## 1. The Comprehensive Poverty Reduction and Growth Strategy (CPRGS) was approved

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---

### Background and purpose of the Report
- CPRGS approved by the Prime Minister of Vietnam on May 21, 2002; discussed by the Boards of the IMF and IDA in July 2002.
- Government completed the “Vietnam Growth and Reduction of Poverty Annual Progress Report of 2002-2003” in November, 2003 — submitted as a first PRSP progress update.
- Report prepared by the Ministry of Planning and Investment (MPI) and the CPRGS Secretariat under the Inter-Ministerial Working Group.
- Drafting consulted Government and external partners (international donors, researchers, local and international NGOs); limited input from some key line ministries (e.g., Ministry of Agriculture and Rural Development).

### Overall assessment — key judgments and staff recommendations
- Report scope:
  - Evaluates economic growth and poverty reduction; policy implementation in 2002-2003; challenges and measures in poverty reduction and growth; strategy implementation, initial results and proposals; adds a new chapter on large-scale infrastructure.
- Staffs’ broad judgments:
  - Recognize rapid output growth despite international instability and SARS in early 2003.
  - Some structural reforms slower than expected, notably SOE restructuring and ownership transformation, with implications for bank credit quality.
  - Candid assessment of social issues: growing inequalities, poverty among ethnic minorities, challenges faced by unregistered or temporarily registered rural-urban migrants, governance and corruption concerns.
  - Progress measured against Vietnam Development Goals (VDGs) and CPRGS targets; governance monitoring remains the most difficult area.
- Key staff recommendations for future reports:
  - Better articulate linkages between achievements and policy actions.
  - Candid assessment of potential risks associated with current policy stances.
  - More explicit description of how the PIP and the annual budget link to CPRGS implementation.
  - More explicit actions to tackle poverty among ethnic minorities and other vulnerable groups.
  - Include a more explicit discussion of planned actions, including an updated policy matrix.
  - Reflect approved targets from the annual socio-economic development plan for 2004 where relevant.
  - Capture outcomes of CPRGS workshop (Haiphong, October 2002) and Government determination to accelerate WTO access.
  - Develop greater cross-ministry debate and involvement; integrate CPRGS with five year and one year planning and resource allocation processes.
  - More active Ministry of Finance (MOF) role over the next two years; incorporate Public Expenditure Review lessons; develop sectoral and provincial MTEFs.

### Implementation — headline macro and external indicators
- GDP grew at 7 percent in the last year.
- Exports expanded by 22 percent.
- Actual inflow of foreign direct investment (FDI) increased by 10 percent.
- Poverty reduction pace: falling by the equivalent of two percent of the population every year.
- Staffs note IMF staff GDP estimates are somewhat lower than official estimates.

### A. Poverty reduction — findings and concerns
- 1993–2002 poverty trend:
  - Proportion of population living in poverty declined from 58 percent to 29 percent (2002 VHLSS).
- Data sources used: 2002 VHLSS, twelve Participatory Poverty Assessments (PPAs) from Summer 2003, and administrative sources.
- Key observations:
  - Progress is broad but uneven; certain groups and areas lag behind national averages.
  - Unregistered or temporarily registered migrants are particularly disadvantaged but not identifiable in VHLSS; recommendation to adjust VHLSS to track mobile populations.
  - Concern about growing inequality; need for improved targeting and redistributive mechanisms in public resource allocation.
  - Limited discussion in the Report of specific measures to improve poverty focus of public expenditure; stronger MOF involvement urged, especially as MTEFs are developed.
- Ethnic minority poverty:
  - Ethnic minorities account for 30 percent of the poor — more than double their share in the population as a whole.
  - Staffs warn ethnic minorities could represent more than 40 percent of the poor in 2010 in the absence of bold and committed action.
  - Passage of the new Land Law could allow land allocation practices better suited to ethnic minorities if implementing guidelines are well-designed.
  - Dependence on fragile forestry lands raises issues for reform of State Forestry Enterprises and ownership/control of forestry lands.
  - Staffs strongly encourage involving ethnic minority people in developing actions intended to benefit them.
- Gender dimensions:
  - Limited attention in the Report to gender aspects of poverty.
  - CPRGS commitment to reduce women’s work burden and domestic violence not thoroughly discussed; PPAs suggest these issues create hardship for women.
  - Staffs urge disaggregation of more data by sex in future tracking.

### B. Macroeconomic policies — assessment and recommendations
- Medium-term macroeconomic framework in original CPRGS (Appendix 2) remains broadly appropriate; updating and extension to cover years 2005-06 are called for.
- Projections and performance:
  - Real GDP growth expected to continue on a strong trajectory over the medium-term.
  - Inflation achieved through 2003 and can be maintained at present moderate levels of 3-4 percent per annum with appropriate monetary management.
  - Fiscal balance (excluding onlending) kept within program objectives during 2002-03; budgetary revenue performance encouraging.
  - Report highlights surging trade and current account deficits in the last year despite strong export growth; external position considered manageable given ongoing capital inflows but merits continued review as a possible indicator of excess demand pressures.
- Staff recommendations and concerns:
  - Elaborate an updated macroeconomic framework extending through 2006; consider frameworks explored in 2003 Article IV discussions with IMF staff.
  - Concerns about rising public debt levels over the medium-term due to trend growth in onlending operations and uncertain (but potentially sizeable) costs of state bank and enterprise reform.
  - These public debt issues require substantial further government consideration.

### C. Structural reforms — progress and risks
- Trade and openness:
  - Impressive progress opening trade, promoting exports and international integration; Government committed to AFTA, the USBTA, and WTO accession.
  - Government developing a detailed, prioritized, time-bound action plan to prepare for WTO membership by end 2005.
  - WTO accession expected to impede implementation of new protectionist policies; World Bank coordinating donor assistance and supporting Poverty and Social Impact Assessments related to trade measures.
- Business environment:
  - Considerable improvements since the Enterprise Law; simplification of registration (one-stop one-stamp service), phasing out dual pricing.
  - Scope for further initiatives drawing on Government-private sector dialogue (Vietnam Business Forum).
- SOE and banking sector reform — constraints and warnings:
  - Pace of SOE and banking reform slower than envisaged; strategy distinguishes strategic sectors (SOE lead role) and non-strategic sectors (divest via equitization).
  - Limited progress improving SOE governance; equitization program behind schedule and masterplan revised mid-2003.
  - Staffs recommend a fuller assessment of obstacles to SOE reform and clearer definition of how to overcome them.
  - Banking sector efforts: improve SOCBs’ operational capabilities and accounting; liberalize interest rates; shift policy-based lending from SOCBs to specialist government financial institutions.
  - Staff concerns:
    - Exceptionally rapid pace of credit expansion in some SOCBs could further burden balance sheets.
    - Sluggish NPL resolution linked to slow SOE reform.
    - Sizeable future capital needs of SOCBs unlikely to be met from internal resources given low profitability.
    - Risk of build-up of quasi-fiscal liabilities in the banking system unless carefully managed.

### Infrastructure and public investment
- Large-scale infrastructure projects, if based on a sound cost-benefit analysis and implemented properly, should contribute to significant output growth and poverty reduction in Vietnam.
- Staffs commend the policy focus of the large-scale infrastructure chapter.
- Identified gaps and recommendations:
  - Chapter does not provide clear guidelines on how to screen projects so that they meet the policy goals — an overarching priority if public investment projects are to contribute to growth and poverty alleviation objectives.
  - Need for a more detailed discussion on how to integrate capital expenditures (coordinated by MPI through the PIP) with recurrent expenditures (coordinated by the MOF through the budget).
  - Slow integration of the PIP into a broader medium-term expenditure framework linking capital and recurrent expenditures is a concern.

### Social sectors: health, education, HIV/AIDS, and targeted programs
- Health:
  - Report documents developments in health but understates some achievements’ potential impact on poverty (e.g., nutrition and disease control, success in containing SARS).
  - Decree 139 on the provision of Health Care Funds for the Poor (HCFP) is identified as an important step for affordable access to health services for the poor.
  - Staffs welcome the intention to increase the health budget, which is currently low as a proportion of total expenditure by international standards.
- Education:
  - Progress hinges on financing and targeting issues as Vietnam moves towards increased decentralization.
  - National Education for All Action Plan cited as a relevant precedent: strong ownership, quality standards, norms for allocation of recurrent expenditure, development of a MTEF for the sector, and targeting of communes and poor households for fee exemptions.
  - Staffs encourage applying successful features of this approach to other sectors.
- HIV/AIDS prevention and response:
  - Report recognizes the potential threat as HIV/AIDS moves from high-risk groups to the general population; Government passed a new HIV/AIDS strategy outlining a multi-sectoral approach.
  - Staffs stress urgent and bold action, including de-stigmatization, dissemination of preventive measures, facilitating confidential and voluntary testing, including HIV/AIDS in school curricula, offering appropriate and affordable care and treatment, involving people living with HIV/AIDS in policy making, and ensuring leadership and commitment at the highest Government level.
- Targeted programs, evaluation, and social protection:
  - Government initiated evaluations of national targeted programs, particularly the Hunger Eradication and Poverty Reduction Program, and Program 135 to assist the poorest communes.
  - Staffs believe evaluations and analytical work could help redefine targeted programs to maximize benefits for the poor.
  - Attention recommended to targeting mechanisms, participatory and decentralized management.
  - Commendation for the safety net for laid-off SOE workers; recent survey shows it is working well.

### Governance, transparency, and oversight
- Recognized achievements:
  - Rapid expansion of the “one-stop shop” model to more than 33 provinces and selected ports.
  - Passage of the Law on the Promulgation of Legal Documents, improving transparency and public consultations in law-making.
  - Amended State Budget Law and new Law on the Organization of People’s Committees and People’s Councils establishing a basis for improved accountability in a decentralized environment.
- Fiscal and monetary transparency and oversight:
  - MOF publishing budget data, including establishing a website, is commended.
  - Need substantial improvement in compilation and release of fiscal data to track budgetary expenditure composition, extra-budgetary funds (such as the Development Assistance Fund), and public debt levels.
  - Need for more transparent monetary data, including regular public release of data on foreign reserves and other key items of the central bank balance sheet.
  - Significant enhancement of the capabilities of the State Audit of Vietnam is needed; weaknesses in audit arrangements for the State Bank of Vietnam contributed to an extended hold-up of Fund concessional assistance under the PRGF.
  - Resumption of lending under the PRGF will require these weaknesses to be adequately addressed.
  - Call for Government to expand resources of the State Audit of Vietnam and utilize available technical assistance.
- Grassroots Democracy and participation:
  - Decree 79 on Grassroots Democracy introduced; PPAs suggest growing knowledge among commune officials but limited knowledge in poor communities about rights and obligations.
  - Recommendation to examine constraints on building transparency, accountability and participation; investigate incentives at commune level beyond capacity constraints.
  - Passage of Decree 88 on local associations provides a legal framework; staffs encourage Government consultations with local organizations as implementing guidelines are drawn up.
  - Decree is testing ground for a Law on Associations on the National Assembly legislative agenda for 2004.
- Anti-corruption:
  - Diagnostic work on corruption is underway but proceeding slowly.
  - Government considering a draft Ordinance on corruption; staffs stress legislation should be informed by a thorough analysis of extent and nature of corruption.
  - Strong encouragement for open discussion of the draft Ordinance and underscoring linkages between corruption and complex and non-transparent regulatory structures.

### Monitoring, coordination, and donor harmonization
- Monitoring and evaluation:
  - Annex updates most indicators of the CPRGS monitoring framework, enabling assessment of progress against VDGs and targets.
  - Poverty and social data partly derived from the 2002 VHLSS; 2002 VHLSS data have not yet been made publicly available despite the new Statistics Law adopted in 2003.
  - Progress towards compiling an overview of agreed definitions of all 136 CPRGS indicators with corresponding information sources.
  - Recommendation to develop a shorter list of “core” indicators to reduce monitoring burden, especially at the provincial level.
- Coordination mechanisms and donor harmonization:
  - Inter-Ministerial Working Group and CPRGS Secretariat activities described; challenges remain, including fostering participation across ministries and potentially needing more human resources.
  - Intention to integrate the CPRGS into five-year and one-year planning processes is welcomed.
  - Commendation for efforts to bring CPRGS to sub-national levels via information campaigns, regional workshops, and collaborative initiatives with provinces.
  - Government hopes to promote stronger, more poverty-focused planning in all provinces of Vietnam by 2008.
  - Recommendation for the CPRGS Secretariat to provide a framework for cross-province learning.
  - Report requests that official development assistance (ODA) be coordinated around CPRGS priorities and calls for harmonization and simplification of procedures.
  - Staffs view the series of PRSCs as valuable for developing coordinated dialogue; many donors indicate willingness to co-fund the next PRSC.
  - Inter-Ministry Working Group requests that direct support to CPRGS implementation focus on sub-national activities, structured within an agreed framework for cross-learning.

### Risks to the strategy and policy implications
- Identified medium-term risks:
  - (i) potential for significant investment misallocation in the government-controlled financial intermediation process, impairing growth and the fiscal position;
  - (ii) risk of a slowdown in private sector investment if weaknesses in the business environment are not adequately addressed;
  - (iii) threats to Vietnam's exports from protectionism and/or intensified competition from other exporting countries, partly as a result of the phasing out of the quotas established under the Multi-Fiber Agreement (MFA).
- Mitigating factors and policy needs:
  - Successful accession to WTO is important in minimizing export threats.
  - Macroeconomic policies, with monetary policy as the most flexible instrument, will need careful calibration to ensure an appropriate pace of demand expansion over the medium term.
- Political-economy and reform slippage:
  - Risks of slippage in public sector reform due to resistance from losers of reform.
  - Possibility of eroding political support or slowing momentum as benefits are shared unequally and certain groups bear disproportionate costs.
  - Reform costs could be higher than estimated if SOE reform remains sluggish or if new lending goes into unviable projects.
  - Potential significant increase in costs of re-capitalization of SOCBs if reform pace does not pick up and banks’ credit appraisal capacity is not substantially enhanced.
  - Failure to improve transparency of public finances and tackle corruption could defeat attempts to build modern governance.
- Distributional risks and analysis needs:
  - Risks for income distribution can be mitigated through prior analysis of poverty and social impact of proposed reforms.
  - Planned accession to WTO in 2005 will demand considerable analytical work to manage changes and minimize costs.
  - Development of a land market and distress sales of land flagged as under-explored areas for Poverty and Social Impact Analysis (PSIA); staffs encourage robust research.

### Conclusions and staff view
- Government progress:
  - Substantial progress in promoting economic growth and poverty reduction over the last year, demonstrated by macroeconomic data and credible evidence on social outcomes.
- Major challenges:
  - Keep the reform program on track while integration with the world economy proceeds faster than state-sector restructuring.
  - Slow progress in SOE reform and financial sector reform is a matter of concern.
  - Need to tackle growing inequality through improved targeting and redistributive mechanisms; address ethnic minority poverty and include unregistered migrants in development activities.
  - Improve quality of governance, cross-sectoral interaction (especially via the Inter-Ministerial Working Group), and center-province coordination.
  - Develop indicators for tracking progress in governance issues.
- Overall assessment:
  - Staffs of the World Bank and the IMF view the CPRGS as articulating a sound set of policies and programs.
  - Country efforts towards CPRGS implementation provide sufficient evidence of continuing commitment to economic growth and poverty reduction.
  - Despite challenges, progress in development outcomes and commitment to reform are strong enough to provide a credible framework for World Bank and IMF concessional assistance.
  - Access to such assistance is subject to meeting fiduciary and other safeguards requirements of the relevant lending institution.
  - Staffs recommend that the Executive Directors of the World Bank and the IMF support these conclusions.

*Source: Vietnam Growth and Reduction of Poverty Annual Progress Report of 2002-2003 (Report prepared by MPI and the CPRGS Secretariat); IMF/IDA staffs’ assessment as summarized in the provided content.*

### 1. The Comprehensive Poverty Reduction and Growth Strategy (CPRGS) was approved

### _cr0457 - 1. The Comprehensive Poverty Reduction and Growth Strategy (CPRGS) was approved

### Background and purpose of the Report
- CPRGS approved by the Prime Minister of Vietnam on May 21, 2002; discussed by the Boards of the IMF and IDA in July 2002.
- Government completed the “Vietnam Growth and Reduction of Poverty Annual Progress Report of 2002-2003” in November, 2003 — submitted as a first PRSP progress update.
- Report prepared by the Ministry of Planning and Investment (MPI) and the CPRGS Secretariat under the Inter-Ministerial Working Group.
- Drafting consulted Government and external partners (international donors, researchers, local and international NGOs); limited input from some key line ministries (e.g., Ministry of Agriculture and Rural Development).

### Overall assessment
- Report scope: evaluates economic growth and poverty reduction; policy implementation in 2002-2003; challenges and measures in poverty reduction and growth; strategy implementation, initial results and proposals; adds a new chapter on large-scale infrastructure.
- Staffs’ broad judgments:
  - Recognize rapid output growth despite international instability and SARS in early 2003.
  - Agree that some structural reform agendas have been slower than expected, notably SOE restructuring and ownership transformation, with implications for bank credit quality.
  - Praise candid assessment of social issues: growing inequalities, poverty among ethnic minorities, challenges faced by unregistered or temporarily registered rural-urban migrants, governance and corruption concerns.
  - Note progress measured against Vietnam Development Goals (VDGs) and CPRGS targets; governance monitoring remains the most difficult area.
- Key staff recommendations for future reports:
  - Better articulation of linkages between achievements and policy actions.
  - Candid assessment of potential risks associated with current policy stances.
  - More explicit description of how the PIP and the annual budget link to CPRGS implementation.
  - More explicit actions to tackle poverty among ethnic minorities and other vulnerable groups.
  - Include a more explicit discussion of planned actions, including an updated policy matrix.
  - Reflect approved targets from the annual socio-economic development plan for 2004 where relevant.
  - Capture outcomes of CPRGS workshop (Haiphong, October 2002) and Government determination to accelerate WTO access.
  - Develop greater cross-ministry debate and involvement; integrate CPRGS with five year and one year planning and resource allocation processes.
  - More active Ministry of Finance (MOF) role over the next two years; incorporate Public Expenditure Review lessons; develop sectoral and provincial MTEFs.

### Implementation — headline macro and external indicators
- GDP grew at 7 percent in the last year.1
- Exports expanded by 22 percent.
- Actual inflow of foreign direct investment (FDI) increased by 10 percent.
- Poverty reduction pace: falling by the equivalent of two percent of the population every year.
- Staffs note IMF staff GDP estimates are somewhat lower than official estimates.

### A. Poverty reduction — findings and concerns
- 1993–2002 poverty trend:
  - Proportion of population living in poverty declined from 58 percent to 29 percent (2002 VHLSS).
- Data sources used: 2002 VHLSS, twelve Participatory Poverty Assessments (PPAs) from Summer 2003, and administrative sources.
- Key observations:
  - Progress is broad but uneven; certain groups and areas lag behind national averages.
  - Unregistered or temporarily registered migrants are particularly disadvantaged but not identifiable in VHLSS; recommendation to adjust VHLSS to track mobile populations.
  - Concern about growing inequality; need for improved targeting and redistributive mechanisms in public resource allocation.
  - Limited discussion in the Report of specific measures to improve poverty focus of public expenditure; stronger MOF involvement urged, especially as MTEFs are developed.
- Ethnic minority poverty:
  - Ethnic minorities account for 30 percent of the poor — more than double their share in the population as a whole.
  - Staffs warn ethnic minorities could represent more than 40 percent of the poor in 2010 in the absence of bold and committed action.
  - Passage of the new Land Law could allow land allocation practices better suited to ethnic minorities if implementing guidelines are well-designed.
  - Dependence on fragile forestry lands raises issues for reform of State Forestry Enterprises and ownership/control of forestry lands.
  - Staffs strongly encourage involving ethnic minority people in developing actions intended to benefit them.
- Gender dimensions:
  - Limited attention in the Report to gender aspects of poverty.
  - CPRGS commitment to reduce women’s work burden and domestic violence not thoroughly discussed; PPAs suggest these issues create hardship for women.
  - Staffs urge disaggregation of more data by sex in future tracking.

### B. Macroeconomic policies — assessment and recommendations
- Medium-term macroeconomic framework in original CPRGS (Appendix 2) remains broadly appropriate; updating and extension to cover years 2005-06 are called for.
- Projections and performance:
  - Real GDP growth expected to continue on a strong trajectory over the medium-term.
  - Inflation achieved through 2003 and can be maintained at present moderate levels of 3-4 percent per annum with appropriate monetary management.
  - Fiscal balance (excluding onlending) kept within program objectives during 2002-03; budgetary revenue performance encouraging.
  - Report highlights surging trade and current account deficits in the last year despite strong export growth; external position considered manageable given ongoing capital inflows but merits continued review as a possible indicator of excess demand pressures.
- Staff recommendations and concerns:
  - Elaborate an updated macroeconomic framework extending through 2006; consider frameworks explored in 2003 Article IV discussions with IMF staff.
  - Concerns about rising public debt levels over the medium-term due to trend growth in onlending operations and uncertain (but potentially sizeable) costs of state bank and enterprise reform.
  - These public debt issues require substantial further government consideration.

### C. Structural reforms — progress and risks
- Trade and openness:
  - Impressive progress opening trade, promoting exports and international integration; Government committed to AFTA, the USBTA, and WTO accession.
  - Government developing a detailed, prioritized, time-bound action plan to prepare for WTO membership by end 2005.
  - WTO accession expected to impede implementation of new protectionist policies; World Bank coordinating donor assistance and supporting Poverty and Social Impact Assessments related to trade measures.
- Business environment:
  - Considerable improvements since the Enterprise Law; simplification of registration (one-stop one-stamp service), phasing out dual pricing.
  - Scope for further initiatives drawing on Government-private sector dialogue (Vietnam Business Forum).
- SOE and banking sector reform — constraints and warnings:
  - Pace of SOE and banking reform slower than envisaged; strategy distinguishes strategic sectors (SOE lead role) and non-strategic sectors (divest via equitization).
  - Limited progress improving SOE governance; equitization program behind schedule and masterplan revised mid-2003.
  - Staffs recommend a fuller assessment of obstacles to SOE reform and clearer definition of how to overcome them.
  - Banking sector efforts: improve SOCBs’ operational capabilities and accounting; liberalize interest rates; shift policy-based lending from SOCBs to specialist government financial institutions.
  - Staff concerns:
    - Exceptionally rapid pace of credit expansion in some SOCBs could further burden balance sheets.
    - Sluggish NPL resolution linked to slow SOE reform.
    - Sizeable future capital needs of SOCBs unlikely to be met from internal resources given low profitability.
    - Risk of build-up of quasi-fiscal liabilities in the banking system unless carefully managed.

*Source: Vietnam Growth and Reduction of Poverty Annual Progress Report of 2002-2003, submitted as the first PRSP progress update (Report prepared by MPI and the CPRGS Secretariat); IMF/IDA staffs’ assessment as summarized in the provided content.*

### 23. The Report provides a very comprehensive discussion of the role of infrastructure in

### _cr0457 - 23. The Report provides a very comprehensive discussion of the role of infrastructure in

### Infrastructure and public investment
- Large-scale infrastructure projects, if based on a sound cost-benefit analysis and implemented properly, should contribute to significant output growth and poverty reduction in Vietnam.
- The staffs commend the policy focus of the large-scale infrastructure chapter.
- Identified gaps and recommendations:
  - The chapter does not provide clear guidelines on how to screen projects so that they meet the policy goals — an overarching priority if public investment projects are to contribute to growth and poverty alleviation objectives.
  - A more detailed discussion is needed on how to integrate capital expenditures (currently coordinated by MPI through the PIP) with recurrent expenditures (coordinated by the MOF through the budget).
  - Slow integration of the PIP into a broader medium-term expenditure framework linking capital and recurrent expenditures is a concern.

### Health and education
- Health:
  - The Report documents developments in health but understates some achievements’ potential impact on poverty (for example, recent achievements in nutrition and disease control, especially success in containing SARS).
  - Decree 139 on the provision of Health Care Funds for the Poor (HCFP) is identified as an important step for affordable access to health services for the poor.
  - The staffs welcome the intention to increase the health budget, which is currently low as a proportion of total expenditure by international standards.
- Education:
  - Progress hinges on financing and targeting issues as Vietnam moves towards increased decentralization.
  - The National Education for All Action Plan initiative (not described in detail in the Report) is cited as a relevant precedent:
    - It is a national plan with strong ownership.
    - It establishes standards for the quality of basic education to apply throughout the country.
    - It will address norms for allocation of recurrent expenditure and the development of a MTEF for the sector.
    - It requires appropriate targeting of communes and targeting of poor households for education fee exemptions.
  - The staffs encourage applying successful features of this approach (definition of quality standards, development of MTEFs, use of proper targeting) to other sectors.

### HIV/AIDS prevention and response
- The Report recognizes the potential threat as HIV/AIDS moves from high-risk groups to the general population.
- The Government has passed a new HIV/AIDS strategy outlining a multi-sectoral approach.
- The staffs stress the need for urgent and bold action to prevent a generalized epidemic, involving:
  - (i) de-stigmatizing HIV/AIDS by treating it as a social trauma rather than a social evil;
  - (ii) disseminating information on preventive measures such as barrier methods to avoid HIV contamination;
  - (iii) facilitating access to confidential and voluntary testing;
  - (iv) including HIV/AIDS issues in school curricula;
  - (v) offering appropriate and affordable care and treatment and supporting adults and children affected and infected by HIV/AIDS;
  - (vii) involving people living with HIV/AIDS in policy making for HIV/AIDS prevention and project design;
  - (viii) ensuring leadership and commitment at the highest level of Government in the fight against HIV/AIDS;
  - (ix) ensuring that the combat of HIV/AIDS is acknowledged by the whole of Government to be mainstreamed in all sectors.

### Targeted programs, evaluation, and social protection
- The Government has initiated evaluations of national targeted programs, particularly:
  - the Hunger Eradication and Poverty Reduction Program, and
  - Program 135 to assist the poorest communes.
- The staffs believe evaluations and analytical work could help redefine targeted programs to maximize benefits for the poor.
- Recommended attention areas:
  - Use findings to direct both activities funded in future targeted programs and the mechanisms/principles guiding implementation.
  - Mechanisms for improved targeting and for ensuring participatory and decentralized management deserve particular attention.
- The staffs commend the Government on implementation of the safety net for laid-off SOE workers, noting it was based on extensive consultation and analysis and a recent survey shows it is working well.

### Governance
- Recognized achievements:
  - Rapid expansion of the “one-stop shop” model to more than 33 provinces and selected ports.
  - Passage of the Law on the Promulgation of Legal Documents, improving transparency in the legal sector and increasing public consultations in law-making.
  - Amended State Budget Law and new Law on the Organization of People’s Committees and People’s Councils establishing a basis for improved accountability in a decentralized environment.
- Fiscal and monetary transparency and oversight:
  - Commendation for MOF steps in publishing budget data, including establishing a website.
  - Need for substantial improvement in compilation and release of fiscal data to allow better tracking of budgetary expenditure composition, extra-budgetary funds (such as the Development Assistance Fund), and public debt levels.
  - Need for a more transparent approach to monetary data, including regular public release of data on foreign reserves and other key items of the central bank balance sheet.
  - Need for significant enhancement of the capabilities of the State Audit of Vietnam to enhance oversight and accountability.
  - Weaknesses in audit arrangements for the State Bank of Vietnam (identified in implementing Fund safeguards policy) contributed to an extended hold-up of Fund concessional assistance under the PRGF; resumption of lending under the PRGF will require these weaknesses to be adequately addressed.
  - Call for the Government to expand the resource capabilities of the State Audit of Vietnam and utilize available technical assistance.
- Grassroots Democracy and participation:
  - Introduction of Decree 79 on Grassroots Democracy; PPAs during Summer of 2003 suggest growing knowledge among commune officials of obligations, but limited knowledge in poor communities about rights and obligations.
  - Recommendation to examine constraints on building more transparency, accountability and participation; investigate incentives at commune level beyond capacity constraints.
  - Passage of Decree 88 on local associations provides a legal framework; staffs encourage Government consultations with local organizations as implementing guidelines are drawn up.
  - The Decree is testing ground for a Law on Associations on the National Assembly legislative agenda for 2004.
- Anti-corruption:
  - Diagnostic work on corruption is underway but proceeding slowly.
  - Government considering a draft Ordinance on corruption; staffs stress legislation should be informed by a thorough analysis of extent and nature of corruption.
  - Strong encouragement for open discussion of the draft Ordinance and underscoring linkages between corruption and complex and non-transparent regulatory structures.

### Monitoring and evaluation
- The annex to the Report updates most indicators of the CPRGS monitoring framework, enabling assessment of progress against VDGs and targets.
- Data and statistics:
  - Poverty and social data are partly derived from the 2002 VHLSS, whose high quality reflects growing capacity of the General Statistics Office.
  - 2002 VHLSS data have not yet been made publicly available despite the new Statistics Law adopted in 2003 committing to greater data dissemination.
- Indicators and recommendations:
  - Progress made towards compiling an overview of agreed definitions of all 136 CPRGS indicators with corresponding information sources.
  - Scope for cross-sectoral discussion (perhaps via the Inter-Ministerial Working Group) on definitions and reliable data collection methods.
  - Recommendation to develop a shorter list of “core” indicators to reduce the burden of monitoring and evaluation, especially at the provincial level.

### Coordination mechanisms and donor harmonization
- Institutional arrangements:
  - Inter-Ministerial Working Group and CPRGS Secretariat activities described; staffs concur that challenges remain and many are correctly identified.
  - Particular concern: need to foster participation across ministries regarding implementation; more human resources might be needed.
- Integration into planning and sub-national rollout:
  - Intention to integrate the CPRGS into five-year and one-year planning processes is welcomed.
  - Commendation for efforts to bring CPRGS to sub-national levels via information campaigns, regional workshops, and collaborative initiatives with provinces.
  - Government hopes to promote stronger, more poverty-focused planning in all provinces of Vietnam by 2008.
  - Recommendation for the CPRGS Secretariat to provide a framework for cross-province learning.
- ODA coordination and PRSCs:
  - Report requests that official development assistance (ODA) be coordinated around CPRGS priorities and calls for harmonization and simplification of procedures.
  - Strong support from Government and donors for using CPRGS as a guide for donor assistance was noted.
  - The staffs view the series of PRSCs as valuable for developing coordinated dialogue; current indications are that a large number of donors would like to co-fund the next PRSC.
  - Inter-Ministry Working Group requests that direct support to CPRGS implementation focus on sub-national activities, structured within an agreed framework for cross-learning.

### Risks to the strategy
- Identified medium-term risks include:
  - (i) the potential for significant investment misallocation in the government-controlled financial intermediation process, impairing growth and the fiscal position;
  - (ii) the risk of a slowdown in private sector investment if weaknesses in the business environment are not adequately addressed;
  - (iii) threats to Vietnam's exports from protectionism and/or intensified competition from other exporting countries, partly as a result of the phasing out of the quotas established under the Multi-Fiber Agreement (MFA).
- Mitigating factors and policy needs:
  - Successful accession to WTO is important in minimizing export threats.
  - Macroeconomic policies, with monetary policy as the most flexible instrument, will need careful calibration to ensure an appropriate pace of demand expansion over the medium term.
- Political-economy and reform slippage:
  - Risks of slippage, especially in public sector reform, due to resistance from losers of reform.
  - Possibility of eroding political support or slowing momentum as benefits are shared unequally and certain groups bear disproportionate costs.
  - Reform costs could be higher than estimated if SOE reform remains sluggish or if new lending goes into unviable projects.
  - Potential significant increase in costs of re-capitalization of SOCBs if reform pace does not pick up and banks’ credit appraisal capacity is not substantially enhanced.
  - Failure to improve transparency of public finances and tackle corruption could defeat attempts to build modern governance.
- Distributional risks and analysis needs:
  - Risks for income distribution can be mitigated through prior analysis of poverty and social impact of proposed reforms.
  - Planned accession to WTO in 2005 will demand considerable analytical work to manage changes and minimize costs.
  - Staffs identify development of a land market and distress sales of land as under-explored areas for Poverty and Social Impact Analysis (PSIA) and encourage robust research.

### Conclusions and staff view
- The Government of Vietnam has made substantial progress in promoting economic growth and poverty reduction over the last year, demonstrated by macroeconomic data and credible evidence on social outcomes.
- Major challenges recognized:
  - Keep the reform program on track while integration with the world economy proceeds faster than state-sector restructuring.
  - Slow progress in SOE reform and financial sector reform is a matter of concern.
  - Need to tackle growing inequality through improved targeting and redistributive mechanisms; address ethnic minority poverty and include unregistered migrants in development activities.
  - Improve quality of governance, cross-sectoral interaction (especially via the Inter-Ministerial Working Group), and center-province coordination.
  - Develop indicators for tracking progress in governance issues.
- Overall assessment:
  - The staffs of the World Bank and the IMF view the CPRGS as articulating a sound set of policies and programs.
  - Country efforts towards CPRGS implementation provide sufficient evidence of continuing commitment to economic growth and poverty reduction.
  - Despite challenges, progress in development outcomes and commitment to reform are strong enough to provide a credible framework for World Bank and IMF concessional assistance.
  - Access to such assistance is subject to meeting fiduciary and other safeguards requirements of the relevant lending institution.
  - The staffs recommend that the Executive Directors of the World Bank and the IMF support these conclusions.

*Source: _cr0457 - 23. The Report provides a very comprehensive discussion of the role of infrastructure in*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2004/_cr0457.pdf_