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Vietnam Overview

    Context

    Vietnam is a development success story. Political and economic reforms (Doi Moi) launched in 1986 have transformed Vietnam from one of the poorest countries in the world, with per capita income below $100, to a lower middle income country within a quarter of a century with per capita income of $1,960 by the end of 2013. Vietnam has already attained four of its ten original Millennium Development Goal targets and is likely to attain three more by 2015.

    Over the last few decades, Vietnam has made remarkable progress in reducing poverty. The percentage of people living in poverty dropped from almost 60% in the 1990s to under 10% today. Over the same period, the mean income for the bottom 40% of the Vietnamese population increased by an annual average of 9%.

    Regarding economic developments, Vietnam’s growth rate has averaged 6.4% per year for the last decade, but it has begun to slow recently. In 2013, GDP growth was 5.4 % and is projected to flatten in 2014. Although the economic growth remains moderate and below its potential, Vietnam managed to improve its macroeconomic stabilization. Headline inflation fell from a peak of 23% in August 2011 to about 4.2% in August 2014.

    The external sector continues to be an important engine of growth. Export value in US dollar terms is estimated to have grown by 15.9% in the first five months of 2014, outperforming other countries in the region. Vietnam’s traditional labor-intensive manufacturing exports such as garments, footwear and furniture, continue to grow at a rapid clip. Recent additions to the export basket such as hi-tech and high-value products (cell phones, computers, electronics, and automobile parts) have also maintained rapid growth.

    The Socio-Economic Development Strategy (SEDS) 2011-2020 gives attention to structural reforms, environmental sustainability, social equity, and emerging issues of macroeconomic stability. It defines three "breakthrough areas": (i) promoting human resources/skills development (particularly skills for modern industry and innovation), (ii) improving market institutions, and (iii) infrastructure development.

    A five-year Socio-Economic Development Plan (SEDP 2011-2015) elaborated objectives for the first five years of the SEDS and identifies the specific measures and resources that are needed to achieve high quality and sustainable economic growth, including: the need to restructure the economy to increase the share of high value-adding economic activities; improve the living standards of ethnic minority populations; strengthen environmental protection; and mitigate and prevent the adverse impacts of climate change. The Plan underlines the need to develop favorable conditions for the private sector and to gradually reduce the contribution of the state sector to GDP, while increasing the contribution from the private sector and FDI. The SEDP also outlines the importance of environmental protection, climate change mitigation, and adaption and building resilience to natural hazards.

    The Eleventh Congress of the Communist Party of Vietnam in January 2011 called for a more comprehensive approach to the country's renovation, decided to promote greater citizens' participation and unity within Vietnam, and to engage proactively in international integration.

    The Government’s Resolution issued after the regular meeting in August 2014 reaffirmed the importance of macroeconomic stabilization. It also emphasized the need for economic restructuring, improving the country’s competitiveness, promoting innovative models of growth, administration reform and fighting corruption.

    LENDING
    Vietnam: Commitments by Fiscal Year (in millions of dollars)*
    *Amounts include IBRD and IDA commitments
    Strategy

    Aligned with the Government's overall strategic priorities and goals, the Bank’s Country Partnership Strategy (CPS) 2012 - 2016 aims to support Vietnam’s three breakthrough areas of promoting human resources, improving market institutions, and advancing infrastructure development.

    The CPS introduces several new principles of Bank engagement in Vietnam aimed at increasing the Bank's impact: (i) sharpening strategic focus by reducing program dispersion through consolidation and greater selectivity; (ii) improving operational efficiency through the introduction of more systemic approaches, leveraging resources by strengthening policy dialogue and analytical and advisory services (AAA), through synergies with development partners, and across the World Bank Group (WBG); and (iii) accelerating implementation for more timely results.

    The CPS program supports investments and policies organized into a strategic framework of three pillars and three cross-cutting themes. The pillars are: (i) strengthening Vietnam's competitiveness in the regional and global economy, (ii) increasing the sustainability of its development, and (iii) broadening access to opportunity. Key cross-cutting themes are (i) strengthening governance, (ii) supporting gender equity, and (iii) improving resilience in the face of external economic shocks, natural hazards and the impact of climate change.

    With new challenges emerging in the poverty agenda - e.g., rising inequality, urban poverty, and concentration of poverty in remote ethnic minority communities - the CPS includes a renewed commitment to poverty reduction, including better understanding of Vietnam's shifting poverty dynamics, and to new targeted poverty interventions informed by this understanding.

    Governance and gender lenses will be applied to all operations at an early stage of preparation to seize opportunities for strengthening support in these areas. Resilience emerges as an important theme in light of Vietnam's greater vulnerability to shocks on several fronts: external shocks at both the macroeconomic and household level, and natural hazards and climate change. The CPS supports a strengthening of Vietnam's resilience on these specific issues in the respective pillars of the framework.

    As regards the WBG’s new twin goals of eliminating extreme poverty (living on less than $1.25 per day) by 2030 and boosting shared prosperity among the poorest 40% in developing countries, Vietnam is a signature example of a country in recent times that has achieved rapid growth without a large increase in inequality. Economic growth has allowed Vietnam to achieve spectacular poverty reduction and shared prosperity over the last 25 years. Vietnam’s extreme poverty rate is below 3% in the most recent data (2012).  However ethnic minorities, who are 15% of the population, account for half of the poor using the national poverty line and have a poverty rate of 59%. In addition Vietnam has not made as much progress on some non-income indicators including nutrition and access to clean water and sanitation. Maternal and child health and education indicators in some ethnic minority communities are also quite low. A large percentage of Vietnamese still live just above the poverty line and could fall back into poverty given rising levels of vulnerability— including from climate change impacts.

    Thus, in Vietnam, the Twin Goals agenda suggests enhanced attention to 4 priority themes: (i) supporting return to strong and inclusive growth; (ii) giving more focused attention to non-income dimensions of poverty; (iii targeting communities that are getting left behind, notably ethnic minority communities; and (iv) addressing sources of vulnerability.

    A challenge for the Vietnam program is to achieve results faster. During the CPS period, the Bank and Government has been working to assess underlying fiduciary systems capacity and to diversify lending instruments for faster development impact. The Bank also continues to work jointly with the Ministry of Planning and Investment (MPI) and other donors to address systemic official development assistance (ODA) implementation issues and undertake analyses to learn from well-performing provinces and sectors. At the project level, the Bank and MPI are giving priority to improving project readiness for implementation, accelerating preparation, and managing the existing portfolio proactively. A more streamlined results framework of this CPS will serve as a management tool for the Bank's Vietnam Country Team.

    In December 2013, the first Vietnam Development Partnership Forum (VDPF), replacing the Consultative Group (CG) Meetings, was co-organized by the Ministry of Planning and Investment and the World Bank. This is a platform for high level dialogue and intends to be more substantive, action oriented and more inclusive. This annual forum supports policy discussion between the Government of Vietnam, its development partners, , local and international civil society organizations, national research institutions and other development actors to foster broad-based socio-economic development and improved well-being for all Vietnamese.

    LENDING
    Vietnam: Commitments by Fiscal Year (in millions of dollars)*
    *Amounts include IBRD and IDA commitments
    Results

    Vietnam is still transitioning to a market-based economy. The Bank’s partnership with Vietnam since 1993 has contributed to achieving notable results.

    As of September 12, 2014, the Vietnam's portfolio consists of 47 IDA/IBRD operations and 6 stand-alone trust funds projects, with total net commitments of US$ 8,537 billion. Similarly, the IFC and the MIGA programs in Vietnam have increased significantly. Over the last three years, IFC’s commitment reached more than US$2 billion. MIGA Vietnam guarantee exposure level has increased from less than US$20 million prior to FY13 to US$679.5 million gross exposure level in FY14.

    Vietnam received the first loan from the IBRD, the Bank’s lending arm for middle-income and poorer creditworthy countries, in 2009, to support a program of public investment reforms. It marked a closer step of the country to reach the lower middle-income status in the following year.

    In FY13, a World Bank’s new financing instrument called the Program for Results or PforR was introduced in Vietnam with the first operation for rural water and sanitation was approved. The program, which links disbursements of funds directly to the delivery of verifiable results, is the first PforR to be approved by the Bank in the East Asia and Pacific region and the first in the rural water supply and sanitation sector.

    Access to rural credit services has improved significantly. Over the past decade, a growing number of rural households gained access to credit—for farming and small business activities—for the first time. The Bank’s First and Second and the Third Rural Finance Projects contributed to this trend as well as to the strengthening of several rural financial institutions. The last two projects financed more than 535,000 sub-projects, leveraging total investments equivalent to US$1.23 billion and generating new sources of employment. More than a third of the borrowers in the Third project accessing formal financial institution credit for the first time and more than half of the borrowers are women. (See video and story)

    Water supply and sanitation facilities have expanded. Urban water supply has doubled in small towns to 60% between 2006 and 2009 and is up from 75% to 95% in cities for the same period. Rural access to clean water has seen an increase from 36% to 70% between 1999 and 2009. The World Bank has helped to support this development through investments in rural water and sanitation in the Red River Delta Region and through innovative programs such as the Global Output-Based Aid funded project in partnership with the East Meets West Foundation. Between 2005 and 2013, the Red River Delta Rural Water Supply and Sanitation Project provided access to clean water for nearly 1.3 million people in four provinces through community-based approaches. Households received access to low-interest loans to build or rehabilitate more than 48,000 hygienic toilets and sanitation facilities, increasing the percentage of households with hygienic toilets from 25 percent to 87 percent. (See the video and story)

    Urban sanitation remains a priority area for support in the urban sector. The Ho Chi Minh City Environmental Sanitation Project has a transformational impact on the city, directly benefitting over 1.2 million people with improved sanitation and reduced flooding while at the same time serving as a new city asset that can be enjoyed by the people of Ho Chi Minh City. (See the story and video)

    Disaster early-warning and forecasting capacity and integrated disaster risk management has been improved. Implemented in 12 provinces, the Disaster Risk Management Project helped constructed 11 major flood and storm mitigation infrastructure, such as safe harbor, river dykes, evacuation roads, drainage pumping stations. More than 210,000 villagers in 30 communes implemented structural measures, including multi-purpose evacuation centers and drainage canals, along with non-structural measures, such as the development of Safer Commune Plans and evacuation drills. (View the story and photo slideshow)

    Electricity now reaches 95% of the population. Every day for the past ten years, 9,000 people have been connected to the grid for the first time in Vietnam. The country doubled its power generation capacity from 12,000 MW in 2005 to 25,000 MW in 2010. Under the Second Rural Energy Project, over 2.7 million people in some of the poorest parts of Vietnam gained access to electricity as 555,327 households were connected to the national grid. (Watch the video)

    Over 90% of the population is now connected by all-weather roads. Working in 33 provinces, the Third Rural Transport project is reaching some of the most difficult mountainous regions of Northern Vietnam, linking poor and marginalized communities to better markets and services. Averaging 4.5% of GDP investment, Vietnam is the leading investor in Asia in its roads infrastructure to make space for the economy to grow, allow cities to move, and lift the remaining population out of poverty. (Watch the video)

    95% of motorcycle riders now wear a helmet. With 6.5 fatalities per 10,000 vehicles/year, over six times those in Japan, accidents on Vietnam’s roads are a major contributing factor to a national injury crisis. Addressing one of the highest accident rates in the world, the Vietnam Road Safety Project is working to bring health, education, police, and highway agencies together to save lives.

    Improving living standards in remote mountainous areas. Under the first Northern Mountains Poverty Reduction Project, 353,871 households have benefitted from improved health care, and over 118,000 households have access to clean water, significantly improving the health of local people. A follow-on project has built on these earlier gains plus strengthen community disaster risk preparedness and pilot market linkage service initiatives. (See the story and video)

    Primary education doubled and more disadvantaged children were enrolled. The proportion of primary students in full day programs doubled from 25% in 2005 to 50% nationwide. Children in disadvantaged districts increased enrollment to 94% (compared to 97% nationally) while girls enrollment in secondary school now exceeds boys at 78% to 77%. Personalized lessons brought a more hands-on approach to learning for ethnic minority students in 49 primary schools. The New School model, which used innovative teaching and learning practices in the classroom, was piloted in 24 primary schools in six provinces in 2010. It was so successful that the government of Vietnam decided to scale it up to all 63 provinces. (See the video and story)

    Health conditions and access to health services have been improved. Thanks to the Mekong Regional Health Support Project, an estimated 16 million people in the Mekong Delta region are benefiting from improved health services and facilities. From this number, 2.5 million people also have better access to health insurance. About 10,000 health workers have received health-related courses and additional training to meet the region’s demands. The HIV/AIDS Prevention Project has significantly contributed to keeping Vietnam’s HIV/AIDS prevalence rate below 0.3 per cent of its population. (Watch the video)

    Women rights to land titles increased. Following the success of two World Bank-supported pilot projects in the early 2000s, the government passed a Land Law making it mandatory for all land titles to be issued jointly in the names of husbands and wives (watch the video). The Bank-supported Vietnam Land Administration Project aims to issue some 5 million (jointly held) land titles by 2013.

     

    LENDING
    Vietnam: Commitments by Fiscal Year (in millions of dollars)*
    *Amounts include IBRD and IDA commitments
Country Office Contacts
Hanoi, +844 3934-6600

8th Floor, 63 Ly Thai To, Hanoi, Vietnam

vietnam@worldbank.org
Washington, +1 202-473-4709

1818 H Street NW, Washington, DC 20433

eastasiapacific@worldbank.org