Policy Reform Initiatives andAid Management in Vietnam
Utilizing Poverty Reduction Support Credits(PRSCs) as a part of reform process

Masumi Shimamura
Mitsubishi UFJ Research & Consulting Co.
May 22, 2008

Vietnam’s Development Vision andPolicy Reform Initiatives
Development Vision: to become an industrialized country
by 2020 with accelerated industrialization andmodernization
 The government’s main driving force for reform is its

strong desire to achieve significant status in theinternational communityÎ Vietnam’s strong determination and commitment to meet with WTO
compliance PRSC policy actions have been consistent with WTO

compliance – PRSC may well be considered as one of theavailable tools to support Vietnam’s WTO accession
Question: Would the government have proceeded the reform process in2
the absence of PRSC?

1

Does PRSC Process Contributeto Strengthen Ownership?
PRSC does not involve explicit policy conditionality
Î Different from traditional adjustment lending



PRSC facilitates donor alignment with the national
strategy
Î Playing significant role as a “coat hanger”

The government is not dependent on PRSC
resourcesÎ Creating bases for healthy policy dialogue

PRSC can facilitate reform process but can not be apanacea for every reformÎ Limitation exists in dealing with step-by-step capacity building on
the ground3

What is the Government’s Intention
in Proceeding PRSC with Donors?
Mobilizing available donor funding until thecountry graduates from the IDA status
Î To utilize donor funds in soft terms until it envisages tobecome a middle income status after 2011



Aiming for signaling effects to both internal andexternal audiences
Î To legitimatize reform process and persuade internal
stakeholders to gain their supportÎ To provide potential foreign investors a sense thatVietnam has increased its attractiveness as a destination
for investment
42

Total Disbursement by Operation
and Number of Co-financiers
400

1312WB350

WB
1110300

WB
8WB
7200
65150

WB

WB

Number of donors

Millions of dollars

9250

4WB

100

3250

100
PRSC 1 (I) PRSC 1 (II) PRSC 2PRSC 3

Number of donors

PRSC 4WBPRSC 5PRSC 6

Millions of dollars

Source：modification of World Bank material
5

Investment trends in Vietnam(amounts newly approved and implemented)
Increase in investment coincides with PRSC assistance period(mil. US$)

Total
IMP

10000

1000

9000

900

8000

800

7000

700

6000

600

5000

500

4000

400

3000

300

2000

200

1000

100

Total No.

0Total1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
1473640512 1147 1926 2615 3721 6524 8497 4737 3658 1567 2013 2529 1376 1900 2200 4268 9200

IMP000428575 1118 2241 2792 2914 3215 2369 2535 2413 2450 2591 2650 3850 3300 4200

Total No.

174059

130

193

261

340

367

325

417

228

308

374518

697

752

723

9229146Source： materials from a JICA expert

3

The Role of Donors Beyond“Donor Management”


While setting appropriate milestones/policy measures,and constantly monitoring their progress through
PRSC framework can facilitate the reform process…..

Î Policy actions only address the essence of the most importantmilestones for reformÎ Thus, step-by-step capacity building on the ground is indispensable
to achieve tangible results

Policy actions and technical assistance should go
hand in hand to exert synergetic effects to facilitatetrue policy reform Japan’s strength: Japan can bring up policy issues
identified through practical assistance on the groundto the PRSC dialogue, and vice versa
The END74