Poverty Reduction Strategies in Vietnam
UCLA School of Public Policy & Social Research
Professor Stephen Commins
Laura Benson, Sonja El-Wakil, Gerardo Gambirazzi, Peter Song, Felicity Wood
June 2001
________________________________________________________________________
Table of Contents
I
Introduction
II
Context
iSocialist Republic of Vietnam
iiThe World Bank
iiiThe Poverty Reduction Strategy Papers
III
Trade as a Poverty Reduction Strategy
iCountry profile
iiThe intellectual debate
iiiTrade reform
ivMajor exports
vMajor imports
viTrade agreements
IV
Life or Debt: Vietnam’s Poverty Reduction Strategy
V
The Role of the State in Poverty Reduction
VI
Vietnam Civil Society and NGO Involvement With the World Bank
iSources, targets, methods
iiPreliminary criticisms
iiiInternational aid
ivProblems for the IPRSP
vHow the PRSP approach works
viPolicy stand
VII
Process and Change through the PRSP
iPotential as a learning tool
iiDynamics between the State and Civil Society
iiiWB stance against interfering with internal politics and its conflict with
poverty reduction
ivHuman rights and poverty inextricably intertwined
VIII
Conclusion
1
I
Introduction
Within the past decade, Vietnam has experienced dramatic changes in its economic
structure and political climate. GDP has surged while productivity and international trade
have increased as reforms to transition into a market economy have been adopted. The
result has been a reduction in poverty and less apprehension among the Vietnamese as to the
future of their country, despite what has happened in many other socialist states.
Yet there is still uncertainty as to Vietnam’s future. Of particular concern is the fate
of certain groups within Vietnam that have traditionally been marginalized. While the
Vietnamese government has repeatedly asserted its commitment to eliminating poverty and
inequality, inequality actually increased in Vietnam during the 1990’s1. The export led
industrialization model that Vietnam is attempting to follow also showed signs of its
weakness during the Asian financial crisis in which the GDP growth rate and Foreign Direct
Investment (FDI) declined2.
This paper attempts to explore and understand the implications that these changes
will have on the poor of Vietnam. In particular, the Poverty Reduction Strategy Papers
(PRSP) initiative of the World Bank and IMF is focused upon as potential tool for
eliminating poverty. Whether the PRSP is actually useful or not, as well as the significance
of its creation and what it means for those who created it (the Bank), must implement it (the
State) and are most impacted by it (the poor) are examined. In order to give a wider context,
a section on the economic situation in Vietnam is developed. This is followed by sections
on the role of the State, the nature of poverty, Civil Society and the World Bank.
1
Based on the Vietnamese Living Standards Surveys taken in 1993 and 1998, inequality went from a gini
coefficient of .33 to .35.
2
FDI is considered an important factor for long-term growth in Vietnam. As it is, 50% of the current FDI
in Vietnam goes to industries with at least 90% effective protection rates. The implication of this is that, as
Vietnam removes such industry protection (and it must do so for greater efficiency as well as satisfying
international trade partners) FDI will further drop.
2
II
Context: Vietnam, the World Bank & the Poverty Reduction Strategy Papers
The Socialist Republic of Vietnam
The Socialist Republic of Vietnam (SRV) is headed by the Communist Party, the
prime minister and the National Assembly. National leadership and ministries are in Hanoi.
The ministries have provincial offices to carry out planning at the local level. However,
provincial officials tend to practice provincial loyalty and autonomy because they are hired in
and tend to remain in the province3. In addition to competing loyalties between the national
and local level, there is an ongoing tension between communist hard-liners and social
reformers in the national government. The government seeks to embrace a market economy
while maintaining a one-party system, but disagreements exist as to just how far to go either
way.
Vietnam experienced widespread starvation in the mid-1980’s but by 1995 claimed
the fastest growing city in the world4. This was largely due to a policy revision making the
primary agricultural production unit the family, rather than the commune5. The result was a
dramatic increase in agricultural output, which surged until the Asian economic crisis of the
late 1990’s tempered it. While the population as a whole gained tremendously in the 1990’s
poverty is still a fact of life for many in Vietnam.
3
Vietnam: Managing Public Resources Better The World Bank p. 8
Ho Chi Minh City at a rate of 15%
5
Atinc, interview 5/10/01, The World Bank
4
3
The World Bank
The World Bank was founded in 1944 to aid the development of poorer countries
and has a membership composed of several nations. The weight of each member’s vote
and how much it must financially contribute to the Bank is determined by their economic
strength. Among other institutions, it includes the International Bank for Reconstruction
and Development (IBRD) and the International Development Association (IDA). The
IBRD is funded for the most part by bonds sold through international capital markets
while the IDA is funded by contributions from the wealthiest member countries. Another
distinction between the two is that the IBRD loans its money to middle-income and
credit-worthy poor countries while the IDA provides interest-free loans to the world’s
poorest countries. Total Bank lending amounts to nearly $30 billion per year.
The World Bank defines development as “ a long-term process that ultimately
involves the transformation of whole societies…Development is about putting all the
component parts in place – balanced economic and social programs.6” While the Bank
speaks of balance between economic and social programs, some things are more balanced
than others. Half of World Bank loans go to economic programs, while less than a third
goes to social programs. The remaining fifth is for infrastructure.
World Bank Expenditures by sector as percentage of $29 billion, 1999
Economic
Financial 23%
Multi-sector 15%
Industry, mining &
telecom 4%
Agriculture 9%
6
Infrastructure
Social
Transportation 10%
Public sector mgmt 4%
Electricity, power
& energy 2%
Water supply & sanitation 2%
Urban dev’t 2%
Social 12%
Education 7%
Health, nutrition and pop. 6%
Environment 4%
The World Bank: Knowledge & Resources for Development The World Bank, September 1999
4
Economic loans: 51%
Infrastructure loans: 20%
Social loans: 29%
---------------------------------The Poverty Reduction Strategy Papers
The Poverty Reduction Strategy Papers (PRSPs) are a new requirement by the
World Bank. Countries seeking debt reduction or seeking to borrow money at especially low
IDA rates must present PRSPs to the World Bank for approval before the debt forgiveness
or loan will be extended. The PRSP requirement was born as a result of widespread
criticism of damage done by World Bank policies, especially economic Structural Adjustment
Programs in the 1980’s in sub-Saharan Africa and other places. Acknowledging that
development had to be approached differently, leaders of the G7 countries decided at a
meeting in September, 1999 to implement PRSPs.
The PRSP process is supposed to be different from Structural Adjustment Programs
and other programs of the World Bank in that they promote country ownership of its own
development strategy. Although the PRSPs must fit within a given framework of “balanced
economic and social programs”, and must be approved by the World Bank, they are in
theory the product of the country national government and its civil society. Once the PRSP
is complete, donors and multilateral agencies as well as national governmental bodies will
have a blueprint from which to construct programs. In theory this will lead to less overlap
and redundancy, less parallel and therefore weakened efforts, and a clearer idea of what the
national strategy is.
For example, in Vietnam the government has indicated that one of its priorities is to
create jobs in the countryside to dissuade people from moving to the cities. This is why they
are seeking development in forms that will get people off the rice paddies but into some
5
other rural work, like raising cattle, for example. Writer Stephen Murdoch who specializes in
Southeast Asia called it a strategy of “from the rice paddies to the hamburger patties.”
So far countries seeking to create a PRSP have encountered the difficulty of making
a comprehensive plan right away – in order to secure loans and reduce debt – and to do so
with meaningful input by its civil society. Coming to agreements on goals and
implementation with civil society participation takes a long time, and in a poor country with
illiteracy, weak communications infrastructure and the demands of the harvest and other
immediate needs, the process is especially challenging. Because of this, only four countries
have completed PRSPs so far while several, like Vietnam, have taken the step of creating an
Interim Poverty Reduction Strategy Paper (IPRSP). According to Tamar Manuelyan Atinc
(in charge of PRSP support for Vietnam, Laos, Cambodia and Mongolia) a problem in
IPRSPs is “usually a lack of prioritization, which is really needed because of huge needs and
a lack of capacity.”7
Vietnam’s Ministry of Planning and Investment (MPI) headed the drafting of the
Interim Poverty Reduction Strategy Paper in consultation with all other ministries.
According to the chief economist at the World Bank Vietnam the analytical work, like
participatory poverty assessment studies, were done in the provinces with provincial
consultation. The World Bank hopes that when the full PRSP is completed in June 2002
“further consultations will take place at provincial levels again.” 8 The MPI worked closely
with donors and international NGO’s, but not with domestic NGO’s. Seven drafts were
made before the I-PRSP was published9.
7
interview, May 10, 2001
Nisha Agrawal, Lead Economist, World Bank Vietnam, correspondence 3 June 2001
9
Joint Staff Assessment of Vietnam’s IPRSP by IMF & World Bank, March 2001
8
6
III
Trade as a Poverty Reduction Strategy
Laura Benson
COUNTRY PROFILE
With rich natural resource endowments, low cost labor, and a strategic Asian
location, Vietnam is well positioned to become a major player in international trade. The
country’s 77.5 million inhabitants have been quick to embrace the activities required for
trade, including shifting from agrarian to manufacturing jobs and learning more advanced
production methods, especially for agriculture. Agriculture employs 70 percent of the labor
force, but this number is shrinking rapidly as the expansion of industrialized zones around
urban centers, Ho Chi Minh City in particular, entices workers from the rural areas to the
cities. Despite the growth, poverty continues to plague the country with a per capita income
estimated at US $400 in 2000. The success of current trade policy reform will have
important ramifications for the country’s most needy.
In its Interim Poverty Reduction Strategy Paper (I-PRSP) made public on March 14, 2001,
the Socialist Republic of Vietnam (SRV) has demonstrated a clear commitment to
establishing a market economy and liberalizing its trade regime. The document declares that
Vietnam will “create all possible favorable conditions for a rapid increase in exports and for
attracting foreign capital and technology.” What has caused one of the most closed
economies in the world, previously defined by central planning and rigid state control over
all external interactions in the 1980s, to embrace market economics and trade liberalization
in the 1990s? The statements in the I-PRSP appear to signal the degree to which
development economists have succeeded in convincing even the most historically closed
7
nations to lower their barriers to trade and foreign investment in order to enjoy the benefits
of economic growth from global exchange. This section will look at Vietnam’s evolving
position from a protectionist state to an open economy, paying special attention to recent
and proposed changes in its trade and foreign direction investment policies and the
implications of these adjustments for poverty reduction in the country.
THE INTELLECTUAL DEBATE
Vietnam was a classic case of protectionism in the early 1980s. The protectionist
stance was fueled and supported by many development economists from the late 1950s
through the 1970s. Theories about “circular and cumulative causation” (Myrdal, 1956),
“underdevelopment” (Frank, 1967, and Szentes, 1976), “dependency” (Frank, 1980), and
import substitution policies all suggested that least developed nations should limit their
vulnerability to more advanced nations through protectionist measures. These theories had
their critics, among them Samir Amin, who wrote about “accumulation on a world scale” in
his critique of the theory of underdevelopment in 1970. Nonetheless, the protective rhetoric
made sense to many of the young countries, like Vietnam, emerging from colonialism and
civil unrest and determined to establish an independent economic reality of their own.
Vietnam developed policies during this time to “protect” themselves from the
extraction of their natural resources at the benefit of wealthier nations. Tariffs in the form of
steep taxes on imported goods as well as nontariff barriers, such as quotas, subsidies,
investment restrictions, and repatriation limits, curbed imports and exports. By insulating
import-competing producers from foreign competition, protective tariffs placed foreign
producers at a competitive disadvantage in the domestic market. Such tariffs and other trade
barriers were meant to encourage local production and support the development of infant
industries by making locally produced goods relatively less expensive. Beyond protectionism
8
were the fiscal benefits of tariffs as a revenue source for cash strapped governments. Like
many socialist countries, Vietnamese trade barriers, such as cultural tariffs, also served to
prohibit the exposure of the general public to capitalist ideologies through the import of
cultural products.
Vietnam’s position towards trade has clearly changed. In the I-PRSP, the
government notes that it will “continue to gradually remove non-tariff barriers and phase out
quantitative restrictions imposed on imported goods” (SRV, p. 1). This new stance would be
supported by most economists today, who agree that tariffs and trade barriers offer more
drawbacks than benefits for governments. They deter imports for the benefit of local
producers, but often increase the price of the good for the consumers and send the benefits
from more efficient production abroad. Thus, tariffs are paid for by the citizens of the tariffimposing nation, not the foreign entity, putting domestic consumers at a disadvantage to the
consumers of more open nations. Tariffs deter innovation, resulting in less competitive
national products and industries. Carbaugh points out that “once a protective tariff is
imposed it is very difficult to remove… and difficult to determine which industries will be
capable of realizing comparative-advantage potential and thus merit protection.”(p.125)
Anti-statism, poor economic performance, evidence of success in other countries,
and pressure to reform by the World Bank for funding have all fueled the shift to more open
economies as well. This has no doubt been the case in Vietnam, which will enjoy a Poverty
Reduction Support Credit as a result of gaining approval from the Bank. The benefits of
trade liberalization seem clear. Trade improves resource allocation in line with marginal costs
and benefits and grants domestic firms access to additional technologies, inputs, and
intermediate goods. Open economies are also better able to take advantage of economies of
scale and scope, prompt improved competition, and encourage the transfer of knowledge.
9
Most importantly, liberalized trade offers favorable growth externalities, such as the shake up
of industry that may induce growth with a more Schumpeterian environment. (Dornbusch,
1992)
Since the transition to a more open economy in Vietnam has begun with the
lowering of export barriers, as the volume of commodity exports grow, the effectiveness of
import tariffs leads to the appreciation of currency. Thus, only with the additional
liberalization of imports does the full potential of trade seem achievable (Dornbusch, 1992).
The World Bank supports full trade liberalization, but sends a cautionary note about the
benefits of trade for the workers of a country:
There is now substantial evidence that open trade regimes support growth
and development and that moving toward an open regime and its attendant
benefits is the reason for trade reform. But the consequences for poor people
depend crucially on how trade liberalization affects the demand for their
greatest asset: their (often unskilled) labor. (WDR, p 70)
Thus, while liberalized trade policies often supports economic growth, a government that
prioritizes poverty reduction must also consider the impact of lower trade barriers on the
livelihoods of their most vulnerable populations, especially impoverished, unskilled workers.
In 1986, the Vietnam Communist Party (VCP) planted the seeds for liberalizing the
country’s trade policy when they formally endorsed a program of “renovation,” known as doi
moi. Made at the VCP’s Sixth national Congress, the decision ended central planning, freed
prices, set limits on public sector spending, disbanded agricultural cooperatives, and
loosened restraints on business activity. In the last 15 years, Vietnam has continued to
expand the number of market reforms and has experienced fantastic growth throughout its
economy as a result. Trade related sectors have been particularly productive. Between 1990
and 1998, Vietnamese exports jumped from US $2,404 million to $9,361 and merchandise
imports grew from $2,752 to $11,494 (WBDR, 2001). Anticipating the surge in both exports
10
and imports to continue, the country’s I-PRSP states: “ It is expected that the value of
exports will increase at an average annual rate of 15%-16%, while the value of imports will
increase at an average annual rate of 14%”(SRV, p.24). Is this realistic?
TRADE REFORM
Vietnam’s trade policy reform began with the formation of a Ministry for Trade in
1993. From its inception, the Ministry’s leadership has steadily opened the country’s borders
through a series of decisions on import and export requirements and trade alliances. Major
trade policy changes include:
March 2, 1993, Decree 15-CP
Establishes the functions, tasks, and powers of the Ministry of Trade. Most important is
the responsibility to draft and submit to the Government the rules and regulations to
control import-export activities, including quotas and tariff rates, and manage the
measurement and quality control in the field of commerce in the whole country.
December 15, 1995 – Decree 89
Eliminates the requirement that companies obtain an import permit from the Trade
Ministry for each import shipment. Companies are still required to obtain a general trade
license, however. Exceptions that still require a permit include products that are imported
by companies formed under the foreign investment law, for oil and gas exploration, for
exhibitions, or for re-export, commodities that are governed by quotas, and goods that are
prefabricated, in transit, or governed by special management regulations. Consumer goods
imported under annual plans, machinery or equipment imported under the state budget, or
articles subject to management for supply and demand also require permits.
December 30, 1995 – Decision 864
Requires specialized management agencies to approve the import of certain products,
establishes import orientation plans, states that consumer goods imports should equal
approximately 20 percent of Vietnam’s total exports, and divides consumer goods into two
categories – limited import products or freely imported consumer goods.
January, 1996 – Decision 91
Sets guidelines around the approval process required for the import of machinery and
equipment using State funds, foreign assistance, and companies majority owned by the
state.
May 10, 1998– Decision 57
Grants firms the right to trade goods without obtaining a permit for each export or import
transaction. The goods imported or exported must be mentioned in the company’s
registration certificate, however.
11
January 20, 2001 -Decision No.04/2001/QD-BTC
Issued by the Minister of Finance, the decision amends and supplements the names and
tax rates for items in the list of preferential import tax rates. For example, new rates
include: aviation fuel - 15 percent, solvent petrol - 10 percent, petrol of other kinds - 40
percent, diesel - 10 percent, mazout - 0 per cent.
April 4, 2001 Decision No.46/2001/QD-TTg
Abolishes the rice export quota, fertilizer import quota, and regulation on focal importers
and exporters of both items. The decision also established the list of goods prohibited
from and allowed for import and export under the special management provision for the
2001-2005 period.
Most recently, the decision to appoint Nong Duc Manh as the Communist Party general
secretary sends a strong message to other nations that the country is serious about reform
The decision made at the Ninth Party Congress on April 22, 2001 shifts power from
conservatives towards economic reformers.
Vietnam’s current tariff code includes 7,000 line items. Preferential tariff rates apply
to goods imported from countries with Normal Trade Relations (NTR) and are 50 percent
lower than ordinary tariffs. Vietnam also has special preferential tariffs for countries with
which they have signed trade agreements; the tariff reduction for these countries has been as
much as 70 percent of the ordinary tariff rate. Import duties are calculated on the basis of (1)
the quantity of the goods declared, (2) the dutiable value, and (3) the applicable duty rates,
normal, preferential, or special preferential. Export controls for trade out of Vietnam include
permits and licenses, export duties, quotas, and restrictions.
The General Customs Department is responsible for inspecting imports and exports
and for collecting taxes related to trade. Customs inspects exported or imported goods
before being cleared at provincial customs stations. Quality, specifications, quantity and
volume of the goods are all considered prior to allowing the good to pass through Customs.
In 1999, Vietnam also issued a set of labeling and marking requirements for all imported and
exported goods, requiring that all labeling be in Vietnamese and dated according to their
12
methods. Certain goods are prohibited from import and export altogether. These include:
firearms, ammunition, explosives, and military equipment, drugs and toxic chemicals,
dangerous and unhealthy cultural products, firecrackers, children’s toys with the potential to
harm, cigarettes, second-hand consumer goods, and certain automobiles. The government
prohibits additional items from time to time as they deem necessary.
Vietnam is in the process of further loosening trade restrictions on exports. New
rules on national export coordination will become more flexible, allowing exporters to make
direct contact with foreign buyers. In an article in the Asia Times Online Vietnam’s Trade
Minister, Vu Khoan, acknowledged that current trade policy has limited many businesses
from taking advantage of export opportunities since import and export companies can only
trade commodities listed expressly in their registration. The changes are expected to bolster
the competitiveness of domestic businesses and help Vietnamese trade policy to conform
with international and regional trade standards. The new changes will also reduce the list of
restricted imports to 10 commodities for the year with the hope of eventually abolishing
each of these from the list.
The commitment to trade by the government appears unequivocal. According to
Trade Minister Khoan, “The Vietnamese people will continue to lift their incomes and
purchasing power in the next 10 years to drive GDP all the way to the target. Export growth
is absolutely crucial in the process.” According to the I-PRSP, the government will:
Continue to gradually remove non-tariff barriers and phase out quantitative
restrictions imposed on imported goods; continue to abolish restrictions imposed on
rice exporting enterprises and on fertilizer imports; and gradually expand the use of
auctions to auction garment export quotas in order to improve market access to
exporters.
Despite verbal commitments, the import restrictions and the actions of government
continue to hamper trade in Vietnam. Special management regulations and import
13
orientation plans continue to act as of non-tariff barriers. For example, in 1999, the Ministry
of Trade artificially shut out several “non-essential imports” and forced import companies to
sell to the government 80 percent of their foreign exchange balances. According to the
Trade Information Center of the U.S. Department of Commerce, “Although these plans set
numerical limits on imports, ministry officials insist they are not ‘quotas’ because the
numerical limits can be adjusted in accordance with domestic demand.” Three of the five
products that fall under the special import orientation plans are principal imports –
petroleum(13.2 percent), fertilizer (3.3 percent), cement, sugar, and steel (5.2 percent). While
monitoring the import of these critical commodities in important, the mismanagement of
Vietnam’s “special import orientation” program would have a significant impact on the
country. Corruption at Customs stations is also a cause for concern. According to the US
Department of Commerce, the calculation of tariff bills is not always based on international
standards: “Customs valuation remains non-transparent and is highly discretionary.
Although, in principle, reference prices are used to counteract the practice of underinvoicing, the system is not responsive to world market price fluctuations.”
MAJOR EXPORTS
Vietnam has experienced dramatic growth in exports across all sectors. The
agricultural and manufacturing sectors have witness some of the most pronounced gains in
productivity and have fueled a gradual shift from an agrarian to a more industrialized
economy (see Chart 1). Services, industry, and agriculture constituted 41.4, 35.4, and 23.4
percent of the nation’s GDP in 2000 respectively. (EIU, p. 5) Part of the marked increase in
manufacturing products as a proportion of total exports is due to the fall in commodity
prices. For example while coffee production effectively doubled from 1998 to 2000 from
14
382,000 to 784,000 tons its export value fell from US$594 million to US$501 million due to
excess supply dampening its price.
Chart 1
The Proportion of Total Exports - 1994 vs. 2000
Tea
Coal
Cashew Nut
1994
Black Pepper
2000
Rubber
Vegetables & Fruits
Handicraft & Fine Arts
Coffee
Rice
Footwear
Marine Products
Textiles and Garments
Crude Oil
0%
5%
10%
15%
20%
25%
30%
AGRICULTURE
Vietnam’s growth in the agriculture sector is most pronounced among the rice,
coffee, seafood, and cashew nut industries. The latest rice crop in the Mekong Delta has set
new records. As of March 2001, more than 876,000 tons of rice have been exported this year
(VTIC). Changes in the rice export quota have lead to most of the increase in export
volume. In 2001, the Minister of Trade removed all barriers to trade when the world price
for rice is low, as it is this year. When the world price for rice increases, however, the
Ministry has declared that a tariff rate and export quota will be established to ensure national
food security.
Vietnam is now the second largest exporter of coffee in the world behind Brazil.
While the government and many outside observers applaud the impressive advance in
15
production over the 10 year period since the introduction of the crop, the failure of an
adequate adjustment policy led to the drastic oversupply of the market in 1999 and 2000.
After members of the Association for Coffee Production Countries (ACPC), a group that
Vietnam has yet to join, decided to cut the total quantity of coffee for export by 20 percent
in the 2000- 2001 crop, they managed to raise the average price level. When the price of
coffee nearly halved between 1999 and 2000, the poorest and most vulnerable coffee
producers felt the external shocks first. The majority of the growth in coffee production has
occurred in the Central Highlands of Vietnam on the traditional lands of various minority
groups, who are some of the poorest and least educated of the country. The growth of
coffee production in Vietnam was spurred on not by the local highlanders, however, but by
the resettlement of many kinh (“ethnic Vietnamese”) migrants who now make up the
majority of the people in the region. Thus, the rapid growth of the industry has lead to an
equally rapid marginalization of some of Vietnam’s most vulnerable groups who do not have
the skills or education to produce coffee at the same levels of productivity. Country analysts
have attributed recent protests in the Highlands to the ethnic tension caused by the
inequitable impact of and distribution of wealth from the coffee production. According to
the EIU, “Since the coffee prices slumped over a year ago, the economic situation of many
ethnic minority households in the [Central Highlands] has become precarious. The
demonstrators were almost all drawn from ethnic minorities…and distrust between the two
groups is strong.”
Cashew nuts continue to be a strong export product for Vietnam. Falling prices,
despite strong growth in output, has lead to stagnate earnings and squeezed many employers
of the more than 70,000 full or part time employees in the industry. Similar to the coffee
16
scenario, Vietnamese farmers are learning a difficult supply and demand lesson, flooding the
market with more cashew nuts than are demanded.
The seafood industry has boomed in Vietnam. Aquaculture, shrimp pond
development in the south and center of the country especially, has fueled strong productivity
gains and growth in exports. In Ca Mau province at the southern tip of Vietnam, shrimp
production has more than doubled from 80,000 hectares in 1999 to 180,000 hectares by the
end of 2000. As with coffee and cashew nuts, however, massive shrimp exports from
Vietnam and other countries flooded the market and caused a sharp fall in the price of
shrimp for 2000. The prospect for shrimp farmers is not bright with exports expected to rise
as much as 50 percent to reach 150,000 tonnes this year.(EIU, p 22)
MANUFACTURING
Textile & garment and footwear manufacturing has exploded over the last 5 years,
growing from zero exports to US $1,892 million and $1,464 million respectively. Footwear
now accounts for over 10 percent of all Vietnamese exports. Companies such as Nike and
Reebok are taking advantage of Vietnam’s low wage labor through subcontractors in the
Industrial and Export Processing Zones around Ho Chi Minh City. Businesses in similar
zones are expected to create 33,000 additional jobs this year, only 6.3% of the 190,000
anticipated to be created in Ho Chi Minh itself. (EIU, p. 22) Foreign Direct Investment
(FDI), which skyrocketed during the 1990s, is fueling much of the industrial expansion. FDI
reached US$746 million in 2000 and is up 44 percent for the first quarter of 2001 from last
year at US $273 million. (EIU, p 29)
MAJOR IMPORTS
Although Vietnam exports crude oil, their lack of an oil refinery requires that they
import all refined oil for consumption. The growth in steel & ingot imports is due to the
17
growth in the manufacturing sector, extensive infrastructure development projects, and
construction taking place across throughout the country, and especially around Ho Chi Minh
City. A recent decision of the Minister of Trade to lower tariff rates on select fertilizers to 5,
3, and 0 percent, depending on the concentration of the good, is the product of the strategy
to support the industrialization of agriculture. The demand for motor cars and motorcycles
has risen dramatically in the last decade. As a complementary industry, the huge growth in
local bicycle production, up 595 percent from last year to 197,200 units for the first quarter
of 2001, indicate that transportation should continue to grow over the next few years as real
wages increase and living standards rise.(EIU, p 20)
TRADE AGREEMENTS
In 1989 Vietnam sent its first signal that it intended to promote regional security
when it withdrew from Cambodia and began seeking admission into regional trade
associations. In July of 1995, Vietnam joined the Association of Southeast Asian Nations
(ASEAN), comprised of Brunei, Philippines, Indonesia, Laos, Myanmar, Malaysia,
Singapore, Thailand, and Cambodia. Enhancing regional trade relationships further,
Vietnam joined the Asia Pacific Economic Cooperation (APEC) forum in 1998. As a
member in AFTA, the ASEAN free trade area, Vietnam has cut tariffs on 720 lines this year
and made commitments to reduce tariffs on a 5,500 additional items over the next 5 years.
Other original members agreed that tariff rates within AFTA should be reduced to no more
than 5 percent by the year 2003. Since Vietnam is a latecomer to the agreement, it has
committed itself to tariff rates of no more than 20 percent by 2003 and no more than 5
percent by January 1, 2006. Nearly 97 percent of the tariff lines will be covered by 2006,
implying a significant increase in competition for Vietnamese producers.
18
Vietnam’s relationship with multilateral agencies began in 1956 when it became a
member of the World Bank Group by joining the International Bank for Reconstruction and
Development, two years after France withdrew from Vietnam following 100 years of
colonial rule. Vietnam joined the International Development Agency in 1960 and the
International Finance Corporation in 1967. Vietnam joined the United Nations in 1977
following the Vietnam War. More recently, following the initiation of trade reforms, the
Vietnam joined the Multilateral Investment Guarantee Agency in 1994. Today Vietnam
receives financial and technical assistance from the World Bank Group and has formulated a
strategic poverty reduction strategy in order to receive a Poverty Reduction Growth Facility
(PRGF) and the World Bank Structural Adjustment Credit (SAC). While its is not a member
of the WTO, Vietnam has initiated the application process for membership and
demonstrated its desire to extend trade relationships outside of the region as well.
Vietnam has established strong trade ties at the country level as well. The chart
below provides the proportion of exports and imports exchanged with dominant trading
partners in 2000.
Main destination of exports, 2000
% of total
Japan
China
Australia
Singapore
Taiwan
Germany
U.S.
Source: EIU Country
Report
Major origins of
imports
Singapore
Japan
Taiwan
South Korea
China
Thailand
Hong Kong
18.1
10.6
8.8
6.1
5.2
5.1
5.1
% of total
17.7
14.4
12.1
11.1
9.1
5.2
3.9
Major export destinations for rice are Indonesia, Iraq, and Malaysia. Russia has a trade
relationship with Vietnam as well. Last September Russia agreed to let Vietnam export rice,
19
coffee, and other products worth approximately US$100 million a year in exchange for the
reduction of US$11 billion in debt over 23 years. The recent development of a trade
relationship with the U.S. is perhaps one of the most significant trade negotiations for
Vietnam since it began to lower its barriers to trade, considering the delicate history as
former enemies of war.
THE US-VIETNAM TRADE AGREEMENT
The seeds for the U.S.-Vietnam trade agreement were first planted in 1993 when the
U.S. declared its support for international lending to Vietnam. For the first time since the
war from 1964-1973, U.S. organizations were allowed to participate in development projects
in Vietnam in 1994. President Clinton also lifted an economic embargo in 1994 that had
restricted U.S. firms from exporting to or competing for business opportunities in Vietnam.
Most drastically, in 1995 and 1996, the U.S. opened normal diplomatic relations with
Vietnam and began negotiations on a Bilateral Trade Agreement. Former Congressman and
POW, Douglas "Pete" Peterson further heals historical political tensions between the two
nations when appointed by President Clinton as the new U.S. Ambassador to Vietnam in
1997.
On July 13, 2000, President Clinton signed the landmark US-Vietnam Trade
Agreement. The agreement, upon the approval of the US Congress, will clear the way for
Vietnam to receive Normal Trade Relations treatment on an annual basis. The agreement
grants market access for industrial goods, agricultural commodities, and services, intellectual
property protection, and includes investment and transparency provisions. More specifically,
according to a White House memorandum, the agreement grants “all Vietnamese firms, and
20
over time U.S. persons and firms, the right to import and export freely from within its
borders for the first time.” As terms of the agreement, Vietnam will:

lower tariffs on the full range of U.S. industrial and agricultural exports;

phase out all non-tariff measures;

adhere to the WTO standards in applying customs, import licensing, state
trading, technical standards and sanitary and phytosanitary measures;

implement intellectual property protection up to the WTO standard for all firms
within 18 months of the agreement’s activation as well;

allow U.S. persons and firms to enter its services market in the full range of
services areas, including financial services (insurance and banking),
telecommunications, distribution, audio visual, legal, accounting, engineering,
computer and related services, market research, construction, educational, health
and related services and tourism. (phased-in over time, typically within three to
five years);

protect U.S. investments from expropriation, eliminate local content and export
performance requirements and phase out its investment licensing regime for
many sectors;

adopt a fully transparent regime with respect to each of the four substantive
areas above, by issuing draft laws, regulations and other rules for comment,
ensuring that advance public notice is given for all such laws and regulations, that
these documents are published and available, and by allowing U.S. citizens the
right to appeal rulings made with respect to all such relevant laws and
regulations.
An important aspect of the agreement and of Vietnam’s trade reform has been the opening
of the local economy to the presence of foreign firms. Already 400 U.S. firms operate in
Vietnam.(EIU, p. 29) In 1999, the U.S. extended export support programs in the form of
export financing, working capital guarantees, loans, export credit insurance, project
financing, and political risk insurance to U.S. companies in Vietnam through the ExportImport Bank (EXIM Bank), the Overseas Private Investment Corporation, and the Trade
Development Agency. This number is likely to grow dramatically once Congress passes the
trade agreement.
21
REFERENCES
AFP. “Vietnam unrest threatens to raise objections to US trade deal” by Vietnam Insight an
online publication at http://www.vinsight.org/insight.html. February, 2001.
HANOI, Feb 11 (AFP) - A wave of unrest among Vietnam's mainly Christian central
Asia Pulse (staff). “Vietnam to take broom to trade restrictions.” Asia Times Online
(http:www.atimes.com) Asia Times Online Co., Ltd. February 23, 2001.
Carbaugh, Robert J. International Economics. South-western: Cincinnati. 2002.
Dornbusch, Rudiger. “The Case for Trade Liberalization in Developing Countries.” The
Journal of Economic Perspectives, Volume 6, Issue 1 (Winter, 1992), 69-85.
Economist Intelligence Unit (EIU). Vietnam – Country Report (April 2001). The Economist
Intelligence Unit: London. April, 2001.
Edwards, Sebastian. “Openness, Trade Liberalization, and Growth in Developing
Countries.” Journal of Economic Literature, Volume 31, Issue 3 (Sept., 1993), 1358-1393.
Myrdal, Gunnar. Economic Theory and Underdeveloped Regions, Duckworth, 1957, also published
as Rich Lands and Poor.
Rodrik, Dani. “The Limits of Trade Policy Reform in Developing Countries.” The Journal of
Economic Perspectives, Volume 6, Issue 1 (Winter, 1992), 87-105.
Ryan, A.G. Assessing the Impact of Rice Policy Changes in Vietnam and the Contribution of Policy
Research. International Food Policy Research Institute (IFPRI): 1999. Available at
http://www.eldis.org
Socialist Republic of Vietnam (SRV). Interim Poverty Reduction Strategy Paper (I-PRSP). Hanoi,
March 14, 2001. Available on the World Bank website: www.worldbank.org
Turley, William. “Vietnam: Ordeals of Transition” in Asian Contagion – The Causes and
Consequences of a Financial Crisis, Karl D. Jackson, editor. Westview Press: Boulder,
CO. 1999, pp. 269-299.
World Bank. World Bank Development Report (WDBR), 2000/2001. The International Bank for
Reconstruction and Development: Washington, D.C. 2001.
U.S. Department of State. White House Fact Sheet on Vietnam Trade Agreement: Congress next step
for Vietnam Normal Trade Relations (1300) Distributed by the Office of International
Information Programs,. Web site: http://usinfo.state.gov. July 13, 2000
VASC. Vietnam News Service online at http://www.vnn.vn/index.html
22
IV
Life or Debt: Vietnam’s Poverty Reduction Strategy
Gerardo Gambazzini
In this paper I will examine in broad terms, the Interim Poverty Reduction Strategy
Paper (IPRSP) produced by the Socialist Republic of Vietnam (Vietnam). Specifically I will
focus my attention on the general approach of the IPRSP as it relates to the implementation
of viable poverty alleviation policies. Vietnam has proposed a number of policy change
recommendations to the World Bank that seek to alleviate many of the social ills affecting
the country. My objective in this paper is to critically analyze those policy choices and their
viability. In short, I will analyze the Vietnam IPRSP in order to answer a single question: to
what extents do the policy changes in the IPRSP contribute to improving the living
conditions of urban and rural poor in Vietnam?
Central to my analysis in this paper is the poverty framework provided by Vietnam in
its IPRSP. The Government of Vietnam seeks to solve a number of social, economic and
political issues by enacting an overall policy in its IRPSP. One of the most pressing issues is
the high rate of poverty that hinders not only economic growth, but also social and political
development. The IPRSP is the plan that should provide a credible framework that assesses
and designs the policy options available to the Government of Vietnam to deal with its
internal problems. In other words, the Vietnam IPRSP serves as the diagnosis of the
problems faced by Vietnam as well as the prescription that is provided by the Government
of Vietnam in its attempt to alleviate poverty rates.
23
In order to analyze the viability of the IPRSP put forward by the Government of
Vietnam, one must take into those policy proposals and attempt to forecast their possible
impact on the social ills of Vietnam. Moreover, one must seek to predict the possibility of
adverse consequences of the various policy options and determine the mitigating measures
the government can take to avoid those consequences.
Finally, I will assess whether the IPRSP proposes policy changes that comply with
the framework put forth by the World Bank and the International Monetary Fund for the
receipt of assistance. In other words, I will assess whether the policy change proposals put
forward by the Government of Vietnam are credible in light of conditions within the
country and in comparison to the ability of the country’s abilities to achieve success when
implementing these same policy change proposals.
Poverty
The issue of acute poverty is one the deepest concerns of the Government of
Vietnam. Another overarching concern is the lack of economic growth and accompanying
economic stagnation. The situation, however; has improved economically but there is a still
lot of room for improvement and this is exactly the area that the IRPSP would seek to
address. The Government of Vietnam implemented an economic program designed to
create economic growth from 1984-1993. This economic program known, as Doi Moi,
shows a degree of commitment in part of the Government of Vietnam in alleviating poverty
and expanding economic growth. David Dollar and Jenny Litvack report in their study
entitled Macroeconomic Reform and Poverty Reduction in Vietnam that the Doi Moi
economic program enacted in the early 80’s – a predecessor to the IPRSP--had a relatively
high success rate in creating economic growth and alleviating some poverty.i The data from
the Doi Moi program clearly shows a marked correlation between income growth and
poverty incidence. However, income growth by itself did not solve most of the problems
24
associated with poverty such as malnutrition, high unemployment rates in rural areas, low
rates of education, lack of access to health services, and issues of gender and security among
the rural and most urban poor.ii
The Government of Vietnam does not provide a clear-cut definition of poverty. In the
IPRSP, poverty is implicitly defined in broad terms by the policies that the government has
designed with the purpose of alleviating what the government appears to understand as the
problem of poverty. In the IPRSP the Government of Vietnam has drafted a document in
which it shows a clear understanding of the varied and complex dimensions of poverty.iii As
a result, based on that analysis the Government of Vietnam has established a framework by
which it intends to achieve several objectives:

Establish a sustainable economy with rapid development

Maintain the best of Vietnamese culture and traditions

Aiming to become a socialist market economy

Intend to have the characteristics of an industrialized and knowledge- based society
within the next 20 years
To best achieve the aforementioned objectives, Vietnam must develop and articulate in
the IPRS the design and plan of such policies that would carry out these objectives.
However, in order to carry out a thorough analysis of poverty in Vietnam a number of
conditions have to be met. First, there has to be current and comprehensive information on
poverty. A significant amount of research and data is necessary in order to identify a
targeted group and avoid misguided policies of the past. Second, proper planning is
necessary to integrate macroeconomic and social policies into a consistent and viable
framework. In other words, the IPRSP must bring the relevant parts of its macroeconomic
principles to bear on the poor with successful results. And third, there has to be the political
25
will to change and improve public governance. What does the Government of Vietnam
articulate in its IPRSP in respect to these 3 conditions?
The most recently collected survey data is from 1992.iv At that time, the World Bank
held a multi-topic household survey that covered 4,800 Vietnamese households from all
regions of Vietnam.v The survey, the first one ever held in Vietnam, collected household
data such as household composition, education, health, employment, migration, housing,
fertility, agricultural activities, non-farm self-employment, food and non-food expenditures,
income, credit and savings, and anthropometrical measurements.vi Though this data seems
complete, it is not an accurate picture of the current situation of poverty across Vietnam, it is
outdated and it contains statistical and qualitative gaps that were not addressed at that time.
A new set of household questionnaires is necessary in order to best identify and best design
anti-poverty measures. These surveys provide with qualitative and quantitative evidence that
is reliable and relevant for the purposes of identifying the population and formulating
policies.
An issue of vital importance is the translation and interpretation of the data collected
into feasible social, economic and political policies that will benefit the poor sections of
society. The integration of income and non-income dimensions into a macroeconomic plan
is necessary as evidenced by prior economic programs in which economic growth did not
alleviate the problems of poverty.
A brief statistical analysis of Vietnam shows the disproportionate levels of poverty across
national lines according to 1993 data.
Population below the poverty line
Rural
57.2
Urban
25.9
National
50.9
Source: World Development Report 2000/2001: Attacking Poverty, p.281.
26
It is clear that in Vietnam as in most countries, rural poverty is attenuated by
historical, social and economic conditions. Compounding the situation, 80% of the
population lives in rural areas “making it one of the least urbanized countries in the world.”vii
The problems of rural poverty compound the problems in the urban areas by migrating in
search of employment. The Government of Vietnam does not address the issue of rural
migration in their IPRSP. In the IPRSP, the Government of Vietnam realizes that poverty
in addition to being multi-dimensional; it is also regional and seasonal. However, a thorough
plan on how to attack these distinctive and complex issues is not articulated in the IPRSP.
V
The Role of the State in Poverty Reduction
Felicity Wood
The role of the state in poverty reduction strategies includes ensuring healthy
institutions, accountability to citizens and partners, and setting a framework in which civil
society can flourish. Institutions need to rebuild or be invigorated for predictable, consistent
policies and services. Accountability, especially at the local level and especially to the poor,
starts with transparency. Challenges faced by states in the new millennium in their role in
poverty reduction include dismantling of a centrally planned economy and the rise of the
meta-state, like the Association of Southeast Asian Nations or the European Union. Those
states experiencing high levels of inefficiency, mismanagement, and corruption within public
institutions will be seriously disadvantaged in their efforts to develop a poverty alleviation
strategy and/or long-term vision of human development. The World Development Report
of 1997 argues that in the absence of the following tasks, sustainable, shared povertyreducing development is impossible:
27

Establishing a foundation of law

Maintaining a nondistortionary policy environment, including macro-economic stability

Investing in basic social services and infrastructure

Protecting the vulnerable

Protecting the environment
Viable and well-managed institutions must be present and functioning if the State
wishes to become equipped to fulfill its role and to furthermore enhance its capacity. The
State must commit itself vigorously to a process that will strengthen the rule of law, reduce
corruption and arbitrary decision making while improving service delivery. Combating
problems such as clientalism, patronage-based bureaucracies, and well-organized interest
groups, who historically counter reform with illegitimate methods, has become a major
obstacle for the State. A well-motivated bureaucracy is central to the State in achieving its
development objectives – including poverty alleviation. Government bureaucracies have
become institutions in themselves and are in desperate need of reform.
A successful poverty alleviation strategy must have the commitment of both national
and local government. Decentralization, which may arguably be better facilitated once the
previous institutional reforms are initiated and significantly achieved, can also have adverse
ramifications.
28
The Socialist Republic of Vietnam: Policies
The Socialist Republic of Vietnam is in the process of creating an overall set of goals
for the coming decade entitled the Socio-Economic Development Strategy. The strategy is
accompanied by specific targets:
Vietnam’s Socio-Economic Development Strategy: Goals for 201010
Goals

Economic: sustainable and rapid development as a globally integrated and competitive
socialist market economy

Societal: a high quality, just and stable of life for all to be industrialized and knowledgebased by 2020 while maintaining the best of Vietnamese tradition
Articulating Targets






Eradication of hunger and hard-core poverty
Universalization of lower secondary education
Reduce the rate of child malnutrition from a third to 15-20%
Increase life expectancy from 68 to 70-71 years
Increase access to clean water in urban areas from 65% to 90%
Increase forest coverage from 28% to 43%
Strategy
Rapid growth and a more modern, industrial and urban economy to create better-paying jobs






10
A doubling of GDP by 2010 attained through economic growth of over7% annually
Increase investment to 30% of GDP
Export growth at twice GDP
Decline in share of agriculture in GDP from 25% to 16-17% with an increase in industry
from 35% to 40-41%, and increase in services from 40% to 42-43%
Share of rural employment to decline from two thirds to one half
Share of urban population to increase from one quarter to one third
Vietnam 2010, joint report of the World Bank, ADB and UNDP overview p. 1
29
World Bank analysts suggest that among these priorities, the SRV must identify
“bottlenecks - the hard to solve problems that are impediments to success – and to begin by
attacking these first.”11
The VNG does not have the resources it needs to take care of its public spending
needs for the next decade. According to Atinc, unlike China, “Vietnam does not have an
unemployment scheme, though in China its small. China created a limbo category for
workers on furlough. They would receive a reduced salary and declining benefits for three
years and at the same time get training and access to microcredit. Those left over at the end
of three years would be categorized as unemployed and receive the benefits associated with
that category.”
Laws: the framework for civil society and a tool to help the poor
The 1992 Constitution mandated that the VNG build a state ruled by law.
One area that has remained particularly touchy for the VNG is non-governmental
organizations, or the recognition of formal associations of people which are neither
government nor family nor business. The Law on Science and Technology is the start of a
framework for a special kind of association and NGO, but only those which are researchoriented.
The GVN issued the Grassroots Democracy Decree in 1998 to increase information
sharing at the commune level on budgets and people’s committees’ activities. In February
and March 2000 the World Bank commissioned a study in six different communes in three
provinces. The study found that households paid fees to the local government without an
itemized account of what the money is going to, or of what they could expect in return. The
11
Vietnam 2010 preface
30
study found that with the exception of one of the six communes studied, commune officials
were not publishing budgets and expenditures as required by the Grassroots Democracy
Decree. “Indeed, most of the households indicated that they had no knowledge of the
commune budget and what money was spent on.”12 Worse, “In all the households
interviewed for these calculations, the wealthy household was paying less than all but one of
the poor households.”
The study corresponds to what peasants were saying after numerous violent
outbreaks throughout the country during the 1990’s. One such incident occurred fifty miles
southeast of Hanoi in Thai Binh Province. Unrest began in March 1997. People voiced
their concerns both through official channels and the use of violence. People from 251 of
the Province’s 285 communes13 lodged complaints, held police hostage, and acted violently
to the persons and property of local cadres (Reuters, Hanoi, June 20, 1998). Feb. 16, 1998
(Reuters) Thai Binh’s incident followed by similar, but smaller, disturbances in other parts of
Vietnam. It is said investigators had found that many communes had been asked to make
contributions of rice over and above the levels required by state taxation. (Reuters, Feb. 5,
1998). In Nam Dinh Province a group of peasants demanding that cadres be sued for
corrupt practices filed a petition with local authorities (Hanoi, May 26 1998, AFP). The
apparent lack of application of the decree raises the very important question of enforcement
of laws.
The World Bank study made a number of recommendations with regards to local
fees. These included reducing the number of separate fees and contributions, clarifying
criteria for exemptions, relating utility fees to consumption, restructuring other fees on a
progressive basis to correspond with household income, ensuring transparency of
12
The World Bank Vietnam: Managing Public Resources Better p. 47
31
assessments and spending of fees, and establishing a way for households to seek answers
from others besides commune officials if these are not satisfactory.
Program 135 was enacted to “improve the material and non-material life of people in
the remote, mountainous and underprivileged communes and to create conditions for them
to overcome poverty and become better integrated into the mainstream of Vietnamese
life.”14 This is an extremely loaded statement, as we shall see later, as many of the poorest in
Vietnam are not ethnically Vietnamese and would lose their heritage if forced to assimilate.
Program 135 is to complement the Decree on Grassroots Democracy in fostering local
participation in development decisions. Program 135 has 1000 of the poorest communes in
Vietnam as its target, with the following strategy: sustainable use of natural resources,
infrastructure development including clinics, schools, markets and communication,
leadership training in social and economic development and relocation from places of
extreme hardship. Funding is to come from the state budget, bank loans and credits and
people’s savings.
Van de Walle and Gunewardena bring up a very important problem in local
governance in their study Sources of Ethnic Inequality in Viet Nam: racism. “In recent
years, the government has targeted a number of rural development policies to poor areas in
which ethnic minorities are found…there is a seemingly widespread perception that such
policies have been largely unsuccessful in raising levels of living of the minority groups.
“In confronting this apparent failure…the (largely Kinh) bureaucrats have tended to
argue that the problem is the backwardness, ignorance, superstition or irrationality of the
minorities…A dissenting view is that the policies have failed, and sometimes even further
disadvantaged minorities, because they are premised on assumptions and models that simply
13
a commune is an administrative unit that combines a collection of villages (Reuters, Hanoi, June 20)
32
do not apply to the circumstances of ethnic minorities…although members of some
minority groups do not know the national language, government services and outreach are
rarely in minority languages…a central question in this debate is whether the same model
generates income for majority and minority groups.” (p. 1-2, Introduction) The study finds
that minorities work up to twice as hard as the Kinh group, because the land they till is
worse and, being farther from markets and places of employment, they have less options for
diversifying income. Growing and selling of opium and other illegal activities may not be
adequately documented. The paper concludes, “In reducing poverty among Viet Nam’s
minorities…there is an important role for geographically targeted programs aimed at poor
areas. However, our results also suggest that it is not sufficient to only target interventions
to poor areas, even with relatively high concentrations of ethnic minority groups. Policies
for fighting poverty among minorities assume the Kinh model will continue to be
ineffective. The paper’s results clearly point to the need for…geographically targeted poor
area development programs to be appropriately tailored to…the situation of minority
households.” (P.20, Conclusions)
Donors are willing to support significant parts of Program 135, with the exception of
resettlement. The World Bank recommends that the role of the state in further
implementing Program 135 should be creating more transparent and accountable budgetary
processes, giving capacity building an equal priority with infrastructure development,
improve poverty targeting, even within communes, and standardize and coordinate program
monitoring (Vietnam 2010 p. 73). It is important that the different development goals of
minority villages do not get lost in the process.
14
Vietnam 2010 p. 71
33
The Enterprise Law enacted in June, 1999 eliminating discretionary restrictions on
the rights of any legal entities and individuals to establish private business, simplifying
substantially registration procedures, creating a basis for unified legislation covering all kinds
of enterprises including equitized enterprises. The agenda includes issuing all decrees to
implement the law in three years. Donald Baron, an American professor of economics
who taught at the National Economics University at the time said the law “was a really
big deal. Caused a lot of local companies who hadn’t registered to register, like four
times the regular rate. It had a minimal impact on foreign investors but was thought to be
generally positive if insufficient.”
As a filter for international aid, the State’s management of public expenditure will
determine when, in what form, and how much of the funding will actually reach those most
in need. As a result, the transparency of a government’s budget process is another key
measure of accountability. The Vietnamese government does not have the resources it
needs to take care of its public spending needs for the next decade. Based on the experience
of other countries, the document Vietnam 2010 makes the following recommendations (p.
22): Improve the flow of budget information across government agencies and from the
central to the commune level and back, establish a clear system of costs and benefits,
including economic, social and environmental to protect against purely political projects, be
careful not to under-fund recurrent expenditure to avoid costly maintenance later, introduce
a pro-poor bias, and divest expenditures that others can finance.
34
VI
Vietnam Civil Society and NGO Involvement with the World Bank
Sonja El-Wakil
Contents
A. Glossary
B. Introduction and Methodology
C. Problems for the PRSP
D. How the PRSP Approach Works
E. History
F. Larger Problems with the CPRS
G. Policy Stand
H. Interviews
I. Endnotes
A. Glossary
CAS: Country Assistance Strategy
CBO: community-based organization
CDF: Comprehensive Development Framework
CEMMA: Committee for Ethnic Minorities and Mountainous Affairs
CG: Consultative Group
CPRS: Comprehensive Poverty Reduction Strategy
CS: civil society
DFID: UK Department for International Development
GRO: grassroots organization
GSO: General Statistics Office
HEPR: Hunger Eradication and Poverty Reduction Program
HIPC: Heavily Indebted Poor Countries
IMF: International Monetary Fund
IPRSP: Interim Poverty Reduction Strategy Paper
MARD: Ministry for Agriculture and Rural Development
MO: Mass Organization
MOF: Ministry of Finance
MOLISA: Ministry of Labour, Invalids and Social Affairs
MPI: Ministry of Planning and Investment
MRDP: Vietnam Mountain Rural Development Program
NGO: non-governmental organization
PPA: Participatory Poverty Assessment
PRGF: Poverty Reduction and Growth Facility
PRSC: Poverty Reduction Support Credit
PRSP: Poverty Reduction Strategy Paper
PWG: Poverty Working Group
SBV: State Bank of Vietnam
SIDA: Swedish International Development Agency
UNDP: United Nations Development Program
VLSS: Vietnam Living Standards Survey
VNGO: Vietnam-based non-governmental organization
WU: Women’s Union
35
More terms by Globalization Challenge Initiative @
http://www.challengeglobalization.org/html/el_menu1.shtml.
B. Sources, Targets, and Methods
The goal of this paper is to give a review and determine a role for the World Bank in
Comprehensive Poverty Reduction Strategy (CPRS) plans, using participatory processes in
Vietnam to highlight overall themes. Work has been done similar to this in the recent past; a
study by a consulting firm, SGTS & Associates. Their composition, Civil Society Participation in
Poverty Reduction Strategy Papers (PRSPs); Vol. III: Vietnam Case Study was drafted as for the
Department for International Development (DFID). The paper is an analysis of the process
for civil society participation in Vietnam, to best make recommendations for the CPRS
process. DFID provided funding for Participatory Poverty Assessments (PPAs), which were
synthesized in Vietnam; Voices of the Poor.
The Vietnam Voices is a summary of the four PPAs completed in 1999. They were done by
Action Aid Vietnam, Oxfam GB, Save the Children Fund (UK), and Vietnam Sweden
Mountain Rural Development Program. It is a document used to support Vietnam’s
strategies for poverty and inequality reduction.
World Bank Resources: the World
Bank publishes many of the resources
used in this paper. I would like to thank
bank employees for their time and
candid answers to interview questions.
This report is not meant to be a
frivolous attack, especially on any one
individual. Instead, I hope this analysis
gives greater elucidation to the CPRS
process.
Additionally, a report titled Vietnam; Attacking
Poverty, document produced from similar data,
the Vietnam Living Standards Survey
(conducted in 1993 and 1998)viii is another
36
well-used resource for research on methods and process in the CPRS.
The context of this paper is civil society’s relationship to poverty reduction in Vietnam.
Civil society is supported in generic terms by international aid and the Vietnam government.
In Vietnam this is very important because international non-governmental organizations
(NGOs), the British government and civil society groups have worked to assess poverty
needs through Voices and Attacking Poverty. International aid, defined here as those
organizations that act to facilitate civil society participation in decision-making, but excluding
the World Bank, is particularly important as a support for MOs, which are civil groups with
huge membership, authorized by the Vietnam government. The goal of this paper is to offer
constructive criticism for civil society’s involvement in Poverty Reduction Strategy Papers
(PRSPs), an initiative to strengthen countries’ development, with NGO and donor support.
Consequently, the aid and civil society elements of PRSP reviews are combined in this paper
to reflect overall participatory processes for poverty reduction in Vietnam.
The document produced by SGTS & Associates has been immensely helpful as a reference.
In this paper I will compliment its delineation of key figures with some procedure,
definition, and critique additions. The SGTS Case Study in Vietnam is one of a few countryspecific analyses of the bank’s poverty reduction strategy plans in Vietnam, especially
focusing on civil society, outside of the Bank itself. Its importance as an outside evaluation is
significant particularly because of the controversy the Bank has stirred engaging in
international development and poverty reduction. This document provides some of the
scope for civil society involvement up until the time it was published in June of 2000.
37
Research for this analysis consists of:
 Online readings from Los Angeles
 Work shared from SGTS & Associates in London, England, ADUKI Pty. Ltd. in
Mawson, Australia, and NGOs in DC, USA
 Documents passed on through meeting with Bank staff in Washington D.C.
 Direct interviews with World Bank Staff, U.S. Agency for International Development,
and NGO/nonprofit watchdog agency staff in D.C.
From sources such as the World Bank website,ix there are many detailed publications about
the conditions of poverty in Vietnam and goal priorities for policymaking. There is little
published about the bank’s role in participatory processes, and fewer in Vietnam. The
conditions of poverty are important for reference, but in the interest of transparency, it is
important to recognize outside research to clarify what the bank intends to do for poverty
reduction.
My focus has shifted from strict research on civil society involvement on the PRSP in
Vietnam to researching the World Bank’s definition and scope for Vietnam civil society
involvement in PRSPs. The goals for this paper are to highlight the bank’s process for
involvement, because the bank has ownership of the CPRS.
38
Preliminary Criticisms
Setting aside problems and issues of participation and capacity, the power struggle between
the sheer feasibility of poverty reduction strategies and World Bank mediation is a significant
challenge. I question civil society’s ability to navigate, and effectively change the bank’s
hoops for debt relief and the Vietnam







government’s resistance to community
OTHER… QUESTIONS TO
NGOS AND BANK STAFF IN DC
How does the World Bank plan to
aid/combat strategies in Vietnam, based
on current findings? (Any future plans?)
To what degree can the World Bank
collect data in Vietnam to first discover
who CS is to better incorporate CS into
the PRSP?
To Vietnamese organizations and
groups: is the government moving
beyond the partnership paradigm to a
solidarity paradigm?
Is anyone addressing the problem of
capacity building?
What is the Bank’s relationship to the
Communist Party?
Why does the Bank insist that the
country jump through additional hoops
if, as in the case of Vietnam, the country
has 5-year plans that have put “the total
number of people living below the
poverty line…from 57% in 1993 to 37%
in 1998?” (SGTS & Associates)
What are the “limits” for the bank’s
involvement with civil society?
organization. The World Bank is, after all, a
bank with internal strategies for profiting. In
readings it has become obvious that by some
definitions of “civil society,” participation
has been negligible in Vietnam. Hence, the
relationship the bank has with the
international NGOs in Vietnam is
particularly significant as well. Some of the
questions I have tried to answer are:

In what capacity has the bank facilitated
civil society engagement?

What is the relationship the bank has
with political parties that are grouped
under “state,” but actually are vehicles for CS involvement?

What is the overall significance of civil society in Vietnam, especially as it relates to the
PRSP?
39
The answers to the first two questions are generally terse and negative. The answer to the
third question is that civil society is immensely important, well organized and very active in
the country.
There is good, deep questioningx happening on behalf of the World Bank country-group in
Vietnam for the Vietnam 2010: Entering the 21st Century; Partnerships for Development, and Linking
Participatory Poverty Assessments to Policy and Policymaking: Experience from Vietnam,xi both
produced by the bank. Despite thoughtful efforts, criticisms internal to the bank from
interviews admit that the mission of the bank fundamentally undermines true participation
from civil society groups for a poverty reduction plan, and allows and supports inadequate
plans for poverty reduction. Individual bank staff members are said to be trapped in
bureaucratic machinery, established to give good public relations as damage control for the
International Monetary Fund (IMF). “The World Bank is a handmaiden of the IMF…and
the private sector. The Bank does cover-up for the IMF. They [the Bank] starve their own
employees…of real information.”xii
The most serious criticism of the PRSP process is that no matter what type of participation
or partnerships are developed, most peoples’ lives do not change very much as a result. For
all the strategizing, too much has been made of the huge leaps and bounds in poverty
reductionxiii because economic stratification has increased, making the situation worse than
ever for the poorest people. NGOs including Globalization Challenge Initiative, and Bretton
Woods Project have voiced this concern.xiv Jubilee 2000, a coalition that advocates for the
Bank to “Drop the Debt,” is concerned more generally that the PRSP is an attention-getting
initiative that distracts country attention away from debt forgiveness. There is a more
40
complete analysis of Vietnam poverty composed in the related section of this report by
Gerardo Gambirazzio.
Methods
Background questions for investigation include:
Civil Society

What is the makeup of Vietnamese civil society? Vietnam is a socialist state,xv with
four levels of administration: central; provincial and urban authorities; urban precincts
and rural districts; and urban wards and rural communes. The Communist Party sets
policy agenda debates. MOs have membership in the millions. The Women’s Union (12
million members), the Vietnam Youth Federation (2.5 million), and Hochiminh
Communist Youth Union (3.5 million) are examples of MOs, commonly concentrated
on women, youth, labor and farmers.xvi

What are established political processes for participation? The MOs are part of the
Fatherland Front, a vehicle to elect government candidates. MOs have representatives in
the National Assembly and Peoples’ Committees. These groups discuss poverty
alleviation.

What are the elements of over and under-representation in PRSP participation?
The IPRSP is the first publication by Vietnam for the CPRS. Consultative Group (CG)
meetings to inform civil society groups, primarily international NGOs, about the CRPS
are held annually. Representative problems may occur because social groups, often the
poorest people, are uncounted in a formal census or other assessments. In Vietnam, the
VLSS, quantitatively, and PPAs, qualitatively, provide thorough information about the
41
poorest members of society. Civil society, however, is not significantly represented in
policy decision-making because of time constraints and lack of MO capacity.

Discover the most urgent inhibitors to civil society participation. The lack of
capacity in the MOs for policy debate is pressing. Supported by the World Bank, the
Vietnam government emphasizes trade liberalization, decentralization, and local
initiatives, putting additional pressure on local groups.xvii At the same time, the Vietnambased NGOs (VNGOs) are only tentatively accepted in society by the government.
There are other tensions, too: “the need to move forward quickly…and the need to
secure country ownership” through broad participation; “no common understanding
of… participation;” “antipathy, widespread in civil society organizations and some
governments;” and the “concern over flexibility – on how far the macroeconomic
framework can integrate poverty reduction concerns.”xviii
International Aid

Discover the extent of aid presence in Vietnam. Donor and international NGOs
have done research targeting poor social groups. The PPAs are significant because the
resulting analyses are directly related to poverty reduction strategies. International NGOs
offer social services historically impossible for VNGOs to provide. The General
Statistics Office (GSO) hosted the VLSS, funded by United Nations Development
Program (UNDP) and Swedish International Development Agency (SIDA).

What is the significance of financial involvement in participation? The bank does
not offer provisions for assessments for the CPRS. It is especially important, then, that
agencies like the DFID fund efforts like the PPAs and as a result, create a welcome
climate for poverty reduction plans.
42

How do aid policies compliment civil society poverty reduction strategies? The
Vietnam government has established poverty reduction plans in its Five Year Report that
have been altered to counter the increasing social stratification, along with the success of
significantly lowering the percentage of poor people by one third in five years. When
international NGOs were solicited to participate in the PPAs, they initially had
reservations that supporting the assessments would detract from their own agendas.
They ultimately agreed to be involved because they “(in some cases) would have carried
out similar participatory research in any case in order to inform their own research,
program or advocacy work; and the links with national (and global) policy-making
provided a strong incentive.”xix The PPAs were the largest collection of civil society
needs for the CPRS.
Problems for the IPRSP
The problem is twofold:
1. What is the process for alleviating poverty in countries weighted with debt, such as
Vietnam?
2. What is the World Bank’s purview for such a process?
In the first problem, publications describe poverty in Vietnam at 37 percent in 1998, down
from 57 percent since 1993. More about poverty in Vietnam is in the section by
Gambirazzio. The problem of solving poverty consists of naming key actors, establishing a
process for regular participation, and securing funding for research and change in the
country. One key player identified by the World Bank is civil society, to encapsulate the
43
poorest members of society in poverty alleviation plans. According to the UK Department
for International Development (DFID), civil society is defined:
All civic organizations, associations and networks which occupy the "social
space" between the family and the state except firms and political parties; and
who come together to advance their common interests through collective
action. Includes volunteer and charity groups, parents and teachers
associations, senior citizens groups, sports clubs, arts and culture groups,
faith-based groups, workers clubs and trades unions, non-profit think-tanks,
and "issue-based" activist groups. By definition, all such civic groups are nongovernment organizations (NGOs). The NGOs which have come together under
the banner of global civil society to campaign on globalization-related issues
constitute a sub-set of broader civil society.xx [italics mine]
In this British government definition, it is important to note which community groups are
left out of the definition. The definition excludes political party groups—an enormous
segment of organized Vietnamese
communities and only includes NGOs,
This image is taken from the Vietnam Ministry of
Planning and Investment website:
http://www.vitranet.com.vn/fdi/data/gioithieu/1.htm.
which are not very prevalent in
Vietnam because of historical
oppression. For instance, the
Communist Party is considered “the
most important place for setting
poverty reduction goals and
programs.”xxi MOs receive state
direction and funding.xxii The MOs are
closely tied to the Party; “debate on
policy options outside the confines of
the Party and Government is
unusual.”xxiii The report these quotes
44
were taken from was produced specifically for the DFID, by which definition excludes the
best-organized and most powerful means for Vietnam civil society participation. Because
Vietnam is a single party socialist state, it fundamentally has a different system for public
participation.
There is a second problem in finding an appropriate role for the World Bank in poverty
reduction. The bank is widely criticized for inappropriate and harmful development around
the world. For instance, the Narmada Dam in India during the late 1980s and early 1990s,
was hugely protested because the project forced resettlement of millions of tribal people and
other poor people with no Environmental Impact Assessment before project approval, and
had enormous environmental impacts. The result of the outcry was the first-ever
independent review of a bank project and the creation of the Information Disclosure Policy
and Independent Inspection Panel.xxiv The strategic significance of the pressure by civil
society is that the bank had been dealing wrongly in development efforts, and thus needed to
be fundamentally challenged and changed. This project along with the Yacyreta Dam in
Paraguay and Argentina (1992-2000), the China Western Poverty Reduction Project (1999),
and others have significantly damaged environmental resources and social groups. The sum
of the difficulty is that the bank, having been made infamous for its development efforts,
now is championing progress and inclusion in poverty reduction processes.
How the PRSP Approach Works
The CPRS is an approach that emphasizes civil society participation, particularly from
community-based organizations (CBOs), because they are oftentimes service providers to
targeted populations for poverty reduction. Vietnam civil society works in some from of
45
partnership with the state to produce a document, the Poverty Reduction Strategy Paper
(PRSP) or the Interim PRSP (IPRSP), delineating steps the country will take to reduce
poverty.
Poverty reduction plans are funded in part by the relief of debt accrued while the country
was under corrupt governance. The World Bank grants partial debt forgiveness, then offers
Poverty Reduction Support Credits (PRSC) to bolster country plans for poverty reduction.
These funds are not available during the stages of research and process of composing the
PRSP. “As the PRSP process evolves and countries begin to implement their Poverty
Reduction Strategies, it will be important to ensure that public actions reduce poverty and
are effectively linked to desired poverty outcomes.”xxv
Vietnam produces an internal report every five years, called the Five Year Report, which is
meant to be a foundation for the PRSP. In an interview with one bank staff member, she
affirmed that the Ministry of Planning and Investment (MPI) had submitted the Five Year
Report as a substitute or beginning IPRSP.
Vietnam has submitted an IPRSP, which serves two functions. The fist is that the IPSRP is a
draft for the PRSP and the bank makes comments to the MPI, the Vietnam government
agency that authors the PRSP. The second is that the IPRSP signals to the bank that not
only is the government actively undergoing an internalized poverty reduction strategy but it
is also now the bank’s responsibility to take an active part by lessening debt. “Vietnam is
only required to produce a…PRSP…if it chooses to borrow funds for structural
46
adjustment.”xxvi Vietnam does intend to submit a PRSP, and has composed a draft, which
was shown in the Consultative Group (CG) meeting in December of 2000.
The CPRS is a World Bank initiative, and the bank has a PRSP team to review completed
PRSPs. In a frank discussion with one bank member, when asked whether the bank could
refuse a PRSP submitted by a country expecting it to pass. The bank member replied that
the PRSP would pass, because countries are given opportunities to write and rewrite their
papers with bank consultation. “Someone in the bank is not doing their job,” if the PRSP is
not acceptable.
The Vietnam IPRSP was written by the MPI after the CG meeting in December 2000. The
CG is a vehicle for the Poverty Working Group, which is comprised of representatives from:

World Bank;

SIDA;

UNDP;

DFID;

the four PPA agencies-Action Aid Vietnam; Oxfam GB; Save the Children Fund, UK;
and Vietnam-Sweden Mountain Rural Development Program (MRDP)-; and

eight government agencies-MPI; Ministry of Labour, Invalids and Social Affairs
(MOLISA); Ministry for Agriculture and Rural Development (MARD);General Statistics
Office (GSO); Committee for Ethnic Minorities and Mountainous Affairs (CEMMA);
the Women’s Union (WU); Ministry of Finance (MOF); and the State Bank of Vietnam
(SBV).
47
CG meetings are generally annual opportunities for donors to gather and “discuss the
challenges and prospects for Vietnam’s growth and reform.”xxvii Essentially, the CG meetings
consist of the same key players as the PWG, and are chaired or co-chaired by Andrew Steer,
World Bank Director for Vietnam.
The PWG authored Vietnam: Attacking Poverty, which has been used in CG meetings for
policy debate. VNGOs have not been invited to attend CG meetings, because the Vietnam
government objects. However, the Grassroots Democracy Decree, the Decree No. 29/ May
1998 promulgating the Regulation on the Exercise of Democracy in Communes, was
declared allowing “the participation of citizens in commune-level local decision-making
processes” and Grassroots Organizations (GROs) to “monitor local expenditures.”xxviii The
Decree No. 29/1998 with the Decree No 177/1999 on “Promulgating the Regulation on
Organizations and Operations of Social Funds and Charity Funds” and “The promulgation
of the Regulations on the Operation of NGOs in Vietnam” of 1996xxix has aided VNGO
growth and development. Because VNGOs are new, they are small. By definition in the
report for DFID, VNGOs
have generally developed as small groups of professionals with interest and
expertise in different sectors such as health, planning and rural development,
and are generally funded by international NGOs or donors, and through
contract work on development projects for government or donors.xxx
The CPRS “will be an input into the Five Year Plan for 2001-2005, the Socio-Economic
Development Strategy for 2001-2010, and the longer term vision to 2020.”xxxi Now, instead
of the PRSP, as the plan for the CPRS, originating from the Five Year Plan, the paper is in
addition to the country’s strategy.
48
Assumptions
There are subtle differences between explicit and implicit assumptions in the CPRS in
Vietnam. The differences are generally that the explicit assumptions are overtly stated in
much of the publications, often produced by the World Bank or bank partners. Implicit
assumptions are only somewhat prevalent in discourse, and may reflect as criticisms of the
bank. In most writings on Vietnam civil society participation in PRSPs, there is very little
about the World Bank’s process for involvement.
Explicit
The explicit assumptions are:
1. The incentives for writing a PRSP will reinforce good development practices in
Vietnam. The incentives behind the CPRS are that countries will have access to
resources to implement poverty reduction plans. ‘Good development’ is subtly
emphasized behind the more boldly stated agenda of poverty reduction. The World
Bank assumes that Vietnam’s completion of the first PRSP will secure poverty reduction
in the country, according to bank standards. Bank members secure this by accepting the
PRSP, and then lending for future development. Development practices adopted in the
PRSP will reduce poverty, instead of stratifying society.
2. Vietnam and other countries using the CPRS initiative want and need an option
like the CPRS, initiated by World Bank involvement in development. It is pretty
widely accepted that countries participating in the CPRS solicit the bank for support in
the form of loans, technical assistance to research poverty and create plans for the
country, and process facilitation to build civil society and NGO participation. “The
49
[Vietnam] Government is seeking financial and technical assistance from the donor
community to its realization of the above-mentioned tasks.”xxxii It is also widely accepted
that countries are suffocating under the weight of debts to an institution with
significantly more power and stability than the countries. Many communities in the
targeted countries have rallied in protest against the bank in acknowledgment of the need
for debt forgiveness.
Implicit
Implicit assumptions in Vietnam’s participation in the PRSP include:
1. The World Bank is an appropriate initiator for poverty reduction. “1999 was a
watershed for the World Bank and the IMF. For the first time they sought to put in
place the more holistic approach to development which had evolved during the
decade.”xxxiii The bank has participated in development decisions that have come under
fire from many civil society groups internationally. More appropriate agents to initiate
and authorize development might be GROs, CBOs, and VNGOs. Bank strategies for
poverty reduction imply bank motivation to reevaluate its own structure and
development policies. Under pressure, the World Bank now offers many of its
publications online, which is the beginning of more procedural transparency. From an
interview with a bank staff member and a document published jointly by the bank and
IMF,xxxiv development goals have changed to include: country ownership; long-term
holistic goals; a partnership orientation; and results from the strategy. The bank is
historically problematic in its goals, however. There are widely publicized histories of
developments that are harmful to millions of people. To achieve success as a champion
of poverty reduction, the bank would undergo a transformation where development
50
goals are publicly altered to best support socially and environmentally sustainable results.
It would apply its development goals in restructuring to its own process. From an
interview with bank staff members offering criticism, first and foremost, “the World
Bank is a bank.”
2. Vietnam will benefit from the strategy and policies for development accepted in
the bank. The policies proposed by the government are very specific toward trade
liberalization, including localization of services, debate, and organization, which are
similar to bank recommendations.
“The content of the reform program has emerged from extensive discussions
between the government of Vietnam and the international community,
especially the World Bank and IMF, and the resulting policies are viewed by
most stakeholders as appropriate for the next phase of poverty-reduction in
Vietnam.”xxxv
When asked about possible repercussions from deregulation, citing the close-to-home
example of the energy deregulation problems in California, bank members responded
theoretically that a competitive market provides the best regulation, citing unnamed
examples of successes in Europe. In the IPRSP, one challenge states that Vietnam “must
deal with fierce competition in international markets while its economy is of low quality
and inefficient, and its ability to compete is weak.”xxxvi There is little mention of civil
society participation in decentralization and deregulation policy decisions, except vaguely
and without explanation in the IPRSP, where the government intends to:
Mobilize funds from enterprises, people, communities, social organizations,
and non-governmental organizations for hunger eradication and poverty
reduction activities. At the same time [italics mine] enhance the role of the
Fatherland Front and mass organizations (such as the Women’s Union,
Farmer’s Association, Youth Union, Veteran’s Association, and so on)
together with other social organizations and non-governmental organizations
in poverty alleviation.xxxvii
51
Vietnam is also responsible for securing funding poverty reduction efforts and mediating
the other terms for success in the CPRS process.
3. Each country that participates in PRSPs will meet all needs for poverty reduction.
One bank staff’s criticism of PRSPs is that they are “horribly generic.” This may refer to
the policies indicated, or the language used. There is a larger concern, however, that a
generic process for poverty reduction in approximately 50 countries in the world cannot
be flexible enough to accommodate each country’s individual strategy. Further protests
from a separate bank member elucidate the problem, because the Vietnam IPRSP is “not
very good.” It has a direction, but no in-depth explanation for its agenda. In a larger
sense, the content of decentralization in the IPRSP may have a detrimental effect on
poverty and inequality reduction in Vietnam, or it may benefit from policies acceptable
to the bank. Without clarification, it is hard to tell.
History
The CPRS is acknowledged in interviews, though not in most publications, again, the
majority of which are produced by the bank, as an initiative resulting from failed
development programs that have occurred in the past. The problems that have been widely
published are related to past bank projects and an organization that will benefit from
successes in the CPRS, the IMF and its development failures. The PRSP is a document that
fits easily with existing programs for poverty reduction in Vietnam. The state has done a
significant amount of work to advocate for poverty reduction, allowing the bank CPRS
initiative simple opportunity to work well within the existing system. “The timing of the
52
PPAs [as an element to the CPRS process] could hardly have been better from the point of
view of influencing policy.”xxxviii
CAS
The CAS is a document composed by the bank; it is a relatively recent bank involvement in
poverty reduction in Vietnam. The CAS is based on the data collected in the VLSSs, and
showed need to collect data that was qualitative, rather than quantitative. It was composed in
1998 and was then followed by Vietnam’s election to become a pilot country for the CDF in
1999. PPAs were planned after the CAS was published in 1998, in the summer. These, too,
preceded Vietnam’s decision to complete an IPRSP as part of the CDF.
HIPC
The Heavily Indebted Poor Countries (HIPC) initiative was announced in1996. This was the
poverty reduction process proposed by the bank that designated countries eligible to
participate in the PRSPs. Further, “in September 1999, the Annual Meetings of WB/IMF
agreed that from January 2000 all adjustment operations and HIPC debt reductions should
be accompanied by PRSPs to demonstrate how the loan/debt reduction would be used to
fight poverty.”xxxix Ultimately, HIPC countries simply became another acronym, becoming
PRSP countries.
Pro-Poor Government
“Even as Vietnam seized independence in 1945, President Ho Chi Minh emphasized that
poverty should be considered an “enemy,” just as illiteracy and foreign invaders are
considered enemies.”xl Vietnam has a strong national policy to fight poverty. Poverty
53
elimination plans were well established in Vietnam by the Government in 1992-1993, when
the GSO conducted the first VLSS. The GSO conducted a follow-up VLSS in 1997/1998,
largely sampling the same households. MOLISA is responsible for an initiative begun in
1998 before the CPRS initiative was announced by the bank. The MOLISA initiative in
Vietnam is still in effect and called the Hunger Eradication and Poverty Reduction Strategy
(HEPR).
HEPR
The HEPR initiative is currently underway throughout Vietnam. It is prioritized in the Five
Year Report as an important strategy to implement and measure its success. The HEPR
initiative signals Vietnam as proactive in poverty reduction, and therefore provided
substantial political groundwork for the IPRSP process. Surveys to assess poverty had begun
before the CDF and CPRS had been announced. The national HEPR initiative afforded the
World Bank security when setting its own initiatives in motion. Regional and local
implementation methods had been established before the IPRSP delineated Vietnam’s
approach for poverty reduction.
VLSS and PPA
The VLSS surveys conducted by the GSO created a politically comfortable climate for
poverty reduction plans.xli In Vietnam, four PPA areas were surveyed in 1999. Originally,
seven places had been selected, but when NGO agreements to carry out the surveys were
finalized, only four could be managed. Another issue was that the immediacy of the
assessments narrowed the scope of the research considerably.xlii The PPAs were important
resources for poverty eradication because they are qualitative, providing substantial and
54
costly information for analysis and owned by the GSO. The significance of the climate
should not be understated because of historic hostility between the Vietnam government
and non-NGO US and other foreign intrusion. Maintaining sovereignty in the process of
writing an IPRSP is difficult because the World Bank owns the initiative and is not based in
the country. Therefore the Vietnam government has less control over plan implementation,
than were it a plan developed in-house.
Larger Problems with the CPRS
Some themes have already been discussed in the Assumptions section. The reverse of World
Bank ideals for the CDF and CPRS is that neither the bank, nor the Vietnam civil society
was completely prepared to perfectly carry out the IRPSP.
Vietnam PRSP Gaps/ Criticisms
MOs do not have the capacity for full participation. This is the most
significant cause for concern in a process that’s meant to be participatory. Vietnamese civil
groups are best organized under the MOs; the criticism that it is an error on the part of the
state and the bank to allow MOs to be underutilized in policy decision-making is crucial.
The mass organizations are both a parallel delivery mechanism for welfare
and credit programs, and an important source of information on the impact
of government programs. They are well placed to influence the government
process, but have constraints. These include [italics mine] lack of capacity, and
need for skill development within personnel and membership alike. The main
focus within these structures does not seem to be the development and
articulation of policy options, but rather meeting the practical needs of their
members.xliii
This concern requires a need for additional funding and assistance to build MO capacity.
55
Participation does not fully exist in the form intended/expected. The
bank defines civil society participation in poverty reduction strategies comprehensively.
Participation is comprehensive because the scope for development is very large, and the
bank states the importance of country ownership, including broad participation of
stakeholders and a partnership orientation, between domestic stakeholders and external
partners.xliv Criticism from bank members and consultants describes civil society
participation in policy decision-making as problematic at best. In the Joint Staff Assessment
of the IPRSP:
Policy measures to address the non-material dimensions of poverty are the
least developed part of the agenda. The need to tackle issues such as
alienation from decision-making processes, the lack of meaningful dialogue
between local authorities and poor communities and access to the legal
system for the poor is central to the government’s goal of promoting
grassroots democracy.xlv
From the report for the DFID: “Few of these bodies [of civil society] have had any specific
exposure to the PRSP.”xlvi
One constraint is Governments’ general lack of experience in how to manage
civil society engagement. The absence of assessment criteria for participation
makes it relatively easy to demonstrate “consultation,” but much is
unsatisfactory with limited impact. It tends to be technical, limited to
“meetings” to consider plans already drawn up, with the danger that the
process is a technocratic exercise which adds little value.xlvii
In the bank paper by Turk: “from the PPA research—people rarely felt informed about the
Government’s plans, less still consulted during the formulation stage. Civil society is
underdeveloped and does not yet play an active role in policy formation.”xlviii These concerns
challenge the bank’s assumptions and efforts to create an idealized participatory process for
involvement.
56
VNGOs are not welcome. Another significant difficulty with participation
and good relations between civil society and the state, is the historic hostility between the
state and VNGOs. VNGOs prefer the title “social development organizations” to appear
more closely related to the government.xlix In the IPRSP, the section for state emergency
relief funds titled “Expanding the participation and enhance the role of domestic social
organizations and non-governmental organizations in the process of building and
implementing social safety net”l was left incomplete with no body under the title. The
government has passed a number of decrees to change the mood, but VNGOs were denied
access to the June 2000 CG meeting. The concern that VNGOs are not welcome
participants in the PRSP process is directly related to the state’s low level of comfort with
independent domestic social organizations.
IPRSP is generic, or will not have proper follow-through. One NGO
staff member pointed out that the predictability of the content in the IPRSPs and PRSPs
meant that before a government sent it out for general viewing, they would “spell-check” to
be sure to include target-population words like ‘gender.’ The word should appear enough
times that the document would appear more ‘gender-friendly’ on first read. Also, the MPI
“used the same “inputs” as the PRS (namely Attacking Poverty and the results of the Sa Pa
Working Groupsli)”lii to write the IPRSP. Documents may be criticized for repetition and
ineffectiveness.
There is inadequate acknowledgement of the World Bank’s stakes in
development. This is another concern in the process, which is partner-oriented. If there is
not full disclosure of lending terms, conditions, and all relevant documents, the secrecy
57
deepens in bank development activity. Because the World Bank is specifically concerned
with accepting responsibility for the CPRS initiative, the bank must then accept its own
history and status in the process. There is very little mention of the relationships the bank or
bank staff members have with civil society groups. One bank policy is that it does not deal in
situations where the bank becomes involved in local politics. Another bank policy is that
initiatives should be country-owned. First the country must know what it is taking ownership
of and from whom. The bank must not overrule state sovereignty, particularly in Vietnam, a
country that has a “history of resistance to foreign intervention.”liii
Policy Stand
The IPRSP, as part of the PRSP initiative seems to be a rubric for international development
that the World Bank can use for positive publicity. The Vietnam IPRSP is not a participatory
document in the sense that CBOs, grassroots organizations (GROs), VNGOs, and other
members of civil society have the ability to use MOs for policy decision-making toward the
document. The data collected in the PPAs and VLSS is comprehensive and thoroughly
compiled and analyzed. The significant problem with the participatory process is that there is
no capacity and little opportunity for civil society groups in Vietnam to fully participate.
What’s right with it
There are significant achievements because of poverty reduction efforts. One of these are
funding for poverty assessments, which is not a designated part of the CDF or CPRS.
Another very solid element to poverty reduction plans in Vietnam is that the World Bank
did not, in fact, begin them. Instead, the MOLISA and other government agencies worked
for years to develop the necessary elements for poverty reduction. These positives about the
58
process however, do not make up for the secrecy, trade liberalization policies, and
inadequacy of participation by civil society groups.
The Sum
If the PRSC and PRGF are kept active, there must be changes to the process. The first
change must be that civil society groups have financial and technical support secured before
meetings, drafts, and decisions are completed. As it exists now, the participatory process is
flawed, although difficult to see in an analysis of Vietnam because of the successes. Full debt
forgiveness is imperative for the HIPC countries.
59
I. Interviews
My thanks to everyone listed who gave their time and candid answers to difficult questions.
NGO Staff
Nancy Alexander
Co-Director
Globalization Challenge Initiative
NCAlexander@igc.org
Barbara Kohnen
Project Director, Rethinking Bretton Woods
Center for Concern
bkohnen@coc.org
Jalal Latif
Executive Director
Inter-Africa Group
iag@telecom.net.et
World Bank Staff
Mark Blackden
Senior Operations Officer, and Regional Gender Coordinator
Poverty Reduction and Social Development Group of the Africa Region
mbalckden@worldbank.org
Steve Commins
Social Policy Specialist
Human Development Network
scommins@worldbank.org
Koen Davidse
Advisor to the Executive Director for Armenia, Bosnia-Herzegovina, Bulgaria, Croatia,
Cyprus, Georgia, Israel, FYR Macedonia, Moldova, The Netherlands, Romania and Ukrane
kdavidse@worldbank.org
Anthony Gaeta
Counselor
HIPC Debt Implementation Unit
agaeta@worldbank.org
Rita Hilton
Senior Economist
Social Development Group and Participation Team
rhilton1@worldbank.org
Amy Luinstra
Operations Analyst
60
Human Development Network Social Protection
aluinstra@worldbank.org
Syed Mahmood
Sr. Private Sector Development Specialist
Private Sector Advisory Services, Private Sector and Infrastructure
smahmood@worldbank.org
Tamar Manuelyan
Lead Specialist
Poverty Reduction and Economic Management Unit, East Asia and Pacific Region
tmanuelyanatinc@worldbank.org
Sharon White
Senior Economist,
Poverty Reduction Strategy
swhite@worldbank.org
US AID Staff
Diana Ohlbaum
Deputy Director
Office of Transition Initiatives
Dohlbaum@usaid.gov
Kristin Randall
General Business Specialist
krrandall@usaid.gov
i
According to the study by David Dollar and Jenny Litvack, the results of the Doi Moi produced a
“dramatic decrease in poverty during 1984-93.
ii David Dollar and Jenny Litvack note that urban areas such as Ho Chi Minh City had the lowest
poverty rate at the end of the Doi Moi program. On the other hand, urban areas also experienced
the largest economic growth during the decade of the Doi Moi, reaching 15.6% growth in Ho Chi
Minh City.
iii Income dimension of poverty, nutritional dimension of poverty, crisis and insecurity, and the
gender dimension of poverty.
iv Dollar, David and Jennie Litvack. “Macroeconomic Reform and Poverty Reduction in Vietnam.”
Ed. By David Dollar et al. Washington DC: The World Bank, 1998. p. 1.
v Dollar, David and Paul Glewwe. “Poverty and Inequality in the Early Reform Period.” Ed. By
David Dollar et al. Washington DC; The World Bank, 1998. p. 30.
vi Ibid, p. 30.
61
Dollar, David and Paul Glewwe. “Poverty and Inequality in the Early Reform Period.” Ed. By
David Dollar et al. Washington DC: The World Bank, 1998. p. 31.
viii Joint Report of the Government-Donor-NGO Working Group –the Poverty Working Group
consisting of government agencies, donors and VNGOs; Vietnam Development Report 2000;
Attacking Poverty, Consultative Group Meeting for Vietnam, December 14-15, 1999.
(http://www.worldbank.org.vn/rep3/attpov.pdf)
ix The homepage for the World Bank is www.worldbank.org, however, there is also a very useful
World Bank website which is Vietnam-specific at www.worldbank.org.vn.
x http://www.worldbank.org.vn/rep22/intro-b1.htm.
xi Turk, Carrie, Linking Participatory Poverty Assessments to Policy and Policymaking:
Experience from Vietnam, World Bank, 2000. http://econ.worldbank.org/files/1356_wps2526.pdf
xii Interview with NGO staff. All interview quotes will remain anonymous to protect individual
identities, and are simply quoted as “from an interview” throughout the remainder of the paper.
xiii http://www.undp.org.vn/undp/docs/2000/undpar99/undpar99e.pdf -the UNDP Vietnam Annual
Report with some references to the Donor-Bank-Strategy relationships; “The People” section.
xiv http://www.brettonwoodsproject.org/topic/adjustment/index.html –the Bretton Woods Project
PRSP address.
http://www.challengeglobalization.org/html/ta_menu3.shtml –the Globalization Challenge
Initiative’s PRSP address.
xv http://www.vietnamembassy-usa.org/learn/other.php3 –the Vietnam Embassy in the US “Learn
about Vietnam” website. This is a good site with links to MOFA, MPI, and the Communist Party
homepages.
xvi Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol III: Vietnam Case Study, SGTS & Associates, June 2000, page 15-16.
xvii Fforde, A. and D. Porter. Public Goods, the State, Civil Society and Development Assistance in
Vietnam: Opportunities and Prospects. Paper to Doi Moi, The State and Civil Society Conference,
ANU, Canberra, 10-11 November, 1994. This paper outlines the relationship tensions between
Vietnam civil society and the government.
xviii Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol I: Overview and Recommendations, SGTS & Associates, October 2000, page 4-5.
xix Turk, Carrie, Linking Participatory Poverty Assessments to Policy and Policymaking:
Experience from Vietnam, World Bank, 2000. http://econ.worldbank.org/files/1356_wps2526.pdf
xx http://62.189.42.51/glossary/GlossaryAtoC.htm –the UK department of international
development’s glossary site.
xxi Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol III: Vietnam Case Study, SGTS & Associates, June 2000, page 15.
xxii The Participation Group, Social Development Department, World Bank, Action Learning
Program on Participatory Processes for Poverty Reduction Strategies; Case Study 3: Vietnam,
Process Documentation of the Country Experience, Draft for Discussion, 11/09/00. This bank
document is parallel to this paper, except that there are significant oversights in CPRS
participation process critique in the other.
xxiii Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol III: Vietnam Case Study, SGTS & Associates, June 2000, page 15.
xxiv This example is from a matrix of projects where civil society, NGOs, and others, to stop
developments funded by the bank, put pressured the bank. The matrix is from "The Struggle for
Accountability: The World Bank, NGOs and Grassroots Movements"; Fox and Brown, MIT Press
(1998), posted on http://www.challengeglobalization.org/html/otherpubs/advocacy.shtml.
xxv Development Committee (Joint Ministerial Committee of the Boards of Governors of the Bank
and the Fund on the Transfer of Real Resources to Developing Countries), Poverty Reduction
Strategy Papers—Progress in Implementation, April 18, 2001, page 13.
xxvi Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol III: Vietnam Case Study, SGTS & Associates, June 2000, page 5.
xxvii http://www.worldbank.org/html/extdr/offrep/eap/vncg98/vncg98.htm –a World Bank website
with some information about CG meetings, press releases, and related information.
vii
62
xxviii
The Participation Group, Social Development Department, World Bank, Action Learning
Program on Participatory Processes for Poverty Reduction Strategies; Case Study 3: Vietnam,
Process Documentation of the Country Experience, Draft for Discussion, 11/09/00.
xxix http://www.ngocentre.netnam.vn/ngores_E/introfra.htm -a website established by the Vietnam
Union of Friendship Organization (VUFO) and People’s Aid Coordinating Committee (PACCOM)
to act as a resource center for information on VNGOs.
xxx Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol III: Vietnam Case Study, SGTS & Associates, June 2000, page 18.
xxxi An Informal Report Prepared by the World Bank and UNDP in Collaboration with Individual
Working Groups, Vietnam: Toward a Comprehensive Approach to Development –An Update on
Partners, Mid-year Consultative Group Meeting, Dalat City, June 22-23, 2000, “Poverty” section.
xxxii Socialist Republic of Vietnam, Ministry of Planning and Investment, Interim Poverty Reduction
Strategy Paper, Hanoi, March 14, 2001, page 23.
xxxiii Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol I: Overview and Recommendations, SGTS & Associates, October 2000, page 8.
xxxiv Development Committee (Joint Ministerial Committee of the Boards of Governors of the Bank
and the Fund on the Transfer of Real Resources to Developing Countries), Poverty Reduction
Strategy Papers—Progress in Implementation, April 18, 2001, page 9.
xxxv International Monetary Fund, and the International Development Association, Approved by R.
Anthony Elson an Shigeo Kashiwagi (IMF) and Richard A. Calkins and Cheryl Gray (IDA),
Vietnam; Assessment of the Interim Poverty Reduction Strategy Paper, March 21, 2001 page 4.
xxxvi Socialist Republic of Vietnam, Ministry of Planning and Investment, Interim Poverty Reduction
Strategy Paper, Hanoi, March 14, 2001, page 8.
xxxvii Ibid. page 15.
xxxviii Turk, Carrie, Linking Participatory Poverty Assessments to Policy and Policymaking:
Experience from Vietnam, World Bank, 2000. http://econ.worldbank.org/files/1356_wps2526.pdf
xxxix Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol III: Vietnam Case Study, SGTS & Associates, June 2000, page 10.
xl Socialist Republic of Vietnam, Ministry of Planning and Investment, Interim Poverty Reduction
Strategy Paper, Hanoi, March 14, 2001, page 3.
xli Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol III: Vietnam Case Study, SGTS & Associates, June 2000, page 22.
xlii Turk, Carrie, Linking Participatory Poverty Assessments to Policy and Policymaking:
Experience from Vietnam, World Bank, 2000. http://econ.worldbank.org/files/1356_wps2526.pdf
xliii Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol III: Vietnam Case Study, SGTS & Associates, June 2000, page 16.
xliv Development Committee (Joint Ministerial Committee of the Boards of Governors of the Bank
and the Fund on the Transfer of Real Resources to Developing Countries), Poverty Reduction
Strategy Papers—Progress in Implementation, April 18, 2001, page 9.
xlv International Monetary Fund, and the International Development Association, Approved by R.
Anthony Elson an Shigeo Kashiwagi (IMF) and Richard A. Calkins and Cheryl Gray (IDA),
Vietnam; Assessment of the Interim Poverty Reduction Strategy Paper, March 21, 2001 page 5.
xlvi Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol III: Vietnam Case Study, SGTS & Associates, June 2000, page 15.
xlvii Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol I: Overview and Recommendations, SGTS & Associates, October 2000, page 5.
xlviii Turk, Carrie, Linking Participatory Poverty Assessments to Policy and Policymaking:
Experience from Vietnam, World Bank, 2000. http://econ.worldbank.org/files/1356_wps2526.pdf
xlix Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol III: Vietnam Case Study, SGTS & Associates, June 2000, page 18.
l Socialist Republic of Vietnam, Ministry of Planning and Investment, Interim Poverty Reduction
Strategy Paper, Hanoi, March 14, 2001, page 21.
li A workshop at Sa Pa was held in July of 2000. This was similar in effect as the CG meeting the
month before.
63
lii
The Participation Group, Social Development Department, World Bank, Action Learning
Program on Participatory Processes for Poverty Reduction Strategies; Case Study 3: Vietnam,
Process Documentation of the Country Experience, Draft for Discussion, 11/09/00 page 19.
liiiliii Godfrey, S., and Sheehy, T.; Civil Society Participation in Poverty Reduction Strategy Papers
(PRSPs); Vol III: Vietnam Case Study, SGTS & Associates, June 2000, page 5.
VI
Process and Change through the PRSP
Peter Song
While the PRSP may be an agent of change, it is also the product of it. As the field
of international development has continued its capricious path towards finding better
solutions, the PRSP was developed as a response to the newer ideas and understanding that
have been obtained. The changes that have created the PRSP include the realization that
previous structural reforms were not working in many situations to adequately relive poverty.
Burdening debt is forcing many nations to spend less and less on the basic investments such
as education and nutrition that ensure long-term sustainability. Meanwhile, the money
borrowed and invested into what was supposed to provide economic growth frequently has
not produced the intended results.
Coupled with these revelations are newer conceptions of the nature of poverty itself.
The result has led to the creation of initiatives such as the PRSP that stress country
ownership through participation and flexibility in the poverty reduction process. These
initiatives reflect the nature of development itself, which is characterized by dramatic change
and the need to be able to react quickly. While this is not the first time the World Bank has
64
tried to create strategies with country ownership, past efforts such as the CAS have ended up
with the financial institutions essentially taking over the process and undermining ownership.
PRSP Potential As a Learning Tool
One of the most important and encouraging aspects of the PRSP is that it is
supposed to be an iterative process throughout which, lessons learned are incorporated into
increasingly more effective efforts. While many of the critiques being leveled at it now may
be valid, there remains the hope that the flexibility of the PRSP process will allow it to
respond and adapt accordingly. Ideally, no one is claiming to know all the answers at this
early stage and the roles of the separate groups (the State, World Bank, Civil Society, G7
nations, etc) involved in development have yet to be fully worked out.
For there to be a real chance at fully realizing this learning potential, there are several
conditions that will need to be met. Each of the States, the international financial
institutions and Civil Society have a certain perspective and knowledge base that can
contribute to the overall goals. Each of these entities can learn and benefit from the others,
but for this to happen channels of dialogue and exchange will need to exist between them.
In conjunction with the dialogue there has to be a certain level of respect between them and
the willingness to fully consider what each has to offer.
The concerns as to whether these conditions actually exist are many and possibly
very serious. For one, the relative power among these separate actors is clearly
disproportionate. How willing will the Highly Indebted Poor Country (HIPC) governments
be of criticizing the World Bank or IMF considering the perception (whether real or not)
that any future funding or debt relief they receive may be at stake if doing so? There is a
clear focus in many of the IPRSPs on macroeconomic reform, sometimes similar to the
65
previous structural adjustment polices imposed by the financial institutions which were so
heavily criticized in the recent past. While growth is important for poverty reduction, it is
important to explicitly link the growth with how it will affect poverty in the PRSP. Not all
growth is the same and sometimes, growth can end up exacerbating poverty. Many of the
IPRSP’s, including Vietnam’s show a weak link between their macroeconomic goals and the
subsequent impact on poverty. In an independent report submitted to the United Nations,
Fantu Cheru offers this explanation for the deficiency:
“What explains this disconnect between macroeconomic components of
the interim PRSP’s and the poverty reduction goals? The answer is to be
found in the unequal power relations between indebted countries and the
institutions that manage the HIPC process, namely, the IMF and the
World Bank. What is obvious from our analysis is that countries have tried
to read too much into the minds of the IMF and the World Bank.”
Fortunately, this is where the PRSP’s potential has the chance to shine. For the World Bank
& IMF, it represents an opportunity to show their true commitment to country ownership of
the PRSP and that its expectations of it are not repeats of the same old structural adjustment
type ones from earlier initiatives. Likewise, the fact that the initial IPRSP may not seem to
be a significant departure from the past should not immediately concern those who have
pushed for reforms in the financial institutions. It is, in some ways, understandable that the
initial IPRSPs will frequently be cautious. However, the IPRSP-PRSP process runs in threeyear cycles and if the financial institutions make clear throughout the initial PRSPs their
stated commitments to country ownership of the papers, this should increasingly show in
later iterations of the PRSPs. It is not the initial PRSPs but the progress that is achieved
from this point on that should form the basis of any judgment as to whether the process is
successful or not.
66
The initial feedback from the financial institutions to the IPRSP & PRSP comes as a
document, written by members drawn from both the IMF and World Bank, called the Joint
Staffs Assessment (JSA). The JSAs produced so far, show some quite promising trends on
the part of the international financial institutions. There is a clear focus in the JSAs on
ensuring that an adequate system of measuring and monitoring poverty reduction is either in
place or being developed. The JSAs also pay close attention to the fiscal budgeting reality of
what the IPRSPs propose. Although some of the IPRSPs are lacking in a framework for
developing a participatory PRSP, the JSAs reiterate the significance of having this for the
PRSP. Meanwhile, criticism of specific methods for poverty reduction and macroeconomic
reform is minimal.
The effect of this is that country ownership is encouraged by allowing latitude in the
methods while still ensuring that there is a commitment to poverty reduction and
participation from the poor. Meanwhile, the issues brought up in the JSAs are in areas that
the financial institutions have strengths in, such as fiscal budgeting, or through pointing out
key areas that the PRSP will need to develop more without specifically stating how it should
be done. For example, participation was a key area of weakness in Vietnam’s IPRSP. The
JSA for Vietnam’s IPRSP reiterated the need for a comprehensive participation process
without dictating how it should be done. The JSA reflects a movement by the international
financial institutions toward finding a new niche in the development process and a
reexamination of their previous role.
There are still areas of concern and obstacles that need to be addressed. For one, it
is the Executive Directors of the financial institutions, not the JSA, who eventually judge the
PRSP and decide whether it is adequate to warrant debt forgiveness or low-interest loans.
What this final assessment will entail or how it will be done is still unclear. The suspension
67
of judgment displayed in the JSA also does not remove the unequal relations of power
between the state and financial institutions. One possible way of addressing this concern is
by integrating other multilateral institutions with representation from developing nations
into the process, such as the United Nations. There has, in fact, been a move towards
bringing the United Nations into the process. But what could be the most serious flaw
undermining the ultimate goal of poverty reduction is the specifics of the relationship
between the state and the constituents it is supposed to serve.
Implications of the Dynamics Between the State and Civil Society Organizations
The role that Civil Society is expected to play in the PRSP is significant and one of
the hallmarks of what sets the PRSP apart from past efforts. But broad participation is
hugely complex and difficult, both in defining and implementing it. Unfortunately, States do
not always care to deal with creating true participation. Even states that are truly committed
to poverty reduction may not view participation as useful, instead falling into the “I know
what’s best for you” trap. Of course, then there are states that really could care less about
poverty. There is little currently available to ensure participation will be genuine as the voice
of Civil Society in the PRSP is entirely filtered through the State. This is a problem that has
not adequately been addressed by the World Bank despite its stated commitment to
participation. What impairs the prospects that it will improve in the future, in keeping with
the nature of the PRSP, is the assertion by the Bank of non-interference in state internal
affairs. This is discussed in more detail later in this paper, as are reasons why the Bank
cannot hope to hold on to this stance if it is to ever really attack poverty.
Currently, the state holds almost exclusive control over the voice of Civil Society as
it is heard, if at all, by the Bank, G7 states and the rest of the world. It is a filtering process
68
that, depending on the particular state, could block or even corrupt that voice. While NGOs
offer some circumvention from the state, this is limited and often also corrupted. Likewise,
the perception of the Bank and IMF by individuals within society can also frequently be
distorted by this lack of direct communication. It becomes easy for the State to blame the
Bank or IMF for the failure to adequately fund social services or address social problems.
This is not to understate the significant burden of paying off debts, but some States insist on
using social service funds rather than say, touch the military budget to pay off such debts. In
such situations, blame may fall on both the state and international financial institutions
rather than unilaterally. Having a channel of communication that does not have to go
through the State would reduce the likelihood of developing such incomplete pictures.
The state could see this not only as a threat but also as a direct insult when
institutions such as the Bank attempt to circumvent what the state may see as its role. When
I brought this issue up with a staff member at the Bank, she clearly expressed her view that
attempting to create such a path was inappropriate and would probably lead to dissonance
with states. This is a very legitimate concern that cannot be glossed over. Yet, the type of
state that would object to their citizens directly working with institutions such as the Bank is
probably questionable as truly being committed to poverty reduction or, if it is truly
committed to poverty reduction, as competent for that role. The cost of any increased
tension between the multilateral institutions and the State is worth the benefit of creating
greater participation.
Creating greater interaction between the financial institutions and Civil Society may
create tension, but this does not increase the power that the institutions have over the State.
Tension, itself may not be a bad thing either as it keeps everyone on their toes and from
being complacent. By structuring the relationship into more of a triangle, there is a greater
69
balance of influence and respect accorded to each rather than through a linear progression
where Civil Society ends up sitting isolated on one end with the State as its only narrow
channel to the rest.
Some have suggested that the PRSP be de-linked from the decision to grant debt
relief. The hope here is that by de-linking the two, the creation of the PRSP will involve less
second guessing of what the Bank or IMF may want, thus resulting in PRSPs that are more
truly focused on poverty reduction. However, the lack of any penalty for not creating an
adequate PRSP will frequently result in lower quality poverty reduction strategies. For this
reason, the PRSP should maintain its explicit link to debt relief. In order to address the
concern over the mismatch between the PRSP process timeframe and the reality that
poverty reduction is a complicated process that takes a longer time, the financial institutions
must make clear several things for those states taking part. First, the expectation is not for a
perfect first document. The iterative nature of the PRSP must be stressed and that changes
in strategies along the way are anticipated. The financial institutions should also assure
critics that any assessment of the PRSP will take into consideration the complex nature of
poverty and that what is being assessed down the line is the achievement of goals and not
the specific mechanics of how it is being done.
The World Bank’s Stance Against Interfering with State Internal Politics:
How it Inevitably Conflicts With its Commitment to Poverty Reduction
The World Bank also has an explicit policy of not interfering with the internal
politics of the states that it lends money to. The only situation where the Bank willingly
intervenes is when there is a clear relationship shown between the policy and an economic
70
effect. An example given by Amy Luinstra of the World Bank was the negative impact on
economic growth that has been shown to result from certain child labor practices. This
reflects the view in the past by the World Bank that poverty can be reduced primarily
through economic growth. It has also been through promoting growth that the Bank has
usually set out to meet its goal of eradicating poverty.
But there has been increasing acceptance of a broader definition of poverty as well as
its relationship with economic growth. It is no longer a minimum income or the meeting of
basic needs alone, that determine whether one is in poverty or not. Broader social and
psychological aspects are increasingly seen to be as important as the basic needs in
determining what poverty is. In addition different types of growth are now being recognized
rather than seeing all growth as indistinct. Not all types of growth affect poverty in the same
way and some can reduce poverty more than others or even exacerbate it by increasing
inequality and raising prices. Privatization is seen as an important way to promoting growth
but sometimes it is carried to far as when certain public services are privatized. For example,
water privatization has been shown in many cases to result in poorer groups not being
served or having to pay considerably higher prices for it.
This trend is forcing the financial institutions, to reexamine their role in
development. It is becoming more and more clear that promoting fast growth alone is
insufficient for promoting poverty reduction. One implication of this is that the World
Bank must now expand their criteria for what is relevant to poverty from the economic
impact limitation that was used before. Yes, the World Bank is a bank but their underlying
mission expressed through their motto, “Our dream is a world free of poverty” clearly puts
them in a position outside the traditional definition of a bottom-line, profit motivated bank.
71
This apparently is creating some unease within the Bank. While accepting the
broader conceptions of what poverty is, the Bank has staunchly held on to its stance of noninterference with politics. But the contradiction that arises with holding on to this stance
while claiming to be committed to poverty reduction is becoming more and more clear. As
an example, consider the situation in Vietnam, one of the countries participating in the PRSP
process. Earlier in 2001, there were numerous conflicts and protests by ethnic and religious
minorities1 in the Central Highlands of Vietnam. The Central Highlands is one of the two
poorest regions in Vietnam. Numerous studies have shown that poverty is persistent in the
Highlands region and that, while most of Vietnam has enjoyed the benefits of a growing
economy, the reach of such benefits has been minimal for the Central Highlands2. From
1993 to 1998, the poverty rate sharply dropped in Vietnam from 54% to 31%. While the
government of Vietnam boasts this figure as showing its success at reaching the poor, it fails
to point out that during the same time period, the poverty rate for ethnic minorities only
dropped from 86% to 75%3.
The reason for the violent conflicts in the region was because of increasing
encroachment by the Kinh (who constitute 86% of the Vietnamese population) onto
minority lands for coffee cultivation. The Central Highlands produces 85% of the coffee in
Vietnam. The Vietnamese government had not only encouraged this displacement but even
___________________________________________________
Minority ethnic groups living in Vietnam include Thai, Tay, Chinese, Khome, Moung, Nung, H’mong and
Dao. Of these, only the Moung comprise more than 2% of the population at 2.4%. These groups each live
in isolated rural and mountainous areas with the exception of the Chinese who mainly live in urban
locations.
2
Based on the Vietnam Living Standards Surveys, which were conducted in 1992 and 1993 covering 4,800
households in the first and 6,000 households in the second survey. These surveys were conducted by the
General Statistics Office of Vietnam with financial support from the United Nations Development Program
(UNDP) and the Swedish International Development Agency (SIDA) and with technical support from the
World Bank.
3
Based on “Vietnam Development Report 2000: Attacking Poverty” and the Vietnam Living Standards
Surveys conducted in 1992-3 & 1997-8.
1
72
subsidized those taking over the lands. As soon as violence erupted, the Vietnamese
government ordered a military lockdown of the region. When a group of religious
minorities from the Central Highlands fled into neighboring Cambodia, the Vietnamese
government immediately demanded their return probably because of the publicity they could
generate.
Can the World Bank honestly claim to be working for poverty reduction while
continuing to provide loans and debt relief to the government of Vietnam, which has
explicitly financed poverty increase (through land takeover) onto some of the most
marginalized groups to be found in the country? And what about the harsh repression in
Vietnam of human rights can be linked with poverty? The World Bank cannot claim that it
is trying to avoid interfering by ignoring these internal political events when it is providing
financial support to the governments that perpetuate such repression. In essence, the Bank
is claiming that its lending is not being used for violations of human rights when there is no
way of certifying this. Even if a nation violating human rights shows that all World Bank
funds are used for social service programs through clearly audited short-term projects, there
is little stopping that nation from using funds freed up through these projects to say, buy
some guns and bullets. If the Bank truly wishes to avoid internal political interference, it
would have to avoid financing any states with human rights violations. And far from what
some would make it out to be this is not an invasive, meddling or improper stance for the
World Bank to take.
73
Human Rights and Poverty Inextricably Intertwined
In commemoration of the fiftieth anniversary of the Universal Declaration of
Human Rights, the World Bank issued in 1998 a short pamphlet describing its role in
promoting human rights. There are some very positive signs that can be found in this such
as the statement on the second page that opens a paragraph, “The World Bank believes that
creating the conditions for the attainment of human rights is a central and irreducible goal of
development.” This is a tremendous step forward towards incorporating an even broader
and effective approach towards poverty alleviation.
But in keeping with a seeming apprehension of possibly upsetting any states, it
avoids articulating a greater commitment to the statement quoted before and instead
launches into a diverting discussion of how others have defined human rights and the
semantics of “traditional” versus other types of human rights. In fact, the initial strong
statement placing human rights as central to development becomes faded by subsequent
comments in the World Bank report “Development and Human Rights” such as:
“The Bank’s Articles of Agreement. . . . also establish guidelines that limit
the range of its activities. In particular, the Articles state that, in all its
decisions, “only economic considerations shall be relevant.” Some believe
that this restriction prevents the Bank from adequately confronting the
issue of human rights. And to be sure, some aspects of human rights do
fall outside its mandate.”4
What is missing is a strong assertion that the World Bank, henceforth, will consider
human rights as a fundamental component of poverty and that all future policies and lending
will factor in human rights when approving any loans or debt relief. This is not only in
keeping with the Bank’s claim to poverty reduction commitment but possibly in keeping
_________________________________________
4
“Development & Human Rights: The Role of the World Bank” pg. 3.
74
with its stance on non-political interference depending on how one interprets it. If one
considers this to be political interference, then it is only because the nature of dealing
financially with States is inextricably a politically interfering act that makes it political and not
the fact that the Bank is refusing to withdraw lending. In other words, either lending or
refusing to lend are both politically interfering acts and the Bank cannot escape such a result
when working in the development field with the role it has.
Change is almost always difficult to make but as an institution with considerable
experience in the volatile field of development, the Bank is no stranger to this. Far from
being a typical ‘bank’ with a numerical ‘bottom line’, the World Bank is inseparable from the
social and political currents that stir and agitate within the countries it lends money to. As
we increasingly realize this, the Bank will have to accept its role and modify its policies
accordingly. The PRSP process, in conjunction with incorporating other groups such as the
United Nations, has the potential to nurture, push and at times force this change to happen.
But whether or not it occurs through the PRSP or through other channels, this shift for the
World Bank is a path it will have to take if it is to effectively reduce poverty for all groups.
75
Bibliography
Agrawal, Nisha, chief economist, World Bank Vietnam, correspondence June 3, 2001
Atinc, Tamar Manuelyan, World Bank Headquarters, interview May 10, 2001
Cheru, Fantu. “The Highly Indebted Poor Countries (HIPC) Initiative: a human rights
assessment of the Poverty Reduction Strategy Papers (PRSP)” Independent report
submitted for the United Nations Economic & Social Council. January 18, 2001.
Dominique van de Walle, Dileni Gunewardena Sources of Ethnic Inequality in Vietnam
Policy Research Working Paper, The World Bank Development Research Group, Public
Economics and Rural Development, March 2000
ESRI has assembled and packaged a collection of geographic data sets that can be
downloaded over the Web. These data sets include country boundaries for each of the
continents, world city locations, world time zones, world UTM zones, and U.S. state plane
zones. The data sets include documentation and project files.
Glickman, N. J., “Does Economic Development Cause Regional Inequality?” New Brunswick, NJ:
Rutgers University, Center for Urban Policy Research, working paper no. 101, March 1996.
Vietnam 2010: Entering the 21st Century Joint Report of the World Bank, Asian
Development Bank and United Nations Development Program, November 29, 2000
The World Bank Vietnam: Managing Public Resources Better, Public Expenditure Review
2000, Volume 2, Annexes. Poverty Reduction and Economic Management Unit East Asia
and Pacific Region December 13, 2000
“Vietnam: The Americans Return” from “Addicted to Profit: Big Tobacco’s Expanding
Global Reach”, Hammond, R. Essential Action 1998
Dominique van de Walle, Dileni Gunewardena Sources of Ethnic Inequality in Vietnam
Policy Research Working Paper, The World Bank Development Research Group, Public
Economics and Rural Development, March 2000
Vietnam 2010: Entering the 21st Century Joint Report of the World Bank, Asian
Development Bank and United Nations Development Program, November 29, 2000
The World Bank Vietnam: Managing Public Resources Better, Public Expenditure Review
2000, Volume 2, Annexes. Poverty Reduction and Economic Management Unit East Asia
and Pacific Region December 13, 2000
“Choosing rural road investments to help reduce poverty” (33 pgs) van de Walle, D.
Policy Research Working Papers, World Bank, 2000 (eldis/country profiles/VN/online
materials/[4th down])
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“Civil society participation in Poverty Reduction Strategy Papers” Muggeridge, E.; Sheehey,
T.; Godfrey, S.; DFID White Paper on Eliminating World Poverty; Making globalization
work for the Poor (2000) (eldis/country profiles/VN/online materials)
World Bank World Report 2000 – 2001
Przeworski, A., and Limongi, F., Political Regimes and Economic Growth. The Journal of
Economic Perspectives, Volume 7, Issue 3, (Summer 1993), pp. 51-69.
“Vietnam Development Report 2000: Attacking Poverty” Joint Report of the GovernmentDonor-NGO Working Group. Consultative Group Meeting for Vietnam, December 14-15,
1999.
Wade, Robert. “Global Inequality: Winners and Losers” The Economist, April 28, 2001.
“Development and Human Rights: The Role of The World Bank” World Bank report,
September 1998.
VIII
CONCLUSION
Nisha Agrawal, Lead Economist of the World Bank Vietnam wrote, “What has
changed in Vietnam due to the process of debate and discussion that took place during the
preparation of the I-PRSP is that for the first time it is now recognized that target
interventions alone will not cure poverty and that what is needed is a strategy that links
macroeconomic, structural, sectoral and targeted policies and investments. This is a big shift
in the mindset here of what a poverty reduction strategy should consist of.”
(Correspondence, June 3, 2001).
ARE LOWERED TRADE BARRIERS ENOUGH?
Vietnam has continued to enjoy a surge in exports ever since it began to lower its
barriers to trade. In 2000 exports rose 20 percent over 1999 to a new high of U.S. $11.5
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billion. However, the fall in commodity prices has continued to hamper the benefits of a
growth in export volume. That the most impoverished citizens, Vietnam’s rural farmers,
remain the most vulnerable to the volatility of world markets remains a great challenge for
the government. As articulated in the IPRSP:
The process of opening up and integrating with the global economy creates many
difficulties and challenges to the economy of Vietnam because it must deal with
fierce competition in international markets while its economy is of low quality and
inefficient, and its ability to compete is weak. Moreover, the volatile price of
agricultural products in international markets and the increasingly adverse terms of
trade between agricultural and manufactured products have a negative impact on
the income of farmers. (CRV, p. 8)
While Vietnam has identified the importance of governmental policies to deal with external
shocks from market fluctuations, the situation on the ground has yet to be resolved. The
continued pace of unhampered growth in agricultural exports without regard for the impact
of the growth in supply on market prices, leaves a gaping hole in the government’s trade
policy reform and poverty reduction strategy.
Despite its progress in growing the economy, Vietnam’s trade reform remains
incomplete. Good trade policy is just one aspect of broad range of policy measures Vietnam
must take into account to develop the economy and thereby reduce poverty. Daniel Rodrik
notes:
Trade policy plays a rather asymmetric role in development: an abysmal trade regime can
perhaps drive a country in economic ruin; but good trade policy cannot make a poor
country rich. At its best, trade policy provides an enabling environment for development.
It does not guarantee that entrepreneurs will take advantage of this environment, not
that private investment will be stimulated.
In order to benefit most fully from an open economy, Vietnam must continue reforms that
remove barriers to economic growth across their economy. Beyond trade reforms, William
Turley, a Vietnam specialist, argues for additional actions throughout Vietnam that would
reform the financial sector, change land policy, restructure the tax system, and privatize
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many of the state owned enterprises. The government’s continued support of extremely high
personal tax rates for white-collar Vietnamese workers, making expatriate workers less
expensive in some cases, will continue to discourage the development of higher skilled jobs
in the country by foreign firms. The persistence of less efficient, less competitive state
owned enterprises (SOEs) as the preferred method of service delivery and commerce will
also hamper growth in the long term. The continuation of “big brother” practices will
continue to cost the growth of the economy at the expense of maintaining political power.
These practice include the limitation of Internet access, the inspection of e-mail and other
correspondence, and the requirement that party members who work together in the same
firm form “cells”, usually clandestinely, to report activities to Party higher-ups and recruit
new members.
Rampant corruption across Vietnam is also a cause for concern. The inconsistencies
in the current judicial and political landscape create an unpredictable business climate and
limit the progress of development and distribution of wealth across the country. In 1997, the
Geneva-based World Economic Forum ranked Vietnam forty-ninth out of fifty-three
countries in “global competitiveness” and dead last in “openness.” The Economist
Intelligence Unit ranks the country worst for corruption among its Asian neighbors with a
score of 9.75 on a scale of 10 (EIU, 2001). The Vietnamese newspaper, Nhan Dan (People),
wrote in January, 2001 that “the communist party should not own enterprises because most
enterprises owned by the party are reporting losses. Many staff in those enterprises are
corrupt.” (EIU, 2001, p 15). Finally, the absence of a strong civil society in the midst of
ethnic conflicts fuels the instability of the nation.
The World Bank Development Report notes that “trade reforms have delivered growth,
and thus poverty reduction—but their distributional effects have been more complex.”
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Three main factors skewing distribution have been (1) the benefit to producers at the
expense of consumers of artificial price increases due to tariffs, (2) the lack of skilled labor in
some countries that liberalize trade, and (3) the disequalizing developments that may
accompanied trade reforms. The report continues, “in countries where unskilled labor is
abundant, such as Bangladesh, China, and Vietnam the gains from integrating into the world
economy can be significant for unskilled labor.” (WDR, p. 71) As the benefits of trade
become increasingly apparent for least developed countries like Vietnam, one hopes that the
government considers fully the implications of trade liberalization for the betterment of their
citizens and society. Lowering barriers to trade is a beginning, but not enough to reduce
poverty on its own.
The Vietnam IPRSP is a candid but simplistic response to a complex problem.
Articulating failed economic policies of the past only serve to trivialize the condition of the
poor. Missing in the IPRSP proposed by the Government of Vietnam are the issues that it
seeks to address as it pertains to poverty. There are no specific and detail plans beyond a
mere articulation of economic programs that promote growth and somehow hope that that
growth is distributed across all sectors of society. While growth is necessary in order to
absorb the large pool of workers, poverty is about more than a lack of income. The IPRSP
only seeks to correct certain aspects of poverty and not the ones that affect the daily lives of
the poor. For the Government of Vietnam and for he international lending institutions this
is an issue about debt and money. For the poor in Vietnam that would never be impacted by
the IPRSP this is an issue about life.
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