Third Party Evaluation Report 2015
Ministry of Foreign Affairs of JapanCountry Assistance Evaluation of Vietnam

February 2016
KPMG AZSA LLC

Preface
This report, under the title “Country Assistance Evaluation of Vietnam”, wasundertaken by KPMG AZSA LLC entrusted by the Ministry of Foreign Affairs of Japan(MOFA) in fiscal year 2015.
Since its commencement in 1954, Japan’s Official Development Assistance (ODA) has
contributed to the development of partner countries, and has contributed to bringing
solutions for international issues which vary over time. Recently, in both Japan and theinternational community, implementing ODA requires higher effectiveness and efficiency.
MOFA has been conducting ODA evaluations every year, of which most are conductedat the policy level with two main objectives: to improve the management of ODA; and toensure its accountability. The evaluations are conducted by third parties, to enhancetransparency and objectivity.
This evaluation study was conducted with the objective of reviewing Japan’s overall
policies on assistance to Vietnam, including the Country Assistance Policy for Vietnam,
2004 and 2009, drawing on lessons from this review to make recommendations forreference in policy planning and its effective and efficient implementation of futureassistance to Vietnam by the Government of Japan, and ensuring accountability bymaking the evaluation results widely available to the general public. Tatsufumi
Yamagata, Professor and Secretary General of Institute of Developing Economies
served as a chief evaluator to supervise the entire evaluation process, and Kenta Goto,
Professor, Faculty of Economics at Kansai University served as an advisor to share his
expertise on Vietnam. They have made enormous contributions from the beginning of
the study to the completion of this report. In addition, in the course of this study both inJapan and in Vietnam, we have benefited from the cooperation of MOFA, Japan
International Cooperation Agency (JICA), and the local ODA Task Force, as well as
government agencies in Vietnam and donors. We would like to take this opportunity to
express our sincere gratitude to all those who were involved in this study.
Finally, the evaluation team wishes to note that opinions expressed in this report do notnecessarily reflect the views or positions of the Government of Japan.
February 2016
KPMG AZSA LLC
Note: This English version of the Evaluation Report is a summary of the Japanese
Evaluation Report of “Country Assistance Evaluation of Vietnam”

Country Assistance Evaluation of Vietnam (Brief Summary)Evaluators (Evaluation Team)・Chief Evaluator
Tatsufumi Yamagata, Prof. and Secretary General of
Institute of Developing Economies
・Advisor
Kenta Goto, Prof., Faculty of Economics, Kansai Univ.
・Consultant
KPMG AZSA LLC
Period of the Evaluation Study
August 2015 – February 2016

Nhat Tan Bridge

Field Survey Country(Source:IHI Infrastructure

Socialist Republic of Vietnam

Systems Co., Ltd.)

Background, Objectives and Scope of the Evaluation
Vietnam is located on the eastern part of the Indochina. With a population of
approximately 92 million people, Vietnam has become a lower middle-income country in2010 and GNI per capita reached over USD 2,000 in 2014. The importance of Vietnam
is increasing from the point of promotion of future regional development in the Mekong
region. On the other hand, the country is facing several challenges inherent to thisabrupt economic growth. The objectives of this evaluation are Japan’s Official
Development Assistance (ODA) to Vietnam and to derive some recommendations andlessons learned as references for the formulation and implementation of future ODA
policies. The evaluation scopes the Country Assistance Program for Viet Nam (2009)
and the Country Assistance Policy for the Socialist Republic of Viet Nam (2012).
Brief Summary of the Evaluation Results
Development Viewpoints(1) Relevance of Policies
Japan’s ODA policies for Vietnam encompass a broad range of areas, including
economy, society and environment, and are consistent with the Government ofVietnam’s development strategy; therefore, the evaluation team concluded that
relevance of the policies is high. Furthermore, it was ascertained that Japan’s
development assistance involves a significant contribution by the Japanese companies
and experts.
(2) Effectiveness of Results
In terms of the priority areas of Japan’s assistance projects/programs for Vietnam,
there were no outstanding obstacles to achieve the expected results. The results were
within the expectations; therefore, the evaluation team concluded that the effectivenessof results is rated high. Major assistance projects have resulted in the transfer ofcutting-edge technologies, recommended operation procedures, and safety control
methods etc., which can be evaluated as positive contribution by Japan’s ODA.
(3) Appropriateness of Processes
Regarding the formulation of assistance policies, the evaluation team confirmed thatthe whole process had been conducted based on mutual understanding. As for the
implementation process, it was confirmed that a multi-layered program approach had
been taken to achieve the goals. Measures to prevent recurrence of ODA-related fraudand corruption incidents had been formulated and implemented rapidly andsubstantially and it was confirmed that a good progress and continuous efforts werebeing made. Therefore, the appropriateness of the processes is evaluated as high.
Diplomatic Viewpoints
Japan and Vietnam have an extensive strategic partnership and the leaders of thetwo countries frequently visit each other; therefore, Japan’s assistance has aconsiderable diplomatic importance. Japan’s assistance is contributing to strengthening
economic relationship and interpersonal/cultural exchanges, and its diplomatic impact isalso considered to be high.
Recommendations(1) Utilization of the Assistance for Vietnam as a front runner in international cooperation
Japan’s assistance has shown a number of characteristics which shall be a model for
Japan’s ODA in other countries. These shall be shared among responsible officers incharge of economic cooperation at Japanese Embassies and JICA Offices in otherdeveloping countries as good practices of Japan’s ODA. In this regard, it will be vital toeffectively formalize diverse tacit knowledge created by Japan.
(2) Effective promotion of assistance in social sectors
While Japan’s ODA is effectively promoted for economic infrastructure, interviews
held in Vietnam have shown that Japan’s assistance performance in social sectors
receives relatively little attention. Specifically, achievements in such fields asenvironment and health care shall be more emphasized. Environmental issues, andglobal warming policies in particular are the focus international community’s attention
nowadays. Under these circumstances, Japan has become a central donor for the
Support Program to Respond to Climate Change in Vietnam. As such, it is considered to
be noteworthy that Japan has played a leading role in mitigating global warming in
Vietnam.
(3) Continuous efforts for Anti-ODA-related Corruption Measures
Both Japan and Vietnam have been consistently implementing measures to prevent
recurrence fraud and corruption incidents. It is necessary for the Government of Japan
to consistently implement improvement and prevention measures for recurrence and tomaintain alertness among the parties concerned, in order to eradicate fraud andcorruption incidents between Japanese companies and the Government of Vietnam.

Contents

Chapter 1. Implementation Policy of the Evaluation .................................. 1
1.1 Evaluation Background and Objectives .................................................... 1
1.2 Scope of Evaluation .................................................................................. 1
1.3 Evaluation Methods .................................................................................. 2
1.3.1 Analytical methods of the evaluation .................................................. 2
1.3.2 Points to be Considered for the evaluation......................................... 3
1.3.3 Conditions of the evaluation ............................................................... 3
Chapter 2. Overview of Vietnam and Development Trends ....................... 4
2.1 Overview of Vietnam ................................................................................. 4
2.1.1 Economic environment ....................................................................... 4
2.1.2 Social environment ............................................................................. 4
2.2 Development Trends in Vietnam ............................................................... 4
2.2.1 Ten-year Socio-Economic Development Strategy (SEDS) ................. 4
2.2.2 Five-Year Socio-Economic Development Plan (SEDP) ...................... 5
2.3 Trends in International Aid ........................................................................ 6
2.3.1 Bilateral aid trends.............................................................................. 6
2.3.2 Multilateral aid trends ......................................................................... 6
2.3.3 Initiatives of the 6 Banks .................................................................... 6
2.4 Trends of Japan’s Assistance for Vietnam ................................................ 7
2.4.1 Overview of the assistance for Vietnam ............................................. 7
2.4.2 Japan-Vietnam Joint Initiative............................................................. 7
Chapter 3. Japan’s Assistance for Vietnam: Evaluation from
Development Viewpoints .......................................................... 8
3.1 Relevance of Policies................................................................................ 8
3.1.1 Consistency with Vietnam’s development plan................................... 8
3.1.2 Consistency with Japan’s ODA policy ................................................ 9
3.1.3 Consistency with international priority issues ..................................... 9
3.1.4 Summary of the Relevance of Policies ............................................. 10
3.2 Effectiveness of Results.......................................................................... 10
3.2.1 The performance of Japan’s assistance for Vietnam (Total from 2006
to 2014) ..............................................................................................11
3.2.2 Promotion of Economic growth and Strengthing International
competitiveness ..................................................................................11
3.2.3 Response to fragility ......................................................................... 13
3.2.4 Good governance ............................................................................. 14
3.2.5 Summary of the Effectiveness of Results ......................................... 15

3.3 Appropriateness of Processes ................................................................ 15
3.3.1 Planning and implementation of assistance policies ........................ 16
3.3.2 Aid coordination ................................................................................ 17
3.3.3 Anti-ODA-related Corruption Measures ............................................ 18
3.3.4 Summary of the Appropriateness of Processes ............................... 20
Chapter 4. Japan’s Assistance for Vietnam: Evaluation from Diplomatic
Viewpoints ............................................................................... 22
4.1 Diplomatic Importance ............................................................................ 22
4.1.1 Diplomacy towards Vietnam in Japan .............................................. 22
4.1.2 Geopolitics ....................................................................................... 22
4.1.3 Japan-Vietnam high level official visits ............................................. 22
4.1.4 Conclusion on Diplomatic Importance .............................................. 22
4.2 Diplomatic Impact ................................................................................... 23
4.2.1 Japan-Vietnam economic relations .................................................. 23
4.2.2 Japan-Vietnam human exchange ..................................................... 23
4.2.3 Japan-Vietnam Joint actions in the international society .................. 24
4.2.4 Japan-Vietnam mutual understanding .............................................. 24
4.2.5 Conclusion of Diplomatic Impact ...................................................... 24
Chapter 5. Recommendations and Lessons Learned.............................. 25
5.1 Recommendations .................................................................................. 25
5.1.1 Utilization of the Assistance for Vietnam as a front runner ininternational cooperation ................................................................... 25
5.1.2 Effective promotion of assistance in social sectors .......................... 25
5.1.3 Continuous efforts for Anti-ODA-related Corruption Measures ......... 25
5.2 Lessons Learned .................................................................................... 26

Chapter 1. Implementation Policy of the Evaluation
1.1 Evaluation Background and Objectives
Vietnam is located on the eastern part of the Indochina. With a population of
approximately 92 million people, Vietnam has become a lower middle-income country in2010 and GNI per capita reached over USD 2,000 in 2014. The importance of Vietnam
is increasing from the point of promotion of future regional development in the Mekong
region. The relationship between Japan and Vietnam has rapidly strengthened their ties.
For example, Japan-Vietnam Joint initiative launched in 2003 as a public-private joint
framework to improve the investment climate. Furthermore, Japan signed the Economic
Partnership Agreement (EPA) with Vietnam in 2009, which was the first bilateral EPA for
Vietnam. On the other hand, the country is facing several challenges inherent to thisabrupt economic growth, such as insufficient infrastructure development, environmental
pollution, increasing disparities, underdeveloped legal and judicial system, and lack ofgovernance. As one of Vietnam’s top donors, Japan provides support for Vietnam tomaintain sustainable growth, overcome fragility, and build a fair society/nation. In
particular, Japan introduced Public Private Partnership (PPP), Local Government
Partnership, and other new assistance schemes in Vietnam prior to other recipient
countries.
The corruption scandals related to the Saigon East-West Highway Construction
Project in Ho Chi Minh City (2008) and the Line 1 Urban Railway Construction Project inHanoi City (2014) were detected. It is important to review the influence of theseincidents on Japan’s ODA in Vietnam and obtain recommendations and lessons learned
for future ODA policies. Meanwhile, some donor agencies of other countries have atrend to redirect their aid policies since they regard Vietnam as a middle-income country.
Furthermore, the rise of emerging donors is affecting the relationship among the
traditional aid agencies, as well as the relationship between donors and Vietnam.
By taking into consideration of the importance of Japan’s ODA to Vietnam, theobjectives of this evaluation are Japan’s Official Development Assistance (ODA) to
Vietnam and to derive some recommendations and lessons learned as references forthe formulation and implementation of future ODA policies. Additionally, in order to fulfill
accountability to public, the evaluation results will be publicized, with feedback to theGovernment of Vietnam and other donors.
1.2 Scope of Evaluation
In order to set the scope of evaluation, the evaluation team summarized the Objective
Framework for Japan’s Assistance for Vietnam shown below, based on the Country
Assistance Policy for the Socialist Republic of Viet Nam (December 2012) and theCountry Assistance Program for Viet Nam (July 2009). Japan’s ODA to Vietnam has
previously been evaluated in FY2001 and FY2006. Therefore, in order to secure1continuity between this study and the previous ones, this evaluation undertakes anoverall review of assistance policies implemented during the period starting just after theprevious evaluation up to and including the most recent developments in ODA.
Objective Framework for Japan’s Assistance for Vietnam
Basic Policy ofAssistance

Priority areas

Promotion of
Economic growthand Strengthning
International
competitivenessSupport to build anation with a goodbalance ofeconomic/social
development

Development issues

Japan's Assistance Programs

Strengthening of market
economy system

Program for market economy
system, fiscal and financial reform

Strengthening of industrial
competitiveness and humanresource development

Program for industrial and humanresource development

Improving of economic
infrastructure and traffic
accessibility

Programs for stable energy supply
and energy conservation/
development of backbonetransportation system/
development of urban
transportation network

Respond ing to the threats ofclimate change, disaster,
environmental destruction, etc.

Programs for urban environmental
management/ climate change/ disastermanagement/ nature conservation

Improving of Social andliving-standard and rectifyingof disparities

Programs for health care / social
security and safety net for sociallyvulnerable people/ agriculture and ruraldevelopment

Strengthening of judicial
and administrative functions

Projects to strengthen
judicial/administrative functions

Response tofragility

Good governance

1.3 Evaluation Methods
1.3.1 Analytical methods of the evaluation
The evaluation team conducted comprehensive evaluations from development anddiplomatic viewpoints in accordance with MOFA’s ODA Evaluation Guidelines (9thEdition).
From the development viewpoints, the evaluation criteria are the relevance of polices,
the effectiveness of results, and the appropriateness of processes.
From the diplomatic viewpoints, the evaluation team conducted evaluation in criteriaof diplomatic importance and diplomatic impact.

2

1.3.2 Points to be Considered for the evaluation
Through this evaluation study, the evaluation team shows recommendations andlessons learned with the evidence that includes specific improvement methods.
In order to ensure high quality and usefulness evaluation, the evaluation teamconsidered carefully (1) improving the quality of evaluation content, (2) ensuring
independence and neutrality, and (3) matching the policy needs.
1.3.3 Conditions of the evaluation
When assessing the impact of ODA in each of the priority areas, particularly in theeffectiveness of results, the best way to ensure objectivity is to use quantitativeevaluation methods. However, for this evaluation study, qualitative evaluation methods
were used if quantitatively measurable indicators and baseline data were not available.
Furthermore, it should also be noted that it is difficult to determine the direct causality
between Japan’s ODA and Vietnam’s progress in development, because other donors
are also providing aid to Vietnam and each of them is contributing to Vietnam’s
achievement of its goals in the priority development areas. These conditions should betaken into consideration when analyzing and comprehending the evaluation results.

3Chapter 2. Overview of Vietnam and Development Trends
2.1 Overview of Vietnam
2.1.1 Economic environment
Vietnam made a rapid recovery from the Asian currency crisis in 1997 and achieved
an annual Gross Domestic Product (GDP) growth rate of 6-7% at an early stage, andcontinues to maintain a high growth rate since 2000. Steady economic growth has
allowed Vietnam to make impressive achievements with regard to poverty reduction.
Compared to 2006, Vietnam’s GNI per capita in 2014 is twice as high, export to Japan
has also doubled, and import to Japan is up 1.8-fold. The number of Japanesecompanies in Vietnam has more than tripled, from 501 companies in 2006 to 1,417
companies in 2014.
2.1.2 Social environment
Ever since the adoption of Doi Moi policy in 1986, Vietnam has been promoting
market economy under the socialist system (socialist-oriented market economy). The
goal to become an industrialized nation by 2020, adopted at the 11th National Congressof the Communist Party in 2011, has become the main development goal for Vietnam. In
order to achieve this goal, various measures are being taken to overcome diverse
inherent challenges. These include stable energy supply, infrastructure development,
urban environmental management, climate change measures, nature conservation,
disaster management, development of healthcare and social welfare system, rectifyingof income disparity, legal and judicial development, strengthening of governance, andreform of state-owned enterprises.
2.2 Development Trends in Vietnam
Under the “10-year Socio-Economic Development Strategy (SEDS) (2001–2010,2011–2020)” and the “5-Year Socio-Economic Development Plan (SEDP) (7th SEDP,
2001-2005; 8th SEDP, 2006-2010; 9th SEDP, 2011-2015)”, Vietnam pursues adevelopment policy to ensure sustainable development, economic growth, and theestablishment of a self-reliant economy on the international arena. In addition to theneed for improvement of investment climate, development of legal and judicial base forintellectual property protection, and capacity-building of financial institutions, there is anurgent need to ensure stable energy supply to support the economic growth and todevelop various infrastructures, including arterial roads and urban transportation
networks. Japan is actively supporting Vietnam in addressing these challenges.
2.2.1 Ten-year Socio-Economic Development Strategy (SEDS)
Current SEDS (2011-2020) was adopted at the 11th National Congress of theCommunist Party held in 2011. It describes the approaches to enhance the goals set

4

forth in the previous SEDS, i.e. to become an industrialized nation by 2020. Based on
the achievements and lessons learned in the 10-year period of the previous SEDS
(2001-2010), the new SEDS was developed with the following goals for the next decade
starting from 2011.
General Objective (2011 onwards)
Strive to make Vietnam a modern and industrialized country by 2020 with:
Socio-political stability and agreement
Democracy, discipline, improved physical and spiritual life of the people
Firmly maintained independence and territorial unification
Continually improved position in international arena
In order to achieve the above objective Vietnam’s development policies were further
specified in newly formulated SEDP.
2.2.2 Five-Year Socio-Economic Development Plan (SEDP)
Overall objectives of SEDP (7th SEDP, 2001-2005; 8th SEDP, 2006-2010; 9th SEDP,
2011-2015) are summarized in the table below.

Objectives of 7th-9th SEDP
7th SEDP（2001- 2005）

Accomplish rapid and sustainable economic growth
Improve and stabilize people’s lives
Promote economic structural reform/ Employment
structural reform
Promote industrialization/modernization programs
Strengthen economic competitiveness, expand trade
Promote major reform in education and vocational
training
Promote science and technology
Promote employment creation
Ensure hunger eradication and poverty reduction
Strengthen economic/social infrastructure
Develop socialist-oriented market economy
Ensure political stability, order, and social security
Protect national independence, sovereignty, territorial
integrity, and public safetyth

8 SEDP（2006 – 2010）

Improve economic growth rate
Accomplish

a

shift

to

rapid

development
Graduate from low growth country

5

andsustainableSignificantly improve people’s material, cultural, andspiritual life
Establish

thefoundationforboostingtheindustrialization/modernization process
Develop knowledge-based economy
Ensure stability of political order and public safety
Protect sovereignty as an independent nation
Improve Vietnam’s domestic/ international statusth

9 SEDP（2011 - 2015）

Establish foundation for becoming an industrialized
nation by 2020
Develop a growth model for economic innovation
Restructure economy for better quality and higher
competitiveness
Enhance diplomatic activities and firmly protect social
security and safety
Ensure social welfare and social security

2.3 Trends in International Aid
2.3.1 Bilateral aid trends
Currently, more than 25 countries are providing bilateral aid to Vietnam. In terms ofthe total amount of ODA loans on disbursement basis (by calendar year), Japan, France,
Korea, and Germany rank as the top bilateral donors. In particular, Japan’s ODA
accounts for more than 80% of the total amount. As for grant aid, Japan, Australia, andUSA are the top 3 donors. For technical cooperation, Japan, Germany, and Australia
claim the largest share (based on actual results of 2014).
2.3.2 Multilateral aid trends
Assistance provided by the World Bank and ADB account for 90% of the total amountin multilateral aid. The total amount of aid from all donors has shown a significant
increase, more than tripling from 2006 to 2014. Aid coordination in Vietnam is realized in
the framework of comprehensive policy consultations among donors throughco-financing for the World Bank’s Poverty Reduction Support Credit (PRSC), theEconomic Management and Competitiveness Credit (EMCC), which replaced PRSC，
and the Support Program to Respond to Climate Change (SPRCC).
2.3.3 Initiatives of the 6 Banks
The “6 Banks” refers to a donor group consisting of 6 aid agencies; the World Bank,
Asian Development Bank (ADB), JICA, French Development Agency (AFD), German
Development Bank (KfW), and the Export-Import Bank of Korea (KEXIM). This started
in July 1999 as a Joint Portfolio Performance Review mechanism, which was launched6

by the World Bank, ADB, and Japan Bank for International Cooperation (JBIC, later
reorganized into JICA) with an aim to establish the legal framework to manage the funds
for ODA projects, harmonize the procedures, and to explore opportunities fordevelopment of project monitoring and evaluation systems. In 2002, the 3 Banksreached an agreement on the harmonization action plan for procurement, financial
management, and environment. AFD and KfW joined in May 2003 and KEXIM joined in2013, creating the current 6 Banks-structure to function as a modality to promoteharmonization and improvement of aid effectiveness.
2.4 Trends of Japan’s Assistance for Vietnam
2.4.1 Overview of the assistance for Vietnam(1) Japan’s ODA Charter (The ODA Charter) and Development Cooperation Charter
The ODA Charter, which had been revised in 2003, outlined the following five basic
policies: (1) Supporting self-help efforts of developing countries, (2) Perspective of“Human Security”, (3) Assurance of fairness, (4) Utilization of Japan’s experience andexpertise, and (5) Partnership and collaboration with the international community.
The ODA Charter was originally formulated in 1992 and was revised in 2003. In
February 2015, a Cabinet decision was made to revise it for the second time, and torename it to “Development Cooperation Charter”, which encompasses a broader
concept. This revision was triggered by, (1) more diverse, complex, and widespreaddevelopment challenges, (2) Increasing role of funds and activities other than ODA for
development of developing countries, and (3) Globalization.
(2) Country Assistance Program, Country Assistance Policy
At the time of the target period of this evaluation study, the ODA Charter (2003
revision) was the main document of Japan’s high-level ODA policies. The Country
Assistance Program and the Country Assistance Policy were formulated and the actual
programs/projects were implemented based on the ODA Charter. The Country
Assistance Programs and Policies that were effective during the target period are theCountry Assistance Program for Vietnam (April 2004), Country Assistance Program for
Vietnam (July 2009), and the Country Assistance Policy for the Socialist Republic of Viet
Nam (December 2012).
2.4.2 Japan-Vietnam Joint Initiative“Japan-Vietnam Joint Initiative to Improve the Business Environment with a view tostrengthening Vietnam’s competitiveness” is agreed and decided to launch in 2003 by
the heads of both countries.

7

Chapter 3. Japan’s Assistance for Vietnam: Evaluation from Development
Viewpoints
3.1 Relevance of Policies
In the Relevance of Policies, the evaluation team verified consistency with Vietnam’s
development plan, consistency with Japan’s ODA policy, and consistency with theinternational priority issues.
3.1.1 Consistency with Vietnam’s development planThis section examines the level of consistency between Vietnam’s 5-year SEDP (7thSEDP, 2001-2005; 8th SEDP, 2006-2010; and 9th SEDP, 2011-2015) and Japan’s
assistance policies described in the Country Assistance Program for Vietnam (April
2004, July 2009) and the Country Assistance Policy for the Socialist Republic of Viet
Nam (December 2012).
(1) Consistency between SEDP (2001-2005) and Country Assistance Program for
Vietnam (April 2004)
The content of the Country Assistance Program (2004) is consistent with theobjectives and priority measures described in Vietnam’s 5-year SEDP (7th SEDP).
Among the objectives of the 7th SEDP, the highest priority is given to boosting the
economic growth, and the following measures are enlisted as the priority measures toachieve

thisobjective:

economic

structuraltransformation,

strengtheningofcompetitiveness, international economic integration, and human resource development.
As support for the promotion of growth is also the top priority area in the Country
Assistance Program for Vietnam, the intentions of the two countries coincide. The 7th
SEDP also defines poverty reduction as one of its objectives, placing importance onhuman resource development and job creation. Since improvement of social and living
standards, including poverty reduction, is one of the basic policies of the Country
Assistance Program, it can be said that the two development plans pursue the same
direction. Furthermore, the 7th SEDP sets forth a strong intention to develop
socialist-oriented market economy system. Support for institutional building is one of themain pillars of the Country Assistance Program, so the two development plans are also
consistent on this point.
(2) Consistency between SEDP (2006-2010) and Country Assistance Program (July2009)
The content of the Country Assistance Program (2009) is consistent with theobjectives and priority measures described in Vietnam’s 8th SEDP, which applies to theperiod 2006-2010. Among the objectives of the 8th SEDP, the highest priority is given to
boosting the economic growth. Similarly, the first goal mentioned in the basic policy of
the Country Assistance Program is the provision of support for the promotion of growth,with a target to become an industrialized nation by 2020; therefore, the intentions of the8two countries coincide. Another objective mentioned in the 8th SEDP is to significantly
improve people’s material, cultural, and spiritual life. Since support to improve the living
conditions of the Vietnamese people and to realize a fair and just society is included in
the basic policy of the Country Assistance Program, it can be said that the twodevelopment plans pursue the same direction.
(3) Consistency between SEDP (2011-2015) and Country Assistance Policy (December
2012)
The content of the Country Assistance Policy (2012) is consistent with the objectives
and priority measures described in Vietnam’s 9th SEDP, which applies to the period
2011-2015. Among the objectives of the 9th SEDP, the highest priority is given to thecreation of the foundation for becoming an industrialized nation by 2020. Assistancetoward the achievement of industrialization in 2020 is also a top priority in the Country
Assistance Policy; therefore, the intentions of the two countries coincide. Anotherobjective described in the 9th SEDP is economic restructuring to ensure better quality
and higher competitiveness. Since improvement of the market economy system andpromotion of growth and competitiveness are also defined as the priority areas in theCountry Assistance Policy, it can be said that the two plans pursue the same direction.
(4) Transition of SEDP
There are some similarities between the 7th, 8th and the 9th SEDP: economic growth isthe primary objective throughout the 3 terms and all 3 SEDPs aims to improve social
and living standards, including poverty reduction, and to develop, promote, andestablish a socialist-oriented market economy system.
(5) Results of the field survey
Vietnam is striving to accelerate its economic growth in accordance with the nineconsecutive 5-year plans. In order to achieve this goal, it is essential for Vietnam topromote industrial development. When the evaluation team visited the Ministry ofTransport of Vietnam for a hearing, the Team received a request to increase
opportunities for the Vietnamese companies to participate in Japan’s assistanceprojects. In fact, the Japanese side was also fully aware of this kind of demand.
3.1.2 Consistency with Japan’s ODA policy
When the evaluation team compared Japan’s ODA policies, namely the ODA Charter(August 2003) and the Development Cooperation Charter (February 2015), with theCountry Assistance Program for Vietnam (April 2004, July 2009) and the Country
Assistance Policy for the Socialist Republic of Viet Nam (December 2012), the Teamconfirmed consistency between the ODA policies as a whole.
3.1.3 Consistency with international priority issues
International priority issues are defined in the Millennium Development Goals (MDGs)

9and the Sustainable Development Goals (SDGs). Japan’s ODA has been supporting
Vietnam to achieve the MDGs and the SDGs. For example, under the integrated childdevelopment program, various sectors have implemented different programs targetingthe ethnic minorities, including maternal and child health activities, support for nutrition
improvement, and technical cooperation for the development of agricultural produce. As
a result, an improvement of nutrition status was observed in the ethnic minority
neighborhood. Vietnam successfully achieved 5 out of 8 MDGs by the target date of2015, with the support from the international community and own efforts in Vietnam.
3.1.4 Summary of the Relevance of Policies
Under the 10-year SEDS (2011-2020) and the 5-year SEDP (2011-2015), Vietnam
aspires to promote an economically, socially, and environmentally balanced
development. Japan’s ODA policies for Vietnam encompass a broad range of areas,
including economy, society and environment, and are consistent with the Government ofVietnam’s development strategy. In addition, the Development Cooperation Charteremphasizes that the result of international cooperation would also lead to ensuring
Japan’s national interests. Since Japan’s development assistance involves a significant
contribution by the Japanese companies and experts, particularly in the area of
economic infrastructure development, it follows that strengthening friendly ties with
Vietnam also serves Japan’s national interests from the perspective of ensuring national
security in East Asia. Furthermore, development assistance for Vietnam mobilizes funds
from wide-ranging sectors, for example through Private Sector Partnership and Local
Government Partnership.

This is reflected in the outcomes of the 4th High-Level

Forum on Aid Effectiveness (Busan, 2011), which shift the focus of development aid“from Aid Effectiveness to Development Effectiveness” 1. The Support Programme to
Respond to Climate Change (SPRCC) is also conducive to the SDGs formulated in
September 2015. Therefore, in general, development assistance for Vietnam is highly
consistent with the policy objectives of the international community. Since nearly all of
the evaluated items were rated highly relevant, the evaluation team concluded that
relevance of the policies is high.
3.2 Effectiveness of Results
In the Effectiveness of Results, the evaluation team verified the performance ofJapan’s development assistance. Promotion of growth and competitiveness, response
to fragility, and good governance will be evaluated by comparing with the neighboring
countries that are more economically advanced, such as China and Thailand, as well as
1

For details refer to Homi Kharas, Koji Makino and Woojin Jung eds., Catalyzing Development:
A New Vision for Aid, Brookings Institution Press, 2011.

10

the less developed neighbors such as Cambodia and Laos. When assessing theeffectiveness of Japan’s development assistance, it should be taken into considerationthat there are inputs from various stakeholders, e.g. other donors, beneficiaries, andNGOs, and that any development outcome is a consequence of diverse factors.
3.2.1 The performance of Japan’s assistance for Vietnam (Total from 2006 to 2014)
A large amount of finance has been spent on the Japan’s ODA for Vietnam since theresumption of bilateral aid in 1992. In this section, each scheme (ODA loans, grant aid,
and technical cooperation) is verified to analyze and quantitatively evaluate the actual
results and trends of development assistance for Vietnam from 2006 to 2014.
(1) ODA Loans
The amount of ODA Loans provided by each donor has been increasing since 2011,
especially Japan’s contribution shows the highest increase rate among all donors. The
reason is thought to be the increasing expenditures for the development of roads, ports,
electrical energy sector and other large-scale infrastructures that are essential forstrengthening international competitiveness.
(2) Grant Aid
Japan also maintains the top-donor position for Grant Aid, but compared to the ODA
loans, the amount of difference with other donors is not as large. The reason is that
Grant Aid projects are implemented by a larger number of organizations compared to
ODA loans.
(3) Technical Cooperation
Japan is also the top-donor for technical cooperation. However, the total amount fromall donors has been decreasing since 2011.
3.2.2 Promotion of Economic growth and Strengthing International competitivenessIn this section, promotion of economic growth and strengthing international
competitiveness is evaluated from development outcomes based on various indicators
and actual results achieved in line with the Rolling Plan.
(1) Development outcomes based on various indicators
Promotion of growth and competitiveness were analyzed based on indicators for (i)economic growth, and (ii) foreign investment promotion.
(i) Economic growth
In Vietnam, the Gross National Income (GNI) per capita was USD 1,890 in 2014. The
country has been in the middle-income category since 2009, based on the World Bank’s
financing guideline which uses GNI as the criteria for income classification2. While
2

Until 2009, the World Bank was classifying the countries with GNI per capita of USD996 - USD
3,945 as Lower Middle Income economies. The classification criteria have been revised and theincome range for the same category is now USD 1,046 – USD 4,125.

11Vietnam’s GNI per capita was USD 760 (i.e. less than USD 1,000) in 2006 - at the
beginning of the target period of this evaluation - the GNI per capita in China andThailand was approximately USD 2,000, almost triple that of Vietnam. This ratio hasn’tchanged a great deal even in 2014 and the GNI per capita in China and Thailand is still
almost three times higher than that of Vietnam. Regarding GDP growth rate, however,Vietnam maintains an average of 6% growth rate. The growth rate of Vietnam is stable,
unlike Thailand and Cambodia, which shows rapid fluctuations, or China, which shows
stagnation.
(ii) Foreign investment promotion
The foreign fund has made an important contribution to Vietnam’s recent economic
growth supported by the industrial development. Foreign Direct Investment (FDI) inflows
per capita have steadily increased between 2006 and 2008, almost to the level of China
and Thailand. However, the global financial crisis triggered by the Lehman Brothers
bankruptcy in 2008 greatly affected the amount of FDI flowing into these countries. The
total amount hovers around USD 20 billion and doesn’t seem to rise back to the level of2008. As for Vietnam, the amount of FDI from Japan dropped from USD 6,308 million in2008 to USD 439 million in 2009, but has steadily increased since and has reached
USD 5,875 million in 2013, returning almost to the level of 2008.
(2) Actual results achieved in line with the Rolling Plan
The annex document of the Country Assistance Policy, called the Rolling Plan for theSocialist Republic of Vietnam (April 2015), sets forth 3 development issues(development issues) related to the promotion of growth and competitiveness: (i)strengtheningofmarketeconomysystem,(ii)

strengtheningofindustrial

competitiveness and human resource development, and (iii) improving of economic
infrastructure and traffic accessibility. These cooperation programs are as follows;(i) Strengthening of market economy system
Cooperation program: Program for Market Economy System, and Fiscal and
Financial Reforms(ii) Strengthening of industrial competitiveness and human resource development
Cooperation program: Program for Industrial and Human Resource Development(iii) Improving economic infrastructure and traffic accessibility
Cooperation program: Program for the Development of Backbone Transportation
System and Program for Urban Transportation Network
During the field survey in Vietnam, hearings were held with the relevant organizations
regarding the plans to improve corporate financial management capacity as a

http://econ.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,print:Y~isCURL:Y~content
MDK:20420458~pagePK:64133150~piPK:64133175~theSitePK:239419~isCURL:Y,00.html

12preparation for the reform of state-owned enterprises, as well as the plans to introduce
E-customs and National Single Window (NSW) for customs modernization. These plans
are included in the Program for Market Economy System, and Fiscal and Financial
Reforms, which aims to resolve the issue of strengthening of market economy system.
Hearings were also held with the relevant organizations about the Noi Bai International
Airport Terminal 2 Project, Project for Support on Establishment of the Programs forOperation & Maintenance in Noi Bai International Airport, Nhat Tan Bridge(Japan-Vietnam Friendship Bridge) Construction Project, Saigon East-West Highway
Construction Project, and Hanoi City Urban Railway Construction Project that areincluded in the Program for Urban Transportation Network Development which aims toresolve the issue of improving economic infrastructure and traffic accessibility.
3.2.3 Response to fragility
In this section, response to fragility is evaluated from development outcomes basedon various indicators and from the performances achieved in line with the Rolling Plan.
(1) Development outcomes based on various indicators
Regarding the response to fragility, the Team analyzed the (i) indicators related topoverty rate, and (ii) indicators related to Human Development Index (HDI).
(i) Poverty rate
The World Bank’s Gini index3 can be used as an indicator for income disparity. A
higher Gini Index means a larger income disparity and Vietnam’s Gini Index continues
to be higher than that of the neighboring countries.
(ii) Human Development Index (HDI)
Human Development Index (HDI) is a simple index measuring average achievementin 3 dimensions of human development – health, education, and income. HDI is
calculated and published in the Human Development Report of United Nations
Development Programme (UNDP). Vietnam’s HDI had been steadily increasing from0.57 in 2006 to 0.67 in 2014 and is ranked 116th out of 188 countries. Among theneighboring countries, Vietnam’s position is not far from China (90th) and Thailand(93th).
(2) Performances achieved in line with the Rolling Plan
The Rolling Plan for the Socialist Republic of Vietnam (April 2015) sets forth thefollowing 2 development issues: (i) responding to the threats of climate change,
disasters, and environmental destruction, and (ii) improvement of social and living
standards, poverty reduction, and rectifying disparities. These cooperation programs
are as follows;3

Website of the World Bank, Gini Index
http://data.worldbank.org/indicator/SI.POV.GINI

13

(i) Responding to the threats of climate change, disasters, and environmental
destruction(a) Urban environmental management
Cooperation program: Program for Urban Environmental Management(b) Climate change policies
Cooperation program: Program for Climate Change(c) Disasters
Cooperation program: Disaster Management Program(d) Nature conservation
Cooperation program: Program for Nature Conservation(ii) Improvement of social and living standards, poverty reduction, and rectifying
disparities(a) Health Care
Cooperation program: Health Care Program(b) Strengthen support for vulnerable people and social security
Cooperation program: Program for Social Security and Safety-Net(c) Agricultural and rural development
Cooperation program: Program for Agricultural and Rural Development
3.2.4 Good governanceIn this section, good governance is evaluated from development outcomes based on
various indicators and from the actual results achieved in line with the Rolling Plan.
(1) Development outcomes based on various indicators
Indicators related to governance are analyzed below.
Efforts to improve the impacts of development aid are closely associated with therecipient government’s commitment to improve its country systems. Issues such as thedevelopment and implementation of the legal system, administrative procedures, andanti-corruption measures are also included in the efforts to improve investment climate
through Japan-Vietnam Joint Initiative. The concept of governance encompasses allthese issues, and various organizations are trying to systemize them.
(2) Actual results achieved in line with the Rolling Plan
The Rolling Plan for the Socialist Republic of Vietnam (April 2015), the annex
document of the Country Assistance Policy, sets forth the following development issue(fundamental goal) related to good governance: (i) strengthening judicial andadministrative functions. These cooperation programs are as follows;(i) Strengthening judicial and administrative functions
In addition to the existing development cooperation for legal and judicial reform,
Japan supports the Vietnamese Government and Party to strengthen administrative
functions.

14

(a) Legal and judicial reform(b) Strengthening administrative functions(c) Enhancing citizen participation in public administration
Cooperation program: Projects to strengthen judicial/administrative functions
3.2.5 Summary of the Effectiveness of Results
Firstly, from the point of inputs (i.e. Japan’s ODA share of the recipient country’s
development budget), Japan fulfilled the role as the top donor and Japan’s quantitative
inputs, in terms of the amount of funding, number of projects, and the scope of the
projects, was sufficiently significant to ensure high outputs and outcomes.
Secondly, from the point of outputs (i.e. achievement of initially-set goals), the overall
achievement level was high because many of the initiatives succeeded in achieving the
program-level objectives.
Lastly, from the point of outcomes (i.e. the kind of assistance provided to address theinitial priority areas, and the extent of impact), the multi-faceted approach for the priority
areas (mid-level goals), using ODA loans, grant aid, and technical cooperation,
contributed to the achievement of the basic policy (basic objective). In terms of thepriority areas of Japan’s assistance projects/programs for Vietnam, there were no
outstanding obstacles to achieve the expected results, and they were within the
expectations.
Furthermore, major assistance projects, such as the construction of the Nhat Tan
Bridge (Vietnam – Japan Friendship Bridge) and the Saigon East-West Highway, haveresulted in the transfer of steel pipe-piled well method, submerged tunnel method, andother cutting-edge technologies. Such aspect, together with the technical transfer of thetacit knowledge 4 related to recommended operation procedures and safety control
methods etc., is something to be proud of and can be evaluated as a positive
contribution of Japan’s ODA. Significant effects were ascertained in nearly all aspects ofthe evaluation study; therefore the evaluation team concluded that the effectiveness of
results is rated high.
3.3 Appropriateness of Processes
In the Appropriateness of Processes, the evaluation team verified planning andimplementation of assistance policies, aid coordination, and measures to prevent
recurrence of ODA fraud and corruption (Anti-ODA-related Corruption Measures).
Unlike the describable knowledge of a patent etc., tacit knowlege is indescribable, as aretechnical skills embodied in technicians and engineers. Refer to Robert E. Evenson andLarry E. Westphal, “Technological change and technology strategy,” Jere Behrman and T. N.
Srinivasan, Handbook of Development Economics, Vol. 3A, Elsevier, 1995, pp. 2209-2299
etc.
4

15

3.3.1 Planning and implementation of assistance policies
Concerning planning and implementation of assistance policies, the evaluation teamverified the following efforts; (1) active commitment toward program-based approach,(2) utilization of Special Terms for Economic Partnership (STEP) projects, (3)commitment to new assistance schemes through partnership with private sectors andlocal governments, (4) implementation of assistance with consideration for ASEAN
connectivity.
（1）Active commitment toward program-based approach
Regarding health sector, Japan has assisted in establishing health and medical care
network through a referral system, i.e. establishing a framework for coordinating
activities among primary institutions (community level), secondary institutions(provincial level) and third institutions (center hospitals directly managed by the Central
Government).
In an effort to create a model for establishing a referral system, Japan has provided its
assistance through combining different schemes, namely a technical cooperation
project for strengthening health service provision in a secondary care institution in Hoa
Binh Province, a grant aid project for the improvement of Hoa Binh General Hospital,
and ODA loans projects for developing regional hospitals. All these projects were
implemented in coordination with the Direction Office for Healthcare Activities in BachMai Hospital, a third institution, which received Japan’s technical cooperation during theperiod from 2000 through 2005. This example of establishing health care network
through a referral system is considered to be a good practice of the program-based
approach.
（2）Utilization of STEP Projects
In September 2011 STEP scheme was applied to the Project for Disaster & Climate
Change Countermeasures Using Earth Observing System (EOS). By then, the field ofspace science (satellite technologies) had been identified as a target field for STEP forsome time already, however never before did Japan provide ODA loans in this field. Also,
for the first time in the health sector, in March 2013 STEP was applied to the Regionaland Provincial Hospital Development Project (II). The original purpose of introducing
STEP was to provide “visible assistance”, and as this project has been made known as“Japan’s assistance” not only to stakeholders but also to wide Vietnamese public, thepurpose of STEP is regarded fulfilled. On the other hand, in terms of Japanesecompanies’ active commitment and competitiveness in participating in the Vietnam’s
construction market, it was pointed out that Japanese companies have been
excessively depending on STEP projects and, even in those, the competition between
them was lacking.
（3）Commitment to new assistance schemes through partnership with private sectors
and local governments

16

（i） Partnership with Private sectors
When Japanese private sectors conduct various projects and business activities indeveloping countries, this may result in creation of employment/job opportunities in thehost countries, increase in tax incomes of the host governments, expansion of trade andinvestment, increase in foreign currency earnings, transfer of Japan’s superior
technologies, etc. This evaluation study examined feasibility studies for Public-Private
Partnership (PPP) infrastructure projects, SME assistance, overseas investment andfinancing, REDD+5.
（ii）Partnership with Local Governments
In order to implement more effective ODA, Japan has been utilizing practicalknowledge of local governments of Japan as well as knowledge and experiences
stocked by Japan’s regional communities, cooperating with them to improve the quality
of ODA projects and to train aid professionals, and promoting active expansion ofoverseas cooperation projects initiated on a regional level.
（4）Implementation of assistance with consideration for ASEAN connectivity（i） Strengthening physical connectivity
Japan supported through its ODA the improvement of National Road No. 9 and theEast-West Economic Corridor through construction of the Second Mekong Bridge etc. In
addition, assistance was provided for establishment of Southern Economic Corridor
which is an economic center for the Mekong region, and it is expected that the logistic
activities will be expanding inside ASEAN region.
（ii）Strengthening institutional connectivity
Japan has promoted regional integration based on Japan and ASEAN Comprehensive
Economic Cooperation Agreement, improved soft infrastructures such as intellectual
property rights, international standardization and standard certification, trade andinvestment institutions, thus supporting economic growth in ASEAN countries.
（iii）Strengthening people to people connectivity
In addition to physical connectivity and institutional connectivity, through ODA Japanhas provided support in strengthening people to people connectivity by developing
human resources and establishing networks between Japan and ASEAN.
3.3.2 Aid coordination
Regarding aid coordination, Paris Declaration, Accra Action Plan, and Pusan
Partnership Document were formulated for the purpose of enhancement of aid quality

5

REDD+（red plus） is a framework where the international society provides economic profits toactivities committed by the developing countries to protect their own forests. This is a policy
measure to prevent forest destruction and global warming by making forest conservation more
profitable than forest cutting. http://www.wwf.or.jp/activities/nature/cat1248/redd/17and aid effects.
（1）Poverty Reduction Support Credit (PRSC)PRSC was provided to Vietnam in 10 stages from 2002 to 2012, as a framework to
support its Comprehensive Poverty Reduction Growth Strategy (CPRGS) that wasformulated in May 2002 to address such policy issues as national enterprises reform,
private sector promotion, financial sector reform, accelerating market economy, tradeliberalization, policy enhancement and institutional development for social sectors
including education and health, administrative reform and strengthening governance.
（2）Economic Management and Competitiveness Credit（EMCC）
EMCC is a program-based loan that succeeded PRSC. Since 2013, it has establishedthree pillars of reform that are key for strengthening economic management andcompetitiveness enhancement, including i) promoting macroeconomic stability, ii)
enhancementoftransparency,

efficiency,

accountabilityinpublicsector,iii)

improvement of business environment. Based on these pillars, seven target fields forreforms were identified as follows: 1. Stabilization of financial system, 2. Strengthening
fiscal discipline, 3. Administrative reform, 4. Improvement of public enterprises
management, 5. Improvement of public investment, 6. Improvement of efficientbusiness environment, 7. Improvement of fair business environment, and these reforms
supposed to be implemented by 2015. In addition to co-financing with the World Bank, it
is coordinated with ADB (supported within ICP framework), Switzerland’s State
Secretariat for Economic Affairs (SECO), and Canadian International Development
Agency (CIDA).
（3）Support Programme to Respond to Climate Change（SPRCC）
SPRCC has been initiated to implement measures to respond to climate change in
Vietnam, based on “National Target Program to respond to climate change (NTP-RCC)(2009-2015)” formulated in 2008 as a comprehensive endeavor of the Government ofVietnam to tackle climate change policies. SPRCC has implemented to formulate policy
actions and promote their implementation in relation to the three priority issues asfollows: 1. Mitigation (promotion of renewable energy and saving energy, forest
management, waste treatment, etc.); 2. Adjustment (water resource management,
integrated coastal management, etc.); 3. Interdisciplinary issues (introducing financial
mechanism for measures to respond to climate change, mainstreaming of measures
responding to climate changes, advocacy, etc.).
3.3.3 Anti-ODA-related Corruption Measures
It was regrettable to note that there were two fraud and corruption incidents related to
ODA in Vietnam since the previous evaluation study was conducted for Vietnam. The
first one was violation of the Law Preventing Unfair Competition committed by Pacific
Consultants International Co. Ltd (hereinafter referred to as ”PCI”), which caused some18

of those involved to be arrested in 2008 (bribery involving foreign public servants;
hereinafter referred to as “PCI case”), while the second case was violation of the Law
Preventing Unfair Competition committed by Japan Transportation Consultants Inc.
(hereinafter referred to as “JTC”) as a case of illegal payoff to foreign public servants(hereinafter referred to as “JTC case”).
（1）Summary of PCI case
In December 2003, PCI paid 600,000 US$ to the officials of East-West Highway andWater Environment Affairs Management Bureau Office at their office in Ho Chi Mihn City
as a reward for the PCI’s contracting the consulting work for the Saigon East-West
Highway Construction Project as ordered by the Management Bureau. In addition, in
August 2006 PCI paid 220,000 US$ to the officials of the Management Bureau at theiroffice as a reward for its contracting consulting work for the Saigon East-West Highway
Construction Project. These were regarded as bribery cases involving foreign public
servants, the bribe amount reaching 820,000 US$ in total.
（2）Measures to prevent recurrence of fraud and corruption in ODA based on PCI Case
PCI case was a serious incident which could threaten not only the public trust to
Japan’s ODA for Vietnam but also the whole of ODA, which uses the public tax as its
basic funds. The awareness of the seriousness of the case emphasized the necessity
for the both governments of Japan and Vietnam, related organizations and industrial
associations to urgently implement practical actions and policies to prevent recurrenceof fraud and corruption in order to recover the public trust. Consultations between thetwo governments were held from September 18 to 20, 2008 that resulted in agreement
to establish “Japan-Vietnam ODA Anti-Corruption Joint Committee” as well as to takethe measures. This was publicized in a report issued in February 2009.
（3）Summary of JTC case
Regarding Hanoi City Urban Railway (No.1) Construction Project, then the Presidentof JTC, a managing director (International Department Director), and an officer incharge of accounting were indicted without arrest for having violated Unfair Competition
Prevention Law (prohibition such as grants of the fraud benefits for the foreign public
servants). Allegedly they paid a rebate of a total of 69.9 million yen to concerned
officials of Vietnamese Railroad Public Corporation (VNR) which was an implementing
agency. They were convicted as guilty (penal servitude two-three years, suspended
sentence of three-four years). Furthermore, JTC was indicted as a company, to be
imposed a fine of 90 million yen as of February 18, 2015. Meanwhile, on the
Vietnamese side, Deputy Prime Minister Nguyen Xuan Phuc ordered to the Ministry of
Public Security to conduct an investigation in collaboration with People’s Prosecution
House, the Ministry of Traffic and Transportation and the Ministry of Foreign Affairs in
Vietnam. As a result, on October 27, 2015 six executives of VNR were arrested to besentenced for the term from five years and six months to13 years.

19

（4）Measures to prevent recurrence of fraud and corruption in ODA based on JTC Case
The second meeting of “the Japan-Vietnam Council for Prevention of Fraud andCorruption in ODA Projects in Transport Sector” was held in Hanoi City on June 2, 2014.
The Japan side stated that approvals for new projects involving VNR would be withheld
until thorough investigations were made into factual relations and treatment of those
involved in the case as well as measures preventing recurrence of similar cases were
determined. As to other new projects, it was stated that they would be approved only
under condition that the Government of Vietnam should promise to conduct theinvestigation and formulate prevention measures for recurrence of similar cases. On
June 24 in the same year, “the Japan-Vietnam Council for Prevention of Fraud andCorruption in ODA Projects” was held in Hanoi City. On the council, Vietnamese sideshared the results of the investigation into fraud and corruption in contracts involving
JTC and VNR. In addition, the Government of Vietnam presented its considerations on
the formulation of measures to prevent recurrence of incidents and their implementation,
which was followed by continuous consultations. Based on these consultations, themeasures to prevent recurrence of incidents will be formulated in the form of revised
Report of Japan-Vietnam ODA Anti-Corruption Joint Committee, which was preparedafter PCI case in 2009 in order to strengthen efforts to eradicate fraud and corruption
from ODA projects.
（5）Progress on measures to prevent recurrence of fraud and corruption in ODA
During the field survey of the evaluation study, the evaluation team visited
Vietnamese government organizations, and conducted interviews with officials of the
Ministry of Traffic and Transportation supervising the projects, in which fraud andcorruption incidents occurred, as well as the Ministry of Planning and Investment incharge of ODA as a whole. All of the interviewed officials stated that they considered theincidents regrettable, giving an impression that they have with all due solemnity taken
measures to prevent fraud and corruption.
Given below are steps taken by the Japan side to prevent recurrence of incidents.
（i）Strengthening contacts for consolidating information on fraud and corruption（ii）Further strengthening of stipulations regarding punishments to companies involvedin fraud and corruption（iii）Formulating JICA fraud/corruption prevention guidance（iv）Policies to strengthen corporate compliance（v）Further appealing to the counterpart government（vi）Supporting governance development and capacity building to prevent fraud andcorruption of the counterpart government
3.3.4 Summary of the Appropriateness of Processes
There are two points to note in evaluating appropriateness of processes. The first20

point is the importance of Japan’s role in the 6 banks group which provides loans as
ODA to the Government of Vietnam. Regarding the formulation of assistance policies,
the evaluation team confirmed that the whole process had been conducted based on
mutual understanding. As for the implementation process, it was confirmed that a
multi-layered program approach had been taken to achieve the goals. The second pointis the measures to prevent fraud and corruption in Japan’s ODA for Vietnam. Measures
to prevent recurrence of ODA-related fraud and corruption incidents had beenformulated and implemented rapidly and substantially and it was confirmed that a good
progress and continuous efforts were being made. On this basis, it is evaluated thatnearly all surveyed possesses were duly conducted. Therefore, the appropriateness ofthe processes is evaluated as high.

21Chapter 4. Japan’s Assistance for Vietnam: Evaluation from Diplomatic
Viewpoints
In terms of evaluation from diplomatic viewpoints, Japan’s ODA for Vietnam and its
diplomacy were analyzed based on the two evaluation criteria, “Diplomatic Importance”
and “Diplomatic Impact”.
4.1 Diplomatic ImportanceWith regard to the bilateral relations, Japan has been a “wide range strategic partner”
for Vietnam, cooperating in all fields. Especially in the economic field, Japan has been
the biggest ODA provider and the second largest investing country.
4.1.1 Diplomacy towards Vietnam in Japan
Forty years have passed in 2013 since Japan and Vietnam established theirdiplomatic relations. The bilateral relations have steadily become intimate after theJapan visit of then Prime Minister Kiet, in March 1993. It is noteworthy that, since 2006,
several meetings of highest level as well as between foreign ministers have been held
every year.
4.1.2 Geopolitics
At the present, after having achieved Vietnam’s participation in WTO, the coming few
years for Vietnam will be an important period when it is decided whether or not it could
go through continuously and steadily its path to economic growth without falling in the
Middle Income Country Trap. It will be an influential factor for not only Japan but also forthe development in Asian region as a whole, whether or not Vietnam could overcome
development issues during this period. In terms of trade and investment expansion forJapan and Mekong region, Industrial Districts, such as Thang Long Industrial Park and
Hai Phong Industrial Zone, which were developed through Japan’s ODA funds, havebeen functioning as production bases for Japanese companies, which entered in
Vietnam market. In addition, improvement of social infrastructure including roads, ports,
airports, electricity, water and sewage has been promoted by utilizing ODA funds as
well.
4.1.3 Japan-Vietnam high level official visits
Since 2006 until the present, high level officials of Japan and Vietnam have been
making mutual visits every year, as well as holding summits and meetings of foreign
ministers. Through these mutual visits between the two countries, the importance ofVietnam for Japan as well as importance of Japan for Vietnam becomes clear.
4.1.4 Conclusion on Diplomatic ImportanceJapan and Vietnam have an extensive strategic partnership and the leaders of the22two countries frequently visit each other. Several summits and foreign minister meetings
have been held every year, establishing intimate good relations. In addition, Japan has
been the biggest ODA provider for Vietnam, and the second largest investing country. It
could be said that Vietnam has potential of economic growth and promising market, andtherefore, it possesses high diplomatic importance. While Japan has insisted onpeaceful solutions that would comply with the International Law over the South China
Sea issues currently facing Vietnam, Vietnam has shown its understanding to Japan’s
policies over the North Korea issues facing Japan. In terms of appropriate managementof geopolitical risks, Japan’s assistance has a considerable diplomatic importance.
4.2 Diplomatic Impact
With regard to diplomatic impact (ripple effect) that Japan’s aid to Vietnam has given,
the analysis focuses on expansion and deepening of economic relations andinterpersonal exchanges between Japan and Vietnam, joint actions and deepening
mutual understanding between the two nations.
4.2.1 Japan-Vietnam economic relations
Following the signing of Japan-Vietnam Investment Agreement in November 2003,
Japan-Vietnam Economic Partnership Agreement was signed in December 2008
(effective since October 2009). It was the first bilateral EPA for Vietnam and the 11th EPA
for Japan. It was clarified from some interviews of the Tax Authority in the Ministry of
Finance in Vietnam that, although custom duties had not been able to catch up with theVietnamese rapid economic growth since its participation in WTO, procedures regarding
export and import as well as custom duties have become shorter and more efficient due
to Viet Nam Automated Cargo Clearance System (VNACCS) which was introduced by
Japan’s grant aid. Economic infrastructure strengthened by Japan’s ODA for Vietnam
has contributed to stimulating economic relations between the two countries.
4.2.2 Japan-Vietnam human exchange
While the number of students from China and Korea studying in Japan, who used to
be dominant among the foreign students in Japan, have gradually been decreasing
every year, the number of students from Vietnam shows rapid growth in recent years.
The number of students from Vietnam in 2006 was 2,119, ranking fifth among countries(areas) of origin, but it has increased to 26,439 in 2014 (ranking second among
countries of origin). The evaluation team encountered some of the graduates of studies
in Japan and now actively working at the visited some interviewed organizations during
the field survey in Vietnam.

23

4.2.3 Japan-Vietnam Joint actions in the international society
In terms of regional security, Vietnam has shown its understanding that
denuclearization of Korean Peninsula shall be important for the regional stability in East
Asia as well as Southeast Asia. As for the abduction issue, the Vietnamese top officials
have expressed their understanding and support to Japan. Prime Minister Abeannounced the current situations over South China Sea, which Japan has been
concerned about increasing tensions in the region due to the unilateral commencementof drilling activities by China and it shall appeal the significance of the rule of law. As
such, Japan and Vietnam share the common understandings as to the regional security
in East Asia and Southeast Asia that the both countries belong to. In addition, Vietnam
has supported Japan to become a permanent member of the United Nations Security
Council. It could be concluded that Vietnam is a very important partner from which
Japan’s foreign policies could obtain its support, and their bilateral relations havecontributed to strengthening presence of Japan in the international society.
4.2.4 Japan-Vietnam mutual understanding
In 2013, the 40th anniversary since an establishment of the bilateral diplomatic
relations between Japan and Vietnam, around 250 cultural exchange events wereorganized both in Japan and Vietnam, deepening interactions between the twocountries. According to the website of JICA Vietnam Office, in 2011, when the Great
East Japan Earthquake occurred, an alumni association for the former trainees turned
into a forum calling for support for Japan. A director of the Vietnamese National
Broadcasting, who was one of the former trainees, suggested donations through TV andit was televised as a charity program for the disaster relief.
4.2.5 Conclusion of Diplomatic Impact
Japan’s assistance to Vietnam has extended to a wide range of fields, through different
schemes including ODA loans, grant aid, technical cooperation, and Grant Assistancefor Grassroots. It has been steadily and continuously implemented for many years,
strengthening the diplomatic relations between the two nations in the process. As aresult of these deepened relations not only in economic aspects but also throughinterpersonal and cultural exchanges, the governments of Japan and Vietnam haveshared common understanding on the issues of Korean Peninsula and South China
Sea. In addition, it could be considered to be one of the good examples of diplomatic
impact that Vietnam has expressed their support for Japan to become a permanent
member of the United Nations Security Council and it has contributed to strengthening
presence of Japan in the international society. Considering the above, Japan’s
assistanceiscontributing

tostrengthening

economic

relationshipandinterpersonal/cultural exchanges, and its diplomatic impact is also considered to be24high.
Recommendations and Lessons Learned
5.1 Recommendations
5.1.1 Utilization of the Assistance for Vietnam as a front runner in international
cooperation
Japan’s assistance for Vietnam has shown a number of characteristics which shallbe a model for Japan’s ODA in other countries. Specifically, this concerns (1) transfer ofthe world’s most advanced technologies and tacit knowledge created by Japanese-style
management, (2) (not passive but) active commitment to aid coordination, (3) prompt
introduction of new trends in international cooperation such as PPP (Public-Private
Partnership), Local Government Partnership, and climate change policies (REDD+,etc.), (4) implementation of flagship projects aimed at transportation nodes that serve as
hubs of people’s activities such as airports, ports, and arterial roads, together witheffective public relations (from the diplomatic viewpoint). These shall be shared among
responsible officers in charge of economic cooperation at Japanese Embassies and
JICA Offices in other developing countries as good practices of Japan’s ODA. In thisregard, it will be vital to effectively formalize diverse tacit knowledge created by Japan.
5.1.2 Effective promotion of assistance in social sectors
While Japan’s ODA is effectively promoted for economic infrastructure, interviews
held at the Ministry of Natural Resources and Environment, the Ministry of Health, andthe Ministry of Agriculture and Rural Development in Vietnam have shown that Japan’s
assistance performance in social sectors receives relatively little attention. Specifically,
achievements in such fields as environment and health care shall be more emphasized.
Environmental issues, and global warming policies in particular are the focus
international community’s attention nowadays. Under these circumstances, Japan has
become a central donor for the Support Programme to Respond to Climate Change in
Vietnam. Japan and France led the way in budgeting the Program, and approximately
half of the cumulative total of funds disbursed by donors was contributed by Japan. As
such, it is considered to be noteworthy that Japan has played a leading role in mitigating
global warming in Vietnam.
5.1.3 Continuous efforts for Anti-ODA-related Corruption Measures
Both Japan and Vietnam have been consistently implementing measures to prevent
recurrence fraud and corruption incidents. These measures were added following
Saigon East-West Highway Construction Plan Project bribery affair as well as Hanoi
City Urban Railway Construction Project (Line No. 1) rebate affair. It is necessary for theGovernment of Japan to consistently implement improvement and prevention measures25

for recurrence and to maintain alertness among the parties concerned, in order toeradicate fraud and corruption incidents between Japanese companies and theGovernment of Vietnam.
5.2 Lessons Learned
As a final conclusion, here are some points which will be useful for future ODA
planning and implementation processes in Vietnam and other countries as well.
Vietnam’s economic growth is highly evaluated by everyone in the world. In general, it
is thought that economic growth has two aspects: an aspect of market expansion
caused by income increase (demand side) and another aspect of increase in production
capacity (supply side). The first aspect of market expansion has been attracting a
number of donors into Vietnam. In addition to the neighboring emerging Asian donors
such as Korea and China, it is assumed that Asia Infrastructure Investment Bank (AIIB)
is to enter into the infrastructure development in Vietnam in the near future. As for thesecond aspect of increase in production capacity, it becomes apparent from thestronger intent that Vietnamese companies have shown to their participation in theinfrastructure development.
As Japan clearly declared its national interests on the “Development Cooperation
Charter” (February 2015), the field survey of this evaluation study clarified that theGovernment of Vietnam (the Ministry of Traffic and Transportation) has also regarded
the Vietnamese companies’ participation in Japan’s ODA projects as a part of theVietnamese national interests to be realized. With regard to Japan’s ODA as a whole,including infrastructure projects, Japan has promoted its assistance with an emphasison high quality and professionalism among those who are engaged in ODA projects.
This point was underlined in “High Quality Infrastructure Partnership” announced byPrime Minister Abe, in May 2015. It is an important direction for Japan to continue in the
coming period as Japan works on the infrastructure development in Vietnam based onsuch characteristics of Japan’s ODA as high professionalism underpinned by highquality. In the meantime, the Government of Japan should be more aware of the factthat both the Government and people of Vietnam have been cost-conscious for all the
projects, and that there are now more and more competitors such as other donors andVietnamese companies.
To facilitate smooth implementation of Japan’s ODA for Vietnam in the coming period,
it will be more and more important for Japan to have a higher awareness in “sharing
national interests” with other countries as well as to be more cost-conscious. These are
the points to be noted as lessons learned from the evaluation team.

26