Japan’s Development Cooperation in Vietnam―Supporting Broad-based Growth with Poverty Reduction―

GRIPS Development ForumMay 2002

National Graduate Institute for Policy Studies (GRIPS)
2-2Wakamatsu-cho, Shinjuku-ku, Tokyo
162-8677 Japan
E-mail: forum@grips.ac.jp

This document was prepared by GRIPS Development Forum in collaboration with the Embassy ofJapan in Vietnam, the Japan Bank for International Cooperation (JBIC), and the Japan International
Cooperation Agency (JICA) to serve as background information for the Vietnam-2002 Informal
Mid-Year Consultative Group Meeting (Ho Chi Minh City, May 23-24, 2002). While the views in
the document are closely coordinated with the above authorities, their final responsibility rests withGRIPS Development Forum. The drafting team included: Izumi Ohno (team leader), Yumiko Niiya(researcher) and Asuka Suzuki (research assistant). Editorial support was provided by Karin Hillen.

Acronyms and Abbreviations
ADB
AFTA
ASEAN
CDF
CG
CPRGS
E/N
FDI
GoV
IDCJ
IDTs
IMF
JBIC
JICA
L/A
MDGs
MOFA
MOLISA
MPI
NEU
NGO
NIES
ODA
OECD
PRGF
PRSC
PRSP
PWG/PTF
SME
SOE
UNDP
VDT
WTO

Asian Development BankASEAN Free Trade Area
Association of Southeast Asian Nations
Comprehensive Development Framework
Consultative Group
Comprehensive Poverty Reduction and Growth Strategy
Exchange of Notes
Foreign Direct Investment
Government of Vietnam
International Development Center of Japan
International Development Targets
International Monetary FundJapan Bank for International Cooperation
Japan International Cooperation Agency
Loan Agreement
Millennium Development Goals
Ministry of Foreign Affairs
Ministry of Labor, Invalids and Social Affairs
Ministry of Planning and Investment
National Economic University
Non-Governmental Organization
Newly Industrializing Economies
Official Development Assistance
Organization for Economic Cooperation and Development
Poverty Reduction and Growth Facility
Poverty Reduction Support Credit
Poverty Reduction Strategy Paper
Poverty Working Group / Poverty Task Force
Small and Medium Enterprises
State-Owned Enterprise
United Nations Development ProgrammeVietnam Development Targets
World Trade Organization

Japan’s Development Cooperation in Vietnam—Supporting Broad-based Growth with Poverty Reduction—

Table of Contents
Acronyms and Abbreviations
Maps
Chapter 1: Overview and Introduction …………………………………………….1
Summary
Main Features of Japan’s Development Cooperation in Vietnam
The Context of Asian Dynamism
Long-term Orientation and Real-sector Concern
Vietnam’s Development Vision and Japan’s ODA
Toward Broad-based Growth with Poverty Reduction
Chapter 2: General Overview of Japan’s ODA to Vietnam ………………………. 9
Overall Trends of Japan’s ODA to Vietnam
Country Assistance Strategy for Vietnam
Japan’s Approach to Development
Chapter 3: Main Features of Japan’s ODA to Vietnam ……………………………12
Human Resource Development and Institution Building
Infrastructure Development in Transport and Power
Support to Other Priority Areas
Chapter 4: Vietnam’s Development Vision and Japan’s ODA …………………… 20
Key Aspects of Vietnam’s Development VisionPartnership Platform for CPRGS
Japan’s Contribution to Vietnam’s Development Vision
Chapter 5: Toward Broad-based Growth with Poverty Reduction ……………… 26—Future Direction of Japan’s Contribution
Partnership Framework for the Implementation of Vietnam’s
Development Vision
Incorporating Real-sector Concern into Growth Strategy—The Case of
NEU-JICA Joint Research on “Industrial and Trade Policies under
Integration Age”
Conclusion—Future Direction of Japan’s Contribution

Bibliography ………………………………………………………………………… 31

BoxesBox 3-1
Box 3-2
Box 3-3

Conditionality in Economic Reform Support Loan
Views of Japanese Businessmen on Japan’s ODA to Vietnam
Three out of four surveyed Vietnam’s business persons perceive that Japan’s
ODA projects have impact on their business.

Box 4-1
Box 4-2

Vietnam’s Strategy for 2001-2010
Comprehensive Poverty Reduction and Growth Strategy

Box 5-1

NEU-JICA Joint Research Project

FiguresFigure 2-1
Figure 2-2
Figure 2-3

Volume of Japan’s ODA to Vietnam 1991-2000
Country Assistance Program for Vietnam
Japan’s ODA to Vietnam by Priority Area 1991-2001

Figure 3-1
Figure 3-2
Figure 3-3
Figure 3-4
Figure 3-5

Major Projects for Human Resource Development and Institution Building
Study on the Economic Development Policy in the Transition toward a
Market-Oriented Economy in the Socialist Republic of Viet Nam
Top 10 ODA Sectors in 2000
Japan’s Contribution to Vietnam’s Total Power Generation Capacity
Japan’s Contribution to Growth of Vietnam’s Power Generation Capacity

Figure 4-1
Figure 4-2

Vietnam’s Achievement in Poverty Reduction
East Asia Reduced Poverty Despite Currency Crisis

Figure 5-1
Figure 5-2

High Performing Asian Countries
Japanese Firms as Builders of Asian Production Network

Japan’s Development Cooperation in Vietnam―Supporting Broad-based Growth with Poverty Reduction―

Chapter 1

Overview and Introduction
Summary

As the top ODA donor in Vietnam, Japan has been strongly supporting Vietnam’s transition toa market economy and its socio-economic development. The purpose of this document is tohighlight the principal features and basic philosophy of Japan’s development cooperation in
Vietnam and to outline a road map for Japan’s continued active engagement in Vietnam’s
sustainable development in the future. In so doing, we pay due attention to the pastexperiences of East Asia’s development and Japan’s contribution to it through ODA, as wellas the strengthened coordination and partnership among donors in the last few years.
Since its full-scale resumption in 1992, Japan’s ODA in Vietnam has placed high priority to
the achievement of balanced economic growth with two clear goals: (i) creating the basic
conditions for sustainable growth; and (ii) supporting poverty reduction efforts (“Country
Assistance Program for Vietnam” by the Government of Japan, June 2000). To pursue theseinter-related goals, the following areas of assistance are specified:z human resource and institutional development, in particular the support for the transition
to a market economy;z infrastructure development with special attention to transportation and power;z agriculture and rural development;z education and health; andz environmental conservation.
Among these five areas, support for the transition to a market economy and infrastructuredevelopment are the outstanding features of Japan’s development cooperation in Vietnam
when compared with other donors’ assistance. They reflect Japan’s consistent philosophy indevelopment cooperation in Vietnam, which is as follows: recognizing the three strategictasks facing Vietnam, namely, (i) long-term development as a latecomer country; (ii) systemictransition to a market economy; and (iii) active and meaningful participation in East Asia’sdynamic production network, and respecting the will and determination of the People andGovernment of Vietnam, Japan wishes to support Vietnam’s balanced development process
consisting of the realization of high economic growth and coping with emerging social
problems which such growth tends to bring.
The key official documents embodying the medium- and long-term visions of the Vietnamese
Government are the Strategy for Socio-Economic Development in the Period 2001-2010 and
the Five-Year Plan for Socio-Economic Development 2001-2005 (both of which wereapproved by the Ninth Communist Party Congress in April 2001). These documents articulate
the areas in which policy efforts must be exerted over the next decade in order to attain thenational goal of “Industrialization and Modernization” by the year 2020.
1

Apart from this, the Vietnamese Government has since 1999 been actively engaged in the aid
partnership process featuring the Comprehensive Development Framework (CDF) and the
Poverty Reduction Strategy Paper (PRSP). The latter was later renamed the “Comprehensive
Poverty Reduction and Growth Strategy” (CPRGS) by the Vietnamese Government. The
Ministry of Planning and Investment (MPI) has assumed a central role in this process andclosely collaborated with other related ministries and agencies. Progress in this area has been
fairly smooth, with the following milestones: the preparation of Interim-PRSP (March 2000),
the presentation of the draft CPRGS at the CG Meeting (December 2001); the organization offour regional consultation workshops (plus NGO-organized six commune consultations) to
discuss the draft CPRGS (February-March 2002); and the finalization of CPRGS (May 2002).
Throughout this process, the Vietnamese Government has exercised strong ownership andmade an impressive effort to ensure broad participation of various stakeholders. This excellent
performance has been well recognized by the international community, and Vietnam’s
partnership experience is now regarded as “good practice.” Vietnam’s CPRGS is nationallyowned, comprehensive with a long-term vision, and growth oriented. These features are
consistent with the basic philosophy behind Japan’s development cooperation in Vietnam.
Japan, from the perspective noted above, has made important intellectual contributions to theestablishment of Vietnam’s development vision. These include: (i) advice on the recent two
Five-Year Development Plans (Sixth and Seventh) and the current Ten-Year Socio-Economic
Development Strategy during their formulation and implementation stages; (ii) active
participation in the Poverty Working Group/Poverty Task Force (PWG/PTF) in the process of
CPRGS preparation; and (iii) leadership role in such partnership efforts as the Transport
Sector Working Group, SME Promotion and Private Sector Development Partnership, and Ho
Chi Minh City ODA Partnership. It is hoped that the Vietnamese Government will deepen its
balanced growth strategy, taking into account the country’s specific circumstances in East
Asian dynamism and building on the two-tired approach that combines broad-based growthwith poverty reduction. The Japanese Government is determined to provide continued support
to such efforts by the Vietnamese Government.
The rest of this chapter discusses the ideas of real-sector concern and long-term orientation
which characterize Japan’s development cooperation in Vietnam, and stresses the importancefor Vietnam to formulate a realistic and outward-oriented growth strategy in the context ofEast Asia’s dynamic production network. Lastly, it clarifies Japan’s intention to makecontinued intellectual contributions, where it has comparative advantages, to the upgrading ofVietnam’s development vision through the donor-coordinated partnership process.

Main Features of Japan’s Development Cooperation in Vietnam
Since the full resumption of its aid to Vietnam in 1992, Japan has made important
contributions to the country’s transition to a market economy as well as to its economic andsocial development. In ODA volume, Japan has been the top donor in Vietnam since 1995.
Simultaneously, Vietnam is considered one of the most strategically important recipients forJapan’s economic cooperation. Vietnam ranked fourth (after Indonesia, China, and Thailand)in 1999 and second (after Indonesia) in 2000 among the recipients of Japan’s ODA (netdisbursement base)[MOFA 2001, OECD 2002].
The most notable features of Japan’s assistance to Vietnam, when compared with other donors,2are: (i) intensive cooperation for infrastructure development in the transport and power
sectors; and (ii) strong support for the transition to a market economy with long-term
developmental vision, through policy research, institution building and human resource
development. Japan has been the largest donor in the transport and power sectors, exceeding
the aid extended by the World Bank and the ADB in volume. Regarding (ii), in addition to alarge number of technical cooperation projects such as expert dispatch and development
studies, Japan has conducted a series of large-scale, policy-oriented programs including:z JICA-supported “Study on the Economic Development Policy in the Transition toward a
Market-Oriented Economy in the Socialist Republic of Vietnam” (“Ishikawa Project”);
z JICA-supported “Judicial System Support”; andz JBIC-financed “Economic Reform Support Loan” ( “New Miyazawa Initiative”).
This aid menu in Vietnam is unique even for Japan, because Japan provides no similarly
concentrated intellectual assistance to a single country anywhere else in the world.
The Japanese Government’s “Country Assistance Program for Vietnam” (June 2000) echoes
the importance of such an aid strategy. In it, Japan expresses its continued commitment tosupport Vietnam’s human resource development and institution building, industrial
development, and infrastructure development which improves the efficiency of private
investment. These will help Vietnam to further enhance the achievements of the Doi Moi
reform and raise income nationwide.
At the same time, it is necessary to address new social problems that emerge in the process of
rapid economic growth, such as the widening of regional and income inequalities, andenvironmental degradation associated with rapid urbanization. To promote equal and shared
growth, the above country assistance program also stresses the importance of focused
attention to these social problems. Thus, the program highlights the specific areas of pro-poor
support including: (i) agriculture and rural development (based on the fact that 60 percent of
the farmers belong to the poor); (ii) improving education and health; (iii) addressing theregional disparities among North, Central, South, Highlands, and Mountain areas; and (iv)protecting the environment which is deteriorating in the growth process.

The Context of Asian Dynamism
Vietnam’s international integration has been proceeding rapidly. With the restoration of
diplomatic relationship with the United States and entry into ASEAN in 1995, Vietnam
normalized its economic relations with major donors and international organizations by themid-1990s. Vietnam became a full-member of APEC in 1998 and signed a bilateral trade
agreement with the United States in 2001. Negotiations for WTO accession are continuing. In
a relatively short period, the Vietnamese economy has become deeply integrated into theglobal economy through trade, investment, and aid. Proper management of the integration
process has thus become a key to Vietnam’s development strategy.
During 1996-2000, the aggregate inflows of foreign direct investment (FDI) into Vietnam
amounted to as much as US$9.9 billion (implementation base). This was higher than US$6.9
billion of the total ODA disbursements for the five years and equaled approximately 70
percent of the total public investment mobilized by the state sector (not including ODA and3

FDI) in the same period [GoV 2002]. Although many transition countries are making
strenuous efforts to attract FDI by providing a better legal framework, infrastructure and so on,very few countries have succeeded in catalyzing FDI as an engine of growth shortly after the
beginning of global integration. Vietnam is one such exceptions. Although Vietnam’s
investment climate is improving, it remains highly deficient compared with its Asianneighbors. Therefore, rapid FDI inflows so far can be attributed to a large extent to thecountry’s favorable geographical location at the heart of East Asia’s dynamic production
network.
There have been many studies aiming to uncover the secrets of sustained high economic
growth in Asian NIES and ASEAN in the recent decades. For example, the World Bank’s East
Asian Miracle attributed their successes mainly to the “market-friendly approach,” namely,
the combination of prudent macroeconomic management, human resource development,
export promotion, public-private coordination and so on, while also admitting the contributionof selective intervention in a few countries [World Bank 1993]. However, assessment of
individual policies pursued by each of the high-performing Asian economies is not enough.
We must recognize East Asia’s dynamic regional context that has provided a role model aswell as an economic environment in which latecomers were challenged to “catch up” with theregion’s more advanced economies. East Asia’s developing economies are closely linked toadvanced economies in Japan, the United States and Europe through trade, investment andmarkets. At the same time, they have deepened economic ties among themselves throughcompetition and intra-regional division of labor in industrial production. Through thiscomplex relationships of competition and cooperation inside and outside the region, dynamic
structural shifts have occurred which continuously transferred industries from one country toanother.
For Japan, East Asia has been the most important developing region. For East Asia too, Japan
has been a particularly important partner as the largest donor, a very large trade andinvestment partner, and the chief architect of the East Asian production network. Because ofthis close mutual linkage, Japan’s official aid and private sector activities have had synergy
effects in East Asia. Japan’s ODA particularly in infrastructure stimulated East Asia’s further
trade and investment relations with Japan as well as with the rest of the world. In turn,private-sector interests of Japanese and East Asian enterprises have strongly guided the
direction of Japan’s aid projects.
Transactions vis-à-vis developed countries normally dominate the external economic relationsof developing countries, while interaction among themselves is often very weak. East Asia ishighly unique in that interaction among developing countries has been a key factor in regional
industrialization. In the design of Vietnam’s development vision, it is important to properly
address the task of “importing” this regional dynamism and use it to the advantage ofVietnam’s sustained growth.
Long-term Orientation and Real-sector Concern: “Ishikawa Project,” “New Miyazawa
Initiative,” and Transport and Power Infrastructure Development (Chapters 2-3)
As noted above, the salient features of Japan’s development approach are: (i) long-termorientation; (ii) real-sector concern (i.e., attention to individual industries); and (iii) strong
interest in trade and investment (with greater attention to “ingredients” rather than4

“framework”). These can be further summarized as a keen interest in the dynamic structure of
the real economy. This perspective strongly influences the way Japan extends its support toVietnam, through intellectual aid and advice on development strategy and plans, humanresource development and institution building aimed at market transition, as well as
infrastructure development in the transport and power sectors.
A good example of Japan’s intellectual ODA to Vietnam is the Joint Japan-Vietnam Research
Project of “Study on the Economic Development Policy in the Transition toward a
Market-Oriented Economy in the Socialist Republic of Vietnam” (so called “Ishikawa
Project”). The project was officially agreed upon by the two governments when former
Communist Party General Secretary Do Muoi visited Tokyo in April 1995. The Japan
International Cooperation Agency (JICA) and the Vietnamese Ministry of Planning andInvestment (MPI, previously the State Planning Committee) were the implementing bodies;and Shigeru Ishikawa, professor emeritus of Hitotsubashi University became the leader on theJapanese side. The research project was implemented jointly by the Vietnamese and Japanese
teams over six years (in 3 main phases plus additional studies, from August 1995 to March
2001) and covered various areas including agriculture and rural development, trade andindustry, fiscal and monetary issues, SOE reform, and SME development. In particular, major
efforts were made in the following areas:z assisting in the drafting process of the Sixth Five-Year Plan 1996-2000 (in the firstphase);
z providing timely advice on the implementation issues of the Sixth Five-Year Plan (in thesecond phase);z coping with emerging issues such as how to prepare for economic integration (e.g., the
AFTA deadline of 2006 and WTO entry negotiations), how to respond to capital accountand financial liberalization in light of the Asian crisis in July 1997 (in the third phase);andz assisting in the formulation of the Seventh Five-Year Plan 2001-2005 and the Ten-Year
Strategy for 2001-2010 (in the third phase).
Compared to the approach of the IMF and the World Bank, the “Ishikawa Project” is highly
unique in its long-term orientation. As the project was initiated, three main tasks of theVietnamese Government were identified: (i) macroeconomic stabilization; (ii) systemictransition to a market economy (“structural adjustment”); and (iii) design and implementationof long-term development strategy. The Ishikawa Project declared to place the highest priority
on the third task of long-term development. This is partly because the former two tasks had
already been supported by the IMF and the World Bank and the Vietnamese authorities hadrecognized and begun responding to these challenges. But more importantly, it was because
the problems faced by Vietnam were fundamentally different from those of Russia andEastern Europe where industrialization had been achieved to a large extent under the previous
communist governments. In Vietnam, by contrast, the economy remained seriously
underdeveloped, and its main task was not systemic transition but economic development.
Therefore, strong emphasis was placed on long-term development and poverty reduction
through industrialization.
The Economic Reform Support Loan (“New Miyazawa Initiative”) was Japan’s first,
free-standing structural adjustment loan, whose conditionality was designed through bilateralpolicy discussions between Japan and Vietnam. This was a quick-disbursing loan, aimed at5relieving the balance of payments pressure and supporting the economic reform efforts by the
Vietnamese Government. The Exchange of Notes and the Loan Agreement were concluded in
September 1999, and the loan amounting to 20 billion yen was fully disbursed in 2000. The
Japan Bank for International Cooperation (JBIC) was the executing agency for the Japaneseside. Based on the agreements at bilateral policy discussions, the “New Miyazawa Initiative”
supported a reform program covering three areas: (i) the formulation and publication of aprogram to promote private sector development; (ii) the diagnostic auditing of the selectedlarge-scale SOEs; and (iii) the conversion of all non-tariff barriers into tariffs. In particular,reflecting Japan’s real-sector concern, the private sector development program ((i) above)
aimed to promote private business activities in three areas (financial access, businessenvironment, and institutional support) and published a detailed action plan.
Infrastructure development focusing on the transport and power sectors has been primarily
supported by ODA loans (“Yen Loan”) in order to create an enabling environment for industry
and business activities. In transport, Japan’s ODA financed the construction of principal road
networks, bridges and ports throughout the country. These infrastructures connect the major
centers of Vietnam and have helped establish a solid base for the distribution system in
Vietnam. In power, Japan’s ODA has contributed to the building of an additional 1,865MW ofpower generation capacity. This corresponds to more than 20% of Vietnam’s current total
generation capacity, or about 40 percent of the increase in total generation capacity over thelast ten years (1992-2001) [IDCJ 2002]. Infrastructure development has been accorded thehighest priority in Vietnam’s national development plan. Its positive impact on economic
growth and poverty reduction has been widely recognized by both the Vietnamese
Government and the private sector. Japan’s aid priority on infrastructure development is
consistent with Vietnam’s development goal, and such prioritization has also been supportedby the donor community as a whole.
Vietnam’s Development Vision and Japan’s ODA (Chapter 4)
In the recent years, the Vietnamese Government has made serious efforts to design a new
development vision for the twenty-first century. Such effort has led to the creation of the key
official documents for medium- and long-term development plan and strategy, sector plans, aswell as the Comprehensive Poverty Reduction and Growth Strategy (CPRGS) under thedonor-coordinated, partnership framework. Since 1999, the Vietnamese Government has
become actively engaged in partnership activities including the Comprehensive Development
Framework (CDF) and the Poverty Reduction Strategy Paper (PRSP) which has developed
into CPRGS. Through this process, the partnership framework has been strengthened, andmore than twenty partnership groups—including the Poverty Working Group/Poverty Task
Force (PWG/PTF) charged with cross-cutting poverty agenda and the other sector-specificthematic groups—have actively discussed wide-ranging issues. The Ministry of Planning andInvestment (MPI) has played a central role in the preparation of CPRGS, coordinating closelywith the other line ministries. CPRGS has been prepared under the strong ownership of theVietnamese Government, building on broad partnership with various stakeholders. Such anationally owned participatory process has been highly appreciated in the donor community.
The Vietnamese Government regards CPRGS as an action plan that translates the Ten-Year
Strategy for 2001-2010, the Seventh Five-Year Plan 2001-2005, and sector policies into
specific concrete measures to realize economic growth and poverty reduction. As its title
6

suggests, CPRGS is built on two pillars: (i) promoting economic growth (doubling GDP in ten
years, with an average annual growth rate of 7.5% during the first five years and so on); and(ii) achieving poverty reduction and social equity. This is consistent with the basic direction ofJapan’s ODA to Vietnam over the past years. It is also consistent with the two goals set in theJapanese Government’s country assistance program for Vietnam.
The economic goals and overall budget allocation under CPRGS are based on the country’s
Ten-Year Strategy for 2001-2010 and the Five-Year Plan 2001-2005. At the same time, tocomplement these growth-oriented, medium- and long-term plan and strategy, CPRGS pays
due attention to the “quality” of growth and proposes ways to minimize income and regional
disparities, reduce poverty and achieve social equity in the rapid growth process.
The importance of growth as a prerequisite for poverty reduction is confirmed by East Asia’s
development experience and also corroborated by various empirical studies [Ravallion &Chen 1997, Dollar & Kraay 2000]. CPRGS properly recognizes the growth-poverty nexus in
the sense that: (i) poverty reduction cannot be attained without growth; and (ii) poverty
reduction should be based on broad-based growth so that the poor and the poor regions canshare the fruits of growth through expanded supply-side activities.
Japan has been assisting Vietnam through a number of schemes including grants, technicalcooperation, and financial cooperation. Japan is committed to continued support of the twopillars of Vietnam’s development vision articulated by the Vietnamese Government and thedonor community.

Toward Broad-based Growth with Poverty Reduction:
Future Direction of Japan’s Contribution (Chapter 5)
In the coming months, active discussions are expected concerning how to ensure the effective
implementation of Vietnam’s development visions (the Ten-Year Strategy, the Five-Year Plan,
and CPRGS etc.). Topics for discussion will likely cover budgetary allocation and public
investment plan, sectoral action plans, and mechanisms for monitoring and evaluation.
Moreover, the roles and responsibilities of individual donors, based on their comparativeadvantages in assistance, will be determined.
Japan is willing to make a continued contribution to the design of a concrete and pragmatic
growth strategy, one of the pillars of Vietnam’s development vision. Japan can provide
intellectual aid so that the real-sector concern, reflecting East Asia’s development experienceand Japan’s own aid experience, can be firmly incorporated into Vietnam’s growth strategy
while respecting its specific circumstances. How can Vietnam achieve industrialization while
promoting economic integration? What kind of long-term strategy does Vietnam need topenetrate into East Asia’s production network? Up to now, the Vietnamese Government has
not presented sufficiently pragmatic and realistic answers to these questions. Japan wishes tomake a meaningful contribution to Vietnam’s economic growth and poverty reduction—not
only through infrastructure development but also through intellectual aid.
The ongoing National Economic University (NEU)-JICA Joint Research on “Trade andIndustrial Policies of Vietnam in the Age of International Integration” is one such example.
This is one of the follow-up projects of the Ishikawa Project which was completed in March
7

2001. The project closely examines a limited number of industries (electronics, textile andgarment, steel, software, etc.) and presents concrete policy recommendations. The work is
conducted jointly by Vietnamese and Japanese researchers, and the results are being widely
disseminated to policy makers in Vietnam. Another purpose of this project is to convey the
research methodology based on East Asian real-sector concern to the Vietnamese authorities
and experts. However, this does not mean that Japan’s past industrial policies should becopied to Vietnam; simplistic importation of policies into different domestic and external
circumstances will never work. The project also stresses that domestic economic development
should be designed and implemented under the internationally committed constraints of free
trade obligations, especially AFTA and future WTO.
Such concrete growth orientation should be addressed not only in the bilateral context but also
under the CPRGS framework. Although CPRGS recognizes that economic growth andpoverty reduction are two sides of the same coin, it has not presented sufficiently detailed andoperational growth strategy. It is necessary to conduct in-depth research on broad-based
growth strategy within the CPRGS framework and align international support according to its
results. For this endeavor, areas for study can include industrialization, trade, agriculture andrural development, SME and supporting industry promotion, private sector development, andhuman resource and infrastructure development in support of industrialization. Specificoperational modalities should be also examined within the CDF-derived partnershipframework, including a possibility to create additional group(s) specializing in the growth
agenda.
The current global development trend regards poverty reduction as the supreme goal as wellas the most effective means of development. Nobody doubts that poverty reduction is a noble
goal in development. However, there should be multiple paths to achieve that goal. From themenu of possible strategic options, the most appropriate path should be chosen by eachdeveloping country with strong ownership. East Asian development has been driven by anational fever for “catching up” and serious concern for industrial competitiveness, whichcannot be captured by the framework of “poverty reduction” alone. Vietnam’s social andeconomic development, if it is to succeed, must also incorporate the perspective of such Asian
dynamism.

8

Chapter 2General Overview of Japan’s ODA to Vietnam

Since its full-scale resumption in 1992, Japan’s ODA to Vietnam has increased steadily, andJapan has been the top donor in Vietnam since 1995. (For example, Japan accounted for over
57 percent of total disbursements made by top ten donors in 2000, disbursing US$870 million[UNDP 2001].) Simultaneously, from the Japanese viewpoint Vietnam ranked fourth (afterIndonesia, China, and Thailand) in 1999 and second (after Indonesia) in 2000 among therecipients of Japan’s ODA (net disbursement base)[MOFA 2001, OECD 2002]. These datasuggest that Vietnam is considered one of the most strategically important recipients forJapan’s economic cooperation. This chapter provides the general overview of Japan’s ODA to
Vietnam.

Overall Trends of Japan’s ODA to Vietnam
As Figure 2-1 shows, since 1992 Japanese aid to Vietnam has grown constantly. The total
volume of ODA amounted to 744 billion yen during the period of FY1992-2000 (commitmentbase). This consists of Yen Loan (or ODA Loan, 652 billion yen), Grant Aid (59 billion yen),
and Technical Cooperation (33 billion yen).
Figure 2-1: Volume of Japan's ODA to Vietnam 1991-2000 *1

million yen
160,000
140,000
120,000
100,000
80,00060,00040,000*2

20,00001991 1992 1993 1994 1995 1996 1997 1998 1999 2000

year
Yen Loan

Grant Aid

T echnical Cooperation

Note s: *1 by fiscal ye ar (April to March) and commitme nt base .
*2 Ye n Loan Proje cts for FY 1994 (58 billion ye n) are re giste re d in 1995.
Source : JICA Vie tnam O ffice , JICA Vie tnam O ffice Brie fing on Activitie s, May 2002, p.1.
JBIC we b site , http://www.jbic.go.jp (Economic Coope ration, O DA Proje ct Data).

Country Assistance Strategy for Vietnam
The Japanese Government published its first assistance policy for Vietnam in 1994, andtaking account of the recent socio-economic developments and the newly emerging
challenges, it formulated the “Country Assistance Program for Vietnam” in June 2000.
9

As indicated in the “Country Assistance Program for Vietnam,” Japan’s ODA in Vietnam hasgiven high priority to the achievement of balanced economic growth with two clear goals: (i)creating the basic conditions for sustainable growth; and (ii) supporting poverty reduction
efforts. To pursue these inter-related goals, the following five areas of assistance are specified:z human resource and institutional development (particularly, support for the transition
to a market economy);z infrastructure development (particularly, in the transportation and power sectors);z agriculture and rural development;z education and health; andz environmental conservation
Among the five areas of assistance, the first two stress the importance of Vietnam’s humanresource development and institution building, industrial development, and infrastructuredevelopment so as to create an attractive environment for private investment. This will help
Vietnam to further enhance the achievements of the Doi Moi reform and raise income
nationwide. On the other hand, it is necessary to address new social problems that emerge inthe process of rapid economic growth, such as the widening of regional and income
inequalities, and environmental degradation associated with rapid urbanization. Recognizing
the importance of balanced equitable growth, the remaining three areas pay attention to

Figure 2-2: Country Assistance Program for Vietnam(by the Government of Japan, June 2000)
Goals：

Achievement of Balanced Economic Growthwith Sustainable Economic Growth and Poverty Reduction

Human Res ource Development and Institution Building (particularly support to the transition to a market economy)
Priority areas of assistance: Design and implementation of development policies, human resource development
Improvement of public administration, legal framework, financial system
Establishment of higher education system
Infrastructure Dev elopment
Priority areas of assistance:

Upgrading of infrastructures in trans port and power sectors etc ., to cope with increasing
demand for power and cargo volume

Agriculture and Rural Development
Priority areas of assistance:
Education and HealthPriority areas of assistance:

Improvement of productivity, food production and access to a market
Off-farm industrialization to absorb the excess labor force and generate higher inc ome
Improvement of facility and quality of primary educ ation
Expansion of health service for poor people and upgrading of medical service installation
Prevention of polio and HIV, etc.

Environmental Cons ervation
Priority areas of assistance: Prevention of destruction of forests and water / air / s oil pollution.

10

pro-poor support including: (i) promoting agriculture and rural development (based on thefact that 60 percent of the farmers belong to the poor); (ii) improving education and health;(iii) addressing regional disparities among North, Central, South, Highlands, and Mountainareas; and (iv) protecting the environment which is deteriorating in the growth process(Figure 2-2).
Figure 2-3 shows Japan’s ODA to Vietnam by priority area of assistance. This clearly suggeststhat Japan has intensively supported: (i) Vietnam’s transition to a market economy withlong-term developmental vision, through policy research, institution building and humanresource development, as well as (ii) infrastructure development in the transport and power
sectors, etc.
Figure 2-3： Japan's ODA to Vietnam by Priority Area 1991-2001
Unit: number of approved projects

43

Economic infr astr uctur e intr ansport and power etc.

57
38

Human r esource andinstitution development

7
21

Envir onmental
conservation

8
20

Education and health

Grant andTechnical
Cooperation
Yen Loan0
Agr iculture

176

Note: by fiscal year (April to March) and commitment base.
Source：JICA Vietnam Office, JICA Activities and Grant Aid Projects in Vietnam, May 2002.
JBIC Website, http://www.jbic.go.jp (Economic Cooperation, ODA Project Data)

Japan’s Approach to Development
As shown in its assistance strategy and operational results, Japan’s development approach is
unique in: (i) long-term orientation; (ii) real-sector concern; and (iii) strong interest in tradeand investment. These can be further summarized as a keen interest in the dynamic structureof the real economy. Furthermore, respecting country-specific circumstances and national
ownership, the following three strategic tasks facing Vietnam are clearly recognized:
z long-term development as a latecomer country;
z systemic transition to a market economy; andz active and meaningful participation in East Asia’s dynamic production network.
This direction is consistent with Vietnam’s desire to achieve the sustainable growth throughtransition to a market economy and industrialization and modernization.
11

Chapter 3

Main Features of Japan’s ODA to Vietnam

This chapter highlights the outstanding features of Japan’s ODA to Vietnam and explains
major projects in the two priority areas (i.e., human resource and institution development,
infrastructure development) and their contributions to Vietnam’s strategic tasks.

Human Resource Development and Institution Building
One of the most notable aspects of Japan’s ODA to Vietnam is comprehensive and intensive
cooperation in the areas of human resource development and institution building. Figure 3-1
explains three different types of intellectual assistance provided by Japan (i.e., policy advice
on development vision, development of the legal system/institutional framework, humanresource development). Such aid menu is unique even for Japan, because Japan provides nosimilarly concentrated intellectual assistance to a single country anywhere in the world. The
following section highlights some of the major projects.

Figure 3-1: Major Projects for Human Resource Development and Institution Building
SUSTAINABLE GROWTH
TRANSITION TO MARKET ECONOMY
MACRO ECONOMIC/ DEVELOPMENT POLICY
Assistance for Economic Structural Reform (GA)

Economic Development Policy in theTransition toward a Market–Oriented
Economy, Phase 1~3 (Ishikawa
Project) (DS)

Economic Reform Support Loan
(New Miyazawa Initiative) (YL)

Formulation of Key Government Policies on
Legal System, Phase 1~2 （ETD)

Construction of Viet Nam-Japan
Human Resources Cooperation
Center in Hanoi (PTTC)

Information Technology Training (PTTC)

Construction of Viet Nam-Japan
Human Resources Cooperation
Center in Ho Chi Minh City
(PTTC)

Modernization of Industrial Property
Administration （PTTC)

Strengthening Training
Capability for Technical
Workers in the Hanoi Industrial
College （PTTC)

Small and Medium Enterprises Finance (YL)

Hanoi High Tech Park Project in Vietnam（DS)Promotion of Small and Medium Industrial
Enterprise (DS)
Development of Industrial Standardization,
Metrology, Testing and Quality Management in
Vietnam (DS)

HUMAN RESOURCEDEVELOPMENTSECTORIAL LEGAL FRAMEWORK/INSTITUTION BUILDINGYL:YenLoan, GA:Grant Aid, DS:Development Study, PTTC:Project-type Technical Cooperation,ETD: Expert Team Dispatch
Source: JICA Vietnam Office, JICA Vietnam Office Briefing on Activities, May 2002
JBIC website, http://www.jbic.go.jp (Economic Cooperation, ODA Project Data).

12

1. Study on the Economic Development Policy for the Transition toward a Market-Oriented
Economy in the Socialist Republic of Vietnam (“Ishikawa Project”):
The project was officially agreed upon by the two governments when former Communist
Party General Secretary Do Muoi visited Tokyo in April 1995. The Japan International
Cooperation Agency (JICA) and the Vietnamese Ministry of Planning and Investment (MPI,
previously the State Planning Committee) were the implementing bodies; and Shigeru
Ishikawa, professor emeritus of Hitotsubashi University was appointed as the leader on theJapanese side. The project was implemented jointly by the Vietnamese and Japanese teams
over six years (in 3 main phases plus additional studies, from August 1995 to March 2001)
and covered various areas including agriculture and rural development, trade and industry,
fiscal and monetary issues, SOE reform and SME development (see Figure 3-2).
z Basic principle: The “Ishikawa Project” is highly unique in its long-term orientation,compared to the approach by the IMF and the World Bank. As the project was initiated,
three main tasks of the Vietnamese Government were identified: (i) macroeconomic
stabilization; (ii) structural adjustment (systemic transition to a market economy); and(iii) the design and implementation of long-term development strategy. In the project,
the highest priority was given to the third task of long-term development. This is partly
because the former two tasks had already been supported by the IMF and the WorldBank and the Vietnamese authorities had recognized and begun responding to thesechallenges. But more importantly, it was because the problems faced by Vietnam were
fundamentally different from those of Russia and Eastern Europe whereindustrialization had been achieved to a large extent under the previous communist
governments. In Vietnam, by contrast, the economy remained seriously
underdeveloped, and its main task was not systemic transition but economic
development. Therefore, strong emphasis was placed on the task of long-term
development and poverty reduction through industrialization. Attention was also paid
to the appropriate role of the government in the development process.
z Approach and methodology: Based on the above principle, main research topics
were selected and task forces were organized. Each task force provided policy options,based on the deep understanding of the existing situations and constraints of Vietnam
which were assessed through intensive field surveys and quantitative analyses. The
experience of Japan and other East Asian countries, especially P. R. China, wasfrequently referred to. Moreover, major efforts were made in assisting the drafting
process of the Sixth Five-Year Plan 1996-2000; providing timely advice on theimplementation issues of the Sixth Five-Year Plan and other emerging issues (e.g., the
AFTA deadline of 2006 and WTO entry negotiations, response to capital account andfinancial liberalization in light of the Asian crisis in July 1997); and assisting theformulation of the Seventh Five-Year Plan 2001-2005 and the Ten-Year Strategy for
2001-2010.
z Team composition: From the Japanese side, about twenty academics participated in
the research team, and almost the same number of government officials was involved
from the Vietnamese side. At various stages of research planning, implementation, andanalysis of policy options, intensive discussions were held so that both sides could gain
sufficient understanding of the issues and reach consensus.

13Figure 3-2: Study on the Economic Development Policy in the Transition toward a
Market-Oriented Economy in the Socialist Republic of Viet Nam (“Ishikawa Project”)

Vietnam ＝ Tran sition Econom y+ Und erdevelopment

Tasks:•Macroeconomic Stabilizatio n•Structural Adj ustment (Sys temic Transition to Market)•Long–term Dev elopment Strateg y

Advice on the drafting
process of the 6th FiveYear Plan

Advice on the implementation
issues of 6th Five-Year Plan,
including participation in
AFTA/ APEC/ WTO andindustrial policy

Phase 1 (95.8-96.6)

Phase 2 (96.7-98.3)

Follow-up Phase (98.7-99.7)

Phase 3 (99.9-01.3)¾Macroeconomy¾Fiscal and monetary policy¾Industrial policy¾Agricultural and ruraldevelopment¾Fiscal and monetary policy¾Participation in AFTA/APEC/
WTO and industrial policy¾Agricultural and ruraldevelopment¾SOE Reform¾General commentary¾Fiscal and monetary
matters¾Industry and trade¾Agricultural and ruraldevelopment¾General commentary¾Fiscal and financial reform¾Trade and industry¾Agricultural and ruraldevelopment¾SOE Reform and Private
Sector Promotion

Advice on the emerging
issues arising from the East
Asian crises and theeconomic integration
process

Advice on the formulationof the 7th Five-Year Plan

Joint research (2001- )Source:MPI and JICA Study on the Economic Development
Policy in the Transition toward a Market-Oriented
Economy in the Socialist Republic of Viet Nam (Phase
3) Final Report Vol. 1 General Commentary, 2001,
pp.iii-vi.
JICA Vietnam Office, Executive Summary of ‘Ishikawa
Project’ Phase 3, March 29, 2002

¾Agriculture and rural development (livestock,vegetable, fruits and industrial crops, etc.)¾Monetary policy under partial dollarization¾Fiscal policy (introduction of personal incometax)¾NEU-JICA joint research program (trade andindustrial policies in the age of integration)

The “Ishikawa Project” is a good example of Japan’s intellectual ODA that shows theJapanese development approach based on long-term orientation and real-sector concern. The
project made important contributions in three areas: (i) advice on strategic policy options forthe long-term development agenda; (ii) production of various academic research papers
including analytic assessment and key development issues facing Vietnam; and (iii) technicalassistance to Vietnamese policy makers in research methodology and Japan’s development
approach, through a collaborative process. While the project was completed in March 2001,
most of the task force activities have developed into independent, joint research projects.
Greater emphasis is put on the design and implementation of concrete measures, which arenecessary for Vietnam to reach the targets of the development vision as envisaged in theSeventh Five-Year Plan and the Ten-Year Strategy.
2. Economic Reform Support Loan (“New Miyazawa Initiative”):
This is Japan’s first, free-standing structural adjustment loan, whose conditionality was
designed based on bilateral policy discussions between Japan and Vietnam. This was aquick-disbursing loan, aimed at improving the balance of payments pressure and supporting
the economic reform efforts by the Vietnamese Government. The Exchange of Notes and theLoan Agreement were concluded in September 1999, and the loan (20 billion yen) was fully
disbursed in 2000. For the Japanese side, the Japan Bank for International Cooperation (JBIC)
was the executing agency of the loan. Based on the agreements reached through bilateralpolicy discussions, the “New Miyazawa Initiative” supported a reform program covering
14three areas, i.e., (i) the formulation and publication of a program to promote private sector
development; (ii) the diagnostic auditing of selected large-scale SOEs; and (iii) the conversionof all non-tariff barriers into tariffs. In particular, reflecting Japan’s real-sector concern, theprivate sector development program ((i) above) aimed to promote private business activities
in three areas and published a detailed action plan (see Box 3-1). In light of the importance tosustain these efforts, Japan has carefully monitored the reform progress, including theimplementation of the action plan.
3. Judicial system support:
To advance market transition, Vietnam urgently needs to establish a modern legal framework.
While the Vietnamese Government enacted the new Constitution in 1992 and the Civil Codein 1993, it still needs to develop a commercial code as well as other laws and regulations
including a civil procedural code. Under the JICA project “Support to the Formulation of Key
Government Policies on Legal System” Phase I (1996-1999), Japan dispatched experts andsupported the drafting and implementation stages of the laws as well as judicial reform.
Currently, under the Phase II project (1999-2002), the support has been broadened to coverother relevant organizations including the Supreme People’s Court and the Supreme People’s
Prosecutor.

Box 3-1: Conditionality in Economic Reform Support Loan (“New Miyazawa Initiative”)(Exchange of Notes/Loan Agreement concluded in 1999, 20 billion Yen)
General principles to promote the private sector(1)Improvement of financial environment¾ Establishment of a new credit facility that will provide credit to private enterprises;¾ Creation of a partial guarantee scheme for small- and medium-size private enterprises;¾ Improvement of collateral system;¾ Other measures.
(2) Improvement of business environment¾ Removal of entry barriers against private enterprises;¾ Improvement of customs system;¾ Improvement of business environment for foreign enterprises;¾ Enhancement of transparency of rules and simplification of procedures;¾ Other measures.
(3) Reinforcement of organizations to promote the private sector.
Diagnostic audit of the 100 large SOEs to be conducted under the international accounting standard
by independent auditors with international standard.
Convert non-tariff barriers into tariffs, accelerating the schedule of tariffication, and introducing
new instruments consistent with the WTO rules to protect domestic industries.
The Government of Vietnam will continue to consult with the Government of Japan,
international financial institutions, and other donors on the schedule of tariffication.

Source: Japan-Vietnam Joint Press Release dated May 16, 1999, Japan’s Financial Support for Vietnam’s
Economic Reforms.

15

4. Human resources development:
To facilitate economic integration and a smooth transition to a market eocnomy, Vietnam
needs to upgrade the knowledge and skills of entrepreneurs and technical staff engaged in
manufacturing. Through JICA, Japan has supported the establishment of the “Vietnam-Japan
Human Resource Center” (including the organization of business courses) at both Hanoi and
Ho Chi Minh branches of the Foreign Trade University. Japan has also supported training
courses for mechanical engineers at the Hanoi Engineering College, which is regarded as thecore training facility (mechanical engineering) in northern Vietnam.

Infrastructure Development in Transport and Power
Both in terms of volume and number of projects, infrastructure development accounts for thelargest share in Japan’s ODA to Vietnam. In particular, high priority has been given to thetransport and power projects to create an enabling environment for industry and businessactivities. Such prioritization has also been supported by the donor community as a whole. As
Figure 3-3 shows, in terms of ODA disbursements in 2000, the energy sector is the largest
recipient of donor assistance (accounting for 26 percent of the total disbursements) followedby the transportation sector (17 percent) [UNDP 2001].
Among Japan’s ODA scheme, Yen Loan has been the principle tool to support these sectors.
Yen Loan Projects are often complemented by technical cooperation (e.g., elaboration of
Feasibility Study and Detailed Design, expert dispatch to executing agencies, and training ofcounterpart staff), in order to facilitate the smooth implementation of the Projects (see map“Japan’s ODA Projects in Vietnam (Infrastructure) Since 1991”).
1. Transportation:
In the transport sector, the construction of principal road networks, bridges and ports
throughout the country has been supported through Yen Loan. These infrastructures connect
the major centers of Vietnam and have contributed to building a solid base for the distribution
system in Vietnam, which is vital to the promotion of economic growth. For example, with
Figure 3-3: Top 10 ODA Sectors in 2000
406

Energy257

Transport
Economic management

214

Area development

129

Education and training

124

Social development

122

Health90

Agriculture

88

Industry

63

Natural resources

58
0

50

100

150

200

250

300

350

Note: Disbursements in 2000 (based on donor reporting, adjusted for calendar year
in US$ millions)
Source: UNDP, Overview of ODA Viet Nam , 2001, p.8

16

400

450

the development of the National Highway Route 5, the 5-hour long drive from the major port
Haiphong to the capital Hanoi was reduced to 1.5 to 2 hours [IDCJ 2002]. Moreover, Japanese
ODA supported the development of the northern transportation network surrounding Hanoi,
which has contributed to the expansion of foreign direct investment to the area (see Boxes 3-2,
3-3).
2. Power:In the power sector, Japan’s ODA has supported the construction of power plants and grids,
with a special focus on large-scale facilities with a view to accommodating the country’s
rapidly increasing demand for electricity. Japan’s ODA has contributed to the establishment ofan additional 1,865MW of power generation capacity. This corresponds to 23 percent of thetotal power generation capacity in Vietnam (8,038MW), or about 40 percent of the increase intotal generation capacity over the last ten years (1992-2001) (see Figures 3-4, 3-5).
Many infrastructure projects are currently being implemented and, therefore a greater
development impact can be expected when these projects start operations upon theircompletion.

Figure 3-4: Japan's Contribution to Vietnam's
Total Power Generation Capacity(based on the installation as of 2001)

Figure 3-5: Japan's Contribution to Growth ofVietnam's Power Generation Capacity(1992-2001)
Growth in generation
capacity due to Japan's
ODA 38% (1,865MW)

Japan's ODA 23%(1,865MW)

Growth of Vietnam's total
generation capacity in the last
decadeVietnam's total generation
capacity: 8,038MW

Source: IDCJ, Country Evaluation Report on Vietnam, 2002,
p89 (the original data are based on Electricity of Vietnam).

Source: IDCJ, Country Evaluation Report on Vietnam, 2002,
p89 (the original data are based on Electricity of Vietnam).

Support to Other Priority Areas
In addition to the above two areas, it is important to note Japan’s contribution to assist
Vietnam’s efforts in achieving social equity and poverty reduction, as well as rural andregional development. Although the projects concerned are smaller in volume and number,such assistance is essential to ensure that the benefits of growth can be evenly distributed
among the population (see map “Japan’s ODA Projects in Vietnam (Agriculture and Rural
Development/ Education and Health/ Environment) Since 1991”).
z Agriculture and rural development: Japan has been providing technical cooperation toagrarian universities in research and extension. Such support has contributed to
institutional strengthening and technology transfer, resulting in the improvement inagricultural productivity. Moreover, through a series of Yen Loan Projects, Japan has
supported the development of rural, basic infrastructure covering the roads, electric
power, and water sectors etc. in order to strengthen the productive base and to raise the17living standards at the province level.
z Education and health: In education, 195 primary schools were constructed by grant
aid. As for health care, Japan has supported the upgrading of medical facilities andservices (including those of principal referral hospitals) through grant aid and technicalcooperation (e.g., expert dispatch and equipment supply), and has thus contributed to
improving the quality of and access to local health care services.
z Environment: The recently started Yen Loan Projects are expected to improve thewater supply and sanitation systems and enhance the living conditions of the densely
populated, urban areas.
Box 3-2: Views of Japanese Businessmen on Japan’s ODA to Vietnam—based on a survey among the Japanese representative offices in Vietnam
Attractiveness of Vietnam from investors’ viewpoints
z Investing in Vietnam is part of the overall business strategy to avoid excessive concentration in
P.R.China (i.e., as the second production location outside China to safeguard against risks).
Within the ASEAN countries, manufacturing firms have already started to move from Thailand
and Malaysia (due to their high costs) to Indonesia, the Philippines, and Vietnam. However,with the political instability in Indonesia and the Philippines, Vietnam has advantages with its
low manufacturing costs and the fairly developed infrastructure. [*financial and trading
companies]z In 2001, Japanese FDI in Vietnam increased, especially in the North. At the newly developed
Tanglong Industrial Park near Hanoi, 9 companies (including Canon and Denso) plan to dobusiness, and the entire lot for the first-phase development was sold out. The Haiphong
Industrial Park (opened in 1995) was facing difficulties in its initial four years with only 7
firms operating, but this year 4 additional Japanese firms (including Yazaki) decided to move
in—attracted by the development of surrounding infrastructure. [*manufacturing firms]
Assessment of the contribution of Japanese ODA in promoting FDIz A notable aspect of the investment trend in 2000 is that large-scale investment increased not
only in Ho Chi Minh, but also in the Hanoi and Haiphong areas which now have fairly
developed infrastructure, built with the support of Japanese ODA. In recent years, theVietnamese Government has become more proactive in promoting FDI and creating an
enabling environment for private business. This change in the government’s attitude isfavorably viewed. [*financial and trading companies]
Expectations from Japanese ODA
The following issues were suggested as the areas where Japan’s ODA can make important
contributions. [*finance and trading companies]z SME development for the promotion of supporting industries;
z Training in business management and engineering skills;z Technical assistance in quality control and improvement; andz Infrastructure development and human resource development.
Note: Underlined by the authors.
Source: IDCJ, Country Evaluation Report on Vietnam, 2002,

18

pp.149-155.

Box 3-3: Three out of four surveyed Vietnam’s business persons perceive that Japan’s ODA
projects have impact on their business.
The survey was conducted by CONCETTI (a Vietnamese consulting and research firm) in 2001-2002
to understand perceptions of business persons and government officials toward the impact of Japanese
ODA. The survey was targeted business persons and Government official mainly in Hanoi and Ho Chi
Minh City who were, directly or indirectly, involved in Japan’s ODA. Out of 100 questionnaires
distributed to each, 68 and 72 were sent back and analyzed. The followings are the main findings ofthe survey.
z

Impact on general development of Vietnam
Areas most impacted by Japan’s ODA
Development and better utilization of internal
resources

19.5%

0%

Promotion of reforms and international
integration

26.8%

Transfer of advanced technology andmanagement experiences to Vietnam
Settlement of strong currency scarcity

12.2%

21.9%

0%
0%
41.5%
37.5%

Reduction of financial difficulty
Businessmen

z

40.6%

GoV officials

Impact on businesses
The way Japan’s ODA projects benefit surveyed businessesz(%)

 Your business is to enjoy better infrastructure

50.0 Your business has more opportunities to supply goods and services
to Japan’s ODA projects

37.5

 Your business is to enjoy more ’’open’’ policies under the impact ofJapan funded projects on mechanism, policy and institution reforms

25.0

 Export to /import from Japan become easier

25.0

 Japan Investment to Vietnam increases

22.9

 Others

8.3

 Your business receives direct support from Japan’s ODA Projects

6.3

Recommended funding area
First recommended funding area in the coming time
47.5%

17.5%
10.0%

10.0%

5.0%

Infrastructure

Agriculture

Heath care

Education

Human resource
development

5.0%

5.0%

Institutionalbuilding

Environment

Source: CONCETTI, A Survey Report: Perceptions of Japan’s ODA Impact in Vietnam, February 2002.

19

Chapter 4

Vietnam’s Development Vision and Japan’s ODA

This chapter outlines the principal aspects of Vietnam’s development vision and Japan’scontribution to the design and implementation of this vision. It also pays due attention to therecently strengthened coordination and partnership among donors.

Key Aspects of Vietnam’s Development Vision
In recent years, the Vietnamese Government has made serious efforts to design a new
development vision toward the twenty-first century. Such efforts have led to the formulationof medium- and long-term development plan and strategy, sector plans, as well as theComprehensive Poverty Reduction and Growth Strategy (CPRGS) under thedonor-coordinated, partnership framework. The Vietnamese Government’s key
documents—the Strategy for Socio-Economic Development in the Period 2001-2010 and
the Five-Year Plan for Socio-Economic Development 2001-2005 (which is supposed toserve as a guideline for implementing the Strategy in the initial five years)—set ambitious
goals such as the doubling of GDP in ten years and the achievement of average annual
growth rates of 7.5 percent. These documents also articulate the areas in which policy
efforts must be exerted over the next decade in order to attain the national goal of“Industrialization and Modernization” by the year 2020.
In the past ten years, Vietnam benefited greatly from the synergy effects of market transition(initiated under the Doi Moi reform) and economic integration. The economy grew rapidly;
between 1992 and 1997 GDP growth did not fall below 8 percent per year. Vietnam’s social
indicators improved dramatically. Halving poverty during the 1990s, Vietnam has alreadyachieved the International Development Targets (IDTs) and the UN Millennium
Development Goals (MDGs) for poverty and hunger reduction (see Figures 4-1, 4-2).
However, the East Asian financial crises affected negatively the Vietnamese economy, andin 1998 economic growth slowed sharply to 5.8 percent and decelerated further to 4.8
percent in 1999. After two years of slowdown, GDP rose by 6.8 percent in 2000 and 2001,
mainly due to a rapid rise in exports and buoyant industrial growth [EIU 2001, IMF 2002].
Vietnam’s international integration has been proceeding rapidly. With the restoration of its
diplomatic ties with the United States and entry into ASEAN in 1995, Vietnam normalized
its economic relations with major donors and international organizations by the mid-1990s.
Furthermore, Vietnam became a full member of APEC in 1998 and signed a trade
agreement with the United States in 2001. Negotiations for WTO accession are continuing.
In a relatively short period, Vietnam has become deeply integrated into the global economy
through trade, investment, and aid. At the same time, Vietnam has learned the lessons fromthe East Asian crises concerning potential risks of globalization; it also needs to recognize
the challenges posed by the current global economic downturn. Proper management of theintegration process has thus become a key to its development strategy.

20

Figure 4-1: Vietnam's Achievement in Poverty Reduction
As Vietnam has integrated it has had a large increase in per capita income and no significant change
in inequality. Thus, the income of the poor has risen dramatically and the level of absolute poverty
has been cut in half in 10 years. Among the very poorest households, survey evidence shows that
98 percent became better off during the 1990s. This improved well-being is not just a matter ofincome. Child labor has declined and school enrollment has increased. Vietnam's export directly
provided income-earning opportunities for poor people: exports included labor-intensive products
such as footwear and rice, which is produced by most low-income farmers.

% per year,
1992-98
10.0

Poverty reduction in Uganda, India, Vietnam, and China
closely related to growth
9.9
8.4

8.0

7.1

6.4

5.9

6.0
4.0

7.5

3.8

4.4

2.0
0.0

UgandaIndia *

Vietnam

GDP p.c. growth rate

Chinapoverty reduction

Note: * India poverty reduction figure is for 1993-99.
Source: World Bank, Globalization, Growth, and Poverty: Building an Inclusive World Economy ,A World Bank Policy and Research Report, 2002 p.6

Figure 4-2 : East Asia Reduced Poverty Despite Currency Crisis
Population in Extreme Poverty (%)
60
50
40

1990
1999

30
20
10
0

East Asia

Latin America

South Asia

Sub-SaharanAfricaSource: S. Devarajan, M.J. Miller and E.V. Swanson, Goals for Development:
History, Prospects and Costs , World Bank Working Paper no.2819, April 2002.

21

Partnership Platform for CPRGS
Following the recent global development trend, particularly since 1999, the Vietnamese
Government has been actively engaged in partnership activities as represented by theComprehensive Development Framework (CDF) and the Poverty Reduction Strategy Paper(PRSP) which has developed into CPRGS—in addition to the conventional strategicplanning stated above. Over the last few years, based on the CDF/PRSP approach, thepartnership platform was established with more than twenty partnership groups actively
discussing wide-ranging issues. These include the Poverty Working Group/Poverty Task
Force (PWG/PTF) focusing on cross-cutting poverty agenda, and other sector-specificthematic groups. The Ministry of Planning and Investment (MPI) has played a central rolein the preparation of CPRGS, coordinating closely with the other line ministries. The basic
principles of the CDF/PRSP approach are: (i) long-term and holistic vision; (ii) country
ownership; (iii) broad partnership with various stakeholders; and (iv) focus on development
results. The preparation of Vietnam’s CPRGS has proceeded based on these principles.
Vietnam is the first pilot country of CDF in East Asia and is most advanced in the
preparation of CPRGS. Thus, the Vietnamese experiences with CDF/CPRGS could haveimportant implications for other Asian countries. The key elements of partnership and
CPRGS process in Vietnam can be summarized as follows.
z

Ownership: As commended by many donors at the last CG Meeting (December 2001),
the Vietnamese Government has demonstrated strong ownership in CPRGS formulation.
More specifically, the government has paid due attention to: (i) the linkage andconsistency with the medium- and long-term development vision; and (ii) theinter-governmental coordination by creating an inter-ministerial team led by MPI and incollaboration with the Ministry of Labor, Invalids and Social Affairs (MOLISA) on theanalysis of poverty and hunger. It should also be noted that the Vietnamese Government
renamed PRSP as CPRGS between the stages of I-PRSP (March 2000) and the draft
CPRGS (December 2001).

z

Long-term and holistic vision: As stated before, CPRGS is based on the government’s
key vision documents, i.e., the Ten-Year Strategy for 2001-2010 and the Seventh
Five-Year Plan 2001-2005. As its title suggests, CPRGS is built on two pillars: (i)promoting economic growth; and (ii) achieving poverty reduction and social equity, andfollows the economic goals and overall budget allocation defined under these key
documents. At the same time, to complement these growth-oriented, medium- andlong-term plan and strategy, CPRGS pays due attention to the “quality” of growth andproposes ways to minimize income and regional disparities, reduce poverty and achievesocial equity in the rapid growth process.

zPartnership: As a CDF pilot country, Vietnam has made important progress inbroadening partnership activities with stakeholders. About twenty task forces have been
established under the partnership framework, involving the government, donors, andNGOs. Among them, the PWG/PTF has played a central role in the preparation of
CPRSP. They assisted analytical work and consultation process including: poverty
assessment (Vietnam Attacking Poverty), the development of monitoring indicators(particularly, work related to localizing IDTs for poverty reduction and establishing“Vietnam Development Targets (VDT)”), and the organization of a series of regional
22

workshops.
Such a nationally owned participatory process has been highly appreciated in the donor
community and is regarded as “good practice” in the partnership experience. The recent
Joint Report of the Government-Donor-NGO Partnership Group (Putting Partnerships toWork in Vietnam) assessed Vietnam’s partnership experience in comparison with other pilot
countries, in light of the four CDF/PRSP principles. The report ranks Vietnam’s
performance “excellent ” in terms of both (i) long-term vision and strategy and (ii)enhancing country ownership, “above average” in (iii) partnership among stakeholders, and“average” in (iv) focus on development results [World Bank et al 2001].
Box 4-1: Vietnam’s Strategy for 2001-2010
Vietnam’s 10 Year Socio-Economic Development Strategy expresses a strong commitment to rapid
growth, employment creation, and poverty reduction/social equity. The strategy articulates Vietnam’s
development vision for the coming decade, namely, developing the country from an agriculture-based
economy to an “industrialized economy by 2020”.
z
z
z
z
z
z

A doubling of GDP by 2010 to be attained through 7.5% annual economic growth (2001-05);
Investment to be increased to 30% of GDP from an average of 25% in the 1990s;
Exports to grow at more than twice the rate of GDP growth;
The share of agriculture GDP to decline from 25% to 16-17%; industry to increase from 35%
to 40-41% and services to increase from 40% to 42-43%;
The share of agriculture employment to decline from two-thirds to half; andThe share of the urban population to increase from a quarter to a third.

Box 4-2: Comprehensive Poverty Reduction and Growth Strategy (CPRGS)
The Comprehensive Poverty Reduction and Growth Strategy (CPRGS) Paper is an action plan thattranslates the Government’s Ten-Year Socio-economic Development Strategy, Five-Year
Socio-economic Development Plan as well as other sectoral development plans into concrete measureswith well-defined road maps for implementation. This is an action plan for realizing economic growthand poverty reduction objectives….. The CPRGS paper sees a harmony between economic growthand measures to solve social problems. The tasks and objectives contained in the poverty reduction andgrowth strategy not only calls for targeted measures to support specific poverty groups, but also sees
important linkages within the matrix of policies that include macroeconomic policies, policies on
structural adjustment, sectoral development policies and measures, to social safety net policies of all
sectors and levels that must work in tandem to ensure sustainable development.
z
z
z
z
z
z

Part I: Socio-Economic Setting, Current Poverty Situation, Achievements and Challenges
Part II: Objectives and Tasks of Socio-Economic Development and Poverty Reduction for the
Period up to 2005 and 2010
Part III: Create Environment for Rapid, and Sustainable Growth, and for Poverty Reduction
Part IV: Major Policies and Measures for the Development of Sectors and Industries to
Ensure Sustainable Growth and Poverty Reduction
Part V: Mobilization of Resources for Growth and Poverty Reduction
Part VI: Organizational Arrangements for and Monitoring and Evaluation of the Poverty
Reduction and Growth Strategy

Source: The Socialist Republic of Vietnam, Comprehensive Poverty Reduction and Growth Strategy(CPRGS) “Introduction,” pp.2-9, (approved by the Prime Minister on May 21, 2002).

23

Japan’s Contribution to Vietnam’s Development Vision
Japan has made important contributions to the formulation and implementation ofVietnam’s development vision. Based on its comparative advantages in assistance, actively
participated in the partnership activities as follows.
zMedium- and long-term vision: Through intellectual aid (including the “Ishikawa
Project”), numerous experts advised the Sixth and Seventh Five-Year Development
Plans and the Ten-Year Strategy at their formulation and implementation stages. These
key documents provide the economic framework for CPRGS.

z

Interim-PRSP: With special emphasis on the promotion of private sector development,
the “New Miyazawa Initiative” provided complementary support to the economic
reform program assisted by the IMF (PRGF) and the World Bank (PRSC) and laid thefoundation for I-PRSP formulation.

z

CPRGS preparation: As a core member of the PWG/PTF, Japan supported CPRGS
preparation, particularly in both analytical work and regional consultation. For example,
Japan played a leading role in assisting the development of localized, monitoring
indicators for basic infrastructure—one of the eight topics for pro-poor support (i.e.,poverty and hunger, social protection, basic education, health and inequalities,
environmental sustainability, ethnic minority, basic infrastructure, governance)—as partof the donor-coordinated effort to establish “Vietnam Development Targets.”zPartnership: In addition to the above PWG/PTF participation, Japan has assumed aleadership role in the Transport Sector Working Group, SME Promotion and Private
Sector Development Partnership, and Ho Chi Minh City ODA Partnership. Japan has
also participated in other groups where it has comparative advantages inassistance—such as Urban Forum (poverty); SOE Reform & Equitization, Banking
Reform, Trade Policy, Public Financial Management (economic issues); and Forestry
Sector Support Program & Partnership, Partnership to Support the Poorest Communes,
Natural Disaster Mitigation, Water Resources (rural and regional development).

The Vietnamese Government regards CPRGS as an action plan that translates the Ten-Year
Strategy for 2001-2010, the Seventh Five-Year Plan 2001-2005, and sector policies into
specific concrete measures to realize economic growth and poverty reduction. CPRGS isbuilt on two pillars: (i) promoting economic growth; and (ii) achieving poverty reduction
and social equity. This is consistent with the basic direction of Japan’s ODA to Vietnam
over the past years, as outlined in the Japanese Government’s “Country Assistance Program
for Vietnam.”
The importance of growth as a prerequisite for poverty reduction is based on East Asia’s
development experience and is also supported by various empirical studies [Ravallion &Chen 1997, Dollar & Kraay 2000]. CPRGS properly recognizes the growth-poverty nexus
in the sense that: (i) poverty reduction cannot be attained without growth; and (ii) poverty
reduction should be based on broad-based growth so that the poor and the poor regions canshare the fruits of growth through expanded supply-side activities.
During CPRGS preparation, the PWG/PTF mainly focused on the aspects of direct poverty
24

reduction or pro-poor targeting measures, e.g., by assisting poverty assessment (thediagnosis and analysis of causes of poverty) and the definition of social indicators (formonitoring and evaluation). For the future implementation, it will be also important tosupport the economic framework for poverty reduction and the achievement of economic
indicators (which are only possible through the implementation of broad-based,
growth-promoting policies and measures). Thus, a solid analysis of the growth agenda isnecessary.
Japan has been assisting Vietnam through a number of schemes including grants, technicalcooperation, and financial cooperation. Japan is committed to continued support of the twopillars of Vietnam’s development vision articulated by the Vietnamese Government and thedonor community.

25

Chapter 5

Toward Broad-based Growth with Poverty Reduction—Future Direction of Japan’s Contribution

This final chapter suggests specific ways of how Japan could contribute toward achieving
Vietnam’s development vision, particularly by assisting in the design and implementation of arealistic outward-oriented growth strategy—taking advantage of Asia’s dynamic production
network—and by mainstreaming the growth agenda into the donor-coordinated, partnershipframework.
Partnership Framework for the Implementation of Vietnam’s Development Vision
In the coming months, active discussions are expected concerning how to ensure the effective
implementation of Vietnam’s development vision (the Ten-Year Strategy, the Seventh
Five-Year Plan, and CPRGS etc.). Topics for discussion will likely cover budgetary allocationand public investment plan, sectoral action plans, and mechanisms for monitoring andevaluation. Moreover, the roles and responsibilities of respective donors will be determined,
based on their comparative advantages in assistance. The PWG/PTF (which has been
instrumental in CPRGS preparation) is expected to continue assuming an important role in theimplementation stage.
Despite impressive progress in poverty reduction, as of 2000, 32 percent of the Vietnamese
population still live under poverty, and Vietnam remains an underdeveloped economy withper capita GDP as low as US$400 [GoV 2002]. Thus, “central to achieving virtually all ofVietnam’s development goals will be the maintenance of high overall growth rates” [WorldBank 2001b]. For the effective implementation of CPRGS, a set of monitoring indicators aredefined in CPRGS—in both economic and social spheres (with the latter including job
creation). In light of the growth-poverty nexus and the vision articulated in the Seventh
Five-Year Plan and the Ten-Year Strategy, the achievement of Vietnam’s development goals
will require a balanced, comprehensive approach and should include both pro-poor targetingmeasures (which have so far been emphasized by the PWG/PTF) and broad-based growthpromotion.
The Vietnamese Government foresees a drastic shift in the structure of the economy over the
coming decade—as Vietnam attempts to follow the path of its successful East Asian neighbors(see Figure 5-1). The government wishes to reduce agriculture labor force and promoteindustry as the source to generate higher-paying jobs. To this end, Vietnam needs to makecontinued efforts to strengthen: (i) human resource development (in both public and private
sectors) to adapt to the market economy; (ii) institution building to sufficiently prepare for the
recently accelerating economic integration such as AFTA entry and WTO accession (e.g., thedesign and implementation of industrialization strategy and the development of a legal
framework); and (iii) a strategic approach to infrastructure development to enhance thesupply-side response. At the same time, it is important to maintain social equity so that thebenefits of growth can be evenly distributed across the population. This requires measures to:(iv) address increasing disparities between urban and rural areas; (v) support the developmentof remote areas, with special attention to ethnic minorities; and (vi) cope with the emerging
issues associated with urbanization.
26

Figure 5-1: High Performing Asian Countries
The transition envisaged in Vietnam’s Strategy is consistent with what was achieved in other countries,
provided appropriate policies are also implemented in Vietnam.

Source: World Bank, ADB and UNDP, Vietnam 2010 Entering the 21st Century: Vietnam Development Report 2001 ,December 2000 (Overview, p.4).

Japan is willing to continue its assistance in the design of a concrete and pragmatic growthstrategy, one of the pillars of Vietnam’s development vision. Japan can provide intellectual aid
so that the real-sector concern, reflecting East Asia’s development experience and Japan’s
own aid experience, can be firmly incorporated into Vietnam’s growth strategy while
respecting its specific circumstances. How can Vietnam achieve industrialization while
promoting economic integration? What kind of long-term strategy does Vietnam need topenetrate into East Asia’s production network? Up to now, the Vietnamese Government has
not presented sufficiently pragmatic and realistic answers to these questions. Japan wishes tomake a meaningful contribution to Vietnam’s economic growth and poverty reduction—not
only through infrastructure development but also through intellectual aid.
The salient features of Japan’s development approach, compared to the other donors, are: (i)long-term orientation (i.e., developmental vision); (ii) real-sector concern (i.e., attention toindividual industries); and (iii) strong interest in trade and investment (with greater attention
to “ingredients” rather than “framework”). Building on such unique perspectives, Japan can
provide pragmatic advice to Vietnam on the issues of how to “import” East Asia’s regional
dynamism and use it to the advantage of Vietnam’s sustained growth. Such approach is also
complementary to the pro-poor targeting measures which currently enjoy enthusiastic support
from the donor community.
Figure 5-2 illustrates East Asia’s production network through trade and investment. The
supply linkage was first formed between Japan and NIEs, then expanded to include ASEAN 4
countries (Malaysia, Thailand, Philippines, and Indonesia). Recently, China and Vietnam havejoined.

27

Figure 5-2 : Japanese Firms as Builders of Asian Production Network:
International Transactions of Asian Affiliates of Japanese Firms

Input Procurement (% of total)

Output Sales (% of total)

60

60

50

50

40

40

Other
Asia
Japan

30
20

Other
Asia
Japan

30
20

10

10
0

0

1992

1992

1998

1998

Source: Shujiro Urata, A Shift from Market-led to Institution-led Regional Economic Integration in East Asia,
presented at the Conference on Asian Economic Integration, RIETI/UNU, April 2002.

Incorporating Real-sector Concern into Growth Strategy――The Case of NEU-JICA
Joint Research on “Industrial and Trade Policies under Integration Age”
The ongoing NEU-JICA Joint Research on “Industrial and Trade Policies of Vietnam under
Integration Age” is an example of intellectual aid aimed at the design of concrete industrial
strategies suitable for the age of integration. The project was launched in summer 2000, anduntil March 2001, it was conducted in parallel with the “Ishikawa Project” (1995-2001) as theresearch related to the Trade and Industry Working Group. With the completion of the“Ishikawa Project,” it has become a free-standing project.
The project closely examines a limited number of prospective industries (e.g., electronics,
textile and garment, steel, software etc.) and makes concrete policy recommendations,
including promotion measures and period, tariff reduction schedule etc. It is based on thepremise that domestic economic development should be designed and implemented under theinternationally committed constraints of free trade obligations, especially AFTA and future
WTO. Moreover, the project is notable in the following approaches: (i) instead of discussing
generalized, abstract questions (such as free trade vs. gradualism), it looks into selectedindustries and conducts in-depth studies; (ii) it makes an effort to convey the researchmethodology based on East Asian real-sector concern to the Vietnamese counterparts (but,this does not mean that Japan’s past industrial policies should be copied to Vietnam); and (iii)
based on the established close relation between the Vietnamese and Japanese researchers, it
further attempts to maximize policy impacts, by widely disseminating the results to policy
makers in Vietnam (see Box 5-1).
While this project exclusively focuses on Vietnam’s industrial and trade policies, it can also
be viewed—from the overall context of Japan’s intellectual aid—as an effort to demonstrate
Japan’s development approach featuring real-sector concern (industry, trade, investment, andintra-regional division of labor in industrial production) and respecting the individuality ofeach country and sector.
28

Box 5-1: NEU-JICA Joint Research Project
Vietnam is willing to integrate, but preparation for it remains insufficient. The purpose of the NEU-JICA
joint research is to produce studies that can help overcome this problem and make policy
recommendations for Vietnam’s industrial and trade promotion. While economic theory is useful as a
general guideline, it is not concrete enough to answer the urgent and practical questions that theVietnamese industries actually face. The project is built on the approach adopted since the “Ishikawa
Project,” which is labor intensive and relies heavily on detailed surveys on prospective individual
industries. Thus it intends to supplement theory by in-depth and up-to-date studies of domestic
industries as well as global market trends.
Up to 2001, the project primarily focused on the analyses of individual industries. Based on these results,
in 2002 the project plans to pay greater attention to policy impacts. With active participation of theVietnamese experts and policy makers, it intends to present future visions of Vietnam’s industrial
development and pragmatic policy recommendations for industrial and trade promotion.
z Implementing agencies: Japan International Cooperation Agency (JICA) and National Economic
University (NEU). Currently, 8 academics/experts from Japan and 21 from Vietnam are engaged
in research activities.
z Period: until summer 2003
z Topics: (i) general studies on AFTA, WTO and FDI; (ii) electronics industry; (iii) textile andgarment industry; (iv) steel industry; (v) software industry, etc.
z Main events: (i) field surveys and analyses under the framework of “Ishikawa Project”(1995-2001); (ii) two intensive steel seminars in Hanoi (October 2000 and 2001); (iii) Hanoi
Workshop of “Ishikawa Project” (December 2000); (iv) lectures by Japanese academics(September 2001); (v) Hanoi symposium (March 2002); (vi) report publication (expected in2002).
z Website: http://www.neujica.org.vn/

Conclusion――Future Direction of Japan’s Contribution
Lastly, it is important to stress that such concrete growth orientation should be addressed not
only in the bilateral context but also under the CPRGS framework. Although CPRGS
recognizes that economic growth and poverty reduction are two sides of the same coin, it has
not presented sufficiently detailed and operational growth strategy. It is necessary to conduct
in-depth research on broad-based growth strategy within the CPRGS framework and aligninternational support according to its results.
For this endeavor, areas for study can include industrialization, trade, agriculture and ruraldevelopment, SME and supporting industry promotion, private sector development, andhuman resource and infrastructure development in support of industrialization. Specificoperational modalities should be also examined within the CDF-derived partnershipframework, including a possibility to create additional group(s) specializing in the growth
agenda.
The current global development trend regards poverty reduction as the supreme goal and themost effective means of development. Nobody doubts that poverty reduction is a noble goalfor development. However, there should be multiple paths to achieve that goal. From themenu of possible strategic options, the most appropriate path should be chosen by eachdeveloping country with strong ownership. East Asian development has been driven by a29

national fever for “catching up” and serious concern for industrial competitiveness, whichcannot be captured by the framework of “poverty reduction” alone. Vietnam’s social andeconomic development, if it is to succeed, must also incorporate the perspective of such Asian
dynamism.

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