I had the pleasure of visiting Hanoi in April, principally to attend a workshop on aid effectiveness. It was impressive enough that so soon after the High Level Forum in Paris which produced the Paris Declaration on Aid Effectiveness, Vietnam was hosting its own workshop. But on top of that, the workshop was being held under the auspices of a group of representatives from the Vietnamese government and the donor community who meet on a regular monthly basis, an arrangement which seems to respond to the needs of both sides.
The workshop had before it a draft of a Hanoi Core Statement on aid effectiveness, which in effect translated the main elements of the Paris Declaration into locally-relevant terms. Although not at that stage yet finalised, it was clear that the final text would resemble the Paris Declaration, while adding two further indicators on environmental and social standards, and on devolution of responsibility to local donor offices. The final version was to be agreed at the interim Consultative Group meeting earlier this month.
I was impressed that so soon after the High Level Forum the Vietnamese Government and the donor community had put together a locally-relevant version of the Paris Declaration – and also one available in Vietnamese. Clearly Vietnam’s close involvement in the DAC aid effectiveness work since 2001 and the advances that have taken place between donors and the Government of Vietnam have given them the impetus to move ahead quickly.
My only previous visit to Vietnam was in 2002 when I was still working for the UK Department for International Development (DFID) and was also Chair of the DAC Task Force on Donor Practices. I was struck then by differing approaches to harmonisation being pursued by different donors. Relations between some donors varied from close to uncomprehending, and the Government of Vietnam appeared to feel a good deal of caution.
Much has happened since then. A single and seemingly effective forum has been created which brings together almost all the donors and the Ministry of Planning and Implementation. This forum is The Partnership Group for Aid Effectiveness and as I mentioned above, was the sponsor of the workshop.
After the workshop I called separately on several donors. The harmonious tone of discussion was striking. I found a wide acceptance of the co-existence of various modes of aid delivery. Projects, particularly for infrastructure and rural development are by far the predominant mode of aid delivery, but technical assistance is also large (the United Nations Development Programme - UNDP - put it at about a quarter of all aid).
Programme forms of aid are also significant, notably the World Bank’s annual Poverty Reduction Support Credit, which had attracted co-financing this year from so many bilateral donors that the World Bank’s own contribution will be less than half the total amount. Also a recent experiment by DFID to put budget funds direct into the government’s ‘Programme 135’, and anti-poverty programme aimed at the poorest communes, is being watched closely.
I was also impressed by the UNDP’s effective publicity for the Millennium Development Goals in Vietnam with the use of celebrities and cartoons. They have also used the totality of the Millennium Declaration in designing their Common Country Assessment, emphasising for example the rights-based dimensions of their work.
All in all I came away with a feeling that donors are working very constructively together.
The Vietnamese government has been receiving significant international aid for only about twelve years. Aid is important (about 4% of GDP) but by no means dominant, and the Government has a strong element of ‘ownership’ in its relation with the donor community. In legal terms, this is manifested by Decree 17, which sets out the basis on which aid is managed in Vietnam, a document currently being revised and updated.
But Decree 17 is only one of the several key instruments that are being discussed, and which make 2005 a particularly important year for the progress of development cooperation in Vietnam. The next Economic and Social Development Plan will issue shortly, a document that will be both the latest Five Year Plan and the successor to Vietnam’s version of a PRSP (Poverty Reduction Strategy Paper). An ‘ODA master plan’ is being developed, and the existing Vietnamese Harmonisation Action Plan is similarly being updated. Integrating all these instruments, together with the Hanoi Core Statement, in a consistent whole will be quite a challenge.
Vietnam has one of the best poverty reduction records in the world, having already more than halved the proportion of absolute poor since 1990. Its economy has grown steadily at around 7% per year even through the Asian crisis of the late 1990s. It is still a poor country (income per head of around $600), but may expect to reach the IDA cut-off - presently $935 - by about 2010 to 2012.
Nevertheless, it faces some tough challenges. WTO entry, likely this year or next, will create increasing pressure to reform, for example in the State-Owned Enterprise Sector, in Intellectual Property Rights and so on. While the major cities and the more accessible and irrigated parts of the countryside are prospering, the more remote areas have few opportunities for productive employment. Many donor programmes are aimed at these areas, but no magic bullets are available.
Capacity is an absolutely crucial issue in Vietnam as elsewhere. I heard concerns about how far operating agencies and provincial governments (of which there are over 80, with a good deal of autonomy and very different levels of capacity) were in fact able to cope with and successfully deliver external aid and the government’s own programmes. For this reason, the indicators and targets in the Hanoi Core Statement on building capacity are probably among the most significant. Capacity needs to be built across the board. If in fact 50 per cent of aid flows by 2010 use government budgeting, financing reporting, auditing and procurement systems, as called for in the Hanoi Core Statement, this will be evidence that serious progress has been made.
Vietnam’s progress will be increasingly linked to progress in its region and the international economy. Risks - Avian flu being one of many – will need increasingly careful management.
Vietnam is a very interesting test case for examining how far good practices agreed amongst donors are actually applied at country level. With its rapid growth and integration into the global economy, but also its deep poverty and structural problems to surmount, and significant though not dependency-creating aid flows the aid effectiveness agenda is highly relevant. As one DAC member representative said to me while I was in Hanoi, Vietnam seems a case where there is a ‘virtuous circle’ between the international discussion of good practice and the way in which the local dialogue and practice is developing. It will continue to be well worth watching.
See also Aid at a Glance chart for Vietnam.
DACNews from the OECD Development Assistance Committee
DAC chair: Mr. Richard Manning