Key Challenges ahead Vietnam

Ten years of 7-8% annual growth has lifted 24 million people out of poverty but over 40 million people still live on under $2 per day. 16 million people are classed as poor.  Poverty is high amongst ethnic minorities and is increasing in cities. The Millennium Development Goals (MDG) targets on HIV and AIDS, and sanitation are off track.

The Vietnamese people regard the system of governance as legitimate but significant changes in governance must happen to run the country effectively. Widespread corruption threatens continued development. The National Assembly’s oversight of the executive is limited. The judiciary is not independent. The media is still carefully controlled, as is people’s participation in the political process.

The increasing integration of the Vietnamese economy into the global market place has made Vietnam more vulnerable to external economic shocks. There are opportunities for further poverty reduction as markets for exports expand and investment creates more jobs, but some jobs will be lost through increased competition and loss of subsidies.

Growth is impacting negatively on the environment and this will get worse without strong management.  Vietnam is also one of the countries most affected by sea level rises associated with climate change.  

Vietnam can play a significant regional role - election in 2007 to a non permanent seat on the UN Security Council is an important step - but only with modern institutions and systems of governance.

Our Financial Commitment

DFID is committed to spending £250 million in Vietnam over five years starting from 2006 as set out in our Development Partnership Arrangement with the Government of Vietnam. With this grant aid, DFID is among the top five donors to Vietnam and is the number one grant-only donor.

Our focus in Vietnam

We will provide general budget support through Vietnam’s Poverty Reduction Support Credit to help pay for necessary broad policy reforms that improve sector spending on basic services for the poor.

We will use targeted budget support and technical assistance in sectors such as basic education, infrastructure in poor communes, rural roads, HIV and AIDS and sanitation where closer work with Government on setting policies and priorities is needed.

Our focus will be to help Vietnam achieve off-track MDG targets, including HIV/AIDS and sanitation in rural area, and reduce vulnerability by improving Vietnam’s health systems and social protection measures for the poor.

Governance will take an even more central role in our work. We have increased our expertise in this area to improve Government accountability, increase citizens’ participation and tackle corruption.  We will also work with others to strengthen civil society.

We will ensure the main gender policy actions are incorporated into the Poverty Reduction Support Credit and tackled at the annual donor discussions with Government. We will continue to support better analysis of gender issues and improved access to services for women through our targeted budget support.

We will continue to support those donors who work closely with Government on the environment and climate change, and use our support to WTO implementation to ensure that growth is environmentally sustainable.
An important part of our work will be to help Government strengthen the impact of international development assistance and to build effective partnerships with other EU partners and major donors including Japan, the World Bank and the Asian Development Bank. We will also support UN reform in Vietnam.

DFID’s future assistance will help deliver

• GDP growth rate over 7.5% per year (although the Government has revised this figure down given the global economic crisis);
• national poverty reduction of 10-11%;
• thnic minority poverty reduction by 40%;
• increased income for the bottom 20% of the population by 6% in real terms per year;
• 100% primary school completion rates for disadvantaged children;
• hygienic sanitation to 75% of the population;
• less than a 1% in the spread of HIV;
• basic infrastructure to 100% of poorest communes; and
• health insurance to 100% of the poor.

Vietnam’s Progress on MDGs

• MDG1: Eradicate extreme poverty and hunger – certain to achieve
• MDG2: Achieve universal primary education – certain to achieve
• MDG3: Promote gender equality and empower women - may also achieve
• MDG4: Reduce child mortality – certain to achieve
• MDG5: Improve maternal health – certain to achieve
• MDG6: Combat HIV and AIDs, malaria and other diseases – will be difficult to achieve
• MDG7: Ensure environmental sustainability – will be difficult to achieve

Some examples of the impact of our work in Vietnam

• increase by 28%  communes with all weather roads lifting 210,000 people out of poverty;
• train 50,000 primary school teachers to  increase the quality of schooling for a million plus children in 10 provinces;
• lift 500,000 people out of poverty by improving infrastructure in the poorest communes;
• increase social sector spending to ensure 15 million poor people have health insurance to access free healthcare;
• improve women’s status by recording their  names on land titles;  
• develop new laws making investment easier and strengthening environmental safeguards; and
• increase budget allocations for the poorest provinces and relax registration requirements for migrants thus improving their access to health and education.