Vietnam Country Update #2: MDB Investment August-October 2004

18 November 2004

The Vietnam Country Updates provide information about recent developments, decisions, civil society concerns and recommendations related to Multilateral Development Bank (MDB) involvement in Vietnam, including that of the World Bank (WB), and the Asian Development Bank (ADB). The updates are emailed approximately every three months to a list of individuals and civil society organizations in Vietnam and abroad who are interested in monitoring MDB investment and project impacts in the country. This Update lists all approved MDB projects/programs to Vietnam since January 2003. Similar Updates are also being developed for Burma, Cambodia, Indonesia, Thailand, and Laos and can be read at http://www.bicusa.org/bicusa/issues/asia/index.php#country . If you would like to be included or removed from the list, or have any questions, please email Mishka Zaman (moderator) at .

The Bank Information Center (BIC) is an independent, non-profit, non-governmental organization that aims to empower citizens in developing countries to influence World Bank and other Multilateral Development Bank (MDB) activities in a manner that fosters social justice and ecological sustainability. BIC advocates for greater citizen participation, transparency, and public accountability. For more information about BIC, see www.bicusa.org.

I. Recent News and Developments

ADB approves $100 million loan for SME development in Vietnam
The Asian Development Bank has approved a $100 million loan package to help improve business environment that would support the development of small and medium-sized enterprises (SMEs) in Vietnam. The project is ADB's first policy loan in Vietnam specifically designed to promote an enabling environment for the SME sector. It aims to enhance the policy and regulatory framework, improve SMEs' access to finance and land use rights, and help increase their access to domestic and international markets by improving industrial and technical standards. The project loan is divided into two subprograms. The first is to be undertaken from November 2004 to May 2006, and will be financed by a $60 million loan from ADB's concessional Asian Development Fund (ADF). After the successful completion of the first subprogram and based on resource availability, a $40 million loan for the second subprogram will be processed.

ADB approves $776 million in loans for Vietnam during 2005-2006
The Asian Development Bank (ADB) plans to lend Vietnam about $776 million over the next two years, according to its latest Country Strategy and Program (CSP) Update for 2005-2006 released in July. The proposed ADB loan total is based on annual commitments of $178 million from its concessional Asian Development Fund, which supports the sustainable development of ADB's poorest members, and about $210 million from its ordinary capital resources. In addition, $79 million is planned for subregional projects. The final allocation will depend on availability of resources and country performance. A mix of loan and grant co-financing from development partners will be sought to support ADB's thematic priorities.

PM approves $80 million education project funded by ADB
Prime Minister Phan Van Khai has recently given the nod to an $80 million project to improve junior secondary school education, financed by the Asian Development Bank (ADB). The project aims at curricular reform and the provision of education aids to disadvantaged provinces nationwide. The ADB will provide $55 million in soft loans for the project with a maturity of 32 years and an interest rate of 1% for the first eight years and 1.5% for the remaining period. The remaining investment will come as Vietnamese reciprocal capital. The project will spend $31 million for building nearly 1,500 classrooms, and hundreds of libraries and laboratories, $11 million for buying learning equipment, and $19 million for diversifying the syllabus. (Source: Vietnam News Briefs, October 19, 2004).

World Bank pledges $35 million for HIV/AIDS prevention in Vietnam
The World Bank has announced that it will allocate $35 million for Vietnam's HIV/AIDS prevention strategy. The amount was reported as the Bank's largest non-refundable aid to Vietnam in a bid to help the country reduce the rate of HIV/AIDS infection among residents to 0.3%. The majority of the funding, around $21.6 million, will support localities in Vietnam in carrying out programs to prevent the deadly disease. Another $8.3 million will be used to map out policies and realize the National HIV/AIDS Prevention and Care Program, and the remaining $5.1 million will be poured in project management from central to provincial levels. The Bank will officially disburse the capital to 20 provinces and cities next April. (Source: Vietnam News Briefs, October 13 2004)

World Bank commits to extend aid to Vietnam's agriculture sector
The World Bank Director of the Agriculture and Natural Resources Department in Asia-Pacific Region confirmed in September the Bank's continued commitment to Vietnam's agriculture sector for 2006-2010. Expected projects include irrigation development in mountainous areas and in areas intensively farming coffee, tea and sugarcane, flood drainage systems in the Mekong Delta, and upgrading dykes, dams and disaster reduction facilities. Since 1995, the Bank has signed 14 projects worth more than $1 billion for the agriculture sector. In the first eight months of this year alone, the Bank has signed four projects totaling $200 million, including support for avian flu control, a project on forestry development, and a project on irrigation development. (Source: Vietnam News Briefs, September 24, 2004)

Vietnam economic growth to remain strong in 2004 and 2005
Vietnam's economic performance in the first half of 2004, supported by the better business environment and robust external demand, suggests that gross domestic product (GDP) growth will remain above 7% in 2004 and 2005, according to the Asian Development Outlook 2004 Update released in September. Risks to the outlook include rising inflation and possible public health scares such as the Avian flu. With the ending of the Multifiber Arrangement quotas at the end of this year, members of the World Trade Organization (WTO) including many of Vietnam's competitors will secure greater export opportunities. Vietnam, yet to enter WTO, will still face constraints on its garment exports. But a new quota with the U.S. and an expanded quota with the EU, and market diversification are likely to make the prospects reasonable for garment exports in 2005. To read the full ADB press release, go to http://www.adb.org/Documents/News/2004/nr2004119.asp.

II. MDB Policy Updates and Consultations

ADB releases second draft of new disclosure policy; draft now open for comments
On October 26, the ADB released the second draft of its Public Communications Policy (PCP) for a 30-day commenting period. ADB’s second PCP draft proposes that: the minutes of Board meetings, including ED votes, be disclosed; a tentative schedule of Board meetings be disclosed up to three weeks in advance; at least two draft CSPs/RCSPs be disclosed for consultation during the development of these strategies; and that ADB work towards developing a translation framework and doing better outreach in borrowing countries through public information centers. ADB is receiving comments on the 2nd draft at until November 24. Comments will be used to prepare a PCP Working Paper, which will be presented to ADB’s Board of Directors in January 2005. For more information on ADB’s PCP review, see ADB’s website on developing a new Public Communications Policy and BIC’s webpage on ADB’s disclosure policy review.

ADB launches review of its governance and anticorruption policy implementation
The Asian Development Bank has launched a review of the implementation of its Governance Policy and Anti-corruption Policies, which hopes to improve its understanding on how effectively governance and anticorruption policies have been operationalized in its country strategies and lending activities. The outcome of the review is expected to be a Medium-Term Agenda and Action Plan for the Governance and Anticorruption Policies for 2005-2009. The ADB states that the implementation of the Governance/Anticorruption Policy Review "is allowed to make recommendations for policy changes.". The ADB has completed and publicly disclosed its desk review. Country level consultations have been planned in 4 countries, namely: Indonesia (Oct 26-28), Vietnam (Nov 10-12), Nepal (Nov 15-18), and the Philippines (Nov 23). Those who are interested in working on the review or participating in a consultation can contact , ADB Consultant, and , Principal Governance Specialist. A 2004 assessment by BIC & Terra entitled "Zero Tolerance" revealed that the ADB almost never implements its anti-corruption policy.

ADB launches review of its Private Sector Development Strategy implementation
ADB is currently reviewing the implementation of its Private Sector Development Strategy, which will assess how effectively the development strategy is being operationalized in individual developing member countries. During the Review exercise, ADB will seek comments from internal and external stakeholders on the preliminary findings of the review. It involves a desk-based assessment, which is currently ongoing, and an internal and external stakeholders consultation, which are going to be held in Kazakhstan, Pakistan, Vietnam, and the Philippines. Consultations in Mongolia have already taken place. The exact date for the other consultations is yet to be determined but have started in September and will end in November. The person in charge of the review process is , Senior Governance Specialist. The external consultations for this review do not consist of events where all stakeholders gather, but Settle and his team are trying to approach NGOs individually, through e-mail and in meetings.

ADB finalizing its revised proposal on its Water Policy revision
ADB has finished collecting comments from water agencies, NGOs, and other interested stakeholders regarding its Water Sector Committee’s proposed revision. ADB staff has reviewed the nineteen comments and are now finalizing a revised proposal for the approval of ADB's Board of Directors. The revised proposed paragraph is expected to be publicly disclosed before the Board discussion, expected to take place before the end of the year. The intended revision seeks to give stakeholders only the “opportunity” to comment on such projects, in sharp contrast to the original Water Policy requiring “all government and non-government stakeholders” to agree on the justification for large water resources projects. Civil society organizations have urged the ADB President to hold true to its past commitment to the recommendations of the World Commission on Dams, which recognizes that free, prior and informed consent and other forms of public acceptance are important principles in development policy.

ADB to move forward on a Regional Cooperation Strategy and Program in South Asia
ADB has been formulating Regional Cooperation Strategy and Programs (RCSP) for specific regions/subregions in Asia, intended as a road map to guide ADB’s regional operations. RCSPs define a five-year strategy supported initially by a 3-year program of assistance. ADB has already completed its RCSP for the Greater Mekong Subregion (2004-2008) and Central Asia (2005-2007), and is presently formulating its RCSP for South Asia. In April 2004, ADB and the South Asia Association for Regional Cooperation (SAARC) signed a Memorandum of Understanding (MOU) that aims to strengthen cooperation between the two institutions. The MOU will help promote mutually interested regional programs/projects and help establish linkages with other regional initiatives.

ADB remains silent on its Forest Policy revision
ADB has not commented nor released any information regarding a revised Draft Forest Policy Paper that was due to be released by July 2004 for stakeholder comments. The June 2003 version currently available at the ADB website has, since July 2003, already been rejected by the Board of Directors. Only a period of four weeks has been allocated for comments when the revised draft is released. A number of concerned citizens have requested information from the ADB regarding the status of the revised Draft and other related information, but no answer has been given to date. The June 2003 draft has already received criticisms, in that it is a step backwards from the Bank's existing 1995 Policy on Forestry.

Monitoring framework for ADB’s environment policy launched
The Philippine Rural Reconstruction Movement and NGO Forum on ADB have released a publication entitled “ADB and the Environment: A Monitoring Framework for ADB’s Environment Policy.” It is based on four case studies that evaluate the implementation of ADB's environment provisions, which are the November 2002 Environment Policy and the preceding Operations Manual Sections. The case studies are 1) the Southern Transport Development Project, Sri Lanka, 2) the Sundarbans Biodiversity Conservation Project, Bangladesh, 3) the Nucleus Agro-Enterprise Project, Papua New Guinea, and 4) the Marcopper Mining Corporation, Philippines. The second part of the publication consists of summaries of all of the ADB's existing environmental provisions and is intended as an easy-to-use monitoring tool for affected communities or involved NGOs.

IFC launches Review of Social and Environmental Safeguard Policies and Disclosure Policy
The International Finance Corporation has launched a fundamental revision of its “safeguard” policies – the environmental and social policy requirements that govern its lending operations. Instead of ten safeguard policies, the IFC has proposed a set of “performance standards” for its private sector clients that allow much greater flexibility in implementation. For the disclosure policy consultations, the IFC has only released a “concept note” that represents a fundamental shift from the traditional “document-based” disclosure policy to a more “principle-based” policy. The IFC is also pursuing an extremely rapid and selective plan for engaging external stakeholders on these policy revisions, planning to engage external stakeholders for only four months. Four regional consultations are to occur between September–December 2004. The IFC will seek Board approval in February 2005. See www.ifc.org/policyreview for both draft policy papers.

121 civil society members claim that IFC consultation process is “seriously flawed”
On September 16, 121 civil society organizations sent a letter to World Bank President James Wolfensohn and IFC Managing Director Peter Woicke, highlighting the shortcomings of the IFC’s consultation process and its draft environmental and social performance standards. Civil society organizations noted a major shift from environmental and disclosure standards that are “mandatory and compliance-based…to a mainly discretionary approach.” The letter registered two major complaints: an inadequate timeframe and the lack of available materials. The civil society organizations demanded that IFC suspend the start of the consultation process on the Safeguard Policy Update until all relevant information had been made publicly available in all appropriate languages at least 30 days prior to the first regional consultation. They also argued that IFC extend substantially the period for consultation on the first draft consultation documents.

Launch of 'Penang Paper': A strategy report from 60 NGOs on the WB/IMF
The “60 Years of the World Bank and the IMF: Civil Society Strategy Meeting Summary Report” has been released, which is a product of the January 2004 gathering in Penang of over 60 civil society organizations to exchange analyses, experiences, strategies, and alternatives to the policies and practices of the Bretton Woods Institutions. Year 2004 marks the 60th anniversary of the World Bank and IMF, and the conference helped bring together civil society representatives from over 20 countries. The summary report distills some of the key themes and messages that emerged from the vibrant discussions in Penang and presents a common agenda for moving forward.

Indian NGOs reject proposed 2005-2008 World Bank Country Assistance Strategy for India
In a National Consultation held in New Delhi on August 7, several civil society organizations in India rejected the World Bank's draft Country Assistance Strategy (CAS) for 2005 to 2008. These organizations, representing major national alliances, rejected the CAS on the basis that the drafting process lacked transparency and adequate consultation from both Indian Parliament and the State Legislatures, and that lending is made conditional on the privatization and "reform" of key sectors. The proposed CAS, which sets an upper IBRD lending ceiling of $2.15 billion, calls for expanded Bank support for infrastructure projects, which may include large hydropower projects. Extensive state reforms, including large-scale privatization in power and agriculture, are also required of the Indian government. Noting the lack of national debate on the strategy, the National Consultation called on the Bank to withdraw the draft and re-engage in extensive consultations with civil society.

III. MDB Country Strategy in Vietnam

Vietnam’s Poverty Reduction Strategy Paper (PRSP)
The basis for cooperation between the Vietnamese Government and the World Bank is its Poverty Reduction Strategy Paper (PRSP), which is known as the Comprehensive Poverty Reduction and Growth Strategy (CPRGS) in Vietnam. The paper, finalized in May 2002, sets out three broad objectives: i) to support Vietnam’s transition to a market economy “with a socialist orientation”; ii) enhancing inclusive and sustainable development through the provision of social services to the disadvantaged; iii) promoting good governance. The strategy requires the adoption of major restructuring reforms and investment, which it hopes shall help the country achieve its target of reducing poverty by 40% by 2010. Related documents that are publicly available include: ActionAid’s critiques of the PRSP approach, Eurodad critiques, an annual PRSP Progress Report released by the government of Vietnam in November 2003, the Joint Staff Assessment of the PRSP Annual Progress Report prepared by the staff of the International Development Association and IMF, and other extensive information on World Bank activities in the country by the Vietnam Development Information Center.

World Bank’s Vietnam Country Assistance Strategy for 2003-2006
Since resuming lending in 1994, the World Bank has supported 45 projects through its International Development Association fund (Vietnam is currently the largest IDA-only borrower), and has pledged $3.8 billion, of which $1.7 billion has been disbursed. There are currently 36 active and publicly disclosed projects with a net amount of about $3 billion. The World Bank periodically develops a Country Assistance Strategy (CAS) to outline its plan of investment to aid the implementation of a country’s PSRP. The CAS determines lending levels, operations and economic and sector research that it will set over a subsequent 1 to 5 year period. The current Country Assistance Strategy (CAS) hopes to support the three major goals of Vietnam’s PSRP and lays out a suggested lending program of $300-$760 million per year. In February 2004, the World Bank released a Country Assistance Strategy Progress Report for Vietnam, which emphasized that the current objectives of the CAS remained valid but proposed changes in the “mode of delivery.” The report also calls on the Bank to increase lending for large-scale infrastructure projects, “in light of the huge infrastructure demands” currently occurring in Vietnam.

ADB Country and Strategy Program Update (CSPU) for Vietnam 2005-2006
The CSP lays out ADB's medium-term development strategy and identifies specific poverty reduction strategies. The ADB also produces CSP Updates every year that take into account the continued relevance of the CSP and its implementation. ADB’s CSP for Vietnam for 2004-2006 focuses on four main strategies: i) sustainable growth; ii) inclusive social development; iii) good governance; and iv) a geographic focus on the central region. The current CSP Update identifies a possible blended lending program of approximately $388 million per year for 2005 and 2006, in addition to private sector operations and cofinancing. Six of the ADF projects identified for 2005-2006, totaling $321 million, will focus on the central region, where poverty incidence remains the highest. ADB plans to prepare a new CSP for Vietnam in 2005, to align with the Government’s 5-year plan for 2006-2010, which is currently under preparation.

IV. Active and Planned MDB Investments by Sector: Summary Tables

Active and Planned MDB Investments by Sector: Summary Tables

V. Tools for Civil Society

World Bank Email Updates
The World Bank periodically sends out regional updates to subscribers through email. These updates include information on recently approved projects, publications, and other major initiatives in that particular region. Visit http://www.worldbank.org/regionalupdates to subscribe to the East Asia and Pacific Regional Update.

Resource Book for Civil Society on Multilateral Development Banks and Burma
This Resource Book developed by the Bank Information Center helps those working toward democracy in Burma to learn about MDBs, so that as the MDBs start to operate fully in Burma, they can work to ensure that sustainable development and good governance are incorporated into MDB operations. To access the Resource Book, please visit http://www.bicusa.org/bicusa/issues/misc_resources/1629.php.

Bank Information Center Toolkits for Activists
BIC’s Toolkits are a series of fact sheets that describe the structure, functions, policies, and procedures of the World Bank Group. The Toolkits are intended to support NGOs, grassroots social movements, and other civil society organizations in their efforts to monitor and influence World Bank-financed projects and environmental and social policies. To view the toolkits visit: http://www.bicusa.org/bicusa/issues/misc_resources/292.php

Toolkits on the Asian Development Bank are currently under preparation and will be available in November 2004.