World Bank Group Launches New Five-Year Country Partnership Strategy with Vietnam and Provides Support to Address Vietnam's Challenges as Lower Middle-Income Country

December 20, 2011

Increasing competitiveness, sustainability and access to opportunity are key pillars of new strategy, with cross-cutting themes of governance, gender, and resilience

Hanoi, December 20, 2011 - The World Bank Group’s new strategy in Vietnam for the five-year period ending in mid-2016 will support reforms and investments key to Vietnam’s transition to a successful middle income country.

The World Bank Group’s Board of Executive Directors on December 15, 2011 discussed the Vietnam Country Partnership Strategy (CPS) for the 2012-2016 period and approved the first three operations under the new CPS.

The CPS will support investments, programs and advisory services 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) enhancing the sustainability of its development, and (iii) broadening access to social and economic opportunity.  The cross-cutting themes are:  (i) strengthening governance, (ii) promoting gender equality, and (ii) improving resilience in the face of external economic shocks, natural hazards, and the impact of climate change.

“This is the World Bank Group’s first Country Partnership Strategy (CPS) for Vietnam since it became a lower middle-income country in 2009”, said Victoria Kwakwa, Country Director for the World Bank in Vietnam. “The new strategy will combines continuity from the previous CPS program with the introduction of some gradual strategic shifts aimed at sharpening strategic focus within the Bank’s program, enhancing operational efficiency, and delivering development results faster.” 

For the new CPS period, the indicative allocation from the World Bank’s concessional arm, the International Development Association (IDA), to support Vietnam is about SDR 2.8 billion (equivalent to about US$4.2 billion). This would be Vietnam’s largest IDA allocation and reflects Vietnam’s strong performance as well as an increase in IDA resources overall. Vietnam will also have access to IBRD resources, proposed to be around US$770 million through mid-2014.

The CPS outlines some of Vietnam’s key development achievements, including:

  • Political and economic reforms (Ðổi Mới) launched in 1986 have transformed Vietnam from one of the poorest countries in the world, with per capita income below US$100, to a lower middle-income country with per capita income of US$ 1,130 by the end of 2010.
  • The poverty headcount ratio has fallen from 58 percent in 1993 to 14.5 percent in 2008,  and the country has already attained five of its ten original MDG targets and is well on its way to attaining two more by 2015.

The strategy also highlights remaining challenges for the country, including maintaining high levels of growth with macroeconomic stability, strengthening the economy’s competitiveness, managing the environment and natural resources properly, tackling persistent poverty in remote communities, and achieving development results faster.

To address these challenges, the CPS is expected to aid in the implementation of the Government’s Socio-Economic Development Strategy (SEDS) 2011-2020, which gives attention to structural reforms, environmental sustainability, social equity, and emerging issues of macroeconomic stability.

Since 1993, when the World Bank re-engaged with Vietnam, the World Bank has provided nearly US$ 14 billion in credits, loans and grants to help the country sustain growth and fight poverty.
The three operations approved by the World Bank’s Board of Executive Directors on December 15, 2011, total US$457 million in IDA credits:  US$150 million for the Tenth Poverty Reduction Support Credit (PRSC 10), US$210 million for the Medium Cities Development Project, and US$97 million in Additional Financing for the Third Rural Transport Project.

The tenth Poverty Reduction Support Credit, the last operation in the series which began in 2001,  provides continuing support to Vietnam’s medium-term reform program. This  series is a vehicle for the World Bank and the international partner community to support the policy reform program of a country that has a track record of economic growth and poverty reduction, and is emerging from the effects of the global financial crisis. The program comprises policy actions in areas such as state sector reform, financial sector reform, public financial management, the social sectors, environment, public administration, and governance.

The Medium Cities Development Project aims to increase access to improved urban infrastructure services in three medium-sized cities in Vietnam in a sustainable and efficient manner. Investments to be financed under this operation will improve overall living conditions and support future city growth with the provision of trunk infrastructure. The IDA credit will finance the upgrading of  infrastructure, including urban environmental sanitation, urban roads and bridges and basic urban services in Lao Cai, Phu Ly, and Vinh cities. Support to improve capacity of urban planning and management will also be provided under the project.

The original Rural Transport 3 Project as well as the additional financing assist the government in improving the access (including reducing the cost of access) of rural communities to markets, non-farm economic opportunities, and social services in thirty two provinces in the North and the central Vietnam. The Additional Financing (AF) would finance unanticipated cost overruns and modified project activities. It would enable the Project to complete the original road rehabilitation targets, allow further piloting of road asset maintenance and management activities in selected provinces for a system that is a replacement for that envisaged under the original project design, as well as provide continued support to the on-going capacity development program.

The three IDA credits have a 25-year maturity and a 5-year grace period.

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