Tham quan đền Gióng- Sóc Sơn- Hà Nội

Bạn đang xem bản rút gọn của tài liệu. Xem và tải ngay bản đầy đủ của tài liệu tại đây (530.28 KB, 98 trang )

(1)<div class='page_container' data-page=1>

Chapter 1: The Development Agenda

1.1. National development strategy

In little more than a decade, Viet Nam has undergone dramatic economic and social transformation. The main
agent of change has been the Communist Party’s adoption in 1986 of doi moi—a policy for comprehensive
renovation of Viet Nam’s society and economy based on three fundamentals:

1) the shift from a centrally planned to a market-oriented economy with State management;

2) the “democratisation of social life”, with the aim of developing the rule of law in a State of the people, by the
people and for the people; and

3) the implementation of an open door policy and the promotion of co-operation and relations for peace,
independence and development with all countries.

These key principles have guided and influenced the Government’s national priorities and development goals for
more than a decade.

The Government’s long-term objectives centre around the goal of modernisation and industrialisation of the country.
The Government’s development strategy is significantly broader, however, and rests on four specific pillars:

• sustainable economic growth, as the force for deepening macroeconomic reforms, overcoming poverty and
fostering industrialisation;

• stability, political, social and economic;

• equity, ensuring a decent minimum standard of living and equal opportunities for all;

• people-centred development, a cross-cutting imperative to create a development process that is implemented
by the people, for the people.

The Government perceives these four pillars as constituting the basic enabling environment for the implementation
of specific development initiatives. In this context, an even balance between the four pillars is essential to
achieving a sustainable development process.

With these broad development objectives as the foundation, the Government formulates national Five-Year
Plans. The current Five-Year Plan will run to end-2000, and preparations are now under way to formulate the
next Five-Year Plan (2001-05). In addition to these medium-term strategies, each year the Government issues a
set of specific national priorities for the coming year. The priorities set for 1999 closely reflect those of the
current Five-Year Plan and read as follows (SRV 1999b):

• maintain socio-economic stability

• concentrate development in advantaged sectors and products
• increase the effectiveness and competitiveness of the economy
• create the basis for the future development of the country

In pursuit of these objectives, the following eight tasks were prescribed at end-1998:

1) Develop agriculture and the rural economy—considered the basis for stable socio-economic
development—through increasing investment and the development of rural infrastructure. Rural
industrialisation and the development of agricultural services to be given priority. Sectors that respond to
domestic demand and have export potential to be supported and expanded.

</div>
(2)<div class='page_container' data-page=2>

3) Mobilise private and foreign investments and make more effective use of both to support production,
and improve the effectiveness of State investment.

4) Improve State finances, through increasing savings, implementing a revised tax system and modernising
the banking system and capital market, with the perspective to establish a stock market.

5) Intensify reforms of the State economic sector, through the equitisation of small and medium

State-owned enterprises (SOEs), the better management of large SOEs and the strong encouragement of
household and farm economy, co-operatives, private companies and foreign investors.

6) Address economic and social problems, through the promotion of vocational training programmes, job
creation, the implementation of poverty alleviation, education, health and cultural programmes, and a
crackdown on social evils.

7) Reform public administration, through enhancing the quality and efficiency of governance and simplifying
administrative procedures.

8) Maintain political stability.

Having set Viet Nam on the path towards a more open economy, the rule of law and the pursuit of equitable
development, the Government is likely to retain most of its current priorities and development orientation when
formulating its next five-year and longer-term development plans.

1.2. Some key quantitative targets

A number of key quantitative targets were agreed upon at the last Party Congress in 1996. These targets
underpinned the Government’s longer term strategic vision and formed the basis for the ongoing five-year
socio-economic plan covering 1996-2000. Real income was to grow eight- to ten-fold by 2020 relative to 1990, implying
an average growth rate of real GDP in the order of 7% to 8% per annum over the 30-year period. Poverty, as
measured by Government criteria, was to be reduced from somewhere in the order of 20% in 1996 to 10% by
the year 2000, and eliminated by 2010. Hunger, which plagued some 5% of the population in 1996 according to
Government measures, was to be eliminated by 2000.

The main vehicle for this planned economic and social progress was to be “modernisation and industrialisation”.
Since mid-1997, greater Government emphasis has been placed on agricultural and rural development, following
concerns that rural areas may not be benefiting sufficiently from the development process. The outbreak of the
regional crisis in the latter half of 1997 resulted in a revision downward of the short-term GDP growth targets to

somewhere in the order of 5% to 6% per annum during the 1998-2000 period, more in line with actual growth
performance according to official data. Many of these targets will be reviewed in the ongoing preparation
process for the new ten-year socio-economic development strategy covering the period 2001-2010, and the
related five-year plans, in the run-up to the next Party Congress in mid-2001.

1.3. Follow-up to World Conferences

In addition to the Government’s own national development targets outlined above, Viet Nam has committed to a
range of specific development goals in the fields of child development, environment, population, social development,
education, women and food security at the world conferences sponsored by the United Nations over the past
decade (see box).

</div>
(3)<div class='page_container' data-page=3>

Major world conferences of the 1990s
• 1990 World Summit for Children (New York)

• 1990 World Conference on Education For All (Jomtien, Thailand)

• 1992 United Nations Conference on Environment and Development (Rio de Janeiro)
• 1994 International Conference on Population and Development (Cairo)

• 1995 Fourth World Conference on Women (Beijing)
• 1995 World Summit for Social Development (Copenhagen)
• 1996 World Food Summit (Rome)

Viet Nam has been an active partner in all of these conferences and it has taken many positive steps towards
fulfilment of its commitments. In fact, Viet Nam’s Government has been one of the most vigilant worldwide in
drawing up national plans of action to follow up on these conferences and other international conventions.
For example, recommendations drawn up at the World Summit for Children have been translated into a National
Programme of Action for Children (1991-2000), as well as local plans of action for children. Viet Nam was also
the first country in Asia to ratify the Convention on the Rights of the Child. Viet Nam’s follow-up to the Fourth

World Conference on Women is unique; it is the only country known to have developed a National Plan of
Action for the Advancement of Women as well as plans of action for every ministry and province. Viet Nam is
also set to meet most of the education targets contained in its National Plan of Action, which was devised
following the World Conference on Education for All. In terms of social development, the Government’s current
Five-Year Plan (1996-2000) closely reflects the pledges made at the World Summit for Social Development,
which are further operationalised through the Government’s two national poverty alleviation programmes.
Viet Nam developed its own National Plan for Environment and Sustainable Development for 1991-2000, which
is compatible with Agenda 21 that came out of the Conference on Environment and Development. Significant
progress has been made in integrating environmental issues into the Government’s agenda. The national plan led
to the adoption in 1993 of a National Law on Environmental Protection and the establishment of a National
Environmental Agency in the same year.

The Government has named food security as a top priority, and has followed up on the World Food Summit by
establishing a national fund for food security as well as a National Committee for Food Security which is
currently drawing up a National Programme for Food Security to 2010. Other follow-up activities include a
National Programme on Integrated Pest Management, the Five Million Hectare Reforestation programme and
the establishment of a Disaster Management Unit.

The issues and goals arising from the 1994 International Conference on Population and Development were
divided into 12 different categories. The Vietnamese Government has devised several specific plans of action to
address these issues, among them a Programme of Action for the Youth Union and a National Plan of Action to
prevent HIV/AIDS. In 1999, in recognition of its success in implementing these various plans of action, Viet
Nam was awarded the United Nations Population Award. (Refer to Annex I for a more detailed description
of Government follow-up to commitments made at each of the World Conferences.)

</div>
(4)<div class='page_container' data-page=4>

such as environmental preservation and gender equality—will necessarily take some time, but should nevertheless
remain Government priorities.

1.4. Public expenditure for development

State spending has been increasing slightly as a proportion of GDP throughout the 1990s, up from around 20%
of GDP in 1990 to 23% in 1999. Due to an improving taxation system, State revenues have been growing over
the same period at a faster pace than expenditure, leading to a steady reduction in the budget deficit.

Spending on social services

Historically, social services have been highly valued in Viet Nam and social expenditure has therefore always
represented a large share of Government spending. The fruits of this policy are evident from the impressive
social achievements of a country with such a low level of national income.

State spending on education increased steadily between 1990 and 1997 (the last year for which spending
figures are available), up from 12% to 15% of total State spending. Over the same period, spending on education
as a percentage of GDP more than doubled. Basic education programmes, consisting of pre-primary, primary
and adult literacy programmes, have consistently received the highest proportion of State spending on education
(over 40% of the total throughout the 1990s), in line with the national goal of achieving universal literacy by 2000.
Between 1990 and 1997 State spending on health remained fairly constant, and accounted for 5.6% of total
State spending and around 1.3% of GDP in 1997. The relatively low share of State spending on health in part
reflects the rapid development of the private health services market since the late 1980s. During the 1990s the
Government has adjusted the distribution of its health spending, increasing the share of spending going to basic
health services to 40% of total public health spending by 1997.

The third component of social spending is social security and safety nets. Between 1990 and 1997 the State
devoted between 12% and 14% of its total spending to social security and safety nets, accounting for 3.2% of
GDP in 1997. The largest share of expenditure is devoted to national priority target groups, the poor and the war
affected (UNDP 1999).

The 1999 budget

In mid-1999 the Government made the State budget public for the first time—a reflection of the Government’s
move towards increased transparency and information sharing. The budget provides a broad guide to expenditure

provisions for 1999.

The budget is divided into three expenditure groups. Recurrent expenditure makes up more than half of the total.
Education and training is projected to account for the biggest slice of recurrent expenditure at 12.4% of total
State expenditure.

The second largest budget allocation goes to investment in development projects. As part of the 1996-2000
Public Investment Programme the Government has committed to substantially increase its investment in favour
of agriculture and rural development, with priority given to the improvement of rural infrastructure. In 1998 the
second largest share of Government investment was devoted to irrigation, agriculture, forestry and fisheries.
The largest share of Government investment went to transport and communication projects, with development
of the rural transport system a priority.

</div>
(5)<div class='page_container' data-page=5>

of 15.7%, according to the poverty line used by the Ministry of Labour, Invalids and Social Affairs (see Chapter
3, sections 1 and 2). The programme initially focuses on remote and mountainous areas and directs investments
to infrastructure, resettlement support, education, health, technology transfer and credit assistance.

Spending on basic social services

In 1997 Viet Nam committed to follow the “20/20 Initiative” adopted during the World Summit for Social
Development. The initiative proposes that, on average, 20% of Government budgetary expenditure and 20% of
official development assistance (ODA) should be allocated to basic social services. According to the UN definition,
basic social services refer to basic education, primary health care and nutrition, family planning services and
low-cost water and sanitation. Viet Nam has added other social services to its definition of basic social services, to
also include welfare for the poor, cash transfers for specially targeted groups, and services for disadvantaged groups.
Based on the international definition, in 1997 Viet Nam allocated 8.5% of its State budget to basic social services,
up from 6.1% in 1990. Following the national definition this share rose from 12.7% in 1990 to 17.2% in 1997.
Projected figures for 1998 are similar. The 20% target has not yet been reached, but the increase in basic social
services spending between 1990 and 1997 is a sign of the Government’s commitment to respond to the 20/20
Initiative’s ambitious target (SRV 1998a). In contrast, it is worth emphasising that, according to the international

definition, in 1997 only up to 10% of ODA for Viet Nam went to basic social services—down sharply from
18.6% in 1993—underlining how far short of its 20/20 commitment the international donor community is falling
(UNDP 1999).

1.5. Key issues

Reliable and useful baseline data, analysis and research

Useful and reliable data and information is essential for accurately assessing current situations, and as a basis
for strategic direction, planning and reform. The recent population census, the second Viet Nam Living Standards
Survey (VLSS II), recent and planned audits of banks and SOEs, and other such exercises are all contributing to
essential baseline information for strategic planning.

While the quality and reliability of information in Viet Nam continues to improve, still underdeveloped surveying,
accounting and auditing practices result in gaps and uncertainty about the reliability of data in some key areas
such as: the financial health of domestic banks and their State-owned enterprise clients; the amounts, composition
and maturity structure of foreign debt; the allocation and efficiency of public expenditures; trade and financial
flows in the foreign balance-of-payments accounts; quantity and quality of valued-added reported in GDP accounts;
and others.

Participation

The strategic planning process in Viet Nam remains largely an internal State exercise. Broadening participation,
particularly by allowing for effective participation of the private sector, would considerably enrich the strategies
and related plans, and create more generalised support for follow-up implementation.

Financial sustainability

</div>
(6)<div class='page_container' data-page=6>

Inadequate analysis has been given to the quality of the proposed investments, much of which is directed at
State-owned enterprises according to the five-year Public Investment Programme (PIP) covering 1996-2000. While some

attention has been paid to planning for Government counterpart funding for the rapidly growing number of ODA
projects, little attention has yet been given to the future sources of financing needed to sustain the operations and
maintenance costs of related infrastructure, related future debt servicing, and other such recurrent costs. Hard
currency foreign debt alone has already reached significant levels, approaching 50% of GDP, and the domestic
savings rate remains low at around 17-18% of GDP. In short, a strategy is urgently needed on the financing of
development in Viet Nam, and ensuring a much safer balance between domestic savings and foreign debt.

Fundamental reforms

Past development strategies and plans in Viet Nam have not explicitly built in a schedule of some of the broad
fundamental reforms needed to ensure the sustainability of the development process. Partly as a result, the pace
of debt financing in a wide variety of development projects has run far ahead of the pace of fundamental
reforms of the overall investment environment in recent years. As a consequence, for example, substantial
investment has gone into inward-looking, capital-intensive and protected import substitution industries that risk
not being able to generate a sufficient future rate of return for the country to meet the related financial obligations
and avoid serious setbacks. This is true of many investments in recent years in State-owned enterprises, but also
many foreign direct investments. These highly risky investments in turn also have implications for the country’s
future financial capacity to sustain many of the debt-financed public infrastructure investments.

Explicitly outlining at least a broad schedule of some of the fundamental reforms, would better enable the
Government to ensure a more rational balance between the pace of debt financing and the pace of reform of the
overall investment environment, better enable all development partners to prepare for the needed changes,
minimise related risks and capitalise on the new opportunities, and better ensure the sustainability of Viet Nam’s
development process.

Decentralisation

Further decentralisation of development planning and finance in selected areas such as rural infrastructure and
poverty reduction would be facilitated by increased human resource and institutional capacity development at
the provincial and sub-provincial levels in such areas as financial planning and management, information systems,

accounting and auditing, and others.

The Public Investment Programme (PIP)

The Public Investment Programme covering 1996-2000 was initially planned at US$15.6 billion for the five-year
period, including US$7.5 billion from ODA. The programme document clearly states on page one that that the
two main objectives of the programme are first, “to develop social and economic infrastructure…” and secondly,
“to develop State-owned enterprises…in some key sectors where others are unwilling or unable to make
investments”. The financial breakdown in the PIP document does not clearly specify how much of the related
planned funding has been earmarked for State-owned enterprises in commercial areas such as cement, steel, fertilisers,
sugar and oil refining, as compared with State-owned enterprises that produce traditional public goods and services.
Nevertheless, in light of the now well-known financial risks of investing too much development finance in SOEs
in commercial sectors, particularly when financial accounting and auditing practices are still very weak, the
public investment programme should be carefully reviewed to further improve the allocations of Government
and ODA investment expenditures with the aim of minimising the related investment risks and ensuring the
sustainability of Viet Nam’s development process.

1.6. Recommendations for action

</div>
(7)<div class='page_container' data-page=7>

Further develop surveying, accounting and auditing systems to international standards.

Better integrate research on international and regional development experiences, and lessons learned from
the successes and failures of other countries, into development strategies and plans in order to increase the
likelihood of success and minimise the risks of failure.

Widen participation in the strategic planning and reform process, especially to include effective representation
of the private business sector, which will need to develop to generate the employment, income, taxes and
savings to underwrite and sustain the development process.

Prepare an effective and safe strategy on the financing of development including a careful analysis of the

amounts, sources and types of financing needed for development under different scenarios in order to
preserve sustainability, stability and sovereignty.

Build in the reforms and incentives needed to generate high domestic savings in order to maximise reliance
on domestic savings to finance the development strategy and minimise reliance on foreign debt in order to
avoid excessive debt and aid dependency that has trapped so many developing countries in poverty.
Review the planned allocations in the public investment programme, particularly amounts earmarked for
SOEs in commercial areas, with the aim of increasing the effectiveness of planned investments and minimising
the related risks.

Further develop the system of public expenditure reviews as a basis for further improving the allocation and
efficiency of public expenditures.

</div>
(8)<div class='page_container' data-page=8>

Chapter 2: Modernisation and Industrialisation

2.1. The transition process

After the reunification of North and South Viet Nam in 1975, the country faced two major challenges: recovering
from war and economic reunification. In the years that followed, the central planning model, which already
applied in the North, was extended to the whole economy, with the advice and support of the former Soviet
Union and other countries of the former Council for Mutual Economic Assistance (CMEA).

By the mid-1980s, the weaknesses of the central planning model had become apparent. The country entered a period
of socio-economic crisis and the situation was exacerbated by the drying up of aid from the former CMEA. In
response to the crisis, in 1986 the Sixth National Congress of the Communist Party set Viet Nam on a path of
renovation, or doi moi, aimed at reforming the centrally planned economy and decentralising Government.

Economically, the two major thrusts of the reform process were:
1) to introduce a considerable degree of market liberalisation; and

2) to implement an open-door policy for trade, foreign direct investment (FDI) and official development assistance

(ODA).

Thirteen years on from the advent of doi moi, the stimulation of the economy catalysed by the country’s
market-oriented reforms has enabled Viet Nam to weather the shock following the withdrawal the CMEA’s support and
helped to transform a serious economic crisis in the 1980s into rapid economic growth in the 1990s. For Viet
Nam’s population, the modernisation and resultant growth and industrialisation of the economy has resulted in an
overall improvement in welfare. Most notably, poverty has been reduced from an estimated 70% in the
mid-1980s, to 58% in 1993 and around 37% in 1998, as measured using the World Bank’s internationally comparable
poverty line. Nevertheless, Viet Nam remains one of the poorest countries in the world, with a 1998 average
GDP per capita of just US$352. The disparity between urban and rural welfare is widening and mountainous and
isolated regions inhabited by ethnic minorities have only benefited marginally from the development process.
2.2. Macroeconomic policies and performance

The macroeconomic reform drive to facilitate the doi moi open-door policy to develop a “socialist-oriented
market economy under State management” gained momentum from 1989. At the external level, the key reforms
initiated since then include a considerable liberalisation of external trade, devaluation and unification of exchange
rates and a new law encouraging FDI.

Domestically, the agricultural sector has undergone a major shift from collective to family-based farming. Key
financial and fiscal reforms include the liberalisation of most prices, the development of a two-tier banking
system, the implementation of positive interest rates to encourage domestic savings, the rationalisation of
State-owned enterprises (SOEs), and the reduction of State subsidies and the State budget deficit. In the legal field,
important gaps have been filled, for example by the introduction of a land law, a labour code, a domestic investment
law, and by the creation of a modern tax system.

Economic growth has been high throughout most of the 1990s with real GDP per capita growth averaging more
than 6% annually over the decade. At the same time, the budget deficit and the inflation rate have been moderated
to tolerable levels. Growth has been strongly supported by booming investment, expanding external trade and
sizeable inflows of FDI and ODA. Agricultural production has been transformed, and Viet Nam has graduated
from being a rice importer to the world’s second largest rice exporter. Reforms, and the accompanying growth,

have generated employment, higher incomes and a better quality of life for most people.

</div>
(9)<div class='page_container' data-page=9>

foundation for the new economic system and to facilitate the growth of the private sector. The Government
continues to develop its strategy for Viet Nam’s transition to a more market-oriented economy.

Moreover, concern about the sustainability of the country’s economic growth was triggered following faltering
FDI inflows from 1996. These concerns were escalated in the wake of Asia’s economic crisis. Viet Nam largely
avoided the direct impact of the crisis—protected by its lack of dependence on liquid foreign capital, the
non-convertibility of the dong and regulations on trade and foreign investment. But the indirect effects of the crisis
have been felt keenly enough. Lower investment, reduced demand for Vietnamese export products and a loss of
competitiveness vis-à-vis its Asian rivals have combined with some hesitation regarding the direction and pace
of the reform process to significantly slow Viet Nam’s economic growth (Figure 1).

Figure 1: FDI and growth of exports and GDP

Source: General Statistical Office

Continued internal structural weaknesses, which had been masked by the high growth rates of recent years, are
likely to be increasingly exposed as growth slows. Together with reduced availability of “easy money” from
foreign lenders and investors after the regional crisis, these seemingly negative trends could engender long-term
benefits. They highlight both the need to invest scarce resources more carefully and the need for further reform
in order to ensure sustainable economic growth and insure the gains already made in human development.
In particular, slower growth further highlights the need for reform of the banking and finance sector. This is
essential to avoid a dangerous build-up of non-performing loans, improve capital allocation, support the development
of the private sector, and enable a further, gradual opening to international financial flows. Reliable audits of both
SOEs and domestic banks are essential to objectively assess the quality of existing investments and related
loans, and to determine capital adequacy and provisioning for bad loans (UNDP 1998).

Public finance reform is also needed to ensure that the tax system does not undermine the incentive environment
for enterprise development and investment, whilst ensuring that taxation provides sufficient State revenue.

2.3. Globalisation and integration

Currently, considerable attention is being focused on Viet Nam’s efforts to further integrate into the world
economy through participation in bilateral, regional and multilateral trade agreements. Already a member of the
Association of South-East Asian Nations (ASEAN) since 1995, and of the Asia Pacific Co-operation (APEC)
forum since 1998, Viet Nam is now in the process of finalising a bilateral trade agreement with the US and
making preparations for accession to the World Trade Organisation (WTO). The negotiation and signing of

0
5
10
15
20
25
30
35
40

1992 1993 1994 1995 1996 1997 1998

-500
1,000
1,500
2,000
2,500
3,000

US$ m

</div>
(10)<div class='page_container' data-page=10>

these latter two agreements would be a continuation of the extensive, unilateral trade and investment reforms
that Viet Nam has carried out over the past decade.

Trade law and the documents guiding the implementation of this law have significantly contributed to the
liberalisation of trade. Among the steps that have been taken are a reduction of non-tariff barriers, elimination of
the case-by-case import/export licence regime, expansion of the rights of enterprises to import and export, and
the application of a united custom tariff code system.

These reforms have led to rapid growth in Viet Nam’s trade. The ratio of exports to GDP rose from 29.4% in
1990 to 33.8%in 1998—an indication of Viet Nam’s increasingly open economy. Over the same period, the
value of imports as a share of GDP rose from 33.7% to 41.5% (Figure 2).

Figure 2: Trade/GDP, 1990-1998

Source: General Statistical Office

Although the reforms have been far-reaching, trade and investment policies still lack sufficient transparency and
continue to provide significant protection to certain sectors. Whilst some protection is considered necessary to
enable infant industries to develop and to allow time to improve the competitiveness of Vietnamese enterprises,
it is clear that current and prospective memberships of multilateral, regional and bilateral agreements will require
accelerated and deepened trade and investment liberalisation. Viet Nam will need to eliminate trade management
mechanisms that are not congruent with trade agreements it has signed. Most pressing, Viet Nam’s obligations
as a member of the ASEAN Free Trade Area (AFTA) will have to be met by 2006.

Important steps towards accelerated reform will be the formulation of a clear international economic integration
strategy and the publicising and understanding of the potential benefits and impacts of the proposed policy
changes needed to prepare the economy for further integration. Without this there is a risk of delay and lack of
support for the process of integration. And without a clear strategy for further economic reforms, there is a risk

that the scope and orientation of policy changes may not serve to maximise the benefits obtainable from economic
integration.

Lessons learned from the experience of other countries in the region indicate that integration can bring not only
the direct benefits of increased trade, but also improved access to trade finance, long-term foreign equity
investment, technology and information transfer, as well as knowledge and skills (UNDP 1998). However, not
every country has benefited equally and integration also introduces new risks. With a clear strategy,
decision-makers can better determine the pace and sequencing of change, and assess the impact of specific initiatives
against a clear set of domestic priorities and objectives.

Trade and industry policy reform will be a central part of the Government’s overall development and international
integration strategy. More open trade policies will be important to increase competition and ensure more efficient

0
10
20
30
40
50

1990 1991 1992 1993 1994 1995 1996 1997 1998

</div>
(11)<div class='page_container' data-page=11>

allocation of resources. This, together with the disciplining of enterprise investment and production decisions,
which more competition can encourage, is necessary if Viet Nam is to maximise its benefits from integration.
The recent economic crisis in Asia has highlighted some of the risks associated with fast growth and poorly
managed economic opening. In particular, it demonstrated the importance of careful debt management based on
reliable information, monitoring and auditing in order to mitigate the risk of over-investment in financially unsound
ventures and to limit the scope for corruption. This experience offers some lessons for Viet Nam. In the past,

SOEs’ preferential access to lending from State-owned banks and State guarantees has secured them well over
half the available formal credit, despite estimates that 60% of SOEs were loss-making or only marginally profitable
in 1997 (IMF 1999).

Other lessons on debt management arising from the crisis include the importance to both the State and enterprises
of managing their debt maturity profiles to avoid a liquidity crisis, diversifying their sources of finance—in
particular to avoid over-reliance on more mobile foreign funds—and to avoid the temptation of over-borrowing
from supply-driven lenders. Viet Nam’s foreign debt levels are already significant and there is a need to move
toward greater utilisation of domestic savings, long-term foreign equity and other non-debt sources.

2.4. Industrial development and competitiveness

Viet Nam remains a predominantly agrarian economy, but the role of industry has been at the core of the
country’s economic planning efforts dating back to the First Five-Year Plan (1961-66). The Eighth Five-Year
Plan (1996-2000) heralded “modernisation and industrialisation” as the backbone of Viet Nam’s efforts to advance
socio-economic development and improve the welfare of the Vietnamese people.

Industry now accounts for around one-third of the economy, up from 22.4% in 1990 (Figure 3). From a small
base, the industrial sector has consistently registered annual growth in excess of 10% since 1991.

Figure 3: GDP by sector, 1990-1998

Source: General Statistical Office

Nevertheless, major reforms are still needed if industry is to weather this period of slower economic growth and
prepare itself for exposure to greater international competition in the future. The Government’s role needs to
shift from directing industrial development to promoting an enabling environment that will foster industrial
competitiveness.

Currently, Viet Nam’s industrial exports primarily comprise low value-added raw materials and semi-processed

goods, which are relatively vulnerable to price fluctuations. Processing industries generally lack competitiveness
on the international market due to relatively small production quantities, low quality products, poor management
and high production costs. Exceptions include the garment, leather and footwear industries.

0%
20%
40%
60%
80%
100%

1990 1991 1992 1993 1994 1995 1996 1997 1998

</div>
(12)<div class='page_container' data-page=12>

Industry is still dominated by SOEs. Fully State-owned enterprises accounted for an estimated 45% of output in
1998. SOEs are also joint-venture partners in about 70% of foreign-invested enterprises (FIEs), which produced
32% of industrial output in the same year (Figure 4).

Source: General Statistical Office

SOE performance clearly varies, but with a significant proportion of SOEs estimated to be loss-making, it is
evident that the sector as a whole is in need of urgent restructuring in order to ease the pressure on State
finances, improve Viet Nam’s productive capacity and competitiveness, and better ensure the financial sustainability
of Viet Nam’s development process. To this end, some SOEs have been merged or dissolved. Others are being
equitised or are linking up with foreign companies to form joint ventures.

Joint ventures with foreign partners can potentially provide SOEs with much needed access to capital, better
technology and know-how, management and marketing skills, and valuable distribution channels. In the successful
cases, this creates higher efficiency and products of better quality that are more competitive, both domestically
and abroad. Lessons from other countries suggest that technology transfer from foreign joint-venture partners
can be encouraged by training the domestic labour force in order to increase an enterprise’s ability to absorb

more advanced technologies, and by the creation of a policy environment which helps to ensure that foreign
affiliates operate in a competitive environment that encourages foreign firms to introduce competitive practices
and technology (UNIDO 1999b).

Equitisation as a measure to restructure SOEs had a slow start, but the efforts have gained new momentum
after a cautious period of testing the potential costs and benefits of equitisation. A significant step forward was
the issuance of Decree 44 in mid-1998 to speed up enterprise restructuring. Whilst only 17 SOEs were equitised
between 1992 and 1997, the number had increased to around 280 by October 1999. Government plans are to
equitise up to 1,400 of Viet Nam’s roughly 6,000 SOEs over the next two years. The renewed impetus has
largely derived from positive experiences with early equitisations in terms of higher efficiency and increased
revenues (and tax payments). In many cases management has become more responsive, and equitised firms in
which employees have become shareholders have generally benefited from an improvement in the work ethic.
The mobilisation of additional capital has also made it possible to renew technology and thereby increase
competitiveness (Duc 1999).

However, despite these early successes, so far equitisation has focused primarily on smaller loss-making
enterprises. The prospects for further speeding up the reform process and equitising larger SOEs will remain
limited due to the resistance of certain interest groups, the difficulties of valuation of SOEs and their generally
high levels of debt. Inadequate funds for compensation of retrenched labour, limitations on the ownership share
of individual companies, the absence of a stock market and a general lack of familiarity with portfolio investment
are further complicating factors.

Figure 4: Industrial output by ownership, 1998

SOEs
45%

Collective
1%
Private

2%
M ixed

6%
Households

14%
Foreign-
invested sector

</div>
(13)<div class='page_container' data-page=13>

In parallel with the ongoing restructuring of SOEs, the last decade has seen a cautious encouragement of private
industry (see also Chapter 4, section 2). Since the introduction of the Law on Private Companies in 1991, the
number of registered private enterprises has grown rapidly. Including both individually owned companies and
limited liability and joint-stock companies (the “private” and “mixed” categories in Figure 4), the number has
grown from 6,808 enterprises in 1993 to an estimated 26,021 in 1998 (MPDF 1999). The rapid growth of the
registered private sector has taken place in spite of complex business establishment procedures and the resultant
flourishing of the informal business sector. Simpler business registration procedures and the introduction of a
stronger, more unified, legal framework since the adoption of the Enterprise Law in June 1999 is therefore
expected to further boost the growth of registered enterprises, and hence strengthen the formal business sector.
New policy measures have also been introduced to promote small and medium-sized enterprises (SMEs) as part
of Viet Nam’s industrialisation effort. SMEs—defined as having less than 200 employees and registered capital
of less than VND5 billion—have been targeted as vehicles of development as these enterprises are often based
on technology that does not require large up-front investment. Two of the related benefits of SMEs are that they
tend to take less time to recover their capital outlay and that they create a large number of jobs per unit of
capital. Whilst the Government has made significant contributions to SME development, further reforms are still
needed, for example to ensure simpler and fairer taxation, enable better access to international markets, credit
and technology, and to simplify company establishment procedures through implementation of the Enterprise
Law (UNIDO & DSI 1999a).

After some years of experimentation with Export Processing Zones (EPZs), the Industrial Zone (IZ) programme
was launched in 1994. By mid-1999 a total of 732 licences had been issued to enterprises to operate in 66 zones.
Of these, 510 were FIEs with total registered capital of US$5.8 billion. Industrial output from the zones in the
first half of 1999 accounted for 20% of total industrial output. Much remains to be done to improve the performance
of the zones and make best use of the IZ programme as a vehicle of industrialisation. By mid-1999, as many as
20 zones still lay empty and occupancy in many of the other zones was low (UNIDO 1999). This is due in part
to zone-specific issues, but it is also clear that investors seek predictable environments in which to do business,
making the introduction of standard operating procedures for all zones an urgent priority.

The imperatives of employment generation (see Chapter 6, section 2) and more regionally balanced economic
development have led the Government to emphasise rural industrialisation (see Chapter 9, section 6) and
provide greater support to household businesses.

2.5. Key issues

Strategic development planning

Over the past decade Viet Nam has benefited economically and socially from its open door policy and the
resultant increase in trade and foreign direct investment. The more open economy has offered many opportunities,
but it has also become clear that building an internationally competitive economy is a complex challenge. Looking
ahead, it will be vital to carefully consider and specify the country’s development priorities and formulate a
strategy for how best to face the challenges of integration and benefit from the opportunities it offers. The
strategy formulation process should consider (i) the practical issues of how to implement and sequence reforms;
(ii) how to ensure sustainability, both economic and environmental; and (iii) how to best prepare the people and
the economy for the challenges of integration.

Policies to promote domestic industry

</div>
(14)<div class='page_container' data-page=14>

Private sector development

Current efforts to overcome a number of structural and legal constraints related to enterprise development are
welcomed. These efforts now need to be consolidated in order to maximise their potential to promote employment
creation and a new generation of entrepreneurship. Further levelling of the playing field for State-owned and
private enterprises will be important in this respect.

Factor markets

There is still considerable scope for developing more efficient markets for land, labour and capital. The country’s
infrastructure also remains relatively underdeveloped, which hampers distribution and efficient allocation of
resources.

Structural reform

The Government has already taken significant steps to reform the SOE and banking sectors. However, the
slowdown in growth and the weakening financial position of SOEs have severely impacted the banking sector,
highlighting the need for ongoing efforts to strengthen bank regulation and supervision and upgrade the enabling
environment for a comprehensive restructuring of the banking sector.

Information

Without reliable and timely information and data, it is difficult to make rational, effective and strategic policy
decisions. Likewise, without transparent and accepted accounting and auditing practices for banks, it is difficult
for them to gain the confidence of depositors. Similarly, enterprises without such accounting standards are likely
to have difficulties in obtaining bank loans or attracting investors. This is true for every country, and in Viet Nam
there is still a need to improve the availability, timeliness and quality of information. There is also a general need
for better dissemination of information on policies and laws.

2.6. Recommendations for action
Globalisation and integration

Formulate and implement a strategy for international socio-economic integration for the coming decade
based on Viet Nam’s development priorities, its specific development context and lessons learned from
other countries. The strategy for integration should assess the country’s strengths and weaknesses, and the
opportunities and threats facing Viet Nam in the integration process, especially in the context of the new
WTO negotiation round, the development of electronic commerce and the impact of the regional economic
and financial crisis.

Adjust existing laws and pass new ones to provide a comprehensive and enabling legal framework for
integration.

Work towards making subsidies and tariffs explicit (tariffication) in order to enhance transparency and
facilitate rational decision-making.

Formulate and publicise a time schedule with intermediate goals for the integration process.
Initiate an information campaign and public debate on the impact and requirements of integration.
Policies to promote domestic industry

Formulate and implement a strategy aimed at improving the competitiveness of industry. Include measures
for strengthening the primary vehicles of industrialisation, such as private sector promotion—including SME
support—foreign investment promotion, further SOE reform and equitisation, and improvement of industrial
zone development and management.

Further develop national strategies for export development and promotion, and promote the growth of economic
sectors with sustained demand for workers.

</div>
(15)<div class='page_container' data-page=15>

Private enterprise development

Streamline and simplify enterprise and company establishment procedures through implementation of the
Enterprise Law.

Create a centralised database of registered enterprises and company information and make it available to
the public.

Improve access to finance/credit by making all borrowers subject to the same rules and by establishing a
legal framework that makes it easier to make use of collateral and mortgages.

Improve access to foreign exchange to facilitate foreign investment and trade.

Simplify income and corporate tax, and VAT. Introduce equal tax treatment for all types of enterprises.
Facilitate increased international trade by lowering tariffs and simplifying customs procedures.

Assess the current problems facing industrial zones and formulate a national strategy to more effectively
utilise the zones as vehicles of industrialisation.

Factor markets

Establish a level playing field for all enterprises, private and public, by ensuring equal access to land, capital,
credit, imports, technology and training.

Support further infrastructure development to improve distribution and resource allocation.

Strengthen technical education to enhance capacity to absorb know-how and technology, including information
and training on new technologies and negotiation of technology transfer contracts.

Improve data collection, analysis and dissemination as a basis for sound business decisions and to facilitate
strategic planning based on accurate information.

Upgrading the legal framework

Develop the capacity of relevant authorities to devise, implement and enforce strategies, policies and laws.

Strengthen and implement bankruptcy, competition, and contract and enterprise laws.

Establish a fair and transparent economic dispute resolution mechanism.
Financial sector reform

Develop and adopt a banking sector strategy aimed at restructuring banks and strengthening the regulatory
and supervisory framework.

Support the development of a banking system based on commercial lending principles of credit assessment,
selection and monitoring of borrowers, by initiating training courses in credit assessment and risk management.
Undertake reliable, independent audits of SOEs and domestic banks to assess the quality of existing investments
and related loans, and to determine capital adequacy and provisioning for bad loans.

Based on the above assessment, prescribe appropriate action for rehabilitation, restructuring, mergers or
closures.

</div>
(16)<div class='page_container' data-page=16>

Poverty line definition

Agency Category of poor Poverty threshold,

VND/month
Rice poverty line: the poverty line is set at

the income equivalent to buy 13kg, 15kg,
20kg or 25kg of rice per month (1995 prices).

Food poverty line: based on the level of
expenditure needed to buy food (rice and
non-rice) to provide 2,100 calories per person
per day.

General poverty line: combines the above
food poverty line (equivalent to 70% of
expenditure) with a non-food component to
allow for basic non-food expenditure (30%).

Human Poverty Index: measures poverty as
deprivation in 3 dimensions of life: longevity,
knowledge and a decent standard of living.
The index is composed of 5 indicators:
illiteracy, life expectancy, underweight
children and access to health services and
safe water.

MOLISA Hungry

Poor (rural
mountainous)
Poor (rural plains)
Poor (urban)
Foof poor

Poor

Human poor

45,000 (13kg rice)
55,000 (15kg rice)

70,000 (20kg rice)

90,000 (25kg rice)
66,500 (1992/93
World Bank only)
107,000 (1997/98
World Bank/GSO)
97,000 (1992/93)
149,000 (1997/98)

Composite index with
no monetary
equivalent.
World Bank/
GSO
World Bank
UNDP

Chapter 3: Poverty

3.1. Poverty in the Vietnamese context

Since 1986, when Viet Nam launched its policy of doi moi, or renovation, economic and social conditions have
improved considerably. The strong economic growth over the past ten years, combined with a relatively equitable
underlying distribution of assets and services—such as land, health, education and family planning—among the
population, have contributed to an improvement in the welfare of most Vietnamese households. Per capita GDP
has risen from less than VND1 million in 1990 to more than VND4.1 million in 1997 (up 57% in real terms). This
considerable increase has contributed to an impressive reduction in the incidence of poverty.

Defining and measuring poverty

Poverty has many dimensions, but the essence of the concept refers to the lack of a minimum level of physical

or human resources to lead a decent life. Absolute income poverty measures the share of the population
disposing of a level of income or expenditure below a threshold considered necessary to satisfy basic human
needs (the threshold is often expressed as a calorie equivalent). The concept of human poverty conveys a
broader picture of deprivation, by encompassing elements other than income or expenditure. It refers to the lack
of essential human capabilities, such as the lack of access to education, health, food, water and infrastructure,
and an inability to participate in national life—economically and politically. While the concept of human poverty
gives a more complete picture of deprivation in a country, income or expenditure poverty is a more practical and
quantifiable tool to describe the state of poverty and to analyse changes in poverty over time. A number of
poverty lines are used in Viet Nam (Table 1).

Table 1: Poverty lines in Viet Nam

</div>
(17)<div class='page_container' data-page=17>

But these great achievements should not hide the fact that Viet Nam remains a poor country. As many as 12.5
million people (15.7%) live in poverty and 1.5 million people face regular hunger (MOLISA 1999). According to
a broader definition of poverty used by the World Bank, no less than 28 million people (37.4%) continue to lack
the minimum income necessary to provide a decent standard of living (GSO 1999a). Today, 57% of the population
still lacks access to clean water, only one household in five has access to sanitation—posing severe health
problems—and 39% of children are underweight.

In addition, although the rapid economic development of the past decade has been a major catalyst helping the
bulk of the population to exit from poverty, some concerns have been raised about the equality of this development
process. Many households continue to face difficulties in raising themselves above the poverty line for reasons
of lack of access to markets, lack of employment or education opportunities, poor health, a difficult living
environment, or lack of information and participation. Consequently, the welfare gaps between rural and urban,
between different regions, and between rich and poor are widening; in particular, poverty remains prevalent and
persistent among ethnic minority people. In addition, while the poverty status of most girls has improved over the
past five years—less so for ethnic minority girls—inequalities still commonly persist between men and women
within households in terms of the quality of life, decision-making power and access to land and services.
3.2. Poverty trends

All existing measures of poverty indicate a clear and impressive decrease in the incidence of poverty in Viet
Nam over the past five years (Table 2). Such a rapid and sizeable reduction in poverty is quite extraordinary for
a country with a very low average income per capita and at a relatively early stage of its development process.
In fact, the rate of decline in poverty in Viet Nam is one of the fastest recorded anywhere.

Table 2: Poverty incidence in Viet Nam, %

1 World Bank figure only; 2 World Bank/GSO figure; 3 1997 index using data from various years.
Sources: MOLISA 1999; GSO 1994, 1999; UNDP 1999a; UNDP 1999b

This reduction in the incidence of poverty has been accompanied by a reduction in other measures of poverty,
according to two Viet Nam Living Standards Surveys (VLSS) conducted in 1992/93 and 1997/98. In terms of
the intensity of poverty, of those households that fall below the poverty line, more are now nearing the poverty
threshold than five years earlier. In terms of the severity of poverty, there has also been a significant reduction
in the gap between the expenditure of poor and very poor households.

The improvement in the lives of so many Vietnamese people is explained by the rapid growth resulting from the
implementation of reforms since the end of the 1980s. More specifically, it is attributable to improvements in
economic and living conditions in rural areas. The agricultural growth and rising agricultural productivity that
have accompanied price liberalisation and revised land policies have contributed substantially to falling poverty.
Crop intensification and diversification from paddy to cash crops and livestock—for which income is usually
higher—are also explanatory factors.

It should be borne in mind, however, that a large proportion of those who have grown out of poverty in the five
years to 1998 now live just above the poverty line, and therefore remain extremely vulnerable to a number of
shocks at the macro and household level that could quickly push them back into poverty. In order to reflect this
vulnerability, it may be more useful to define the scope of poverty using a range of 30-45%.

Agency Poverty lines 1992/93 1997/98

Hungry 5.0 2.0

MOLISA

Total poor 30.0 15.7

World Bank/GSO Food poor 24.91 15.02

World Bank Poor 58.1 37.4

</div>
(18)<div class='page_container' data-page=18>

3.3. Inequality trends

Compared to other developing countries, Viet Nam’s population is relatively equal in terms of distribution of
expenditure between households. The VLSS figures indicate that in 1997/98 Viet Nam had a Gini coefficient of
inequality of 0.35, up from 0.33 in 1992/93 (GSO 1999a). Nevertheless, this reflects significantly lower inequality
than in other developing countries in Asia. The latest World Development Report presents comparable Gini
coefficient indices of 0.36 for Viet Nam, 0.43 for the Philippines and 0.46 for Thailand (World Bank 1999). (The
Gini coefficient measures the inequality in expenditure distribution among the population, with inequality increasing
the nearer the figure to one.)

One explanation for the relatively low inequality in Viet Nam is the Government’s traditional concern for equity
and the policies of a Socialist State, which have contributed to the widespread availability and use of health
services—including family planning—and basic education, the redistribution of land and a return to family-based
farming. The Government’s priorities have also ensured considerable investment in rural areas, where most of
the poor live.

Although rapid economic growth is almost invariably accompanied by some reduction in the incidence of poverty,
it does not go systematically hand-in-hand with a decrease in inequality. The critical factor is whether reforms
and the related growth reach all households, or if some are left out of the development process. History has
shown that countries undergoing the transition from a socialist to a more market-oriented economy often suffer

from some increase in inequality. Viet Nam is no different in this respect. Although the level of inequality
remains relatively low, it is increasing, if only at a modest pace.

Expenditure inequality

In 1992/93 Viet Nam’s poorest families spent on average VND854,000 per capita a year, compared to the
average VND3.9 million spent by the richest families. By 1997/98 the relative expenditure of the poorest and the
richest was VND1.1 million and VND6.1 million respectively. These figures testify to the widening gap between
rich and poor in Viet Nam. In 1992/93, the richest 20% of households were spending on average 4.6 times as
much as the poorest 20%. By 1997/98, this figure had risen to 5.5 times (GSO 1999a).

Rural/urban inequality

Poverty remains a predominantly rural problem in Viet Nam—notwithstanding the fact that the rural poverty
rate decreased substantially, by 21 percentage points, from 66.4% in 1992/93 to 44.9% in 1997/98, according to
the World Bank’s definition (GSO 1999a). The urban poverty rate has reduced dramatically to 9% in 1997/98
from 25% in 1992/93 (Table 3). However, the 1997/98 figure significantly underestimates the true extent of
urban poverty, since it does not include urban migrants, an estimated 25-50% of whom are poor.

Table 3: Rural-urban inequalities

Source: GSO 1994, 1999a; GSO 1999b *1998 comparative prices

The poor in rural areas are much poorer than the poor in urban areas, as their expenditure levels are much
further below the poverty line. The rise in inequality between rural and urban areas is also confirmed by the
increase in the difference between average urban and rural expenditure levels. In 1992/93 the average annual per
capita expenditure was 1.8 times higher in urban areas than in rural areas; by 1997/98 it was 2.2 times higher.

1992/1993 1997/1998

Urban poverty incidence, % 25.1 9.0

Rural poverty incidence, % 66.4 44.9

</div>
(19)<div class='page_container' data-page=19>

A snapshot of rural and urban poverty

Poor rural families typically suffer from geographic isolation, since many live in mountainous or remote areas,
which become inaccessible during the rainy season or which are not linked to markets and towns by road. These
families also tend to have access only to small plots of land, or land with poor soil, which limits their potential to
generate income. Under these conditions it can be disastrous if any working member of the family is struck by
illness, livestock are hit by disease, a harvest fails or is destroyed, or the household is hit by natural disaster.
Another common problem across poor rural households is the shortage of capital, which compels families to
borrow money to acquire land or materials or to cover the costs of health and education services. The consequence
is often heavy debt, which keeps families in the poverty trap by forcing them to sell their crops, or lease or sell
their land.

In Viet Nam’s cities, poverty has a different face. Both Ha Noi and Ho Chi Minh City have seen a huge influx of
migrants from rural areas over the past few years. Although many migrants have managed to obtain jobs in the
formal or informal sectors, urban life involves many hardships. Not least are those associated with the illegal
status of provincial inhabitants who migrate to the cities, such as difficulties in accessing Government-funded
education, health, housing and other services. Moreover, the regional crisis has translated into growing levels
of unemployed and underemployed in Viet Nam, which have hit the urban poor—and especially migrants—
hardest.

Children most visibly manifest the face of urban poverty. A growing number of street children do not attend
school and are forced to beg in the streets or sell small items or food to earn their living. Such children are
potential victims of a variety of problems and situations, including child prostitution and subsequently the risk
of HIV/AIDS infection, child trafficking, drug abuse, child labour, homelessness and conflicts with the law.
Whilst there are a number of factors that put children into these difficult circumstances—including the negative
impacts of a more market-oriented economy, rapid social and economic change, disparities in the distribution of

wealth, migration, urbanisation and disintegration of households—many of these find their roots in poverty.

Regional inequality

The incidence of poverty also varies by region (Table 4). In 1997/98 the three regions with the highest rate of
poverty were the Northern Mountainous, the Central Highlands and the North Central regions—the same three
poorest regions as five years ago. The remote Northern Mountainous region is by far the poorest region, with
over half of its population (58.6%) living in poverty in 1997/98. By far the wealthiest region is the South-east, the
country’s major industrial region—including large commercial centres such as Ho Chi Minh City—with only 8%
of its population recorded as poor.

Table 4: Poverty incidence by region, %

Source: GSO 1994, 1999a; MOLISA 1999

Regional inequality partly mirrors the rural/urban divide, since households living in the poorest four regions derive
the majority of their income from agricultural activities. In the three richest regions the sources of income are
more diversified, the most important being non-farm self-employment, and wages in the South-east. In 1997/98
people in the South-east were spending on average 2.6 times more than in the Northern Mountainous region, and

Region VLSS I

92/93 VLSS II97/98 MOLISA1992 MOLISA1998

Average per capita
expenditure, 
1992/93-1997/98 growth rate, %
Northern

Mountainous 78.6 58.6 35.5 22.4 33

Red River Delta 62.9 28.7 20.6 8.4 57

North Central 74.5 48.1 44.0 24.6 48

Central Coast 49.6 35.2 35.7 17.8 30

Central Highlands 70.0 52.4 48.0 25.7 26

South-east 32.7 7.6 20.0 4.8 80

</div>
(20)<div class='page_container' data-page=20>

between 1992/93 and 1997/98 expenditure levels in the South-east grew by 80%—up to three times as fast as in
the poorest regions. In addition to households in the poorest regions deriving a large portion of their income from
agriculture, the vulnerability of some of these regions to natural disasters also helps to explain the regional
poverty divide. For example, in the Mekong Delta floods regularly destroy crops and in the North Central region
frequent typhoons deepen poverty by destroying houses, infrastructure and crops.

Ethnic minorities

Comparison between the VLSS of 1992/93 and 1997/98 shows that poverty remains prevalent and persistent
among Viet Nam’s ethnic minority population, and that inequality is increasing between ethnic minorities and the
Kinh majority. At 75%, the poverty rate among ethnic minorities in 1998 was double the national average of 37%
(GSO 1999a). A much lower poverty reduction rate among ethnic minority people—falling 11 percentage points
between 1992/93 and 1997/98, compared to the national average reduction of 21 percentage points—has resulted
in their increased share of the poor in Viet Nam (Table 5).

Table 5: Poverty among ethnic minorities

Source: World Bank estimates based on VLSS II

Many ethnic minority populations suffer from greater isolation than the Kinh majority, essentially because of
their remote location, poor infrastructure and linguistic differences. In some remote areas the education system
is very poorly developed, with a shortage of teachers and classrooms. School enrolment and literacy are low,
particularly among ethnic minority girls. Food security is often not guaranteed, as ethnic minorities commonly
live in mountainous areas where the weather is unpredictable and crop yields vary considerably from one season
to another. Due to few alternative means of income generation, opium poppy cultivation is viewed by some
ethnic minority groups in North Viet Nam as an alternative way of generating cash income. Environmental
sustainability is also a concern in these areas, with population growth putting pressure on already over-exploited
forests and land.

3.4. Characteristics of the poor

Several factors are closely related to poverty, either because they influence the level of welfare of households,
or because they are a direct consequence of poverty. These factors include employment, education, health,
gender, household size (Table 6), ethnicity, age, land and geographic location.

Employment

The main source of income for poor households continues to be agricultural activities. In 1997/98 almost 80% of
the poor worked in agriculture. More than half of the income of the poorest 60% of households comes from
agricultural activities, mostly in the form of self-employment. The seasonal and sometimes unreliable nature of
this income, combined with a deficit of off-farm jobs, makes rural underemployment a major cause of poverty.
In urban areas the situation is better, as the vast majority of job opportunities with Government institutions,
State-owned enterprises and the private sector, including informal activities, are concentrated there. Nevertheless,
migrants to the cities and poor urban dwellers are feeling the effects of an increasingly crowded labour market
in the cities, as State-owned enterprises scale down and streamline their businesses and since growth in Viet
Nam’s once-booming city economies has slowed.

Health

The correlation of poor health to household income illustrates well the greater vulnerability and exposure of poor
people to poor health and malnutrition. Poor women and children tend to be disproportionately afflicted. In rural
areas limited access to clean water, lack of immunisation, insufficient food and an unbalanced diet have the

</div>
(21)<div class='page_container' data-page=21>

most negative consequences on the health of newborn babies, children and mothers. Malnutrition—leading to
iron deficiency anaemia for women—and the lack of access to prenatal care affect both poor mothers’ health
and the weight of the newly born. Lack of food and clean water has a vital impact on children’s physical and
mental development and puts them at greater risk of poor health later in life, making them less productive and
thus more prone to poverty. In households containing one or more drug addicts, a significant proportion of
expenditure is diverted to buying drugs, leading to a strong correlation between illicit drug use and poverty.
Table 6: Human development among Viet Nam’s poorest and richest people, 1997/98

Source: GSO 1999a

Education

Level of education is also closely related to poverty. The average number of years of education of the poorest
20% of households remains half that of the richest 20% of households. In rural and remote areas in particular,
the relatively high cost of schooling and long distances to schools often keep children away from school and
contribute to dropouts. In 1998 40% of the people who had never attended school came from the poorest 20%
of households, while only 9% of them were from the richest 20%. Only 10% of the people who had finished
upper secondary school were from the poorest 20% of households, compared to 37% from the richest 20%. The
literacy gap between the poorest and richest also remains significant, although it should be borne in mind that the
literacy rate for the whole population of most developing countries is much lower than the literacy rate for the
poorest section of the population in Viet Nam. Female literacy is lower than for males at all levels of household
income, though the gap is biggest for older people and ethnic minority populations. Fewer ethnic minority girls
have access to and complete secondary school than any other sector of the population. A recent participatory
poverty assessment conducted in two remote communes with predominately minority populations in Lao Cai
province found that there were no adult women who were literate (SRV et al 1999).

Age

Households headed by young people are poorer than households headed by the middle-aged and elderly. Almost
40% of households headed by 25- to 30-year-olds are in the poorest 20% of households, with this share declining
with the increase in age of the household’s head. In addition, young, poor, newly formed households have less
land and often of worse quality, due to difficulties in transfer of land after marriage or leaving the parents’ house.
Only 14% of households headed by 50- to 60-year-olds are in the poorest 20% of households, with 25% in the
richest 20%. As many as half of the households headed by 65-year-olds or above are in the richest 40% of
households, with only 15% in the poorest 20%. Average per capita expenditure of households headed by 50- to
70-year-olds is around 1.5 times higher than the expenditure of households headed by under 30-year-olds.
Gender

Even within the same household, poverty status can differ between male and female members. Viet Nam has a
strong differentiation of labour tasks. Women tend to work significantly longer hours than men (OXFAM GB et
al 1999) and their average monthly earnings are 22% less than men’s (GSO 1999a). Viet Nam scores impressively
in terms of access for children of both sexes to education and health levels, for which there is little or no gender
gap (GSO 1999a). However, adult women—particularly those from ethnic minority groups—do fare worse in

Social indicators 20% poorest 20% richest

Fertility rate (number of children) 3.5 2.1

Household size 5.6 4.1

Pregnant women receiving prenatal care, % 50 83

Underweight children with moderate malnutrition, % 43 18
Underweight children with severe malnutrition, % 7 1

Children with low birth weight, % 11 5

Sick people unable to do usual work in past month, % 56 38

Average number of years of education 4.4 8.2

Literacy rate, % 78 95

</div>
(22)<div class='page_container' data-page=22>

terms of education, literacy and adequate access to health services. Women also have lower nutrition status,
partly because it is customary to feed men and boys more and better food, which discriminates against the health
of women and girls. Women and girls are also more disadvantaged by the increased cost of public welfare
facilities—such as kindergartens, schools and health care—since this tends to increase the burden on women
and girls to raise and care for family members at home. Men tend to monopolise decision-making power, and
women also lack control and access to essential resources such as land, which is usually registered in the male’s
name. Without any land to offer as collateral it makes it more difficult for women to access credit.

Household size

It is a common correlation worldwide that better-off families are somewhat smaller than poorer families. This
also holds true for Viet Nam. The correlation is partly explained by the fact that wealth quintiles (grouping the
population into 20% segments from poorest to richest) are determined using per capita expenditure, so that
members of larger households are automatically poorer. But there are other factors behind the relationship
between household size and welfare. Poor households are usually larger because they depend on a greater
number of children to support the household financially. They also choose to have more children to compensate
for the fact that a greater number of poor children die in early childhood than children from richer households.
Irrespective of their choice about family size, poor couples often lack information on, access to and the means to
afford contraceptive methods, meaning they have less control over the number of children they have. Larger
households are also particularly vulnerable to changes in health and education costs.

Geographic location

Poverty remains a predominantly rural phenomenon. Isolation from markets, health and education facilities, and
sources of information, is a major factor accounting for the high incidence of poverty in rural areas. This isolation
often goes hand-in-hand with poorly developed, even non-existent, infrastructure, and lack of means of transport.
Lack of access to productive resources in some rural areas further reinforces the poverty trap. The shortage of
capital and sufficient quantity and quality of land, coupled with the shortage of knowledge and skills, prevent
households from developing productive and sustainable sources of income. These shortages also deprive households
of tools to help them better manage risk and uncertainty. The unpredictability of the rural environment and
climate makes households that depend on agricultural outputs to survive very vulnerable. This extreme vulnerability
to natural catastrophes as well as to the loss of a family breadwinner (through migration as well as death or
illness), crops or livestock is a typical characteristic of poor rural households, and goes a long way to account for
the rural-urban poverty gap.

3.5. National responses

Aware of the challenges of alleviating poverty, and following a tradition of concern for equity, the Government
has put social development and poverty reduction at the forefront of its development agenda. At 8.5% of total
1997 State resources, spending on basic social services still fell some way short of the 20% committed in 1995
at the World Summit for Social Development (WSSD), according to the international definition of social services
(using the national definition, social spending in 1997 had reached 17.2% of total State expenditure). Nevertheless,
spending on basic social services is increasing steadily, and is up from 6.1% and 12.7% in 1990 according to the
international and national definitions respectively (SRV 1998).

</div>
(23)<div class='page_container' data-page=23>

One of the major activities of the HEPR-related programmes is the provision of subsidised credit. About 30% of
the budget of the National Target Programme for HEPR and more than 90% of the budget for the National
Target Programme for Employment are used for the provision of credit through the Viet Nam Bank for Agriculture
and Rural Development and the Viet Nam Bank for the Poor (VBP). The latter has set a target to provide up to
VND2.5 million per household (with a repayment term of up to three years and without requirements for
collateral) to 90-95% of poor households by 2000. Currently, the VBP estimates that 60% of poor households
have been given loans (UNDP 1999b). However, in 1997/1998 credit provided by the VBP and the HEPR
programme to the poorest 40% of households made up only 20% of total loans, while nearly 30% of the total

credit sources were given to the richest 40% of households (GSO 1999a). Overall, women received less than
10% of VBP loans. These figures clearly indicate the need to direct more funds to the poorest and to women.
However, repayment ability remains a constraint on the allocation of credit. Around 10% of responding households
in VLSS II stated that they could not repay their loans, whilst another 14% could only repay with difficulty (see
Chapter 9, section 4 for more on credit).

Also in 1998 the 1,715 Poor Communes Programme was launched to target communes faced with extreme
difficulties in mountainous and remote areas, where ethnic minorities make up the majority of the population.
With a planned budget of VND410 billion in 1999, the programme will first concentrate on assisting the 1,000
communes in most need of support. In 2000, further budget provision will be made available to assist an increased
number of communes.

Both of the Government’s poverty alleviation programmes encourage the greater decentralisation and delegation
of implementation authority to the provincial and sub-provincial levels, and promote community participation as
important measures to improve the effectiveness and targeting of poverty reduction investments.

Aware of the need to develop formal social safety nets to protect vulnerable groups, the Government spends
around 14% of its budget on social transfers, and has been developing a number of social insurance schemes and
relief funds. However, most of the social allowances are provided to special priority groups, such as those
recognised for their contribution to the country during war time. Currently, only 11% of Viet Nam’s labour force
(mainly from the Government sector or urban areas) have social insurance, and no unemployment scheme is yet
in place. The benefits of the Social Guarantee Fund for Regular Relief reach only a minority of those qualified to
receive assistance. Due to the poor definition of who is eligible for the fund, even the low shares of 24% of
orphans, 15% of disabled and 46% of solitary elderly receiving assistance in 1998 are likely to be overestimated.
The Contingency Funds for Pre-Harvest Starvation and Disaster Relief designed to aid poor faced with disasters
such as typhoons, floods and crop failures similarly only reach a small proportion of those in need, and the level
of relief is often too low to significantly aid the recipients (GSO 1999a; UNDP 1999b).

To address the needs of poor and at-risk children the Government launched a National Programme of Action for
the Protection of Children in Special Circumstances in mid-1999. The Ministry of Public Security is responsible

for implementing the programme, which includes measures to help street children and protect children from
labour abuse, trafficking and prostitution, juvenile delinquency and drug abuse. Viet Nam was the first country in
Asia to ratify the International Convention on the Rights of the Child.

3.6. Key issues
Effective targeting

</div>
(24)<div class='page_container' data-page=24>

There are still distinct groups of people that remain relatively disadvantaged with regards to poverty: ethnic
minorities (including current and former opium-producing communities), households in geographically remote
areas, women and children. These groups require specific consideration and targeting in order both to decrease
inequality and eradicate extreme poverty.

Another targeting issue relates to the effectiveness of social safety nets. Currently, the percentage of the eligible
population receiving formal social safety net services and benefits is low and the assistance provided—such as
small cash and food transfers—has insufficient impact on improving the welfare of recipients.

Sustaining growth and funding

A large portion of the population just escaping poverty is extremely vulnerable to small shocks or crises at the
macroeconomic or household level. Strong and sustained economic growth in the next five to ten years is needed
to consolidate past achievements in poverty alleviation and prevent a significant section of the population from
falling back into poverty. For the same reasons, the recent economic downturn can not be allowed to threaten
Government spending on basic social services and poverty alleviation programmes.

Poverty alleviation programmes

The funding level of the National Target Programme for HEPR and of the 1,715 Poor Communes Programme
is low in light of the targets set. The funding situation is made more serious given the lack of a long-term funding
strategy and plan, and in view of the fact that only 38% of the total funding for the National Target Programme
for HEPR is expected to come from the central Government.

Both poverty alleviation programmes still suffer from an unclear organisational structure and distribution of
responsibility and accountability among stakeholders at all levels. They are also handicapped by limited
management, implementation, co-ordination, and monitoring and evaluation capacity, as well as an inadequate
number of qualified staff—especially at the commune and district levels. These weaknesses contribute to the
slowdown in the implementation of the programmes and their limited capacity to absorb more funding. For
example, by end-August 1999, only about 20% of the 1999 plan of the 1,715 Poor Communes Programme had
been implemented, even though 70% of the funding for the programme had already been transferred to local
State Treasury accounts.

Furthermore, although the two programmes promote greater decentralisation and participation by local communities
and people at the implementation stage, there is still inadequate participation of local people in identifying their
own problems, needs and solutions and in making decisions related to planning, management, implementation,
monitoring and maintenance of the projects that affect their lives. This, together with the above mentioned
organisational and capacity problems, may result in low efficiency, inappropriate targeting, limited impact and
sustainability of the two programmes.

The HEPR-related programmes also lack sufficiently clear targeting strategies and differentiated approaches in
dealing with specific groups of poor, particularly ethnic minorities. This leads to the risk of the programmes being
unable to reach some groups of the poor, which sometimes do not even have access to information about the
programme benefits available to them. Some groups of the poor—especially the poorest—still have limited
access to formal credit provided by the programmes. Reasons for this include cumbersome procedures, poor
targeting, the inflexibility of credit terms, the inability of the poorest to use the credit to accumulate assets,
untrained and poorly resourced banking staff, and the requirements for collateral. Another concern is the financial
sustainability of the credit components of the HEPR-related programmes in view of their highly subsidised
interest rates which, even so, are still failing to ensure access to loans for the poor, and the inability of the formal
banking system to provide savings facilities to poor households.

Methodology

</div>
(25)<div class='page_container' data-page=25>

3.7. Recommendations for action

As the Government reform process proceeds, particular attention should be paid to those reforms that
directly affect the rural poor involved in agriculture—such as gender-equitable land policy (to ensure the
landless have access to agricultural and forest land), pricing reforms, regulations regarding agricultural
exports, and adjustments in taxes, fees and other contributions.

Increase the proportion of the Government’s and donors’ resources spent on basic social services from
8.5% and 10% respectively in 1997 (using the UN’s definition) to the 20/20 targets by 2004. Both in addition
to and as part of this target, funding as well as efficient management of funds for poverty alleviation
programmes should be increased, in order to achieve the Government’s goals for hunger eradication and
poverty reduction in the early years of the next millennium.

Institutionalise gender-sensitive participatory approaches in HEPR-related projects and programmes. Develop
appropriate strategies to apply the Government Decree on Grassroots Democracy, in order to promote
greater decentralisation and participation by local communities and individual men and women in identifying
their own problems, needs and solutions, and in making decisions related to planning, management,
implementation, monitoring and maintenance of the projects that affect their lives. Related to this, ensure the
building of local knowledge and capacity to preserve and manage local heritage and indigenous cultural
practices.

Based on the existing 1,715 Poor Communes programme and the National Target Programme for HEPR,
develop a specially targeted, gender sensitive, integrated rural development programme to tackle persistent
poverty—especially among ethnic minorities—with a clear and strong organisational and management
structure, and sufficient and qualified staff, particularly at the local levels. Such a programme should build on
indigenous knowledge and target the most needy regions, such as the Northern Mountainous region and the
Central Highlands. Poverty alleviation programmes in disaster-prone regions should include a disaster
preparedness/ mitigation of impact component and ensure a sustainable use of local resources, especially in
upland areas.

Actual provincial expenditure figures on the HEPR and 1,715 Poor Communes programmes should be fed
back to the central Government—and not only to the Ministry of Finance—in order to assist planning for
future programme phases.

Use the Partnership to Assist the Poorest Communes (PAC) mechanism to develop a comprehensive
multi-donor/Government project to support the national poverty alleviation programmes and to practise partnership,
as well as to learn from and build on each other’s experience.

Improve co-ordination among the Government line ministries and agencies, and Women’s Unions at various
levels, as well as between central and local authorities involved in HEPR.

Create a unified national poverty line and poverty assessment methodology suitable for Viet Nam. Establish
a workable poverty monitoring system along with mechanisms to monitor and evaluate HEPR-related
programmes and projects.

Develop a formal banking system for the poor and rural areas that is:

•

financially sustainable (based on average market interest rates, with sound savings services and efficient
and effective management);

•

user friendly and easily accessible, especially for poor ethnic minority women (with simplified procedures,
clear targeting criteria and flexible credit terms); and

•

widely publicised.

</div>
(26)<div class='page_container' data-page=26>

Improve formal social safety nets by:

•

separating Pre-Harvest Starvation and associated supplementary assistance from the Disaster Relief
Fund (DRF), in order to ensure accumulation of the DRF in years of few/no disasters, and transferring
the former to the Social Guarantee Fund for Regular Relief. The Disaster Relief Fund should become

a central fund financed by general contributions from provinces in proportion to their resources, by the
central Government and external aid.

•

creating better targeting criteria and mechanisms and strengthening the capacity of the above mentioned
Funds in management and service delivery, with the twin objectives of improving access for poor and
needy people to the services of the social assistance funds, and enhancing the effectiveness of the
funds’ assistance and its impact on target groups.

•

expanding the coverage of the existing insurance schemes to rural areas and the informal sector.

•

improving the targeting strategies and implementation of policies on (i) exemptions for children from

poor households from school fees and contributions, and (ii) providing free health insurance cards to
ensure equality of access to health services to all family members of poor households.

</div>
(27)<div class='page_container' data-page=27>

Chapter 4: Governance

Governance is the exercise of economic, political and administrative authority to manage a country’s affairs at
all levels. Good governance should involve three key participants—the State, the private sector and civil society—
as equally represented and valued partners in governing the affairs of a country (Figure 5).

Figure 5: The three key players in governance

Good governance rests on four pillars:

• Participation: where all men and women have a voice in decision-making, including the poorest, those
living in remote areas as well as the most vulnerable members of society.

• Rule of law: where legal frameworks are fair and impartially enforced.

• Transparency: which relies on the free flow of relevant and understandable information.

• Accountability: where decision-makers from all three key sectors are answerable to the public.

The capacity of the three key partners in administering the country’s affairs is critical to human development.
The State creates a conducive political, economic and legal enabling environment. The private sector generates
jobs and income, and civil society facilitates political and social interaction. The effective functioning of each
participant, and a constructive partnership between all three, are also crucial in order to balance the strengths
and weaknesses of each.

The launch of doi moi in Viet Nam marked the beginning of a transition from a centrally planned to a more
market-oriented economy and the adoption of the rule of law. Having embraced a programme of renovation (doi
moi) in the political, economic, legal and public sectors, Viet Nam has become a more open society. However,
there is still some uncertainty from the Government regarding which point on the sliding scale between a
market-oriented and centrally planned system Viet Nam should opt for, which has important implications both for the role
of the private sector in the economy, as well as for the efficacy of the governance system. Much also remains
to be done to improve the efficiency of governance structures and processes, and enhance participation in
governance for the benefit of Viet Nam.

4.1. The State

The political framework

Viet Nam’s political framework has undergone considerable change in support of the rule of law and to increase
representation and accountability. Formally, Viet Nam has a unitary State structure, with all political power
concentrated in the National Assembly and one-party political system. As stated in the 1992 Constitution, “the
Communist Party of Viet Nam is the force leading the State and society” (Article 4). The 1992 Constitution
made the National Assembly the highest body representing the people. It is also the highest legislative body and
exercises “supreme control” over all activities of the State. All of the institutions of the State, including the
Executive Government, the Supreme People’s Court and the Supreme People’s Procuracy, report to and derive
their legitimacy from the National Assembly. The Government is the executive body of the National Assembly
and the highest administrative body of the State.

State Civil

Society

</div>
(28)<div class='page_container' data-page=28>

“Democratic centralism” continues to be the principle governing the organisation and functions of all State
organs, according to which decisions are made centrally, although views of concerned agencies and individuals
are also taken into consideration. The prerogatives of national sovereignty and stability are afforded the highest
priority and play a key role in shaping political decisions.

Significant challenges remain on the road to a more market-oriented system, both in terms of establishing a clear
consensus on the direction and pace of reform, and the capacity of Government institutions and personnel to
effectively implement reform. The Government is still trying to define how to balance the socialist ideology
notion of equity for all, which encourages a more interventionist role of the State as caretaker of the people, and
the pragmatic requirements of a market-oriented economy, in which market forces to a large extent regulate the
economy, while the State tends to concentrate much more on policy framework, global strategies, enabling legal
framework development and monitoring. Currently, there is no clear demarcation between the “steering” (policy
intervention) and “rowing” (direct intervention) role of the State. However, if the country’s productive forces
are to be better mobilised and the allocation of resources rationalised, it is essential that the State’s direct role in
the economy be further reduced, and its enabling role as policy-maker and legal framework provider further
strengthened. Although there has been steady progress in revising old laws and devising new ones, Viet Nam is
still in need of a more comprehensive, clear and enabling legal framework to provide the basis for the emergence
and development of a healthy and stronger private sector and civil society with which the Government can
finally, in all confidence, share the responsibility for the country’s development.

The challenge of transition from one system to the other is not confined to shifting mindsets and rallying the
political will. It is also a question of capacity. Limitations in terms of the effectiveness and efficiency of the
current system result in gaps between the requirements of change and the responsiveness of the system in terms
of institutional and human resources. New market institutions need to be set up and existing institutions streamlined.
The capacity and experience needed to implement these changes—particularly with regard to management

skills—is still limited.

The issues of corruption, abuse of power and respect for citizens’ rights have been recognised by the Party and
the Government and need to be comprehensively addressed as part of the reform process. The former issue at
least partly results from an insufficiently performance-based wage and job allocation system—a problem which
the Government has begun to address. Additional challenges include improving transparency as well as enhancing
public awareness of, and participation in, the political process.

The rule of law and transparency

</div>
(29)<div class='page_container' data-page=29>

However, some important obstacles remain to a genuine separation of powers of the different arms of Government.
According to the judicial structure, only the Supreme People’s Court is independent from the administrative
control of the Government. The lower courts are still administered both by the Ministry of Justice as well as by
the local authorities within their jurisdiction. The presence of the Procuracy, with its role of “supervising” court
decisions, draws the independent decision-making of the courts further into question.

The Procuracy is already in principle unified and institutionally independent at the central and provincial levels
from the administrative control of the Government. The key task with respect to this institution is to ensure that
it is able to perform both its prosecutorial and supervisory roles in a well-informed, positive and transparent
manner.

In addition to structural issues, the existing procedural rules for civil, economic and administrative cases also
weaken judicial independence because of the lack of clarity regarding the potential remedies afforded the
judiciary. While the revision of the Civil Procedure Code may strengthen the courts in this respect, it is unlikely
that this alone will lead to a strong, independent judiciary. The development of a judiciary with the independence
and authority to resolve disputes under the law remains an urgent priority.

In terms of the content of the law, the legislative process would benefit from strengthening the capacity for
policy analysis. Increasing the meaningful participation in law analysis and policy debates of Deputies and other
entities eligible to take legislative initiatives, will enable a greater concentration on national policy issues with

respect to the law rather than unstructured debates over technical matters. The aim should be to draft laws that
are more focused, designed to achieve clearly defined goals and allow for improved implementation. As such,
increasing the ability of the National Assembly to make informed policy decisions—perhaps through the
establishment of a law-drafting and policy-analysis service within the Office of the National Assembly—would
help Viet Nam to build up a more harmonised legal system with laws drafted in congruence with national policy
and according to a professional drafting procedure.

While many new laws have been passed, effective and consistent implementation remains limited in many
cases. Problems occur both at the stage of drawing up implementation codes for laws, and in the actual
implementation and enforcement of laws. Encouraging more outside consultation with concerned parties in the
law- and policy-analysis process would improve the transparency of the process as well as make it more
participatory. Thereby, it would also increase the likelihood of effective implementation of and compliance with
these laws, once enacted.

In the interests of bolstering the transparency and accessibility of the law, the Government has shown a desire
to better publicise and advocate the legal system and encourage the participation of the general public. To this
end, legislative sessions are now televised, two directives on legal dissemination and a Law on Petitions and
Denunciations were issued in 1998, and community outreach programmes have been set up. However, there
remains a need to reinforce information networks and legal information dissemination structures and ensure that
they extend to the most remote areas.

</div>
(30)<div class='page_container' data-page=30>

Local government and intra-governmental relations

Viet Nam’s local administration system is divided into three levels: provinces (61 units), districts (600 units) and
communes (10,330 units). Each locality at all of these levels has a representative organ (People’s Council) and
an executive organ (People’s Committee), which roughly correspond to the National Assembly and the Government
at the central level.

Local authorities can not carry out any public administration functions unless explicitly assigned such responsibilities
by national legislation. In this regard, following stipulations in the 1992 Constitution, the Law on Organisation of

the People’s Council and the People’s Committee (1994) and the Ordinance on the Concrete Tasks and Powers
of the People’s Council and People’s Committee at Each Level (1996) were promulgated, in order to provide the
basic legal framework for local government organisation and operation. The Budget Law (1996, 1998) formalised
the fiscal arrangements between different levels of Government, assigning important budget responsibilities to
local authorities, especially at the provincial level.

The 1992 Constitution stipulates that the popularly elected People’s Council is “the local organ of State power”,
which in turn elects the People’s Committee as its executive organ. But in practice, there are a number of
obstacles for People’s Councils to carry out this function effectively. While the tasks of People’s Councils are
increasing in importance as well as volume, they are poorly equipped in term of basic resources, skills and
infrastructure. People’s Councils normally meet in two four-day sessions a year, which typically take place after
the two sessions of the National Assembly, that gives the impression that contribution of People’s Councils to
policy discussions of the nations not substantial.

Relations between different levels of Government are complicated in many ways. First, the People’sCouncils at
all levels are supervised and guided both by the Standing Committee of the National Assembly and the Government.
Second, the People’s Committees are accountable both to the People’s Councils at the same level, as well as to
the next highest executive body (either a People’s Committee or the Government, depending on the level). Third,
some central ministries have branch offices in each locality, which are administratively placed under the People’s
Committees but which functionally report to the higher authorities along the line of command within each ministry.
Fourth, most tax revenues belong to the central Government, with local administrations in theory receiving
revenue allocations according to centrally dictated norms. In practice, however, revenue allocations and
expenditures at local level are not strictly and totally controlled by the central authorities, and tend to be determined
following a series of negotiations between different levels of Government.

While decentralisation of management to local administrations has been an achievement of public administration
reform, the above mentioned complicated arrangements suggest that a strategy for a more effective devolution
of power and decision-making authority still needs to be developed. A further issue that needs to be addressed
is that current funding available for localities, especially at lower levels, often does not meet the public service
responsibilities of these bodies.

The problem on the part of the central Government over decentralisation may be at least partly due to the fact
that there is not yet enough capacity within local authorities in order to make them efficient public service
providers. Problems with efficiency and accountability can be traced to the generally low morale of underpaid
local officials and a lack of training, as well as the absence of proper structure of local government.

Public administration reform

</div>
(31)<div class='page_container' data-page=31>

PAR: “The priority task of PAR is to centralise all regulation-making tasks and decentralise economic
and social decision-making for local authorities” (GCOP 1998). PAR has been put at the top of the
Government reform agenda and PAR committees established in all ministries and provinces. At end-1998 a
Government PAR Steering Committee, chaired by the Prime Minister, was set up to guide and monitor PAR
activities. The Government Committee for Organisation and Personnel (GCOP) is a standing member of the
committee and has been assigned as the Government focal point for PAR. The Seventh Plenum of the Communist
Party Central Committee in August 1999 concluded that there was an urgent need to “examine and readjust
the functions, responsibilities and structure of Government organisation and provincial departments”.
Noteworthy progress on PAR has already been made. Many laws and ordinances have been passed by the
National Assembly and put into operation. Legal documentation has been reviewed and adjusted to ensure
simplicity and consistency. Administrative procedures have been streamlined, simplified and publicised, and a
system of “one door, one stamp” is already in place in several cities and provinces. Recommendations from the
public and the business community have been sought on further administrative improvements. An Administrative
Court has been established. In 1995 the number of ministries was reduced from 27 to 22, and a further reduction
is planned. The streamlining process has been mirrored at the local level. In addition, new general corporations
have been created which have largely taken over the task of managing key SOEs from the line ministries,
allowing the ministries to concentrate on their policy management function—although the potential monopoly
power and inefficiencies manifested by such corporations create their own problems. A Civil Servant Statute
has been promulgated, information technology in Government institutions is being modernised and capacity
building training activities conducted.

Whilst there has been significant progress in certain areas of PAR, one of the main obstacles to the full

implementation of the reforms is the current lack of a comprehensive PAR vision and strategy clearly identifying
the steps towards the changed role of the Government in a more market-oriented economy. As a consequence,
there is still a gap between PAR policy formulation and implementation, which is further exacerbated by a lack
of implementation capacity. The absence of a clear PAR strategy has also resulted in low consensus on and
commitment to this reform and has provided fertile ground for informal mechanisms to operate in parallel with
formal ones, undermining the objectives of the reform.

Another difficulty is that in many cases civil servants lack sufficient knowledge, skills and attitude to enable
effective implementation of PAR. Motivation and productivity are also problems, as is the absence of a service
culture. These problems and lack of proper implementation of policies can be linked in part to low income and
benefits. Performance-based remuneration is recognised by the Government as a potentially good management
tool, however its insertion in a human resources management plan will be part of the new round of discussions
that the Government is launching, following the Seventh Plenum, on the salary structure and policy of civil
servants.

Last, but not least, in every society reform involves an evolution of the status quo that affects power relations
among various groups. Resistance to PAR may therefore arise among groups that feel at risk of losing influence
and power as a result of reform.

4.2. The private sector

</div>
(32)<div class='page_container' data-page=32>

uncertainty related to the overall investment environment. Policy and institutional changes since the formal
launching of doi moi in 1986, and the strong growth of the economy and incomes during the 1990s, are gradually
improving the scope for the development of the private sector in higher value-added export sectors (seealso
Chapter 2, section 4). The private sector already accounts for 98% of value added in agriculture, and some
70% of value added in the service sector (excluding public administration, health and education services). While
the State sector continues to dominate industrial production, accounting for about half of industrial sector value
added, the domestic private sector plays an important role in a number of rapidly growing light industries.
Moreover, foreign-invested companies already account for the largest share of value added in some sectors
such as oil, gas and automobile assembly.

More recent reforms reflect the Government’s increasing commitment to developing the domestic private sector.
The new Enterprise Law, approved in May 1999 by the National Assembly, is an important step towards levelling
the playing field for all enterprises. It largely replaces separate legislation governing different types of businesses
and also allows, for example, for partnerships and for 100% State-owned enterprises to be incorporated as
companies. The new law sends an important message to the private sector that the Government positively
encourages private sector investment. Effective implementation of the law will be critical. For the time being,
SOEs—several of them loss-making—still dominate the economic scene, slowing down the reform process.
If the Government wants to effectively move towards a more market-oriented economy, even though SOEs
may keep the lead in certain sectors, the legal framework will need to be much further enhanced to allow the
private sector to take on its responsibilities and become the engine of growth of the country. A thriving private
sector could also become an outlet for, and a way to reintegrate, redundant civil servants into the economic
cycle, thereby also facilitating the PAR process and Government structure streamlining. The transfer to the
private sector of a number of functions currently carried out at great expense by the Government would not only
provide new impetus to the private sector, but also allow for savings and much more efficient use of public funds.
A key challenge for the Government in promoting the private sector is to ensure equal treatment for the private
and public sectors. Having now enshrined this principle in the legal framework, it is very important that equal
treatment is enforced in practice, for example regarding access to credit.

While recent growth in private sector activity is evidence that private property rights, including contract
enforcement, are improving, it is also clear that many market institutions have not been functioning efficiently,
such as the registration system for enterprises, thereby hampering the efficient mobilisation and allocation of
resources. Encouragement of domestic investment—particularly by the private sector—is also crucial for
sustainable growth. This is a challenging task in an environment in which elements of central planning are
retained alongside attempts to move towards a market-based allocation of resources.

4.3. Civil society

Promoting empowerment and participation

</div>
(33)<div class='page_container' data-page=33>

The Communist Party has been leading both Vietnamese culture and society for many decades. The Party
exercises leadership by assigning its senior members to key positions in the Government, the State machinery
and socio-political organisations at every level. Mass or socio-political organisations, such as the Viet Nam
Farmers Association (VFA), the Viet Nam Union for Science and Technology Association (VUSTA) and the
Viet Nam Women’s Union (VWU), are not strictly part of civil society and still have more the characteristics of
State organisations. This said, the widespread network of some of these organisations from the central to the
local level, and their large membership—for example the VWU has over 11 million members and the Youth
Union around four million members—allow them to play an important role in improving communication between
the Party and State and the grassroots level. These organisations are becoming increasingly responsive to the
needs of their members. Nevertheless, there remains significant scope for increased participation of the broader
society in decision-making.

Viet Nam’s open door policy and a number of important recent changes are contributing to the creation of a
more enabling environment for the emergence of a civil society. These changes include:

a) the development of a system of rule of law, in particular a civil code;

b) the move towards a more accountable, transparent and participatory Government;
c) the reform of SOEs, which makes workers and managers stakeholders in the system;
d) the emergence of an information society;

e) international economic integration; and
f) the move to enhance grassroots democracy.

The result of these developments has been significant growth in the number of State groups or quasi
non-Governmental organisations (Vietnamese NGOs), which form a central pillar of civil society in Viet Nam. Most
of these groups were established after 1990, fostered by the renovation process. However, the majority were
founded by intellectuals in urban areas, despite the fact that it is in rural and disadvantaged areas that there tend
to be more social groups of people with common interests and needs. Although there are still few local NGOs in
rural areas, savings groups and new co-operatives—which have emerged as a result of the 1997 Law on

Co-operatives—serve some of the same purposes, by grouping together people with common needs and interests.
The emergence of many Vietnamese NGOs is encouraging, but these organisations are still young and restricted
by historical, economic and social conditions, and by the lack of an enabling legal environment. As such, they
have not yet been able to develop their full potential to actively contribute to the development of the country.
The sustainable development of Viet Nam depends on active and constructive interaction between the State, the
private sector and civil society. Vietnamese civil society will only genuinely develop if the Government sees it as
an important partner in the development process, and creates an enabling environment in which it can flourish.
Gender in governance

</div>
(34)<div class='page_container' data-page=34>

Table 7: Representation of women in politics

Source: Viet Nam Country Report to the Fourth World Conference for Women

In addition to addressing gender imbalances in governance structures, attention also needs to be paid to gender
issues relating to governance processes. National development programmes need to be made gender sensitive
through better design and targeting, and in terms of specific project activities, delivery mechanisms and institutional
arrangements. These programmes should also encourage the full participation of women in planning, design,
implementation, monitoring and evaluation.

4.4. Key issues

Clarify the role of the State

It is crucial during a transition period as fundamental as the one Viet Nam has embarked on, that the role and
organisation of the State is adjusted in tandem to match the new operating environment. The transition necessitates
an important shift in the role of the State from Government to governance (from direct intervention to policy and
regulatory framework provider) and the further development of a practical, comprehensive and articulate legal
framework in support of a more market-oriented economy.

Strengthen the rule of law and transparency

In continuation of the above, the principle of the rule of law (as promoted by the 1992 Constitution) needs to be
further advanced, which will involve strengthening the independence and capacity of the judicial system,
strengthening implementation of laws and improving the dissemination of legal information. As advocated by the
Government and the Party, corruption needs to be tackled effectively at all levels, and openness and transparency
made guiding principles of governance in order to increase efficiency, equity and accountability to the public.
Decentralise Government and increase local government capacity and accountability

Local governments must be empowered and the capacity of local administrations needs to be improved to
effectively carry out increased tasks arising from decentralisation. There is a need to strengthen the representative
system at local levels to incorporate the wishes of local people in deciding public resource allocation and ensuring
accountability in public spending.

Reinvigorate public administration reform (PAR)

There remains a need to develop a comprehensive PAR strategy, taking into account the changed role of the State in
a more market-oriented economy and the relationship between PAR and the process of economic reform. Responsibility
for PAR should be effectively devolved to local levels, with effective monitoring and evaluation by the central
Government. It is possible to promote popular participation in the PAR process by raising public awareness and
encouraging feedback from the public on the quality and adequacy of public service delivery, and by increased
“socialisation” of public services through more involvement of the private sector and civil society organisations in
public service delivery. Accountability in the management of public finances is also essential.

Developing an enabling environment for the private sector and civil society

Developing the private sector and civil society in Viet Nam takes an enabling environment. For this to exist, the
Government needs to ensure that the public and private sectors are treated as equals, as well as strengthen the
effectiveness and efficiency of market institutions, and invest in entrepreneurial and management skills
development. The important and positive role to be played by Vietnamese NGOs should also be further recognised.
Promoting the participation of all sections of society in governance needs to be supplemented by specific efforts

at promoting participation of women, ethnic minorities and other disadvantaged or excluded groups in the
decision-making process and in management positions at all levels, and through national policies and development
programmes sensitive to the needs, interests and participation of these sectors of society.

Political body % of women members, 1994-99

</div>
(35)<div class='page_container' data-page=35>

4.5. Recommendations for action

Further define the role of the State in a more market-oriented economy, reinforcing the guidance,
policy-making and monitoring (“steering”) role of the State and reallocating the implementation (“rowing”) role
away from the State, in order to provide clearer guidance for the reform process.

Foster greater policy dialogue between all pillars of the governance system to allow the various actors to
understand their role in a more market-oriented economy and take active responsibility for the development
and growth of the country.

Enhance the capacity of the various actors to fulfil their societal obligations.
a) The State:

• Formulate and implement a comprehensive Public Administration Reform strategy to further restructure,
streamline and enhance the efficiency and transparency of the Government apparatus, with special
emphasis on thorough institutional diagnosis, cost efficiency, decentralisation and quality of public service
delivery at central and local levels.

• Advance decentralisation by delegating decision-making authority, together with the required resources
to implement the decisions, to appropriate levels of Government, simplifying reporting mechanisms, and
enhancing the capacity of local government personnel.

• Enhance the quality of policy analysis, policy-making and planning at central and local levels.
b) The private sector:

• Provide clear official endorsement and recognition of the critical importance of the private sector to
future employment, incomes, domestic savings and the sustainability of the overall development process
needed to eliminate the uncertainty and perceived risks facing potential entrepreneurs.

• Reform and develop an effective market-based banking system to ensure that credit is allocated to
sustainable and profitable employment-generating enterprises.

• Further reform SOEs, particularly by limiting State-directed bank credit to SOEs, in order to free up
capital, land, and skilled workers for the private sector.

• Substantially increase investments in business education and related practical training.

• Through further policy support and lawmaking and implementation, create a favourable environment for
private domestic and foreign investment and promote the role of the private sector as the engine of
economic growth and employment generation.

• Enhance the capacity of private sector organisations, such as effective chambers of commerce, and
provide further opportunities for them to participate actively in policy debate.

• Promote partnerships between the Government and private sector organisations.
c) Civil society:

• Enhance the role and capacity of civil society institutions, such as NGOs, professional organisations,
trade unions and research institutes and universities.

• Promote partnership dialogue and agreements between the State and civil society, in particular in the
area of socialisation of basic social services.

• Invest in media and communication at the local level, for example through support for community-based

media and local language newspapers, in order to promote community participation in governance.

•

Institutionalise structures to ensure that women and men from all levels (from commune to national) and

from all backgrounds—including ethnic minorities, disabled and the very poor—are involved in the
design and implementation of decentralisation and governance activities.

Further strengthen the rule of law by:

•

Enhancing the capacity of the legislature (National Assembly) and judiciary (Court and Procuracy).

•

Improving the quality of the law-making process, in particular by creating direct linkages with the process

of policy analysis through external consultation, and by enhancing appraisal and review processes.

•

Reducing the scope for discretionary interpretation of the law by State authorities through more explicit

</div>
(36)<div class='page_container' data-page=36>

•

Improving legal information dissemination, and encouraging abidance by, and strengthening implementation
of, the law.

</div>
(37)<div class='page_container' data-page=37>

Chapter 5: Population

Viet Nam is the twelfth most populous country in the world, with 76.3 million people, and is the second most
populous nation in South-east Asia, after Indonesia. The population is concentrated mainly in two large river
deltas. The Mekong River Delta is the most populous region, with a population of 16.1 million, or 21% of the
total. The second is the Red River Delta, including Ha Noi, with a population of 14.8 million, or 19% of the total.
The overall population density for the country is not particularly high, at 231 people/km2, but it is very high in the

two main river deltas, where the density rises to an average of 1,180 people/km2.

The country has undergone dramatic demographic changes over the past ten years. The population growth rate
has fallen rapidly, and fertility and mortality rates have decreased to levels comparable with more developed
South-east Asian countries. These changes are affecting traditional Vietnamese household structures as families

grow smaller and the population grows older. In addition, rapid economic development has stimulated population
mobility, and sped up the process of urbanisation. Viet Nam’s economic transition, coupled with an increase in
the number of people entering the workforce, is also creating new and increased employment challenges (see
Chapter 6 for more on labour issues).

The ramifications of these changes are far-reaching. Key population issues need to be addressed to take advantage
of new opportunities and meet the emerging challenges.

5.1. Population levels and trends

Although Viet Nam’s population continues to grow, its population growth rate, fertility rate and mortality rate
have all substantially declined over the past decade. After the Government failed to attain its population growth
rate targets during the 1980s, it strongly intensified its efforts to support family planning programmes aimed at
reducing fertility rates in the 1990s. Since that time, the population growth rate has dramatically declined, as has
the total fertility rate. In contrast to its South-east Asian neighbours, Viet Nam has achieved these results quite
rapidly, and with a relatively low level of economic development.

Over the past decade, Viet Nam’s population grew from 64.4 million in 1989 to 76.3 million, according to the
1999 census (Figure 6).

While this population increase is substantial, the average annual growth rate during this period actually declined
to 1.7% from the 2.1% average annual growth rate of the previous decade. Over the next 25 years, the population
growth rate is expected to continue its decline (Table 8).

Figure 6: Population of Viet Nam 1954-1999, millions

0
10
20
30

40
50
60
70
80
90

1954 1959 1964 1969 1974 1979 1984 1989 1994 1999

millions

</div>
(38)<div class='page_container' data-page=38>

Table 8: Projected population and growth rate, 1994-2024

Source: General Statistical Office

The Government’s goal of replacement-level fertility should be reached within the next six years, and the total
fertility rate is projected to fall to 1.7 by 2024 (Figure 7).

Source: General Statistical Office

Viet Nam has a low mortality rate relative to its level of economic development. Infant and under-five mortality
estimates for 1996 are equivalent to those of a more developed country like Thailand, and have been in decline
over the past decade (Figure 8).

Source: General Statistical Office

Over the next ten years, life expectancy is expected to increase from its current level of 64.9 years for men and
69.6 years for women, to 65.8 years and 71.7 years respectively.

5.2. Ramifications of current population trends

Shifting migration patterns and accelerating urbanisation

Following reunification in 1975, the Vietnamese Government instituted policies resulting in the internal migration
Average annual growth rate, %

--1.63 (1994-1999)
1.31 (1999-2004)
1.23 (2004-2009)
1.11 (2009-2014)
0.95 (2014-2019)
0.77 (2019-2024)
Population, millions

70.8
76.8
82.0
87.2
92.2
96.7
100.5
Year

1994
1999
2004
2009
2014
2019

2024

Figure 7: Total fertilty rate (TFR), 1987 to 1992-96

2
2.5
3
3.5
4
4.5

1987 1988-89 1989-93 1992-96

TFR

Replacement
fertility

Figure 8: Infant and child mortality, 1979-83 to 1992-96

0
20
40
60
80
100

1979-83 1984-88 1989-93 1992-96

Mortality rate per 1,000

</div>
(39)<div class='page_container' data-page=39>

of almost five million people. The majority of these people were moved from areas with high population density,
such as the Red River Delta, to more sparsely populated areas in the Central Highlands and Mekong River
Delta. While this resettlement programme remains in effect, the number of persons being moved under this
scheme is declining. In fact, the Government is now acting to curb migration to certain rural areas due to
negative effects on the environment.

Migration from rural to urban areas has emerged as the dominant trend in the 1990s. In 1989 the urban population
accounted for just 19.4% of the total—approximately the same level as 20 years earlier. By 1999 the rate of
urbanisation had accelerated to 23.5% (GSO 1989, 1999). Since many migrants do not register their residency
with the Government, the true rate of urbanisation is likely to be even higher. It is estimated that between 70,000
to 100,000 migrants move to Ho Chi Minh City each year, and approximately 40% of Ha Noi’s current growth
is attributed to migration (UNDP 1998). Large numbers of temporary migrants who flow into Viet Nam’s cities
each year further swell the urban population. Government estimates indicate that the rate of urbanisation will
continue to increase to 45% by 2020.

Rural-urban migration is especially pronounced among young adults. A survey undertaken in Ho Chi Minh City
found that over two-thirds of migrants are between 15 and 29 years of age, and most are women (ibid). As the
number of people in this age group rises and the difficulty of securing a job in rural areas increases, urban
centres will continue to grow as young adults migrate to cities in search of employment.

The rapid growth of cities, fuelled in large part by migration, is placing increased pressure on the urban living
environment and infrastructure. Since existing sanitary and service structures are inadequate to cope with
current population levels, pollution levels will continue to rise. Rapid urbanisation also threatens to have a negative
impact on urban poverty, overcrowding and unemployment, which in turn may exacerbate crime, drug abuse and
sexual exploitation, and generally undermine social stability.

Ageing population

As fertility rates continue to decline, the population will become progressively older, with the average age
increasing from its 1994 level of 21.5 years to 33.3 years in 2024. While the proportion of the over-60 population
is not expected to change dramatically over the next 15 years, it is expected to increase to 12.7% of the
population by 2024, as compared to 7.6% in 1994 (Figure 9).

Figure 9: Population age pyramids for Viet Nam, 1994 and 2024

1994

8 6 4 2 0 2 4 6 8

0 to 4
10 to 14
20 to 24
30 to 34
40 to 44
50 to 54
60 to 64
70 to 74
80 +

Age

%
Male

</div>
(40)<div class='page_container' data-page=40>

2024

8 6 4 2 0 2 4 6 8

0 to 4
10 to 14
20 to 24
30 to 34
40 to 44
50 to 54
60 to 64
70 to 74
80 +

Age

%
Male

Female

Source: General Statistical Office

Given the growing gap in life expectancy between men and women, the increase in the number of single elderly
women will be especially pronounced.

Fewer school-aged children

As Viet Nam’s population ages, the percentage of its under-15 population will decline. This provides the
Government with an opportunity to increase its investment in improving the education of younger children and
expand education opportunities at higher levels of education in light of the rapidly increasing number of adolescents
in the population. It is estimated that by 2014 Viet Nam will have four million less children to educate than 20
years earlier (Figure 10).

Source: General Statistical Office

Over 90% of children enrol in primary school, and the majority of children receive some secondary education
(see chapter 8 for further details). The growing number of people of university age in the next five years may
temporarily hamper efforts to provide a greater proportion of adolescents with access to higher education.
However, this trend will be reversed by 2005, and by 2014 this section of the population will significantly decline.
Changing household structures

New population trends and rapidly changing household structures are transforming the traditional Vietnamese
Figure 10: Population by age, %

0
10
20
30
40
50
60
70

1994 2004 2014 2024

</div>
(41)<div class='page_container' data-page=41>

institution of the family. Average household size is decreasing due to declining fertility rates, and increasing
mobility of the young is separating family members and decreasing parental control over the life choices of their
children. Women are waiting longer to marry, and when they do there is a growing trend away from traditional
extended family structures in favour of the modern nuclear family model. As the size of households shrinks, and
the number of children living away from home grows, the probability of parents eventually living by themselves

increases.

5.4. Key issues

As Viet Nam progresses toward lower population growth, fertility and mortality rates, it must focus on the new
problems and opportunities this transition presents, and the additional challenges that remain.

Population policy

There is an immediate need to revisit and revise the 1993 national population policy in light of the emerging
population issues highlighted above, and to further promote the implementation of the International Conference
on Population and Development (ICPD) Programme of Action and the National Plan of Action for the
Advancement of Women (see Annex I for summary of ICPD and Fourth World Conference on Women
commitments and follow-up).

Changing family patterns

While the family remains a strong and important institution in Viet Nam, current demographic, economic and
social forces necessitate that support be provided to assist families in maintaining their cohesiveness and sustaining
their traditions.

Urban planning and management of migration

Urbanisation of Viet Nam’s population has begun to accelerate over the past decade, and will speed up further
as the economy industrialises. The effective management of this process will require careful planning. Systems
of gathering and incorporating migration data into population and development models are needed. In particular,
care must be taken to ensure that migration does not place undue pressure on sensitive environments and
communities, and urban planning needs to be further strengthened to ensure that cities are equipped to cope with
the forecast population influx.

Promote gender equality

Policies need to be reviewed to better address women’s concerns, especially to increase opportunities for
employment and higher levels of education for women. Investment in the education of women is required to
empower them to make reproductive and other life choices.

Planning for an older population

The rapid demographic changes under way in Viet Nam imply a significant increase in the number of elderly in
the coming decades. Mechanisms need to be developed to provide better care for the growing number of elderly
in the future. Assistance will be needed to help families care for their older members and, where necessary, to
provide the elderly with alternative, non-familial sources of support.

5.5. Recommendations for action

Complete the review and development of new population policies, and ensure widespread policy dissemination.
Establish a monitoring system for policy implementation throughout the country.

Strengthen national awareness on population and development issues, through intense involvement of mass
media and Government institutions, targeting in particular elected officials at the national, provincial and
districts levels and key national training institutions.

Continue to strengthen national capacity to integrate population variables into development planning. Gather
and incorporate migration and urbanisation data into population and development strategies.

</div>
(42)<div class='page_container' data-page=42>

urbanisation on urban infrastructure, such as transport, housing and sanitation. Strengthen the capacity to
minimise the negative effects of urbanisation, such as rising poverty and crime levels, drug abuse, sexual
exploitation, overcrowded housing, unemployment and social instability.

Ensure the provision of adequate resources for processing, analysing and disseminating data from the 1999

census. Increase awareness of, and data availability on, key population issues by disseminating 1999 census
findings to all levels of Government, donors and relevant agencies.

</div>
(43)<div class='page_container' data-page=43>

Agriculture
66% (71%)

Services
21% (17%)

Industry
13% (12%)

Chapter 6: Labour

Over the past decade, reforms instituted in pursuit of doi moi have inevitably impacted on the labour field,
reshaping the structure of employment and incomes, and directing attention to the need to address social and
labour issues in tandem with economic reform. In addition, over and above their immediate implications for
patterns and levels of employment, a number of policy changes—such as the shift from collective to
family-based farming, the emphasis on industrialisation as the lynchpin of economic development, the rationalisation and
equitisation of State-owned enterprises (SOEs) and the concomitant encouragement of the private sector and
foreign investment—have revealed the shortcomings of existing labour market institutions in supporting the new
policy direction and in creating the appropriate enabling environment for employment generation. The need to
review and renovate these institutions is now an essential part of the policy agenda.

6.1. The employment profile

Employment in Viet Nam has to be seen within the context of the predominantly family-oriented nature of the
economy. In rural areas, where the vast majority of the labour force is still to be found, paid employees comprise
only one-tenth of the labour force, the rest being family workers (Jamal & Jansen 1998). Even in urban areas,
paid employees comprise under 50% of the labour force. Notwithstanding this high proportion of unpaid labour,

urban unemployment was officially recorded at 7.4% in 1999 and rural unemployment at 2.5% in 1998—both up
significantly from 1996. Underemployment affected 29% of the rural labour force in 1998, up from 24% in 1996.
While both unemployment and underemployment were reported to be slightly lower for women than for men in
1998, the latest MOLISA statistics suggest that this may be changing. Results of a recent study in five cities
indicates that the urban unemployment rate throughout the country is now 7.4% for men, and 8.3% for women.
Viet Nam’s labour force was estimated by MOLISA to be 42.5 million in 1999—with three-quarters in rural
areas—and given current population trends it is expected to increase substantially over the next decade, pointing
to the need for sustained employment creation policies.

Figure 11: Sectoral share of employment, 1998
(1993 figure in brackets)

Source: General Statistical Office 1999

</div>
(44)<div class='page_container' data-page=44>

Figure 12: Job creation by sector, 1993-98
(average 1993-98 growth rate per annum in brackets)

Source: World Bank estimates based on VLSS I & II

6.2. Employment generation

Open unemployment is now a feature of the Vietnamese economy and is set to grow in both urban and rural
areas as the State sector sheds labour and the momentum of growth slows. The fact that a significant proportion
of the nominally “employed” are actually underemployed—with more than a quarter of total employment time
estimated as surplus—is equally disturbing (Jamal & Jensen 1998). So too is the often related persistence of
poverty, particularly in rural areas. Acknowledgement of the link between poverty and underemployment is
implicit in the employment creation components of the Government’s ongoing programmes for poverty alleviation
and hunger eradication.

At present, more than one million jobs would have to be created annually to absorb new entrants into the labour

force, and a further 100,000 jobs are needed each year up to 2010 to clear the current unemployment backlog of
one million workers. Government targets for employment by 2010 include reducing the proportion of the labour
force in rural areas to 60% from the current 80%, and reducing the corresponding proportion employed in
agriculture to 40% (ILO/MOLISA 1999). The employment targets for industry and services require employment
in these sectors to grow at 7-8% a year—a much higher rate than has been achieved in the recent past.
Even with the greater role assigned to non-agricultural employment, the rural sector will still need to create 70%
of the new jobs. Employment and income growth in agriculture, off-farm enterprises and services in rural areas
will also continue to be critical for rapid poverty reduction in the future. Several micro-level programmes exist
for job creation, but the first imperative would be to put in place an enabling environment at the macro level that
embraces all the major sectors of the economy, and accommodates and encourages the growth of the more
labour-intensive sectors by removing the existing biases against them. Such a framework should include: (i) a
clearly defined set of policies and laws to consolidate and support the household-based economy; (ii) increased
Government investment in infrastructure and social services in rural areas; and (iii) increased availability of
micro-credit for farmers, rural non-farm enterprises and small-scale urban units.

A major tool at the Government’s disposal in its efforts to address unemployment is the country’s system of 143
Centres for Employment Services (CES) run by MOLISA and other organisations, including the Viet Nam
General Confederation of Labour (VGCL) and the Viet Nam Women’s Union. These centres, which have their
origin in the renovation policies of the late 1980s, should serve as important institutions for the more efficient
operation of labour markets. They are intended to provide a range of services, including labour market and
occupational information, guidance and counselling services, training and retraining, self-employment promotion
and the matching of job seekers with employers’ specifications. They should also provide an important link
between the country’s vocational training system and the labour market. However, although the idea of such
centres is widely accepted in Viet Nam and they are supported by policy guidelines and underpinned by legislation,
they are not yet operationally strong institutions and serve a relatively small proportion of the unemployed.
Strengthening and developing these centres would make a useful contribution to the country’s employment
programme, with resultant benefits for income generation and poverty alleviation.

Industry
27% (4% pa)

Agriculture
17% (0.4% pa)

</div>
(45)<div class='page_container' data-page=45>

6.3. The emergence of the private sector

The growth of the private sector has been significant, and the sector now comprises an estimated 24,000
registered private enterprises (which include private, limited liability and joint stock companies) and over two
million household enterprises (Lamotte 1999). However, regulatory requirements and problems of access to
capital, technology and markets have limited the potential of the formal private sector (Dao Quang Vinh 1999),
and its overall contribution to employment growth is small in comparison with other Asian countries. Nonetheless,
the private sector’s contribution to Viet Nam’s economy (including agriculture, services and industry) is significant,
at about 60% of GDP and 91% of total employment, as against the State sector’s 40% share of GDP and 9%
share of employment. In terms of sheer numbers and employment contribution, the household sector dominates
the private sector, accounting for 89% of total employment (about 66% in farming and 34% in non-farming
enterprises) and 33% of GDP (Lamotte 1999).

With a viable small-enterprise sector widely regarded as a potential source of productive and sustainable
employment, the promotion of this sector is likely to loom large in the country’s plans to generate employment.
This is reflected in the 1998 National Target Programme on Employment (NTPE), which recognises that 80% of
new employment opportunities must come from the non-State sector and places special emphasis on the
development of small enterprises and self-employment, with the support of the National Fund for Employment
Assistance. While no direct impact assessment of the NTPE is available, 350,000 jobs are reportedly created
annually by this programme (Thompson 1999).

6.4. Working women

Women comprise slightly more than half of the total labour force in Viet Nam, constituting around 51% of all
workers in agriculture, 49% in services and 48% in industry and construction (SRV 1999). Changes in the labour
market consequent upon the adoption of doi moi have significantly influenced women’s access to employment.

On the one hand, retrenchments due to the equitisation or closure of SOEs have affected more women than
men, with estimates of women’s share of redundancies varying from 60% to 75%. More positively, women have
benefited from the new job opportunities being opened up by the development of the industrial zones and the
growth of private-sector enterprises (Research Centre for Women Workers 1998a). It is also estimated that
27% of micro-enterprises or family-run businesses are headed by women (Pham Chi Lan 1996), with a 50/50
sex ratio of family members employed in these firms (Research Centre for Women Workers 1998a). However,
in industrial enterprises with more than ten employees, this ratio drops to 43% of female to 57% of male
workers, and only four in ten technically trained workers are women (Research Centre for Women Workers
1998b).

As in many other developing countries, women’s labour tends to be highly concentrated in industries such as
textiles, garments and leather, and food processing in which, for the most part, women comprise the majority of
unskilled workers. Wage differentials also follow patterns common elsewhere. A 1997/98 survey by the Ministry
of Labour, Invalids and Social Affairs (MOLISA) found that women’s average income amounted to only 88% of
the average income of men of the same skill level (Research Centre for Women Workers 1999a).

Nevertheless, Viet Nam has a strong commitment to gender equality and has ratified the ILO Conventions on
Equal Remuneration 1951 (No. 100) and Discrimination (Employment and Occupation) 1958 (No. 111), both of
which are reflected in the Labour Code promulgated in 1994. Measures to reinforce the practical application of
these legal provisions have been written prominently into Viet Nam’s National Plan of Action for the Advancement
of Women.

6.5. Child labour

</div>
(46)<div class='page_container' data-page=46>

Social Affairs (ILSSA) suggests that the problem may be increasing in the fast-growing informal sector, where
children work as employees or trainees, or as seasonal migrants, doing any available jobs—in small businesses,
serving in small restaurants and polishing shoes, for example (ILSSA 1999). Of greater concern is the possibility
that they could be drawn into prostitution and cross-border trafficking.

Poverty and disparities in economic development between different parts of the country are the main underlying

reasons for parents to trade the long-term interests of their children for families’ short-term needs for survival.
Poor families are obliged to mobilise children to improve family subsistence and to reduce spending on education
and training (ibid), and the high dropout rate of children in primary and lower secondary school could be an
indicator of the existence and extent of child labour in the country. Other push factors include disrupted family
patterns and continued, though slowing, population growth—especially in rural areas. Pull factors include the
fact that children make docile, compliant and cheap workers, who can be easily hired, dismissed and rehired.
Among employers there is only a limited awareness of the problem of child labour, which occurs mostly in areas
beyond the direct reach of labour law. This is compounded by the shortage of labour inspectors and of inspection
facilities to ensure that legislation is enforced. While economic growth with equity will contribute to the gradual
eradication of child labour, action-oriented research, an increase in public awareness and closer co-operation
among relevant Government bodies and non-Governmental organisations (including workers’ and employers’
organisations) are more immediate measures that could contribute significantly to its reduction—particularly in
its more excessive forms.

Accurate analysis of the situation has been difficult, and up-to-date statistical information is urgently needed to
determine the extent of the problem. Existing labour force surveys will need to be adjusted if the child labour
situation is to be adequately captured. Gathering data on child prostitution, pornography and the sale and trafficking
of women and children—which are serious criminal offences in Viet Nam and hidden from view—would require
innovative research methodologies and interventions.

As a signatory to the Convention on the Rights of the Child, Viet Nam has voiced its commitment to addressing
the issue of child labour. The Government is alert to the emergence of a child labour problem in the country, and
wishes to eradicate it. A Decree calling on MOLISA to develop a plan of action to combat child labour was
issued in March 1997, and MOLISA has expressed its intention of following up on this. In view of the importance
of the issue, an action plan has also been developed with Viet Nam’s trade union movement.

6.6. Vocational training

</div>
(47)<div class='page_container' data-page=47>

6.7. Working conditions

According to surveys carried out by MOLISA, working conditions in Viet Nam require major improvements
(MOLISA 1997a, 1999a). The majority of workers are exposed to a range of safety and health hazards including
dust, toxic chemicals, noise, heat, vibration, outdated technology, poor lighting and ergonomics, and biological
hazards. Long working hours are also not uncommon—particularly in domestic private enterprises. The most
hazardous occupations are found in agriculture, construction, mining, fishing, and in the textile industry. The
number of fatal industrial accidents rose from 264 in 1995 to 362 in 1998. According to MOLISA, Ho Chi Minh
City, Quang Ninh, Ha Noi and Dong Nai provinces accounted for a disproportionately large share of these
fatalities and of the 2,914 other work-related injuries recorded that year. Given that current reporting and notification
mechanisms are inadequate, it is probable that these figures are much higher in reality. In 1997, the Ministry of
Health reported close to 630,000 cases of work-related diseases, the most serious of which is silicosis, with
9,000 cases recorded between 1978 and 1997. The Ministry estimated that 260,000 workers in more than 300
enterprises are exposed to high silica dust levels. Serious efforts are being made to address this problem with
donor support.

Enforcement of occupational safety and health legislation is often limited to large SOEs and joint ventures.
Workers in domestic private enterprises and the informal sector are normally outside the compass of safety and
health programmes, making awareness-raising among employers and workers through information and training
activities and the strengthening of safety inspection services essential activities for the future.

6.8. Pay reform

For SOEs, as well as for the public sector at large, the Government faces the looming challenge of pay reform.
In the trade-off between jobs and wages, Viet Nam has clearly favoured the former, with the consequence of
low pay and resultant problems of low motivation, absenteeism, moonlighting and corruption. Although a
complicated allowance system has developed over the years as a means of addressing low pay, this has brought
its own problems. Pay is not related to performance in a transparent way, and is also not always obviously
matched with the qualifications required for the job. In addition, as allowances are not included in the calculation
of pensions, the shift from employment to retirement brings with it a substantial decline in income. The Government
has recognised the urgent need to address these issues and a first step in reforming public-sector pay was
announced at the recent seventh Party Plenum.

6.9. Social safety nets

In Viet Nam, the term “social safety nets” is generally understood to mean a system built around social security,
social protection, poverty alleviation and employment creation measures. Both the Government’s priorities for
the further implementation of doi moi reforms outlined in September 1997 and the National Report for the Ha
Noi Meeting on the 20/20 Initiative (which sets the goal for 20% of both Government and ODA spending to be
allocated to basic social services) identified the upgrading of various components of the system as an important
goal.

</div>
(48)<div class='page_container' data-page=48>

The development or further strengthening of non-contributory schemes is an equally important objective, and
crucial to addressing the needs of especially vulnerable groups that fall outside the scope of the social insurance
system. Viet Nam is already addressing this issue through follow-up activities to achieve the objectives outlined
in its report to the World Summit for Social Development (see Annex I on Viet Nam’s follow-up to the World
Conferences), and has undertaken major structural changes to its system of poverty reduction through the
formulation and establishment of the Viet Nam Bank for the Poor in 1995, and its two national poverty alleviation
programmes. Other key components of the system of social safety nets include a Social Guarantee Fund for
Regular Relief—which addresses the needs of groups incapable of self support and lacking family care—and
the Contingency Fund for Pre-Harvest Starvation and Disaster Relief, which is also of crucial importance in
natural disaster-prone Viet Nam (see Chapter 3, section 5 for further details). In view of the breadth of these
schemes and the potential for gaps in coverage, as well as areas of overlap, the support of the international
community has been sought in assessing their functioning and impact on the intended target groups.

6.10. Institutional capacity building

The transition from a centrally planned to a more market-oriented economy has seen Viet Nam’s private sector
assume a larger role in economic growth and employment creation, and is bringing about fundamental changes
in employment relations. This, in turn, requires a rethinking of the respective roles and functions of the principal
actors in the labour field—namely the State, employers and workers, and their respective organisations—and of
the relationships between them. However, while the Government has adopted a new approach to industrial

relations that encourages greater responsibility on the part of employers and workers in the establishment of
terms and conditions of work and in dispute resolution, a formal system of collective bargaining, supported by
access to conciliation and arbitration, still lies in the future.

Similarly, an institutional framework for tripartite dialogue between the Government (represented by MOLISA)
and the workers’ and employers’ organisations has yet to be developed. In view of the contribution that the
workers’ and employers’ organisations—as important groups in society in terms of wealth creation—could
make to the building of resilient labour market institutions, this is a fruitful area for future action. In addition, as
a tool for effective governance, social dialogue requires social partners that have the capacity and will to engage
in the process responsibly, and the strength and flexibility to adjust to new demands and opportunities (ILO
1999). Strengthening the capacity of the three principal parties—MOLISA, the VGCL and the VCCI—in a
wide spectrum of labour market issues would be a necessary condition for active and constructive engagement,
as would an enabling environment in which the contributions of the social partners was solicited and valued.
6.11. Key issues

Employment generation

Whether Viet Nam can meet the challenge of ensuring enough jobs for a growing labour force will depend on
action on several fronts. In the first instance, it will require the development of sound macroeconomic policies
that promote both high economic growth and sustained demand for workers. Currently, insufficient emphasis is
being placed on providing conducive conditions that will encourage the types of enterprise with the greatest
employment generation potential—namely rural non-farm enterprises, small-scale urban enterprises and
self-employment. Constraints to employment expansion, particularly in the private (industrial) sector, are recognised,
but need to be addressed in a systematic way. Labour market institutions, including the Centres for Employment
Services, are still not sufficiently supportive of the needs of a market economy, and need to be overhauled or
upgraded. They possess insufficient capacity and resources to effectively match job-seekers with appropriate
vacancies, and to link vocational training to labour market needs.

Human resources development

</div>
(49)<div class='page_container' data-page=49>

and greater attention needs to be paid to the longer-term employability of workers, as well as to the provision of
immediately marketable skills. In this context, there is insufficient appreciation at the policy level of the potential
contribution employers and their organisations could make, in view of their knowledge of likely labour market
developments and future skill requirements.

Gender inequality in employment

Women still lack the equal employment and training opportunities that would empower them to attain a greater
level of independence and make an optimum contribution to society. Equal opportunity legislation is insufficiently
enforced, particularly with regard to equal access to training, jobs and opportunities for career development and
to equal pay for work of equal value. In view of the predominance of the household economy, and women’s roles
within it, greater attention to improving women’s access to key resources, micro-entrepreneurship training and
credit programmes would pay dividends.

Child labour

There appears to be some uncertainty concerning the extent of child labour in Viet Nam. While a 1997 Decree
calling for an action plan to address the issue and preliminary national research findings suggest that the problem
is surfacing in the country, further analysis and statistical data are necessary to determine its gravity and to
identify the sectors in which children are working. Such data collection could form part of the above mentioned
action plan, which should be aimed at increasing public and employers’ awareness of the issue. Close
co-operation between the relevant Government bodies and non-Governmental organisations would be necessary to
ensure the successful implementation of the action plan.

Social protection and social safety nets

While the adaptation of the social protection regime to the needs of a market economy has been under way for
some time, this remains an area in which more work needs to be done in the context of the planned Social
Security Act. Training—particularly on social insurance principles and governance—and awareness-raising at
the policy-making level are immediate priorities. Social safety nets—which are crucial to addressing the needs

of especially vulnerable groups that fall outside the scope of the formal system—have already been set up, but
the efficiency with which they function and their ability to reach those most in need of these services need to be
evaluated with a view to identifying and addressing their gaps and weaknesses.

Working conditions and occupational safety and health

In view of the growing importance of the domestic private sector and more particularly of the informal parts of
this sector, it will be necessary to pay more attention to monitoring working conditions and occupational safety
and health within it. While the extension of best practice to this sector is an imperative, and might be achieved in
part through awareness-raising among employers and workers, the concomitant strengthening of the safety
inspection services may be more difficult to achieve, and is an issue that would benefit from the assistance of the
donor community.

Institutional weaknesses

The transition to a more market-oriented economy implies a corresponding transition in the roles of the State and
the social partners in the labour field, and a fundamental shift in their relationships with one another. It also
requires the creation of, and familiarity with, the institutions and legal framework within which industrial relations
take place, and the capacity to use the system to their mutual advantage. The smooth functioning of the labour
market is contingent upon these conditions being met, and the institutional weaknesses of the three actors—
MOLISA, the Viet Nam General Confederation of Labour and the Viet Nam Chamber of Commerce—need to
be identified and addressed if they are to be successful in confronting the challenges of a market-based economy.
Inadequate labour statistics

</div>
(50)<div class='page_container' data-page=50>

• improve communication between users and producers of statistics, thereby promoting the more informed
use of statistics and improved awareness of statistical needs;

• introduce separate surveys (or modules attached to the Labour Force Surveys) to measure the activities of
children and youth, and detailed measurement of the informal sector;

• introduce a programme of regular establishment-based surveys of employment, wages and related labour
statistics (for example vacancies and labour turnover); and

• improve the statistics derived from labour records and the administrative systems from which these records
are drawn. Possible data sources to be considered in this regard include the system of labour inspections, the
social security system and the system of employment service centres.

6.12. Recommendations

Devise a macro-level labour and employment generation strategy encompassing the following:

•

a clearly defined, coherent set of policies and laws to support the household-based economy;

•

increased investment in infrastructure and social services;

•

strengthening of micro-credit and training for farmers, rural non-farm enterprises, small-scale urban
enterprises and the self-employed;

•

promotion of private sector organisations (including associations of micro-entrepreneurs), enabling them
to play a greater role in designing and delivering the requisite support programmes for small enterprise
development;

•

improvement of human resources development strategies which engender both immediately marketable
skills and the knowledge and adaptability to ensure longer-term employability; and

•

promotion of economic sectors with employment generation potential.

Improve the functioning of the labour market by improving information flows needed to match job seekers
with employers, modernising the Centres for Employment Services and improving their service to employers
and job-seekers. Greater co-ordination between the sub-systems of centres (run by different Government
and non-Governmental bodies) would facilitate the achievement of the objectives in the National Target
Programme for Employment Generation.

Improve and expand the vocational training system. Employers’ and workers’ organisations should be involved
in the identification of national and regional training needs to ensure coherence between employment and
training policies and labour market needs.

Upgrade occupational health and safety standards, especially in the domestic private sector, through the
extension of best practice and awareness-raising among employers and workers, and by strengthening the
safety inspection services. Greater co-ordination of the three existing inspectorates (safety, health and
general inspection) should also be a priority.

Extend social protection for workers in the formal and informal sectors.
Improve the effectiveness of the existing social safety nets by:

•

better integration of the constituent programmes;

•

improved monitoring and evaluation;

•

strengthening of early warning systems to identify areas that require special targeting;

•

greater programme flexibility; and

•

systematic guidelines on the identification of target groups.

Improve the position of working women by enforcing equal opportunity legislation, improving women’s
access to and control over the allocation of key resources, and targeting them for micro-entrepreneurship
training and credit programmes. Create associations of women entrepreneurs to encourage mutual self-help
and facilitate advocacy to promote gender-sensitised policies and programmes.

</div>
(51)<div class='page_container' data-page=51>

Strengthen the institutional capacity of MOLISA, the Viet Nam General Confederation of Labour, and the
Viet Nam Chamber of Commerce, to enable these bodies to meet the challenges and opportunities of a
market-based economy. For MOLISA this should include strengthening its labour administration functions
and its capacity to perform its roles in advisory services, inspection, enforcement and conciliation, and

dispute settlement. Employers’ and workers’ organisations must further develop their capacity to contribute
to economic policy formulation, widen the range of services provided to their membership and develop their
capacity in the area of collective bargaining and social dialogue.

</div>
(52)<div class='page_container' data-page=52>

Chapter 7: Health and Nutrition

Viet Nam’s vital health indicators are good compared with countries at a comparable level of income. Life
expectancy, for instance, is 11 years longer for Vietnamese people than would be expected given the country’s
level of economic development (Dahlgren 1999).

However, a number of serious health problems persist in Viet Nam, and some health indicators are still poor.
Malnutrition is extremely high—particularly for children, 39% of whom are malnourished (NIN & MOH 1998a).
Viet Nam’s infant and maternal mortality rates, though comparable with other countries in the region, are also
still high. The former is around 37/1,000 live births and the latter is officially 100/100,000 live births, although WHO
estimates a significantly higher maternal mortality rate of 160/100,000 live births (UNICEF 1999). Viet Nam’s abortion
rate is also one of the highest in the world; in 1998 one in three pregnancies ended in abortion (MOH 1999).
Furthermore, despite the Government’s emphasis on equality and a nominally impressive coverage of health
care services, considerable disparities in health status still exist between different geographical regions. The
Central Highlands and the Northern Mountainous region have an infant mortality rate of 56/1,000 and the latter
region has a maternal mortality rate four times higher than in the lowlands. In general, health indicators in the
Mekong River Delta, the Central Highlands and the Northern Mountainous region are considerably worse than
in the rest of the country. These regions have large ethnic minority populations and are also characterised by a
significantly lower level of economic development, less formal education, and poorer nutrition than the other
regions, with some areas experiencing food shortages for up to four months a year.

7.1. Major causes of morbidity and mortality

Viet Nam is currently facing a double disease burden. While infectious, vector-borne and communicable diseases
still account for a large (though falling) percentage of morbidity and mortality—especially among children—the
incidence of non-communicable diseases is also rising quickly. Regarding the former, of particular concern are a

number of new and re-emerging diseases such as tuberculosis, HIV/AIDS, dengue fever and Japanese encephalitis.
Malaria remains a serious public health problem in mountainous and ethnic minority areas, exacerbated by
increased drug and insecticide resistance.

Source: Ministry of Health 1998a

As Viet Nam continues its efforts to control infectious diseases, non-communicable diseases—such as cancer
and cardiovascular disease—are steadily increasing, and such diseases have now become the leading cause of
morbidity and mortality in Viet Nam. Largely as a result of the increase in traffic density and poor respect for the
traffic code, accidents are also set to overtake infectious diseases as the second most common cause of mortality—
accounting for 21.6% of total mortality in 1997, up from just 2.2% in 1976 (Figure 13).

Child health

Peri-natal conditions, such as birth asphyxia, birth trauma, neo-natal tetanus, pneumonia and congenital diseases
Figure 13: Causes of mortality, 1976-97

0%
10%
20%
30%
40%
50%
60%

1976 1986 1997

Accidents

</div>
(53)<div class='page_container' data-page=53>

account for the largest share of under-five mortality, closely followed by acute respiratory infections. Malaria is

still an important cause of child morbidity and mortality in mountainous and remote areas.

Although disease and poor hygiene are important contributing factors to child mortality, malnutrition remains a
major underlying cause. Notwithstanding a gradual improvement over the past ten years, all nutrition indicators
show that malnutrition is still a serious health concern—despite Viet Nam being a major rice exporter. The main
causes of malnutrition are, above all, poor feeding practices and, in remote areas, household food insecurity and
seasonal hunger, with poverty as a main underlying cause. The implications of low calorie, protein and
micro-nutrient intake are severe. In 1998 39% of children under five were underweight and 34% were stunted (NIN
& MOH 1998a). The figure for stunting as a result of malnutrition rises to as high as 47% of children in rural
areas—nearly three times the percentage in Viet Nam’s cities (NIN & MOH 1998a). Micro-nutrient deficiencies
(vitamin A, iron and iodine) contribute to poor child nutrition and high levels of childhood anaemia, and also have
a negative impact on physical growth as well as cognitive development.

Adolescent health

Adolescents are at high risk of unwanted pregnancy, maternal morbidity and mortality, sexually transmitted
infections (STIs) including HIV/AIDS, accidents and other health-related problems, such as illicit drug and
alcohol abuse. Young people have very limited access to information and services on sexual and reproductive
health, including family planning. Nationally, about 15% of all births are by women aged less than 19 (MOH
1998b) and it is estimated that unmarried women (most of whom are adolescents) account for 30% of total
abortions (NCPFP 1997). By August 1999 around 50% of all new HIV infections were occurring among those
under 30 (up from 45% at end-1998), and almost 8% of reported cases involved those under 20 (MOH).
Drug abuse is another growing health concern, particularly among young adults. The total number of registered
drug abusers increased by 28% between 1998 and 1999, with 76,000 registered in the former year and 97,000 in
the latter. The vast majority (70%) of those registered as drug addicts in 1999 are under 30, including 4,000
students and school children.

7.2. Reproductive health

Viet Nam has reasonable coverage of family planning services. However, availability and accessibility of maternal

health care services ranges from as low as 20% in remote areas to more than 90% in urban areas (MOH
1998b). Other reproductive health services are virtually non-existent at the local level, the overall utilisation of
reproductive health services is low and the service quality is well below optimum. The fact that MOH’s current
health strategy does not contain any reference to reproductive health, nor any reproductive health-related indicators
in its list of basic health indicators, is a matter of concern.

Contraceptive use in Viet Nam is nominally high at 75%, and has been on the rise for the last ten years.
However, promotion of contraceptive use is oriented primarily towards married women, and around 20% of
those using family planning methods still rely on traditional and less reliable methods (NCFPF 1997). Providers
have a preference for intra-uterine devices (IUDs) and there is still limited choice of other methods. Despite the
apparently extensive use of contraceptives, as many as one-third of pregnancies ended in abortion in 1998 (MOH
1999).

As mentioned earlier, estimates of Viet Nam’s maternal mortality rate vary considerably, up to a high 160/
100,000 live births. The major underlying causes of maternal mortality are related to poor nutrition, infection and
abortion, with the principal immediate causes of maternal death highlighted in Figure 14. High maternal mortality
during birth also reflects poor maternal health care.

</div>
(54)<div class='page_container' data-page=54>

Figure 14: Main causes of maternal mortality, 1997

13%

13%
14%

14%

46%

Eclampsia

Rupture of uterus
Haemorrhage
Sepsis
Others

7.3. Environmental health

Official surveys suggest that only 47% of the urban population and 42% of the rural population have access to
safe water supply, and only 43% and 15% respectively to means of safe excreta disposal (TBMC 1996). A
number of water and sanitation campaigns have been launched by the Government over the past few decades,
leading to the construction of millions of latrines, bathrooms and shallow wells. Rural water supply projects
under the Ministry of Agriculture and Rural Development have also led to the construction of nearly 190,000
water supply facilities serving about 24 million rural inhabitants. In many cases, however, although water and
sanitation facilities may exist they are not necessarily used hygienically. Continued high morbidity from
water-borne and diarrhoeal diseases underlines the urgent need to improve both access to safe drinking water and
sanitation facilities, and to educate people on hygienic use of these facilities.

Food safety is also a problem. Food safety regulation has been developed but is not yet widely implemented.
Health inspection services are available but require strengthening. Of particular concern is food sold by street
vendors. Recent developments in environmental health have focused on social mobilisation and the development
of integrated programmes in line with the concepts of “Healthy Cities” and “Healthy Markets”.

7.4. Future trends

There have been significant lifestyle changes in Viet Nam over the last decade, including a greater reliance on
motor vehicles, increased use of tobacco, alcohol and illicit drugs, and a growing number of imported foods
leading to a rise in dietary fat and salt intake. The resultant increase in unhealthy practices and conditions such
as alcohol and drug abuse, obesity, hypertension, lack of exercise, dietary changes and smoking—WHO estimates
that 73% of men and 4% of women smoke—together with the growth of environmental health hazards, such as
pollution, have led to a significant rise in non-communicable diseases such as cardiovascular disease, chronic

pulmonary disease, cancer and diabetes. This trend is set to continue.

Predicted demographic changes will also have an impact on health status and the demand for health services in
the future. The population over 40 years old is predicted to grow by 27.6% by 2009, and the under-five population
will also remain high for some time. This both suggests that non-communicable diseases will place an increasing
burden on the health system, and that child malnutrition, and morbidity and mortality resulting from infectious
diseases will continue to be high.

The growth of the sex industry and intravenous drug use has resulted in a large increase in HIV infections. As
mentioned, the number of officially reported cases by mid-1999 was 14,800 (UNAIDS 1999), and HIV infections
have been reported in all 61 provinces. However, reported figures significantly understate the scale of the
problem, and by end-2000 the Vietnamese authorities estimate that 160,000 people will be infected with HIV.
Currently 65% of HIV infections reported are associated with intravenous drug use, but heterosexual transmission
among young people is increasing. There is no data on the incidence of hepatitis B or C among drug users, but

</div>
(55)<div class='page_container' data-page=55>

the incidence of hepatitis B at least is likely to be high. There is a reserved attitude toward harm-reduction
activities and a suppressive approach in response to the increase in drug abuse and prostitution. This approach
threatens to drive at-risk groups to set up underground operations, thereby increasing the risk of continued
unsafe practices which transmit HIV, STIs and hepatitis.

Mental health is another growing concern in Viet Nam. Currently most mental health services are
hospital-based, and focused on treatment of the severely ill. With the recent influx of amphetamine-type substances into
Viet Nam, a substantial additional burden on mental health services of treating the psychiatric/psychological
effect of abuse of these drugs is to be expected. However, hospital-based services are inappropriate to deal with
many mental illnesses, such as depression leading to suicide. There is a need to expand the number and quality
of community-based mental health centres offering psychosocial rehabilitation services.

7.5. Health policy

Over the past two decades a vast volume of literature points to weak health policy development. The Strategic

Orientation for People’s Health Care and Protection (1996-2000) and Viet Nam’s National Drug Policy, which
is the primary policy document for health sector development, does not provide a clear description of purpose
nor clear measures to address issues of inequity, quality, funding and other issues identified as problems.
Consequently, efforts to address these issues have not been particularly effective.

Existing health information systems also need considerable improvement in order to provide the necessary range
and quality of data to develop appropriate health strategies and policies. Data that are already available need to
be fed much more systematically into health plans at the central and local levels. However, the reliability of even
routine data continues to be questionable. For instance, the 1998 Extended Programme on Immunisation (EPI)
survey highlighted a significant discrepancy between reported and surveyed data on EPI coverage. This was
particularly the case for disadvantaged areas where the percentage of fully immunised children was officially
reported at 95%, but a survey of one province revealed only 57% coverage (MOH 1998c). As well as highlighting
problems with official data collection, such discrepancies suggest that in disadvantaged provinces at least the
coverage of preventive health programmes is not as high as reported.

The Government is currently undertaking a comprehensive health sector review in collaboration with the donor
community. This review provides an opportunity for intentions to be translated into clear policies through a
review of the national strategic orientation and the formulation of an investment plan for the sector.

7.6. National health programmes

In order to address key health problems, Viet Nam has developed a number of vertical health programmes and
projects, often with donor funding. These programmes have structures running from the central to the district
level, are often led by a strong National Institute and receive substantial financial support. The programmes and
projects cover the following health issues:

HIV/AIDS Malaria

Goitre Leprosy

Tuberculosis Expanded Programme on Immunisation (EPI)
Prevention and Control of Malnutrition Child Malnutrition Control

Dengue fever Mental health

Nutrition Micro-nutrient control (Vit.A/iron/iodine deficiency) Acute
Respiratory Infection (ARI) Control of Diarrhoeal Diseases (CDD)

</div>
(56)<div class='page_container' data-page=56>

Some vertical programmes have been successful in reducing morbidity and mortality from disease. For example,
between 1995 and 1997, morbidity resulting from malaria decreased from 900 to 580 per 100,000 people, and
mortality from 0.5 to 0.2 per 100,000 people (MOH 1998a).

In addition, the coverage of some child preventive health programmes is relatively high. Almost all children
under one year are reported to be fully immunised against the six EPI target diseases (poliomyelitis, tuberculosis,
tetanus, measles, diphtheria and pertussis), and have received at least two doses of Vitamin A before 36 months
(MOH 1998c). By 1998 the Child Malnutrition Control programme was being implemented in 30% of communes.
The performance of these preventive programmes has resulted in a decrease in the malnutrition rate and the
incidence of EPI diseases, such as poliomyelitis (zero cases in 1998) and measles (down from 82,231 cases in
1985 to 11,690 cases in 1998) (ibid). However, the coverage of many other programmes is low. It is estimated,
for instance, that although acute respiratory infection (ARI) is the leading single cause of under-five mortality in
Viet Nam, only 19% of suspected ARI cases reach the health system at commune level (MOH 1998d) (Table 9).
Table 9: Performance of child health services

Sources: a MOH 1998c; b NIN & MOH 1998a; c GSO 1997; d MOH 1998d

Although some of the strong, vertical structures developed to manage national health programmes have produced
results, a number of problems associated with these vertical programmes include:

• High cost. The national malaria programme, for example, accounts for 2% of the health budget.

• Weak co-ordination between different departments in charge of these programmes leads to frequent
duplication and overlapping of activities, particularly in training, supervision and monitoring. And although
many programmes have related components, there is minimal integration between programmes when it
comes to implementation. There is even direct competition between some of the programmes, to the clear
detriment of the intended beneficiaries.

• Centralisation. Vertical national programmes are centrally managed, with little involvement of local levels
in decision-making. Communities are not adequately involved in planning, implementation, monitoring and
evaluation of basic health services. The non-involvement of local levels in planning also raises concerns
about the cost-effectiveness of the programmes.

• Low utilisation. Despite the potentially wide coverage of vertically implemented programmes, the utilisation,
and consequently the coverage, of some programmes is very low.

• Lack of flexibility. Vertical programmes can be inflexible and unresponsive to emerging needs. For example,
the incidence of dengue fever is rising, with morbidity increasing from 56/100,000 in 1990 to 301/100,000 in
1998 (MOH 1999), but the national programme to combat dengue fever is not developing in proportion to the
rising impact of dengue fever on health.

• Unsustainable funding sources. Many vertical health programmes are over-dependent on ODA resources,
which raises questions about their financial sustainability.

To improve the efficiency and effectiveness of national health programmes, there is a clear need for a more
integrated approach to health programming as well as decentralisation of programme development and
management. One potentially integrated programme—the Integrated Management of Child Illness—already
exists, but a concerted effort is required to implement a transition from vertical health programmes to programmes
which are integrated into the mainstream health service. A number of integrated approaches for providing

Programme Indicator Score, %

</div>
(57)<div class='page_container' data-page=57>

quality care at affordable cost, and with active community participation, are currently being piloted at the district
and commune level. Such innovative interventions should be carefully evaluated and, if considered useful, be
expanded as national policy.

7.7. Structure of the health care system

Viet Nam has a well-developed public sector health infrastructure, and private sector services have grown
rapidly in recent years.

Public-sector health services

At the central level, the Ministry of Health (MOH) formulates health policies and issues instructions on technical
questions of implementation. It directly manages a number of specialised institutes that provide tertiary and
referral services in various specialities, as well as national medical, pharmaceutical and public health schools.
The MOH is also responsible for the management of all central hospitals, national drug and medical equipment
producers.

The provincial-level service is accountable to the MOH and is managed by a health service bureau responsible
for preventive medicine centres, provincial-level medical training schools, local production of medical supplies
and provincial hospitals. Each of the 61 provincial health service bureaus covers an average population of
around 1.2 million, and includes between 8 and 12 districts.

The district-level service manages primary and first-level referral curative services, preventive services including
preventive medicine brigades, district hospitals and inter-communal polyclinics. The role of polyclinics is to
provide supervision, technical and referral services and training to the commune health stations. Each district
covers a population of around 100,000-150,000 and includes between 10 and 20 communes.

The commune-level service consists ofcommune health centres. Each centre covers an average population of
6,000 and is in charge of providing primary health care services, including maternal health care.

Traditional medicine is part of the State system managed by the MOH, and is accepted as an alternative means
of treatment. Official statistics put the number of traditional medical practitioners at 2,967, although this figure is
likely to be underestimated as many practitioners are not officially registered.

Private-sector health services

The number of private health providers has almost doubled since 1996. This growth is less visible in terms of
health clinics than in the number of private pharmacies, which grew from an estimated 2,000 in 1990 to around
7,500 by end-1996.

The development of private health services has taken place in the absence of clear policy guidelines or regulation.
There are no referral guidelines for patients from the private to public sector, nor any integration of the private
sector into the national health service. Private providers have also yet to establish contracts to access funding
through health insurance.

Private health services generally make use of public-sector health facilities, and while private practices contribute
considerably to the private income of health professionals, the use of public facilities for this purpose offers no
financial return for the public health system. The rapid, unregulated expansion of the private sector has also
resulted in reports of a compromise of the medical ethics of some practitioners.

7.8. Health care access and utilisation

</div>
(58)<div class='page_container' data-page=58>

under-represented in health insurance schemes, have more difficulties in accessing public health services, access
poorer quality health services and find these services less acceptable to their needs and values than richer
groups. Over the past five years the rich have captured a disproportionately high share of Government subsidies
to health care in hospitals.

There is also evidence of general under-utilisation of community health services. Although official statistics state
that in 1998 all but 545 communes (5% of the total) had community health centres (MOH 1999), in 12 districts
implementing community-based monitoring, the utilisation of curative services in 1998 was only 40% (MOH &

UNICEF 1999). Availability and accessibility of maternal health care services is as low as 20% in some remote
areas. Nation-wide only 56% of pregnant women registered for prenatal care in 1997, and antenatal check-ups
averaged just 1.6 per pregnancy (MOH 1998b). Even where health care services are available, those with the
most health needs—ethnic minorities, those living in remote areas and the poor—either lack access to or are
making insufficient use of them.

There remains insufficient investment in, access to and quality of primary health care services. These services
are important for health promotion, early detection of health problems, early treatment, community awareness of
health issues, environmental health and safety, and community participation in health services.

7.9. Quality of health care services

Literature on the quality of health services focuses on the need to modernise equipment, overcrowding in hospitals,
poor staffing levels and medical ethics, and insufficient or inadequate hospitals and equipment. There is clearly
a need for modernising the health infrastructure, but it needs to be carefully planned to ensure the fair and
rational geographical distribution of facilities. A system of technical assessment needs to be developed to prevent
the costly proliferation of high-tech and inappropriate equipment.

The quality of health service delivery also needs to be reviewed. There is little data available, but in terms of
maternal health care services, for example, findings from 12 districts implementing community-based safe
motherhood activities show that only 23% of women had a “safe delivery”, including adequate ante-natal care,
assisted delivery and post-natal care (MOH & UNICEF 1999). Moreover, the fact that infection continues to be
a major cause of maternal mortality raises serious concerns regarding the technical skills and quality of delivery
care being offered by health personnel.

7.10. Essential drugs

Essential drugs are available through both the public and private sector. Viet Nam has laid the foundation for its
pharmaceutical sector by establishing pharmaceutical factories in almost every province. Most of the drugs Viet
Nam requires, and 58% of all EPI vaccines, are locally produced.

A Revolving Drug Fund programme has been implemented in more than 40% of communes. Almost 90% of
communes implementing the programme are able to recover the cost of drugs through user fees (Narula 1997).
However, there is mixed evidence on the extent to which these revolving funds have improved drug availability.
In addition, the availability of trained staff for drug management at the commune level is very low; at present,
only 7.3% of all pharmacists are stationed in communes (ibid).

Self-medication is very common in Viet Nam, although knowledge of safe drug use is limited. There is a tendency
for poor people to self-treat with drugs, rather than visit a health worker. Self-medication is frequently associated
with inappropriate drug use, and data on antibiotic abuse reveals a high rate of antibiotic resistance.

7.11. Human resources

</div>
(59)<div class='page_container' data-page=59>

reference to the overall training system. There are no national standards for professional practice, and no
system to assure the public of the scope and quality of service they can expect from health professionals.
The ratio of doctors to nurses is 1:2—one of the highest in the region—and suggests an inappropriate use of the
health workforce. A well-trained nurse is estimated to be able to effectively provide for up to 80% of the health
needs presented in health facilities, and at less cost. Consideration needs to be given to the cost effectiveness of
maintaining this ratio of doctors to nurses: strengthening the nursing workforce to meet future needs may be an
effective and efficient option for Viet Nam. Another matter for concern is the decline in the number of doctors,
midwives and nurses at the commune level since doi moi reforms were introduced, resulting in a shortfall of
health workers—particularly preventive health workers—in rural areas.

The health system continues to be managed centrally, even though Government policy is to decentralise
management. Most managers are medical doctors, and few have had adequate training in general management.
Decentralisation needs to be linked with improved management at all levels.

7.12. Health care finance

Financing for the health sector comes from central and local revenues, private payment for medicine and services,

ODA and compulsory contributions by employers and employees to mandatory health insurance.

Public spending on health has increased in real terms since 1991 in terms of per capita spending, share of total
Government expenditure, and as a percentage of GDP. In 1997 the health budget was 5.6% of the total budget,
and represented 1.2% of GDP. However, with a growing population and the increased demand for health
services that has accompanied economic growth, there is scope for an increase in public funding. To reach the
World Bank’s recommendation for low-income countries for financing an essential package of health services,
a further VND660 billion is required annually.

Although the Government is the major provider of health services, it is not the dominant funder (Figure 15). The
bulk of local government health expenditure (70%) is spent on hospital services, and funding from health insurance
and user charges is also spent on curative services. This means that although the share of central Government
expenditure on curative care has declined sharply in recent years, from more than 80% in 1993 to 33% in 1997,
the ratio of public spending on curative interventions to that on preventive activities is still high, at 5.2:1 in 1997.
This is much higher than the ratio of 2:1 recommended by the World Bank. An ageing population and the
increase in non-communicable diseases and lifestyle-related health issues also suggest that there is a need to
shift some public expenditure away from curative (hospital) care towards preventive and primary health care.

Figure 15: Funding sources for health expenditure

Funding sources for Funding sources for Government’s
health services, 1997 share of health expenditure, 1997

Source: Deolalikar 1999

Public (tax-based) funding tends to be allocated to better-off income groups and provinces. The current system
of allocating funds to districts (according to bed numbers) further perpetuates the historical inequity between

19%
80%

Donors
Government
Households

28%

55%
7%

10%

</div>
(60)<div class='page_container' data-page=60>

districts in terms of health care facilities. A formula to ensure a fair allocation of Government funds, which takes
into account population and health needs, has yet to be developed.

To maintain equitable access to health care, but faced with the problem of erosion of public funds for health, the
Government has introduced mandatory and voluntary insurance schemes. In 1992 the Council of Ministers approved
a Decree on Health Insurance, which required all Government administrative workers and industrial, salaried workers
to take part in compulsory health insurance programmes. Since then, efforts have been made to gradually expand
enrolment. By 1998 the number of insured persons reached almost 10 million (MOH 1999). In addition, other groups
are covered by voluntary insurance programmes. However, the schemes are facing a number of challenges, including
difficulties in expanding coverage, cost escalation and lack of redistribution of revenues to poorer provinces.
User charges were institutionalised in the public sector in 1989, and implementation has been variable across the
country. In addition there are various informal health care payments made by the population, the scale of which
is unknown. Out-of-pocket expenditures in the private sector go primarily to drugs.

The vast majority of ODA to basic social services (71%) goes to health care (SRV 1998). ODA funding to the
health sector is focusing increasingly on developing policy and managerial capacities. Poor co-ordination of aid

remains a major concern.

7.13. Key issues
Health sector funding

Overall public finance levels for health are low in Viet Nam by international standards, resulting in an underfunded
health care system. In addition, the distribution of total public funds for health is becoming increasingly uneven,
with large disparities between provinces. Private spending on health, which at 80% of total spending is very
important, is mainly concentrated on pharmaceuticals, and current spending patterns are not very efficient due to
poor prescribing practices, overuse of drugs, etc. Health insurance could play an important role in raising revenue
in the future, but is currently beset by major problems.

Curative services versus primary health care

Health data suggest that non-communicable diseases, infectious diseases among children and lifestyle health
problems are Viet Nam’s health issues of the future. Primary health care and preventive measures are the key
to addressing these issues, but there remains an over-concentration of resources allocated to curative services.
There is also a need to support greater investment in primary health care with an expansion of health education
to teach healthy practices and behaviours.

Policy development, regulation and management

Capacity for strategic thinking, planning and policy-making all need to be strengthened, particularly at the central
level. There are several areas in which there is a need for clear, effective policy and regulation. The role of the
private sector in the national health system is still not clear. Operating rules of private practitioners, and the
supervision and monitoring of quality of care provided by this sector, need to be clarified. The role of the MOH
and the private sector in relation to the development of the pharmaceutical and medical equipment industry
needs to be defined. There is a lack of regulation of both the public and private sectors to ensure safety to health
service users and protection to providers, as well as a rational distribution of resources. There is also a need to
strengthen the quality and efficiency of health services through improved management at all levels.

Health programmes

The frequently low efficiency and effectiveness of vertically integrated programmes suggest that a more integrated
approach may be more appropriate to tackle a number of health issues. There is a need to decentralise the design and
implementation of health programmes and integrate them into the mainstream health system, along with a number of
issues—such as maternal health—which are not currently addressed by national health programmes.

Health inequalities

</div>
(61)<div class='page_container' data-page=61>

introduction of market-oriented reforms in the health sector has been increased inequalities between rich and
poor in access to public health care. Gender inequality in treatment also means that women tend to receive poor
care and support in their reproductive and child care role. Barriers to utilisation include geography, language and
culture (especially for ethnic minorities), attitudes and gender of health professionals, cumbersome and bureaucratic
procedures, poor equipment and lack of skilled staff in some health facilities, long waiting times, and high user
charges. These factors are linked to an increased use of self-treatment and self-medication among these
disadvantaged groups. In addition to improving equality of access to health care services, inequities in resource
allocation and quality of service also need to be addressed.

Specific health issues

The persistence of child malnutrition, the high abortion rate and infant and maternal mortality rates, low access
to safe water and sanitation, the rapid increase in HIV infection, growing illicit drug and tobacco use, the rapid
increase in accident-related deaths, and the persistence of some diseases such as malaria, tuberculosis and
dengue fever, all require priority attention.

7.14. Recommendations for action
Policy directives for institutional reforms

Strengthen the institutional capacities of MOH and agencies that have influence over health, with particular

emphasis on building planning and policymaking capacity at all levels, to support the effective leadership and
clear direction of the health sector reform process.

Develop policies, laws, guidelines and regulations to govern private sector expansion.
Health sector funding

Allocate additional public resources to health, and direct them to areas of greatest need.

Identify mechanisms to widen the coverage of Vietnamese health insurance to poorer groups and improve
its performance.

Influence private spending on health through public information, training of health personnel—including
pharmacists—and setting clear rules and regulations.

Health information system

Revisit the health information system and adapt it to changing needs. This will involve, inter alia, obtaining
epidemiological knowledge to be applied to preventive and curative activities, to the development of health
strategies and to health education of the population

Services delivery

Analyse reasons for the low utilisation of health services, in particular community health services, and
develop measures to improve quality of and access to services (including redistribution of staff and facilities,
improvement of technical skills and appropriate equipment, pharmaceuticals and contraceptives).

Invest in primary health care services and preventive measures, and expand health education to teach
healthy practices and behaviours.

Strengthen the village health worker network in order to increase economic and geographic access to, and

utilisation of, quality basic health care in remote and disadvantaged areas.

Integrate the vertical programmes into the mainstream health system and give priority in doing so to the most
pressing current and emerging health problems, in particular malnutrition, reproductive and maternal health,
inadequate access to water and sanitation, HIV/AIDS, tobacco use, accidents, tuberculosis and dengue fever.
Human resources and training

Develop a human resources development plan for the health sector, with emphasis on increasing the number
of nurses and health workers in remote and rural areas.

</div>
(62)<div class='page_container' data-page=62>

Chapter 8: Basic education

Basic education is defined as early child care, pre-primary and primary education for all children up to 14 years
old, as well as adult literacy education for youth and adults over 15 years of age.

The high level of participation in primary school and Viet Nam’s impressive overall literacy rate of 92% (MOET
1999b) are supported by a widespread network of day-care centres (DCCs) and kindergartens, which cater for
the physical, psycho-social and cognitive development of young children.

The first DCCs and kindergartens in Viet Nam were established in 1956. Over the years State subsidies of early
childhood care (ECC) gave rise to a nation-wide network of DCCs and kindergartens. However, Viet Nam’s
post-1986 economic and agricultural reforms have had a dramatic effect on ECC services—particularly in rural
areas, and on the number and utilisation of DCCs. The number of children aged between three months to three
years enrolled in DCCs has dropped from 1.85 million in 1986-87, or 27% of the total, to just 444,000, or 10%, in
1997-98. This decline can be explained in part by the large reduction in Government subsidies for the operation
and maintenance of DCCs. Rural and poor communities have been particularly hard hit since it is generally more
difficult for them to shoulder the financial burden of sending children to DCCs. As a result, a disproportionate
share of rural DCCs have had to close down over the past decade or so.

The overall trend for kindergartens during this period has been quite different. After an initial decline in the

number of kindergarten classes and enrolment during the late 1980s and early 1990s, enrolment in kindergarten
centres has seen a marked upswing, especially since 1995. In 1991-92 only about 1.5 million children attended
56,400 classes in 6,870 centres, but by 1997-98 2.25 million children were attending more than 82,000 classes in
8,200 centres.

It should be noted that the increase in kindergarten classes and students has occurred primarily in urban and
semi-urban areas. In some rural areas the number of kindergarten classes have also increased but services are
only available for five- to six-year-olds, while in remote and mountainous areas families often have no access to
kindergarten education for their children at all. In addition, while the State remains the primary source of funding
for DCCs and kindergartens in urban areas, rural communities and parents—who are generally poorer than their
urban counterparts—are required to shoulder most of the financial burden for ECC programmes in their locality.
Primary education consists of five years of schooling for children who are generally between six and 14 years of
age. Currently, the participation rates for primary-school-age children are high in comparison with many other
countries in the region. In 1998/99 about 10.3 million children were in primary school, 47% of whom are girls,
and 16% ethnic minority children. By 1997/98 the net enrolment rate had reached nearly 97%—up from 89% in
1992/93—and the primary school completion rate was reported to be 66% (ibid). However, about 1.2 million
children of primary school age (6-14) have never enrolled in school at all, and more than 600,000 primary school
children dropped out during the 1996-97 school year (MOET 1998d). The transition rate from primary to secondary
school is relatively high and lower secondary school net enrolment rates have doubled in the past five years to
reach 61% for girls and 62% for boys (GSO 1999). The number of children enrolled in lower secondary school
dipped to a low of 2.7 million in 1990, but has now climbed to 5 million. However, regional disparities in secondary
school enrolment are very significant, with the Northern Mountainous Region, the Central Highlands and the
Mekong Delta Region lagging far behind. Again, remote rural populations—particularly ethnic minorities—are
especially disadvantaged with regard to access to secondary school facilities, availability of teaching-learning
materials and the recruitment of trained teachers. Gender disparities, particularly among ethnic minorities, are
also more pronounced at the secondary school level.

</div>
(63)<div class='page_container' data-page=63>

nation-wide. However, in a few provinces with large ethnic minority populations, illiterate women constitute as much as
60% of the total population of illiterate youth and adults in the 15-35 year-old age group (MOET 1999b).
8.1. National policies

The Government has long prioritised ECC, as evident from a 1979 national policy document that states that
“care and education given to children from birth to six years of age is of prime importance” (UNICEF 1994a).
A new Education Law came into effect in January 1999 that made early childhood education part of the formal
national system of education for the first time. It stipulates the basic required content of early childhood education
and lists different types of recognised ECC institutions. While the State encourages the establishment of private
ECC institutions, it also acknowledges its responsibility to support disadvantaged groups in gaining access to
ECC services. It is clear that current Government policies prioritise enrolment of children in kindergartens over
enrolment in DCCs, and this trend will almost certainly continue well into the next decade.

In 1991 the National Assembly passed a law on Universal Primary Education that made primary education
compulsory for primary-school-age children. The law prioritised support and development of primary education
in disadvantaged regions, including ethnic minority areas. The 1999 Education Law reiterated that primary
education is compulsory for all children between six and 14 years of age. Furthermore, it stipulates that primary
schooling must ensure that a child develops basic listening, reading, speaking, writing and calculating skills,
acquires a habit of doing physical exercises, practises good sanitation, and gains knowledge of natural social
science and humankind.

Following the World Conference on Education for All in Jomtien, Thailand in 1990, Viet Nam developed goals
for basic education that were outlined in a National Plan of Action in 1991. The targets for 2000 and progress
towards reaching these targets by the 1997-98 school year are set out below (Table 10).

Table 10: Basic education achievements and targets

Source: MOET 1999b

Viet Nam is on track to achieve most of its ECC objectives for 2000, although a sizeable gap between the target
for primary school completion and the 1997-98 rate still remains (see Annex I for a summary of Viet Nam’s
commitments and follow-up to the World Conference on Education for All).

8.2. Organisation and financing

The Ministry for Education and Training (MOET) is responsible for policy-making and the supervision of general
education programmes including ECC, primary and secondary education. At the central level, the Department
of Early Childhood Education assumes responsibility for implementing all ECC activities for children up to age
six. The Institute of Early Childhood Studies develops ECC curricula and teaching aids.

At the provincial and district levels, the Deputy Director of Educational Services (linked to MOET) is responsible
for all activities relating to ECC education in DCCs and kindergartens. All provinces have at least one
pre-school teacher education programme, which offers training to ECC providers.

At the commune level, the day-to-day management of the ECC programme falls under the leadership of the
chairman of the local People’s Committee. MOET, the Viet Nam Women’s Union, the Farmer’s Union and the

Category 1997-98 school year Target for 2000

3 months–3 year olds enrolled in DCCs 8.9% 14%
3-6 year olds enrolled in kindergartens 40.1% 40%
5-6 year olds enrolled in kindergartens 77% 80%
Primary-school-age children completing primary school 66% 90%

Under-15 literacy rate 93% 100%

</div>
(64)<div class='page_container' data-page=64>

Ministry of Health also support ECC activities in local communities. This informal coalition of partners has
created the potential for a more participatory, flexible and co-ordinated approach to ECC at the local level.
Although MOET oversees certain areas of education planning—such as the national curriculum, standardised
textbooks, teachers’ salaries and basic school facilities—a decentralised planning structure has been in place at
the provincial and district levels since 1986. So, for example, the annual education budget is prepared at the
district level as part of the overall district development plan, before being passed to the Provincial Education Department,
which reviews and consolidates district-level plans into a Provincial Education Plan to be submitted to MOET.

The budget for general education and training increased sharply between 1991 and 1998, and State spending on
education as a percentage of GDP has more than doubled from 1.6% in 1991 to 3.8% in 1998 (MOET 1999b).
The relative share of funding for basic education (including pre-school and primary education) has remained
relatively stable at just over 40% of the total education budget (Table 11).

Table 11: Education and training budget, 1991-98 (VND billion)

* The % of total State budget allocation to education and training at each level of schooling is given in brackets.

Source: MOET 1999b

However, a large proportion—roughly 80%—of the basic education budget is spent on teachers’ salaries (OXFAM
et al 1998). Most construction of new primary schools and the costs of teaching-learning materials are financed
by funds raised at the household level, along with textbooks, basic school supplies, uniforms and various fees and
contributions. Altogether, these costs are very significant, and are an important factor leading to poorer parents
taking their children out of school (GSO 1999). Regional budgetary norms designed to redistribute financial
resources from wealthier to poorer provinces do exist, but such mechanisms have been insufficient to cover the
shortfall in funds for basic education in poorer areas (OXFAM GB et al 1998).

In recognition of some of these challenges facing the basic education sector, over the last decade a number of
donors have provided assistance to the Vietnamese Government for basic education. In addition to capacity
building to improve education planning and investment, poor children—especially those from ethnic minorities—
have been targeted through bilingual and multigrade primary education. So far relatively little assistance has
been earmarked for ECC programmes.

8.3. Access and participation

In many rural and ethnic minority areas kindergarten facilities do not exist at all. In some communities
“home-based” day care had already become an alternative to institution-based care by the late 1980s, when nearly
11,000 households were providing home-based care (UNICEF 1994a), catering for about 1% of children aged

six or below. In 1998 the number of home-based services had grown to about 16,000, with nearly 94,500
pre-primary school children enrolled (MOET 1998d).

In terms of primary school access, MOET reports a shortfall of more than 100,000 classrooms. Shortages are
particularly acute in rural areas, and in some cases communities have no primary school at all. Even where
primary schools do exist, poverty, long distances and difficult terrain tend to reduce participation rates, especially
for younger children. Parents may delay enrolling their children until they are eight to ten years of age. The

1991 1995 1998

GDP 76,707 222,840 313,437

Total State budget 11,465 63,080 89,976
State budget allocation to education and training

Of which*:

Pre-school education budget
Primary education budget

Junior secondary education budget
Senior secondary education budget

1,256

61.4 (4.9%)
475.3 (37.8%)
192.0 (15.3%)
45.0 (3.6%)

6,915

290.5 (4.2%)
2,234.1 (32.3%)
1,352.5 (19.6%)
594.2 (8.6%)

11,757

</div>
(65)<div class='page_container' data-page=65>

National Literacy Programme also lists the shortage of facilities and insufficient number of classrooms as an
obstacle for conducting literacy education, particularly in remote rural areas.

To tackle these problems the Government has encouraged local communities in remote rural areas to build
“satellite schools” teaching grades one to three, which are connected to a principal school through a cluster
school network. An Alternative Basic Education (ABE) system—an abbreviated form of primary education—
is also available in many rural and urban communities for children who have never entered or have dropped out
of the formal primary education system. Of the more than 1.2 million primary-school-age children not attending
primary school, over 340,000 are enrolled in ABE classes, accounting for the high net enrolment in primary
education (MOET 1999a).

The net primary school enrolment rate for ethnic minority children—82% in 1997/98—is still significantly lower
than the national average, according to the Viet Nam Living Standards Survey II (GSO 1999) (Table 12).
Overall, of the children currently not enrolled in primary school, about 50% are from ethnic population groups,
even though ethnic minorities account for only 14% of the total population (ibid). In addition, the latest available
sex disaggregated data from the 1992/93 Viet Nam Living Standards Survey reveal that gender disparities affect
ethnic minority girls more than any other category, particularly at the lower secondary school level. They tend to
bear considerable responsibility for housework and if families can not afford to educate all of their children, they
usually choose to keep girls at home and send boys to school.

Table 12: Trends in (net) school enrolment rates, by ethnicity

Source: World Bank estimates based on VLSS II

Other groups of children that lack sufficient access to basic education include those from unregistered migrant
families, since unregistered children are not eligible to enrol in basic education. This is a growing interregional
and rural-urban problem affecting large numbers of people. In HCMC alone, unregistered migrants are estimated
to number more than one million (OXFAM GB et al 1998). Viet Nam’s more than one million disabled children
are also disadvantaged in terms of access. They are not included in Viet Nam’s universal primary education
goals and their enrolment in school is not a requirement for parents and authorities.

There are significant regional variations in primary school completion rates: 37.5% in Gia Lai province (Central
Highlands), 41.1% in Soc Trang province (Mekong River Delta) and 56.7% in Lao Cai province (Northern
Mountainous region) during the 1997-98 school year. All of these predominantly rural provinces ranked significantly
below the national average completion rate of 66.3% that year (MOET 1999b).

The net enrolment rate of children in lower secondary school is a relatively high 61.8%, according to 1997-98
data, and the transition rate from primary to lower secondary school is 64.9% (MOET 1999c). Notably, the
gender gap becomes quite pronounced at the secondary school level. With regard to secondary school access,
many rural students can only continue past primary school if their families can afford to pay for residence at a
district secondary school. This is often prohibitively expensive. Hence, although about 80% of the population
lives in rural areas, rural high school students account for only 42% of the total (UNDP et al 1998).

8.4. Service quality

The main functions of the ECC programme in Viet Nam are to provide age-appropriate mental stimulation as
well as basic health and nutrition services. DCC curricula emphasise physical activities, music and art lessons,
storytelling and environmental education. Children generally spend long hours in ECC centres—usually between

% share of targeted age group at each school level

1992/93 1997/98

Kinh majority Ethnic minorities Kinh majority Ethnic minority

Primary school 90.6 63.8 93.3 82.2

</div>
(66)<div class='page_container' data-page=66>

seven and nine hours per day, six days a week, for nine months a year. The fundamental difference between the
curricula for DCCs and kindergartens is that the latter places greater emphasis on the development of specific
cognitive skills.

An abbreviated 36-day kindergarten curriculum has been developed for disadvantaged rural populations, including
ethnic minority children. The language of instruction for ethnic minority children is Kinh, occasionally with
supporting explanations in the local minority language. However, many teachers in rural areas are Kinh and do
not speak minority languages (UNICEF 1994a). As a result, most ethnic minority children do not speak any Kinh
at the age of six when they are eligible for enrolment in primary school.

Curriculum materials are provided to urban State-run DCCs and kindergartens by the provincial education
authorities. In contrast, most rural ECC institutions are community-financed, and the modest State subsidy
usually only covers the salary of one ECC teacher in each commune. Local communities generally finance all
materials and equipment in rural DCCs and kindergartens themselves. As a result, the facilities and
teaching-learning environment of many rural DCCs and kindergartens are poor, and many lack playgrounds and water and
sanitation facilities. Rural ECC centres also face difficulties in recruiting and training qualified ECC teachers, since
salaries provided by the State for urban ECC teachers are usually much higher than rural communities can afford.
Due to all these factors, the quality of ECC services varies enormously. In urban areas, well-equipped DCCs
and kindergartens provide a fairly stimulating service. Many rural ECC institutions, by contrast, are unable to
provide the most basic learning materials, to feed young children nutritious food, or to take preventive health
measures in support of the overall development and welfare of young children. Observations from field visits to
rural communities suggest that the quality of home-based ECC also varies significantly.

Universal primary education has been achieved in most of Viet Nam’s provinces. However, one of the obstacles

to greater participation of ethnic minority children is again their poor command of the Vietnamese language,
which is the medium of instruction for all five grades of primary school—regardless of locality and local language.
The consequences of the language barrier—particularly for younger ethnic minority children in lower primary
school—are very high repetition and dropout rates and a lower level of scholastic achievement in primary school
compared with Kinh majority children (World Bank 1996). Significant flexibility in the literacy materials has been
achieved in terms of producing learning materials in Vietnamese and some ethnic minority languages. However,
the curriculum is quite traditional and lacks life skills components.

Low salary levels for teachers of basic education—coupled in some cases with the demands of teaching in poor
and isolated areas—reduces the appeal of both becoming and remaining a teacher. Viet Nam has a significant
estimated shortfall of 50,000 primary and 38,000 lower secondary school teachers. The qualifications and
competence of teachers is also an issue. The problem is most acute in rural and remote areas, where it is more
difficult to recruit teachers who can meet even minimum qualifications. In an effort to address this situation—as
well as to overcome problems with the language barrier for schools in ethnic minority areas—special teacher
training courses with lower academic requirements have been established in order to train and place teachers
who are conversant with the local ethnic language and culture (UNDP et al 1998).

Traditional methods of teaching rely very heavily on rote learning. The main pedagogical approach in primary
and secondary schools still involves memorisation of facts, usually with little opportunity to express thoughts,
ideas and opinions.

</div>
(67)<div class='page_container' data-page=67>

8.5. Key issues
Teaching

There is a considerable shortage of teachers in Viet Nam, and also of schools in some areas. In particular there
are insufficient and inadequately trained bilingual teachers for ethnic minority children. In order to facilitate
better learning, more ethnic minority teachers or Kinh teachers who are at least conversant in the local minority
language need to be recruited. The shortage of teachers, and the low quality of teacher trainees, are at least
partly due to low salaries, particularly for pre-primary teachers.

Training for teachers does not sufficiently emphasise child-centred, holistic and dynamic teaching methods.
DCCs and kindergartens lack an integrated care model that adequately addresses children’s physical,
psycho-social and cognitive development. There is also uncertainty regarding whether the ABE model meets the learning
needs of those children not in the formal education system, such as acquiring functional literacy skills.

Cost effectiveness

Community participation in basic education is often limited to fundraising and maintenance of school facilities.
Effective, low-cost models that encourage local communities to participate in the management, planning and
monitoring of ECC services need to be introduced.

Access and participation

A significant number of children, particularly children living in rural areas and ethnic minority girls do not enrol in
or complete primary education. All children need to be integrated into the mainstream primary education system
as far as possible, and children should be offered a curriculum of the same quality and comprehensiveness
regardless of locality, ethnicity, sex or ability to pay. Presently, poor parents are prevented from enrolling their
children in mainstream basic education because of their inability to afford the private costs of participation.
Redistribution of education resources needs to be improved, to ensure basic education for poor communities,
including many ethnic minority areas.

Policy change is also needed to allow migrant and unregistered children equal access to basic education. In
addition, UPE goals do not include education for children with disabilities. The right to basic education for
children with disabilities needs to be fully recognised by the Government and included in basic education policies
and targets. Many poor and rural communities are still without ECC services. ECC messages and training
through outreach activities for parents and other child care providers need to be developed for these communities.
Data availability and quality

Currently, the availability of meaningful information and accurate statistics is inadequate, but urgently needed to
assess the progress, problems and opportunities of the education system. In particular, there is a need for better

disaggregated data on the basis of age, sex and ethnicity at the sub-regional level.

8.6. Recommendations for action

Develop integrated and holistic early child care models, and develop advocacy, communication and social
mobilisation programmes on early child care to inform and educate the general public, as well as parents of
young children and other primary care givers and community facilitators, on the importance of holistic early
child care.

Support community child care and kindergarten programmes by recruiting and training teachers and child
care facilitators from local communities.

Support pre-primary Kinh language development for ethnic minority children, through bilingual interactions
in early childhood care groups.

</div>
(68)<div class='page_container' data-page=68>

Develop relevant life skills components of the functional literacy programme.

Promote a participatory and activity-based approach to teaching and learning at all levels.

Promote the triangle relationship between school, family and community for better quality outcomes of the
teaching-learning process.

Prioritise the improvement of access to and quality of basic education for children in the poorest communes.
Continue to provide free textbooks and other essential learning materials and build more multi-grade schools
and commune semi-boarding schools, particularly for ethnic minorities and other disadvantaged children in
remote mountainous and rural areas.

Organise social mobilisation campaigns to address cultural practices that restrict educational opportunities
for girls in order to increase the demand for education among girls.

Change policy to allow migrant and unregistered children equal rights of access to the basic education
system.

Ensure equal rights for disabled children to enrol in and complete basic education with the Government’s
financial and technical commitment.

Promote recruitment and training of teachers at District Accelerated Teacher Training Centres, prioritising
ethnic minority teachers.

Improve content and process of teacher training, emphasising multi-grade training techniques. Promote
regular in-service teacher training through cluster school networks.

</div>
(69)<div class='page_container' data-page=69>

Chapter 9: Rural Development

Viet Nam remains a predominantly agrarian society. As much as three-quarters of the total population lives in
rural areas, with two-thirds dependent on farming for a living. Since the advent of doi moi in 1986, and particularly
during the last decade, rural areas have experienced dramatic changes. While overall agricultural output and
productivity have risen significantly, the achievements in the rice sector have been spectacular, transforming
Viet Nam from a net importer into the world’s second largest exporter. As a result, food security has been
achieved at the aggregate level. Rural incomes have increased, poverty has fallen, and overall well-being in rural
areas has improved.

In spite of these overall improvements, high levels of rural poverty and food insecurity persist, particularly in
remote upland areas inhabited by ethnic minorities, and in some coastal provinces. Indeed, a striking 94% of
families classified as living below the poverty line are located, and make their livelihoods, in rural areas (GSO
1999). A better future for the rural poor is, however, within reach. With an enabling framework for rural
development, strengthened institutions and policies in support of private farmers and entrepreneurs, further
economic reform and sound rural investment, the destiny of rural areas can be turned around. Building on the
successes of previous reform will have beneficial impacts—on social development as well as productivity. It will
also help to enhance the livelihoods and well-being of disadvantaged groups including ethnic minorities, women,

the underemployed and jobless, and the landless.

The Government has recognised the urgency of accelerating development in rural areas. Investment in rural
infrastructure and services has been increased, and a number of support programmes initiated. Among them, the
National Programme for Hunger Eradication and Poverty Reduction (1996-2000) includes various poverty
alleviation initiatives with an emphasis on subsidised and directed credit. The 1,715 Poor Communes Programme
(1998-2005) is seeking to generate income and employment, improve infrastructure and build local administrative
capacity in the poorest areas (see Chapter 3, section 5 for more details). The Five Million Hectare Reforestation
Programme (1998-2010) aims to create new jobs for rural households while speeding up reforestation and
improving protection of existing forests. The Rural Development Strategy currently being formulated by the
Ministry of Agriculture and Rural Development (MARD) will be critical in providing a comprehensive and
guiding framework to 2010.

9.1. Rural institutions

Compelled to respond to the move towards a more market-oriented economy, rural institutions at all levels are
finding it difficult to adjust to their new role as “facilitators” of integrated rural development. At the central level,
institutional change has tended to be limited and slow. Some key issues regarding the role of various rural
development institutions remain unresolved, with important implications for the future orientation and consistency
of policy. The Government is aware of these issues and various initiatives to strengthen MARD’s internal
capacity in rural development policy planning, implementation and management at different levels are being
undertaken in collaboration with the donor community (MARD 1997; UNDP 1998b).

</div>
(70)<div class='page_container' data-page=70>

The number of farming families with any involvement in private business is so far limited. As discussed in
Chapter 2, preferential support for SOEs in terms of land, taxation, credit, investment and trade has considerably
reduced the potential of farm households and the private sector to act as a strong and competitive driving force
for rural development. This has discouraged private investment in rural areas and reduced the scope for building
an efficient and diversified rural economy. The Government’s promotion of voluntary co-operatives and associations
based on the new Co-operative Law of 1996 is a genuine attempt to enhance the capacity of local communities
to work together more effectively. It has enabled a number of the old production co-operatives to change into

‘new-style’ service co-operatives that can supply agricultural inputs and services more effectively. However,
changes have been limited, and a substantial number of co-operatives exist only on paper. Most co-operatives
remain ineffective, with little farmer participation in management. Their competitive position is often weak and
based on some form of monopoly power (Fforde 1998).

Mass organisations form an important link between the highest echelons of Government and major socio-economic
groups, such as women, farmers and youth. In recent years, the focus of some of these organisations has
widened to include socio-economic activities, though some have been more successful in facilitating rural
development than others. The Viet Nam Women’s Union—which appears to be more pro-active than other
mass organisations at present—has assisted MARD in developing a seven-point Plan of Action for the
Advancement of Women in agriculture and rural development, and is credited with significant achievements in
micro-finance, extension and functional literacy.

Following the advent of doi moi a variety of new demand-driven, self-help and economic-based groups—such
as extension clubs, savings and credit associations and integrated pest management groups—have begun to
emerge to share resources, purchase inputs, acquire loans or exchange labour. While particularly strong in the
Mekong Delta, new voluntary groups of farmers and fishermen also exist in the Red River Delta and the north
central coast. Although they are usually still informal and at a very early stage of development, these new groups
represent an important new actor in rural development and could contribute to ensuring equitable access to
resources for women, ethnic minorities and other disadvantaged groups.

9.2. Rural infrastructure

Rural infrastructure in Viet Nam is generally underdeveloped. Most rural communities lack access to basic
infrastructure services, including all-weather roads, irrigation, drainage, flood control facilities, clean drinking
water, permanent markets and the national electricity grid. Rural communities in the poorest and most isolated
regions—particularly areas inhabited by ethnic minorities—are usually even worse off. The Government has
recognised these pressing needs and identified rural infrastructure as a development priority. In this context,
under the 1,715 Poor Communes programme, the poorest 1,000 communes will each receive VND400 million,
the first tranche of which is to be allocated to one of six types of infrastructure (health station, education facility,

market building, power station, small irrigation scheme or road to the commune centre), according to local needs.
Earlier in 1997 another programme for the development of commune centres was implemented (Prime Minister’s
Decision 35/TTg), testifying to the Government’s effort to build and improve rural infrastructure.

Inadequate access to good transport routes in Viet Nam seriously limits the income-generating options available
to rural people, exacerbates marketing difficulties and reduces access to basic social services. It can also make
alternative development for drug control unsustainable in upland areas and contributes to the resumption of
poppy cultivation. Rural roads are generally constructed to low standards with high maintenance costs (World
Bank 1998). Moreover, some 20% of communes in the Northern Mountainous region are reported to lack
motorable roads, and about 30% of district and 50% of commune roads are estimated to be impassable in the
wet season (UNDP 1998b). Similarly, inland waterways, vital for the transport of agricultural produce in the
Mekong Delta, are in urgent need of rehabilitation and upgrading.

</div>
(71)<div class='page_container' data-page=71>

have been prioritised at the expense of small-scale, on-farm facilities, which would enable small farmers to
diversify into higher value crops. In the absence of well-developed dykes and flood control systems, flooding
from rivers and storm-driven tidal flows result in heavy loss of life, as well as extensive damage to crops and
farms, leading to estimated annual economic losses of some US$50 million (World Bank 1998).

Rural electrification is an important part of Government plans to promote rural industrialisation and modernisation.
As discussed in Chapter 10, rural electricity use is still low, due to limited access and high charges. Consequently,
family use, water pumping, agricultural processing and other rural commercial uses account for as little as
10-15% of national energy consumption (UN 1998a).

9.3. Land allocation and management

By developing the system of land-use rights under the
1988 and 1993 Land Laws, the Government created
the conditions under which farm households and private
and public enterprises gained security of tenure to land
(see box). The benefits for the majority of rural people

have been enormous. Since 1993 significant progress
has been achieved in clarifying and assigning agricultural
land-use rights, though the process for forestry and
non-agricultural land has lagged behind considerably. By
early 1998 some 86% of cropland had been allocated,
compared to just 10% of forest land (World Bank 1998).
Although guidelines for forest land allocation exist,
mapping difficulties associated with the terrain, a lack

of updated land-use maps, poor methods and problems in reconciling the law with customary land-use practices
have prevented efficient allocation.

At the local level, land allocation has been constrained by a scarcity of information on the new rules and
regulations, inadequate implementation capacity, limited transparency regarding allocation procedures and
insufficient participation (UN 1996). In some cases, serious conflicts over boundaries and competing claims
have emerged. In general, poorer households, women and ethnic minorities have fared least well in the process
(UN 1998a). Based on existing land-use patterns, poorer families have tended to be assigned the smallest, least
fertile and most remote plots. In some cases, they have refused to formalise their land allocation, while in others
they have been unable to afford the land-use certificate fee (ibid). Although official policies are gender neutral
and certification allows for joint titling, in reality women are often excluded by custom if not by law. Although
land-use certificates have created more legally binding relationships between households, the intra-household
dynamics of land allocation are less clear. In this context, some studies have pointed to the increasing likelihood
of female landlessness following separation or divorce, given that women are not usually named on land-use
certificates (OXFAM GB 1997).

The livelihoods of some ethnic minority groups have been threatened by the new laws, which recognise neither
swidden agriculture nor collective land rights. Under resettlement programmes, incoming migrants are allocated
so-called “barren” land that may actually already be used by minorities for shifting cultivation and grazing,
gathering wood, fodder, supplementary foodstuffs and so on. The allocation of fragile barren lands has further
increased the likelihood of soil erosion through the application of unsuitable and unsustainable agricultural practices

in upland areas.

Despite their new rights, farmers still lack complete control of their land assets. Maximum ceilings on land
holdings, set by the Government and based on food security and equity concerns, as well as restrictions on the
use to which land may be put, continue to constrain household decision-making. Converting paddy land to other
uses, and renting land for more than three years for annual crops or aquaculture is allowed only with special,

New land rights for farmers

The 1993 Land Law recognised the farm household

as the main unit of agricultural production and
granted farmers 20-year rights to land used for rice
and other annual crops, and 50-year land rights for
perennial crops. It liberalised farm decision-making
related to the purchase of inputs and the sale of
outputs. Most importantly, it granted“five rights”
to those legally possessing land: the rights of

</div>
(72)<div class='page_container' data-page=72>

high-level permission, while high taxes on the sale and exchange of land inhibit land amalgamation. Notwithstanding
such disincentives, some consolidation of land has occurred, especially in southern provinces, giving rise to a
new and controversial class of landless people. Although landlessness is often an acute social problem, in cases
where poor households have been able to use the proceeds of their land-use rights sale to find off-farm employment
that pays as well or more reliably than farming, a reduction in the number of families owning land may be a
positive development. Viet Nam already has one of the highest ratios of population to arable land in the world
and the growing population will place increasing pressure on scarce land resources for production of food as
well as cash crops.

From 1993 until recently, implementation of the five land rights (see box, previous page) was held up by the
absence of sufficiently clear guidelines. Uncertainty regarding the renewal of land-use rights, together with

ambiguities related to the transfer and mortgage of land, further reduced the ability of farmers to offer land as
collateral. In March 1999, however, the Government finalised guidelines, which should considerably facilitate the
development of a market in land.

9.4. Rural credit

In general, rural demand for credit far exceeds supply, particularly for services tailored to the needs of the poor.
The Government has sought to respond to the situation by establishing the Viet Nam Bank for the Poor in 1995
to provide subsidised and directed credit for the poor, introducing innovations aimed at enhancing the outreach of
the Viet Nam Bank for Agriculture and Rural Development (VBARD), promoting commune-level savings and
credit co-operatives (People’s Credit Funds), and prioritising access to credit in HEPR and other programmes.
In spite of these efforts, however, a large part of the rural population, particularly women and isolated communities,
continue to rely on informal financial providers demanding considerably higher rates than formal financial institutions.
Due to distortions in the formal credit market, competition for loans is high, and applicants perceived to be less
risky are favoured over poorer farmers. However, NGO and donor-supported micro-finance schemes have
demonstrated that this perception is false, and that the poor can repay loans at interest rates equal to or higher
than VBARD rates. Such micro-finance schemes have also confirmed that poor people value access to credit
over low-cost credit (for instance credit at preferential rates, such as that offered by the Bank for the Poor).
While still limited in outreach, these mostly group-based schemes have demonstrated their capacity to empower
the poor, improve household production, enhance women’s status and reduce child malnutrition.

Complicated credit request procedures and conventional collateral requirements significantly reduce poor people’s
access to formal credit. Despite considerable progress in land-use certification, few farmers can offer land as
collateral given uncertainty over the renewal of allocations, as well as the fact that the value of the land is based
on current rental payments rather than on the actual market value (World Bank 1998). Many poor farmers are
simply afraid to risk using their land as collateral as it is their only means of subsistence (UN 1998a). Similarly,
although the borrower’s sex is not a criteria for lending, women not named on land-use certificates sometimes
experience difficulties in securing loans. In addition, access to medium- or long-term credit is particularly limited,
seriously inhibiting agricultural diversification, as well as the development of rural industries and off-farm employment.
Despite the importance of savings in smoothing seasonal consumption imbalances and building household equity,

formal institutions (except people’s credit funds) pay little, if any, attention to savings. Indeed the Bank for the
Poor exists only to lend. The people’s credit funds have indicated their potential to provide much-needed competition
in the rural financial sector. Together with NGO and donor-supported savings and credit schemes, they have
underlined the benefits of expanding access to financial services tailored to the needs of the poor and women.
9.5. Agricultural productivity

</div>
(73)<div class='page_container' data-page=73>

more than doubled rice output after 1988. Output of non-rice food crops (such as soybeans and vegetables),
commercial and industrial crops (such as coffee, cotton, rubber and tea), livestock and aquaculture also expanded
significantly. The success of the rice sector has made a major contribution to the achievement of food security
at the aggregate level, and to significant foreign-exchange earnings from exports.

But despite the substantial improvement in overall food security, many families remain vulnerable, and some—
particularly ethnic minorities in isolated uplands—go hungry for as many as three or four months each year
(IIED 1998). Malnutrition is also a persistent and, in some instances, growing problem. In addition, large pockets
of poverty have emerged in the delta areas, especially among small farmers (FAO 1998). Women carry a major
workload in the agricultural sector, with 73% of all farmers being women. While also involved in aquaculture and
livestock production, it is in rice production that women have the most substantial—and growing—role.
The combined real growth rate of agriculture, forestry and fisheries has declined over the last few years from
4.8% in 1995 to 2.7% in 1998 (IMF 1999). Rice farmers now face the prospect of stagnant incomes and
reduced incentives in rice production, caused by the lower real prices created by productivity gains and the
transformation of the economy which has seen demand for staple foods grow more slowly than for higher
value-added foods and non-food commodities (IFPRI 1998). Fluctuations in national rice prices since 1996 have
illustrated the dangers of over-reliance on rice production and increased the urgency of further policy change to
encourage a diversified and flexible agricultural economy that is responsive to market conditions.

Although limited until now, diversification into non-rice crops, livestock and aquaculture is growing. Since achieving
self-sufficiency in rice, the Government has placed greater emphasis on developing the livestock subsector. In
response, livestock (mainly pigs, cattle, poultry and goats) has grown in importance during the last five years and
now accounts for some 25% of total farm income (Hai 1998). Demand for livestock products can be expected
to rise rapidly in parallel with increasing incomes, and to lead to expanded production. However, certain issues

must be addressed for households to successfully exploit this opportunity. In particular, high-quality animal feed
is in short supply, feeding practices are poor, processing standards are low and advisory services for animal
health and breeding are inadequate.

Diversification offers significant potential to increase farmers’ incomes and expand local off-farm
income-generating activities, including processing. In upland areas, it can provide opportunities to fill the gap in farming
systems left by opium eradication programmes. To maximise the potential of diversification, it will be important
to remove persisting constraints, including policy biases, trade restrictions, insufficient long-term credit and
inadequate support services. For instance, import restrictions on inputs, including fertiliser and hybrid seed varieties,
have increased the cost of these inputs to farmers and subsequently reduced their use (World Bank 1998). The
Government has taken steps to address farmers’ needs for advice and training by establishing a new integrated
agriculture and forestry extension system in 1993. In spite of the progress made, however, extension capacity
remains especially weak for non-rice crops and animal husbandry, and access is particularly poor for upland
communities and women. Linkages between research, extension and farmers are also poorly developed. The
capacity of the national agricultural research system is reduced through duplication and overlap, limited funding
and weak resource allocation, together with a lack of needs-based research, particularly for non-rice,
higher-value crops and upland agriculture (UNDP & SDDP, 1998; MPI 1997).

</div>
(74)<div class='page_container' data-page=74>

9.6. Off-farm employment and rural industry

Viet Nam has a very high ratio of farmers to arable land, and off-farm employment remains underdeveloped.
Although one million people—most of whom are in rural areas—are entering the labour force annually,
employment generation in the rural areas has been very limited in recent years. Most of the modest growth in
private, non-farm activities during the last decade has been in small-scale service delivery which, in the absence
of complementary agricultural and industrial growth, is unlikely to raise rural living standards significantly (Perkins
1998). At the same time, some 6-7 million rural working-age people are believed to lack permanent work, with
rural underemployment estimated as high as 57%, according to the 1997/98 Viet Nam Living Standards Survey
(GSO 1999). The scarcity of off-farm employment has seriously reduced the capacity of rural households—
including the landless poor—to improve their food and livelihood security. It has also contributed to increased
criminal activities, including drug trafficking and abuse, and trafficking and sexual exploitation of women and

children.

The domestic private sector is estimated to provide as many as 96% of rural industrial-sector jobs and about
80% of rural industries are natural resource-based. Some two million household enterprises are active in food
and agro-processing, wood processing, textiles and garments, brick-making, tanning, handicrafts and so on, often
in traditional, “occupational” communes or villages. Although the rural business sector includes some 4,500
SOEs, their role in employment generation has been minimal (UNIDO 1999).

In the absence of an enabling environment, household businesses and industrial units have generally been unable
to achieve high productivity or expand their operations. Attempts to increase rural off-farm employment have
faced a number of barriers, including active preferences vis-à-vis SOEs, lack of capital and credit, poor market
access and infrastructure, and inadequate equipment (Smith 1998). Institutional support has been limited and
red-tape can be excessive, reducing the ability of farmers, processors, entrepreneurs and industrialists to maximise
their returns.

The Government is aware of the challenges of transferring labour from agriculture to higher-growth non-agricultural
activities in rural areas, and has set out an initial strategy to develop handicrafts and small industries, including
processing of agricultural and forest products (MARD 1999). The ability to generate additional off-farm productive
employment through an enabling environment for private business development will be vital to the success of this
rural strategy. The new Enterprise Law is a positive development in this regard.

9.7. Key issues

In recent years Viet Nam has taken a number of steps on the path towards enhancing equity, increasing incomes
and improving livelihoods in rural areas. However, a range of constraints persist, and further liberalisation,
together with institutional, policy and legislative reform, is required to stimulate pro-poor growth and further
reduce rural poverty and food insecurity.

Given the multifaceted nature of the rural development challenge, several key issues are closely interrelated and
will need to be addressed simultaneously. For instance, clarification of land-use rights, particularly the right to

mortgage, is important for the development of rural credit markets. Similarly, better access to improved
infrastructure as well as technology, extension and vocational training is necessary to promote agricultural
diversification, and expand off-farm income opportunities.

Three issues in particular deserve urgent attention. In addressing each of these priorities, it will be essential to
mainstream gender, environment and ethnic minority needs and interests.

Capacity and institutional development

</div>
(75)<div class='page_container' data-page=75>

reform will be critical to streamline and improve the effectiveness of existing rural institutions at the central and
lower levels, and to assist MARD to successfully adapt to its new role as facilitator of rural development.
Empowerment of the rural poor

The second priority is to empower poor rural people to participate effectively in a more market-oriented rural
economy, through increasing their access to improved inputs (such as seeds, fertilisers and credit), support
services (such as extension, training and market information), as well as post-harvest processing technologies
and markets. In this context, access to improved basic physical and social infrastructure should be expanded,
land allocation accelerated, processes to facilitate local people’s participation in decision-making improved, and
security of tenure guaranteed.

Diversification of rural livelihoods

Finally, there is a pressing need to diversify rural livelihood options and expand off-farm income generating
opportunities, given the inability of agriculture to continue to absorb the steadily growing labour force and the
desire to avoid large-scale rural-to-urban migration. The success and sustainability of efforts to encourage
agricultural diversification and expand off-farm employment will depend significantly on progress achieved in
addressing the first two priorities.

9.8. Recommendations for action
Policies

Agriculture and the rural economy must continue to be among the main vehicles for development and
poverty reduction over the coming decade, and should consequently be invested with the appropriate capital
and human resources.

Since the Government remains significantly dependent on donor support for rural development, the keys to
progress are the same as for improved aid effectiveness generally: sound policies and competent institutions,
followed by adequate resources.

Rural development should be supported within a comprehensive strategic framework with a Government/
donor partnership at its core, led by the Government and open to other relevant stakeholders. A new structure
and role should be established for the Government/donor working group led by MARD.

Partnerships should aim to develop sectoral or programme approaches to rural development to replace
project approaches.

There is a need to ensure equal opportunity, access and control of assets and resources, for example through
equal inheritance rights and titling of Land-use Certificates, Residence Registration Cards, and other
certificates of household assets. The work of the MARD Technical Working Group on Women’s Advancement
and Gender Integration in Agriculture and Rural Development should be supported in this process.

Rural sector competitiveness

Food security and rural job creation, two overriding rural development objectives, will only be achieved by a
competitive rural economy. That means placing resources and decision-making largely in the hands of
producers and consumers, with limited State intervention, as well as the creation of a level economic playing
field for all economic actors, including the State.

To promote the competitiveness of producers, they require freer access to input and product markets,
access to reliable market information and assistance to appreciate the demands of the market place and the

need for quality in production.

Existing obstacles to attracting small and medium-sized industries into rural areas to generate job and income
opportunities need to be removed. Land, taxation and other policies should be reviewed and amended to
attract investment—both domestic and foreign—into the rural sector.

</div>
(76)<div class='page_container' data-page=76>

Institutional reforms

Institutional reforms should be accelerated to support the continued evolution of competitive rural sector
industries—farm and off-farm. This should take place within the Government’s framework for decentralised
administration.

The structure and functions of MARD need to be fully reviewed. The merger of three former departments
to create MARD needs to be realised, and the respective roles and responsibilities of central and provincial
authorities should be reviewed and realigned.

MARD should aim to reflect the structure of the industry it serves, both with respect to gender and ethnicity.
Specific attention should be given to considerations of gender equity in staffing and participation in ministerial/
project activities and benefits.

Agricultural research and extension requires a significant overhaul if it is to serve the practical needs of
farmers and the agricultural industry.

Stakeholder participation

Stakeholders at all levels need to be provided with the opportunity to effectively participate (and not only be
represented) in planning and implementing the development processes that affect them. Government staff
and rural residents at all levels should be trained in participatory planning and development.

Functional farmer groups, such as water users’ and women’s credit groups, as well as modern co-operatives

should be encouraged and empowered. Participation in rural sector planning and decision-making by mass
organisations, such as the Women’s Union and the Farmers’ Union, and emerging civil society should be
promoted. Collaboration of these mass organisations with the Governmental institutions should be strengthened
in order to maximise their respective support to actual rural development.

Labour-based methods should be the norm for rural infrastructure projects, in order to maximise rural job
creation.

Human resources development

Invest more in human resources for rural development—especially in remote and mountainous areas and
among ethnic minorities—through expanded professional and vocational training.

Develop further the capacity of the regional agricultural universities and colleges and MARD’s rural
management colleges.

Focus on developing farmers as business people. Formulate and implement a nation-wide training programme
for farmers, commune and district level staff, to include training on farm management, marketing, participatory
planning and effective use of development assistance.

Expand vocational training centres in remote and mountainous areas, and on-site training for technical staff
and farmers.

</div>
(77)<div class='page_container' data-page=77>

Chapter 10: Environment and Natural Resource Management

During the 1990s, a number of important legal and institutional measures have been taken to protect Viet Nam’s
environment. The National Plan for Environment and Sustainable Development 1991 to 2000: Framework for
Action(NPESD) was published in 1991, the National Environment Agency was established in 1993, and a
comprehensive Environmental Protection Law was enacted in 1994. The Government of Viet Nam has also
ratified several major international environmental conventions and agreements (see box). Following Viet Nam’s

ratification of the Convention on Biological Diversity the Government prepared the National Biodiversity Action
Plan, which was approved by the Prime Minister in 1995. In 1998, the Politburo issued a directive on Strengthening
Environmental Protection in the Period of Industrialisation and Modernisation (No. 36-CT/TW). An update of
the NPESD is currently being prepared, and should include key issues such as population growth and migration.

Major International Environmental Conventions and Agreements
ratifed by the Government of Viet Nam during the 1980s and 1990s

• 1971 Convention on Wetlands of International Importance especially as Waterfowl Habitat (RAMSAR
Convention)

• 1972 Convention Concerning the Protection of the World’s Cultural and Natural Heritage (World Heritage
Convention)

• 1973 Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)

• 1973/78 MARPOL Convention for the Prevention of Pollution from Ships

• 1982 United Nations Convention on the Law of the Sea

• 1985 Vienna Convention for the Protection of the Ozone Layer

• 1987 Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol)

• 1989 Convention on the Control of Trans-boundary Movements of Hazardous Wastes and their Disposal
(Basel Convention)

• Agenda 21, the Action Plan from the 1992 UN Conference on Environment and Development (Earth Summit)
in Rio de Janeiro

• 1992 Convention on Biological Diversity

• 1992 United Nations Framework Convention on Climate Change

• 1994 United Nations Convention to Combat Desertification

Yet, with all these efforts, the natural environment in Viet Nam continues to deteriorate. Forest degradation and
unsustainable conversion of forest to other uses has continued unabated in many areas, both in the highlands and
along the coast. Land degradation is an important and growing environmental problem, in particular in poor
farming areas in the highlands. Freshwater wetlands are threatened with agricultural encroachment, and marine
resources are being degraded by inappropriate fishing methods. There are severe localised problems with water
quality. In the larger cities, the mostly outdated urban infrastructure can no longer cope with the increasing population.
As a result of recent industrial expansion, industrial water and air pollution has also become critical in and around Viet
Nam’s major cities. The next decade will see significant growth of energy production and consumption, but the energy
options being considered by the Government have potentially serious environmental impacts.

A major cause of environmental degradation is population growth. Since 1950, the population has trebled, making
Viet Nam one of the most densely populated countries in Asia. Today there is less than 0.12 hectares of
agricultural land and 0.10 hectares of forested land per person (UN 1998). Further agricultural expansion and
intensification will have a negative impact on the environment as sensitive areas are brought under cultivation
and increasing amounts of pesticides and chemical fertilisers are used.

</div>
(78)<div class='page_container' data-page=78>

the population continues to grow and consumption patterns change as a result of higher standards of living,
threats to the environment will remain very real in Viet Nam into the foreseeable future.

10.1. Forests and land

The forestry policy in Viet Nam has been changing simultaneously with the introduction and adoption of major
changes to the country’s economic policies. For the forestry sector this change implies greater involvement of
people in implementing forestry activities and new orientations for forestry development, including a move away

from large-scale plantation development and reliance on State management of forest resources. In spite of these
policy changes, however, the forestry sector is generally witnessing a deteriorating situation on the ground, and
many outdated policies and practices remained unchanged.

The allocation of forest land to households for management and protection has been the centrepiece of forest
policy reforms to date. Secure land tenure and land-use rights are seen as essential elements for the sustainable
use of natural resources. It is estimated that some 24 million people live in or close to forested areas, thus directly
depending on forests and forest land for their livelihood (Warfwinge & Hoai 1998). As discussed in Chapter 9,
allocation of forest land to farmers and forest users is taking place only slowly, with some areas embarking only
now on the process.

Of the 33 million hectares comprising the total land area of Viet Nam, 19 million hectares is officially classified
as forest under the jurisdiction of the Ministry of Agriculture and Rural Development (MARD). Ecologically
speaking, only part of this area actually possesses forest vegetation and much of that has suffered serious
biodiversity loss. The total forest cover in Viet Nam has declined steadily since 1943, when the total estimated
forest area was 14 million hectares (43% of the land area). This figure had fallen to 9 million hectares by 1997
(26% of the land area), according to the official classification.

Natural forest has been transformed into “barren” and “unproductive” land in many parts of the country. However,
although much of this land is degraded, it is often still used for cultivation of food crops and grazing of livestock.
As the population increases, pressure on forests to provide increasing quantities of food has led to the clearing of
ever more land, and the shortening of traditional fallow periods. In upland areas, where most of Viet Nam’s
remaining natural forests are found, forest cover loss due to population pressures and the widespread use of
swidden agricultural practices has precipitated an environmental crisis. Habitat destruction is quickly leading to
biodiversity loss and forest clearance is impacting on river regimes and water regulation capacities as well as
contributing to increased soil erosion. Although there is no consensus on the principal cause of deforestation, it
is generally agreed that logging practices, agricultural expansion, the effects of war, and shifting cultivation have
all contributed (Dubois & Morrison 1998). The loss of forest lands needs to be addressed in conjunction with
rural development and poverty alleviation activities.

Since about 1990, it appears that the rate of deforestation has marginally decreased. Official figures even
suggest an actual increase in the overall forest cover between 1990 and 1995, with the loss of natural forests
being offset by increased plantation areas and natural regeneration. However, the statistics do not take into
consideration that forests may be deteriorating in quality. In many cases, the offset is based on plantations of
eucalyptus and acacia, which increase wood availability (thus, in theory, easing pressure on natural forests), but
do not compensate for loss of bio-diversity. There is little consensus regarding the current status of forest assets.
There is currently no unified system of land classification. As a result, a high degree of confusion exists and this
is likely to cause conflicts over land issues with the implementation of the Five Million Hectare Reforestation
Programme. Policy changes, achievement of food security at the aggregate level, and the allocation of forest
land to smallholders may have led to the reported increase in forest cover, although the relative significance of
the different factors is unknown.

</div>
(79)<div class='page_container' data-page=79>

Hectare Reforestation programme, which was approved by the National Assembly in 1998 and is scheduled to
run to 2010. This programme could transform the forestry sector, since local people are to take on greater
responsibilities for managing forest land, while large-scale plantation development and State forestry enterprises
are expected to play a reduced role.

However, many of the institutional and policy constraints that limited the effectiveness of earlier forestry
programmes still remain. The Government’s 327 programme on Re-greening of Barren Hills, which ran from
1991 to 1998, had some localised benefits especially for State Forest Enterprises, but was criticised for being too
top-down, inconsistent in its objectives, insensitive to local people, biased toward tree plantations on land crucial
for local food security, and slow in disbursing funds. It was also hampered by the lack of progress in land
allocation in many areas.

Building on these lessons, the Government and donor community have embarked on a consultative process
intended to strengthen the planning and implementation of the Five Million Hectare Reforestation programme. In
the short term, a number of key issues, including the programme’s components and implementation methodology,
will be studied in detail to strengthen the scientific and technical foundations of the programme. In the longer
term, it is expected that these Government-donor consultations will lead to a partnership for unified
forestry-sector support and a shift towards more programmatic and co-ordinated assistance to forestry in Viet Nam.

10.2. Marine and water resources

Viet Nam has 3,260km of coastline fed by 112 rivers and streams. Almost all major population centres are found
on the banks of these rivers, and more than 50% of the population lives in coastal areas (MPI & MOF 1996).
Water—both as a productive resource and as a destructive force (in the form of annual floods and typhoons)—
plays an integral role in Vietnamese life and culture.

In general, water resources in Viet Nam remain abundant. However, there are numerous signs of deteriorating
marine and water resources. Population growth, urbanisation and industrialisation have increased the pressure
on the country’s water resources, causing problems of water shortages, water pollution, salinity intrusion, watershed
degradation, and increasing flood damage in recent years. There are severe localised problems with water
quality, particularly due to increasing sediment loads and organic waste, even in most rural areas. In addition,
rapid up-stream deforestation is leading to greater and more frequent peaks and troughs in water flows, which
may contribute to flooding and drought. About 50% of the fluctuation in rice production is due to the growing
unpredictability of water flow levels (UNDP 1999). Also, competition between sectors—hydropower, flood
control and irrigation—has resulted in sub-optimal investments. Lack of co-ordination across administrative
boundaries has caused environmental problems downstream.

Partly in response to these threats, the National Assembly approved the national Water Resources Law (WRL)
in 1998, after a very long period of consultation. The WRL will, for the first time in the country, establish specific
institutions and instruments for comprehensive water resources management, recognising the need for integrated
water resources management that reaches across administrative boundaries and sectors. For example, the
WRL provides the legal basis for establishing river basin organisations that would be responsible for the
management of river basin planning. However, few changes have actually taken place yet, as the implementation
decrees are still to be finalised. Effective implementation of the WRL will also require a large and sustained
investment in capacity building to undertake the new functions.

</div>
(80)<div class='page_container' data-page=80>

At the same time, coastal aquaculture has grown dramatically. Between 1985 and 1994, the area utilised for
brackish water aquaculture more than quadrupled, from 67,000 to 288,600 hectares. More than 80% of this area
is in the Mekong River Delta, primarily in the Ca Mau peninsula (ibid). Unplanned and poorly managed aquaculture

development is causing severe degradation to coastal marine habitats, wetlands and mangrove forests, and in
turn to the viability of the aquaculture itself.

The Government is aware of this increasing environmental degradation and the seriously damaged fisheries
resources base. The Master Plan for Fisheries to the Year 2010, prepared by the Ministry of Fisheries (MOF) in
1998, clearly recognises the threats of over-exploitation and unsustainable development. The master plan outlines
a list of activities to strengthen the MOF’s internal capacity to protect the environment and preserve Viet Nam’s
fisheries resources and those natural resource systems that are impacted by the fisheries industry. However, the
industry appears to continue to operate largely uncontrolled, and implementation capacities within the ministry
remain weak.

Many bilateral and multilateral donors are active in the water and coastal and marine development sectors in
Viet Nam. However, projects are mostly conducted in isolation, using different approaches and lacking a conceptual
or organisational connection that could provide synergies. Despite some good work done in individual projects,
and the adoption of a programme approach by some donors, these separate efforts have not been able to bring
about sustainable management of marine and water resources. In order to assist the Government more effectively
in its management of marine and water resources, the Government and the donor community have embarked on
a consultative process intended to find approaches to managing the resource base in a more environmentally and
socially sustainable manner.

10.3. Urban and industrial pollution

The high rates of emission of industrial pollutants—particularly by SOEs—are largely the result of the widespread
use of environmentally inefficient technologies and poor management. The Law on Environmental Protection
includes comprehensive environmental standards and decrees on Environmental Impact Assessment and
administrative fines. However, environmental inspection agencies are generally weak, with limited capacity to
enforce the law. There are also few incentives to change, and most companies lack the know-how to significantly
reduce their waste and energy use. A constructive step to address this gap was the recent issuance of a
directive on Strengthening Environmental Protection in the Period of Industrialisation and Modernisation (No.
36-CT/TW) to encourage cost-effective waste minimisation and cleaner production. The directive also states

that the provincial Departments of Science, Technology and Environment and environmental institutions will
receive assistance to improve their capacity and effectiveness.

Urbanisation and industrialisation are accelerating simultaneously, resulting in a concentration of people and
pollution in the cities. Effective urban planning has crucial implications for sustainable resource use and
environmental quality in cities. At present, infrastructure for waste treatment is either absent or of poor quality.
Municipal and industrial wastewater treatment systems are insufficient. Solid waste is disposed of at poorly
designed dumpsites, allowing pollutants to leak into the groundwater. Furthermore, hazardous waste is not treated
separately but mixed with inert solid waste. According to a recent study of hazardous waste management in Viet
Nam, of the 275,000 tonnes of hazardous industrial waste currently generated and mostly dumped without
treatment, approximately 110,000 tonnes require physical/chemical treatment, 45,000 tonnes require incineration,
and 120,000 tonnes require a secure landfill (NEA & ADB 1998).

</div>
(81)<div class='page_container' data-page=81>

industrial zones have no environmental infrastructure, although some larger ones have plans to install wastewater
treatment facilities. Hazardous waste management is not yet on the agenda of most industrial zone authorities.
10.4. Energy production and use

Viet Nam is one of the lowest consumers of energy in the region. At just four giga-joules per person annually,
Viet Nam’s per capita consumption is only one-third that of Indonesia, one-sixth that of China and one-thirtieth
that of South Korea (UN 1998). However, both production and use of energy are increasing rapidly. The growth
translates into Viet Nam needing 400 megawatts of new capacity added per year to meet demand (UNDP
1999). The energy options being considered by the Government have potentially serious environmental and
social impacts. Hydropower directly alters rivers and watersheds, and people are forced to relocate. Coal power
has severe landscape and pollution impacts. A detailed comparison of the relative advantages and disadvantages
of the various options must be undertaken before any energy sector development strategy is adopted.

A recently completed report on Viet Nam’s energy sector has identified key structural and institutional reforms
and investments that need to be made in the oil, gas, coal and electricity subsectors. Issues related to rural
energy or the “traditional” energy are much harder to analyse, but there is no question that they deserve equal
attention in view of the fact that Viet Nam remains essentially a rural society, and traditional energy consumption—

mainly in the form of wood and other biomass fuels—still makes up 66% of total consumption (World Bank
1998).

Nearly six million Vietnamese households—or 30 million people—have no access to electricity. In 1995 only
14% of the electricity sold by the State-owned power company, Electricity of Viet Nam, went to rural areas.
Thus, approximately 20% of the country’s population consumed 86% of its electricity. Rural consumers use only
one-fifth the electricity of urban consumers, but pay more than twice as much per unit (ibid). Transmission and
distribution networks are old, over-stretched and inefficient, resulting in poor reliability and high distribution
losses. Restricted access to energy has presented a serious impediment to rural development in Viet Nam.
The Government recognises the electricity needs of rural areas and has developed an ambitious rural electrification
programme that envisages providing electricity to 80% of communes by 2000 (from 63% currently), and connecting
all communes in the plains and 60% of rural households by 2010. Under this programme, although rural electricity
consumption would increase in absolute terms, the rural share of electricity consumption in 2010 would drop to
about 13%, from 14% today (ibid).

However, even with an aggressive programme to extend the rural grid, many households in Viet Nam’s 2,800
remote and mountainous communes will not be connected to the grid within the next 10-15 years. Other options
to complement the grid extension work need to be found in order to meet the energy needs of rural areas more
quickly. There is considerable potential for the use of decentralised energy supply systems and renewable
energy sources. Such energy solutions should be considered where conventional sources are not available or
inconvenient to use.

EVN is attempting to reform itself based on the Electricity Law and Grid Code, but is in a difficult position. The
Government is demanding a more professionally run and cost-effective utility at the same time as an expansion
of the rural electrification grid to 80% of communes. This is problematic, since electricity tariffs are not allowed
to be raised to recover the full cost of grid expansion.

</div>
(82)<div class='page_container' data-page=82>

10.5. Key issues

In spite of the many important legislative and regulatory measures that have been taken to protect Viet Nam’s

environment, environmental degradation continues. Current patterns of natural resource exploitation are not
sustainable and as such threaten the long-term economic as well as environmental health of the country. A
number of key challenges lie ahead, and further assistance is needed for Viet Nam to achieve the goal of
sustainable development.

Integrated planning and prioritising the environment

The need for integration of economic, social and environmental factors in the development planning process is
still not well understood by the Government. The recent directive on strengthening environmental protection is a
step in the right direction, but environmental protection agencies remain understaffed and poorly funded. For
example, the National Environment Agency has only 70 staff and an annual budget of just US$1.5 million. The
main priority of the Government continues to be economic development, modernisation and industrialisation.
This emphasis has brought many short-term benefits but, in many instances, long-term costs to the environment.
Data for environmental planning

A reason for the low profile of environmental conservation is that policy-makers are not sufficiently aware of
these long-term costs because high-quality baseline data are lacking. Thus, even if environmental protection
were a high priority, it would be difficult to set priorities since environmental trends are not well understood.
There is no regular environmental monitoring programme that produces reliable and comprehensive
state-of-the-environment reports, or even an agreed set of indicators. Thus, decision-makers are not fully aware of
negative environmental trends and the hidden costs of development.

Institutional capacity for environmental planning and management

Even if policy-makers were aware of the urgent need to prioritise and integrate environmental issues in their
planning, institutional capacities for environmental planning and management remain weak. This is partly a result
of the above mentioned limited human and financial resources, but it also results from disincentives and conflicts
of interests that are built into the environmental management system. For example, many of the largest natural
resource ministries (MARD, MOF and the Ministry of Industry) retain obligations both to extract and protect
natural resources such as timber, fish and coal. Capacity building is needed both for strategy and policy

development—for example, in updating the NPESD—and for implementation.

Public awareness

Public awareness of environmental issues is still low, and tolerance for environmental degradation is high. These
attitudes result partly from the long legacy of central planning, under which State ownership of all natural
resources discouraged a sense of responsibility on the part of individuals. The land allocation process is slowly
changing those attitudes, but much remains to be done before individuals, civic groups, mass organisations, the
mass media and businesses have a strong environmental voice in Viet Nam.

Protection strategies

It is difficult to promote regulatory approaches in Viet Nam, due to conflicting and often overlapping areas of
responsibility. Thus, support for non-regulatory approaches including voluntary compliance should be a key
element of any environmental protection strategy. Improving the awareness of important groups—such as the
business community, environmental journalists and women—would help promote voluntary compliance with
environmental regulations.

Disaster preparedness

Viet Nam is one of the more disaster-prone countries in the world and suffers from regular typhoons, floods,
tropical storms and droughts. In response to such threats, MARD and the Central Committee for Flood and
Storm Control are working together to establish strategies for disaster preparedness, prevention and mitigation.
There are still a number of areas in which improvements could be made, such as better dissemination of disaster
information and improved management capacity for droughts, forest fires and sea-water intrusions.

Financing

</div>
(83)<div class='page_container' data-page=83>

with the problem of paying for environmental protection measures. In the near term, this is mostly a problem of
using existing financial and physical resources more efficiently. In the long run, Viet Nam will need to develop

more creative ways to ensure that the costs of environmental degradation are internalised and accounted for by
those causing the degradation.

10.6. Recommendations for action

Strengthen the institutional capacities of agencies with influence over environmental strategy and policy
(such as MOSTE, DOSTEs, NEA, MPI, MARD and MOF), with particular emphasis on building environmental
planning capabilities and inter-agency co-ordination.

Strengthen commitment to environmental protection and management by improving understanding of the
long-term costs of natural resource degradation through the increased use of cost-benefit analysis for projects
under consideration.

Support sustainable rural development and poverty alleviation by routinely incorporating environmental
considerations into poverty reduction and rural development projects.

Improve environmental management by enforcing minimum environmental standards and promoting
self-regulatory tools, such as the promotion of voluntary compliance in the business community, more and better
quality environmental journalism, and increased environmental education in primary and secondary schools.
Improve the quality and quantity of environmental data available, through support for an improved national
environmental monitoring and reporting system. This will, in turn, improve the quality of the State of the
Environment reports as a means of better incorporating environmental concerns into Government
decision-making.

Build environmental and natural resource considerations into the next five-year plan and ten-year strategy
for Viet Nam up to 2010.

Strengthen the national capacity to make contingency plans for, and respond to, natural disasters by extending
disaster management capacities to include drought, sea-water intrusions and forest fires, as well as improving
the public information system for disseminating disaster information.

Develop a donor partnership to support the forest sector and the shift towards a more programmatic focus
for the Five Million Hectare Reforestation Programme, including sub-projects that address unsustainable
forestry practices in critical upland areas.

Make the reversal of coastal environmental and natural resource degradation a development priority for
reasons of poverty reduction and biodiversity conservation, by implementing integrated coastal management
projects on a pilot basis, and promoting partnerships among donors to help formulate common coastal
management strategies.

Encourage land-use planning in urban areas and industrial zones, with adequate space and facilities provided
for wastewater treatment and hazardous waste management.

Improve electrical energy coverage by supporting decentralised supply systems, and encourage sustainable
energy use through the development of renewable energy sources and more efficient use.

Promote the practical application of the principle that environmental costs should be more fully borne by
those who cause them.

</div>
(84)<div class='page_container' data-page=84>

Chapter 11: Conclusions

Regaining the upward momentum of reform, investment and economic growth is certainly crucial for Viet
Nam’s development into the next decade. But what the analysis in this report consistently highlights is that for
Viet Nam’s socio-economic development to be healthy, sustainable and competitive, and for economic growth to
translate into human development, there is a need for developing practical, informed strategies, related human
and institutional capacities and an enabling legal and regulatory framework that can translate intentions and
policies into reality. What this means is that as well as getting the practicalities of development and international
integration right, a widely shared “philosophy of human development” that is both practical and equitable is also
extremely important.

The Government has unequivocally demonstrated that it possesses this commitment to improving the well-being
of the people of Viet Nam by prioritising people-centred development as its overarching objective. Viet Nam’s
people, in turn, have reaped the benefits of this commitment and their lives are generally now vastly improved
from just ten years ago, not only in material terms, but also in terms of greater opportunities and choices. The
progress in meeting many of the country’s own development targets, as well as its international development
commitments made at the UN’s world development conferences is further testimony to the importance placed
by Viet Nam on satisfying the needs of its people. This commitment forms an excellent basis on which to further
develop good governance of the development process. There still remains some distance to travel, though, and
a number of obstacles to navigate in order to create the conditions for Viet Nam to benefit more fully from its
many advantages. To this end, in addition to the issue-specific recommendations for action presented at the end
of each chapter of this report, there are a number of generic recommendations highlighted below, which point to
possible ways to navigate the next phase of Viet Nam’s development:

Focus on the people

At all stages and in all sectors of development planning, the needs and interests of people, and disadvantaged
groups in particular, must continue to be prioritised. The growth of opportunity, choice and well-being of the
most poor, isolated and disadvantaged women and men, and environmental and cultural as well as economic
sustainability must remain the benchmarks against which the success and benefits of development strategies
are assessed. It is also imperative that economic development is not planned without reference to the
benefits and effects of economic plans on the society, culture and environment of the country. Viet Nam has
generally avoided this in the past, and must continue to guard against it. Economic development must remain
a means to the end of improving all-round the lives of the Vietnamese people—particularly the poorest and
most disadvantaged members of society—and preserving their environment and heritage.

Promote people’s participation in development

• Consider allowing more room for public information and discussion, not only to raise public awareness about
important issues and to make Government more transparent and accountable, but also, importantly, to increase
the quality of the policy debate and to garner support for policies and decisions. Nurturing a competitive and

open information environment is just as important for the healthy growth and development of the country as
fostering principles of economic competition.

• Policies, programmes and projects need to be designed with the input of those who will be directly affected
by them in order to make these interventions effective and to reduce any potential negative impacts.
Reaffirm political will

</div>
(85)<div class='page_container' data-page=85>

reform drive is vitally important to securing the investment, capital, allies and aid that are also important in
stimulating Viet Nam’s development.

Devise appropriate strategies

• The process of setting the Government’s short-, medium- and long-term priorities for the country is currently
under way. Defining clear, practical and far-sighted national priorities and the strategies that will address
them is indeed a critical task that should be based on the specific situation and conditions of Viet Nam as
well as build on the development experiences of other countries. Deciding on the appropriate sequencing of
reforms will also be necessary to ensure their success.

• The Government should aim to devise complementary strategies for sustainable socio-economic development,
international economic integration, public administration reform, rural development, poverty alleviation and
sustainable development finance.

• As well as making the policy adjustments and introducing the reforms necessary to prepare Viet Nam for
increased interaction with the rest of the world, national strategies must also provide the framework, incentives,
rules and regulations for both effectively exploiting the country’s unique comparative advantages as well as
preserving the country’s unique heritage.

Promote the private sector

Based on lessons learned in Viet Nam and other developing countries, enable and promote the private

sector’s role in generating future growth, employment, incomes, domestic savings and the sustainability of
the overall development process.

Decentralise and devolve the responsibility for development

• Government will be much better able to fulfil its strategic leadership role as framework-provider and
policy-maker if it delegates the responsibility and authority for certain tasks to local levels of Government and to
other, non-Governmental actors, such as the private sector and civil society. For this process to be effective
and to reap benefits it will involve strengthening political belief in, and further commitment to, decentralisation
and devolution as the most effective ways to manage public affairs and the responsibility for development.
In the case of decentralisation, it will also require substantial resources and investment in training local-level
officials to manage a greater number and variety of responsibilities.

• Effective and good governance of the country would benefit substantially from an increase in accountability
at all levels of Government. The Government has already expressed its firm commitment to this process,
and, for example, has voiced its intention to root out corruption. But to consistently ensure accountability will
require introducing formal mechanisms and procedures that apply to all Government employees, at all levels
of Government.

Build human and institutional capacities

The human and institutional challenges posed by Viet Nam’s ongoing doi moi reforms involve not only the
acquisition of new knowledge, skills and organisational rationales for those individuals and institutions responsible
for facilitating change and implementing new reforms. They also require a significant evolution in mindset to
embrace a more accountable culture that is a prerequisite to effectively operate decentralised systems.

Consolidate the legal and regulatory framework

• In line with the principle of the rule of law enshrined in Viet Nam’s Constitution, current efforts to put in
place a comprehensive legal and regulatory framework and accompanying enforcement mechanisms need

to be maintained and accelerated where possible, in order to put into place a transparent, rule-based guide to
social, economic and political interaction that will promote accountability.

• Existing laws need to be amended and new ones passed in order to regulate Viet Nam’s international
economic integration and to comply with international obligations.

Generate sustainable financial resources for development

</div>
(86)<div class='page_container' data-page=86>

• Undertake regular, comprehensive Public Expenditure Reviews to reassess the allocation of expenditures in
light of the Government’s development priorities.

• Implement the “20/20 Initiative” by boosting both donor and Government allocations to basic social services
spending in order to improve the welfare of the most needy sections of the population.

• In preparing the next phase of its development strategy, the Government should guard against a reliance on
foreign debt and liquid capital and aim as far as possible to generate its financing for development domestically,
focusing on measures to increase domestic savings, in order to preserve sustainability, stability and sovereignty.
Improve data availability and quality

• Prioritise finding solutions to address the urgent need to improve the availability and quality of information,
data and indicators required to make effective and strategic policy decisions.

• Reduce the vulnerabilities and risks to the overall development process through further improved information
on the financial health of domestic banks and their SOE clients, as well as on the quality of public expenditures.
• Address the need for more ethnically and sex-disaggregated data collected using sensitive methods.
• Build capacity, technical capabilities and awareness to promote a culture of reliable and open information.

Institutionalise collaboration and partnership

• Enhance linkages, co-ordination and thereby also the synergies between Government ministries and agencies

working in the same issue area, and likewise between donors and the Government, to maximise the efficient
allocation of financial, human, knowledge and technical resources.

• Promote Government ownership of ODA-funded projects by strengthening the capacity of the aid
co-ordinating bodies and applying a programme approach.

• Review and clarify the mechanism for aid co-ordination inside each Ministry, at both the central and provincial
levels.

• Pursue closer, more effective “partnership” between ODA and NGO partners, with the objective of
progressively heading towards a programme approach in which Viet Nam’s development interests—and not
donor interests—come first. Encourage a graduation from diplomacy to constructive and frank debate
between partners.

Moving ahead: partnerships for further progress

The challenge of the CCA is to translate the recommendations offered into concrete actions that will support the
Government and all of its development partners in working together towards further progress in improving
human well-being in Viet Nam. The analysis in this report offers a multitude of rich opportunities for both
deepening existing partnerships and developing new partnerships in a wide variety of areas, and developing the
capacities for improved governance to further improve human well-being. Government-led partnerships for
developing and implementing effective strategies, plans, reforms and policies will be essential to providing a
broad framework for all development partners needed to guide comprehensive, coherent and well-balanced
development, and meet the multitude of challenges facing Viet Nam in the first decade of the new millenium.
Partnerships for strengthening participation of the non-state sectors will be needed to ensure balanced and
sustainable development. Partnerships for further developing the flow of useful information, and increased
transparency as a means for improving accountability, would contribute greatly to reducing isolation and risks,
and increasing participation of all Vietnamese people in the development process. Partnerships for an enabling
and equitable legal and regulatory framework to guide responsible development would help underwrite the
sustainability and stability of the development process. Clearly there is no lack of rich opportunities for working

together, but rather a need to prioritise, which in turn would be most effectively achieved through
Government-led dialogue with all development partners, both national and international.

</div>
(87)<div class='page_container' data-page=87>

Some existing partnership groups

The following partnership groups (among others), anchored around national priorities and programmes,
provide an ideal opportunity for the UN to continue a dialogue based on this Common Country Assessment
and work closely with the Government and donors to form a consensus to implement a number of the
recommendations contained in this report.

Partnership groups for National Target Programmes are established in Forestry and Rural Development.
• The Partnership to Assist the Poorest Communes (PAC):

This supports the Government’s 1,715 Poor Communes Programme. The PAC includes donors and
Government ministries and agencies, such as the Ministry of Planning and Investment (MPI), Ministry
of Agriculture and Rural Development (MARD), Ministry of Labour Invalids and Social Affairs
(MOLISA), and the Committee for Ethnic Minority and Mountainous Areas (CEMMA).

• The 5 Million Hectares Group supports the 5 Million Hectares Forestry Programme. The group
consists of a number of donors and MARD, MPI, MOFI and State Bank of Viet Nam.

A partnership group based on co-operation on a sectoral basis is now active in the Health sector,
while a similar sectoral approach is emerging in water resource management where an informal donor
support group is evolving towards a partnership group.

• The Health Working Group has as its initial objective to develop a joint Health Sector Strategy. The
Health group brings the Ministry of Health (MOH) together with bilateral donors and multilateral
agencies.

Regional partnership groups geared toward increased collaboration on a regional basis are taking form

in three areas: Ho Chi Minh City, Hai Phong/Quang Ninh Coastal region and Tra Vinh province.

development dialogue of all development partners to reach a shared vision and objectives, and to offer guidance
on priorities and related partnerships for future actions.

This strategy will involve research and analysis on a number of topics, including the role of the State, the impact
of globalisation and integration, economic development and social equity, and rural development. The strategy
will help to provide a timeline for the sequencing of reforms and set medium-term development objectives for the
country. Other work is being carried out at the sectoral level, including development of the next Environmental
Action Plan, and National Strategy on Public Administration Reform, for example. Taken together, this work
being carried out by the Government provides an opportunity to discuss in detail the recommendations contained
in this CCA and, where appropriate, to provide input into the national plans and strategies.

</div>
(88)<div class='page_container' data-page=88>

Acronyms

ABE Alternative Basic Education

ADB Asian Development Bank

AIDS Acquired Immune-Deficiency Syndrome
ANC Ante-Natal Care

AFTA ASEAN Free Trade Area

APEC Asia-Pacific Economic Co-operation
ARI Acute Respiratory Infection

ASEAN Association of South-East Asian Nations
CBM Community-Based Monitoring

CMC Child Malnutrition Control

CPCC Committee for Protection and Care of Children
CPR Contraceptive Prevalence Rate

DCC Day-Care Centre

DSI Development Strategy Institute of Ministry of Planning and Investment
ECC Early Childhood Care

EFA Education for All
EOC Essential Obstetric Care

EPI Expanded Programme on Immunisation
EPZ Export Processing Zone

FAO Food and Agricultural Organisation of the United Nations
FDI Foreign Direct Investment

FIE Foreign-Invested Enterprise
FP Family Planning

GDP Gross Domestic Product
GSO General Statistical Office

HEPR National Programme for Hunger Eradication and Poverty Reduction
HIV Human Immune Deficiency Virus

ICPD International Conference on Population and Development
IDD Iodine Deficiency Disorder

IDU Injecting Drug User

IEC Information-Education-Communication
ILO International Labour Organisation
IMCI Integrated Management of Child Illness
IMR Infant Mortality Rate

ISO International Standard Organisation
IUD Intra-Uterine Device

IZ Industrial Zone

LEB Life Expectancy at Birth
LUC Land-use Certificate

</div>
(89)<div class='page_container' data-page=89>

MOET Ministry of Education and Training
MOF Ministry of Fisheries

MOLISA Ministry of Labour, Invalids and Social Affairs
MOH Ministry of Health

MPDF Mekong Project Development Facility
MPI Ministry of Planning and Investment

NCPFP National Committee for Population and Family Planning
NGO Non-Governmental Organisation

NIN National Institute of Nutrition
ODA Official Development Assistance
PAR Public Administration Reform

PER Public Expenditure Review
PIP Public Investment Programme
PCF People’s Credit Funds

RTI Reproductive Tract Infection

SMEs Small- and Medium-sized Enterprises
SOE State-owned Enterprise

SRV Socialist Republic of Viet Nam
STI Sexually Transmitted Infection

UNAIDS Joint United Nations Programme on HIV/AIDS
UNDCP United Nations Drug Control Programme
UNDP United Nations Development Programme
UNFPA United Nations Population Fund

UNICEF United Nations Children’s Fund

UNIDO United Nations Industrial Development Organisation
UPE Universal Primary Education

USI Universal Salt Iodinisation
VAT Value-added Tax

VBP Viet Nam Bank for the Poor
VLSS Viet Nam Living Standards Surveys

WB World Bank

</div>
(90)<div class='page_container' data-page=90>

Bibliography

Chapter 1: The Development Agenda

Ministry of Planning and Investment (MPI) (1998) Workshop on Public Investment Programme 1996-2000,
Ha Noi

Socialist Republic of Viet Nam (SRV) (1998a) Basic Social Services in Viet Nam: An Analysis of State
Public and Donor Expenditures, National Report at Ha Noi Meeting on 20/20 Initiative, Ha Noi

SRV (1998b) Socio-Economic Development and Stabilisation Policy in the Context of the Regional Financial
and Economic Crisis, Government Report for 1998 Consultative Group Meeting for Viet Nam, Ha Noi
UNDP (1997) Viet Nam: Development Co-operation Report 1997, Ha Noi

UNDP (1999) Report on Basic Social Services in Viet Nam, Ha Noi

UN (1998a) United Nations Development Assistance Framework for the Socialist Republic of Viet Nam,
Ha Noi

UN (1998b) United Nations Development Assistance Framework—Issues Papers on Follow-up in Viet
Nam to Major World Conferences, Ha Noi

__________________________________________________________________________________
Chapter 2: Modernisation and Industrialisation

Centre of International Economics (CIE) (1998) Viet Nam’s Trade Policies 1998, Canberra
IMF (1999) Viet Nam: Selected Issues, Washington DC

Le Dang Doanh (1999)Ten Years of Doi Moi: Where is Viet Nam’s Economy?, in Vietnamese Studies, No. 2,
Ha Noi

Le Viet Duc (1999)Viet Nam’s Industry: 15 Years of Renovation (1986-2000), in Vietnamese Studies, No. 2,
Ha Noi

Mai Ly Quang (ed) (1999) Viet Nam’s Integration in Progress, Ha Noi

Tran Thu Hang (1999) Viet Nam’s Trade in the Course of International Integration, in Vietnamese Studies, No.
2, Ha Noi

Mekong Project Development Facility (MPDF) (1999) Viet Nam’s Undersized Engine: A Survey of 95 Larger
Private Manufacturers, Ha Noi

The Services Group (TSG) (1998) Recommendations to Enhance the Vietnamese Industrial Zone Regime,
Virginia

UNDP (1998) East Asia: From Miracle to Crisis—Key Lessons for Viet Nam, Ha Noi
UNDP (1999) Human Development Report, New York

</div>
(91)<div class='page_container' data-page=91>

UNIDO & Central Institute for Economic Management (CIEM) (1999a) Trade and Industry Policies for
Economic Integration, Ha Noi

UNIDO & CIEM (1999b) Transnational Corporations and Host Country Development, Ha Noi

UNIDO & Development Strategy Institute (DSI) (1997) Viet Nam: a Medium-term Industrial Strategy, Ha Noi
UNIDO & DSI (1999a) Improving Macroeconomic Policy and Reforming Administrative Procedures to
Promote Development of Small and Medium Enterprises in Viet Nam, Ha Noi

UNIDO & DSI (1999b) Viet Nam: Industrial Competitiveness Review, Ha Noi
World Bank (1998) Viet Nam: Rising to the Challenge, Ha Noi

__________________________________________________________________________________
Chapter 3: Poverty

ADUKI (1995) Poverty in Viet Nam, SIDA, Stockholm

Dollar, D., Glewwe, P. & Litvack, J. (eds) (1998) Household Welfare and Viet Nam’s Transition, World Bank,
Washington

General Statistical Office (GSO) (1993) Rich and Poor Survey, Ha Noi
GSO (1994, 1996) Multipurpose Household Surveys 1994, 1996, Ha Noi

GSO (1994, 1999a) Viet Nam Living Standards Surveys I (1992/1993) and II (1997/98), Ha Noi
GSO (1999b) Population and Housing Census (preliminary data), Ha Noi

Haughton, D. et al (eds) (1999) Health and Wealth in Viet Nam: An Analysis of Household Living Standards,
Institute of South-east Asian Studies, Singapore

Ministry of Labour, Invalids and Social Affairs (MOLISA) (1999) Annual reports of the Office of the National
Target Programme for HEPR, Ha Noi

OXFAM GB, Action Aid, SCF UK & MRDP (1999) Participatory Poverty Assessments, Ha Noi

Socialist Republic of Viet Nam (SRV) (1998) Basic Social Services in Viet Nam: An Analysis of State Public
and Donor Expenditures, Ha Noi

SRV et al (1999) Attacking Poverty: Viet Nam Development Report 2000, a joint report of the
Government-Donor-NGO working group, Ha Noi

Thompson, K. (1999) Social Safety Nets for Vulnerable Groups in Viet Nam, ILO report, UNDP-funded
project

UNDP, UNFPA & UNICEF (1995) Poverty Elimination in Viet Nam, Ha Noi

</div>
(92)<div class='page_container' data-page=92>

UNDP (1997b) Some Lessons Learned in Supporting the Transition from Poverty to Prosperity, Ha Noi
UNDP (1998) Overcoming Human Poverty, UNDP Poverty Report 1998, New York

UNDP (1999a) Human Development Report, New York

UNDP (1999b) Capacity Assessment for Viet Nam’s National Target Programme for HEPR, Ha Noi
UNDP (1999c) Report on Basic Social Services in Viet Nam, Ha Noi

World Bank (1999) World Development Report 1998/99, New York

__________________________________________________________________________________
Chapter 4: Governance

Government Committee for Organisation and Personnel (GCOP) (1998) Overview of the Socio-economic
Situation and Implementation of Public Administration Reform in Viet Nam, Ha Noi

National Assembly Office (NAO) (1996) Ordinance on the Concrete Tasks and Powers of the People’s
Council and People’s Committee at Each Level, Ha Noi

NAO (1999a) Law on Organisation of the National Assembly, Ha Noi
NAO (1999b) Law on Organisation of the Government, Ha Noi
NAO (1999c) Law on Organisation of the People’s Court, Ha Noi
NAO (1999d) Law on Organisation of the People’s Procuracy, Ha Noi

NAO (1999e) Law on Organisation of the People’s Council and People’s Committee, Ha Noi
NAO (1999f) 1992 Constitution, Ha Noi

NAO (1999g) Budget Law, Ha Noi

Socialist Republic of Viet Nam (SRV) (1995) National Public Administration Reform Programme, Ha Noi
SRV (1997) National Plan of Action for the Advancement of Women, Ha Noi

SRV (1998) Decree 29/CP on Grassroots Democracy Regulations, Ha Noi

__________________________________________________________________________________
Chapter 5: Population

Cuong, D.M. & Vinh, D.Q. (1998) Social Adjustment in Globalisation Contact, the Role of Social Actors,
Ha Noi

Dang Anh, S. Goldstein & McNally, J. (1997) Development and Internal Migration in Viet Nam, International
Migration Review, Vol. 27, No. 2, pp312-337

</div>
(93)<div class='page_container' data-page=93>

National Committee for Population and Family Planning (NCPFP) (1996a) Population and Family Planning
Programme in Viet Nam, Ha Noi

NCPFP (1996b) Report, Review and Assessment of Population Policies in Viet Nam, Ha Noi
NCPFP (1997) Demographic and Health Survey, Ha Noi

Parliamentary Committee for Social Affairs (1999) Viet Nam: Along the ICPD Path, Ha Noi

Troung Si Anh, Knodel, J., Lam, D. & Friedman, J. (1998) Family Size and Children’s Education in Viet Nam,
Demography, Vol. 35, No. 1, pp57-70

UNAIDS (1999) Progress Report 1998, Ha Noi

UNDP (1998) The Dynamics of Internal Migration in Viet Nam, Ha Noi

UNFPA (1996) Programme Review and Strategy Development Report, Ha Noi

__________________________________________________________________________________
Chapter 6: Labour

Chandarasi, S. & de Silva, A. (1996) Globalisation, Employment and Equity: the Viet Nam Experience
(unpublished)

Dao Quang Vinh (1999) Country Paper: Viet Nam (paper prepared for the ILO Asia and Pacific Roundtable
on the Roles of Enterprises and Society Partnerships), Ha Noi

General Statistical Office (GSO) (1999) The Second Viet Nam Living Standards Survey 1997/98, Ha Noi
ILO (1998) Inter-Regional Programme to Support the Design and Implementation of Tripartite National
Occupational Safety and Health Policies and Measures (draft report)

ILO (1999) Decent Work. Report of the Director-General to the 87th Session of the International Labour
Conference, ILO Geneva

ILO/MOLISA (1999) Report and Recommendations of an ILO/MOLISA Workshop on Agrarian Transition
in Viet Nam: Employment and Poverty Alleviation, Ha Noi

Institute of Labour, Science and Social Affairs (ILSSA) (1998) Centres for Employment Services: Status and
Solutions, Ha Noi

ILSSA (1999) Profile on Child Labour in Viet Nam (draft report), Ha Noi
Jamal, V. & Jansen, K. (1998) Agrarian Transition in Viet Nam, ILO Geneva

Krishnamurty, J. (1999) Employment and Labour Market Social Safety Nets for Vulnerable Groups in Viet
Nam (working paper), ILO Bangkok

</div>
(94)<div class='page_container' data-page=94>

Ministry of Labour, War Invalids and Social Affairs (MOLISA) (1996, 1997a, 1998 and 1999a) Status of
Labour and Employment in Viet Nam, Ha Noi

MOLISA (1997b) Quinquinial Report 1992-1996, Ha Noi

MOLISA (1999b) National Week of Industrial Safety and Health, Ha Noi

Ministry of Planning and Investment (MPI) (1998) Annual Report: Department of Labour, Culture and
Social Affairs, Ha Noi

Oudin, X. (1998) Employment and Unemployment, Ha Noi

Pham Chi Lan (1996) Vietnamese Women in Business, VCCI Ha Noi

Research Centre for Women Workers (1998a) Summary Report: Results of a Survey on Employment and
Life, Working Conditions, Labour Safety and Health of Women Workers in Industrial Enterprises, MOLISA
Ha Noi

Research Centre for Women Workers (1998b) Female Labour Force in Industry in Viet Nam in Period of
Renovation, MOLISA Ha Noi

Socialist Republic of Viet Nam (SRV) (1999a) The Second National Report on the Implementation of the
UN Convention on the Elimination of all Forms of Discrimination Against Women, Women’s Publishing
House, Ha Noi

SRV et al (1999b) Attacking Poverty: Viet Nam Development Report 2000, a joint report by the
Government-Donor-NGO working group, Ha Noi

Thompson, K. (1999) Social Protection and Social Safety Nets (internal working paper), ILO Bangkok
UNIDO (1998) Rural Industrial Development in Viet Nam: Strategy for Employment Generation and

Regionally Balanced Development (draft report), Ha Noi

_________________________________________________________________________________
Chapter 7: Health and Nutrition

Dahlgren, G. (1999) Global Health Reform
FAO (1998) ESN—Nutrition Country Profiles

General Statistical Office (GSO) (1997) Implementation of Mid-decade Goals for Vietnamese Children by
1995, Ha Noi

Ministry of Health (MOH) (1996) Strategic Orientation for People’s Health Care and Protection in the
Period of 1996-2000 and Viet Nam’s National Drug Policy, Ha Noi

MOH & UNICEF (1999) Annual Monitoring Review Workshop on Community-based Monitoring
Implementation, Ha Noi

MOH (1998a) Health Statistics Year Book 1997, Ha Noi

</div>
(95)<div class='page_container' data-page=95>

MOH (1998c) EPI Annual Report, Ha Noi
MOH (1998d) ARI Annual Review, Ha Noi

MOH (1999) Health Statistics Year Book 1998, Ha Noi
MOH HIV bulletins

Narula, M. (1997) Viet Nam Revolving Drug Fund Study,Department of Health Policy and Planning, Tokyo
University

National Committee for Population and Family Planning (NCPFP) (1997) Viet Nam Demographic and Health
Survey 1997, Ha Noi

NIHE & MOH (1998) EPI National Review, Ha Noi

NIN & MOH (1998a) National Nutrition Survey, (draft report), Ha Noi
NIN & MOH (1998b) Investment for Child Nutrition in Viet Nam, Ha Noi

Socialist Republic of Viet Nam (SRV) (1998) Monitoring the 20/20 Initiative:Basic Social Services in Viet
Nam: An Analysis of State Public and Donor Expenditures,Interim report of preliminary findings, Ha Noi
Thai Binh Medical College (TBMC) (1996) Baseline Survey on Household Latrines in Five Provinces of
Central and Northern Viet Nam, Ha Noi

UNAIDS & WHO (1998) Viet Nam: Epidemiological Factsheet on HIV/AIDS and Sexually Transmitted
Diseases, Ha Noi

UNAIDS (1999) Progress Report 1998, Ha Noi

UNICEF (1999) The State of the World’s Children, Ha Noi
WHO Western Pacific Region Health Data Bank

__________________________________________________________________________________
Chapter 8: Basic Education

Bray, M. (1996) Counting the Full Cost: Parental and Community Financing in Asia, Washington DC
Evans, K. (1998) The Affordability of Supplies for Primary Education in Viet Nam, UNICEF, Ha Noi
General Statistical Office (GSO) (1999) Second Viet Nam Living Standards Survey 1997-98, Ha Noi
Ministry of Education and Training (MOET) (1994) Transition of Children to School,National Institute for
Education and Science, Ha Noi

MOET (1997) Educational Statistics for the 1997-1998 School Year, Ha Noi

</div>
(96)<div class='page_container' data-page=96>

MOET (1998c) Annual School Report, Department of Primary Education, Ha Noi

MOET (1998d) Education Statistical Data, Education Management Information Centre, Ha Noi
MOET (1999a) Annual Record Book, Department of Primary Education, Ha Noi

MOET (1999b) Report on the Assessment of Education For All in Viet Nam 1990-2000, National Committee
for EFA-2000 Assessment, Ha Noi

MOET (1999c) 1997-98 School Year Report, Education Management Information Centre, Ha Noi
MOET (1999d) Education Statistics in Brief 1998-99, Ha Noi

OXFAM GB, Save the Children Alliance & UNICEF (1998) Beyond 20/20. The Vulnerable Family Challenges
for Education, Ha Noi

Radda Barnen (1998) Children at Risk—Prevention of Exclusion, Stockholm

UNDP (1998) Monitoring the 20/20 Initiative, Basic Social Services in Viet Nam: An Analysis of State
Public and Donor Expenditures, Ha Noi

UNDP (1999) Human Development Report 1999, New York

UNDP, UNFPA & UNICEF (1998) Expanding Choices for the Rural Poor, Ha Noi

UNDP & UNICEF (1996) Catching Up: Capacity Development for Poverty Elimination in Viet Nam, Ha Noi
UNICEF (1994a) Viet Nam: A Situation Analysis 1994, Ha Noi

UNICEF (1994b) Towards Universalised Primary Education in Viet Nam: A Study of the Cost-effectiveness
of the Primary Education System, Ha Noi

Socialist Republic of Viet Nam (SRV) (1999) First Periodic Report on the Implementation of the Convention

on the Rights of the Child, 1993-1998, Ha Noi

World Bank (1996) Viet Nam Education Financing Sector Study, Ha Noi

_________________________________________________________________________________
Chapter 9: Rural Development

Dubois, O. & Morrison, E. (1998) Sustainable Livelihoods in Upland Viet Nam: Land Allocation and Beyond,
Forest and Land Use Series, No. 14, International Institute for Environment and Development, London
Fforde, A. (1998) Economic Development and Organisation in Viet Nam’s Countryside: Rural Institutions,
the New-Style Co-operatives and Implications for the Restructuring of the Ministry of Agriculture and
Rural Development, Ha Noi

FAO (1998) Crop Diversification and Export Promotion, (draft report), FAO/ADB Co-operative Programme,
Ha Noi

</div>
(97)<div class='page_container' data-page=97>

International Food Policy Research Institute (IFPRI) (1998) Policy Simulation for Agricultural Diversification,
Ha Noi

IMF (1999) Viet Nam Statistical Appendix May 1999, Washington DC

Johnson, A. (1996) Micro-finance in Viet Nam: A Collaborative Study Based upon the Experiences of
NGOs, UN Agencies and Bilateral Donors, Ha Noi

Kerkvliet, B. & Porter, J.D. (eds) (1995) Viet Nam’s Rural Transformation, Institute of South-east Asian
Studies, Singapore

Ministry of Agriculture and Rural Development (MARD) (1997) Rural Development in Viet Nam: A Strategic
Framework for Planning and Programme Development, (draft report), Ha Noi

Ministry of Planning and Investment (MPI) (1997) Sector Review on Agriculture in Post-Transition Viet
Nam: Opportunities and Challenges, supported by UNDP and FAO, Ha Noi

Nguyen Viet Hai (1998) Livestock Production in Viet Nam, Ha Noi

OXFAM GB (1997) Gender Issues in Land Allocation: A Case Study in Lung Vai Commune, Ha Noi
Perkins, Wriggley & Dapice (1998) Rural Industrialisation: Various Papers, Ha Noi

Socialist Republic of Viet Nam (SRV) (1998) Government Direction on Agriculture and Rural Development,
Report prepared for the 1998 Consultative Group Meeting, Ha Noi

UN (1998) Expanding Choices for the Rural Poor, Ha Noi

UNDP (1998a) Viet Nam Agriculture: A Review of Trends and Issues, Ha Noi
UNDP (1998b) Rural Development Strategy Document, Ha Noi

UNDP & UNICEF (1996) Catching up: Capacity Development for Poverty Elimination in Viet Nam, Ha Noi
UNIDO (1999) Rural Industrial Development in Viet Nam: Strategy for Employment Generation and
Regionally Balanced Development, (draft report), Ha Noi

UNOPS (1996) Successfully Achieving Decentralisation and Participation: A Case Study from Viet Nam
of Tuyen Quang Province, Kuala Lumpur

World Bank (1998) Viet Nam: Advancing Rural Development from Vision to Action, Report prepared for the
1998 Consultative Group Meeting, Ha Noi

__________________________________________________________________________________
Chapter 10: Environment and Natural Resource Management

Dubois O. & Morrison, E. (1998) Sustainable Livelihoods in Upland Viet Nam: Land Allocation and Beyond,

Forest and Land Use Series No.14, International Institute for Environment and Development, London

</div>
(98)<div class='page_container' data-page=98>

National Environment Agency (NEA) & Asian Development Bank (ADB) (1998) Viet Nam National Strategy
for Hazardous Waste Management, Ha Noi

UN (1998) United Nations Development Assistance Framework: Issues Papers on Follow-up in Viet Nam
to Major World Conferences, Ha Noi

UNDP (1999) A Study on Aid to the Environment Sector, (draft report), Ha Noi

Warfvinge, H. & Ngo Sy Hoai (1998) National Paper on the Socialist Republic of Viet Nam, (draft report),
New York

</div>