the Central Committee ofthe Party adopted Resolution No. 17 on renovation and raising the quality of the political systems in rural communes, urban wards and townships; this was followed by Decision No.85 (2002)7 which set out objectives for reform of the grassroots administrations. Program 135 is the only NTP which has a concerted policy for decentralization to commune level. Similarly, a majority of donor and INGO projects working with Commune Development BudgetdFunds have been working primarily (although not exclusively) in the poor communes8. Implicitly, shifting investment ownership responsibilities to these poor communes is seen as a means ofbuilding their capacity as well as for improving the targeting ofthese resources focused on poverty reduction.
36. Land policy for ethnic minorities is a related issue not directly addressed under P135-2. Recent legislation has provided a stronger basis for ensuring equitable and stable allocation of residential and production land to disadvantaged ethnic minority households (through Decision No. 134 of2004), and specifically for ethnic minority people in the Central Highlands (through Decision No.132 of 2002) and the allocation of forests and contractual assignment of forests for protection to ethnic minority households and communities in hamlets and villages in the Central Highlands (through Decision No.304 of 2005). Land allocation is not included as a component under Program 135 Phase 2; however, it is important that the experience with the land allocation program be explicitly considered in strengthening production support.
37. The performance of P135-2 to-date is encouraging, though significant implantation challenges remain. Through the end of2008, P135-2 had budgeted over $400 million and disbursed over 70% in support of almost 2000 “extremely difficult communes”, and an additional 3,000 “extremely difficult villages” in 47 provinces. During the first three years ofthe Program, 107 communes graduated from P135-2 on the basis of improved social indicators. However, implementation has not been consistent throughout the Program. Only about 57% of the 2006 budget was expended that year (including virtually none of the production support) due to delays in issuance of required guidelines. However, in 2007 the investment backlog was addressed with disbursement of 107% of that year’s budget.
Order No.06/2007/L-CTN ofApril 30,2007, of the President on the promulgation of the ordinance on exercise of democracy in communes, wards and townships.
Decision No.85/2002/QD-TTg of June 28,2002, promulgating the plan on renovating, and raising the quality ofpolitical systems in communes, wards and townships.
Including the Action Program 2015 (GTZ), Caritas (Switzerland), the Mountain Rural Development Program (MRDP) and the Chia Se Program (Sida), the Community Based Rural Infrastructure Project (WB), the Improved Livelihoods for Mountainous Communities Project (CIDA), the Northern Mountains Poverty Reduction Project (WBDFID), the Quang Ngai Rural Development Program (AusAID), the Rural Infrastructure Development Fund (UNCDF), and the Rural Income Diversification Project (IFAD) amongst others.
13 Similarly, while the infrastructure investment component generally disburses fully and rapidly, the newer components, such as livelihoods (including education and sanitation), capacity and production support have implemented much more slowly as local authorities gain a better understanding of the administrative and technical requirements for these activities.
IV. BANK SUPPORT TO GOVERNMENT’S PROGRAM LINK TO CASKPS
38. The proposed operation is fully aligned with the Bank’s Country Partnership Strategy (CPS) 2007-2011. The CPS is based on the Government’s SEDP (2006-2010), which the Bank and other donors recognize as embodying the main principles of a poverty reduction strategy, including a clear results orientation. The proposed operation is most strongly aligned with the second CPS pillar - ‘Strengthen social inclusion’ - under which it directly addresses two CPS outcomes of ‘better access to services and infrastructure for the rural poor’, and ‘ethnic minorities in rural areas more fully integrated into development processes’. It would also contribute to the fourth CPS pillar - ‘strengthened governance systems’ - particularly with respect to the outcome ‘modernized planning towards development objectives, with more participatory approaches’. In addition, the proposed programmatic series of development policy credits is filly consistent with the strong emphasis in the CPS on new modalities for delivery of development assistance, and partnerships between Government and donors around program-based approaches, underpinned by the Hanoi Core Statement commitments adopted by the Consultative Group Meeting in 2005. The proposed operation is included in both the previous CAS (2003-06) and new CPS (2007-1 1) as part ofthe base-case lending scenario.
COLLABORATIONWITH OTHER DONORS
39. The series of operations serves as an effective vehicle for the coordination of development partner support for the intended reforms in Vietnam’s NTPs for poverty reduction. Government and its development partners for P135-2 engage through a Partnership Committee which ensures that reporting, supervision and policy dialogue are streamlined and standardized to minimize the incremental demands on implementing agencies, and provide the basis for a consensus based approach to assessment ofprogress and required changes. This engagement is led by Government, with donors rotating the coordination role. Australia, Finland, and Ireland are providing parallel budget support to P135-2. Table 4 summarizes actual and expected budget support financing by the core donor group In addition, UNDP, Finland, AusAid, Ireland and IFAD are providing TA assistance at the national and provincial levels (see Annex 5).
14 Table 4: Actual and Expected Donor Financing to P135-2
-- (currency) calendar year (million) equivalent 2006 I 2007 I 2008 I 2009 I 2010 (currency)
RELATIONSHIPTO OTHER BANK OPERATIONS
40. The series of operations is designed explicitly to complement and build on both the Poverty Reduction Support Credits (PRSCs) and ongoing investment operations. It bridges the gap between the macro-reform agenda of the PRSCs and the micro-operational foundations of ongoing investment operations by supporting a set of meso-level policy and institutional actions between these two levels to scale-up and institutionalize a programmatic reform agenda for improved delivery of critical public services targeted to addressing the needs ofmarginalized ethnic minority communities concentrated in the poorest, most remote areas of the country. It draws on the demonstrated results from directly relevant, community driven development (CDD) -type investment operations supported by IDA and other donors that may be readily be applied under P135-2 and other NTPs and thereby significantly improve their results and effectiveness.
41. The operations support scaling up of P135-2 and the policy level of institutional innovations already demonstrated under ongoing IDA-supported projects. Most notably these include the recently closed Northern Mountains Poverty Reduction Project (NMPRP) and Community Based Rural Infrastructure Project (CBRIP), both implemented by MPI. NMPRP and CBRIP promoted informed participation and civic engagement at community level in basic infrastructure provision and, in the case of NMPRP, in complementary support for agricultural extension, health and education services as well. Between them, NMPRP and CBRIP were implemented in 19 ofthe 47 provinces in which communes have been selected as being eligible for support under P135-2. A second NMPRP is being prepared for FYlO with an explicit focus on complementing P 135-2 through more intensive capacity building support to provincial, provincial and district levels, as well as additional piloting of agricultural and other livelihoods support elements which continue to face challenges in terms of local capacity building under P135-2.
42. The operations also complement other programs supported by the Bank which strengthen provision of core education and health services in ethnic minority communities. The Bank is providing considerable support for education services in ethnic minority communities through the ongoing, geographically targeted Primary Education for Disadvantaged Children Project and through its support to the Education for All initiative in the context of Government’s Education National Targeted Program. The Bank-supported Second Higher Education Project also includes a small grants program targeted to universities
15 in ethnic minority areas. In the area of health, the Bank’s support includes two on-going regional health projects - the Mekong Health Support Project and Northern Uplands Health Support Project, with a third project focused on the Central North Region under preparation.
LESSONS LEARNED
43. The design of the program initiated in the first P135 Phase 2 Support Operation reflected general World Bank experience in the design of policy operations, as set out in Box 1 and discussed more extensively in the Program Document for the first operation. A recent, independent review commissioned by DFID concluded that “in terms of policy reforms, P 13 5 support has provided a sound partnership platform for Government and donors to discuss improved policies, and potential solutions for reducing poverty in ethnic minority and deprived rural areas. Useful policy discussions have occurred through bi-annual Joint Program Reviews and the Mid-Term Review and helped to bring about a positive evolution in policy (e.g. on pro-poor resource targeting, O&M and commune investment ownership). The existence of clear agendas and a policy matrix has helped to frame these disc~ssions.”~In particular, the experience ofthe first three years ofthe Program confirms the value of a policy support operation in facilitating a coordinated donor approach and engagement with Government, as well as a means to maintain focus on key policy related aspects of program implementation. Experience has also indicated the importance of timing planned tranche releases such that they provide time for the joint assessment of results of independent assessments and stakeholder discussions to be translated into revised, agreed policy actions which reflect lessons learned in order to maintain joint accountability, transparency and ownership.
Minford, Mark and Pham Huy Tuan Kiet, “Effectiveness ofDonor Support in Supporting P135 Phase 2”, Draft Report for DFID, February 10,2009. 16 Box 1. Good Practice Principles on Conditionality
Principle 1: Reinforce Ownership
The operation supports the reformed aspects ofone ofthe Government’s principal national target programs for poverty reduction, identified through an exceptionally thorough a consultation process involving central and sub- national agencies and field studies in the context ofthe P135-2 Midterm Review (MTR). It benefits from broad support across at least five participating ministries and 45 provinces. Vietnam’s impressive economic performance and overall achievements in poverty reduction attest to its track record in policy reform, and previous Bank support through five PRSCs has seen steady policy implementation. The operation addresses a high-priority, strategic agenda for the country in contributing to narrowing the poverty gap between lagging regions and population groups (notably ethnic minorities) and the rest of the country.
Principle 2: Agree up front with the government and otherfinancial partners on a coordinated accountability framework
The Bank’s support is summarized in a focused policy matrix or results framework which provides a vehicle for coordinated donor support to a strategic reform agenda over this period. Three bilateral donor partners are joining with the Bank to provide budget support, all relying on the same policy matrix/ results framework. Other development partners including bilateral donors and international NGOs are also considering aligning their support with the accountability framework underpinning the series of operations.
Principle 3: Customize the accountabilityfiamework and modalities of Bank support to county circumstances
The operation adheres fully to the core principles of the Hanoi Core Statement on Aid Effectiveness (Vietnam’s localized version ofthe Paris Declaration). It complements and builds on ongoing Bank-supported investment operations and macro-level policy lending through PRSCs, and seeks to institutionalize key lessons learned through reforms in the policy environment shaping the country’s own poverty-targeted programs and support their sustained implementation in practice. The policy areas supported concern poverty targeting ofpublic investment, community-driven approaches to basic infrastructure provision, fiduciary transparency and accountability, and country systems for results measurement. The agreed actions are based on the experience with Government and donor financed programs on the ground in around a half of all targeted communities, and extensive analytical work to synthesize these lessons from experience, reflecting evolving country circumstances and priorities. .
Principle 4: Choose on& actions critical for achieving results as conditionsfor disbursement
The jointly agreed BanWdonor policy matrix uses a limited set of conditions as prior actions (9) across the 13 selected policy areas, plus 8 additional monitoring actions to gauge overall program progress. The policy matrix also includes actions that some bilateral donor partners use as conditions for disbursement in the alternate years between the joint operations also supported by the Bank. Conditionality is focused on steps considered critical to achieving results on the ground and to strengthen transparent implementation and use ofresources and are sequenced in support ofconsistent progress towards program objectives.
Principle 5: Conduct transparentprogress reviews conducive to predictable and performance-basedfinancial support
Joint progress reviews take place twice each year, timed so as to allow for a predictable review ofprogress and announcement ofsupport levels at the beginning ofthe budget year. The results framework includes outcome indicators which are assessed as part ofoperation implementation and mid-term review, and are closely linked to the supported policy actions. Support for the Government’s own results measurement system is one ofthe four priority policy areas in the policy matrix.
17 44. The November 2008 Joint Mid-Term Review of Program 135, Phase 2 also identified several important lessons which are reflected in the revised policy matrix, as well as the increased focus on subnational capacity building and technical assistance. The mixed progress on indicative actions underscores the need, in the case of a highly decentralized reform program, to recognize that the pace of translation of specific reforms into specific behaviors at the subnational level is rapid in higher capacity provinces which have benefited from similar, donor funded projects, but requires more time and maintenance of frequent engagement with lower capacity areas. The review also highlighted the need to ensure the timely deployment of anticipated technical assistance to reinforce national policy decisions with local implementers as well as facilitate feedback in terms ofthe realism of the agreed progress indicators - all aspects which Government and Development Partners agreed to strengthen as a result ofthe MTR discussion.
ANALYTICAL UNDERPINNINGS
45. Recent analytical work has confirmed the policy direction of P135-2 and sharpened the focus on fiduciary elements and informed participation. The analytical underpinnings of the P135 Phase 2 support program were set out in the Program Document for DPCI. These included a number of evaluations of P135 Phase 1 as well as other CDD type operations in Vietnam, including NMPRP. This was complemented by the 2004 Public Expenditure Review and other studies of decentralization. The recent update of the Country Financial Accountability Assessment identified areas for improvement in subnational public financial management, highlighting the significant needs to increase public financial management capacity, and to strengthen auditing, particularly the absence ofmechanisms for review of implementation of inspectiodauditing missions. These issues are addressed through the fiduciary transparency and accountability policy area and outcomes pursued under P135-2 and form the core ofthe policy actions under DPC2.
46. The recent Country Social Assessment: Ethnicity and Development in Vietnam (CSA) provides an in-depth analysis of the situation of ethnic minorities - particularly in such sectors as access to services, issues related to livelihood opportunities and impacts of targeted policies and programs in order to understand their continued social and economic marginality. The CSA identifies six primary factors for continued ethnic minority poverty: lower levels of education; less mobility; less access to financial services; less productive lands; lower market access; and stereotyping and other cultural barriers. The CSA also indicates six policy priorities to address these factors: (I)improving the quality and public access to information on minorities to serve as the basis for designing cultural appropriate service interventions; (ii)use of affirmative action programs, particularly in education, to increase representation of particularly less numerous groups in administration of services to these same communities; (iii)increase understanding ofcultural differences, particularly with respect, to agricultural practices and land rights; (iv) strengthening cultural inclusion through recognition and support of cultural differences, particularly of the most marginalized groups; support; (v) support to ethnic voices through strengthening of grassroots participatory processes in the context of local governance and support to minority-run NGOs; and (vi) opening dialogue on new approaches such as for more effective targeting ofvulnerable groups and consideration of moving from blanket approaches and programs for ethnic minorities to more differentiated approaches. These results, which are consistent with the P135-2 outcomes and the policy actions taken under DPC1, are reinforced in the implementing guidelines and manuals for procurement and production support under DPC2, and are the emphasis of the accelerated, decentralized technical assistance agreed by Government and
18 Development Partners at the MTR. Additional analytical work is planned in FY09 and FY 10 on food security and agriculture in highlands regions as well as ongoing work on land tenure and forestry which include issues specific to ethnic minority communities, and which are expected to provide the basis for further refinement oftriggers for DPC3.
V. THE PROPOSED OPERATION
OPERATION DESCRIPTION
47. Development Objective. The Program Development Objective is to improve the results ofone ofVietnam’s National Target Programs for poverty reduction, the “Program for Socio-Economic Development in Communes Facing Extreme Hardship in Ethnic Minority and Mountainous Areas (2006-2010)”, known as “Program 135 Phase 2” (or P135-2), through strengthening the four, main policy areas. The proposed Credit would continue to support policy and institutional actions to improve the results of Program 135 as an entry point to a wider, emerging agenda for systemic change in the way NTPs in Vietnam are conceived and implemented. This reform agenda aims broadly to promote improvements in informed participation and civic engagement at community level, as well as increased fiduciary integrity and accountability and high quality evaluation in the Government’s poverty-targeted public investment programs. Progress with the reform agenda has generally been positive and generally consistent with achievement of the end of program outcomes, though the pace of reform in several areas has been delayed due to initial challenges in program coordination amongst the multiple implementing agencies resulting, inter alia, in a protracted process of revising Inter-Circular 676 governing program implementation, as well as some delays in deploying technical assistance to national and subnational levels.
48. Sequencing and phasing of policy and institutional actions. The Jirst operation established the basic legal and administrative framework for pursuing the policy reform agenda under P135-2. The prior actions in this case were primarily policy and institutional actions for strengthening community-level ownership over the planning, execution, management and construction supervision, and operation and maintenance of basic infrastructure investments. The second operation follows an objective stock-taking of overall program progress through the mid-term review, and emphasizes policy actions in the areas which were assessed as requiring additional clarity to strengthen implementation or push forward policy actions which have experienced some delay. The third operation, expected to be prepared in early CY2010, would support additional areas of policy and institutional actions identified through the mid-term review in areas not anticipated in the original policy matrix, to accelerate progress, particularly at the subnational level, towards achievement of results in the final years ofP135-2.
49. Expected benefits and results. The series of operations supports the Government of Vietnam to pursue its objectives for the reform of its NTPs for poverty reduction. All NTPs will benefit from the updated procedures developed under donor and NGO financed area projects, as well as capacities developed under P135-2. More specifically, the expected results of the proposed series of operations over the medium to long term (next ten years) include: (a) public investment resources better targeted and more effectively delivered to contribute to increasing the level, security and sustainability oflivelihoods of ethnic minority households living in remaining deep pockets of poverty in remote, upland areas of Vietnam; (b) higher quality and more cost-effective support services and basic infrastructure used by
19 poor, ethnic minority households in remote locations to access markets, wage-earning opportunities, education and health services, and sources of public information; (c) greater responsiveness of local authorities to citizens’ and communities’ demands for more effective service provision; and (d) a reduction in corruption risks in NTP and other government programs through enhanced public participation and oversight of public financial management and procurement.
PROGRESS ON BENCHMARKS AND POLICY ACTIONS
50. The November 2008 mid-term review of P135-2 provided a thorough basis for assessing progress towards outcomes in the four program policy areas. The agreed aide- memoire summary ofthe mid-term review is included as Annex 4. The mid-term review was also used by Government and development partners to review progress in achievement of 2007 benchmarks, 2008 prior actions, and to redefine 2009 triggers and 2010 benchmarks based on the priorities emerging from the various assessments and stakeholder discussions.
Policy Area I:Poverty Targeting 51. LA. Commune, Wlage and Household Selection. End of Program Outcome: Commune, Village and household selection criteria are pro-poor and effectively applied as verified by baseline and evaluation survey.
52. Under the first phase of P135, provinces utilized a broad range of mechanisms, often without sufficient poverty targeting focus, to qualify participating communes, villages and households for program support. With the issuance of decision 393/2005/QD-UBDT, which was a prior action for DPC1, all provinces have adopted the poverty targeting criteria specified by the Ministry of Labor and Social Affairs (MOLISA) which have been subject to several independent assessments and found to be effective in identifylng the poor and as a standardized approach, facilitates determining which villages and communes should “graduate” from P135-2 support based on reductions in poverty rates. A list of poorest villages (3,149) to be included in the Program coverage was issued by CEM (Decision 01/2008/QD-UBDT) on January 11,2008, and the list of graduated communes in 2008 (1 10) was approved by the Prime Minister on May 28, 2008 (Decision 69/2008/QD-TTg), consistent with the 2007 program benchmark. As part of the MTR, the baseline survey data confirmed that P135-2 communes do generally include a higher proportion of poor households and that the households selected for targeted support in these communes are more likely to be poor than non-P135-2 communes. In order to enhance transparency, a 2009 benchmark is to publicize the lists ofP135-2 beneficiaries at eh commune and village offices. As an input into future program development and implementation, the use of the MOLISA targeting approach is being reviewed in the context of its application in several NTPs and further evaluation is a benchmark for 2010 under P135-2.
53. I.B. Program Resource Allocation. End of Program Outcome: Program resource allocation favors poorer participating communes and villages as indicated by (i)provinces developing specific allocation criteria; (ii)evidence from baseline and evaluation surveys; and (iii)verifying correlation of expenditures with number ofpoor at commune level.
54. Under the first phase of P135, most provinces allocated resources on an equal basis amongst targeted communes irrespective of the number of poor or the specific conditions, such as isolation, of the communes. Inter-ministerial circular 676/2006, a prior action for
20 DPC1, requires provinces to allocate P135-2 resources on a pro-poor basis with flexibility provided to address specific poverty reduction challenges within the province. Currently, 42 of 47 provinces have developed and are applying allocation criteria. As the MTR indicated significant variations in the allocation criteria being used, Government in 2009 will develop tools for assessing how pro-poor expenditures have been in practice in an initial set of provinces with support from donor financed technical assistance. These tools will be reviewed as part of the end of program assessment to determine their efficacy for use in follow-on programs.
55. I.C. Enhancing Sustainability of Program Investment. End of Program Outcome: Program infrastructure outputs are well maintained.
56. The mountainous regions which are the target areas for P135-2 support are highly vulnerable to erosion, rock slides and rapid deterioration from use and due to the extreme weather and slopes. As a result, consistent maintenance is crucial to extend the useful life of these investments beyond one or two years. However, no explicit budget line or allocation has previously been included in NTPs, with maintenance of commune level investments expected to be carried out on the basis of local contributions without mandating specific institutional or technical support from districts or provinces, resulting generally poor maintenance. Acknowledging the importance of improving maintenance to increase returns to public infrastructure investments, in 2008, CEM issued the O&M funding policy which allocates 6.3% of the annual infrastructure component budget for O&M. In the same year, Government, for the first time under an NTP, allocated this funding to provinces, which is a .prior action for DPC2. At the same time, Government has acknowledged the importance of capacity building for O&M at community level, drawing on experience under IDA- and other ODA-supported projects with formation of O&M groups and capacity-building support (e.g. simple maintenance and construction skills). However, an independent review of O&M under P 135-2, financed by Finland, has indicated that capacity building has lagged behind funds allocation, resulting in limited use of the funds provided, with few communes having developed O&M plans as a basis for utilization of the earmarked funds. As a result, at the MTR, Government accelerated issuance of Guidelines for the Management and Disbursement of P135-2 Funds on March 4, 2009, which include specific guidance on use of O&M allocations, a prior Action for DPC2. In order to support more sustainable local investments, ,monitoring ofboth environmental and O&M aspects ofinvestment management are being strengthened through introduction of benchmarks focused on implementation of environmental awareness and training activities, continued provision of O&M budget allocations, as well as development and implementation of O&M plans at district and communes levels.
57. I.D. Pro-Poor Orientation of ProductiodLivelihoods Support. Outcome: Poor upland households increase incomes and diversify livelihoods in a sustainable, market- responsive manner.
58. In the redesign ofP135, it was acknowledged that basic infrastructure alone would not bring about the intended achievements in poverty reduction. At the same time, it was recognized that existing production support under NTPs had focused almost exclusively on input subsidies limited to food self-sufficiency needs. Evidence from household surveys shows that while land holdings are similar or even larger for poorer, ethnic minority groups, compared to JSinh in the same areas, incomes from agriculture are substantially higher for the
21 Kinh who have a greater share of their land producing non-staple cash crops. In addition, experience in upland areas throughout East Asia has identified improved livestock systems - including production of cut and carry forage, as an important mechanism for increasing household assets and resiliency to unexpected expenditures such as illnesses or finerals, increasing the willingness of households to risk diversification of food production. Accordingly, under P135-2, Government emphasized the need to promote market linkages and in-kind savings and investment opportunities through support to diversification of household production skills, while maintaining awareness of food security needs. In order to address these issues, Government took the important step of allocating a greater share of the total program budget for P135-2 to productiodlivelihood support than was the case under Phase 1 (from less than 4 percent to as much as 20 percent). However, translating this broad commitment to a change in production support at the local level has been challenging. The original Circular 01 established two budget lines for production support under P135-2 - capital and recurrent budget - with the result that provinces and districts felt constrained to use the majority of the funding for purchase of equipments such as rice threshing or corn husking machines. In addition, there was insufficient guidance for targeting and cost-sharing criteria for subsidized inputs resulting in concerns, reflected in the baseline survey and citizen report card reports that those most in need were being excluded in some communes. Inter- Ministerial Circular 01, issued in September 2008, unified the budget lines under the production component, providing more flexibility to support a demand-driven approach. However, given the need to clearly re-orientate existing practice of extension agents in many provinces towards a more diversified and demand driven approach, MARD, working with CEM, has prepared Circular 12/2009/TT-BNN, dated March 6, 2009, for implementation of the component, a prior action for DPCZ. MARD is also preparing, with support from IFAD and other donors, technical manuals which reflect regional differences in diversification and marketing opportunities as the basis for training activities to support widespread transfer of these options to P135-2 communities which is being monitored as benchmarks in 2009 and 2010.
Policy Area 11: Decentralization, Participation and Empowerment
59. 1I.A. Informed Public Participation in Program Planning and Management. Outcome: Socially inclusive, active and informed participation in program planning and implementation and monitoring achieved, and NTPs and other forms of public action at commune level effectively coordinated.
60. Planning processes for NTP investments, including under P135 Phase 1, vary considerably in terms of transparency and opportunities for participation in prioritization of investments. In addition, there is limited coordination of the planning processes between these and other local investment activities except through the district and provincial level screening processes. These factors result in both lower participation rates, less awareness of public investment efforts, and therefore lower satisfaction rates of communities with investments. In order to increase awareness of P135-2 objectives and processes, CEM formulated a communications strategy for P135-2- a prior action for DPC1, and the Prime Minister approved the allocation of funding for implementation ofthe strategy to ensure that information about program activities and opportunities, implementation guidelines and approaches, and other outreach materials be made publicly available through a wide range of communications media and in ethnic minority languages, including posters, leaflets, newspapers, radio, television (e.g. via provincial stations and the new VTV5 channel which
22 broadcasts mainly in ethnic minority languages), and other audio-visual formats. The MTR indicated that while there has been use of national media to broadly communicate P135-2 objectives and activities, more focused implementation of the communications strategy to support the participatory planning process and local transparency has been delayed, with result that several provinces have developed their own communication materials. It was agreed that technical assistance support will work closely with CEM to increase the availability of materials to provinces, including expanded use ofmaterials in ethnic minority languages, a trigger for DPC3. At same time, it was agreed that the experience with participatory planning under P 135-2 and other NTPs provides sufficient basis for developing a consolidated, local participatory planning process which can improve investment coordination and reduce the administrative burden on local officials and communities, while ensuring integration of O&M requirements and mandating greater participation of women. Issuance ofa manual on commune-level participatory planning is a trigger for DPC3.
61. ILB. Devolution of Investment Ownership Outcome. All P 135-2 communes act as investment owners for a significant share of all infrastructure investments and communities apply acquired skills in activities beyond P135-2 alone.
62. Government’s Democratic Governance Decree prioritizes devolution of development planning and implementation to the local levels - in particular communes so as to ensure alignment with local priorities and increase local responsibility for maintaining investments. However, the poor, often isolated communes targeted under P135 have generally lagged behind other communes in Vietnam in assuming ownership responsibilities due to the lower education levels ofthe commune leadership and, in some cases, reluctance of districts to transfer responsibility to isolated communes due to lack of confidence in their ability to respect administrative procedures. In order to encourage devolution in these areas, Decision No.7 approving P135-2, the Government has declared that all communes under P135-2 shall have gained experience as investment owners over a significant share ofthe total value of investments in their localities by the end of the program. Development by CEM of specific guidance to provinces on transparent criteria to be used to determine commune readiness to assume investment ownership responsibility was a prior action for DPC1. Investment ownership responsibility was then extended to all P135-2 communes with prior experience with investment management under State or ODA-financed projects (about 35% of program communes). In order to increase transparency and facilitate the process of devolution of investment ownership to communes, Inter-Circular 01, issued in September 2008, included specific criteria for identifying communes for investment ownership as well as criteria for targeting technical support from the districts, a prior action for DPC2. As ofthe end of 2008, Provinces and Districts had transferred investment ownership to 1000 communes, or over 60% ofthe total under P135-2. However, while the MTR indicated that communes with investment ownership generally had higher satisfaction rates with P135-2 investments, it also highlighted a number of challenges in the process ,of devolution of commune ownership. In particular, both communes and districts emphasized the need for districts to strengthen their role in support ofcommune monitoring boards for development of technical designs, procurement processing and technical oversight of civil works - a function which could be leveraged more broadly in support of decentralized public investments. Accordingly, technical taskforces will be formed in selected provinces, drawing from provincial and district technical staff - a trigger for DPC3 - to accelerate the transfer of investment ownership to 100% ofcommunes supported by P 135-2.
23 63. IL C. Local Institutional Capacity Building Support. Outcome: Communities apply learned behaviours in grassroots democracy (e.g. supervision of investment) in activities beyond P135-2.
64. While the Grassroots Democracy Decree encourages participation and transparency in all local development activities, NTPs provide very little or no dedicated funding for capacity development to support this objective. Under P 135-2, support for local-level institutional capacity-building was increased from less than 1% under P135 Phase 1, to a minimum of 7% of total program cost, as confirmed in the Prime Minister’s Approval No. 206/TTgt-QHQT (dated February 8, 2007) which was a prior action for DPC1, and a capacity building plan was adopted in 2008. Evidence from assessments conducted for the MTR indicate higher participation rates in investment planning and supervision in P 13 5-2 communes and for P 135- 2 investments within communes than for other local investment programs. However, as indicated above, there remains significant scope to utilize technical assistance support to strengthen communications and capacity building activities at the district and commune levels to broaden popular participation in the investment planning, decision making and supervision processes which will be monitored through program benchmarks in 2009 and 2010.
Policy Area 111: Fiduciary Transparency and Accountability
65. IILA. Procurement for Small-scale Infrastructure. Outcome: Improved cost- effectiveness and quality of, and citizen satisfaction with, built infrastructure.
66. Internal and external evaluations of investments under P135 Phase 1 found to represent reasonable value for money, however the evaluations judged that there was considerable scope to improve the cost-effectiveness of and local satisfaction with investments made, particularly through the use of more transparent and competitive public procurement methods. In addition, there was considerable scope to use community contracting which would generate much needed employment in poor communities. However, provisions for introduction of these procurement methods, which are not explicitly covered by Vietnam’s Procurement Law, into P135-2 through Inter-Circular 676 were found to be insufficiently clear in emphasizing that these methods are not inconsistent with the Procurement Law and therefore take precedence over the better known methods which local authorities had been using for several years. This confusion delayed the expected progress amongst communes in utilizing these procedures to include at least 50% of communes by 2008. Accordingly, in 2008, revisions were made to the regulations guiding procurement under P135-2, and these have been integrated into the revised Circular 01 to clarify consistencies with the Procurement Law which does not explicitly specify the use of competitive procedures or community contracting for small scale procurement. However, as there is some hesitancy amongst local officials to follow these “new” procedures which currently apply only to Program 135-2, MPI and CEM prepared a Procurement Manual to guide use of these methods, including the stipulation to ensure procurement planning as part ofthe investment proposal process under P135-2, a prior action for DPCZ. As Government does not have direct experience with community procurement outside of some donor-financed projects, it was agreed that a specific contract format and detailed instructions will be issued in 2009, a trigger for DPC3. Procurement management and supervision will be one of the focal areas of the intensified TA support to districts and communes in support of commune investment ownership in order to achieve benchmarks of at least 50% of contracts under P135-2 awarded through open and competitive bidding, community contracting or other non-
24 Direct contracting methods by 2009 and 80% of contracts by 2009, as verified by SAV audits. Government will also focus its technical support to encourage use of community contracting for works below the relevant threshold for infrastructure investments.
67. IILB. Public Financial Management. Outcome: Transparency in public resource use strengthened through regular, public disclosure or program financial statements.
68. The joint IDA/ Government Public Expenditure Review-Integrated Fiduciary Assessment (PER-IFA) in 2004 (updated in 2005), found that fiduciary controls in public expenditure management under P135 and some other NTPs were stronger than many critics had thought, however there was scope for increased public disclosure of financial management information. The budgetary planning and management system that is being put in place for P135-2 is in accordance with the Government’s overall PAR Program (2001- 20 lo), specifically with respect to the decentralization of state management responsibilities to the provincial government authorities (under Resolution No.8, June 2004), detailed regulations on implementation of the State Budget Law from 2002 (under Decree N0.60 of June 2003), and guidelines on management and administration of the National Target Programs (under the Prime Minister’s Decision No.42, March 2002). This legislation assigns the rights of decision-making for program resource allocation to the Provincial People’s Councils, and executive authority and accountability to the Provincial People’s Committees. As a prior action for DPC1, MOF issued Guidance No. 2849 (dated December 29, 2006), giving instructions for MOF to prepare processes and procedures for fund-flow reflecting the provision of funds from the state budget to each spending agency at central, provincial, district and commune levels; and quarterly financial reports and reconciliation of P 135-2 expenditures between spending agencies and state treasury. Implementation of these procedures, including placing reports on transfer and use of funds to provinces on MoF website, was implemented in 2007 and 2008, and is being monitored as benchmarks in 2009 and 2010.
69. IIL C. Public Financial Management (contd.). Outcome: Ensure adequate oversight over public funds through publically disclosed, independent audits.
70. According to the State Audit Law, the State Audit of Vietnam (SAV), Vietnam’s supreme audit authority, now reports directly to the National Assembly rather than to the Government, and is therefore considered an independent auditor. The Audit Law also provides for not only compliance audits, which were until recently the norm in Vietnam, at least under NTPs, but also for full financial and operational audits to be performed on public expenditure programs including NTPs. Issuance of Guidance No. 2849 - a prior action for DPCl - provided the basis for more systematic and transparent auditing with provincial coverage being progressively increased year by year. In order to increase transparency ofthe auditing process, Government is sharing the annual audit plans with P135-2 donors for comment; audit reports are submitted within six months of the end of the year of audit; implementation of each prior year’s audit recommendations reviewed; and audit reports publicly disclosed on SAV’s website and through the media, in accordance with the provisions ofthe State Audit Law. In the 2007 audit ofP135-2, SAV attempted its first audit of P135-2 which reviewed issues of compliance, coordination, management, and progress towards objectives as well as surveys ofbeneficiaries as an integral part of the audit process, and audits have made explicit recommendations for reimbursement of funds due to incorrect use offunds or failure to comply with procedures. Consistent with State Audit Law, specific
25 sections of the audit were disseminated through a press release and on the SAV website. The 2008 audit was expanded to 10 provinces, a prior action for DPC2, and its findings correlated closely with other independent assessments such as the National Assembly Commission for Ethnic Minorities and Development Partners field reports. Given the success of the SAV audits as a mechanism for independent supervision of public programs, it was agreed, as a prior action for DPC2, to further strengthen the accountability framework by having SAV and CEM review and share with development partners, reports from the audited provinces indicating the actions taken by provinces to implement the previous year’s audit recommendations, including reimbursement of funds to the State Budget. Government is working with development partners to strengthen the follow-up to these reports as part of the regular joint monitoring review process. Government intends to further extend SAV’s audit coverage to 14 provinces in 2009, and 18 provinces in 2010.
71, ZZLD. Community Contribution. Outcome: Local contributions are equitable, wage earning opportunities in public work fully exploited for generation of local multiplier effects, especially for poorest households.
72. The practice of community contribution under NTPs and other local investments is generally is confined to contribution of land and/or labour, usually unpaid. Inter-ministerial Circular No. 676, a prior action for DPC1, stated that compulsory local contributions shall be affordable; that the poorest households shall be exempted from compulsory cash contributions; and that mechanisms shall be developed to promote paid local labour in civil works, with priority given to poor households in wage-eaming opportunities. However, the MTR indicated that interest in accessing paid labour is not consistent in all regions. Specifically, villagers in the southern and central regions indicated less interest in these employment opportunities, while in the northern regions there was greater interest due to fewer alternative, local sources of employment. Given concerns that the current global economic crisis will increase the need for employment generation in villages due to reverse migration and reduced private construction activity, rules and guidelines to encourage communes to utilize local paid labor in P135-2 investments will be developed in 2009 and to capture this information in commune accounts and be monitored through the MIS, a trigger for DPC3. Given the interest in this issue for future program development, the P135-2 end of program evaluation will include assessment ofpaid labor participation rates and wage rates- a 2010 benchmark.
Policy Area IV: Monitoring and Evaluation
73, ZKA. Impact Evaluation. Outcome: Evaluation of Program outcomes performed to high methodological standard including use ofappropriate comparator.
74. While evaluations have generally been part of assessing NTP performance, there has been limited use of statistically based impact surveys or efforts to correlate a range of quantitative and qualitative sources ofinformation. With TA support from UNDP, the World Bank, and other agencies, the Government has designed a comprehensive M&E system for P135-2. Outcome indicators and the overall M&E framework were agreed and adopted, and a baseline survey was designed including a matched control group as a prior action for DPC1. The baseline was conducted in 2007 and analysis completed in November 2008 - a first for an NTP. The survey results were matched with results from other independent assessments, including the field reports from the National Assembly Commission on Ethnic Minorities, the
26 donor partner field observations and SAV audit results and shared and discussed in an open forum with Government, donor and civil society representatives - a prior action for DPC2 - as the basis for agreeing on additional policy actions and institutional measures to strengthen progress towards agreed program objectives and outcomes. In order to ensure timely implementation of the end of program evaluation survey work, the preparation of terms of reference and budget estimate for the survey and assessment is a benchmark for 2009, and its implementation a benchmark for 20 10.
75. IKB. Process Monitoring. Outcome: Effective and reliable MIS is used to track progress towards agreed outcomes and identify/resolve program management issues.)
76. NTPS, while regularly collecting information on progress with outputs, generally do not institute a standardized, computer-based MIS which covers process as well as input and output elements, nor are these usually complemented by client satisfaction tools such as citizen report card surveys. Recognizing the challenges in monitoring the effectiveness of implementing the agreed policy changes under P135-2 in 47 provinces throughout the country, CEM, with MPI adapted the Government’s Portfolio Monitoring Tool (PMT) - developed under the auspices ofthe Partnership Group on Aid Effectiveness - as the basis for its own computerized Management Information System (MIS) for P135-2. The PMT was designed for monitoring ODA projects and programs supported by the five development banks, and are currently being used by around 40 project management units and six ministries including MOF. The action plan to adapt the PMT for purposes of tracking and reporting on inputs, outputs, and intermediate outcomes of P135-2 was adopted as a prior action for DPC1. Implementation of the action plan was delayed, but as of October 2008, training of trainers had been carried out in the provinces for use of the MIS and a number of communes, districts and provinces have begun to generate reports for the MTR. In parallel, a Survey on People’s Satisfaction with P135-2 was carried out with 480 households in 16 communes in four provinces in September/October 2008 covering client views on the past two years of implementation. Both the establishment ofthe PMT MIS and the use of a citizen report-card type survey are firsts for NTPs in Vietnam. Similarly, cross learning amongst provinces was initiated in September/October 2008, and AusAid supported an independent assessment of “Lessons from Best Practice”. The results of the “citizen report card” type survey and the cross learning were reported and discussed as part of the MTR - a prior action for DPC2, indicating that while there is fairly broad participation in investment selection and general satisfaction with investments and production support, there is a need to broaden information communication, strengthen participation in supervision of investments during construction and O&M, and need for greater transparency and clarity in selection of beneficiaries for production support. Ensuring that the PMT is established in and being used for reporting by all provinces is a trigger for DPC3. Use of the PMT data, as well as the citizen report card survey, for end ofprogram evaluation is a benchmark for 2010.
27 VI. OPERATION IMPLEMENTATION
POVERTY AND SOCIAL IMPACT
77. P135-2 implements a community based approach to eradicate hunger and reduce poverty below 30% in the targeted areas by 2010. P135-2 complements other national programs for poverty reduction by focusing its support primarily at the community level relative to other programs which are based exclusively on household targeting. As a result, most funding under the program supports infrastructure to improve water and sanitation and connections to markets, and through process oriented support, builds social capital to strengthen ability to engage administrative processes. These activities are complemented by more finely targeted support for access to basic education, electricity, and healthcare and production assistance for food security.
78. The baseline study verifies that the areas targeted by P135-2, and the emphasis on ethnic minorities is appropriately focused to address the needs of the poor. The baseline study estimates that 43% of households covered by P135-2 are below the poverty line compared to about 16% nationally, indicating that P 13 5-2 is effectively targeting communes with the highest proportion ofpoor households. Poverty in these communities is twice as high amongst ethnic minorities as amongst the Kinh and Hoa groups, verifylng the importance of P 13 5-2 focused communications and participation strategies. Self-reported poverty rates were similar to income-based poverty measures at 5 1% for ethnic minorities and 28% for Kinh and Hoa headed households. 46% of households in the program area declared that they lacked food over the past 12 months, ofwhich over a third indicated frequent periods offood shortage.
79. The baseline study and other MTR studies also verify the relevance of the activities supported under P135-2. On average, less than 15% of households had access to piped or filtered water or hygienic toilets. Insufficient physical facilities were identified as the most serious obstacles to primary schools in 85% ofthe P135-2 communes, and only 66% of communes. Although the presence of primary health care facilities was nearly universal, the rate of free medical treatment was relatively low at 55%, similar to the rate in less poor communes. Income generation is limited by poor road access (over a third ofP135-2 villages do not have a car road passing by, limiting access to labor, input and output markets, resulting in lower yields and less focus on market crops amongst households in P135-2 areas, particularly ethnic minorities.
80. P135-2 is expected to have significantly positive social and poverty impacts, however the program’s poverty reduction objectives are unlikely to be achieved within the five year program period. The recent mid-tern review confirmed that P135-2 has been effective in increasing the access ofremote communities to critical road, school buildings and other public infrastructure, and is beginning to effectively channel improved social services such as support for poor students to stay in school and sanitation investments, and the P135-2 investments are expected to contribute to significant narrowing or closing ofthe gap between the communities in the P135-2 program areas and those which do not qualify due to lower poverty rates in areas such as enrollment rates, improved water supply systems, electricity and sanitation. However, reducing poverty from 43% to 30% would require an annual rate of poverty reduction twice the 2% national average and as high as 7 to 8% amongst ethnic 28 minorities. As P135-2 interventions are focused on building physical and human capital which will only gradually facilitate greater labor migration and market integration, measured poverty rates are expected to decline more slowly in the mostly isolated target communities. As a result of the MTR, Government intends to accelerate implementation ofactivities which facilitate access to basic services and the strengthening of social capital, thereby encouraging greater confidence to engage administrative processes and to link to labor and market opportunities outside their existing communities.
IMPLEMENTATION, MONITORING AND EVALUATION
81. Institutional and Management Arrangements. Under Decision No. 7 ofthe Prime Minister (dated January 10, 2006), the Committee for Ethnic Minorities (CEM) is assigned by the Government of Vietnam as the lead agency in managing and supervising the implementation ofP 135-2. However, as Inter-Ministerial Circular (IMC) No. 676 details (see Annex 2 for further details), it does so with support from and in coordination with the four other ministries that are also co-signatories to IMC No. 676: Ministry of Planning and Investment (MPI), Ministry of Finance (MOF), Ministry of Agriculture and Rural Development (MARD), and Ministry of Construction (MOC). These ministries have representatives on the Program Steering Committee, which is chaired by a Deputy Prime Minister. SAV, which reports to the National Assembly, the National Assembly Committee for Ethnic Minorities, and the Vietnam Fatherland Front among other mass organizations, play the role ofindependent supervision bodies. At provincial level, a Steering Committee for the implementation ofthe P135-2 is set up with participation from all related agencies and the standing agency is the Provincial Committee for Ethnic Minorities, chaired by the Chairperson of the Provincial People’s Committee (PPC). The PPC creates an enabling environment for the effective implementation of the P 135-2 by developing and issuance of provincial guidance regulations and implementation of capacity building. The same institutional setting applies at the district level. The District People’s Committee provides guidance and supervision for planning and implementation at commune level. The Commune People’s Committee is the investment owner and makes decisions on implementation and supervision. At commune level there is a ‘program management unit’ established by the District People’s Committee.
82. Roles and Responsibilities. CEM is responsible for overall policy development, inter-agency coordination, capacity support to provinces, monitoring, assessment and reporting to Government and the National Assembly. Program funds are transferred directly to program provinces based on the number of targeted communes and villages, and these funds are then allocated amongst communes based on criteria established by provinces. While most guidelines for implementation of the program are provided through CEM to the provinces, provinces frequently adjust these guidelines consistent with their own institutional procedures. Provinces can also initiate their own capacity building and communications activities. Communes are the focus of identification of priorities for P135-2 funding which are transmitted and reviewed at the district and provincial levels for approval. Contracting of investments can be carried out by either the commune or the district, if the commune does not have sufficient capacity, though in many cases the district will provide technical support to the communes, particularly for designs and supervision of construction. Reporting is provided by communes through the districts and provinces which review and consolidate reports which are provided to CEM. Accountability mechanisms include the elected Commune, District and Provincial Peoples’ Councils, as well as the Committee for Ethnic
29 Minorities ofthe National Assembly, all of which have the right to review documentation and seek clarifications on Program activities.
83, Monitoring and evaluation. According to Inter-Ministerial Circular No. 676, the PPC takes overall responsibility for quality, progress, and effectiveness of P135-2. Every quarter the PPC takes the lead in supervising, monitoring and evaluating program implementation. The P135 Provincial Standing Office serves as the key agency to conduct monitoring and supervision, and assists the PPC in synthesizing and reporting results to the Central Standing Agency. Monitoring and evaluation are also achieved through annual audits, independent field missions of the Commission for Ethnic Minorities of the National Assembly, semi-annual joint monitoring missions to the field carried out by Government and development partners, a mid-term review (or reviews), and a final evaluation upon program completion. A baseline study to permit impact evaluation was conducted in 2007 in both a representative ‘treatment’ sample of P135-2 target communes and in a matched ‘control’ sample. Further details are provided in section IV above, since actions pertaining to monitoring and evaluation make up one of the four main policy areas supported by the proposed series ofoperations.
84. Reporting within Government. Provincial Steering Committees synthesize reports from local levels and submit regular progress reports to the relevant higher-level authority. Prior to report submission, local project management units are required to collate data certified by the local branch of STV in which their financial accounts are opened. Provinces are to send their reports to CEM on a quarterly and annual basis. CEM submits aggregated reports to the National Steering Committee every six months.
85. Partnership Committee. A P135-2 Partnership Committee (PC) has been formally established by the Government to oversee and review progress towards the agreed policy and institutional actions under the proposed series of operations. The PC is chaired by CEM, and comprises senior managers and specialists from all those Government agencies that have a role in P135-2 implementation (including CEM, MOF, MPI, MARD, Office of Government, GSO, and MOLISA). All co-financing donor agencies are also represented in the PC. The group of donor representatives in the PC designate one among their group to lead the policy dialogue with the Government representatives in the PC on a rotational basis.
86. Joint Progress Reviews with IDA/ Donors. Annual and interim review missions are organized according to the following schedule, dictated by the Government’s budget cycle: interim review missions are held around April ofeach year, and full annual reviews conducted around October each year. Interim review missions involve field visits, while annual reviews form the basis for preparation of the next operation and involve an assessment of progress towards accomplishing the agreed policy and institutional actions/ triggers. A Memorandum of Understanding concerning the Partnership Framework between the Joint Donor Budget Support Group and the Government with respect to the PC has been signed by all development partners concerned, including draft TOR for the PC.
30 87. The P135-2 DPCl Program Document provided an extensive assessment of Government’s public financial management systems, and concluded that adequate protections are in place to support policy lending. In 2007, a Country Financial Accountability Assessment (CFAA 2007) was performed. The 2007 CFAA assessed the financial management risk to proper use, control and reporting of funds that are managed through the Vietnam public financial management systems is Moderate. The public accounting system and financial management arrangements are well-documented and regulated, but financial management risks arise from gaps and overlaps in the systems, and more particularly risks arise from weaknesses in implementation and compliance gaps. The CFAA found that key challenges in the PFM systems remain in the areas of (i)expanding budget coverage in line with internationally accepted norms; (ii)implementing the new government Chart of Accounts and the Treasury and Budget Management Information System with strengthened internal controls (including internal audit) and streamlined business processes; (iii)implementing more comprehensive accounting and timely financial reporting based on internationally recognized standards and practices; and (iv) expanding audit coverage and quality, and legislative oversight of PFM. Strengthening strategies and implementing action plans to enhance capacity and accountability for public financial management in line ministries and agencies at all levels of government is a priority area for action.
88. Many developments and reforms in public financial management such as streamlining of business processes, strengthening of expenditure and revenue internal controls, and enhancing monitoring and oversight of budget development and execution are in progress, and a gradual strengthening of PFM is taking place. The implementation of the 2004 PER-IFA and 2007 CFAA recommendations are being supported by number of programs and projects ofwhich the Public Financial Management Reform Project (IDA 3767) directly support the PFM process. Progress under the Public Financial Management Reform Project (IDA Cr.3767) remains satisfactory, and a number of the reforms to improve the transparency of financial management and auditing are incorporated and monitored as part of the policy matrix for the proposed operation with generally satisfactory progress to-date, including public release of the results of annual audits through press conferences and posting on the SAV website, as well as posting of quarterly financial reports for P135-2 on the MOF website. In addition, it was agreed during the mid-term review that CEMwill work with SAV and MoF to share with development partners the updates of progress made by provinces on audit recommendations from the previous year. Finland is providing TA to SAV specifically to further strengthen the quality ofauditing ofP 135-2 towards full performance audits, as well as to strengthen the follow-up actions taken by provinces and central agencies based on the audit results. Government has further agreed to work closely with IDA in strengthening the fiduciary review aspect ofthe Joint Government Donor Review Missions.
RISK AND RISK MANAGEMENT
89. Identified risks which may affect implementation and achievement of results and objectives fall broadly into three categories: (i)institutional capacity; (ii)fiduciary; and (iii) policy. Specific measures were put in place to mitigate and manage these risks as part of the design ofP135-2, with varying degrees of effectiveness. For example, while the original risk matrix identified the challenges of the decentralization process in terms of capacities at the
31 central and sub-national levels, and willingness to devolve responsibilities to communes, as low to medium level risks, the anticipated capacity building and technical assistance activities have been both significantly delayed and insufficient to address these risks, with significant impacts on the translation of the national level policy reforms into changes in local level implementation behavior, suggesting that the importance of these risks was under-assessed. By contrast, the DPCl suggested that fiduciary risks would be medium to high risks for the program. While these concerns remain important areas of focus in implementation of improved procedures and independent assessments, including the SAV audits, their apparent impact on achievement of program outcomes and objectives has been much less than the institutional constraints. Policy related risks - particularly those associated with potential overwhelming ofthe ethnic minority poverty reduction dialogue or the imposition of counter- productive policies on ethnic minority communities have also had a limited impact, in large part due to their limited realization during the first three years ofthe program.
90. Accordingly, under DPC2, the risks and risk mitigation matrix (Table 8) has been streamlined to focus primarily on addressing institutional constraints at the national and subnational level, and translating the fiduciary policy reforms - particularly as regards small scale procurement planning and transparency - to changes in local level procedures and behaviors, with increased risk ratings. This more focused risk management approach is expected to be an explicit focus of the JMR process which will assess implementation of capacity and technical assistance activities, as well as the improvement of procurement procedures in local infrastructure contracting.
TABLE8: P135-2 RISKS AND RISK MITIGATION
1. Institutional risks:
1.1 Weaknesses in capacity of central agencies to TA plan developed by CEM and donors includes carry out policy formulation, interministerial focused support to CEM in managing its multiple coordination and implementation monitoring and roles. However, additional staff deployments are capacity building responsibilities. - medium to required within CEM given its broad range of high risk. responsibilities under P135-2.
1.2 Decentralization of investment ownership to General public administration reform is gradually communes for local infrastructure does not raising the standards for commune officers, progress to the extent envisaged, either because however frequent rotation and insufficient salary district officials are unwilling to delegate incentives remain a challenge which requires authority and resources, or because communes further attention in the reform process. MTR lack the necessary capacity, frequent rotation of identified need to accelerate TA deployment to commune officers, low salary incentives, unclear develop district based capacity support to institutional responsibility and limited budgetary communes. Development partners and CEM resources to address constraints - medium to high have revised TA planning to emphasize risk. provinces with lower proportions of commune investment ownership.
1.3 In context of significant and continuing MTR emphasized need to mobilize TA more decentralization in Vietnam, policy and effectively at subnational level to reinforce institutional actions agreed at the center translate behavioral changes required by policy actions insufficiently. into intended provincial and local- instituted at center. Revised TA plan emphasizes level outcomes - medium to high risk. reinforcement of these actions at Drovincial level
32 and enhanced training and monitoring will be carried out by CEM based on benchmarking of provinces using ATM monitoring reports.
2. Fiduciarv risks: 2.1 DFID’s targeted budget support operation for MOF/STV acknowledge these shortcomings and P135-1 in 2005 revealed a number of PFM have introduced specific measures to strengthen shortcomings which may lead to the mis-use/or financial management of all NTPs including inefficient use of the Program funds. The P135-2 as an integral aspect of the operation shortcomings mainly related to institutional/FM results framework: (i)quarterly fund-flow ‘maps’; arrangements of which the critical points are: (i) (ii)quarterly reconciliation statements between increasing transparency of flow of funds; (ii) spending agencies and STV; and (iii)independent ensuring effective reconciliation of expenditures; audits of these programs (by SAV with and (iii) ensuring independent audits and appropriate institutional strengthening) and effective follow-up of findings - medium risk. reporting on implementation of actions taken to address audit findings. Complementary and wider policy dialogue on country systems for internal and external auditing is being supported through annual PRSCs.
2.2 Corruption is a significant and growing Government is taking steps towards the problem in Vietnam, and in a rapidly-growing implementation of measures to combat corruption: economy corruption vulnerabilities and an Anti-Corruption Law took effect in June 2006, opportunities for graft could outpace measures to and includes provisions for increased public combat them for some time. P135-2 and other disclosure and transparency in public programs specifically targeted to the poor are procurement, civil works, management of SOEs, often viewed as intrinsically more vulnerable to auditing of the state budget, management and use corruption because of their highly decentralized of land, and personnel management. The Law also forms of implementation involving generally provides individuals with a right to request weak local-authority institutional capacity. information from public bodies such as People’s Overall risk assessment - medium to high risk. Committees; strengthens accountability of heads of state organizations and agencies by making them responsible for all corruption occurring in the entities under their authority; requires asset declaration by high-ranking officials; and encourages denunciation of bribery and other corruption-related offenses. If implemented strictly and fairly, the new Law should act as a strong deterrent to corruption at all levels.
The design of P135-2 itself, and the policy and institutional actions under the proposed operation, should significantly strengthen transparency and accountability in the use of public resources under this NTP through wider use of ‘social audit’ mechanisms and measures to increase the responsiveness of local governments. These measures will enable beneficiary communities to acquire the responsibility and capability to manage public resources themselves, and will result in much stronger oversight and local ‘voice’
over mblic resource use. These issues are beinp:Y
33 addressed as an integral aspect in the design of the proposed operation, and form one of the four key policy areas in the operation policy matrix.
In order to strengthen oversight of, and reinforce capacity support for the implementation of the policy actions at the local levels, it was agreed, following the mid-term review, that the Bank fiduciary staff will work closely with CEM, MPI, MoF and SAV and other development partners in strengthening joint supervision of fiduciary aspects of the program, including implementation of procurement planning and implementation of competitive processes, as well as follow up of the SAV audit fmdings and recommended actions.
3. Policv-related risks:
3.1 Emphasis on “mainstreaming” ethnic MTR confirmed inconsistent awareness of need minorities impedes increased use of local for use of ethnic minority languages amongst languages to ensure effective provinces and participating agencies. Agreement participation. - medium to high risk. was reached to increase development of informational and capacity building materials in ethnic minority languages, including videos and radio broadcasts.
3.2 Failure to actively promote gender 3.3 MTR led to agreement that gender aspects aspects, in particular women’s require additional focus and support as reflected participation limits developmental in the TA plan. Nonetheless, gender effectiveness of program activities in disaggregated monitoring of participation through terms of prioritization and utilization of the MIS system and field visits is critical given investments - medium risk, the uneven recognition of importance of these aspects in some provinces, districts and communes.
3.3 Techniques for raising agricultural Initial Circular 676 indicated two budget lines for productivity more suited to Vietnam’s production support which led to continuing focus irrigated lowlands continue to be on capital goods distribution. Revised Circular 01 introduced to rain-fed, upland farming addresses this and MARD has issued a guidance systems, where they could prove letter and will shortly issue guidelines supporting economically, socially or more diversified and locally appropriate environmentally unsustainable - medium approaches to production support. to high risk.
3.4 Resettlement and compulsory asset Resettlement and compulsory asset acquisition acquisition under P135-2 are not well- under P135-2 itself are expected to be minimal. handled - low risk. However, IDA and the wider donor community should continue to engage Government in policy discussions around the strengthening of country
34 systems for resettlement and compensation.
3.5 Despite the formal exclusion of Building on findings of the DFID-supported study sedentarization activities from P135-2, a of sedentarization impacts under P135-1, IDA and perceived link may remain. This may wider donor community will encourage the indirectly associate IDA and the donor collection of better data and research on the community with any adverse social and positive and negative impacts of sedentarization. livelihood-related impacts of In conjunction with engagement with MARD on a sedentarization - low to medium risk. revised upland agriculture science and technology strategy, IDA will also work with CEM and others to encourage more open debate on this topic.
3.6 Some activities under P135-2 may The proposed operation would not directly finance be associated with other activities of investments under P135-2, but seeks to enhance Government designed to promote public its potential to reduce poverty by encouraging security. This might: (a) hamper the systemic reforms. These reforms will foster effectiveness of development activities; stronger engagement by local communities in and/or (b) associate donors with activities expenditure decisions under P135-2. Program that tighten forms of social control in monitoring systems should produce evidence that some communities - low risk. this is happening in all P135-2 communes, including those in more sensitive areas.
DISBURSEMENT, REPORTINGAND AUDITING ARRANGEMENTS
91. The proposed Credit will follow IDA’Sdisbursement procedures for development policy credits. The untied finances will be disbursed against satisfactory implementation of the development policy program and not tied to any specific purchases. Once the credit is approved by the Board and becomes effective, the proceeds ofthe credit will be deposited by IDA in an account designated by the Borrower and acceptable to the Bank at the State Bank of Vietnam at the request of the Borrower. The administration of this credit will be the responsibility of the Ministry of Finance who will open and maintain a dedicated Deposit Account (DA) in US dollars for the Borrower’s use once the Credit is approved by the Board and becomes effective. The dedicated DA will form part of the country’s official foreign reserves. The Borrower shall ensure that upon the deposit of the Credit into said account, an equivalent amount in Vietnamese Dong is credited in the Borrower’s budget management system to be used for budget expenditures in a manner acceptable to IDA.
92. Through SBV, the Borrower will: (i)report the exact sum received into the dedicated DA; (ii)ensure that all withdrawals are for eligible expenditures; (iii)confirm to IDA details of the Treasury account to which the Vietnamese Dong equivalent of the Credit proceeds will be credited, and (iv) submit a report on receipts and disbursements for the dedicated DA. IDA will maintain the right to request an audit of the dedicated DA. These processes and controls are intended to provide assurance that IDA funds have arrived at their
35 intended destination to be used for the intended purposes, and are subject to the Borrower’s rules and regulations.
93. The 2005 State Audit Law has established the SAV as an independent institution reporting to the National Assembly on the uses of State Budget funds. The SAV will act as the auditor of the Credit who will prepare (i)annual audit plan acceptable to donors prepared by the start ofthe year; (ii)annual audit conducted with sample coverage ofat least fourteen (14) provinces; (iii)FY2008 Audit Report issued by June 30, 2009; (iv) Implementation ofprior year’s audit recommendations reviewed as part of each JMR mission based on summary of actions taken by provinces and central agencies to implement 2008 audit recommendations including reimbursement and (v) audit reports publicly disclosed through the media and website in accordance with the State Audit Law. The Government will, if deemed necessary by IDA, allow an independent external audit of the dedicated deposit currency account.
ENVIRONMENTAL ASPECTS
94. During preparation of Phase 2 of P135, an examination of the environmental implications of P135-2 was undertaken by Government with consultant support, building on an earlier, generally positive, assessment of the environmental impacts of Program 135 Phase 1 conducted in 2005 with support from UK DFID. The environmental examination of P 135-2 also incorporated the findings of environmental safeguards compliance monitoring conducted under the IDA-supported Northern Mountains Poverty Reduction and Community Based Rural Infrastructure Projects. Experience under these ongoing investment operations, which finance very similar investments to those under the infrastructure component of P 13 5-2, indicated that adverse environmental impacts were very small, whether considered individually or in the aggregate, while significant positive effects on the environment are likely through enhanced efforts at environmental awareness, intensification of agriculture and stall feeding of livestock which reduces deforestation and improved road construction approaches based on approved designs incorporating environmental considerations for drainage, etc. Adverse impacts, when they are a concern, could generally be mitigated or prevented entirely by relatively simple measures during sub- project planning and construction and incorporation of appropriate clauses in construction contracts.
95. During mid-term review, specific attention was placed on reviewing environmental implications during field visits and the following issues were identified: . The infrastructure component might cause some impacts due to clearance ofbushes and tree making inter-village or inter-commune roads; water, air, soil pollution at construction site; solid waste concentration; type ofraw material used; solid and construction material run-off to surface water, or to water course. . Other three components activities (very small scale production, capacity building, and living standard support) result in low negative impacts to the environment (although small rice field or shrimp farm can cause water pollution if chemical fertilizers or pond disinfectants and antibiotics are misused).
36 96. As a result of these observations, it was discussed and agreed to introduce a benchmark into the policy matrix to ensure heightened attention to Government’s efforts to strengthen environmental awareness at the community level and with contractors in the context of subprojects. CEM is intensifymg its environmental communications activities program-wide, as well as developing and implementing targeted training activities in communities in environmentally sensitive areas such as those near protected areas and areas subject to erosion. These activities will be supported, in part by the increased, decentralized TA. In addition, and the new production component guidelines will promote use of IPM and other environmentally friendly production practices as an alternative to heavy use of chemical inputs.
37 ANNEXES
ANNEX 1: LETTER OF DEVELOPMENT POLICY
LETTER OF DEVELOPMENT POLICY
Hanoi, 6 March, 2009
Dear Mr. President,
The Comprehensive Poverty Reduction and Growth Strategy (CPRCS) has been strongly ~~nunittedand implemented by the Government of Vietnam, among which the poverty reduction and social and mrnornic development of extremely difficult, ethnic minority and mountainous areas is one of the top priorities of Vietnam.
In the past 20 years of renovation, Vietnam has gained a number of achievements in economic developmeat and poverty reduction. especially for ethnic minority and disadvantaged areas. The results of thc renovation and economic growth have bna redistributed with priority given to thc NMionaI Targeted Propms, among which many programs have mgeted poverty reduction and living standard impmvment for poor and ethnic minority people.
Since 1998, when Vietneun was still in the middle of the economic crisis with an avcrage GDP growth of 4%, the Government already dctcrmined to invert into a spedprogram on socio-economic development for disadvantaged, mountainous and ethnic minwity arcas (referred to as Program 135). This program was implcmmttd in almmt the whole country {m 52 among 63 provincedcitics) ’ *! benefitting 2.400 disadvantaged and poor communes. ,,# After 7 yeam of implementation (1 999 to ZOOS), Pmgram 135 achieved significant targets in many social and economic fields, the appeamncc of rural mountainous areas has changed cunsiderably as infrastntcture has been improved substantially to .atis@ essential needs of production development, sewing people’s life, development of market economy has been promoted poverty incidence has ban reduced spectacularly, and people’s intellecaral standard has been improved. Up to 2005, mathan 700 communes that patticipated in Program 135 were eligible to graduate from the Program; it also meant that those communes pdated from the list of poorest and most disadvantaged communes in Vietnam.
Program 135 has gained popularity and its support by the people throughout the country, including people in cxawnety dficulr areas, in such a way that the): understand their own responsibility in implementing the Program and exape from poverty. Under thc strong leadership of the PattysGovernment and authorities at all levcls. Program 135 has effdvely promotad democracy and openness, and I
38 participation in implementation supervision. The Govemrnmt of Vietnam always paid special attention and gave priority to Program 135 with 8n increasing annual budget ailocatcd to thc Program year by ycar.
Although the ;Ichicvements of Program 135 after 7 years of implementation mere rrlativsly clear in contributing to the reduction in poverty in the program areas. ii wnsidemble number of communes remained with poverty incidence of above 25 percent according to the fmer povaty line (more than 60% according to the new povetty Iine]. and the diffnrncc in povcrty rates and poverty gap of the target areas and other amof tlre country remained, reflecting the continuing challenges of relative iselation and lesser access to basic social, economic and infisstructure services.
To address the above issues mare effxtively, while drawing upon the ~ucccssful experiences of the first phase of the Program, the &igned FYogriim for Social- Economic Development in Cirmmunes Facing Extreme Hardship in Ethnic Minority and Mo~~ainousAreas 2006-2010 (hereafter refmd to as ‘Program 135, Phase 2*), was approved by the Prime Minister under Decision 07/20061QD- ‘flg dated IO Janumy 2006, aiming at: a rapid improvement in production and transition in agricultural economic structure towards a close linkage between productian and market; improvement in physical and spiritual wqll-being of pdombantly ethnic minority communities living in poorest and mote cmunes and villages in a sustainable way; and narrowing the development gap among ethnic groups and regions in the country. More specifically, Program 135. Phase 2 seeks to provide a major contribution ta the goal that by 2010, there will basically be no hunger and the percentage of poor households according io the new povexty line will fall below 30 percent.
In order to irnprovc the effwtiveness ofthe Program, the Committee for Ethnic Minority Affain (CEMA) and line ministries and agencies reviewed the expwimce under the first phase of the Pmgtam, carried out extensive consultations with Iacal people, specialists and donors, and utilied updated poverty asssessment information and amstudies as part ofthe redesign of Program 135, Phase 2. The review resulted in both an expansion ofsupport activities under the Second Phase, BS well as specific policy chgato strmgthm overall Program effectiveness and results.
Under Program 135, Phase 2 activities were expanded beyond basic infrastn;lcture with additional focus an ansUring greatpr access to complementary basic smvices such as potable water and sanitation, primary education and legal services. pmduction support WBS also broadened to include memarketable crops and handicrafts to allow communities to utilize improved road, electricity and telecommunication linkaga to market their local production. Capacity support has srlso been highlighted as a basic challenge in many poor communities.
2
39 In order to increase the Program’s effectiveness in delivering this support and -@hen the basis for broader development efforts in the assisted communities, Program 135, Phase 2 has also placed increased emphasis an (i) improving targeting of resources to the poor; (ii) accelerating decentralization, participation and empowerment in Program supported communities; (iii) increasing fiduciary transparency and accountability; and (iv) strengthening ongoing monitoring and evaluation of the Program. Specific measures for achieving results in these four “policy areas”, have been drawn from thc review of experience under the first phase of the Program, as well as the experience under other, area-based programs supported by Government and its development partners.
Program 135, Phase 2 has also benefitted from the formation of a partnership based approach based on the Paris Declaration on Aid Effectiveness and the Hanoi Core Statement on Aid Effectiveness, which emphasize ownership, harmonization, linkages and outcomes. The second phase of the Program was initiated in 2006 with budget support hnr Australia, Finland, Ireland, the United Kingdom and the World Bank, and technical support committed by Australia, Finland. the International Fund for Agricultural Development, and the United Nations Development Program. This support was organized in the context of a Partnership Committee, including leader and senior experts from concerned departments of line Ministries, agencies and representatives of international donors, which serves as an advisory body to the Steering Committee of the Program and provides a basis for the ongoing policy dialogue process, including joint progress assessments.
Progress under the first three years of Program 135, Phase 2 has demonstrated considerable success in achieving progress in implementation of the Program activities, though this progress has varied with delays in some important areas. The November 2008, joint mid-term review ofProgram 135, Phase 2 (JMTR), was led by Government with the participation of all relevant Government line ministries and agencies, representatives of participating provinces and districts, donors and NGOs, and included a wide range of independent assessments including the results of the overall program evaluation baseiine survey, the pilot participatory =port cards, the program audits canid out by the State Audit of Vietnam in 2007 and 2008, and field visit reports fiom the National Assembly Committee on Ethnic Minorities and the joint Government and donor field missions carried out in early November 2008. The JMTR acknowledged that after a slow initiation in 2006 due to continued administrative uncertainties, Program implementation has accelerated with 81.3% of programmed funds disbursed by end of 2008, representing direct support to communes in 47 provinces. In addition, 172 communes have already “graduated” from Program 135 during this period based on improved socioeconomic indicators. The JMTR also acknowledged the need to accelerate and improve implementation of the livelihoods, capacity building and production support compcments which have lagged the more familiar infrastructure support activities in most provinces.
3
40 In terms of the four policy arcas. important progress in key areas has also been matched by &lay in other arm, and actions agreed amongst stakeholders to acccleratc pgress towards ~csults. ‘Ilhe JMTR acknowledged that the Program has effectively integrdted Govmment’s updated household poverty criteria as the basis for asstssSing poverty rates in villages for inclusion under P135, Phase 2, rind that these criteria we effectively pro-pw and verifiable. The JMTR also confumed that 45 of the 47 provinces have cstablivhrd locally appropriate mechanisms tor allocating P135 Phase 2 resources amongst communes in a mmer which better reflects the differentialed needs of communes reiative to the “egalitarian’” allocations wed under the htphase of the Program, It was agrccd that the criteria will be Merassessed in 2009 using the recently updated p~crty map for Vietnam to determine which provinces may need fudm refinement of their allocation formula.
In terms of issues relating to the targeting of specific support activities, the JMTR acknowledged that the Program had included tmsfm of specific budget allocation equal to 6.3 percent of the Infrastnrcture Component budget allbcatian to provinces fhr operation and maintenance of Program supptcd infrastructure invcstmcnts in 2008, as fmt for a Nation31 Tlvgetrd Program in Victnarn. Howrvcr, it was also noted that this allocation had only in &he third year of the Program and that its utilimtian WBS constrained by uncertainties amongst provinces, districts and cmueson the appropriate procedures fot programming and accounting for use of the furrds. Accordingly, Covcrnmnt has issued a Financiai Management mudfi Program 135 Phase 2 which clarifies these requkments and is implementing training and suppott activitics with the local administrations to support utilii~timof the funds consistent with the objective of ensuring effective maintenance ofProgram-financed infmtmcture investments,
The JMTR has also resulted in specific actions to improve implementatian of the Production Supputt Cmnpment. Issues telatod to the budget liespecifications under the ariginal Inter-Minislerial Circular 676 has resulted in delays in utilization ofthe funds in 2086 and 2007, as well as a focus on provision of capital equipment which did not necessarily support the more demand driven, market oriented approach required to achieve the desired outcome of inmeascd and diversified incomes in pear, upland households in a sustainable and &et responsive manner, Gctvenvnent addressed thc budget line constraints under the revised Pregram description in Inter-Ministcrial Circular 01, issued on 15 September 2008, and has issued spccific Instructions 79 which clari@ the fwus an a demand-driven approach which provides beneficiaries with market-orimted as well as self-sufficiency based paduction options. Government is also preparing a set of more extensive, regionally focuscd field guides for use by agricultural exteusicto.agents in 2009,
4
41 The JMTR confirmed significant progress in decentralization, participation and empowerment, while highlighting the need for additional efforts going forward, including incmased Government and donor supported technical support at the provincial level, to remain on-track with expected end-of- program outcomes. The Program 135, Phase 2 Communication Strategy, issued in 12 October 2007 was acknowledged as appropriate to the needs of the Program, however implementation of the strategy has been delayed in tern of production of communication materials in ethnic minority languages, though several provinces have taken the initiative in this area. The anticipated goal of devolving investment ownership to and use of participatory planning by 60 percent of participating communes by the end of 2008 has been achieved, however it was emphasized by local authorities that achieving the desired outcome of all Program 135, Phase 2 communes acting as investment owners for significant share of all infnlstructure investments and application of these skills beyond the Program would be difficult without significantly increased commitment by districts to support communes, combined with technical support to address capacity constraints at the commune and district levels. Accordingly, it was agreed that Government support activities will be increasingly focused at these levels and the parallel, donor financed technical assistance programs should be revised to support this approach.
Strengthening of fiduciary transparency and accountability has progressed considerably in terms of improved transparency and oversight of public funds, while introduction of measures to improve cost-effectiveness and wage opportunities in the context of infrastructure construction under the Program has been more limited. Quarterly financial reports, statements on flow of funds, and six-monthly reports on allocation and transfer of P135, Phase 2 funds to the provincial level have been prepared and publically disclosed on the Ministry of Finance website. Similarly, the State Audit of Vietnam has carried out annual prowaudits in 2007 and 2008, covering 8 and 10 provinces respectively, and disclosed such audits through the media and the SAV website consistent with the State Audit Law. The JMTR recognized the quality and importance of the SAV audits, and it wes agreed that detailed reports on the status of implementation of the previous year’s audit recornrnendations by provinces, including any reimbursement of funds to the State Treasury of Vietnam, will be reported to donors as past of the semi-annual joint monitoring review missions.
Issuance of the supplementary regulations on procurement which would clearly complement the Procurement Law with the require that competitive bidding be used as a priority over Direct Contracting for small, infmtructurc works, and introducing the use of community contracting for very small works, anticipated by end of 2007, was integrated into the Inter-Ministerial Circular 01, issued on 15 September 2008. In order to accelerate this transition by the local authorities, Government has issued on 29 December 2008 a detailed procurement manual for hqpn 135, Phase 2 with step by step guidance on implementation of these procedures, as well as requiring use of procuwment method planning as part of
42 investment proposals to be assessed by districts and provinces, as well as IS day public disclosure of requests for bids and bid cvaluation results. Application of these guidelines will be a focus ofprogram capacity support and monitoring in the coming two years of the Program.
The JMTR review has resulted in a revision of the expectations regarding increased opportunities for local, paid labor in Program 135, Phasc 2 infrastructure investments. Field interviews with local communities and independent assessments have indicated significant differences in labor availability or alternative employment opportunities, such that a more regionally focused approach is required. Accordingly, while promoting local labor opportunities will continue to be actively promoted in the poorer, Northern Provinces, the issue will be monitored in other regions as part of enhanced monitoring of use of local labor - paid and 8s in-kind contributions - for Program infrastructure investment in 2009 and 2010 and appropriate measures taken to increase the former and reduce or efiminate the later, as appropriate.
Program 135, Phase 2 is establishing an important example in terms of integrating high methodological standards for evaluation of program outcomes, as well as effective use of a reliable management information system (MIS) as a key tool for identiQing and addressing program management issues. A baseline survey, based on a statistical sample and use of a control group has been carried out in cooperation with the General Statistical Office, and the results used as a key input to the JMTR. The MIS, based on the Aligned Monitoring Tool being introduced for overall investment monitoring purposes in Vietnam, has been established for the first time for an NTP for Program 135, Phase 2. While initiation of the MTS was delayed fiom 2007 to late 2008, initial training of provinces has been completed and the system's capacity to generate consolidated reports confirmed. Additionally, results of the first Citizen Report Card survey prepared for an NTP and initial lessons leamed cross-learning assessmcnts amongst provinces provided key inputs to the JMTR assessments. In 2009, Government intends to consolidate use of the MIS at the commune, district, provincial and national levels, and to continue the use of participatory assessment tools such as the citizen report cards and cross-learning activities to infmprogram management and to expand use of these tools for the end of program evaluation in 2010, as complements to the planned impact survey in 20 10 as part of the final impact evaluation.
On behalf of the Government of Vietnam. I would like to express OW appreciation for the role of the international donors in supporting the design and implementation of Program 135, Phase 2 to-date, and for the continued support in assessing and improving implementation and progress towards objectives and outcomes. Government is strongly committed to continue to implement the above-mentioned policy and institutional actions to ensure the success of the Program, and to continue the close coordination between the World Bank, the donor community and the Government of Vietnam. We hope that through this
6
43 continued, close cooperation, the Program will be implemented more effectively and will further contribute to poverty reduction in this time of increasing Global macro-economic uncertainty, and the achievement of the Millennium Development Goals.
Yours sincereiy,
Oiang Seo Phu Minister, Chairman of the Committee for Ethnic Minorities cc:
I1.E. Prime Minister; 1l.E. Deputy Prime Minister Nguyen Sinh Hung; Members of the National Steering Committee for Program 135, Phase 2; Representatives of International Donors on Program 135, Phase 2 Partnership committee.
44 THU' CH~NHSACH PHAT TRIEN
IIA Noi, 6 thing 03 nsim 2009
g Th& giui - Washington, D.C.
Thua ngai Chu tich,
Chi& luqc To& dien vb Tslng truhg va XoB doi Gihnghko dl duuc Chinh phu Viet Nam ban hanh va cam kCt thpc hien mqnh me trong nhmg nlm qua. trong di, vi& xoa boi gihnghbo viphat triin kinh t&x5 hoi cho cac khu vuc dac biCt kho khh, vhng d5n t& thi&u s6 va mikn nui la mQt trong nhhg uu tiCn hhng &u cua Viet Nam.
Trong hun 20 ngm dbi miri vira qua, Viet Nam dl bat duqc nhibu thiinh tFtrong vi& phat trikn kinh tk va xoa doi giam ngheo, @c bitt la u cac khu QIC diin t$c thi& d vikh6 khh. Kit qul thgtrudng kinh d & duuc phh b6 lai trong do uu ti8n cho cac Chuung trinh Muc ti&u Qu6c gia, @IC biQtla nhhg chuung trinh xoa doi gih nghb va n5ng cao muc sang cho ngubi ngheo va ngubi diin t& thih s&
Tir n&n 1998, khi ViQtNam v6n cbn trong giai dopn khling hohg kinh t& v6 mirc tang truhg GDP binh quh 18 4%, Chinh ph6 bl quy6t djnh diu tu thuc hien Chuung trinh &ic biQtnhh phat trih kinh t&x5 hoi cho cac khu vyc kh6 khh, khu vuc d6n toc thi&us6 vimi&n nui (duqc goi la Chuung trinh 135). Chuung trinh nay / duqc thuc hien u 52 tinh, thhh trong dng 63 tinh thhh ca nuuc, mang lai lyi ich ', J s6 tho hun 2.400 xf nghbo nhh va d$c biQtkho khEn cua Viet Nam. /
Sau 7 niim thuc hiQn(tir n5m 1999 tc3 2005), Chuung trinh 135 dl dat duqc nhilng muc tibu quan trQngtrong nhih linh vuc xlh$i va kinh t6, bo m#t n6ng thdn mibn n6i b5 thay d6i dAng kd khi he thang cu sir hp ding duqc xAy dung, nhmg dpnhh dtip irng nhwg nhu chithdt y6u di phat trih san xuk, phyc vy dbi s6ng nguui dln, thuc diy phat tri& nbn kinh t&thi truirng, va ti le nghb & gihdhg ki, dhng thui trinh do dhtri ckgdl duqc niing En. Cho tui nh2005, & co tr&n 700 xB tham gia vao Chuung trinh 135 Ctb dibu kien ra khbi Chucmg trinh; di&u do ciing dhng nghia chc xl di, ra khoi danh skh cac xlnghbo vikho khw nhh cua Viet Nam.
45 Chuung trinh 135 & tgo duqc ti6ng vang vZi nh& duqc s~ hgho clia nguiri & cH nu& n6i chung VA nguiri dhir c8c khu v\lc d#c biet kh6 khb n6i ribng. Ngutri & dii hibu 1-5 duqc v& bichnhi$m clia hp trong thgc hien Chuung trinh vA n6 luc thoat nghb. V(ti sv liinh dqo vbg vhg cbDEtng, Chinh phti va chinh quykn chc cip, Chuung W 135 dl phht huy m6t cach hi@ qua tinh dhchti, cdng khai, vl su tham gia trong gihsat thvc hien chuung trinh. Chinh phti Viet Nam lu8n chu trQng dgc biet vB uu tibn cho Chuung trinh 135 bhg vi& tang nghsach &u tu hhg n&n cho Chuung trinh.
M#c dc cac thanh tgu dat dugc chChumg trinh 135 sau 7 nhthyc hi&~18 tuung dhi r6 ndt gop phh gihnghko cho cac xl thu4c Chuung trinh; tuy nhibn, vhcon m@ts6 luqng cihq kb chc xlti le nghh b mirc trbn 25% the0 chuh nghko cii (va trbn 60% the0 chuh @&o miri); sv chhh I&h vb ti 16 nghb va khohg cach ngheo gib chc vhg mng Chumg trinh vB dcvhg khhc tr8n ch nu6.c cbn dt lim, thb hi& nhihg Mch thirc mil c4c khu qrc niiy phhi ti6p tuc d6i m@do sv chia ch4a hinh, Uibu kien tg nhih khb khh vinhbg djch q~xl h@, kinh t6 vii cu sir ha thg vhcbn nhi&uy&u kdm.
Dk gihi quykt cbvh d& trbn hi@ qua hm, chg viri vi& kk thua cic kinh nghiem thhh cdng & &tt dugc ctia Chuung trinh, Chmg trinh PMt trih Kinh ti-Xl hoi cho cbxl &c biet kh6 khh khu vvc dht& thibu s6 v9 mi&nn6i duqc thi6t k6 lpi cho giai dow 2006-2010 (gpi At la “Chuung trinh 135 - Giai dogn 11”) dl &QC Th~ tuimg Chinh phd phb duyet the0 Quy6t dtjnh d 07/2006/QD-l’Tg nghy 10 thhng 0 1 n&n 2006 vdi myc tibu nhanh chong chi thien chit luqng shdt vh chuyf!n djch cu chkinh d ndnq nghiep the0 huhg gib sin dtv6.i thj truhg, chi thign mot chch bhvDng diri song v$t chit vB tinh thh cbchc c6ng dhg bao gdm chti y6u la ngutri diln t6c thibu s6 s8ng b cac xl vA thh bin nghb nhht vb b vbg shwhg xa; VA thu hep khohg dch phat trih giaa chc dht& vichc wing trong cH nu&c. Cu C thb I$Chuung trinh 135 - Giai dopn IT tim chch d6ng ~6pdb @t mpc tibu d6n nh 2010 sE khdng cbn h+ d6i vH ti le h(i nghho the0 chuh nghbo miri se gihxuhng a- muc duui 30%.
Nhh nhf cao hi& qdcda Chuang trinh, Uy ban Dht& (UBDT) vh cac b6 n@nh d tong k& lcinh nghiem trong giai dogn Ictia Chuung trinh, thp hi+ntham vhr6ng t%iviri nguiri dh&a phuung, chc chuybn gia vii cbnhA tai trq, va sSr dyng dcthhg tin cep nh& v& ctiinh gih nghh d6i vinghibn chkhi thi6t k6 lpi Chuung trinh 135 - Giai dop 11. Vi& dhh gii t6ng k6t d5 mang Id k6t qUa 18 mir r6ng cac hogt d6ng h8 trg trong Giai dogn II chg viri nhihg thay &i cy th6 v& met chinh dch df! tang cuhg hi@qui v$ k6t qui chtoh Chucmg trinh. 2
46 Trong khu6n kh6 Chuunp trinh 135 - Giai doogn I1 ckc hoqt dijng d€i duqc mu rijng, kh6ng chi 6 muc cung cap cac cu sb hg tbg cu bhma chn t@ptrung th6m vi0 vi& dAm bao nguiri dhduqc ti6F cbv6.i cac djch vy cu bAn hacnhu nu& sach vA v@ si& m6i truhg, gib dpc tidu hgc va cclc djch vy phhp 19. H6 trq v& shxdt chg duqc mu rijng nhhh6 trq trhng chc logi ciy vlsin xuht chc m#t hing thd &ng my nghe c6 thd ti6u thy duqc trh tbj trubng nhh tgo di&ukien cho chc ngutri din sli dwg duh giao thang dii duqc cii thien, Uien va chc djch vv khic d& ci, thi ti6p thi cho sin pham9 cua ho. Vhd& nhg luc ciing dii dugc coi la mat thhch thirc cu bhu dt nhi&ucijng dhng nghko.
Nhh n&g cao hieu quh cda Chucmg trinh 135 giai dog^ I1 trong vi& thuc hien h6 trq ndy vi chg c6 n&nthg cho nhhg n6 luc trong phht tri& & quy m6 1h hun trong chc cijng dhng Uuqc h6 trq, Chuung trinh 135 giai doan I1dfi chfi trgng hun tiri (i)chi thien vi& phhb& nguhn Iuc huhg tiri ngug nghdo; (ii)dy mpnh phh chp, sp tham gia va trao quy&n & cac cQngUhng duqc h6 trq b& Chucmg trinh, (iii)thg cuimg tinh minh bgch vi tdi chinh va tdch nhiem $Ai trinh; va (iv) tang cubng the0 dai va danh gih Chuung trinh. Chc bien pMp cy th6 nhh &t dupc ckk6t quA trong 4 "hh qrc chinh skh" nhy ds duqc At ra tir vi& dng k6t kinh nghiem trong giai do@ Ich Chuung trinh, ciing nhu la kinh nghiem cita dcChuung trinh Mctrong khu wc do Chinh ph6 va cac d& t& phh trih h6 trq.
Chuung trinh 135 giai dopn 11 chg B"a huhg lqi tu vi& xiy dpgmijt phuung thirc ti6p c#n dw t&n quan hQdhi tic tren cu sb cia Tuy6n b6 Pa-ri vk Higu qu& Vien trq
't va Tuydn bs chung Ha Niji v& HiQuqui ViQntrg, nhiing tuy6n b6 nay dE nhh mqnh thquan Wng cim quyh 1Bm ch6, su hai hod ho4 sp gbk6t, vh cac k6t qui. Giai dow I1cia Chuung trinh duqc bit dhvho nib 2006 viri sy h6 trq v&ngin shch cda &-xtrdy-li-a, Fhh Lan, Ai-len, Vuung qu6c Anh va Ngin hhg Th6 gitri, va sp h6 trq ki th@ cda &-Xtrsy-li-a, Phh Lan, Quy PhAt tridn Nang nghigp Quik ti, va Chuung trinh Phat trib Lien hqp Quik. Sy h6 trq nay dii dugc thvc hien vtri sp tham gia chBan 33%tic phht trikn h6 trq cho chuung trinh, bao ghm lanh @o vB ... ckch ba cim cic w, nganh lien quan, chc cu quan vd da dien cua cac nha tii trq quhc t6, vdi vai trb Ih cu quan tham muu cho Ban Chi &o Chuung trinh vd Qo n&n 9 cho quii trinh U6i th+ v& chinh shch dang dik ra, bao gbm ca nhBng dhh gia phdi hqp v&ti& bij @t Uuqc.
Ti6n ba @t duqc trong 3 nh&u clia Chucmg trinh 135 - Giai doy~II cia duqc thd hien dt r6 trong vi& &t nhftng ti6n vb qh1y trdn khai thuc hi@ c4c hoqt dijng cim Chuung trinh, m$c du co sy. khac biet v& ti6n dQ tri&nkhai giaa cic hgp phh ciing nhu c6 nhihg ch&n tr8 u mot d 1-W vc. Or$ D8nh gih giDa kjl chung v& 3
47 Chuung trinh 135 - Giai dogn I1 Uuqc thyc hien vbthhg 11 nh2008 do Chi& phti chl tri chg viri sy tham gia cua dt d cic B$ ngbh lien quan c6a Chhh ph6, dpi di4n chcbc tinh vA huyen tham gia, cbc nhd tAi trq VA t6 chuc phi chinh phti, vh bao gbm mat logt cbc drinh gib d$c l$p kd cac kit quH clia di&utra cu bhdhh gil toh b6 chuung trhh, Th6 Bho c$o C6ng dhduuc thu nghiem (Khb sat Muc d6 Hai lhgch Ngutri dh), kkt qui kidm tohn Chuung trhh do Kidm toh Nhh nuuc Viet Nam thw hien dun 2007 VP 2008, vd cbbiio cho khb dt thyc dia chHei bbng Dht& chQu& h$i va ctia cac doh Dhh gih phbi hpp giea Chinh phu vi3 cic nha tAi trq duqc thvc hien viio &u thhg 11 nh2008. DohDdnh gih GiOa kj Phbi hqp dii ghi nh$n rbgsau nhbg ch&n trg ban diu trong giai doqn khcri d6ng dv h vbnEim 2006 do chua nbn r6 vb cac thti QC hbh chinh, tikn do thyc hien Chuung trinh d%duqc dpmgmh v6i 8 1.3% tren dng sb ngh shch cho Chum5 trinh d5 dugc giii nghtinh den cubi nh2008, chuung trinh ti5 ~QCh6 trq wctidp cho cbx3 13 47 tinh thW. Ngodi ra 172 xsi & thoat khdi Chumg trinh 135 trong giai dogn nay xet the0 chc chi d vb kinh tk-xii h6i d duqc nhg cao. Doh Dinh gih Gih Phbi hqp cijng ghi nhk nhu ch&y nhanh ti& d$ vA c& thi& vi& thvc hien cbhqp phbv& Ha trq phht trih sinxu&, Dao Qo vinhg cao nhgluc vA H6 trg dich vy vfi Nhgcao Ubi s6ng ngubi &.
Doh Dhh gih Giita kf Phbi hqp & ghi nhk &g Chucmg trinh & sir dyng m6t chch hi& quli dctieu chi xb&h h$ ngheo c$ nh$t ctia Chhh phu dd lhcu sir cho vi& dhh gih ti le nghh I3 cac then bhd ll Uua VAO Chuung trinh 135 - Giai dopn 11, vi ghi &g nhitng tieu chi nay mang tinh vi ngutri ngMo vh c6 th& kidm U$I khiich quan. Doh D;inh gib Giita kS, Phbi hqp chg xic nhb rbg 45 tren 47 tinh thanh & xiiy dpg dugc cu chi phii hqp viri &bu kien dja phumg cho vi& phh bB chc ngubn lvc cSla Chucmg trinh 135 - Giai dogn I1 cho chc xl the0 cbch miphin hh tbt hun chc nhu chkhk nhau cla cac xii so v6i cbch phh bd binh quh duuc sir dyng trong giai dogn Icita Chuung trinh. Ck b6n nhh tri rbg uic tieu chi nay se duqc tikp QC gih trong thti gian tcri viri viQc xem xdt sli dyng bAn Ub nghho d6i m6i chViet Nam nhh xhc &@I chc tinh chph&i chinh sua vh hob thien &ng thuc phhb8 chminh.
V&cbc vhdb lib quan tiri vi& xkc dinh Ubi tu- cho cbhost dljng ha trq cp the, DohDhh gib Gihkf Ph& hqp chg d5 ghi nh& &g Chuong trinh & chp n@in sbh twng duung 6,3% t6ng d vbn cda hqp phh Ha trq X8y dmg cu s6 ha thg cho vi@ V&I hinh va Duy tu Bfio du&g chc cdng ainh diu tu do Chuung trinh h6 trq trong nh2008, VA day 1h 1h&u tien mat Chuung trinh quhc gia xem x& bb tri rihg ngubn vhnay. Tuy nhih, Doh&nh gih chung c& luu >’ rhgdkn nhthu ba ctia Chuung trinh thi ngh sach nay mcri duuc phh boB vi vi& su dpg khoh ngh sttch dycdn bi hw chk biri c? ti+, huyen, xlchua nhn r6 duuc v& cac thl tyc l$p k6 howh vB sli dwg c8c nguon van ngh dch ct6. Do v$y, Chinh ph6 d ban 4
48 hanh vin bhHuhg dhquh 19 di chinh cho Chuung trinh 135 - Giai Uow I1 lh rd nhihg yeu chc6 lien quan vB Uang thvc hien chc hoat dong Uho Qo vA h6 trg v6i myc ti& & biio duy tuy bHo duhg hi@ qua chcBng trinh &u tu do Chuung trinh cbp v6n xiy dm.
DohDhh gia chung gih@ nh2008 ciing Ua dua ra Uuqc nhhg gihi phap cy th6 & nkg cao hi& qdthvc hien hqp phh H6 tru phht tri&n shxu&. CAc vbU& lien quan t6i vi& phh &h r6 chc dbng ngin s6ch rigng bi@cho vi+ thvc hien hqp phb nay the0 Thhg tu Lien W s6 676/2007/TTLT-UBDT-TC-XD-KHDT- NNPTNT ban diu Ul d& t6i nhimg ch&n t& trong vi& sir dwg dcngubn v6n trong nHm 2006 vA 2007 chgnhu 18 vi& t#p trung vao cung cbp cac &u tu cubh, chua thgc sv h6 trq the0 tihp cbdm the0 nhu chvA djnh huhg thj truimg U6 c6 th6 Ugt Uuqc cac k& qua mong mu6n 18 tang vd da dqng hoh thu nhep cda cbc ho ngh6o vhg cao mot chh b&nvkg the0 Uinh huhg cGa thi trubng. Chinh phd US gihi quykt nhhg vuhg mkc lien quan dkn vi$c thch cac dbng ngh sich rihg cho hqp phh nay trong Th6ng tu li&bo s8 01/2008/'TTLT-UBDT-TC-XD-KHDT- NNPTNT ban hhh vbngay 15 thhg 9 nh2008 vA cihg & ban hhnh nhhg huhg dh1h rd Cach tikp cQ dva t&n nhu ch, cung cbp cho cac Ubi tugng huhg 16 nhhg phuung h stin xuht mang tinh djhuhg thj trubng. Chinh phu chg hgsow thao nhilng huhg d& cy th&hun cho cic ch cu sb ban hhh trong nh2009.
DohMnh @a Gihkj. Ph6i hqp & xac nhh nhihg ti6n W dang k&trong vi& thvc hien phin c&p, sv tham gia VA trao quyh, dbng thti neu 13 nhu c$u chphhi n8 lvc hun nih trong 66 bao gbm vi& thg cuhg h6 trq kithu& c~aChinh phd vicac nhA tAi trq cho chp tinh nhhtihp tyc di &ng huhg d& &t Uuqc czic kkt qui dy kikn vao cubi chuung trlnh. Chi& luqc Truykn thhg cda Chuung trinh 135 - Giai do~11 ? ban hanh vb 12 thhg 10 nh2007 dB Uuqc ghi nh@nla pha hgp v6i cac nhu ch cia Chuung trlnh, tuy nhih vi& thvc hien chi& luqc nay chua thyc sv dip img % Uimg tihn UQ nhu vi& xiy dngin ih chc tii lieu truydn thBng bhgtikng chdin t& thih s6, ding nhu vi@ mat d tinh cGng chua chG dong tridn khai thuc hien I"&vgc ti& tu i nay. Myc dv kikn 18 phh chp quyh lAm chi Uiu va 60% chc xf tham gia chuung trinh ap dwg phumg phip I@kh hoach Ci, sy tham gia tinh d6n cu6i nh 2008 UG duqc thvc hien, tuy nhih dcchinh quyh Uia phuung nhh mpnh st kho Uqt Uuqc thhh qua mong mubn clia Chucmg trinh 135 - Giai Uow 11 U6 la xf lh chd diu tu Ubi v&i phhn lh dt cB cac khoh &u tu vA 6p dpg cic k7 nhg Ub k6 ca sau khi Chumg trlnh k€tthfic n6u nhu lchdng tang cuhg dang k&muc UG cam kkt clia c6c huyenAtroFgvi& h6 trq cho dcxil dbnf thbi h6 trq k? thu& nhhn khkc phuc nhimg hw che ve m#t &g lyc It cip xl VA cap huyb. The0 U6, cac &n & th6ng nhh rhg c8c hoat dong h6 trq chChinh ph6 st! t#p trung nhibu hanQa cho cac
5
49 chp nay va song song v6i cic hoat dong d6 thi chmg trinh h6 trq ki thu@ c6a ck nhA di trq &n t$p trung ha trq cho phuung thirc tikp c@n nay.
L-mh qrc quh If di chinh dH c6 ti&nbo &g kk viri vi& thg cuhg tinh minh bgch va gib sit vi& sir dung cbngudn vbn chg, tuy nhien vi& hp dwg nhhg bien pMp nhh cii thiQnhi@ qua chi phi vtf QO ra cac cu hoi vi+ Iim c6 trh c6ng tronp hqp phh x6y dmg cu s6 ha thg trong khudn kh6 Chuung trinh vhdn h+n chb. Cdc bbcio tii chinh hhgquf, cic bhsa0 kb, va cic bbcao Cfd kjl sau thhg vi vi& phk bb v$ chp pMt cic ngubn v6n c6a Chuung trinh 135 - Giai dogn I1 CB duqc c6ng khai trh trang web c6a Ba Tai chinh. Tuung Qr, Kikm tob Viet Nam dg thuc hiQncdc dqt kikm toh chuung trinh hhg dim tron nlim 2007 vi 2008 Qi 8 tinh nb2007 va 10 tinh nh2008, va cdng khai dcket 4 ud kikm tohn trbn cic phuung tiQntruybn thdng Ctgi chhg vS. t&n trang web c6a Ki1 m toh Nhh nu& ViQt Nam the0 dhg Lu& Kibm toh Nhi nu&. Doh Dhh gii Giita ky Phbi hqp chg Cra ciing nhh chit luqng vi dm quan mug clia cbdqt kikm toh chKi&m tohn NhAnuirc ViQtNam, vA cic 3 kith thbng nhht rhg&c bao cao chi tikt v& tinh hinh thuc hien cac khuykn nghj ckkikm tohnam tndc c6a chc tinh bao gam vi@ h6i tb CLngudn vbn cho Kho bac Mi nu& ViQtNam sE dum cung chp cho cac nhii ti% trq nhu mat phhn chcdc Uqt Uhhgia the0 daii ph& hqp duqc tih hhh 2 1h trong nlim.
Vi& ban hanh cbquy dinh d sung vb diu thhu chic chhd b6 sung cho L$t Diu thh chg v&i thay d6i cho vi@ vu ti& sir dwg phuung thirc &u thhu cgnh tranh so vbi phumg thirc Chi &$I thhu dbi v6i cbc6ng cu s6 hg dng quy md nho, vi vi& ip dwg hinh thirc &u thh cang dbng (giao khob cho dh) cho ckc6ng trinh quy ma dt nh6 dg kikn bit &u duqc thuc hien ti^ cubi niim 2007 duqc dua vbVh kien Chuung trinh sira dhi, va0 Thhg tu lien ba ban hhh ngiy 15 thhg 9 n&n 2008. Nhh Uiy nhanh vi& cic chinh quyh dia phuung chuykn san s6 dung nhitng phuung thirc niy, Chinh ph6 dii ban hhhmat S6 tay Huhgd&n veB Dhu thh cho Chuung rrinh 135 - Giai Uogn I1 vbngiy 29 thhq 12 n&m 2009 nhh huhg dhtimg buuc thqc hien cbthh tyc nay Udng thbi ybu cau sir dwg phucmg phap I& k&hogch &u thhu trong cic dk xdt dhtu dk c$ huyen vd tinh dhhgih, ddnp thbi ybu duphii cdng khai cac thdng Mo mtri thhu truuc 15 ngiy vA thBng bbket qua xdt thh. Vi& bp dwg nhhg huhg dhnay sB 18 trgng tslm c~avi& h8 trq nhg 1vc vithe0 daii thvc hien chuung trinh bong 2 niim thqc hiQnChuung trinh sip tiri.
Dqt Dhh gia Giita ky Phi% hqp dii shd6i lei nhhg kj. vong c6 li2n quan tCri vi& agcic cuhai vi& 1Bm c6 trsl &ng cho ngu&i dh4a phuung v6i nhmg cdng trinh &u tu cu sit ha dng trong khu6n kh6 Chuung trinh 135 - Giai dogn 11. Chc CU~C phbng vhQi dja phuung v6i cdc c6ng dhng Uja phuung va cic Uhh gia d@c16p da
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50 chi ra rhg 6 cic dng mi&n Uia phuung khic nhau c6 nhkg khac biet I&nv& luc luqng la0 d&g sk~c6 ho& cizc w h@vi& 1Bm c6 thk lva chQn, do U6 chc6 chch ti6p c& phh hqp vcti timg vbg. The0 66, vi& t3ng cuhg c8c cu h6i vi+ Ihu dia phuung chtikp Qc duqc thvc hien met chch tich cvc fr chc tinh Mi&nnhi Phia bic ngh+o, nhung d CAC vhg mihkhac chtheo d6i vhd& nay nhu mijt phh cua vi& tgng cuhg the0 d6i vi& SQ dpng nhhg khoh d6ng gop bhg nghy c6ng vA d6ng g6p bhg hi& vQt- ddi v6i c6ng trinh diu tu trong Chumg trinh vbnh 2009 va 2010 va chphhi hp dpg cQ bib phhp thich hqp nhhtang cuh8 chc cu h$i vi& 1Bm cho dctinh Mihntli Phia bic vigih ho$c xoi b6 ybu cdu vb cu hei vi& lim Ir citc vhgmibn khb niu thhy phc hqp.
Chuung trinh 135 - Giai do@ I1 duqc Uhnh gib nhu mat chuung trinh diu tibn sir dyng c8c ti& chub cao v& m&t phuung phslp Udi v6i vi& gib chc kit qui c6a chuong trinh ckg nhu vi& sir dpng hiQuqui mat HQthbng Th6ng tin QuhIy (MIS) khoa hgc vi&g tin c$y, Ihm6t c6ng cy then chbt cho vi+ x6c Uinh vigiai quy6t chc vh&. v& quh 19 chuung trinh. Dibu tra cu bin Chuung trinh 135 giai dopn 11, dva trbn vi+ lhy duthdng ke vd sir dwg nh6m ddi chhg dH duqc thuc hien phdi hqp chng veri Thg CIJC Thdng kb, vichc k6t quH Uibu tra Uii dugc sc dwg 1Bm th6ng tin diu vao chinh cho Dgt Dhh gib Giih Phdi hqp. HQthdng Thdng tin qh19 (MIS) dw trbn Cdng cu The0 d8i Thbng nt$t (AMT) Uuqc 6p dwg vcti mpc Uich giltp the0 d8i dhu tu t6ng th& i! ViQtNam dg duqc hi6t 14p cho Chuung trinh 135 giai do@ II.Day 1h IhUhu tien mQt Chuung trinh Mpc ti& Quhc gia 6 Viet Nam lslm duqc dih nay. MBc db vi& trih khai xfiy dwg He thbng Thdng tin Qdn 19 MIS Uii bj tri hoh !AIn8m 2007 cho tbi cudi n8m 2008 nhung vi@ Uio QO & tinh Uii Uuqc hoh thhh va nhg lvc cda h@thdng trong viQc ra cac bb dothg hqp Bzi Uugc dcnhh. Them vho 136, cac k6t qua ctta Khao sdt v& Muc d6 HHi lbng chngubi dh(Thh BBo cbCBng dh) Ih &u ti& duqc xAy dwg cho met Chuung trinh Myc tibu Quik @a va chc b8i hpc ban diu chg v6i nhhg Uhh gia so sanh giaa cic tinh I% cung cap nhhg dhu vbquan trQngcho nhhg dhhgia clia DohDhh gib Giih kj, chung. Trong n8m 2009, Chinh phu &ic6 dv khthdng nhh vi& su dwg He thdng ThBng tin Quan 19 (MIS) tr dp xH, huyen, tinh vichp quk gia vitiip Qc SQ dyng dcphuung phclp dhhgia c6 su tham gia nhu 11 Phi& KhHo sdt Mirc do HBi 16ng chNgubi dgn (ThB Bho c80 CBng &) vicac hoqt U6ng chia sd kinh nghiem nhh cung chp th6ng tin cho vi& quh 19 chuung trinh vimi! rang vi& sir dpng nhihg c6ng cy niy U& Uhnh gib k6t thltc Chuung trinh vzio nh 20 10 U& b6 sung cho diku tra dhh gia tic U6ng the0 k6 hopch s5 Uugc thvc hien vao ngm 2010 trong k6 hoach Uhhgia thc dijng cudi chg.
Thay m$t cho Chinh phG Vi3 Nam, tBi xin biy t6 su trh trQngclia chhg t6i vb vai tr6 clia cac nhh thi trq quk t6 trong vi& h6 trg thih k6 vithvc hi@nChuung trinh 135 giai Uw II cho t&inay, va sv ha trq lih tyc trong vi& dhh giia va nhg cao I
51 chit luqng va ti& d4 thvc hien chuung trhh d& &t dvqc chc muc ti& vik6t qui mong Uqi. Chinh phli cam kkt rndme nhkn dim bio su thhh cbng clia Chumg trinh viti6p tgc duy tri sv hqp t4c chat chi? gihNgh h&ng Th& giiri, cang dhg chc nha tiii trq, vB Chinh phli Viet Nam. Chhg t8i hy vgng 6ng th8ng qua sq hqp tac libn tgc vichat chE niy, Chuung trinh si? duqc thvc hien mat ckhhiQu qui hun vi si? dhg g6p nhi&uhun nhcho cbng cub x6a d6i gibnghb trong bbi chh ngay cing c6 nhiku bht t& v& kinh t6 v? mb tr& toh chnhu hien nay, vig6p phh dgt duqc cac Mvc ti& PMt tridn Thih ni&ne.
Trin trgng,
BO trutrng, Chu nhiem Uy ban Dht6c
&ng kinh giri: - Thli tuhg Chinh ph6; - Phi, Thti tuhg Thutmg tqrc Nguyh Sinh Hhg; - Cac Thbh vihBan Chi dgo Qu8c gia clia Chuung trinh 135 - Giai dopn 11; - Dqi &en dcNhB tdi trq Qubc d trong Ban D& t8c vk Chuung trinh 135 - Giai crow n.
8
52 ANNEX 2: OVERALL GOVERNMENT DEVELOPMENT PROGRAM
1. The Program for Socio-Economic Development in Communes Facing Extreme Hardship in Ethnic Minority and Mountainous Areas, 2006-2010 (more familiarly known as ‘Program 135 Phase 2’) is the redesigned successor to a program with the same name implemented over 1998-2005. It aims to help reduce poverty and promote economic growth among ethnic minority groups and local people living in remote, mountainous and upland regions of Vietnam, building on lessons from recent evaluations ofPhase 1.
2. Program objectives. Program 135 Phase 2 (P135-2) has the overall objectives of eradicating hunger by 2010 in the targeted areas (primarily those listed above as being the poorest in the country), and reducing the share ofpoor households to below 30%, based on a newly approved poverty line. Significant design improvements ofP135-2 over the previous phase ofthe program are that: (a) it is not limited to basic infrastructure provision alone but also includes significantly increased support for agricultural production and rural livelihoods; (b) it includes criteria for targeting the poorest villages within poor communes; (c) it aims at ‘wider implementation of the commune-level investment ownership concept; (d) it provides more resources for operation and maintenance (O&M) ofbasic infhstructure; and (e) it provides significantly increased support for local-level capacity building.
3. Program components. P 135-2 has five components: (i)production/ livelihoods support (accelerating agro-economic productivity, and enhancing income); (ii)infrastructure development (ensuring provision of essential commune infrastructure on a sustainable basis and which contributes to improved living conditions, production development and income generation); (iii)capacity building (provision of training and fostering of commune and grassroots cadres and strengthening community capacity for effective participation in infrastructure creation, operation and maintenance, and supervision of village and commune management); (iv) living conditions support (ensuring improved access to essential social services); and (v) management support (to ensure successful program implementation).
4. Component 1 (production/ livelihoods support) comprises various production programs aiming at introduction of high-yielding crops and new production practices based on participatory and demand-led extension services. However, while most development partners viewed this component as emphasizing diversification and market based production, Government continued to focus support on food security through provision of subsidized inputs - particularly improved seed and fertilizer. In addition, the initial Inter-Ministerial Circular 676 specified distinct capital and recurrent budget allocations which emphasized purchase and distribution of durable inputs such as threshing and husking machines. These factors have delayed implementation of these activities in the initial years of P135-2. The recent Inter-Ministerial Circular 01 has combined these elements to provide more flexibility to respond to local demand, and MARD has recently issued implementing guidelines (a prior action for DPC1) which reinforce a more flexible and demand-driven approach which can respond to a community’s specific priorities and opportunities.
5. Component 2 (infrastructure development), focuses on small-scale and essential works to meet identified needs at commune and village levels. Typical types of works in the program are inter-village roaddpaths, small-scale irrigation, low-voltage power supply, houses for semi-boarding school students, public market-places and meeting halls for villages,
53 commune clinics with equipment, clean water and commune-cluster extension centers. Communes are encouraged and planned to become investment owners with regular support and capacity building from district and provincial levels. In 2007, the annual allocation per commune for these activities was increased from VND600 million to VND700 million. Another new development under P135-2 is that 6.3% of the component budget is earmarked for operation and maintenance of the infrastructure created under the program (a prior action for DPC2). Results of the mid-term review indicate a very high rate of participation in identification of infrastructure works, but much lower rates of participation in supervision, which will be a focus of the enhanced, decentralized TA support. Similarly, use of O&M funds from P135-2 has been constrained by uncertainty at local levels on the procedures for accounting for use of these funds, which is being addressed by the issuance of Funds Management Guidelines for P 13 5-2 (a prior action for DPC2).
6. Component 3 (capacity building) is an area of special focus and this marks a major improvement ofP135-2 over its predecessor. Under Program 135 Phase 1, less than 1% ofthe total program budget was allocated to capacity-building activities. In P135-2, at least 7% of the total program budget is allocated to capacity-building activities. A wide range ofcapacity- building activities, topics and target groups has been identified under the program to equip. local leaders, technical officers, supervision boards and local people at commune and village levels with project management skills, supervision, participatory planning, household economy planning, and legal knowledge. However, while the budget for these activities was increased in 2008 from VND40 million to VND60 million per commune per year, implementation has been hampered by delays in preparation of training materials and inadequate training courses, particularly to promote cross-learning amongst communes and provinces. A number of provinces have taken initiative to develop training materials and these are being reviewed for use nationally in conjunction with the enhanced TA support at the subnational level.
7. Component 4 (living standards support) comprises complementary policies aimed at improving the living standards and local environment of poor people, their access to public services, and helping to narrow the welfare gap between people living in lagging regions and those living in better-off regions. The priority policies are for housing, clean water, sanitation and public hygiene, healthcare, education and legal aid. These sets ofpolicies are carried out in coordination and integration with other NTPs on, notably, healthcare, education, and rural water and sanitation. The component activities were only initiated in July 2007, and activities have focused on subsidies to encourage school attendance - an important distinguishing factor between poor and non-poor rural families. VND70,OOO per month are provided to support kindergarten attendance, and VND140,OOO per month is provided for students attending boarding school and MTR results suggest that this has been effective in improving enrollment and completion rates amongst those receiving the benefits.
8. Geographic scope and targeting. P135-2 is implemented in over 2,500 poor communes in 47 provinces (out of a total of 64 in Vietnam), located throughout the country but with the highest density of communes in the North-West, South-Central Coast, and Central Highlands regions (see maps). These communes are characterized by high poverty incidence; upland/ mountainous locations, often along the national borders; a predominance ofethnic minorities within the local population; and facing constraints to accessibility. One of the new features ofthe redesigned P135-2 is that the program also includes some 2,500 ofthe poorest villages in Zone I1 (less poor) communes as part of its finer-grained targeting
54 approach. These villages remain as pockets of poverty and need further support and public investment. The Government has revised the criteria for zoning and classifjmg communes according to levels of poverty and other dimensions of hardship or diffculty. The list of eligible communes shall be updated annually as communes progressively ‘graduate’ from P135-2.
9. Funding. The main funding source for the implementation of P135-2 is the state budget, including central budget sources (which account for 70-75% of all state budget resources for P135-2), resources from provinces, and those from local people’s contributions. The Prime Minister’s Decision No. 1922 (November 23, 2006), allocated just under US$l billion equivalent too the P 13 5-2 over five years. During the first three years ofthe Program, P135-2 has budgeted over VND7 billion (over US$400 million), and disbursed almost VND 6 billion, with almost 80 % going to infrastructure investments (including roads, schools and small-scale irrigation improvements). Donor funded budget support has been equivalent to only about 25% oftotal Program funding to-date.
10. P135-2 is financed by various sources, and Provincial People’s Committees (PPCs) are responsible for: integrating the program into other projects and programs within their areas of jurisdiction; mobilizing local resources contributed by the State, economic enterprises, social organizations and residents in target communes; and empowering the latter with participatory responsibilities and involving them in program implementation. Inter- ministerial Circular No. 01 guiding P135-2 implementation further requires that use of P135 resources be planned and accounted for within the Government’s national planning and financial management system; that information about the program be disseminated to each commune and resident in an open manner; and that program funds be allocated only to eligible localities and target groups, for the correct purposes and without waste or abuse whatsoever.
11. Resource allocation. P 135-2 resources are allocated through a two-tier system. In the first tier, from central level, state budget shall be allocated to equally according to the number of communes in a given province. In the second tier, at provincial level, provincial authorities should develop a clear and transparent mechanism to allocate funds to communes, so that poorer communes and those facing greater difficulties are allocated more resources. Detailed criteria are worked out by each province, based on their own circumstances and conditions (e.g. population, poverty rates, geographical conditions, etc). Information on budget allocation to communes is announced and made public to all program communes and local people.
12. Monitoring and evaluation. P135-2 features a comprehensive monitoring and evaluation system, which was largely absent under Phase 1 of the program. Baseline data was collected, albeit in 2007 with a delay of one year, and documented. Monitoring criteria have been developed and are being introduced at all levels to track the progress. CEM, as the lead agency, has introduced an overall monitoring and evaluation (M&E) framework at central level, and provincial authorities are required to maintain their own M&E frameworks to provide inputs to the central M&E system. Semi-annual and annual reviews are conducted - jointly with donors on an annual basis which utilize the M&E system and field visits to identify to required changes.
13. Legal framework: P135-2 is governed and regulated by a number of key legal regulations. The overall program document was approved by the Prime Minister in Decision
55 No. 7/2006/QD-TTg, dated January 10,2006. A set ofguidance documents have been further developed to set the framework for implementation. This section highlights key newly issued guidelines for the last twelve months. Full list of other regulations applicable to the Program are listed in the Attachment below.
14. On September 15,2008, Inter-Circular 01 was issued to replace the Inter-Circular 676 (issued on May 17,2006) and presented some policy changes that have been learnt from two- year implementation of the Inter-Circular 676. Key changes are (1) removal of two budget lines for Production Support activities; (ii)regulating for and application of non-direct procurement methods; (iii)opening more opportunities for local capacity building and vocation training. Decision No. 69/2008/QD-TTg dated May 28, 2008, approving the list of 152 communes to be newly included in the program, and 110 communes to be graduated from the program (making the total number of P135-2 communes of 1946). Decision 01/2008/QD- UBDT on 3149 poorest villages to be included in the program coverage and investment was issued by CEM on January 11,2008. Decision 04/2008/QD-UBDT on Policy and Forms for Monitoring and Reporting for P135-2 was issued by CEM on August 8, 2008. PM Official Document No. 744/TTg-KHTH dated May 19, 2008 on additional budget allocated for P135- 2, especially on the fund for Operation and Maintenance (O&M) which was subsequently stipulated mher by MoF on 6.3% ofthe total Program budget for O&M activities.
15. Program implementation is based on the principles of ‘grassroots democracy’, enabling the maximum degree ofpeople’s participation throughout the whole process. It is the responsibility ofPPCs to disseminate program content, such as menus ofeligible investments, lists of beneficiary communities, financial allocations, designation of local implementing agencies, and the accounting for and posting ofprogram fund allocations in public places and via the mass media. Regarding the Government’s policy to promote decentralization of management and of implementation of P 135 investments to communes, Provincial and District People’s Committees (PPCs and DPCs) are instructed to provide guidance and to assign staff to support participating communes to directly manage the program.
16. In line with the decentralization reforms and guidelines for budget management under NTPs, the provincial authorities are afforded an increased degree of autonomy in decision- making on program implementation within the planning framework set out at national level. Province-specific decisions, instructions and guidelines are therefore a critically important part of the overall policy context for P135-2 implementation. This relates to resource allocation to different components and sub-components of the program, as well as to implementation processes and procedures that will have a determining influence on results and impacts on the ground.
17. Planning procedures. According to Inter-Ministerial Circular No. 01, procedures for development, synthesis and assignment of annual plans for P135-2 are implemented simultaneously with the general planning process but should stand as a separate item in the annual plan. That is, People’s Committees at various levels make investment plans and budget estimation for P135-2 in line with the Budget Law; and PPCs aggregate at their level and report to CEM as a basis for fund allocation from the state budget. Financial allocation under the annual Plan is made as follows: when authorized by the Prime Minister, MPInotifies PPC oftheir allocation for P135 projects and programs as a separate item in the provincial general plan; PPC submits to the Provincial People’s Council for allocating P135-2 resources, integrated with other funds mobilized locally, to projects and programs at district level; DPC
56 allocates the provincial budget, integrated with other funds mobilized locally, to participating communes or villages/hamlets, within the general framework of plans decided by the province. Within the overall budget estimates and structure determined at the provincial level, DPC can take the initiative to revise budgets to implement projects and programs under their responsibility.
UPDATED LEGAL FRAMEWORK FOR PROGRAM 135 PHASE 2
Curream applicsble regulations and guidelines
Overall e Official document 206/TTGQHQT (Feb. 8,2007) implementation e PM’s Decision 07/2006/QD-TTg (Jan.lO720O6) on approval of P135-2 guidelines e Inter-Ministerial circular 01/2008/TTLT-UBDT-KHDT-TC-XD-NNPTNT (Sept. 15,2008) on the overall implementation of P135-2 e PMdecision 42/2002/QD-TTg (Mar. 19,2002) on management ofNTPs e PM’s Official Opinion No. 744/TTg-KHTH dated May 19,2008 on additional budget allocated for P135-2, especially on the fund for Operation and Maintenance (O&M) - Targeting e Decision No. 69/2008/QD-TTg dated May 28, 2008, approving the list of 152 communes to be newly included in the program, and 110 communes to be graduated fiom the program e Decision 01/2008/QD-UBDT , January 11 , 2008, on 3 149 poorest villages to be included in the program. 0 CEM decision 393/2005/QD-UBDT (Aug. 29, 2005) on criteria for selection of communes for inclusion in P135-2 and determining ethic minority and mountainous zones according to their level of development e CEM decision 166/2002/QD-UBDTMN (5 Sep.02) issuing criteria to identify ethcminority households with special difficulties
Financial management e State Treasury in MOF Guidelines 319/KBNN-KHTH, dated March 4, 2009, for the management and disbursement of funds under Program 135 Phase 11, including the funds allocated for the operation and maintenance expenditures. e MOF’s Official Document No. 7151/BTC-NSNN, June 20,2008 on Additional Fund allocation for P135-2. e MOF guidance 2849KBNN-KHTH (Dec. 29,2006) on state treasury instructions on management and payment of investment capital under P 13 5-2 e PMdecision 192/QD-TTg on financial transparency e MOF decision 60/2003/QD-BTC (June 2003) on budget and financial management for communes, wards and small towns e MOF circular 106/2003/TT-BTC (Nov. 7,2003) guiding capital management in communes D MOF circular 118/200O/TT-BTC on commune budget management and other financial management affairs in communes, wards and small towns B State treasury official letter 308/KB/KHTH (Mar. 24,2000) on the deadline for capital disbursement for infrastructure works in border communes and construction of roads to state borders B MOC circular 12/2000/TT-BXD (Oct. 25,2000) guiding the cost management of infrastructure investment in P. 135 B MOF circular 3700/NSNN (Jul. 30, 1999) guiding operating costs for P135 Steering Committee
57 Cnrrenely applicable regulations and guidetines
Government decision 24/1999/QD-CP on mobilization and management of voluntary labor contributions for infrastructure construction in communes and small towns
Infrastructure CEM’s Decision to Issue Manual of Procurement No.ll25/UBDT-CSDT, on December 29,2008. MOC’s Circular No. 02/2008/TT-BXD, January 02,2008 on Guidance for Costing and Management of investment costs for infrastructure projects under P135-2. Decision No. 1/2006/TT-BXD (May 17, 2006) of the Ministry of Construction, giving guidance on investment expenditure for infrastructure construction under P135-2 Government decree 16/2005/ND-CP on construction management MPIcircular 04/2003/TT-BKH (Jun. 17,2003) guiding investment appraisal
Production support MARD Circular 79/2007/BNNPTNT, September 20,2007, complimenting MARD’s Circular 01/2007 guiding the implementation ofthe production support component of P 13 5-2 MARD Circular 01/2007/BNNPTNT (Jan. 15,2007) guiding the implementation ofthe production support component of P135-2 Government decree 181/ND-CP(Oct. 29,2004) guiding the implementation of the land law MoNRE circular 01/2005/TT-BTNMT (Apr.l3,2005) guiding the implementation of decree 18 1 Living conditions CEM’s Circular No. 06/2007/TT-UBDT, September 20,2007, on norm for supporting services for improvement of living standards and legal aid under P135-2, following PM’s Decision 112/2007/QD-TTg. PM’s Decision 112/2007/QD-TTg7 July 20,2007, on policies on supporting services for improvement of living standards and legal aid under P135-2. Inter-ministerial circular 912/TTLT/UBDTMN-BTC-BKHDT (Nov. 16,2001) guiding the implementation of support policies towards ethnic minority households with special difficulties 0 MARD decision 140/1999/QD-BNN-DCDC (Oct. 14, 1999) on criteria relating to settlement and resettlement
Capacity building CEM’s Circular 01/2007/TT-UBDT, June 4,2007, on guidance of classification and capability for communes as investment owners under P135-2. 0 CEM’s Decision 04/2007/QD-UBDT, July 19,2007, on Issuance of Overall Framework for Capacity Building for local cadres and people in implementation of P135-2. Official document 206/TTGQHQT (Feb. 8, 2007) regarding fund allocation for capacity building activities under Program 135-2
Communication CEM’s Decision 165/QD-UBDT, June 27,2008, on Strengthening of Communication for P 13 5-2 CEM’s Decision 06/2007/QD-UBDT7 October 12,2007, on Issuance ofP135-2 Communication Strategy. Works supervision PMdecision 80/2005/QD-TTg on community supervision
Monitoring and CEM’s Decision 04/2008/UBDT, August 8,2008, on Policy and Forms for 58 €sue Currentfy appticable regulations and guideiines
I Evaluation Monitoring and Reporting in P135-2. 0 CEMA circular 218/2005/TT-UBDT (Mar. 29,2005) guiding the determination of those communes deemed to have acheved the objectives of P135 CEMA circular 894/2001/TT-UBDTMN(Nov. 13,200 1) guiding the collection of data on infrastructure works and construction of commune clusters under P135
59
N W
ANNEX 4:
AIDE MEMOIRE ON JOINT MID-TERM REVIEW OF PROGRAM 135-11 BY GOVERNMENT AND DEVELOPMENT PARTNERS 5 - 25 November 2008
I. INTRODUCTION
1. The Joint Government - Donors Mid Term Review (JMTR) was conducted in accordance with the Memeorandum ofUnderstanding dated 7 July 2008 between the Government ofVietnam (GoV) represented by the Committee for Ethnic Minority Affairs (CEM) and donor agencies including AusAID, DFID, Irish Aid, IFAD, Finland, World Bank and UNDP (hereafter referred to as the Development Partners).
2. The purpose ofthe JMTR is to report on and assess the implementation ofthe Program on Socio-Economic Development for Extremely Disadvantaged Communes in Mountainous and Ethnic Minority Areas (Program 135 phase I1or P135-11) for the period from 2006 to mid 2008. The JMTR also reviewed progress towards the targets set out in the P 135-11Roadmap and Results Framework.
3. Based on findings ofthe JMTR, the GoV, with support from the Development Partners, will improve P 135-11 implementation by refining policies for P 13 5-11 management and implementation at different levels (national and sub-national). Results of the JMTR will also provide information for the GoV Mid-Term Review of3-years implementation ofP 135- I1and inputs for preparation ofpoverty reduction and development programs beyond 20 10 for ethnic minorities and mountainous areas. The outcome ofthis P135-I1 JMTR will be used for the GoV’s MTR Workshop on the National Target Program for Poverty Reduction which is scheduled for the first Quarter 2009.
11. OVERALL ASSESSMENT OF THE P 135-11 APPROACH
A. OVERALL ASSESSMENT
4. Since the beginning ofthe implementation ofP 135-11, three Joint Government - Donor Progress reviews have been conducted before the JMTR. The JMTR has the following overall assessments:
+ The different local government authorities and sectors are aware of and realize the importance of P135-11. The program has been of great practical value and it has invested in the socio-economic development of extremely difficult areas and it has benefited the poor ethnic minority people. The Government, ministries and central level agencies have provided close guidance and paid due attention to P135-11. The Government, ministries and central agencies have issued a number
66 of guidelines for the implementation of the Program. The planned budget for the Program has been allocated. However, some guidelines still need further improvement and the actual disbursement under the program still falls short ofthe planned budget.
Allocated investment by component 2006-2008:
Component Program document YOof investment funds (% planned allocated for period investment) 2006 - mid 2008 (*) Production 17.18 12.03 Infrastructure 67.56 59.90 Inter-commune centres 4.26 O&M 6.75 1.60 Social services & legal assistance 4.05 17.90 Capacity building 4.05 4.04 Support to Provincial Steering 0.38 0.30 Committees Total 100 100
(*) The figures for 2008 refer to the MoF allocation to provinces, and not the final disbursement figures.
+ The central and local governments have made substantial efforts to make the program effective. The total investment capital for the period 2006 to 2008 is VND 7,038 billion and 11,765 infrastructure work and other projects have been carried out. The poverty rate in the Program area has been reduced by 3-4% per year on average.
5. The implementation ofP 135-11 has initiated discussion and concrete activities towards a more market based economic structure. Ethnic minority people's education attainment level in target areas has also been enhanced as compared with before. The qualifications and capacities ofcommune and village level staff have been enhanced gradually.
6. However, according to the baseline survey, conducted in 2007,43% ofthe P135-I1 population was still poor and 46% lacked food over the past 12 months." This suggests that the 2010 target ofno hunger stricken households and 30% poverty rate is a challenging task. There is a 14 percentage point gap in terms ofthe 2010 target ofroad access to villages, a 20 percentage point gap for irrigation systems and a 22 percentage point gap for schools and clean water supply.
loOf this number, 68% ofhouseholds reported that they were not very often in food shortage, while 32% reported that they are very often or even always experiencing a lack of food.
67 7. Since the GoV has other National Target Programs (NTPs), and plans new additional NTPs, the issue ofrational central level management and the complementarily of the NTPs need to be resolved. Otherwise, the management task becomes difficult for local authorities. This is made more complex with increasing decentralization to different levels of local government and within NTPs.
8. CEM, on behalf ofthe GoV, informed the JMTR mission oftheir plans to design the third phase ofthe Socio-Economic Development Program for Extremely Disadvantaged Communes in Mountainous and Ethnic Minority Areas for the period 201 1 to 2015, following completion ofP135-11. CEM considers that donors' participation in the preparation and start-up ofthe new program is an imperative and meaningful measure to ensure its effectiveness and sustainability.
B. Cross-cutting issues in program implementation
9. Programme financing
10. Lessons learned
11. Based on reports by CEM and the Ministry ofFinance (MoF), the rate offinancial allocation is slightly behind the 5-year schedule and the government may consider the extension offinancing to 201 1. The actual disbursement is also behind schedule. One ofthe reasons for this is that infrastructure works often take more than one year to be completed and liquidated. Very limited information is available on how funds are transferred from one year to another.
12. Due to recent high inflation, it is important to reconsider the level of total financing as well as the level ofaverage funding for each commune.
68 Summary of the program budget and disbursement for the period:
VND billion I2006 12007 12008 I2009 I2010 I Total Donors’ direct 1620.2 260.8 1881.0 disbursement to the Program Annual Program Budget 1672.38 1498.09 3867.4 2527.09 9564.96 Actual disbursement by 1672.38 1498.09 3867.4 2527.09 9564.96 central government Actual disbursement by 953 1604.9 3020.3 5572.52 provinces Actual disbursement rate 57.0 107.1 81.3 80.9 (%) (excluding %’ 2009)
13. Decentralization, participation and empowerment
14. Lessons learned
15. Decentralization is a key element ofthe government’s strategy to work in sparsely populated mountainous areas. P 135-11 has made progress in the area ofdecentralization, although challenges remain in achieving the objectives. Decentralization means shifting power structures. Decentralization is not an end in itself: the empowerment ofpeople needs to lead to concrete and practical improvements.
16. One major obstacle in the decentralization process is the capacity of local authorities, especially among commune officials. This challenge is increased by the high turnover ofcommune officials. Commune officials are exposed to many training courses but, due to the complexity oflegislation, they may still lack the capacity to implement regulations.
17. This issue has been exacerbated by the recent restructuring ofCEM with the abolishment ofCEM’s sections at district and commune levels. This has made it more difficult for the program to implement commitments made at central level. The provinces have expressed their need to have a ‘Taskforce’ at the District level and a Community Facilitator for each P135 commune to assist communes to be investment owners.
18. Recommendations
19. In general, the management system ofthe NTPs should be rationalized at central level. Whenever possible, the various NTPs should be combined together and the
69 management responsibilities divided according to the technical mandate ofthe central level agencies. The government should seek to minimize overlap between P 135-11and the recently approved Resolution on support to 61 poorest Districts.
20. District officials do travel to communes but more continuous practical support from district to communes, with appropriate incentives, is crucial. Rotation ofdistrict officials to work in communes for some period oftime can facilitate hands-on learning.
21. The need for further TA support (e.g. a ‘commune facilitator’) should be considered if district staff are insufficient in number or lack experience. CEM will recommend to include the provision ofcommune facilitators in the policy for 61 poorest districts.
22. A communication strategy has been formulated. Its implementation requires increased attention. Using various communication channels and media such as TV, radio and DVDs and seminars is essential for the empowennent ofthe citizens.
23. Gender
24. Lessons learned
25. In practice, women are responsible for many production activities in the household economy. Ifwomen are marginalized in managing funds and receiving inputs, there is a danger that program support will not meet their real needs nor fully utilize existing commercial potential.
26. Among ethnic groups with a strong gender based division oflabour, the role models provided by women leaders tend to have a strong influence on ordinary women.
27. Recommendations
28. A firm target ofa minimum of30% women for all the program activities (management, trainings, meetings etc.) is suggested for enhancing women’s participation. Women should be actively encouraged to act as role models.
29. CEM should issue a manual on gender mainstreaming in P 13 5-11 implementation.
111. BRIEF ASSESSMENT OF THE IMPLEMENTATION OF COMPONENTS UNDER PROGRAMME
30. Component on Support for Production Development and Economic Structural Shift:
31. This is a component ofcritical importance, providing support to households in poverty reduction and hunger alleviation. Implementation started in 2007 after the
70 announcement ofthe budget allocation for the component. The budget allocation for the Production Component was VND 120 million per commune in 2006, increasing to VND 200 million in 2007. The Ministry ofAgriculture and Rural Development (MARD) has issued Circular No.01 and No.79 guiding implementation ofthis component. However, the categorization ofbudget expenditure has caused difficulties for implementation. The recent Inter-ministerial circular No.01/2008, which removed the difficulties arising from the previous categories ofexpenditure, is expected to pave the way for improved implementation ofthe component.
32. Achievements:
- Over the past 3 years, the component has brought about initial change in the way of-thinking (but not yet way of doing) among the villagers and grassroots officials and staff about the way of doing business and more commercially-oriented production. - Support has been provided to a great number of poor households in accessing new production knowledge and skills. Supplies, seeds and seedlings, small livestock, and production tools have been provided. Such direct support has partly met the needs ofthe beneficiaries.
33. Constraints:
- There is a high risk that the approach ofthis component still relies mainly on input supply and the bulk of the equipment and supplies of animals, seeds and fertilizers are distributed to less poor households while the purpose of Production Component is to create agricultural products for commercial purposes, which requires a significant change in the way of delivering agricultural services. The component has yet to bring about the expected results. Manuals on implementation of the component have not yet been issued by MARD, leading to delays and difficulties in the implementation at the local levels. - Manuals on construction and agriculture production should take into account measures to strengthen environmental protection.
34. Infrastructure Development Component:
Building on the results of P135 Phase I,the provinces have been implementing infrastructure projects carried over from Phase Iand new projects from 2006. The government budget for this component was VND 700 million per commune in 2006 and it was increased to VND 800 million per commune in 2007. Most of the provinces have adopted a pro-poor fund allocation approach. The implementation of the component is assessed to be good. The balance between transparent competitive contractor selection and simple, efficient procedures for the component is still an issue. A comprehensive procurement manual for P135-2 has not yet been issued by CEM.
71 35. Achievements:
The shift of investment focus to villages and communes in remote and off- road areas has resulted in visible changes in the rural areas. The proportion of villages having infrastructure serving production and daily life has increased. Access to electricity and roads has become easier, with high levels of satisfaction amongst poor households. - A separate budget line has been allocated for Operations and Maintenance (O&M) in accordance with a Prime Minister’s Decision which allocates 6.3% of the program budget to O&M. The Inter-Ministerial Circular 01/2008 emphasizes O&M during the preparation of annual financial plans by the communes.
36. Constraints:
- People’s participation in the planning process, during which the infrastructure works to be built are identified, is considered high (the baseline survey indicates that 90% of local people are consulted).. However, the participation and role of the people during supervision of infrastructure construction is still limited. - The construction management guidelines are cumbersome and they should be simplified to apply for small scale infrastructure projects under P135-I1 The commune officers have not been able to manage all the guidelines while there remains a lack of incentives for district officers to provide additional support to the communes. Procurement documents are largely prepared by the district officers. Commune officers can be involved in the planning and procurement while the citizens have only very limited knowledge about the process. Furthermore, small scale infrastructure works in remote communes do not draw much interest from contractors. - O&M plays an important role in maintaining the quality and sustainability ofthe projects and a JMTR background study on this issue found that:
o Districts and communes are reluctant to prepare O&M guidelines without having central guidelines; o Insufficient attention is given to management and human resource needs ofO&M; o O&M planning at commune level is undermined by the absence of asset inventories.
37. Component on Capacity building for Commune, village Officials and Staff, and the community:
38. This is the key component aimed at enhancing the capacity ofthe grassroots officials and staff and local communities in order to achieve the program objectives. The government budget for this component was VND 40 million per commune in 2006 and was
72 increased to VND 60 million per commune in 2008. In addition, CEM has received an additional budget ofVND 2 billion for communication activities in 2008, and VND 500 million per year for capacity building and training activities from 2008 onwards.
39. Achievements:
- Thanks to the close attention by central level agencies and the guidelines on capacity building and awareness-raising for grassroots officials, staff and the community, the awareness and understanding of such groups about the Program has improved. Nearly 100% of the people know about the support activities of P135-11. Program management skills have been progressively improved through the decentralization of management functions, and by organising 1,300 training classes for village officials and 12,000 villagers. - A framework training package has been issued. - Some provinces have been proactive and have developed local training materials for use in training courses.
40. Constraints:
- The adaptation oftraining materials from the central level by the provinces, as well as conducting the necessary training courses, has been slow. Training materials prepared by central level have been issued late in some cases. - While the system oftraining has been established, most ofthe training courses are delivered by government officials and administrators who simply repeat the texts ofthe guidelines. The training methods do not yet provide problem solving skills to the trainees; instead they are focused on the implementation ofadministrative guidelines.
41. Support for services, livelihoods improvement, and legal aid to enhance legal awareness:
- The current government budget for this component has been spent primarily on schooling support for poor pupils. The budget allocation has been VND 70,000 per month for 9 months per year to support pupils attending kindergarten, VND 140,000 per month for 9 months per year to support students attending boarding school, VND 1 million per household for sanitation improvement and VND 2 million per village per year for legal service support.
- The allocation for the livelihoods component was small in the original budget. However, MoF figures show a large allocation to the component in 2008 (see Table on page 2). If more funds are used for this component,
73 other components might face shortfalls. No official notification has been made on the reallocation offunds from one component to another.
42. Constraints:
- The approval of this component was delayed until July 2007. Provinces have launched surveys to analyse the needs of ethnic minorities and poor people for support according to the existing policies. Provinces find the funding allocation criteria for semi-boarding secondary school students restrictive, since in a number ofprovince there are only a few boarding or semi-boarding schools. Therefore, in these areas poor pupils still have to travel a long distance to their rented apartments for which they are not entitled to get support.
IV. ASSESSMENT OF PROGRAM IMPLEMENTATION AGAINST 13 POLICY ACTIONS IN THE RESULT FRAMEWORK
43. The following assessment provides an overview ofprogram implementation progress against the milestones of 13 policy actions under four policy areas for the year 2008 in the Result Framework.
44. IA. Poverty Targeting (selection of poor households, villages, and communes)
45. Lessons learnt:
- The promulgation ofcriteria for determining villages and communes with extreme difficulties and the screening of communes and villages to identify those to be added to the list ofP 135-11 beneficiaries have been undertaken in a timely manner in 2007 and 2008. - The Baseline Survey for P135-I1 indicates that the criteria for determining target beneficiaries is clear and user-friendly. l1 - The Baseline Survey also shows that there is a large gap between the poverty rates ofKinh and ethnic minorities in P 135-11 communes. - The number ofcommunes included and graduated from the program is as follows:
2006 2007 2008 2009 2010 (forecast) (forecast) Communes included 1644 1799 1946 1850 Communes graduated 65 107 I Totalnumberofcommunes I 1644 I 1799 I 1881 I 1743 I I
~
l1According to the Report on Baseline Study for P135-11.
74 46. Constraints:
- A small number of poor households have not totally agreed with the outcome of the selection process of poor households to benefit from the Program. - Some provinces have not been pro-active and transparent in their assessment ofthe communes to graduate from the program.
47. Recommendations:
- CEM in coordination with the Ministry of Labour, Invalids and Social Affairs (MOLISA) should conduct a study to improve the methodology for determining poor households (since MOLISA is responsible for identifying poverty line/ poverty rate); - CEM should work with relevant ministries and agencies to formulate a mechanism to encourage poor communes to actively pursue poverty reduction objectives and graduate from the program. CEM and the program provinces should work further to ensure that due attention is paid to the specific needs ofethnic minorities.
48. RATING: achieved.
49. IB. Programme resource allocation:
50. Lessons learnt:
- Rather than allocating the budget on an equal-share basis, 42 of the 47 provinces have developed and applied pro-poor budget allocation formula, based on criteria such as commune population, poverty rate, natural area, the number of villages, the number of required infrastructure projects in the localities, the distance between villages to the commune and district centres, and other typical characteristics ofthe localities, - The methodology for calculating this formula and the extent of application of the criteria in budget allocation vary from province to province, depending on the specific conditions ofeach province and locality.
51. Constraints:
- The budget allocation criteria of some provinces have not been rigorously based on specific calculations and objwtive foundations. - At the time of the JMTR, most provinces have applied pro-poor budget allocation criteria. However, the timing ofintroducing these criteria differs from province to province (in some provinces, application was just started a month before the JMTR).
75 52. Recommendations:
- CEM is to conduct a thorough review ofthe fund allocation criteria of provinces with a view to adopting a simple and objective pro-poor budget allocation formula which all P135-I1 provinces can apply. P135 communes should be well aware ofthis formula. - In 2009, CEM should conduct a study on the expenditures by program communes, and other relevant commune data, in order to improve the pro- poor budget allocation in the future. - CEM should encourage localities with similar conditions to share experiences and learn from each other about the development and use of criteria for budget allocation.
53 * RATING: achieved.
54. I.C. Enhancing sustainability of programme investment
55. Lessons learnt:
- It is necessary to emphasize the importance of O&M of infrastructure facilities in maintaining long-term benefits for the villagers and to fully understand the difficulties ofpoor people and poor communities in making financial contributions to O&M. - Studies indicate high rates of return for O&M. The first issue is to make an asset declaration ofexisting infrastructure (systematically, regardless of whether it is P135-I1 funded or not). If local authorities can decide on ownership, the listing of assets could be made (locally or even nationally) using modern GIS systems. The second issue is to develop a reliable financing mechanism for O&M. Some major repairs (e.g. for irrigation systems, schools) may require procurement at the scale of VND 100-300 million, that is, at a scale fairly similar to initial investments. - The issuance ofOfficial Letter No.744/TTg-KTTH by the Government on the allocation of budget of 6.3% of project investment for O&M of infrastructure works in P135-I1 is a remarkable step forward which will contribute to the sustainability ofthe infrastructure investments.
56. Constraints:
- As the budget line for O&M was just recently added to the recurrent budgets of localities, local governments are still not clear about how to use this budget line for O&M ofinfrastructure works. - O&M is technically a diverse field because each sector has its own O&M problems and requirements. This makes preparation of O&M guidelines a complex technical matter.
76 57. Recommendations:
- The quarterly financial reports of the MoF, and the audit report for 2009, should provide information on O&M expenditures and a preliminary assessment of how additional and earmarked O&M budgets affect the quality ofO&M. Instructions by the Province People Committees on the use of allocated O&M budgets are to be issued in the first half of 2009. It is recommended that these should include:
o asset listing ofthe communes and districts; o legal status of O&M groups; o capacity building plan for O&M. o Provinces need to specify the mechanism for close supervision of resource mobilization and utilization by localities for O&M of completed works. Plans for assessing adequacy ofO&M funding by the end of2009 also need to be made. o Recurrent and reliable O&M financing in proportion to the asset stock is needed.
58. RATING: partly achieved.
59. I.D. Pro-poor orientation of Production and Livelihoods support
60. Lesson learnt:
implementation of the component has been decentralized to the commune level in some provinces and districts. - There have been adjustments and changes in policies to remove barriers and bottlenecks in its implementation. Circular No.01/2008 has fundamentally removed all difficulties caused by the separate budget lines. - Despite the slow pace of implementation, the current production component is still useful as a tool for distributing benefits and poverty support to cash-poor and fairly poor households. The Production Development Support Component is the key new feature ofP 13 5-11 aimed at increasing incomes for households. The management and baseline study points out that producing an adequate amount of food throughout the year is still the priority concern for the majority of farmers, especially ethnic minority households, with 46% of the P135-I1 population lacking food (see Footnote No. 1).
61. Constraints:
- The production component is comparatively small and therefore does not generate much interest among the provincial DARDs.
77 Slow disbursement because of difficulties caused by separated budget lines, - Not many new agricultural development models have been developed. There has been too much focus on provision of subsidized seedlings and livestock inputs. MARD has yet to issue the Production Operational Manual as recommended in the previous Aide Memoir. - There is limited integration of different financial resources available in the same localities.
62. Recommendations:
MARD should issue an Official Letter detailing the implementation of Inter- Circular 01/2008 by the end ofDecember 2008. - A set of Production Operational Manuals should be issued by MARD within Quarter Iof 2009 at the latest. The manuals should be simple and easy-to-follow and provide meso-level guidance to provinces while leaving the provinces with certain discretion to adapt and implement the component effectively. - Carry out location specific market-chain analyses: input prices, price instability and seasonal prices, trader issues and market related factors.
63. RATING: not yet achieved.
64. I1A. Informed Public Participation in Programme Planning and Management
65. Lessons learnt:
- CEM has developed and circulated a Communication Strategy for the Program. A budget for its implementation has been allocated. - Communication tools have been developed. For the first time, a website for P135-I1 has been established and is frequently updated with news and articles on policies and implementation of the program in the provinces, with management tools of the program and interesting lessons from provinces. - Leaflets, posters and communication activities in village meetings have provided villagers with updated information about the program. The percentage ofpeople who know and are consulted about P135-I1 is high”. - CEM should continue guiding the dissemination of information about P 13 5-11 implementation in P 135 communes. The percentage of households aware about P135 projects and infrastructure works is fairly high, and the figure is highest with regard to production support activities: 94.8% ofhouseholds surveyed said that they know that the program provides production development support in the
’*Report by SAV in 2007 local areas. The percentage of households aware of other program activities and projects/works is over 50%13. - The percentage of villagers satisfied with P135-I1 investment projects is high, for example with regard to electricity supply facilities (95.4%), transport works (92%), health stations (95.5%), and legal assistance (90.7%)14.
66. Constraints:
- There is no separate budget line for communication activities at the local level which has caused difficulties in mobilizing a budget to implement communication activities in the provinces. - Communication materials have not been easily accessible for the ethnic minority people who are not fluent in the Vietnamese language, thus limiting the awareness and understanding of ethnic minority people about the program. - There are differences in the interpretation of “people’s participation” between the management at the central level and implementation levels. This has led to too high expectations with regard to the understanding and active participation by the people in the planning, implementation and supervision processes.
67. Recommendations:
- CEM should assist the localities to develop and implement communication plans at village level in order to provide full information to the villagers about the components of the program and the role of the people in the implementation process. - CEM will issue a Manual on Participatory Planning in the first half of 2009 and training courses will be conducted so that the implementation of participatory planning can begin from 2010. CEM should work with local levels to develop and disseminate communication materials in Vietnamese and some other major ethnic minority languages in order to enhance understanding among ethnic minorities about the components ofthe program.
68. RATING: partly achieved.
69. 1I.B. Devolution of Investment Ownership: >6O% P135-I1 communes are granted investment ownership responsibility in 2008
l3Citizen’s Report Card Survey Report l4Citizen’s Report Card Survey Report
79 70. Lessons learnt:
- By the time of the JMTR in 2008, 55% of P135-I1 communes have acted as commune investment owners. In 2006, this figure was 18 % and rose to 35 % in 2007. - P 13 5-11 is the only National Target Program under which management of the budget is decentralized to the communes and where the communes act as investment owners - this is a significant and right change in the mindset of people. For the first time, P135-I1 has a clear set of criteria for the communes to conduct self-assessment of their capacities and to undertake ownership ofP135-I1 investment projects. - Commune investment ownership should be accompanied by capacity building and continued support by the district level to the communes to help them master the procedures. - 71. Constraints
- In some localities, communes are investment owners for either the Production Component or Infrastructure Component only. - A number of localities are still hesitant in decentralizing management to the commune level. - Procedures and policies are still complicated (e.g. construction procedures for infrastructure projects).
72. Recommendations:
- CEMis to report separately on commune ownership in the infrastructure and production components for 2008 and update the list annually. - The support ofdistricts is required to provide technical back-up. Districts should support communes in liquidation and settlement procedures with the District Treasury and finance section. It is important that adequate management fees are used for district and commune officers and for commune supervision boards to carry out their tasks; and, if necessary, to provide computers for financial management and trained accountants. - CEM and local levels should provide more training in order to enhance the capacities for communes to undertake ownership of P135-I1 projects. This training should be organized in thematic areas with specific manuals for Participatory Planning, Procurement; Construction Preparation; Financial Management and Accounting.
73. RATING: partly achieved.
74. IIC. Local Institutional Capacity Building Support
80 75. Lessons learnt:
- The capacity of local officials and communities remains a key obstacle in empowering the local level in program planning and implementation (commune investment ownership, participatory planning, and community supervision). - CEM has completed and issued the framework oftraining as per Decision No.04/2007/QD-UBDT and has made the necessary adjustments to comply with the amended Inter-Ministerial Circular No.01. - Some provinces have been pro-active in organizing training activities and have adopted a hands-on training approach, combining both theory and practical experience. These training courses have been interactive and participatory. - Capacity building is one of the key functions of central level and it is a decisive factor for decentralization to commune investment ownership, as targeted by the program. - Capacity building on program management and implementation takes time to achieve the required impact. - The structural change with regard to District Division on Ethnic Minorities (DEM) and changes in personnel at the local level will affect the effectiveness ofcapacity building.
76. Constraints:
- A number of provinces have not been pro-active enough in developing training plans and their training contents are not fully relevant to the real needs ofeach target group. - Training has been provided mainly for management levels and has not yet focused on training for local community and villagers.
77. Recommendations:
- CEM should soon finalize the training materials as per the training framework. It is recommended that the materials should emphasize the capacity-building methodology, and support to localities to improve training methods and skills. - Training should aim to enhance the capacity of communes to assume commune investment ownership and other management skills. - Capacity building support may overlap with capacity building provided by other program. These activities should be clearly focused on the specific needs for P135-I1 implementation. - It is necessary to accelerate the process of capacity building for the community and villagers especially with regard to people’s participation in planning and supervision ofprogram implementation.
81 - Local mass communication through radio, TV and newspaper is very advanced in Vietnam and provides a good mechanism for distributing some training as well. - The management responsibility for this component should be clarified at local level. If district level DEM is disbanded, full time staff should be assigned at district level to work on P 135-11. - 78. RATING: partly achieved.
79. 1II.A Procurement: 50% of contracts under P135-I1 awarded through open and competitive bidding and community contracting.
80. Lessons learnt:
- Even for restricted bidding and appointed bidding, according to GoV regulations on procurement, three proposals (quotations) need to be obtained and evaluated. Because of small size of investment, few P135-I1 projects require public bidding. There is still room for improvement with regards to transparency ofthe procurement process. - Procurement procedures should be simplified while still ensuring the strictness in the selection of bidders. The budget allocation as well as information of the successful bidders should be posted on the commune notice board and on the construction site. The revisions in Circular No.0 1/2008 have introduced community contracting and have provided details of the bidding process for projects valued from VND 300 million to VND 1 billion, The new circular has as an objective to increase the transparency and competitiveness in the procurement process as compared to current regulations on appointed bidding and competitive bidding for projects valued at over VND 1 billion.
81. Constraints:
The Procurement Manual has not been issued. The procurement regulations and liquidation regulations are not easy to understand for communes which manage funds and have limited professional experience. The government policies try to address these issues but the advancement is gradual. Simplified procedures should be used for small-scale procurement and payment and liquidation procedures (especially with regard to community contracting). Such simplified procedures should still ensure strictness in the selection ofbidders.
82 82. Recommendations:
- CEMwill issue a Procurement Manual in December 2008. CEM is to organize training courses on procurement, through a Training of Trainers approach, to ensure that the Communes are fully aware of and implement the provisions in this Procurement Manual. - CEM should advocate to the Government for the broader adoption of this improved procurement process for P135-11.
83. RATING: partly achieved.
84. IIIB. Public Financial Management
85. Lessons learnt:
- Although the accounting and financial management system of the MoF and State Treasury of Vietnam (STV) is comprehensive, the practice of reconciliation, regular reporting and public disclosure is still not yet a routine exercise for these agencies at all levels.
86. Recommendations:
- Publish annual expenditures by program components on the website ofthe Ministry ofFinance. - Continue to enforce this commitment in the coming years. MoF and CEM shall conduct a pilot reconciliation and reporting for one province in the first half of 2009. Lessons learnt and a practical reconciliation and reporting process will then be formulated for the program overall.
87. RATING: achieved.
88. IIIB. Audit
89. Lessons learnt:
- The number of audited provinces has been increased as committed in the Policy matrix. For the first time in 2008, CEM, in coordination with State Audit of Vietnam (SAV), organized a press conference to publish the audit results. - The audit reports of 2007 and 2008 and the audit plan of 2008 have been shared with donors. - Audit reports have reflected positive changes in program management and financial management as well as reporting. There is good coordination between the SAV, MoF, MPIand CEM in audit activities.
a3 90. Constraints:
- The SAV has performed a good audit for P135-11. However, this report was shared late with donors (after the field visits) which did not allow time for a thorough analysis before the JMTR.
91. Recommendations:
- Good audit work brings added value when adequate follow-up actions take place effectively. CEM will request local authorities to report on the implementation ofthe audit recommendations. - The SAV will share the annual audit plan with stakeholders of the Program in the first quarter ofeach year. - CEM commits to share the audit report with all stakeholders of the Program two weeks after the SAV has officially issued the report.
92. RATING: achieved.
93. IIIC. Community contributions
94. Lessons learnt:
- Communes and districts require external contractors to use local paid labour as an integral part ofthe construction contracts. Villagers in the Central and Southern provinces are generally less interested in paid labour on infrastructure projects as they can find other opportunities with higher income. This type of income generation is appropriate in the North. - With community participation contracts, income generation for local villagers will become easier.
95. Constraints:
- Community contributions are not formally recorded in the program M&E sys tem.
96. Recommendations: - CEM, in coordination with MoF, will prepare formats to record community contributions in different forms such as land, labour days, and materials etc. The AMT and PMT formats should be supplemented or amended if necessary. The design contractors should be guided to include adequate local paid labour opportunities and specifications in the works design.
97. RATING: partly achieved.
84 98. 1V.A. Impact Evaluation.
99. Lessons learnt:
The Baseline Survey has been conducted and data analysis of the survey has been completed. - The Baseline Survey started later than originally planned (with the result that a separate mid-term survey was not conducted), so it is necessary to have a comprehensive completion survey at the end of the program to compare the results over time. The Baseline Survey is only used for reference in the MTR.
100. Constraints:
- The Baseline Survey report was finalized and sent to the donors late (after field visit and before the JMTR workshop).
101. Recommendations:
- It is necessary to mobilize the TA resources from donors to conduct the completion survey at the end of the prop& in 2011 for evaluating the impacts ofP135-11. - CEM shall officially engage GSO for the design and planning ofthe final impact evaluation exercise and budget for 2010.
102. RATING: partly achieved.
103. 1V.B. Process monitoring.
104. Lessons learnt:
- Process monitoring is a key function of the central agencies in program management. - Tools that have been put into use include MIS and the use ofAMT/PMT is institutionalized in Decision No.04 of CEM. Training on the use of the forms and data collected, as well as on data analysis, has brought about positive initial results. - Citizen report cards to measure levels of satisfaction ofbeneficiaries have been piloted by CEM in four provinces.
105. Constraints:
- The number of provinces which apply the monitoring tools fully and effectively is limited. - The data collected at the local level is not easily accessible or fully accurate.
85 106. Recommendations:
- CEM should provide further support to local task-forces by hands-on coaching.
107. RATING: partly achieved.
V. SUMMARY OF KEY PRIORITY POLICY ACTIONS THAT NEED TO BE PERFORMED
MARD should issue an Official Letter guiding the implementation of Inter-Ministerial Circular No.01/2008 in 2008. MARD should issue the Production Operational Manual on the basis of the key points in the Inter-Ministerial Circular No.01 in the first quarter of 2009. CEM is to issue the Procurement Manual as per Inter-Ministerial Circular No.01 by the end ofDecember 2008. CEM is to request the localities to report on P135-I1 implementation using the AMT and PMT systems. CEM is to take the lead role in working with relevant ministries, agencies and the localities to monitor and accelerate follow-up actions to be taken as recommended in the SAV audit reports. The SAV should provide donors and monitoring and supervision agencies with more detailed information about how localities have taken follow-up actions in light ofaudit report's recommendations in the first half of2009. The SAV is to share the audit plan for 2009 in first quarter of2009. CEM is to conduct a study and issue a Manual on Gender Mainstreaming in P135-I1 implementation at the local levels in the first half of2009. CEM is to issue a Manual on Participatory Planning in P 135-11 in the first half of2009. CEM is to conduct a review of fund allocation criteria ofprovinces in the first half of2009. CEM and MARD should jointly commission a study on market chain analyses (input prices, price instability and seasonal prices, trader issues and market related factors) by the third quarter of2009. CEM is to work with local levels to develop and disseminate communication materials in Vietnamese and some other relevant ethnic minority languages in the first halfof 2009.
86
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0s 2 ANNEX 6: FUND RELATIONS NOTE
EXTERNAL RELATIONS Public Ififormation Notice DEPARTMENT
International Monetary Fund Public Information Notice (PIN) No. 09/36 700 lgthStreet, NW FOR IMMEDIATE RELEASE Washington, D. C. 20431 USA March 17, 2009
IMF Executive Board Concludes 2008 Article IV Consultation with Vietnam
1. On March 16, 2009, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Vietnam .I5
Background
2. Following an extended period of strong economic performance, Vietnam is facing considerable challenges. Growth moderated to 6.2 percent in 2008, from a historical average of 7% percent. Rapid credit growth fueled by massive capital inflows, coupled with a surge in commodity prices, led to high inflation and large trade deficits in the first half of 2008. While inflation pressures are subsiding with easing food and energy prices, growth is expected to slow further to 4% percent in 2009 on the back of weaker domestic and external demand. The current account deficit is projected to decline to 8 percent of GDP, mainly due to lower imports. Near-term risks are on the downside, as the deteriorating global environment could worsen Vietnam's growth prospects and reduce capital inflows, putting pressure on reserves and the exchange rate. A slower pace of economic activity could also heighten banks' vulnerabilities.
3. Spillover effects from the global turmoil have become more apparent since October 2008. Exports of goods and services, private remittances, and foreign direct investment have all weakened. Risk aversion remained acute, prompting foreign investors to continue reducing their portfolio exposures to Vietnam, particularly in bonds, and the stock market lost two-thirds of its value in 2008. Depreciation pressures on the dong have also resurfaced.
4. Macroeconomic policies have reversed course as concerns over growth increased and inflation pressures waned. Earlier in 2008, the State Bank of Vietnam (SBV) made considerable efforts to stabilize the overheating economy. In the fourth quarter, the SBV
l5Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. 97 rapidly eased monetary policy by lowering its policy rates by 7 percentage points to 7 percent, and reducing reserve requirements sharply. To alleviate depreciation pressures on the exchange rate, the SBV devalued the dong and widened the dong-U.S. dollar trading band. However, the dong has continued to trade at the weaker end of the band. More recently, the government has announced a broad economic stimulus plan aiming to support growth and protect vulnerable groups.
5. Fiscal policy has also become accommodative. With spending stepped up in the final quarter, the overall fiscal balance in 2008 is estimated to have recorded a deficit of 4% percent of GDP. The original 2009 budget plan (excluding the stimulus plan) indicates a widening of the overall deficit to about 8% percent of GDP with a large domestic financing, reflecting lower revenue from oil and recent tax reforms and an increase in off-budget expenditure and net lending. The non-oil primary deficit is projected to rise slightly.
6. Strains in the banking system emerged in 2008. Banks have high loan-to-deposit ratios and rely heavily on short-term interbank funding, and their profit margins were squeezed by the higher funding costs and caps on lending rates. Smaller joint-stock banks were reportedly most affected, with some obtaining liquidity support from the SBV. Nonperforming loans (NPLs) doubled to 3 percent in October 2008 from the end-2007 level, and some banks are likely to face a substantial increase in NPLs with a slowing economy .
Executive Board Assessment
7. Executive Directors commended the Vietnamese authorities for the significant progress they have made in stabilizing the economy, which was overheating in 2008. Directors welcomed the recent improvements in inflation and the trade balance. They noted, however, that Vietnam is facing substantial near-term challenges stemming from the sharp deterioration in global economic and financial conditions, and that risks are tilted firmly to the downside. Economic growth is expected to slow in 2009 with capital inflows, exports, and private remittances likely to decline significantly, while the current account deficit will remain large. Slower growth could also heighten banking system vulnerabilities. At the same time, Directors agreed that the medium-term outlook is favorable, with Vietnam remaining an attractive destination for foreign investment.
8. Directors considered that an accommodative fiscal stance in 2009 to help mitigate the economic downturn is appropriate. They cautioned, however, that in the absence of additional concessional external financing, a large stimulus could further weaken the external position, crowd out private sector activity, and undermine fiscal sustainability. Most Directors encouraged the authorities to revise their budget plan for 2009 in the light of these concerns, and with a view to ensuring that the stimulus measures envisaged are well targeted and effective in supporting aggregate demand.
9. While welcoming the recent tax reforms, Directors agreed that longer-term revenue and expenditure reforms will be needed to preserve fiscal sustainability. They called for further efforts to broaden the tax base. Also, the structure of expenditures should be reviewed to ensure the efficiency of public investment and the protection of vulnerable groups. Directors welcomed the initiative to revise the state budget law.
IO. Directors advised the authorities to assess the effects of recent monetary adjustment before considering easing further. To strengthen the monetary framework, they recommended improvements in open market operations and liquidity management.
98 Directors took note of the recent devaluation of the dong and the widening of its exchange rate trading band, and in that context, they welcomed the authorities’ intention to allow greater exchange rate flexibility, supported by appropriate macroeconomic policies. They noted the staffs assessment that the dong appears somewhat overvalued compared with its estimated medium-term equilibrium level, although the precise degree of the deviation is difficult to ascertain.
11. Directors considered that the strengthened capital position and improved provisioning practices of Vietnamese banks may provide them with a buffer against the impact of the economic slowdown. Nevertheless, bank loan portfolios could come under pressure as economic growth slows. Directors encouraged the authorities to develop a more comprehensive contingency plan to help the banking sector confront the effects of the global financial turmoil. Directors welcomed the recent efforts to improve bank supervision, but called for further improvement to ensure that bank vulnerabilities are assessed in a timely and effective manner. They encouraged the authorities to advance financial sector reform, in particular, strengthening the operational autonomy of the State Bank of Vietnam.
12. Directors welcomed the authorities’ intention to press ahead with the reform of state-owned enterprises (SOEs), while noting that the equalization process has been postponed due partly to unfavorable market conditions. The planned reforms will help strengthen the performance and governance of SOEs and sustain Vietnam’s rapid pace of economic development.
13. Directors welcomed the steps taken to improve data provision, and emphasized that this-along with an effective public communication strategy-will help bolster investor confidence. They encouraged the authorities to continue to improve the quality and timeliness of data, especially in the areas of the fiscal accounts, SOEs, and banking.
~ Public lnformafion Notices (PINS) form part of the IMF’s efforts to promote transparency of the IMF’s views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINS are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINS are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.
99 Vietnam: Selected Economic Indicators. 2005-09 1/ 2005 2006 2007 -2008 -2009 Est. Proj.
Real GDP (annual percentage change) 2/ 8.4 8.2 8.5 6.2 4.8 Saving and investment (in percent of GDP) 3/ Gross saving 34.5 36.5 31.8 31.2 25.1 Private 26.7 28.1 26.2 26.1 23.0 Public 7.8 8.4 5.6 5.1 2.1 Gross investment 35.6 36.8 41.6 41.5 33.2 Private 24.1 26.4 30.3 32.2 24.0 Public 11.5 10.4 11.4 9.3 9.2 Inflation (annual percentage change) 2/ CPI (period average) 8.3 7.5 8.3 23.1 8.0 CPI (end of period) 8.8 6.7 12.6 19.9 6.0 GDP deflator 8.2 7.3 8.2 21.7 4.8 General government (in percent of GDP) Official fiscal balance -0.1 1.1 -2.2 -1.6 -4.1 Revenue and grants 27.2 28.7 27.6 27.2 24.0 Expenditure 27.3 27.5 29.8 28.8 28.1 Off-budget expenditure and net lending 4.4 2.2 3.1 3.1 4.1 Overall fiscal balance 4/ -4.5 -1.1 -5.3 -4.7 -8.2 Non-oil primary fiscal balance 4/ -11.7 -8.8 -11.1 -9.4 -9.7 Money and credit (annual percentage change, end of period) 2/ Broad money 29.7 33.6 46.1 20.3 ... Credit to the economy 31.7 25.4 53.9 25.4 ... Interest rates (in percent, end of period) 2/ Nominal three-month deposit rate (households) 7.8 7.9 7.4 8.1 ... Nominal short-term lending rate (less than one year) 12.0 11.8 11.8 11.5 ... Current account balance (including official transfers) (In billions of US. dollars) -0.6 -0.2 -7.0 -9.2 -7.3 (In percent of GDP) -1.1 -0.3 -9.8 -10.3 -8.1 Exports f.0.b. (annual percentage change, US. dollar terms) 22.5 22.7 21.9 29.5 -15.5 Imports f.0.b. (annual percentage change, US. dollar terms) 15.0 22.1 38.3 27.6 -19.9 Foreign exchange reserves (in billions of US. dollars, end of period) Gross official reserves, including gold 2/ 8.6 11.5 21 .o 23.0 20.7 (In months of next year's imports of GNFS) 2.2 2.1 3.0 4.1 3.3 External debt (in percent of GDP) 5/ 32.5 31.4 33.3 29.8 31.9 External debt service (in percent of exports of GNFS) 4.5 4.2 3.8 3.4 4.5 Total public and publicly-guaranteeddebt (in percent of GDP) 44.5 44.1 46.3 44.4 47.5 Dong per US. dollar exchange rate (end of period) 2/ 6/ 15,907 16,068 16,003 17,486 ... Nominal effective exchange rate (end of period) 7/ 83.6 77.3 73.3 75.4 ... Real effective exchange rate (end of period) 7/ 99.8 96.8 100.5 121.9 ... Memorandum item: GDP (in trillions of dong at current market prices) 839 974 1,144 1,479 1,623 Sources: Data provided by the Vietnamese authorities: and IMF staff estimates and projections. I/ Figures in 2008-09 are staff estimates and projections unless otherwise indicated. Projections for 2009 do not take into account the recently announced stimulus plan. 2/ Figures for 2008 are actual. 3/ The private sector includes state-owned enterprises. 4/ Includes off-budget expenditure and net lending. 5/ Includes private debt. 6/ Interbank exchange rate. 7/ 2000 annual average=100.
100 ANNEX 7: COUNTRY AT A GLANCE - - East POVERTY and SOCIAL Asia 8 Low- Development dlamond' Vietnam Pacific Income 2007 Population, mid-year (millions) 85.1 1,914 1,296 Life expectancy GNI per capita (Atas method, USSJ 790 2,180 518 GNI (Ah5 method, US$ biNionsJ 67.2 4,174 749 T Average annual Qrowth, 2001-07 Population (%I 1.3 0.8 22 Labor force (%) 2.2 1.2 2.1 Gross primary Most recent estimate (latest year available, 2001-07) capita enrollment Poverty (% ofpopu/ation below nafjonalpoverty line) 29 Urban population (% of totalpopulabn) 27 43 32 Life expectancy at birth (yead 71 71 57 I lnfant mortality (per f,ooO live births) 15 24 85 -&- Child malnutrition (% of children under 5) 20 13 29 Access to improved water source Access to an improved water source (96 ofpopulation) 92 87 68 Literacy (% of populabon age f5+J 91 61 Gross primary enrdlment (76 ofschm/-age populabon) 110 94 -Vietnam Male 111 100 -Low-income group Female 109 89 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1987 1997 2006 2007 Economic ratios' GDP (US$ billions) 36.7 26.8 61.0 71.2 13.6 28.3 35.7 35.3 Gross capital formaConlGDP Trade Exports of goods and seriicedGDP 6.0 43.1 73.5 75.7 Gross domestic JavingdGDP 4.8 20.2 32.4 21.4 I Gross natilsavingdGDP 21.6 36.9 32.8 Current account babndGDP -1.6 -6.2 -0.3 -3.1 Domestic Capital Interest pavmentslGDP 0.0 1.o 0.5 savings formation Total debVGDP 0.5 81.1 33.1 7.7 2.0 Total debt servicalexports I Present value of deWGDP 27.9 Present value of debtlexporls 37.3 Indebtedness 1987-97 199747 2006 2007 2007-11 (average annual growth) GDP 7.7 1.2 8.2 8.5 8.1 -Vietnam GDP per capita 5.6 5.9 6.9 7.2 6.9 -Low-inwme group Exports of goods and services 21.3 11.9 22.1 17.9 11.9
STRUCTURE of the ECONOMY 1987 1997 2006 2007 Growth of capital and GDP [x) (% of GDP) 15 Agriculture 40.6 25.8 20.4 Industry 28.4 32.1 41.6 10 Manufacturing 22.4 16.5 21.3 5 SeNiWS 31.1 42.2 38.1 01 ' I Household final consumption exwnditure .. 71.1 61.1 67.1 General gov't final consumption expenditure .. 8.1 5.9 5.5 Imports of goods and services 14.8 51.2 76.8 83.6
1987-97 1997-07 2006 2007 GroWm of exports and imports (%) (average annual growth) Agriculture 4.0 4.0 3.4 QT I Industry 9.5 9.9 10.4 Manufacturing 6.5 11.2 12.4 Sewices 9.1 6.2 8.3 :LE???Tz10 I Household final consumption expenditure .. 10.8 12.9 20.3 General pov't final consumptron expenditure .. 5.7 8.5 8.5 Gmss capital formation 23.8 10.2 9.3 9.2 Imports of goods and services 29.6 18.1 21.5 22.6
Note: 2007 data are preliminary estimates. This table was produced from the Development Economics LDB database. * The diamonds show four key indicators in the country (in bold) compared with its incomegroup average. If data are missing, the diamond will be incomplete.
101 PRICES and GOVERNMENT FfNANCE 1987 1997 2006 2507 Domestic pn'ces 1% change) prices 3.2 7.5 75 P deflator 362 6 6.6 73 82 Government finance @ of GBP, indudes cumfit ri@t?nt~i Current revenue 13.2 20.2 27 1 25 5 Cumnl budeeet balance -0.6 45 85 58 Overall s~~lu~de~c~ .. -1.4 -6.3 -3 4
TRADE 1987 1497 2006 20.07 fuss mriftons) TotaS exports (fob) 610 9,185 39,826 Rrce .. 926 2,276 Fuel 1.443 8,265 BVBanviEhrres 4401 19,360 Tokit imports [cfl 1,184 11.592 44,839 1 Food 6 Fuei anti eneqy I *94 5.970 Capihl goods 3.512 10,800 Export pnce intiex Q50U=fOG :19 IO0 Emport price index (2OoO=POOJ 20 I03 Terms of trade (2000=1009 99 97
BALANCE of PAYMENTS 1987 1997 2506 2007 [US$ mifltons) Expork of qodand sewices 11,678 44,926 52,964 Emports of wads and sewtces . 13618 47,710 58,502 Resource balance . -1,9413 -2,784 -5,538 Met income -94 -614 -I ,430 -1,687 Net current trarsfezs 27 887 4,049 5,227 Current aec~untbalance -592 -IE67 -165 3.198 Financing rtems [net) 56 3,093 Changes in net fesewes $,E?: -2,928 Memo: Reserves rncludr _. 186 11,485 Conversion rate 78.3 f4,6&3 3 15,%3.9 16,056 0
EXTERNAL DEBT and RESOURCE FLOWS 1987 1997 2006 2507 [US$ mifijbns) To&! debt oWaPrdiwg and drsbumed 1% 2f.777 20,202 IBRD 0 0 0 0 IDA 60 569 3,%3 4,559 TOWdebt service 2 914 91 8 iERD a 0 0 CI IDA 0 4 56 M Cornposibon of net resource flows OffiaaI grants 41 254 5.43 Official creditors -I 378 863 Private credtton 43 292 66 Foreign direct tnvestment (ne $0 2220 2.345 POrtfOkO WMiW (!let 8plfkWS) 0 0 D E: 9,Wq World Bank program Com~i~m~?s 656 973 Disbursements ?do 748 Principal repnymeslks 23 30 Net Rows 377 738 fnterest payments 33 3.1 Net tnnsfws 255 685
is table was prepared by country mi staff, from other Wodd Bonk publrshed 9Q4i08
102 IBRD 33511R
102°E 104°E ToTo 106°E 108°E 110°E ToTo BabaoBabao KunmingKunming ToTo KaiyuanKaiyuan ToTo VIETNAM TiandongTiandong CHINACHINA
HaHa GiangGiang 4 CaoCao BangBang 5 PROVINCE CAPITALS LaoLao CCaiai ToTo NanningNanning PhongPhong ThoTho Re d 9 NATIONAL CAPITAL 1 3 8 BacBac CanCan 22°N ToTo 22°N RIVERS TuyenTuyen 1010 LangLang HepuHepu QuangQuang SonSon Bla 7 ThaiThai 2 ck YenYen BBaiai NguyenNguyen MAIN ROADS 1313 SonSon LaLa VietViet TriTri 1212VinhVinh YenYen 1414 DienDien BacBac GiangGiang RAILROADS BienBien PhuPhu 1111 1515 6 1616 BacBac NinhNinh ToTo HANOIHANOI 1717 HaiHai DuongDuong HaHa LongLong PROVINCE BOUNDARIES MuangMuang XaiXai HoaHoa BBinhinh HaHa DongDong 1919 2020 HaiHai PhongPhong HungHung YenYen 2121 INTERNATIONAL BOUNDARIES 2222 1818 HaHa NamNam 2323 2424 ThaiThai BinhBinh NamNam DinhDinh NinhNinh BinhBinh 2626 M 2525 20°N 2727 a 20°N PROVINCES: ToTo LuangLuang ThanhThanh HoaHoa PrabangPrabang 1 Lai Chau 32 Thua Thien Hue LAOLAO 2 Dien Bien 33 Da Nang PEOPLE'SPEOPLE'S Gulf 3 Lao Cai 34 Quang Nam 2828 HainanHainan I.I. 4 Ha Giang 35 Quang Ngai DEM.DEM. RREP.EP. of 5 Cao Bang 36 Kon Tum (China)(China) A VinhVinh Tonkin 6 Son La 37 Gia Lai n 7 Yen Bai 38 Binh Dinh n HaHa TinhTinh 8 Tu Yen Quang 39 Phu Yen a 2929 9 Bac Can 40 Dac Lac ToTo m 18°N 18°N KhammouanKhammouan 10 Lang Son 41 Dac Nong 11 Phu Tho 42 Khanh Hoa C 12 Vinh Phuc 43 Binh Phuoc DongDong HoiHoi o 3030 13 Thai Nguyen 44 Lam Dong r 14 Bac Giang 45 Ninh Thuan d 15 Quang Ninh 46 Tay Ninh i DongDong HaHa 16 Ha Noi 47 Binh Duong ToTo l SavannakhetSavannakhet l 3131 17 Bac Ninh 48 Dong Nai THAILANDTHAILAND e HueHue 18 Ha Tay 49 Binh Thuan r 19 Hung Yen 50 T.P. Ho Chi Minh a 3232 3333 DaDa NangNang 20 Hai Duong 51 Ba Ria-Vung Tau 16°N 16°N 21 Hai Phong 52 Long An TamTam KyKy 22 Hoa Binh 53 Tien Giang 3434 23 Ha Nam 54 Dong Thap
24 Thai Binh 55 Ben Tre QuangQuang NgaiNgai 25 Ninh Binh 56 An Giang 3535 26 Nam Dinh 57 Vinh Long NgocNgoc LLinhinh (3143(3143 m)m) 27 Thanh Hoa 58 Tra Vinh 3636 28 Nghe An 59 Kien Giang KonKon TumTum 29 Ha Tinh 60 Can Tho 3838 30 Quang Binh 61 Hau Giang CentralCentral 14°N 14°N PleikuPleiku 31 Quang Tri 62 Soc Trang 3737 QuyQuy NhonNhon 63 Bac Lieu HighlandsHighlands 64 Ca Mau 3939 TuyTuy HoaHoa CAMBODIAC A M B O D I A 4040
BuonBuon MaMa ThuotThuot 4242 4141 NhaNha TrangTrang GiaGia NNghiaghia 12°N ToTo DaDa LatLat 12°N KampongKampong ChamCham 4343 DongDong ToTo 4444 4545 KampongKampong XoaiXoai PhanPhan Rang-Rang- ChhnangChhnang M 4646 ThapThap ChamCham e TayTay NNinhinh k 4848 o 4747
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MotMot BienBien HoaHoa 5050 PhanPhan ThietThiet Gulf 5252 5454 HoHo ChiChi MinhMinh CityCity 5151 of 5656 CaoCao LanhLanh TanTan AnAn LongLong XuyenXuyen 5353 MyMy ThoTho Thailand VungVung TauTau Phu VinhVinh LongLong BenBen TreTre VIETNAM Quoc 6060 CanCan ThoTho 5757 5555 10°N RachRach GiaGia a 10°N t 5959 6161 TraTra VVinhinh l ViVi ThanhThanh 5858 e This map was produced by SocSoc TrangTrang D the Map Design Unit of The 6262 g World Bank. The boundaries, 6363 n BacBac LieuLieu o colors, denominations and CaCa MauMau k any other information shown M e 0 50 100 150 200 Kilometers on this map do not imply, on 6464 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 2007