SOURCE: ANDREW GREEN/MSI

INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM November 20, 2017

This publication was produced for review by the United States Agency for International Development. It was prepared by NORC at the University of Chicago. The authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. CONTENTS ACRONYMS ...... II MAP - VIETNAM ...... IV EXECUTIVE SUMMARY ...... 1 INTRODUCTION ...... 4 Assessment Purpose ...... 4 Assessment Context ...... 4 Assessment Approach ...... 9 ANALYSIS ...... 10 Step 1 and Step 2 - The Five DRG Elements AND STAKEHOLDER ANALYSIS ...... 10 Step 3: USAID’s Operational/Programmatic Environment ...... 20 RECOMMENDATIONS ...... 25 Step 4: Outlining the Proposed Strategy ...... 25 ANNEX A: DONOR MATRIX ...... 31

I | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV ACRONYMS APCA Administrative Procedures Control Agency

CCIA Central Commission for Internal Affairs

CDCS Country Development Cooperation Strategy

CEC Central Economic Committee

CECODES Center for Community Support Development Studies

CPV Communist Party of Vietnam

CSO Civil society organization

DCHA (Bureau for) Democracy, Conflict, and Humanitarian Assistance

DFID Department for International Development (Government of the United Kingdom)

DOHA Department of Home Affairs

DPI Department of Planning and Investment

DRG Democracy, Human Rights, and Governance

FY Fiscal year

EU European Union

GI Government Inspectorate

GIG Governance for Inclusive Growth

GVN Government of Vietnam

HCMC Ho Chi Minh City (formerly known as Saigon)

INGO International NGO

INL (Bureau of) International Narcotics and Law Enforcement Affairs

IP Implementing Partner

ISIS Islamic State of Iraq and Syria

KII Key Informant Interview

LER Learning, Evaluation, and Research

MSI Management Systems International

MO Mass Organization

MOHA Ministry of Home Affairs

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | II MOJ Ministry of Justice

MONRE Ministry of Natural Resources and Environment

MPI Ministry of Planning and Investment

MSI Management Systems International

NGO Non-Governmental Organization

ODA Overseas development assistance

OOG Office of the Government

PAPI Public Administration Performance Index

PCI Provincial Competitiveness Index

PM Prime Minister

SAF Strategic Assessment Framework

SME Small and Medium Enterprises

SOE State-Owned Enterprise

STAR Support for Trade Acceleration

TPP Trans-Pacific Partnership

UNDP United National Development Programme

US United States

USAID US Agency for International Development

USG US Government

VCCI Vietnam Chamber of Commerce and Industry

VFF Vietnam Fatherland Front

VGCL Vietnam General Confederation of Labour

VNA Vietnam National Assembly

VNCI Vietnam Competitiveness Initiative

VUSTA Vietnam Union of Science and Technology Associations

WTO World Trade Organization

III | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV MAP – VIETNAM

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | IV EXECUTIVE SUMMARY This Inclusive Governance Assessment involves two interrelated tasks. First, the assessment portion of the task is intended to define the core inclusive governance problem(s) in Vietnam, identify the interests and resources of key actors and institutions that could promote or inhibit more inclusive growth, and consider the United States Government’s (USG) operational and programmatic environment in Vietnam. The assessment portion is expected to examine positive trends in opening policy space in Vietnam that foster economic growth. Research and analysis includes coverage of issues related to political structures, such as national-subnational relations; budget processes at all levels; and oversight of policy implementation. Second, the strategy development segment is intended to result in clear and actionable strategic and programmatic recommendations to address the core inclusive governance problem(s) identified in the assessment portion. The Assessment focuses on the last ten years of development and identifies areas of continuity and change. The Assessment begins with the perspective that the most relevant and prominent governance debate in Vietnam is fundamentally the classic trade-off between efficiency and representativeness. More efficient decision-making processes can be more responsive to emerging issues or policy priorities, but at the expense of excluding information and ideas from citizens and societal organizations; to the contrary, more representative decision-making processes deliberately incorporate information and ideas from citizens and societal organizations, but at the expense of efficient, timely response to emerging issues or policy priorities. The central premise of this perspective is that pathways for information and ideas from citizens and societal organizations into policy making processes at any level are critical for improving inclusive governance, as conditioned by context and the political economy of actors and institutions. The analysis was conducted in line with United States Agency for International Development’s (USAID) Strategic Assessment Framework in order to identify key governance problems and stakeholder interests in the conceptual elements of consensus, rule of law, competition and political accountability, inclusion, and government responsiveness and effectiveness: • The team did not view consensus as a major or urgent problem. While some credit the Communist Party of Vietnam (CPV or Party) with the tremendous reduction in poverty rates and the maintenance of egalitarian socio-economic development, there are concerns that state actors have become slightly more independent of the Party, that corruption may degrade the Party’s legitimacy, and that growing pressure from middle-class demands on the state will lead to widespread popular dissatisfaction. • The team viewed inclusion as an especially significant and urgent problem. At all levels of the state, there are more channels for citizen input, as directed in Party guidance and implemented through two decades of donor-funded public administration reform. While the expansion of opportunities has been impressive, the reality is that these channels often do not meet expectations. Decision-making processes are closed and opaque, and it is apparent that State-Owned Enterprises (SOEs), large private business, and other politically- connected actors have preferential access. The civil society sector itself is particularly weak. The result of these systemic weaknesses in inclusion are that certain voices and perspectives can be lost in important policy discussions and mistakes in policy making can occur.

1 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV • It was clear to the team that the competition of ideas and institutional checks and balances were extremely weak. State actors at all levels and some Party leaders keenly feel the need for more and better information about their performance and citizen perceptions, and indeed support data collection efforts. Closed decision-making processes limit the entry of new or different ideas at every policy stage. Civil society organizations (CSOs) in particular are not engaged in social policy processes, despite playing precisely this key role in advanced and middle-income countries around the world. Accountability in Vietnam must come vertically top-down or horizontally. Horizontal accountability is weak at the national level, however, due to the judiciary’s lack of independence and an inadequate legislative branch; this problem is exacerbated at the provincial level by the fusion between Party and state actors. • The team assessed the rule of law to be generally functional, yet compromised by the judiciary’s lack of independence from the Party-state leadership and control by the Ministry of Public Security. On the positive side, the legal corpus had been broadened and deepened substantially in the last ten years, including new civil and criminal procedure codes, elaboration of special courts, and judicial training. Efforts have also been made to ensure predictability in the application of the law within the economic sector. On the negative side, while efforts have been made to ensure consistency in lawmaking through the recent Law on Laws, the Ministry of Justice faces capacity constraints in their ability to vet the consistency of all legislation. • The team assessed government responsiveness and effectiveness to be a significant problem for inclusive growth in Vietnam. While some governance experimentation (“fence breaking”) is variously encouraged, allowed, or tolerated at the provincial level, these appear to be exceptions and not the norm. Provincial governments have significant capacity deficits that make policy implementation and enforcement tremendously difficult, especially given the pace of legislation over the last ten years. Over the past ten years, USAID has deepened its development programs in Vietnam as part of the United States. Government’s (USG) broader objectives to further open Vietnam as a market for United States (US) trade and investment and to expand cooperation on regional security issues. USAID’s 2014-2019 Country Development Cooperation Strategy (CDCS) identifies inclusive and accountable governance as a key enabler for Vietnam’s transformation from middle to upper-middle economic status. The strategy zeroes in on three key factors affecting governance quality: 1) the legal and regulatory framework; 2) the accountability of public institutions; and 3) the use of public- private alliances to spur innovation. Within the framework outlined in the Administration’s FY18 budget request to Congress, USAID’s work in Vietnam is likely to continue to be viewed as a priority within the region, even amidst proposed reductions to global foreign assistance accounts: governance programs working on legal and regulatory reform help US companies compete; strengthened public accountability systems and rule of law provide predictable practices, dispute resolution, and rights enforcement; and adherence to international labor standards prevent undercutting of US-based manufacturing. There is sentiment among some USAID and Government of Vietnam (GVN) interlocutors that development partner programs should be reoriented to support policy implementation and oversight, beginning first with untangling what is now a relatively sophisticated albeit complex legal framework. Further, as the Mission nears a turnover in its flagship economic growth and governance portfolio and contemplates a new basket of activities, it is likely to take on a more focused approach on trade

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 2 and growth with clearly defined and achievable targets. Current and future year funding imperatives, both from the Administration and Congress, however, may limit USAID’s discretion to pursue certain sector programs. The change in US administration in early 2017 has not yet induced a significant shift in USAID’s strategy for Vietnam, though the US withdrawal from the Trans-Pacific Partnership (TPP) has affected some areas of positive cooperation. Momentum on governance reforms has stalled over the past year, and donors and CSOs alike are reporting new difficulties in the burdensome and time- intensive project approval process. The Ministry of Foreign Affairs is also contemplating severe new restrictions on international non-government organizations (INGOs). In short, the assessment identifies a number of persistent and emerging governance challenges facing Vietnam, many of which will be critical to the country moving beyond middle-income status. The team has three overall strategic recommendations for improving governance, efficiency and representation in particular, for more inclusive economic growth based on the foregoing analysis: • Improve the quality and performance of regulations impacting private enterprise, investment, and trade – One of the main consequences of Vietnam’s fragmented and relatively decentralized public sector is a complex and often contradictory regulatory framework. National-level bodies as well as provincial-level administrations should be connected in order to increase political buy-in for experimentation and learning. • Strengthen channels for meaningful, broad-based public participation in economic decision-making – CPV and GVN interlocutors have expressed interest in getting more and better information on issues of public concern and appear to value independent, donor- funded data analysis. It would serve the goal of inclusive growth well to simultaneously strengthen policy process participation among public interest groups around socio-economic issues, while promoting cost-effective feedback loops with relevant government agencies. • Enhance mechanisms that promote integrity, transparency, and fairness in the business environment – The structural changes being considered, such as streamlining Vietnam’s Party-State anti-corruption apparatus and reducing the size of the civil service, are unlikely to lead to significant changes in existing bureaucratic incentive structures. USAID should look to the private sector, particularly foreign firms interested in expanding responsible supply chains in Vietnam, for ideas and solutions to self-regulate and model “clean” behavior.

3 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV INTRODUCTION

ASSESSMENT PURPOSE As part of the Democracy, Human Rights, and Governance Learning, Evaluation, and Research Activity, USAID requested NORC/MSI to design and conduct an Inclusive Governance Assessment of Vietnam. It should be noted at the outset that this report has been written by a team of independent consultants and as such is intended to provide USAID and the USG with an independent assessment of the current situation and future prospects for promoting inclusive governance in Vietnam. The views expressed in this assessment are the authors’ alone and do not necessarily reflect the views or policies of USAID or the USG. The Assessment involves two interrelated tasks. First, the assessment portion of the task is intended to define the core inclusive governance problem(s) in the country, identify the interests and resources of key actors and institutions that could promote or inhibit more inclusive growth, and consider the US government’s operational and programmatic environment in Vietnam. The assessment portion is expected to examine positive trends in opening policy space in Vietnam that foster economic growth. Research and analysis includes coverage of issues related to political structures, such as national-subnational relations; budget processes at all levels; and oversight of policy implementation. Second, the strategy development segment is intended to result in clear and actionable strategic and programmatic recommendations to address the core inclusive governance problem(s) identified in the assessment portion. Because a governance assessment has not been conducted for Vietnam since 2007 and the country has experienced a series of notable shifts in economic policy and governance since that time, the Assessment is expected to inform future decisions about USAID/Vietnam governance programming. The assessment findings include strategic and illustrative program area recommendations, but do not specify program or project designs.

ASSESSMENT CONTEXT This section reviews the political, socio-economic, and foreign policy context of Vietnam, with a particular focus on the ten years since 2008. In focusing on the past decade, this section identifies the areas of continuity as well as the areas of significant change. The primary developments include

TEN YEARS AFTER THE 2007 ASSESSMENT 1. Formal inclusion in governance processes has improved, but in limited, exclusionary ways 2. The Party is actively re-asserting its oversight of politics and administration 3. An increased number and formal activities of integrity institutions, but they remain marginal actors 4. National Assembly is more active, but is a contestation proxy between Party and state elites 5. Legislation has been elaborated broadly and deeply, but is problematic for low-capacity provinces and for service delivery 6. Civil society sector is still small and its engagement at the central level stems largely from proactive inclusion by donors and international NGOs 7. Traditional media outlets are more active and profit-driven, social media penetration is now extensive

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 4 attempts by CPV institutions to reassert control over the state. On the socio-economic front, after a period where civil society organizations, often with the support of international organizations, increased in numbers and scope of activity, that space has shrunk since the anti-China protests of 2014 and the US withdrawal from TPP. The shrinking space for civil society groups, particularly those representing non-business interests, coincides with the rising influence of large private businesses. Finally, in terms of foreign policy, the major development is Vietnam’s increasing resistance to Chinese incursions in the South China Sea, which coincided with unprecedented concessions to US demands as part of the negotiations for TPP. With TPP no longer operable, the influence of the US and China is now in flux, which has implications for Vietnam’s future political and economic reforms.

POLITICAL At a general level, Vietnam’s political system remains unchanged since 1986 when it began its policy of economic reforms. The CPV still exercises control over the government and the legislature. All members of the government cabinet are effectively required to be members of the CPV, and more than 95 percent of the 14th Vietnam National Assembly (VNA) (2016-2020) are CPV members. The latter figure is actually an increase from the previous two legislatures, where 92 percent of the legislators were Party members, reflecting the continuing political dominance of the Party. Within the CPV, the two most important decision-making bodies are the Politburo and the Central Committee. The Politburo, which currently has 18 members,1 is the top-ranking Party organization. The Politburo, led by the CPV General Secretary, is seen as the de facto most powerful political organization in Vietnam. Although the Central Committee only meets twice a year, it has significant powers independent of the Politburo and has been known on occasion to reject Politburo proposals. The most notable example occurred in 2012, when the Central Committee rejected a recommendation by the Politburo to censure then-Prime Minister Nguyen Tan Dung.2 One important development emphasized by interviewees is the possibility that provincial interests – as opposed to central interests – are increasingly important in the Central Committee. Although the percentage of provincial members has remained stable at about one-third of the committee, interviewees suggested that the non-provincial chair members were increasingly loyal to their home provinces. Sitting astride the Party institutions are the government bodies and the president. The government and the position of prime minister are particularly important players. Since 2008, the role of the government vis-a-vis the CPV has become a particularly important issue. During Nguyen Tan Dung’s premiership from 2007 to 2016, the government gained increasing de facto autonomy from the Party. Although the CPV retained ultimate authority, the state played a more prominent day-to- day role due to its larger cadre and organizational resources. Two important examples were the decline of the Party’s economic policy making organs and the centralization of anti-corruption efforts under the state at the expense of the Party.

1 It was 19 members until the May 2017 removal of Dinh La Thang, Ho Chi Minh City Party Secretary, who was implicated in corruption involving PetroVietnam. 2 See: Schuler, Paul and Kai Ostwald. “Delayed Transition: The End of Consensus Leadership in Vietnam?” ISEAS Perspective. January 14, 2016. No. 2.

5 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV Seeking to redress this imbalance, CPV General Secretary Nguyen Phu Trong has attempted to reassert Party control over the state. In particular, in 2013 the CPV reinstated two Party bodies that had been dissolved in 2007 – the Central Economic Committee (CEC) and the Central Commission for Internal Affairs (CCIA)– in order to rein in the government’s independence with regard to economic management and government oversight. Finally, alongside the Party and the state sits the VNA, Vietnam’s highest legislative body. Despite its prodigious power on paper, in practice it is subordinated to the Party and government in terms of influence. Its influence is limited in two ways. First, the Party exerts control over the body through its power to vet candidates for the assembly and set the legislature’s agenda. Second, in terms of lawmaking, the VNA cedes lawmaking duties to the government, which drafts nearly all laws promulgated by the VNA. From 2010 to 2012, the VNA seemed to take a more assertive role in criticizing the government, but this was viewed by observers to be a way for the CPV to keep the active Dung government in line. In 2010, one delegate called for a vote of no confidence in the prime minister, and in 2012 the VNA was granted the authority to conduct annual votes of confidence in public ministers. Over the last two years, the VNA has again moved to work more closely with the Party and government.

SOCIO-ECONOMIC CONTEXT Regarding the social context, the most notable development in Vietnam since Doi Moi, the economic renovation process begun in 1986, has been the country’s remarkable economic growth. As is well known, since Doi Moi was initiated Vietnam has grown at an average of more than 6 percent per year; the structure of the economy is now approximately 29% public sector, 43% private sector, and 18% foreign direct investment.3 Furthermore, where more than 60 percent of the population lived in poverty in 1986, less than 15 percent of Vietnam’s population is poor today. Since 2008, this trend of economic growth has continued. However, in the past ten years, a number of warning signs have emerged that could threaten Vietnam’s continued economic progress The most important concern regarding the economy remains the factors that inhibit the development of a sophisticated private sector. Traditionally, economists have been concerned about the influence of unproductive SOEs in soaking up investment and crowding out other potentially more productive competitors. That problem persists. However, in the past decade, large private corporations have emerged as another important impediment to growth.4 Survey results show that small and medium sized enterprises are increasingly concerned that large private businesses use personal connections

3 Based on 2015 and preliminary 2016 data for gross domestic product at current prices by types of ownership from the General Statistics Office of Vietnam. 4 Note that the GVN has also changed the definition of SOE: previously it included enterprises where a minority share had been sold, but then the 2014 Law on Enterprises defined it as 100% state ownership.

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 6 to directly influence economic policies.5 This trend is all the more worrying because increasingly these large conglomerates appear no more productive than oft-criticized SOEs.6 In terms of social concerns, poverty reduction remains an overwhelming concern for Vietnamese citizens (see Figure 1). However, in 2016 with the emergence of a major environmental disaster in Ha Tinh linked to a Taiwanese steel plant, the environment has surged as an important issue in the minds of Vietnamese citizens. Where in 2015 only a few citizens reported being concerned with environmental issues, environmental protection emerged as the second most important issue in Vietnam in 2016. More highly educated citizens were particularly concerned about the environment, reflecting the fact that as Vietnam develops its citizens increasingly demand more than simply economic growth.7 Figure 1: Issues of Greatest Concern to Vietnamese Citizens in 2016

Note: The results are based on a survey of more than 13,000 respondents in the UNDP’s annual governance survey. Source: UNDP. "PAPI 2016: The Viet Nam Provincial Governance and Public Administration Performance Index." UNDP, Hanoi, 2017.

5 Malesky, Edmund. "The Viet Nam Provincial Competitiveness Index: Measuring Economic Governance for Private Sector Development." 2016 Final Report, Viet Nam Chamber of Commerce and Industry and United States Agency for International Development, Ha Noi, 2017. 6 See the Vietnam 2035 Report. 7 UNDP. "PAPI 2016: The Viet Nam Provincial Governance and Public Administration Performance Index." UNDP, Hanoi, 2017.

7 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV Worryingly, however, while non-economic issues have grown in importance, the space for civil society actors representing non-business interests has shrunk. While the number of CSOs, INGOs, social groups, and professional organizations has increased, the ability of these groups to engage in policy advocacy, particularly on non-economic issues, has either remained the same or shrunk since 2014. In particular, the Ministry of Home Affairs (MOHA) has begun enforcing restrictions on their activity more rigorously, pushing more civil society organizations into an uncertain legal environment. Furthermore, the ability for INGOs to operate has become more constrained. Given that these groups are the best advocates for the environment, the poor, and disadvantaged groups, this has exposed the need for traditional mass organizations (MOs) such as the Farmer’s Union, the Women’s Union, and the Vietnam General Confederation of Labor (VGCL) to play a greater role; the internal politics of the MOs is opaque, although it is possible that there are reformist elements in the provinces. Given concerns about the influence and representativeness of these groups, there is a concern that non-business and grassroots citizens’ voices are not adequately represented in the public discourse. Gender and youth present a mixed picture. On the one hand, there is a complex institutional, legal, and policy framework to promote the development and inclusion of women and youth in all aspects of socio-economic life. Vietnam has constitutional and core legal instruments guaranteeing gender equality, and multiple bodies in the form of a ministerial department, advisory councils, and the Women’s Union mass organization; similarly, there is the Youth League mass organization and a National Youth Development Strategy. Labor participation rates for women are approximately as high as for men, but women lag behind men at higher levels of education. Youth are roughly one- third of the population, large enough that there are now two or more economically productive persons for every dependent person. On the other hand, women are vastly underrepresented in the Politburo, the Central Committee, and the Party as a whole. This of course translates to low percentages of women in the VNA, although still higher than the region, and only single digits in sub- national People’s Committees. As with many aspects of life in Vietnam, action does not follow rhetoric. One final important development in the socio-economic sphere is the increasing role of social media and Internet access. According to Internet Live Stats, 52 percent of Vietnamese in 2016 had online access at home as compared to 24 percent in 2008; note that inclusion of mobile devices would push current penetration rates much higher. Despite government attempts to manage online material, this remarkable increase in online access has put additional pressure on the state to improve its governance. In particular, the explosion of national interest in recent governance issues such as a land seizure in Hai Phong in 2012, a plan to cut trees in Hanoi in 2015, or the Formosa disaster in Ha Tinh in 2016 show the power of social media to put pressure on the government and the limits on the government’s ability to control online access. Unlike China, where the government has relatively more resources at its disposal to control the media, Vietnam’s ability to control online access is relatively limited.

FOREIGN POLICY The most important foreign policy development in Vietnam undoubtedly concerns its evolving relationship with China and the US. Since 1995, when Vietnam normalized its relationship with the US, it has cautiously improved its ties with the US while remaining wary of any US attempt to foster

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 8 political liberalization. At the same time, it has maintained an uneasy cooperation with China since normalizing its ties with that country in 1990, following Vietnam’s withdrawal from Cambodia. Vietnam’s general policy of maintaining cordial ties to both countries appeared to tilt more strongly in the direction of the US in 2014 following a Chinese incursion into Vietnamese waters in the South China Sea. While previous provocative actions in the South China Sea have sparked protests, the 2014 incident was a watershed. Following the incident, several unprecedented visits from Vietnamese officials to the US occurred, including the first trip by a sitting General Secretary and the Minister of Public Security. Reflecting the warming ties, the US also partially lifted its ban on weapons sales to Vietnam. Finally, Vietnam and the US reached a breakthrough side agreement on the TPP negotiations, where Vietnam agreed to making reforms, including a phased-in approach to allowing independent trade unions. The unprecedented warming of ties between the United States and Vietnam is now in flux since the current Administration’s policy decision to withdraw from TPP. While Vietnam has remained engaged with the US, particularly on security, it has entered a holding pattern while it waits for signals that the US is open to reengaging on trade. Furthermore, it has cautiously re-engaged with China, with several high-profile visits between Vietnamese and Chinese officials. So far, no clear change of direction has occurred, possibly due to the fact that public opinion may play an increasingly large role in constraining Vietnam from engaging China.8 One concrete consequence of the collapse of TPP is that domestic reforms in terms of revisions to the Labor Code, the Law on Associations, and the Law on Trade Unions are dead, at least for the moment. While Vietnam remains eager to engage the US, particularly on trade and security, the ability of the US to influence governance quality in Vietnam has diminished.

ASSESSMENT APPROACH This assessment is based on USAID’s DRG Strategic Assessment Framework (SAF, revised in October 2014), along with the accompanying Guidance to Assessment Teams. The team begins with the perspective that the most relevant and prominent governance debate in Vietnam is fundamentally the classic trade-off between efficiency and representativeness. More efficient decision-making processes can be more responsive to emerging issues or policy priorities, but at the expense of excluding information and ideas from citizens and societal organizations; to the contrary, more representative decision-making processes deliberately incorporate information and ideas from citizens and societal organizations, but at the expense of efficient, timely response to emerging issues or policy priorities. This is true for both policy making and policy implementation processes, e.g., the proposed elimination of provincial People’s Councils makes decision making at that level more efficient, but the result is that an even smaller number of political elite make decisions for an entire province. The central premise of our approach to this exercise is that pathways for information and ideas from citizens and societal organizations into policy making processes at any level are critical for improving inclusive governance, as conditioned by context and the political economy of actors and institutions.

8 Thayer, Carlyle. 2017. “Vietnam’s Foreign Policy in an Era of Rising Sino-US Competition and Increasing Domestic Influence.” Asian Security. 13:3. 183-199.

9 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV Of particular relevance to this question of efficiency and representation is the nature of interactions among Vietnam’s political institutions. The important interactions include engagements between the Party and the state, the legislature and the government, the state and social organizations, and the center and provincial institutions.

METHODOLOGY The DRG SAF is a structured inquiry designed to provide both latitude and limits to assessment exercises. The four steps in the SAF are not intended to be sequential or linear; rather, the first three steps are primarily analytical filters. Step 1, identifying the key governance problems, begins before and yet continues into field work, guiding the depth and focus of the team’s data collection that leads into the Step 2 analysis of stakeholders. Steps 1 and 2 tend to be iterative, producing ever-deeper knowledge of problems and the political economy of reform; the analysis below will not cover the entire process of iterations. Put through the filter of USAID’s operational and programmatic environment in Step 3, the analyses from Steps 1 and 2 generate preferential strategies and programming considerations. Based on this analysis, the team should be able to produce a set of actionable strategic and programmatic recommendations in Step 4 to inform the Mission’s programmatic strategies. The team applied the four basic steps of the SAF, but adapted it to focus more on the stakeholder analysis in the second step after discussions with USAID staff. This minor change to the analytical process of the assessment exercise was intended to highlight the inclusive nature of economic policy making and produce more actionable recommendations. The assessment team collected data primarily through a review of relevant literature and relevant USG and Implementing Partner (IP) documents, key informant interviews, and a review of existing indices and other data. The team used the important interactions listed above to create provisional lines of inquiry, and then develop semi-structured interview protocols around the specific policy issues of budgets, SME promotion, environment, and administrative reforms as windows into policy making processes. The team conducted 65 interviews in Hanoi, Ho Chi Minh City (HCMC), Can Tho, and Da Nang. The team also conducted interviews with USG officials in Washington, DC.

ANALYSIS

STEP 1 AND STEP 2:THE FIVE DRG ELEMENTS AND STAKEHOLDER ANALYSIS The SAF lays out a four-step process, but as noted above the first two steps are interactive and iterative. Here, the analysis combines the two steps of identifying the key governance problems and analyzing stakeholders in a discussion of the five DRG elements: consensus, rule of law, competition and political accountability, inclusion, and government responsiveness and effectiveness. Of these, we viewed competition and political accountability, inclusion, and government responsiveness and effectiveness as the most important areas for this inquiry. For consensus, the CPV maintains its historic legitimacy in power. Regarding the rule of law, we do not focus on it heavily because other recent assessments deal with this arena more specifically, in addition to the fundamental lack of judicial independence similar. This section presents a synthesis of the team’s analysis of stakeholder interests, resources, strategies, and arenas as seen in the five elements, rather than an analysis of actors and

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 10 institutions. The synthesis is structured by DRG element, and within each whether an actor or institution would be an opponent or proponent of governance reforms for more inclusive economic growth. Our analysis emphasizes three factors that are important in analyzing stakeholder incentives. First, actors should not be viewed as monolithic, e.g., ministries within the GVN have different interests, not all provinces have the same resources and strategies, and stakeholders may hold existential or instrumental views of reforms. As such, we point to islands of reform as well as resistance within institutions. Second, we also emphasize that due to the importance of personalities in determining where those islands are, that the institutional identity of those stakeholders may be ephemeral. As such, when discussing stakeholders it is important to keep in mind that “islands of reform” may be personalities and not institutions. Finally, this assessment’s approach is to examine the balance between efficiency and representation through the lens of the broader policy process, and here “representation” is synonymous with the objective of inclusive governance.

CONSENSUS The team did not view consensus as a major or urgent problem. Currently, there are no There can be no stability, let alone challengers to the CPV’s role as the leading legitimacy, without consensus on certain political organization in Vietnam. While some fundamentals… For disagreements to credit the Party with the tremendous reduction resolve peacefully, or to have peaceful in poverty rates and the maintenance of politics at all, the basic rules need to egalitarian socio-economic development, it is command consensus and legitimacy…The nonetheless concerned about future erosion of most frequently contested issue for consensus on its legitimacy, as seen in various consensus concerns national identity and moves to re-assert a deeper role in policy narrative…Gender often figures prominently making. Several challenges concern the Party in in issues of consensus. particular. First, over the last ten years elites in Per the SAF, pp.9-12 the government have marked out a slightly more independent line than anticipated in Party guidance, which could raise questions about which political actor is more meaningful in citizens’ lives. Second, the Doi Moi reforms effectively disconnected CPV ideology from not just economic practice, but the Party’s original revolutionary justification. Finally, over the last ten years, corruption related to SOEs and to land use has become more widely known due to the spread of social media, and this has episodically sparked social unrest and protest. As Vietnam’s economy continues to expand, there is the very real possibility that growing pressure from middle-class demands on the state will lead to widespread popular dissatisfaction. The main threat to the legitimacy of the CPV is likely to come from a lack of democratic legitimacy. The main and strongest opponent to increasing the democratic legitimacy of the system is the CPV, which includes nearly all government officials, SOE leaders, and MO leaders. While there are pockets of reform within these groups, overall the Party has no interest in losing its privileged position. As such, the reformists are concerned with making the system work better, not fundamentally changing the system. The Party is concerned about its legitimacy and leading role, and as such, is concerned about its performance. However, rather than reaching for more openness to face these challenges, it is attempting to renew a more active role in policy making processes to

11 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV improve the public perception of its value. Certainly, Party leaders and key Party bodies such as the Central Organization Committee, the Central Economic Committee (CEC), the Central Committee for Internal Affairs (CCIA), and the Central Propaganda Committee would like to see greater Party control. Furthermore, it is relying on existing rhetoric and formal institutions to demonstrate citizen engagement with the Party. In terms of potential champions for increased democratic reforms, while most actors are not openly advocating for dramatic changes, some provinces, VNA committees, and media outlets have pushed for greater reforms. In Da Nang, under Nguyen Ba Thanh, who was Da Nang Party Secretary from 2003-2013, there were suggestions for direct elections of lower level People’s Committee chairs. In the VNA, the VNA Standing Committee has confirmed that the VNA will continue to hold votes of confidence in GVN officials at least once per VNA session. Finally, media outlets continue to probe for opportunities to expose corruption without drawing the ire of the Party. However, within the all-important Central Committee, the question is less clear. While the leaders of the Party bodies mentioned above are members of the Central Committee, provincial leaders and GVN officials also carry enormous weight within that body. Given their incentive to protect their independence, it is not clear that the Central Committee as a collective body has an incentive to dramatically curtail the independence of the GVN from Party committees as Nguyen Phu Trong would seem to desire.

INCLUSION The team viewed inclusion as an especially significant and urgent problem. Moreover, in The universal franchise is one manifestation line with the efficiency versus of inclusion, but not the only one. All citizens representativeness trade-off identified early in must be free to participate in decision- the assessment process, the team focused on making processes, access government the nature and quality of representation and services, and participate in economic and participation of various segments of society in social life…In addition to political exclusion, policy making processes. The state at all levels social and economic exclusion can also lead has moved to provide more channels for citizen to political instability…Women’s participation input, as directed in Party guidance and is a fundamental component of implemented through two decades of donor- inclusion…Ensuring that indigenous peoples funded public administration reform. These participate in political life is essential for channels for inclusion have many overcoming historical inequities and manifestations: comment periods for legislation discrimination. and regulations accompanied by web-based Per the SAF, pp.12-15 comment functions; complaint phone lines at provincial administrative departments; ministry- supported media outlets that print letters from citizens; more explicit consultations with the Vietnamese Fatherland Front (VFF), the umbrella group for MOs; support and publication of such data collection efforts as the Public Administration Performance Index (PAPI) and the Provincial Competitiveness Index(PCI); and even invitations to CSOs to attend policy workshops. While the expansion of opportunities has been impressive, the reality of these channels often do not meet expectations. Often, citizen input channels are only formal and the quality of direct engagement is weak. Evidence that citizen comments have been considered in any legislation or

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 12 regulation is sparse, and the reporting of statistics or breakdowns of comments is infrequent. Letters to the editor appear to be chosen for their value in contestation between elites. Many do not view MOs like the Women’s Union as representative, but instead as merely classic “transmission belts” of communist systems. The inclusion of CSOs in policy discussions is largely at the discretion of government officials or occurs at the behest of donors or INGOs. Furthermore, CSOs outside of Hanoi find an even more difficult time gaining access, as they are frequently provided even less access at the provincial level than they are at the national level. The lack of inclusion has a sharper effect on women, given that men overwhelmingly dominate sub-national People’s Committees and leadership posts, so the policy agenda of women or evidence on differential effects of policies by gender is hardly heard. The civil society sector itself is particularly weak. Although the GVN has been moving for more LAW ON ASSOCIATIONS than 20 years to develop an enabling Laws shaping civil society in Vietnam data environment for social organization, the most back to the early independence years of the recent version of a Law on Associations late 1950s. The last 25 years have witnessed changed drastically under political pressure from multiple attempts to revise laws for the highest political levels and was pulled from associations, social and charity funds, and consideration. The GVN has not promulgated foreign NGOs; note that the Fatherland Front any other laws or regulations to provide a more and MOs are covered by Party statutes, not enabling environment for CSOs, apparently in laws. reaction to civil society’s role in political upheavals over the last two decades. The few Movement toward a more forward-looking Law and small CSOs that do exist do so under the on Associations has been stymied four times sponsorship of quasi-state organizations like by political competition with the Party-state and Vietnam Union of Science and Technology CSO mobilization. Ten years ago, VUSTA Associations (VUSTA). convened a team of specialists to write an The results of these systemic weaknesses in alternative to a draconian draft from the VNA, inclusion are that certain voices and and eventually the bill was dropped. While the perspectives can be lost in important policy US withdrawal from TPP is blamed for ending discussions and mistakes in policy making can the latest attempt, the repetitive reality is that occur. With regards to policy making, the lack of the draft that emerged was unacceptable to a effective representation for non-business large portion of the Party-state, CSOs, and interests leads to ad hoc considerations for international donors. environmental concerns and citizen rights with regards to land, e.g., the 2015 tree-cutting For more than two decades, the same episode in Hanoi.9 contradicting motivations have persisted: a need for CSOs to provide social service While the beneficiaries of this closed decision- delivery, but also a need to keep CSOs from making environment vary from issue to issue, threatening the existing power structures. the key opponents to greater transparency in decision making would be SOEs, large private

9 The Hanoi city authorities planned to cut down almost 7,000 of the Hanoi’s nearly 30,000 trees, and protests arose in reaction to unclear or unpersuasive justifications by officials. See https://thediplomat.com/2015/03/hanoi-citizens-protest-tree-felling-plan/

13 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV businesses, and Central Committee members, which all benefit by having the ability to selectively intervene or exclude voices from issues that are seen as vital to their interests. With that said, the Central Committee and Politburo do genuinely desire information and inclusion on issues where they are more concerned with performance than with rent seeking, even if that is simply to overcome the state’s overwhelming advantage in this area. The goals of obtaining more information about citizen needs, preferences, and opinions could also stem from a fear of unexpected and embarrassing political protests. The provinces are different than the Party in that they are much more aware of citizens, and some provinces are attempting to be more responsive, e.g., Da Nang and one-stop shops as a means of ameliorating business complaints about the difficulty of dealing with multiple departments separately for one bureaucratic action. Provinces are also keenly aware that citizen dissatisfaction would be more likely focus on provincial leadership, not national leadership. The problem is that to formally institutionalize such openness and transparency would deprive Central Committee, Politburo, and provinces of a key source of leverage. As such, while they support inclusion subject at their own discretion, they are unlikely to support systematic and institutionalized inclusion. The strongest proponent of increasing representation in policy making and implementation for inclusive economic growth is ironically one of the weakest actors of all, independent social organizations. Whether national, provincial, or very local, CSOs claim to have deep expertise in specific policy issues and a segment of society that supports their policy advocacy. This is as true for national-level issues like access to information as it is at the village or commune level for domestic violence counseling. The VNA also has an institutional interest in increasing inclusion, as this would bolster their role. However, the incentives are likely stronger within the Office of the VNA, the body’s full-time Delegates, permanent committees than in the all-powerful VNA Standing Committee, amongst the provincial delegates themselves, or even the in-house Institute for Legislative Studies (ILS). However, the incentives are likely stronger within the body’s permanent staff, such as in the ILS, the Office of the VNA, or the permanent committees than in the all-powerful VNA Standing Committee or even amongst the Delegates themselves. This is because while the Delegates are committed to the VNA for the long term and has an interest in its development, the VNA Standing Committee is largely co-opted into the CPV Central Committee, where they have a greater role. As such, they would likely wish to maintain the power of that body. Amongst the provincial delegates themselves, given that the majority are part-time and will not be selected to run again, their commitment to strengthening the VNA at the expense of their fulltime positions is likely weak.

COMPETITION AND POLITICAL ACCOUNTABILITY As a result of this assessment’s theme of governance for inclusive economic growth, the team did not examine electoral competition; rather, it focused here on the competition of ideas and inter- institutional power competition. Despite a vibrant media sector, the existence of three branches of government, and the presence of “independent” National Assembly Delegates, it was clear to the team that the competition of ideas and institutional checks and balances were extremely weak.

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 14 The weaknesses in accountability and competition of ideas stem from several factors. Pluralistic civil society (the profusion of non- This means that all accountability must come governmental forms of public organization) from the top down or horizontally. The only along with freedom of information, transparent institutionalized channels for bottom-up rules and procedures, rights of assembly and accountability come from within the Party. expression, and a free media are However, within the CPV, the only body that indispensable to ensure a competition of ideas, has a track record of challenging the decisions inform analysis and debate, and check the of higher ranking bodies is the Central power of government…a true competition of Committee, which has on occasion rejected ideas in the public sphere must also be Politburo directives. Moreover, cadre selection inclusive…institutionalize competition within is a careful process directed by the provincial government itself through a balance of power and national levels. In terms of top-down and between central and local government and horizontal accountability institutions, bodies among the branches of government at all such as the Government Inspectorate (GI), levels. CCIA, and the Central Steering Committee for Per the SAF, pp.15-18 Anti-Corruption are all capable of performing accountability functions. With that said, some Party and state actors at all levels keenly feel the need for more and better information about their performance and citizen perceptions. It is quite striking that Party-connected and state actors support data collection efforts and actively disseminate results of indices, which shine a light on provincial performance issues and provide an opportunity for high-scoring provinces to engage in public relations. • PAPI is supported by VUSTA, the VFF, and the UNDP, and implemented by the Center for Community Support Development Studies (CECODES), which is a legal CSO sponsored by VUSTA • PCI is supported by VCCI and USAID/Vietnam • A judicial index at the provincial level is supported by VUSTA, the VFF, the Vietnam Lawyers Association, and implemented by CECODES Furthermore, some Party organizations such as the CCIA, the CEC, and even the Central Organization Committee seem keener than in the past to engage with foreign organizations and experts. However, channels for citizen voice and CSO engagement and accountability between institutions do not take place in regular constitutional order. The VNA does on occasion provide a check on the government, but this is a proxy for the Party’s move to re-assert a more active role vis- à-vis the state. As such, the VNA essentially operates at the Party’s discretion although some vocal Deputies are keen to step out of the boundary given. The judicial sector is similarly a tool, but for both the Party and the state: national-level political competition can play out through court cases, while provincial courts are presided over by judges who owe their careers to provincial leaders. The paucity of women in leadership positions at national, provincial, and sub-provincial levels is in many ways self-reproducing: to the extent that women look out for and mentor other women, there are fewer and fewer mentors up through the Party ranks. Moreover, women face obstacles to career development because gender stereotypes and traditional family expectations block them from

15 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV participating in after-work socializing with colleagues, weekend golfing or hiking, work travel, and more. Horizontal accountability is also weak. While the VNA includes some non-Party delegates, they must be approved by provincial Party leaders to be on the ballot. As such, their willingness to challenge government officials is tempered. Furthermore, they are not even allowed the possibility of holding Party leaders such as the General Secretary or the chairs of the Central Committee organizations accountable. At the provincial level, People’s Councils – the provincial legislative bodies – are even weaker. This means that socio-economic actors with direct access to provincial leadership, like the unrepresentative MOs and large private enterprises, have much easier and more frequent influence in decision making processes. With regards to CSOs, the team only heard about isolated cases at sub-provincial levels of CSOs engaging with state officials. Compared to CSOs, SMEs appear to have more direct engagement with provincial officials on relevant policy issues, particularly through VCCI. The most effective means for citizens to hold officials accountable is ad hoc and event- responsive social mobilization through social media, as with public protests against the Hanoi tree- cutting plan in 2015 that was facilitated through Facebook. The lack of horizontal accountability may also be exacerbated by the right fusion between Party and state actors at the provincial level. The result is that meaningful oversight could only come from the center. While central Party bodies are interested in reining in provincial power, control by the Party or even the state over provinces is quite problematic for the center. Authority to implement legislation and regulations is decentralized to a great extent to the provinces. Moreover, the provinces are strongly represented in the Party Central Committee and the VNA and therefore have the capacity to defend their interests. In terms of proponents of reform for expanded consideration of policy ideas and stronger enforcement of defined institutional roles, CSOs, SMEs, and provinces would rank among the strongest. As above, CSOs have significant interest in being engaged in the competition of ideas through policy making and implementation, indeed they claim to be able to be more responsive and innovative than the state for implementation of socio-economic policies, and more knowledgeable for the policy feedback and revision phase.10 Moreover, CSOs as independent actors would want to function as watchdogs, if they could rely on appropriate political protection. SMEs are similarly interested in having their perspective on economic matters part of policy discussions, because their needs and preferences are different from SOEs and large private businesses. Some within the VNA and GVN are also interested in promoting a genuine competition of ideas. However, this depends largely on the specific committee or ministry in question. For example, we found that the VNA’s Economic Committee was interested in bringing in foreign experts and consulting with citizens on new regulations. We were not able to confirm whether this was a common practice for other committees. Some GVN ministries, whose performance is often in the limelight,

10 Civil society sectors around the world are dominated by service delivery organizations, and the largest or second largest source of revenue for CSOs is always state contracts for goods and services. States around the world essentially contract out service delivery in order to expand reach, achieve better performance, and save budgetary resources. CSOs are also deeply involved in every phase of the policy process, contributing ideas and expertise.

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 16 such as the Ministry of Natural Resources and Environment, may also be interested in engaging in genuine outreach to CSOs and INGOs for input. A number of actors would like to see improvements in accountability. For instance, there are some within the VNA, such as the ILS, the Office of the VNA, or some of the permanent committees that may like to see the VNA granted greater effective oversight powers and more genuine inclusion in policy making. An additional actor to consider would be some provinces. In particular, those provinces that are wealthier or have a greater share of foreign investment relative to the state sector may be more willing to increase both their own accountability in order to attract investment and to advocate for a more open political process at the center. There is some evidence that certain provinces, often led by particularly ambitious leaders, have been instrumental in pushing administrative reforms that have enabled growth. However, other provinces, particularly those that are beneficiaries of central transfers or are in sensitive border regions, may be less willing to experiment. Finally, integrity institutions such as the GI or the CCIA would be eager to play a stronger role. However, the Politburo and Central Committee as a whole are loath to give these institutions the necessary leverage because those institutions could be turned on them. As such, the Politburo and Central Committee ultimately wish to retain an effective veto over any investigation by any other bodies.

RULE OF LAW As a result of this assessment’s theme of governance for economic development and a Governance rooted in the rule of law recent rule of law assessment, the team did not contributes to long-term, sustainable economic examine rule of law and human rights issues in and social development…the term usually much depth. The team assessed the rule of law refers to a principle of governance in which to be generally functional, yet compromised by citizens, corporations, and the state itself obey the judiciary’s lack of independence from the the law…are enforced fairly and equally by the Party-state leadership and control by the executive, and are independently adjudicated Ministry of Public Security. by the courts…All forms of governance, and consequently the economy, suffer from the On the positive side, it was clear to the team that corrosive impact of unbridled corruption, both the legal corpus had been broadened and on petty and grand scales. deepened substantially in the last ten years, including new civil and criminal procedure Per the SAF, pp.18-23 codes, elaboration of special courts, and judicial training. With regard to lawmaking, the most recent Law on Laws gives greater authority to the Ministry of Justice to ensure that newly promulgated laws do not conflict with existing legal codes. Efforts have also been made to ensure predictability in the application of the law within the economic sector. On the negative side, while efforts have been made to ensure consistency in lawmaking, the Ministry of Justice faces capacity constraints in their ability to vet the consistency of all legislation. With regards to accountability before the law, while GVN officials, particularly at subnational levels may be held accountable in courts, Party officials are not. When Party officials are removed, as was the

17 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV case with the Da Nang or the Ho Chi Minh City secretaries,11 such accountability is meted out through internal Party institutions at the recommendation of the Politburo. Finally, with regard to the application of the law, we can point to a desire to set stable expectations to guide behavior: enforce economic laws consistently so that economic actors will push forward, and consistently do not enforce political rights so that political actors will not push forward. Furthermore, even within the economic sector, SOEs and large private businesses have channels that allow them to bypass formal procedures. The possibility that a wider range of actors and institutions would become subject to the equal rule of law, whether for contracts, torts, corruption, or criminal acts is unlikely in Vietnam. The list of potential opponents would include the most powerful and corrupt: the Party, the state, provinces, SOEs, and large private businesses. All of these benefit from a weak and pliable judiciary that struggles to interpret and evenly apply an increasingly complex system of laws. Proponents are similarly easy to identify: actors that cannot overcome more powerful actors or institutions, and so would look to an independent arbitrator of the law. CSOs are among the most vulnerable actors in Vietnam, due as much to their uncertain legal existence as to their weak resources and limited strategy options. Similarly, SMEs receive rhetorical support from central and provincial state leaders, but are unable to compete on a level playing field against SOEs and large private businesses. State associations like VCCI would also value a more even legal playing field for its member businesses. There is a larger and more powerful set of actors or institutions that would support stronger rule of law for purely instrumental reasons, i.e., the “accountability for thee, not for me” perspective.

GOVERNMENT RESPONSIVENESS AND EFFECTIVENESS The team assessed this element to be a significant problem for governance in Vietnam. The state has spent more than 20 years implementing public administration reform but these reform efforts do not have the same priority following Prime Minister Dung’s retirement in 2016. Furthermore, some experimentation is variously encouraged, allowed, or tolerated at the provincial level. This process, known as “fence breaking,” still takes place at the provincial level, and then is taken up by the central state for national adoption. Despite these efforts, problems remain. SMEs report significant burdens from regulation and administrative processes, and the one-stop shop reduces the process of submitting paperwork separately to multiple departments, but approval processes by those departments are still lengthy and unpredictable. Officials at center and local levels report of difficulties in retaining talented policy makers. Provincial governments have significant capacity deficits that make policy implementation and enforcement tremendously difficult. Moreover, the pace of legislation over the last ten years has been hard for provinces to handle. Provincial level leaders, particularly Party secretaries, are not accountable to any other provincial actor, or even to a large extent any central actors; the central

11 Nguyen Xuan Anh, Danang Party Secretary and Central Committee member, was removed at an October 2017 Central Committee meeting for abuse of power and other violations of Party standards. Dinh La Thang, Ho Chi Minh City Party Secretary and Politburo member, was removed in a May 2017 Central Committee meeting for corruption involving PetroVietnam.

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 18 Party is the main threat to provincial leaders through Party promotion and discipline Ultimately, citizens will judge their government mechanisms or through legal proceedings in …on whether it responds to public need and national- and regional-level courts. “delivers the goods” fairly and impartially to all To address these shortcomings, the Party and citizens. Performance therefore is partially state have debated or experimented with a determined by state capacity…A government variety of reforms such as eliminating the is effective when it harnesses the capacity of subnational legislative bodies (the Provincial its administrative infrastructure for consistent People’s Council and lower at the district and provision of desired services and when it is commune levels), revising state cadre responsive to changing conditions and needs. evaluation, and merging provincial-level These principles include merit-based civil departments of ministries. At the conclusion of service systems, evidence-based policy- the October 2017 Party Congress, proposals making, transparent financial management, were made to cut a small portion of civil service sound and regularized revenue collection, positions, reduce the number of deputy heads of standards for the delivery of services, and ministries and agencies, and institute exam- simplified regulations and processes. They based competitions for new appointments. The pertain equally to executive and non-executive impetus for this was a CPV Central Committee branches of government, and to national- and report noting that Vietnam has 30.5 civil local-level offices…Accountability of public servants per thousand citizens, which is a much sector institutions is a core component of their higher rate that Singapore (25.7), Indonesia effectiveness… institutionalized citizen (17.6), and the Philippines (13.0); in addition, it participation can enhance transparency, was estimated that 10% of Gross Domestic provide more input for government Product (or 35% of total budget spending) went responsiveness, and lead to more efficient and to officials’ salaries, the highest rate in the appropriate allocation of public resources. region. One reform of importance for gender Per the SAF, pp.23-25 equality was not on the agenda: women have an earlier mandatory retirement age than men, which affects their career earnings and pension; women also have fewer opportunities for professional development, and so have lower career trajectories than men. This element combines the ideals of efficiency and representation, or the lack of either, as the case may be. Inefficiencies and a lack of responsiveness can arise because of opportunities for rent- seeking and the need to distribute patronage. The main opponents to the streamlining necessary to increase efficiency would include Party and state leaders at all levels that need to distribute patronage jobs and offer rents through bureaucratic procedures in order to retain power. With that said, Party and GVN leaders do have an incentive to promote efficiency, provided that it is other organizations within the apparatus that will be streamlined. For instance, there has been discussion about merging the Provincial People’s Committees and Provincial People’s Councils. Furthermore, they are also advocating for having more central level officials run provinces. This is not surprising given that such streamlining will enhance their power, particularly vis-à-vis the government and provinces. Powerful SOEs and large private businesses value preferential access and treatment, which means a government that is responsive to them and efficient only when it benefits them, e.g., inside information for business activities and quick licensing, but poor inspections. MOs similarly have direct connections into the state at the provincial and sub-provincial levels, and have central Party

19 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV connections to try and influence the national-level budget when it is submitted to the Party by the government for approval. There are, however, many potential proponents of more responsive and effective government, whether as an end unto itself or a means to other ends. One key proponent would be CSOs, which have a natural interest in engaging the state, especially for socio-economic policy implementation at the provincial and sub-provincial levels. CSOs of course have extremely limited resources and allies, not to mention MOs as predominantly competitors. SMEs and state associations have strong interests in a state that they can engage and thereby shape regulations, procedures, and more. As with CSOs, both have limited allies and powerful competitors. Finally, once again at the provincial level, some provinces have a greater incentive to promote efficiency than others. In particular, those provinces keen to attract foreign investment or who cannot rely on SOEs may promote measures to improve efficiencies. Additionally, some ambitious provincial leaders, such as the former secretary of Quang Ninh, who is now the Central Organization Committee chair, may also endorse reforms as a way to bolster their credentials. To recap, the team viewed government responsiveness and effectiveness and inclusion to be the most problematic areas for inclusive economic growth. Indeed, combined with weakness in the competition of ideas, it is clear that policy making process is closed to new ideas and actors, but there are opportunities to open the process. Rule of law is problematic due to the lack of judicial independence. Consensus is not an urgent problem, but it is ultimately threatened by processes that cannot accommodate growing voices for better policy solutions.

STEP 3: USAID’S OPERATIONAL/PROGRAMMATIC ENVIRONMENT

USG AND USAID PRIORITIES, INTERESTS, AND USAID CDCS DEVELOPMENT RESOURCES HYPOTHESIS Over the past ten years, USAID has deepened its OBJECTIVE #1: GOVERNANCE ENHANCED TO development programs in Vietnam as part of the FACILITATE BROADER-BASED, SUSTAINABLE USG’s broader objectives to further open Vietnam GROWTH as a market for US trade and investment and to expand cooperation on regional security issues. DO1 identifies broader-based, sustainable The guiding framework for bilateral cooperation – growth as the economic engine of Vietnam’s the 2013 US-Vietnam Comprehensive Partnership progress towards the goal of becoming a – outlines economic relations, maritime capacity responsible, more inclusive partner, building, climate change, education exchange, focusing on the governance constraints to addressing war legacies, and human rights that growth as the principal development promotion as key pillars of cooperation. The May problem that USAID will focus on during this 2017 meeting between President Trump and Prime five-year strategy period. Despite the Minister Phuc reaffirmed the commitment to the challenges, there is strong evidence that Comprehensive Partnership and previewed a identifies areas where demand for improved November 2017 visit by the US President to the governance is sought and where institutions Asia Pacific Economic Cooperation Leaders’ Forum are incrementally supporting reform while in Danang. While bilateral trade, including a push seeking technical assistance to make those by the US side to reduce its $32 billion deficit, and changes. regional security on South China Sea and North

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 20 Korea, will no doubt attract the most attention in the coming years, avenues remain to diplomatically raise human rights concerns including the annual US-Vietnam Human Rights Dialogue12 and January 2019 Human Rights Council Universal Periodic Review. USAID’s 2014-2019 Country Development Cooperation Strategy (CDCS) identifies inclusive and accountable governance as a key enabler for Vietnam’s transformation from middle to upper-middle economic status. The strategy zeroes in on three key factors affecting governance quality: 1) the legal and regulatory framework; 2) the accountability of public institutions; and 3) the use of public- private alliances to spur innovation. The strategy ambitiously sets out to “play a catalytic role in building the capacity of the GVN to improve policy making processes and accountability mechanisms through targeted information for decision making, greater citizen participation, and increased transparency that results in the quality development outcomes that its citizens increasingly expect. Without such enhanced governance, Vietnam will underperform and will suffer increasing inequality and risk of instability.” The change in US administration in early 2017 has not yet induced a significant shift in USAID’s strategy for Vietnam, though the US withdrawal from TPP has obstructed some areas of cooperation where there had been forward momentum (see more below). USAID is considering extensions of all soon-to-expire country strategies to allow time for the administration’s foreign assistance priorities to be determined. The Administration’s FY18 budget request to Congress outlines a refocusing of foreign assistance to “defeat ISIS,” foster “opportunities for US economic interests by combating corruption and ensuring a level playing field for American businesses,” and to ensure “effectiveness and accountability to the US taxpayer.” Within this framework, USAID’s work in Vietnam is likely to continue to be viewed as a priority within the region, even amidst proposed reductions to global foreign assistance accounts. While DRG is not explicitly regarded as a priority sector, the relevance of USAID/Vietnam’s current strategy and programs to the Administration’s “America First” foreign assistance framework is clear: • Governance programs working on legal and regulatory reform help ensure a level playing field for US companies competing in the country’s growing markets. • Strengthened public accountability systems and rule of law can sanction unfair business practices, improve the efficiency of commercial dispute resolution mechanisms, and the enforcement of intellectual property rights and contracts. • Labor activities can benefit US companies by working to ensure adherence to international labor standards and prevent Vietnam from undercutting US factories engaged in similar manufacturing.

12 The 21st Human Rights Dialogue was held May 2017 with a focus on the focus will be on prisoners of conscience, freedom of religion, forced land eviction, environmental issues, freedom of speech and Internet, and independent labor unions.

21 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV The USAID Mission’s integrated economic growth and governance KEY FINDINGS: GIG MID-TERM EVALUATION portfolio – from the early iterations of the • GIG increased oversight capacity and Support for Trade Acceleration (STAR) legislative skills of VNA and Vietnam Competitiveness Initiative • Broad program design with ambitious objectives (VNCI) programs to the current • Complex multi-stakeholder management model Governance for Inclusive Growth (GIG) lacks operating guidelines and clear program – have served as the primary communication channels vehicles to support Vietnam’s • Most counterparts valued technical support, implementation of its 2001 US-Vietnam though some felt lack of ownership Bilateral Trade Agreement and 2007 • Missing learning and adaptation component World Trade Organization (WTO) • Many successes failed to cumulate into higher commitments. Also as part of its trade order and sustainable achievements facilitation around the now-inoperative US side of TPP, USAID programs have been rather successful in addressing the country’s economic growth priorities through the promotion of inclusive and transparent governance processes. Multiple assessment sources credited USAID programs for contributing to significant legal and regulatory reforms, not least of which is the 2013 Constitution, amendments to the Law on Promulgation of Legal Normative Documents (aka “Law on Laws”), Project 30 on Administrative Reform, the 2015 Law on State Budget, the 2016 Law on Access to Information, and recently the 2017 Law on Support to Small and Medium Enterprises. Despite these policy achievements, there is sentiment among some USAID and GVN interlocutors that development partner programs should be reoriented to support policy implementation and oversight, beginning first with untangling what is now a relatively sophisticated albeit complex legal framework. The 2015 amended “Law on Laws” includes law making provisions that should reduce conflict and improve legal and regulatory quality; however, it remains to be seen how a fragmented and sprawling bureaucracy will meaningfully encumber these new provisions. With the foundational legal framework now elaborated, Vietnam’s remaining development partners may have more confidence shifting resources from supporting general policy processes to the content and implementation of specific policies. Further, as the Mission nears a turnover in its flagship economic growth and governance portfolio and contemplates a new basket of activities, it is likely to take on a more focused approach on trade and growth with clearly defined and achievable targets. A recent mid-term evaluation of the GIG program validates this point by noting that some of the new GVN law making processes facilitated by the program, such as extensive public consultations and regulatory impact assessments, are not financially and logistically sustainable. As such, a key consideration for future governance programming will be depth versus breadth of scope. The former may allow for a focused troubleshooting around promising areas where policy implementation and oversight are lagging, whereas the latter approach may give flexibility to address crosscutting, systemic policy issues on an on-demand basis.

THE ENVIRONMENT FOR GOVERNANCE PROGRAMMING Since the 2001 signing of the Bilateral Trade Agreement and initiation of the STAR program, USAID has enjoyed a high degree of access and interest among GVN agencies to address governance-

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 22 related barriers to trade and growth. While not without implementation challenges, these and related donor programs have helped give Vietnam confidence in opening its market institutions and pursuing needed structural reforms. In addition to the policy achievements noted above, donors have also helped to facilitate the emergence of a professional civil society, including service delivery NGOs, advocacy organizations, and business associations, which have become a mainstay alongside the CPV’s mass social organizations. As recently as late 2015 with the release of the Vietnam 2035 report, the government articulated a forward leaning vision for strengthening democratic institutions and reducing the role of the state in the economy. However, what had been largely perceived as momentum on governance reforms has stalled over the past year. Donors and civil society organizations alike are reporting new difficulties in the project approval process, which already is quite burdensome and subject to delay. The Ministry of Foreign Affairs is contemplating a new decree that would levy sanctions on international NGOs found to be violating administrative regulations – arguably a step in the wrong direction given complications posed by the current regulatory framework (e.g. Decrees 16 and 93). Additionally, Vietnam has placed a few donor-supported policy reforms, including the Law on Associations and revisions to the Labor Code, on the backburner. Meanwhile, observers have reported a severe crackdown on dissent with over a dozen activists and bloggers arrested since the beginning of the year, more than any year since 2011. A few factors explain the apparent hesitation of the GVN to expand cooperation with donors, INGOs, and domestic civil society on governance reforms: • As suggested earlier in the analysis, the Party is making efforts to reassert its guiding policy role and to rein in central and provincial leaders. The years of decentralized policy experimentation, such as reducing sub-national redundancies in the Party-state apparatus, came to an end with the 12th Party Congress and departure of Prime Minister Nguyen Tan Dung in January 2016. • There is broad acknowledgement that the relative role and influence of overseas development assistance is waning given Vietnam’s growing economy and easier large-dollar financing options. Many donors already exited when Vietnam attained middle-income status in 2013. • Without the allure of the TPP and related side agreement with the US, it is arguably harder to get political commitment at the highest levels for programs that promote greater transparency, rule of law, respect for intellectual property rights, workplace standards and labor rights. One government interlocutor was frank in his assessment that reforms envisioned in the TPP Consistency Plan on labor were “off the table.” Another challenge facing development partner programs, particularly those engaging on national level policy, is the time intensive and unavoidable inter-governmental coordination process. The overwhelming majority of governance-related technical assistance projects catalogued by the assessment (see the Donor Matrix in Annex A) have line ministries or the National Assembly as their principal counterparts, and only a few appear to engage multiple GVN partners. One of the identified limitations of USAID’s GIG program is a multi-agency, project-specific steering committee based in the Ministry of Justice that oversees the distribution of project resources on a per department basis. While evaluating the effectiveness of donor programs was not a specific area of inquiry for the assessment, it is evident that governance programs need to better tap into existing policy

23 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV coordination units at the highest levels of the government, and perhaps also the Party, to attain buy- in and ensure even implementation across stakeholders. Such an approach would be in line with the current political-economy dynamics of the CPV seeking to rein in the discretion of GVN institutions. Lastly, USAID should consider how best to complement the investments of the small pool of donors remaining in Vietnam. In terms of dollar value, the largest programs being implemented over the next few years include World Bank public financial management and tax administration programs, Global Affairs Canada’s National Legislative Development Project, the EU’s Justice and Legal Empowerment Program, and Australia Department of Foreign Affairs and Trade’s Aus4Reform economic competitiveness program. In addition to the EU’s new rule of law program, the US State Department’s Bureau for International Narcotics and Law Enforcement (INL) is also anticipating new investments to support criminal justice reform. Despite some of the difficulties mentioned above, USAID has an opportunity to be a lead donor on governance issues and is the best equipped to invest in resource-intensive institutional strengthening initiatives.

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 24 RECOMMENDATIONS

STEP 4: OUTLINING THE PROPOSED STRATEGY

SUMMARY ANALYSIS AND THEORY OF CHANGE The preceding analysis identifies a number of persistent and emerging governance challenges facing Vietnam, many of which will be critical to the country moving beyond middle-income status. Chief among these challenges is participation. While public participation has become institutionalized in policy making processes, powerful private interests are increasingly bypassing these forums while citizens have not taken advantage of them. Furthermore, civil society and INGOs, who might advocate for excluded interests, operate under an increasingly constrained environment. Another area of concern is administrative efficacy. While administrative reforms have improved Vietnam’s business climate, a large civil service cadre, competition for talent from the private sector, and unclear chains of command have put pressure on the capacity of the state to implement policies; in addition, reportedly low civil service salaries may produce a climate conducive to petty corruption. Finally, weak oversight bodies, particularly legislative institutions and MOs, have not become substantially more active or influential in the past 10 years, particularly at the provincial level. Increasingly, rather than empowering such institutions to oversee the government, the Party is bolstering its own capacities. The result of these issues is that while economic growth remains strong, some voices are heard louder than others in the policy making process, a sprawling public (and quasi-public) sector remains highly inefficient, and the opportunities for course correction are significantly limited. Based on the filter of USG and USAID priorities, interests, and resources in Step 3, the team formulated the following problem statement identifying the core governance challenge to inclusive economic growth in Vietnam: Despite gradual improvements to the efficacy, inclusiveness, and transparency of Vietnam’s political institutions since Doi Moi, governance quality remains constrained by limited avenues for public participation, public administration and regulatory inefficiencies, and weak accountability systems. Each of these challenges is complicated by the rising influence of large private enterprises.

Considering the above problem statement, the assessment team developed the following purpose statement, or rather objectives that should undergird USAID’s future inclusive economic growth strategy and programming: To achieve its vision of being an “enabling state” for inclusive economic growth, Vietnam will need to 1) improve the quality and performance of regulations impacting private enterprise and trade, 2) strengthen channels for meaningful public participation in economic decision-making, and 3) enhance mechanisms that promote integrity, transparency, and fairness in the private sector.

Implied in the above statement are a few key assumptions about the drivers of change in Vietnam. The pace and depth of reform is often a function of: the apparent urgency of the issue; the perceived

25 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV sensitivity of the issue relative to CPV interests; the degree of consensus within the CPV and GVN on the issue; the capacity of bureaucratic institutions responsible for handling the issue;, and, the extent to which influential external actors have leverage over the issue. By focusing on issues affecting Vietnam’s economic competitiveness, USAID would be responsive to an area of incontrovertible and ongoing interest for senior CPV and GVN officials. Further, there is greater likelihood to leverage economic reforms that help to “level the playing field” as part of future trade negotiations. For instance, it would be more effective for USAID to approach a partnership with the GVN in areas of public administration reform when the issue is framed as poor regulatory quality and bureaucratic rent seeking delaying the shipment of goods across the border. Also, given the emphasis on economic performance, GVN agencies and provinces are more likely to be held accountable for implementing governance reforms if connected to economic growth targets. For instance, a recent push by the Prime Minister vis-à-vis the Office of Government (OOG) and the Administrative Procedures Control Agency (APCA) to improve the business enabling environment and attracting foreign direct investment induced some line ministries to slash hundreds of unnecessary administrative procedures. In sum, while there are no silver bullets per se to advance inclusive economic growth in Vietnam, the assessment team offers three meta-recommendations that should be considered essential for the design of new programs. • First, continue striving for gains in both efficiency and representation when possible. For example in activities to improve government responsiveness to economic concerns, the current dual approach is recommended to strengthen feedback loops with the private sector while also helping the government to streamline policy implementation across multiple units of government. Previous USAID programs have helped to make inroads in both areas, and should continue to push for more streamlined economic governance while elevating the voice of those groups least heard in the policy process. • Second, integrate program adaptability through cooperation with multiple actors at multiple levels. Reform opportunities are not infrequently created by specific personalities or political alignments, which may change unexpectedly in Vietnam. By working with a wider set of reform actors, programs can reduce the possibility that changing political conditions wipe out activity gains. For instance, partnering with existing bodies under the OOG, such as APCA and the National Trade Facilitation Committee (NTFC) should be considered critical to advancing the enabling environment for private enterprise and trade, respectively. With the support of the PM, these bodies can help promote, though not necessarily enforce, compliance among affected line ministries. USAID can also expand relationships with the CPV’s Organization Committee and Economic Committee given their significant advisory roles. Engaging the Economic Committee of the VNA and offering targeted technical assistance, while less critical for successful policy implementation, would help to exercise a needed oversight function. • Third, maintain a unified strategy that connects “islands of reform” in the center and provinces. Any governance-focused program must think carefully about how policy is implemented at the provincial level, and when possible, consider how positive local examples can be replicated, scaled, and linked to national-level policy processes. A coherent program that is able to spur partnership and healthy competition across multiple actors and geographies will succeed much more than one based around a specific actor. Such an

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 26 approach promotes and empowers reform coalitions, creates positive signals for external stakeholders, encourages replication and scaling, and also helps to differentiate factors that influence program effectiveness.

STRATEGIC AND ILLUSTRATIVE PROGRAM RECOMMENDATIONS The team has three overall strategic recommendations for improving governance, efficiency and representation in particular, for more inclusive economic growth based on the foregoing analysis: 1. Improve the quality and performance of regulations impacting private enterprise, investment, and trade

One of the main consequences of Vietnam’s fragmented and relatively decentralized public sector is a complex and often contradictory regulatory framework. While recent years of legal reform have introduced new constraints on GVN ministries’ ability to regulate and decree at will and subjected new laws to various quality checks, the tendency will likely remain to address public policy challenges through highly prescriptive and difficult-to-implement legislation. Apex GVN institutions like MOJ, MPI, and the Ministry of Finance as well as OOG bodies like APCA can play an important role in refereeing policy and lawmaking processes, whereas relevant VNA committees can be empowered to play an oversight role as new laws are being rolled out. As it concerns economic policies impacting trade and growth, USAID should be engaged both on new policies that might be considered (e.g. the Ministry of Industry and Trade is revising the Competition Law) as well as implementation of new policies (e.g. 2017 SME Law and 2017 Foreign Trade Management Law). Support for implementation should connect provincial-level administrations with key national level bodies, so as to have the political buy-in from the top for lower level experimentation and learning. Further, absent a significant realignment of bureaucratic incentive structures, USAID will need to consider mechanisms to enhance coordination and compliance between agencies and provincial units. PCI has a strong brand in Vietnam for measuring provincial level performance in the aggregate, though there is interest in reviving a ministry-level index such as that previously supported by USAID’s STAR Plus program.13 Illustrative activities include: • Strengthen the capacity of select departments within “economic power” ministries to produce “Law on Laws”-compliant economic policies and monitor implementation to ensure quality performance. The “Law on Laws” mandated a number of elements that would complete proposed legislation, among them regulatory impact assessments and public consultations. Capacity within ministries to fulfill these requirements is uneven and limited. External consultants currently provide regulatory impact assessment services on an ad hoc basis, and the team received reports that proposed legislation is still being submitted without budget impact information.

13 The Ministerial Effectiveness Index was conducted in FY2011 and FY2012. The first year was based solely on perceptions by more than 200 business associations, and the second added measures of administrative timeliness, review procedures, and public comments. Support from Politburo and VCCI was not provided in FY2013.

27 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV • Enhance inter-governmental coordination mechanisms within the OOG, including APCA as a focal point on administrative reforms. Coordination across ministries is remarkably poor, in part because ministry counterparts are not aware of each other, relevant units are poorly staffed, and there is no mandate from the ministerial level. On administrative reform, support APCA’s initiatives to streamline regulations, gather feedback from businesses and citizens, and expand e-government services. Success of this effort will significantly improve efficiency of the GVN bodies and bottom-up accountability mechanisms. • Strengthen lawmaking and oversight functions of key National Assembly bodies, such as the Institute for Legislative Studies, Economic Committee, Judicial Committee, and the Office of the National Assembly – all involved in economic policies. Although the team felt the VNA was not a politically important or capable enough actor to warrant USAID support for the VNA as an institution, there are key Delegates or committees with competence in economic issues that could help connect islands of reform at the center and provincial levels. • Encourage innovation, learning and replication of administrative reforms at the provincial level. Provinces have periodically been a breeding ground for administrative reforms, which can be picked up at the national level for implementation by more provinces. Key developments are communicated directly by inter-province meetings or annual meetings of provincial leadership. Identifying provincial targets for supporting reform opportunities is difficult due to the strong idiosyncratic role of leaders, but provinces that are net providers of revenue to the center tend to have more interest and resources for reform. • Engage key advisory bodies and research institutes to utilize and strengthen capacity for evidence-based economic policy making, including CPV advisory bodies like the Central Economic Commission and MPI’s Central Institute for Economic Management, and state bodies such as the Economic Advisory Board and APCA. 2. Strengthen channels for meaningful, broad-based public participation in economic decision-making

In terms of promoting public participation, while there isn’t a strong incentive or resource capacity for state institutions to consult with the public, they are more likely to respond to the perceived grassroots interests of member-based business, professional, and consumer groups working under an umbrella mass organization over those from nominally independent, issue-based CSO. Further, CPV and GVN interlocutors have expressed interest in getting more and better information on issues of public concern and appear to value independent, donor-funded data analysis over their own internal studies. It would serve USAID well to simultaneously strengthen collective action among public interest groups, particularly around socio-economic issues, while promoting cost-effective feedback loops with relevant government agencies. Additionally, should Vietnam look to revisit key legislation regulating civil society, such as the Law on Associations and the Law on Demonstration, USAID should continue to connect local advocates with international expertise on these issues. • Continue to advocate through diplomatic and development programs for improvements in the civil society enabling environment. The GVN has through decree been modulating the enabling environment for social organizations for more than 20 years. The most recent draft Law on Associations will likely be revisited again in the coming years and should be re-worked to produce a version more in line with positive international standards.

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 28 • Promote the emergence of social service delivery CSOs as a partner to the state for improving socio-economic conditions. Provincial and sub-provincial officials already engage on a reportedly limited basis with informal CSOs on service delivery. In civil society sectors in a wide variety of contexts around the world, CSOs provide better, cheaper, and more innovative service delivery than government, and nonprofit sectors around the world are dominated by service delivery organizations that receive funding primarily through state contracts or market-based activities; they also engage rather deeply in all parts of the policy cycle. Such engagement could positively affect gender gaps, too, as policy implementation and feedback can be more responsive to gender issues at the local level, and local CSOs tend to be dominated by women. Current law is not an obstacle, as service delivery CSOs could be sponsored by state associations like VUSTA. Procurement law would need to be changed to allow for state contracting for goods and services by CSOs, however. • Strengthen the capacity of business, professional, and consumer associations, including their member outreach and service functions as well as capacity to conduct research and advocacy. A focus on provincial level associations would complement nicely provincial-level trade and growth activities. • Support issue-based coalitions including CSOs, community-based organizations, researchers, and media to improve the frequency and quality of policy debate, including marginalized groups to work on most pressing economic, social and environmental issues for Vietnam. The coalitions should establish linkages with VNA Committee priorities to channel societal voices and provide evidence on GVN performance in those areas. • Promote government-citizen feedback loops at national and provincial levels to better collect, analyze and incorporate citizen viewpoints. A surge in mobile telephony and broadband internet in Vietnam offers new opportunities to efficiently aggregate citizen viewpoints. There are strong examples of e-government services and platforms for citizen feedback in places like Da Nang that could be replicated in locales. • Assist with implementation of environmental and social protection safeguards as a key opportunity to account for local voices in public infrastructure projects. This could include continued support for the Vietnam Learning Center on Environmental and Social Sustainability, established in 2015 between donors (including USAID) and the Asian Institute of Technology in Vietnam. 3. Enhance mechanisms that promote integrity, transparency, and fairness in the business environment

Corruption in both the public and private sector has become so pervasive that “informal payments” are an increasingly utilized and unspoken means of obtaining services and doing business in Vietnam. Despite some of the structural changes being considered, such as streamlining Vietnam’s Party-State anti-corruption apparatus and reducing the size of the civil service, it is unlikely that existing bureaucratic incentive structures will easily give way to reform. USAID should have an in- depth understanding of the risks associated with particular economic institutions, such as border agencies, and private sector actors, particularly well-established domestic firms. Also, while technical fixes such as e-government systems can enhance transparency, they don’t necessarily constrain rent-seeking behavior. Rather, USAID should look to the private sector, particularly foreign firms interested in expanding responsible supply chains in Vietnam, for ideas and solutions to self-

29 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV regulate and model “clean” behavior. Business clusters and economic zones tend to offer the best opportunities to promote these types of business integrity initiatives. • Support both public and private sector initiatives that bring Vietnam more closely into alignment with global anti-corruption and responsible business standards. This may include technical assistance to Vietnam as it looks to roll-out its private sector anti-corruption regime over the next few years and generally reduce risks associated with FCPA compliance. Foreign enterprises operating in Vietnam are also beginning to encourage new business integrity pledges and compliance with the new ISO 37001 on anti-bribery management systems. Further, USAID should ensure that it partners with private sector firms committed to responsible labor practices and non-discrimination in the workplace. • Strengthen e-government and e-procurement services to help reduce information asymmetries in the private sector and to encourage fair tendering opportunities. This will likely require donor coordination, as the World Bank and others have been working on public financial management systems for a number of years. • Strengthen the role of business associations in providing legal and conciliation support to SMEs. Business associations can play an important role in helping their corporate members link with global market opportunities, including developing trusted relationships with prospective firms, respond to solicitations, execute contracts, and resolve legal disputes. The net effect of these efforts is enhancing sustainable, local services that help promote predictability and fairness in market transactions.

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 30 ANNEX A: DONOR MATRIX GVN Counterpart Agency Implementer Project Title Committed Budget ($) MPI, MOIT, MARD Central Institute for Economic Restructuring for a More Competitive AUD 3,100,000 Management (CIEM) Vietnam MPI, MOIT, MARD, VCCI Aus4Reform (2nd phase of the above) AUD 6,000,000 MPI IFC Corporate Governance USD 1,500,000 TPA MOIT NA Strenthening Decentralized Trade CHF 3,320,000 Support Services (Vietrade) State Audit France Expertise Internatinal and State Audit of Vietnam EUR 1,200,000 Consortium SAI F and Latvia

State Audit, MOF Canadian Audit and Accountability International Legislative Oversight CAD 8,800,000 Foundation Program MOF GIZ EU Public Finance Modernisation EUR 3,000,000 Programme in Viet Nam World Bank Revenue Administration Restructuring USD 3,000,000 Support Project Vietnam Public Financial Management USD 4,190,000 (PFM) Analytical and Advisory Assistance (AAA) Program MOJ (lead), VNA Law Cmte, A consortium of the Canadian Bar National Legislative Development CAD 15,000,000 OOG, MOF, MARD, MOIT Association (CBA), Ministry of the Project Attorney General of Ontario (MAG) and Stikeman Elliot LLP (SE)

MOJ Oxfam (TBC) Justice and Legal Empowerment EUR 13,500,000 Program (JULE) MOHA MONRE Asian Development Bank Implementation of Civil Service Reform USD 1,000,000 MOLISA Asian Development Bank Skills and Knowledge for Inclusive USD 800,000 Economic Growth Program OOG World Bank Not a project, only assessment n/a VNA Asian Development Bank Mekong Business Initiative (MBI) USD 10,500,000 RED Communication Center for Media Partnership for Improved n/a research on Development Economic Policy Communication UNDP Good Governance and Aid Effectiveness CAD 3,500,000 (Component 2) SOCODEVI - Canadian Cooperation Vietnam co-operative enterrise CAD 1,550,000 Society for International development Development VFF UNDP, Centre for Development The Research Project "Viet Nam USD 774,000 Studies and Community Support Provincial Governance and Public (CECODES) Administration Performance Index Soc Trang People's Committee Soc Trang People's Committee SME Development in Soc Trang Province CAD 485,000 Private Sector IFC Regional Biotrade CHF 6,580,000 IDH, private sector and local partners Value Chain Financing CHF 4,190,000

(blank) UNIDO UNIDO Business Registration CHF 5,450,000

31 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV Donor Implementer Committed Budget ($) Implementer GVN Counterpart Agency Donor Committed Budget ( Asian Development Bank Asian Development Bank USD 10,500,000 Asian Development Bank VNA Asian Development USD 10,500,000 Bank

USD 800,000 MOHA MONRE Japan USD 1,000,000

DFAT Central Institute for Economic AUD 3,100,000 MOLISA Asian Development USD 800,000 Management (CIEM) Bank AUD 6,000,000 Canadian Audit and State Audit, MOF Global Affairs Canada CAD 8,800,000 Accountability Foundation EU GIZ EUR 3,000,000 Central Institute for Economic MPI, MOIT, MARD DFAT AUD 3,100,000 Management (CIEM)

Oxfam (TBC) EUR 13,500,000 MPI, MOIT, MARD, VCCI DFAT AUD 6,000,000

Global Affairs Canada A consortium of the Canadian CAD 15,000,000 A consortium of the Canadian MOJ (lead), VNA Law Global Affairs Canada CAD 15,000,000 Bar Association (CBA), Bar Association (CBA), Ministry Cmte, OOG, MOF, MARD, Ministry of the Attorney of the Attorney General of MOIT General of Ontario (MAG) and Ontario (MAG) and Stikeman Stikeman Elliot LLP (SE) Elliot LLP (SE) Canadian Audit and CAD 8,800,000 France Expertise Internatinal State Audit Swiss SECO EUR 1,200,000 Accountability Foundation and Consortium SAI F and Latvia

RED Communication Center n/a GIZ MOF EU EUR 3,000,000 for research on Development Communication Soc Trang People's CAD 485,000 IFC Private Sector Swiss SECO CHF 6,580,000 Committee UNDP CAD 3,500,000 MPI Swiss SECO USD 1,500,000

SOCODEVI - Canadian Cooperat C AD 1,550, 000 NA TPA MOIT Swiss SECO CHF 3,320,000 Japan Asian Development Bank USD 1,000,000 Oxfam (TBC) MOJ EU EUR 13,500,000 World Bank USD 4,190,000 RED Communication Center for VNA Global Affairs Canada n/a research on Development Communication Swiss SECO IDH, private sector and local CHF 4,190,000 Soc Trang People's Committee Soc Trang People's Global Affairs Canada CAD 485,000 partners Committee France Expertise Internatinal EUR 1,200,000 UNDP VNA Global Affairs Canada CAD 3,500,000 and Consortium SAI F and Latvia

IFC USD 1,500,000 UNDP, Centre for VFF UNDP, AECID, SDC USD 774,000 Development Studies and Community Support (CECODES) CHF 6,580,000 UNIDO (blank) Swiss SECO CHF 5,450,000 NA CHF 3,320,000 World Bank MOF Japan USD 4,190,000

UNIDO CHF 5,450,000 World Bank, SECO, USD 3,000,000 Global Affairs Canada

UNDP, AECID, SDC UNDP, Centre for USD 774,000 OOG World Bank n/a Development Studies and Community Support (CECODES) World Bank World Bank n/a SOCODEVI - Canadian VNA Global Affairs Canada CAD 1,550,000 Cooperation Society for International Development World Bank, SECO, World Bank USD 3,000,000 IDH, private sector and local Private Sector Swiss SECO CHF 4,190,000 Global Affairs Canada partners

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 32 Implementer Donor GVN Counterpart Project Title Description Time Frame Committed Contact Person World Bank World Bank, SECO, Ministry of Finance Vietnam Public 2017 - 2020 3,000,000 Quyen Hoang Vu Global Affairs Canada Financial Management The Program aims to: (i) support strengthening the capacity Senior Economist (PFM) Analytical and of executive bodies to make, implement, and monitor policies Mobile:+ 84 123 898 8889 World Bank Japan Ministry of Finance Revenue The Project aims to support Tax Policy and Tax 2018-2021 4,190,000 Viet Anh Nguyen Administration Administration reforms. The main counteparts are Tax Public Sector Specialist Restructuring Support Policy Department and General Department of Taxation Mobile:+ 84 123 898 8889 Project Email: [email protected] 63 Ly Thai To, Hoan Kiem, Hanoi World Bank World Bank Office of Government Not a project, only The intervention is a follow-up of Vietnam 2035 Report to Q4/2017- na Tran Thi Lan Huong assessment strenthen the center of government functions by conducting Q1/2018 Senior Public Sector Specialist Open Data Readiness Assessment and Digital Government Email: [email protected] Assessment. Status: Waiting for Prime Minister Approval M + (84) 9151-08948 63 Ly Thai To, Ha Noi, Viet Nam Asian Development Bank Asian Development National Assembly Mekong Business The MBI objective is to promote business environment 12/2014- 10,500,000 Dominic Mellor Bank Initiative (MBI) reforms in Vietnam, Laos, Cambodia and Myanmar. MBI 12/2017 MekongBiz "MBI" Project Lead aims to take novel approaches to support private sector Email: [email protected] development, particulalry experimental initiatives . The project's outputs are: (i) Improved functioning of national and regional markets for SME financial services, addressing supply and demand issues; (ii) Improved business regulatory environment that incentivizes business formalization and supports regional harmonization and integration; and (iii) Improved provision of strategic and knowledge management Asian Development Bank Japan Ministry of Home To support the implementation of the Government's Plan on 3/2015- 1,000,000 Dao Viet Dung, Senior Public Affairs, MONRE Implementation of reforming the public services and strengthening civil 8/2017 Management Officer, Email: Asian Development Bank Asian Development Ministry of Labor, Approved in 800,000 Tanaka, Sakiko, South East Asia Bank Invalids and Social Skills and Knowledge To support the government in a phased approach to 2015, not yet Department Welfare for Inclusive Economic progressively modernize the technical and vocational signed UNDP, Centre for UNDP, AECID, SDC Vietnam Fatherland The Research Project The Viet Nam Provincial Governance and Public 2009-2018 774,000USD (for Development Studies and Front "Viet Nam Provincial Administration Performance Index (PAPI) provides objective the period from Đ Thanh Huy n (Ms.) Community Support Governance and Public and evidence-based measures, based on citizens’ experiences 2009-2011 funded Programme Analyst Soc Trang People's Global Affairs Canada Soc Trang People's SME Development in 2010-9/2018 CND$ 485k ỗ ề Committee Committee Soc Trang Province To create expanded economic opportunities for poor rural women and men, including ethnic minority populations by A consortium of the Global Affairs Canada Ministry of Justice National Legislative 2013 - 2020 CDN$ 15 mil Canadian Bar Association (lead partner); Development Project The objective of NLD is to assist the GOV in enhancing the JACOB GAMMELGAARD (CBA), Ministry of the Law Committee of the transparency, quality and effectiveness of enacted laws and Project Fiel Manager Attorney General of National Assembly; the processes and procedures of law-making. To achieve this Email: Ontario (MAG) and Office of goal, NLD collaborates with the state machinery and [email protected] Stikeman Elliot LLP (SE) Government; institutions that produce legislation and are tasked with its Tel: 024.3943.3064 (Ext: 10) Ministry of Finance; implementation (legislative institutions, executive branch Ministry of and public administration). The Project activities are Agriculture and Rural structured around the four core components/pillars of the Development; and law-making process: 1) planning; 2) policy development; 3) Ministry of Industry legislative drafting; and 4) legal system coherence. and Trade.

Canadian Audit and Global Affairs Canada State Audit of International The project aims to improve value for money in public 8/2012- 8.8 million (for 4 Harriet Roos Accountability Foundation Vietnam, Ministry of Legislative Oversight expenditures in Cameroon, Ghana, Tanzania, and Vietnam. 12/2017 countries) First Secretary (Development) | UNDP Global Affairs Canada National Assembly Good Governance and To improve core government systems (procurement, 2012-10/2017 CND$ 3.5 mil Aid Effectiveness management of ODA, anti-corruption, public (Terminating)

33 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV Implementer Donor GVN Counterpart Project Title Description Time Frame Committed Contact Person Central Institute for DFAT MPI, MOIT, MARD, Aus4Reform (2nd To deliver more inclusive and better quality economic growth 2017-2021 A$ 6 mil Economic Management VCCI phase of the above) in Vietnam through reducing barriers to competition and (CIEM) inefficient regulations that increase the costs of doing business in Vietnam, improving the business environment and shifting Vietnam towards a more market-based economy. Expected results: • At least 1 million formal private enterprises register by 2020 as a result of an improved and more equitable business enabling environment; Increase in the percentage of women-headed enterprises. • Accelerated growth in private sector employment and labour productivity. • Strengthened property rights, more competitive factor markets, and improved enforcement of competition policy, facilitating Vietnam’s regional and global economic integration. • Better evidence and understanding of the links between supporting women’s economic empowerment and accelerating productivity growth, especially in rural areas, to support Government of Vietnam reform initiatives. UNIDO Swiss SECO UNIDO Business Support to the nationwide business registration reform: 2014 - 2017 5.45 mil Registration unified registration and tax code, statistics IFC Swiss SECO Ministry of Planning Corporate Governance Improve corporate governance standard and practice in 2013-2018 6.9 Mil (global and Investment selected budget, of which Asian countries USD 1.5 Mil for VN) France Expertise Swiss SECO State Audit of Vietnam State Audit of Vietnam Support to SAV in implementing its development plan in the 2014-2018 Euro 1.2 mil Internatinal and area of Human Resource Development and audit Consortium SAI F and methodology, with focus on financial audits. Latvia

NA Swiss SECO Vietnam Trade Strenthening The overall objective of this program is to sustainably 2013-2016 3.32 mil Nguyen Quang Huy Promotion Agency, Decentralized Trade upgrade, at regional and provincial levels, the contribution of National Program Officer Ministry of Industry Support Services SMEs to exports in key priority export sectors through Mobile:0909541064 and Trade (Vietrade) strengthening trade development support services to potential Email: [email protected] or current SME exporters. IFC Swiss SECO Private Sector Value Chain Financing Value Chain Financing 2018-2022 6.58 mil Nguyen Quang Huy Improving competitiveness of Vietnamese SMEs to National Program Officer participate in the value chain through innovative financing Mobile:0909541064 solutions and increased adoption of environmental best Email: [email protected] practices. Stakeholders of the commodity sector (cocoa, coffee, soy, palm oil, cotton) IDH, private sector and local partners IDH, private sector and Swiss SECO Private Sector Regional Biotrade Regional Biotrade Project 2017-2020 CHF 4.19 mil Nguyen Quang Huy local partners Promote the conservation of biodiversity through sustainable National Program Officer trade of natural ingredients to increase the livelihood benefits Mobile:0909541064 for rural populations in Laos, Vietnam, Myanmar. Email: [email protected]

USAID.GOV INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM | 34 Implementer Donor GVN Counterpart Project Title Description Time Frame Committed Contact Person Global Affairs Canada National Assembly Vietnam co-operative The project aims to: (1) provide assistance to the 2/2015- CND 1.55 mil SOCODEVI - Canadian enterrise development Government of Vietnam to develop a national strategy to 7/2020 RED Communication Global Affairs Canada National Assembly Media Partnership for To increase citizen and media participation in the 2014-8/2018 Center for research on Improved Economic development and implementation of Vietnam's economic Development Policy policies through supports journalists, in collaboration with Communication CSOs and other stakeholders, to improve public accountability and transparency, and create a greater space for civil society and citizen dialogue. Project activities include: (1) training approximately 250 journalists and members of CSOs on policy research and analysis, including gender and environmental impact assessments; (2) conducting a gender-disaggregated study on media and CSO participation in policy development, with a particular focus on economic policies; (3) producing communication tools to support citizen participation, including a website for policy feedback, one documentary film, and up to 300 media interventions such as articles, commentaries, and other forms of media coverage; (4) developing mechanisms to monitor media obstruction cases, producing and disseminating annual reports on media obstruction, and developing a gender-sensitive code of ethics on journalism with technical support from Canadian experts; and (5) providing training to RED Communication personnel in project management, leadership and institutional development. GIZ EU Ministry of Finance EU Public Finance The objective of the action is to strengthen the Ministry of 2/2015 - EUR 3 mil Mrs Kim Thu NGO, Programme Modernisation Finance of Viet Nam to improve the management of public 6/2018 Officer, Email: Thi-Kim- Programme in Viet finances. The programme aims to ensure that the legal, [email protected], Tel: +84 4 Nam organisational and regulatory framework for the planning 39410099 and execution of the state budget at the central and local levels is closer to international standards. Oxfam (TBC) EU Ministry of Justice Justice and Legal The overall objective is to contribute to strengthen the rule of 12/2015-2020 EUR 13.5 Daniel Empowerment law in Vietnam through a more reliable, trusted and better Program (JULE) accessed justice system. The specific objective is to increase access to justice for vulnerable groups, in particular women, children, ethnic minorities and poor people. The programme has four key results: 1) Increased public awareness and understanding of legal rights and how to invoke these rights; 2) Increased access to legal advice, assistance and representation in administrative, civil, and criminal matters; 3) An improved enabling environment and regulatory framework for legal empowerment and access to justice; and 4) Enhanced integrity, transparency and accountability in the justice sector. These results are linked to the logical framework of the overall EU JULE program.

Central Institute for DFAT MPI, MOIT, MARD Restructuring for a To support the Government of Vietnam to drive the 2014-2017 A$ 3.1 mil Economic Management More Competitive implementation of reforms at improving conditions for (CIEM) Vietnam private sector enterprise and to shift Vietnam towardsbecoming a more market-based economy, and facilitated stronger linkages and knowledge exchange with Australian agencies. Expect results are: (i)Regulatory reforms improved business conditions, cut red-tape and made it easier for Australian business to trade with or invest in Vietnam; (ii) New laws and regulations enacted in restructuring of state enterprises to reduce their role; and (iii) Rural economy restructered through developing a national strategy and implementation plan to reduce the influence of state ownership in the rice sector and to raise rice production productivity. 35 | INCLUSIVE GOVERNANCE ASSESSMENT FOR VIETNAM USAID.GOV