Final Report 191208

INDEPENDENT MONITORING OF THE IMPLEMENTATION
OF THE HANOI CORE STATEMENT AT SECTORAL AND

SUB-NATIONAL LEVEL IN VIETNAM
Final Report
Katarina Kotoglou, Marcus Cox, Masumi Shimamura, Pham Hong Van,

Dao Nhat Dinh and Nguyen Cuong
The views presented in this report are exclusively those of the IMT, and do not reflect the
official views of the GoV, development partners or any of the other organisations consulted.
December 2008
Independent Monitoring on the Implementation of the Hanoi Core Statements
Acknowledgements
The report and case studies were prepared by Katarina Kotoglou and Marcus Cox with
background and research support from Masumi Shimamura, Pham Hong Van, Dao Nhat
Dinh and Nguyen Cuong. Internal quality control and advice on methodology was provided
by Stephen Jones.
The independent monitoring team (IMT) interviewed key informants, including

representatives from the Government of Vietnam (GoV), development partners and non-
governmental organisations (NGOs). We would like to thank all concerned, who were
generous with their time, especially all the people interviewed in Phu Tho and Nghe An.
The IMT would also like to thank the Ministry of Planning and Investment (MPI) for its
provision of guidance and its help in accessing people, information and documentation. The
team would also like to express its appreciation for the feedback provided on earlier drafts of
the report by the Independent Monitoring Thematic Group (IMTG).
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Executive summary
In September 2005, Vietnam and its development partners made a series of joint
commitments to improving aid effectiveness in Vietnam, set out in the Hanoi Core Statement
(HCS). The HCS establishes joint targets in the areas of ownership, alignment,
harmonisation, managing for results and mutual accountability to be achieved by 2010. One
of the commitments in the HCS is for independent monitoring of progress against these
commitments to support mutual accountability and lesson learning. The first round of
independent monitoring was carried out in 2007. In 2008, a Terms of Reference (ToR) for the
second round of independent monitoring was developed by the IMTG, with a focus on
implementation of the HCS at the sectoral and sub-national levels. Two provinces (Phu Tho
and Nghe An) and three sectors (agriculture and rural development, HIV and transport) were
selected.
The exercise was carried out by an IMT using an approach and methodology agreed by the
IMTG. A monitoring framework was created by disaggregating the HCS implementation into
its component commitments, using a set of headings based on an idealised process of
sectoral policy making and Official Development Assistance (ODA) management. It draws on
the Organisation for Economic Cooperation and Development/Development Assistance
Committee (OECD/DAC) definition of a programme-based approach (PBA), namely: (i)
leadership by the host country or organisation; (ii) a single comprehensive programme and
budget framework; (iii) a formalised process for donor coordination and harmonisation of
donor procedures for reporting, budgeting, financial management and procurement; and (iv)
efforts to increase the use of local systems for programme design and implementation,
financial management, monitoring and evaluation.1 The elements in the monitoring
framework also reflect the recommendations from the 2007 independent monitoring report to
focus on: the emergence of PBAs to improve country leadership of assistance at sectoral
level; use of country systems for aid delivery; and country-led and coordinated capacity
building.
The challenge
Vietnam has gone further than perhaps any other developing country in articulating
principles, commitments and targets on aid effectiveness. With the active facilitation of the
MPI, the structures for dialogue with donor partners are active and continually improving.
Vietnam continues to take a leading role in international aid effectiveness arenas, and is now
moving quickly to implement the Accra Agenda for Action (AAA). The key question for the
independent monitoring is: to what extent have these commitments led to real changes in aid
delivery practices at sectoral and sub-national level?
Many past and current assessments of aid in Vietnam point to the fragmented nature of
external assistance. For example, in agricultural and rural development, there are as many
as 200 ongoing projects, with some 40–50 new projects agreed each year. In the health
sector, there are around 75 ongoing projects, mostly under US$500,000 in size, and with
98% funded by a single donor. Moreover, in comparison to other developing countries with
similar aid levels, Vietnam has a high level of fragmentation of external assistance, and has
1
OECD/DAC, ‘Harmonising Donor Practices for Effective Aid Delivery’, vol. 2, Box 3.1. This definition
is also used in the HCS.
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December 2008
been identified as one of the countries with the greatest potential for improved division of
labour.2
Fragmented project delivery has a number of well-documented shortcomings. Project design

is heavily influenced by donor rules and preferences, which diminishes country ownership,
undermines planning and budgeting processes, and reduces the focus and coherence of
development efforts in the sector. Multiple Project Management Units (PMUs) create high
management costs for government counterparts, while reducing the impact of the projects on
planning, budgeting, financial management and monitoring systems.
Given that external assistance represents only a small proportion of overall development
finance3, and has only a few years to run before Vietnam achieves middle-income country
(MIC) status, the fundamental aid effectiveness challenge in Vietnam is therefore how to
make external assistance more strategic in nature—that is, how to achieve transformative
impact on policies, resource allocation, institutional reforms and capacities.
The HCS calls for the reform of aid to Vietnam according to the well-known principles of the
Paris Declaration (ownership, alignment, harmonisation, managing for results and mutual
accountability). But what, in practical terms, does the HCS envisage should change about
the way aid is delivered? The IMT concludes that there are two main types of change
required to implement the HCS. One is to move towards PBAs by fitting external assistance
within agreed, GoV-led programmes and budget frameworks. A second is to increase the
use of country systems for aid delivery, so that assistance helps strengthen Vietnamese
institutions and processes. These solutions are linked. Both of these are ambitious goals,
which entail changes to established practices in Vietnam, on both the donor and GoV sides.
In both cases, progress has been harder to make than may have been anticipated at the
time the HCS was adopted. They continue to represent the two main frontiers for improving
aid effectiveness in Vietnam.
Programme based approaches
The 2007 independent monitoring report concluded that developing PBAs could be an
effective strategy for strengthening the alignment of assistance at sectoral level behind
country-led strategies, and overcoming the fragmentation of external assistance. However, it
also noted that, while PBAs could provide a platform for a more intensive, higher-quality
engagement between donors and government, these benefits did not automatically follow.
Their realisation depended on the extent to which both sides were willing and able to bring
about real changes to behaviour. To achieve a significant improvement in aid effectiveness,
a PBA has to be based on a shared vision between donors and GoV counterparts on how
exactly the development partnership should be strengthened.
2
OECD/DAC, ‘Towards Better Division of Labour: Concentration and Fragmentation of Aid’, Global
Forum on Development—Policy Workshop on the Challenges of Scaling Up and Country-Level
Predictable Aid Linked to Results, December 2007.
3
While Vietnam is one of the largest recipients of ODA in the world in absolute terms, ODA represents
on average only about 4.5% of GDP, and less than 12% of the total government budget. The volume
of ODA is less than FDI, tourist revenues and remittances. However, ODA is nonetheless regarded as
an important catalyst for investment flows and a key source of financing for capital investments in
socioeconomic infrastructure, providing around 30% of capital investments (2007 IMT report, p. 4.)
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December 2008
There are a number of benefits expected from the shift to PBAs. It is hoped that PBAs will
encourage a more coherent approach to programming both national and external resources.
By directing assistance through country systems, donors hope to support and accelerate
institutional reform and capacity development. Donors also hope that basing their support on
an agreed sectoral or sub-sectoral strategy will provide a more effective platform for policy
dialogue and mutual accountability. However, while there have been some early successes,
it appears that the level of effort on the GoV and donor side required to realise the benefits of
PBAs is much harder to achieve than originally anticipated.
The IMT identifies a number of factors inhibiting the development of effective PBAs:
Fragmented policy-making process and dialogue

• Policy making at the sectoral level tends to be highly fragmented, in that policy decisions
emerge from multiple institutional sites and processes, rather than through a single
mechanism. As a result, line ministries appear to find it difficult to formulate and
implement a single national policy for their sector. The problem is even more acute where
responsibilities are divided across several ministries (for instance, in the area of HIV and
rural water and sanitation).
• The fragmented nature of the policy process may also affect the quality of policy
dialogue. Because the policy process is not centrally organised, it often appears opaque
to non-government stakeholders (both donors and civil society). Donors are often unsure
of how best to engage in policy dialogue, and there are relatively few opportunities for
civil society participation in the policy process at the sectoral level (although there have
been major improvements in grass-roots participation). While sector partnership groups
exist in all the major sectors and thematic areas, they are often limited to information
sharing, with few opportunities for substantive involvement in sectoral policy development
and strategic discussions on how best to allocate resources over the medium term.
Lack of comprehensive sector programme and budget framework

• While sector strategies provide a broad policy framework to which donors can align their
support, they do not constitute a single, comprehensive sector programme and budget
framework. What appears to be missing in the sectors examined by the IMT are
operational programmes with cost estimates for proposed activities and a set of priorities
developed by reference to a defined resource envelope.
• Vietnam has been piloting Medium-Term Expenditure Frameworks (MTEFs) in a number
of sectors (agriculture and rural development, education, health and transport) and
provinces in order to establish a stronger link between planning and budgeting. While
recognising that the initiatives are underway, in the absence of functioning MTEFs,
formal linkages between planning and budgeting are weak, and the capital and recurrent
budgets are not integrated (for instance, in the area of transport, budgetary allocations for
maintenance are generally inadequate to sustain the capital investments undertaken). It
has also so far proven to be difficult to incorporate accurate figures on external
assistance (in particular grants) into the MTEF.
Decentralisation
• Decentralisation presents another major challenge to the effective development of PBAs.
Vietnam is progressively decentralising or deconcentrating responsibilities for
implementing development policy to the provincial level and below. Most services and a
substantial share of development investments are now the responsibility of provincial
authorities. This entails a transformation in the role of line ministries, from service
delivery agencies to policy makers and regulators. Line ministries appear to be finding
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December 2008
this a difficult transition to make. As fiscal responsibility is transferred to the provinces,

the central ministries have relatively little practical authority to ensure that national
policies and priorities are implemented.
• Financial reporting at provincial level remains fairly weak, and focuses on inputs rather
than outcomes and results. The planning and budgeting processes at provincial level are
not well linked, and there are capacity constraints on developing public finance
management systems that can support the development of PBAs at the provincial level.
Capacity for monitoring and evaluation of development programmes is also weak at the
provincial level. As a result, central authorities have little information about programme
delivery at provincial level, and the provinces face little or no formal accountability for
their contribution to implementing national and sectoral development strategies.
Commitments and incentives

• The above factors may help to explain why line ministries appear to be at best
ambivalent, and at worst resistant, to donor initiatives to develop PBAs. Line ministries
appear to be content with stand-alone project modalities, which are usually the preferred
aid modality. In part, this may be a desire to accommodate donors who prefer to remain
with stand-alone projects. However, there are also deeper incentives at play.
• Stand-alone projects provide line ministries with direct access to and control over
financial resources. These resources provide a means of implementing projects directly
at the sub-national level, through hierarchical project management structures.
Traditionally, many donor projects have been established with a central PMU in the line
ministries, and provincial PMUs that report directly to the central authority and donor.
This structure provides the line ministries with a measure of control over project
expenditure at provincial level. The central PMU also provides line ministries with
additional staffing and operational budgets that enable them to oversee project
implementation by the provinces. Without the additional resources associated with stand-
alone project management approaches, the ministries find themselves accountable for
the delivery of decentralised programmes, despite having little practical authority over
their implementation.
In the face of these challenges, there are risks associated with the move towards PBAs.
Some donor agencies are under strong pressure from their headquarters to increase their
participation in PBAs on a global basis, in accordance with their Paris Declaration
commitments. Line ministries are trying to accommodate this preference, without necessarily
sharing the vision of the benefits offered by PBAs. The danger is that this will lead to the
introduction of ‘pro forma’ PBAs, in which the aid modality changes but the quality of
engagement does not improve. This is not to say that moving towards PBAs is not the right
goal for Vietnam. However, to avoid these risks, GoV and donors need to give careful
consideration to exactly what they are trying to achieve with PBAs, and how best to manage
the transition.
Use of country systems for aid delivery and country–led capacity building
There has been a concerted effort to bring Vietnamese systems (project preparation,
procurement, financial management, reporting, etc.) up to international standards, with well-
coordinated support on regulatory and technical issues provided by the six Banks. There
have been some successes, including the development of common Feasibility Study
guidelines and an Aligned Monitoring Tool (AMT). However, some donors continue to take
the positions that they are only willing to use the country system as and when they reach
international good practice standards. In the view of the GoV, however, they are being too
rigid in their assessments, given that Vietnamese regulations will need to apply to all public
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December 2008
investments, whether ODA-financed or not. There are concerns that unrealistic standards
are being used to mask a lack of flexibility in donor rules and procedures.
The IMT concludes that donors should be more willing to make real changes in their
practices, using country systems as and when they reach standards that are appropriate for
the Vietnamese context and administrative realities, provided that the gaps between the
country system and expected donor standards are not considerable. The AAA also makes it
clear that donors must use country systems as their first option. If they do not do so, they
must state the reason, and ensure that any additional safeguards they impose are consistent
with ongoing reforms.
However, more work is also needed on the Vietnamese side to enable this to happen.
Inconsistencies within Vietnamese laws and procedures, and rules requiring special
treatment of donor funds irrespective of donor requirements, pose practical obstacles to
systems alignment. The MPI’s facilitation on this issue needs to be translated into effective
commitment across the administration.
The IMT also concludes that, while line ministries and provincial authorities often appear
sceptical of the value of external capacity building and technical assistance, they are not
effectively analysing their own capacity constraints and needs, or providing guidance to
donors on their preferred forms of support. On the other hand, donors also appear weak at
coordinating capacity-building and technical-assistance initiatives with each other.
Recommendations for moving forward
The IMT offers a number of recommendations for how to move forward. Key priorities for the
coming period include:
Government and donors

• The development of PBAs should become an explicit topic for discussion in
each sector partnership group. How should the PBA target apply in the sector? In
what sub-sector or thematic areas are PBAs most appropriate? What concrete benefits
would they hope to achieve by it?
• Based on this discussion, sector partnership groups should prepare a plan setting
out how to develop PBAs for the sector. They might also consider developing a
sectoral code of conduct or statement of principles to operationalise the HCS and
guide the development of PBAs. Sector partnership groups should then report annually
on the implementation of the plan to the Consultative Group and/or other venue that
GoV and donors deem most appropriate. The MPI should provide support and
guidance to sectors in developing PBAs, as well as ensure that good practices
are identified and shared with line ministries and donors.
• Engage in further analysis of the obstacles and disincentives to implementing

PBAs, looking at particular sectors in more detail (including specific analysis on
sectoral and geographical differences). These obstacles and disincentives should then
be addressed specifically in the design of PBAs.
• Consider the practical implications of developing PBAs in decentralised sectors.

The design of PBAs should be done with a view to supporting decentralised
programme delivery, by building intergovernmental policy dialogue and coordination,
strengthening provincial planning and budgeting and providing resources to line
ministries to improve their regulatory and oversight role.
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December 2008
• GoV and donors should put more effort into the development of sectoral and
provincial monitoring and evaluation frameworks, and develop systematic
approaches to building monitoring and evaluation capacity. As monitoring and
evaluation frameworks are put in place, donors should make a concerted effort first to
ensure that their project-level monitoring and evaluation arrangements support and
contribute to the development of the sectoral and provincial framework, and they
should then progressively should use the sectoral and provincial monitoring and
evaluation framework for project-level monitoring. Annual sectoral reviews conducted
jointly by GoV and donors, as have recently been initiated in the health sector,
potentially provide an excellent basis for policy dialogue.
Government
• Monitoring the progress of PBAs should be done through a specific analysis
carried out by the MPI, rather than through donor surveys. The MPI should
develop a list of PBAs in each sector, in consultation with the relevant sector
partnership group. The MPI should then identify the volume of donor funding falling
within each PBA, and use this figure to calculate an overall proportion of PBA. The list
should be updated each year at the time of the HCS monitoring survey, and published
in full in the Partnership Group on Aid Effectiveness (PGAE) report. This would both
increase the accuracy of HCS monitoring, and improve the transparency of donor
practices.
• Accelerate the development of sectoral MTEFs in order to introduce a more

strategic approach to planning and budgeting. At present, GoV agencies are not
generating operational programmes in a form that donors can readily finance. The
planned introduction of MTEFs will create a more robust link between planning and
budgeting.
• The MoF should play a stronger role in the management of external assistance.
In cooperation with the MPI, the MoF should take on a stronger role in developing the
systems and processes for including aid on the budget, and developing guidance for
donors on aligning their assistance with sectoral and provincial budget processes.
• Line ministries and provincial authorities should review capacity needs specified
in strategies and plans; analyse their own capacity constraints, and articulate their
preferences and needs for technical assistance to donors. These preferences and
needs should then be discussed in relevant sector partnership groups.
• Resolve barriers and inconsistencies in laws and procedures to enable greater

use of country systems.
Donors
• Focus on discrete sub-sectoral areas that have strategic importance for the
achievement of Vietnam’s development goals where there appears to be scope for
a positive contribution to policy making and where programmatic support is both
needed and welcomed.
• Careful consideration to consolidating and harmonising assistance, as a step

towards PBA development, including the introduction of the use of joint projects,
pooled funding and delegated cooperation arrangements as appropriate. This should
be a specific topic for discussion in sector partnership groups, and where possible,
targets should be identified and specific commitments agreed.
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• For donors unwilling or unable to pool funding, alternatives include improved dialogue
with GoV partners and other donors on division of labour, and developing more
effective cooperation at the operational level (that is, ensuring complementary
approaches with other projects working in the same area).
• Donors that choose to support PBAs in project form need to give careful
consideration to how this is to be accomplished. What exactly is the difference
between a project that forms part of a PBA, and a stand-alone project? At a minimum,
there needs to be a structured process to (i) develop a common programme and
budget framework, encompassing both national and external resources, to which the
project contributes in a strategic way; (ii) ensure that the project uses, or has a clearly
defined process for working towards the use of national systems for programme
management, procurement and financial management; and (iii) develop monitoring and
evaluation arrangements for the implementation of the programme as a whole, and not
the discrete project component. This is something that has to be done in collaboration
with GoV counterparts and a group of other donors. It is not something that a donor
can achieve in isolation, however well designed their project.
• Donors should understand their HCS commitment as requiring the use of

country systems as and when they reach standards that are appropriate for the
Vietnamese context and administrative realities. Donors should always use country
systems as the preferred option, even where there remain shortcomings, provided that
there is a credible process in place for addressing those shortcomings. In future project
or programme designs, where donors choose to impose additional safeguards, they
should present a written statement of reasons to the relevant sector partnership group.
They should also ensure that any additional safeguards are consistent with ongoing
Vietnamese reform goals and processes.
• Improve the coordination of technical assistance, where relevant, using pooled

funding arrangements, and support the establishment of a sector database or mapping
exercise on technical assistance. Coordination of technical assistance should be an
explicit topic for discussion at relevant sector partnership groups.
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Table of contents
Acknowledgements i
Executive summary ii
List of tables and figures x
Abbreviations xi
1 Introduction 14
1.1 Background to the study 14
1.2 Approach 14
2 Challenges and lessons for implementing the HCS 16
2.2 Programme-based approaches 19
2.3 Use of country systems for aid delivery 27
2.4 Country–led and coordinated capacity building 34
3 Recommendations 36
Annex A HIV case study 41
Annex B Transport case study 52
Annex C Provincial case study 66
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List of tables and figures
Table 2.1 Selected examples of aid fragmentation in well aided countries 17

Table 2.2 Gaps between donor requirements and government regulations 31
Table A.1 HIV funding 50
Table B.1 Transport partnership group actions 57
Table B.2 Transport partnership group project list 61
Table C.1 ODA projects and PMUs, Nghe An 75
Table C.2 ODA projects and PMUs, Phu Tho 77
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Abbreviations
AAA Accra Agenda for Action
ADB Asian Development Bank
AFD Agence Française de Développement
AFTA ASEAN Free Trade Area
AMT Aligned Monitoring Tool
ARV antiretroviral treatment
BOT Build Operate Transfer
CAP Coordination Action Plan
CCBP Comprehensive Capacity Building Programme to Strengthen ODA

Management
CCM Global Fund Country Coordination Mechanism
CDOPP Capacity Development of ODA Project Planning
CFAA Country Financial Accountability Assessment
CFPAR Country Procurement Assessment Reports
DAC Development Assistance Committee
DAD Development Assistance Database
DARD Department of Agriculture and Rural Development (provincial)
DFID Department for International Development, United Kingdom
DoF Department of Finance (provincial)
DoH Department of Health (provincial)
DoT Department of Transport (provincial)
DPI Department of Planning and Investment (provincial)
EIA Environmental Impact Assessments
EU European Union
FERD Foreign Economic Relations Division (provincial)
GFATM Global Fund for AIDS, Tuberculosis and Malaria
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GoV Government of Vietnam
HCS Hanoi Core Statement
IDU intravenous drug users
IMT Independent Monitoring Team
IMTF ODA Inter-Ministerial Task Force
IMTG Independent Monitoring Thematic Group
JBIC Japan Bank for International Cooperation
JICA Japan International Cooperation Agency
KfW Kreditanstalt für Wiederaufbau
MARD Ministry for Agriculture and Rural Development
MIC Middle-Income Country
MoF Ministry of Finance
MoH Ministry of Health
MoLISA Ministry of Labour and Social Affairs
MoPS Ministry of Public Services
MoT Ministry of Transport
MPI Ministry of Planning and Investment
MTEF Medium-Term Expenditure Frameworks
NGO Non-Governmental Organisation
NIHE National Institute for Hygiene and Epidemiology
NTPs National Targeted Programmes
ODA Official Development Assistance
OECD Organisation for Economic Cooperation and Development
PAC Provincial AIDS Centre
PBA Programme-Based Approach
PEPFAR President’s Emergency Fund for AIDS Relief
PER Public Expenditure Reviews
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PGAE Partnership Group on Aid Effectiveness
PMU Project Management Unit
PRSC Poverty Reduction Strategy Credit
SEDP Socio Economic Development Plan
SIA Social Impact Assessments
STI sexually transmitted infections
SWAp Sector Wide Approaches
TABMIS Treasury Management and Budget Information System
ToR Terms of Reference
TPG Transport Partnership Group
TWG HIV Technical Working Group
UN United Nations
VAAC Vietnamese Administration of AIDS Control
VAMESP Vietnam Australia Monitoring and Evaluation Support Project
VITRANSS Vietnam Transport Strategy Study
VRA Vietnam Road Administration
WTO World Trade Organisation
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1 Introduction
1.1 Background to the study

In September 2005, Vietnam and its development partners made a series of joint
commitments to improving aid effectiveness, set out in the HCS. The HCS establishes a
number of joint targets in the areas of ownership, alignment, harmonisation, managing for
results and mutual accountability to be achieved by 2010. It covers the capacity of GoV
agencies to formulate and implement development policies, strategies and approaches,
covering all aspects of the programming cycle from participatory policy making through to
monitoring and evaluation. For donors, it also covers a range of commitments, from aligning
behind country strategies to using country systems for aid delivery and limiting unnecessary
transaction costs for government.
One of the commitments in the HCS is for independent monitoring of progress against these
commitments to support mutual accountability and lesson learning. The first round of
independent monitoring was carried out in 2007. The work was prepared by an independent
team, according to ToRs prepared by the IMTG established by the PGAE.
In 2008, a ToR for the second round of independent monitoring were developed by the
IMTG, with a focus on implementation at the sectoral and sub-national levels. The ToRs are
substantially different from those for the first round. The IMT for 2008 is not asked to provide
an overview on the implementation of the HCS at the national level, but to investigate
government and donor progress in implementing their aid-effectiveness commitments
through case studies of specific sectors and provinces that will highlight experiences,
challenges and constraints, particularly in relation to: (i) capacity of government ministries,
agencies and provinces in relation to the implementation of the HCS; (ii) the process of
implementation of the HCS commitment; and (iii) the interaction among ministries, provinces
and donors in those specific areas.
Two provinces (Phu Tho and Nghe An) and three sectors (agriculture and rural development,
HIV and transport) were selected. The IMT has, in agreement with the IMTG, prepared one
provincial case study, covering the two provinces of Phu Tho and Nghe An, and two sectoral
case studies on HIV and transport. The sectoral case study on agriculture and rural
development has not been written up separately due to time constraints, but informs the
discussion in the report.
This year’s exercise is a light review and was undertaken in a short timeframe and with
limited resources during October and November 2008. This exercise should also be viewed
as testing, developing and piloting a monitoring tool that may be used in future similar
exercises. Moreover, it is not IMT’s role to compare or rank donors, line ministries or
provinces according to the performance, but to advise them collectively on how to move the
HCS agenda forwards. The report should therefore be read with this in mind.
1.2 Approach
The approach prepared by the IMT was approved by the IMTG. A monitoring framework was
created by disaggregating the HCS implementation into its component commitments, using a
set of headings based on an idealised process of sectoral policy making and ODA
management. It draws on the OECD/DAC definition of a PBA, namely:
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December 2008
• leadership by the host country or organisation;

• a single comprehensive programme and budget framework;
• a formalised process for donor coordination and harmonisation of donor procedures for
reporting, budgeting, financial management and procurement; and
• efforts to increase the use of local systems for programme design and implementation,
financial management, monitoring and evaluation.4
The elements in the framework also reflect the recommendations from the 2007 independent
monitoring to focus on: the emergence of programme-based approaches to improve country
leadership of assistance at sectoral level, use of country systems for aid delivery, and
country-led and coordinated capacity building.
In preparing the report, the IMT has reviewed documents and literature and conducted key
informant interviews and group discussions to help the IMT gain a picture of experiences,
challenges and lessons learnt, as well as further insights into stakeholder perceptions of aid
effectiveness. The IMT met government representatives, including relevant line ministries
and their agencies, and provincial authorities, including provincial departments for planning
and investment, finance, and relevant sector departments (agriculture and rural
development, health and transport). The IMT also met with representatives from selected
central, provincial and district PMUs, as well as donor and NGO and civil society
representatives active in relevant sectors. In total, approximately 100 people were consulted
through key informant interviews and group discussions. In addition, the IMT attended, as
observers, one PGAE meeting, one Health Partnership Group meeting, one workshop on
Civil Society Organisations, aid effectiveness and the AAA, and one ODA management
project completion workshop (Capacity Development of ODA Project Planning (CDOPP)).
4
OECD/DAC, ’Harmonising Donor Practices for Effective Aid Delivery’, vol. 2, Box 3.1. This definition
is also used in the HCS.
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December 2008
2 Challenges and lessons for implementing the HCS
Vietnam has gone further than perhaps any other developing country in articulating
principles, commitments and targets on aid effectiveness. Under the active facilitation of the
MPI, the structures for dialogue with donor partners are active and continually improving.
Vietnam continues to take a leading role in international aid-effectiveness arenas, and is now
moving quickly to implement the AAA.
However, while both the GoV and donors are in principle firmly committed to the HCS, the
IMT found little sign of consensus among donors and GoV agencies on how aid practices
need to change. While it is very valuable to have a clear statement of aid-effectiveness
commitments and targets, the HCS is in the final analysis a problem-solving tool. It will be
effective only in so far as there is a common understanding of what problems need to be
solved.
Most past and current assessments of aid in Vietnam point to the fragmented nature of the
assistance as the principal challenge. Vietnam’s large number of donors and large volumes
of aid has led to a proliferation of aid projects—most provided by a single donor and set up
with their own management structures. For example, in agricultural and rural development,
there are as many as 200 ongoing projects, with some 40–50 new projects approved each
year.5 In the health sector, there are around 75 ongoing projects, most under US$500,000 in
size, and with 98% funded by a single donor.6
In comparison to other developing countries with similar volumes of ODA, external

assistance to Vietnam shows a high level of fragmentation. A recent comprehensive review7
of 152 developing countries conducted by the OECD/DAC found that fragmentation of aid8 at
the country level in Vietnam is among the highest. Vietnam has the second highest number
of donors (29), while 19 donors together account for just less than 10% of aid. At the sectoral
level,9 Vietnam had the highest level of fragmentation of aid in the health sector, where 17
donors provide less than 10% of aid. The economic infrastructure sector was similar, with 18
donors providing less than 10% of aid. The smallest donors at the country level also tend to
be the smallest donors at the sectoral level (among the 19 smallest donors at country level,
13 were also the smallest donors in the health sector, and 11 the smallest donors in the
economic infrastructure sector). The report concluded that Vietnam has the greatest potential
for improvements in division of labour. Table 2.1 below presents aid fragmentation in
Vietnam and selected countries with similar aid levels and high aid fragmentation.
5
Figures provided to the IMT by the Ministry for Agriculture and Rural Development (MARD).
6
Martinez, ’How external support for Health and HIV will evolve as Vietnam becomes a Middle-
Income Country’, July 2008.
7
OECD/DAC, ‘Towards Better Division of Labour: Concentration and Fragmentation of Aid’, Global
Forum on Development—Policy Workshop on the Challenges of Scaling Up and Country Level:
Predictable Aid Linked to Results, December 2007.
8
While there is no standardised definition or methodology, fragmentation of aid is here defined as a
large number of donors each with a small share of aid provided to a given country and sector.
Fragmentation is an issue when the recipient country deals with a large number of small donors. The
more small donors that combined represent less than 10% of aid, the more severe the fragmentation
of aid.
9
Two sectors were studied: health (including reproductive health), and economic infrastructure
(transport, communications, energy, banking/finance, and business services).
16
December 2008
Table 2.1 Selected examples of aid fragmentation in well aided countries
Overall Health Economic Reference

fragmentation infrastructure
No. of No. of No. of No. of No. of No. of Aid per GNI per
donors donors donors donors donors donors capita capita
10
providing providing providing (US$) (US$)
less than less than less than
10% of 10% of aid 10% of
aid aid
Vietnam 29 19 25 17 21 18 24 620
Tanzania 27 15 22 15 19 15 37 340
Rwanda 25 16 20 16 15 11 56 230
Cambodia 27 16 22 17 15 14 35 430
Fragmented aid delivery has many well-documented shortcomings. Fragmentation makes it

very difficult for line ministries to coordinate assistance. None of the line ministries
interviewed by the IMT was in a position to produce an accurate, up-to-date list of donor
projects within its sector, let alone accurate figures on disbursements. This results in a
proliferation of separate project management structures. Most PMUs in Vietnam are formally
integrated, rather than parallel, in the sense that they are managed by a senior GoV official
and subject to Vietnamese laws on public investment management. However, many of them
(particularly for grant projects) continue to operate with a high degree of operational
autonomy. Where there are a large number of PMUs within a single sector, it fragments
counterpart capacity and distorts institutional development. For instance, as noted in a
review of PMUs in the transport sector:
’PMUs have not been consistently successful in discharging of

their responsibilities in project management and there has
been little, if any, capacity development at the central level, a
finding in no way unique to PMUs in Vietnam.’11
Furthermore, line ministries become dependent on aid projects, and the additional financial
benefits they offer, to recruit and retain skilled staff to manage development initiatives. This
can create unhelpful incentives, in that line ministries seek to maximise the number and size
of aid projects in their portfolio, rather than to maximise the impact of their total assistance.
Where this occurs, aid projects often reflect the preferences of donors, rather than the
counterparts. The IMT came across examples where offers of assistance (especially
technical assistance) had been accepted by counterparts despite scepticism about its value,
because they were associated with (and seen as a condition for) investment funds.
Perhaps most importantly for the Vietnamese context, a scattered portfolio of aid projects
militates against coherent planning and budgeting. Most sectors in Vietnam are still working
to establish effective mechanisms for policy oversight, planning and budgeting. In the
10
Aid is here calculated as country programmable aid where flows that are unpredictable by nature
have been excluded (such as humanitarian aid and debt forgiveness) and aid that does not form part
of cooperation agreements between governments (such as food aid).
11
World Bank, ’Transport Strategy: Transition, Reform, and Sustainable Management’, June 2006, p.
47–58.
17
December 2008
absence of effective sector-wide planning, the GoV often resorts to vertical programmes to
meet discrete development challenges. While sometimes very effective as programmes, they
are often poorly integrated with each other. It is therefore important that donors help to build,
rather than reduce, the coherence of overall development efforts within each sector.
The aid-effectiveness challenge in Vietnam is shaped by two key contextual factors. First,
ODA represents only a small proportion of development finance12 (for example, only 3% of
total health expenditure, or 10% of the national health budget). Second, ODA has only a few
years to run before Vietnam achieves MIC status and assistance levels start to fall. Given
these factors, there is a risk that fragmented external assistance will have little lasting
impact. To be sure of making a difference, aid in Vietnam must become more strategic in
nature—that is, it must aim for transformative impact on policies, resource allocation,
institutional reforms and capacities.
The HCS calls for the reform of aid to Vietnam according to the well-known principles of the
Paris Declaration (ownership, alignment, harmonisation, managing for results and mutual
accountability). But what, in practical terms, does the HCS envisage should change about
the way aid is delivered? The IMT concludes that there are two main types of change
required to implement the HCS. These two solutions are not self-contained in nature, but are
complementary to each other.
One is to improve the harmonisation and alignment of aid through increased use of PBAs.
The HCS sets an ambitious target of 75% of aid to be based on national or sectoral
programmes—above the Paris Declaration target of 66%. The 2008 HCS survey13 reports
that 58% of aid in 2007 (compared to 34% in 2005) was delivered in the contexts of PBAs,
although the IMT notes that continuing differences of interpretation among donors may
render this figure unreliable. The 2008 HCS survey also notes that the list of 158 PBAs from
39 donor responses need to be verified and studied in further detail. Moreover, at sub-
national level only 18% of aid is delivered through PBAs, and only 25% of 48 provinces have
actively participated in national sector programmes or developed their own provincial
programmes.14
The other solution is to increase the use of country systems for the delivery of aid, including
project preparation, management, procurement and public financial management systems.
The HCS sets the target of 50% of aid flows using country systems, as well as 50% of
donors using country systems for 50% of their assistance. The 2008 HCS survey notes that
the use of country procurement systems has increased from 33% in 2005 to 59% in 2007,
and the use of country public financial management systems increased from 32% in 2005 to
53% in 2007. While this was a significant improvement on past figures, the PGAE has
concluded that most of the progress is accounted for by the expansion of general and
targeted budget support programmes, rather than by a major shift in the way investment
12
While Vietnam is one of the largest recipients of ODA in the world in absolute terms, ODA
represents on average only about 4.5% of GDP, and less than 12% of the total government budget.
The volume of ODA is less than FDI, tourist revenues and remittances. However, ODA is nonetheless
regarded as an important catalyst for investment flows and a key source of financing for capital
investments in socioeconomic infrastructure, providing around 30% of capital investments (2007 IMT
report, p. 4.)
13
OECD/DAC, ‘2008 Paris Declaration Monitoring Survey: Vietnam Country Chapter’, 2008.
14
PGAE, ’Mid-Term Review on the Implementation of Paris Declaration and Hanoi Core Statement on
Aid Effectiveness’, 2008 Consultative Group Meeting for Vietnam, Draft Report, November 2008.
18
December 2008
projects are delivered.15 Moreover, at sub-national level only 27% of aid is disbursed through
country systems. The 2008 HCS survey also notes that if further progress is to be made
against these ambitious targets, the GoV and donors need to tackle the limited use of
country systems for project delivery, and consensus needs to be reached on the international
good practice standards that Vietnam should work towards.
Both of these are ambitious goals which entail major changes to established practices in
Vietnam, on both the donor and GoV sides. In both cases, progress has been harder to
make than may have been anticipated at the time the HCS was adopted. They continue to
represent the two main frontiers for improving aid effectiveness in Vietnam.
2.2 Programme-based approaches

The IMT notes that there is continuing uncertainty among donors about the circumstances in
which external assistance can legitimately be described as part of a PBA. Some further
explanation on these points is therefore required.
PBAs require that assistance is delivered in the form of support to an overarching strategy
and programme of development activities at the national, sectoral, sub-sectoral or thematic
level. According to the standard OECD/DAC definition, the programme should have the
following characteristics:
• it should be led by the counterpart organisation;

• it should have a single, comprehensive programme and budget framework, covering both
national funding and external support;
• there should be a formalised process for donor coordination, and progressive
harmonisation of donor procedures for reporting, budgeting, financial management and
procurement;
• efforts must be made to increase the use of local systems for programme design and
implementation, financial management, and monitoring and evaluation.
The definition of PBA refers to the way that external assistance to a particular sector or area
is organised. It requires donors and counterpart institutions to agree a single, formalised
mechanism for harmonising and aligning assistance, in order to support the achievement of
an agreed sector strategy or programme.
PBA is therefore a characteristic of the sector or area, not of the individual donor programme
or project. A project or programme may be aligned to country preferences and use country
systems, but if donors and counterparts have not agreed on the establishment of a PBA in
that particular area, the assistance will not qualify as a PBA.
A PBA is not limited to any particular aid modality. Some forms of assistance—notably
budget support in its various guises—are ‘automatically’ PBAs, because they are provided in
support of an agreed strategy or programme, and use country systems for aid delivery. Other
aid modalities may constitute PBAs where they are designed to fit into an agreed sectoral or
thematic programme. For example, capacity-building support or discrete investments may be
provided in project form, as part of an agreed programme of activities. However, a ‘stand-
alone’ project—that is, one where the objectives and modalities have been negotiated
between the donor and counterpart without reference to a wider programme—would not
15
Partnership Group on Aid Effectiveness, ‘Report on Aid Effectiveness’, Mid-Term Consultative
Group Meeting, Lao Cai, June 2008, p. 53.
19
December 2008
constitute a PBA, no matter how well aligned the project may be with government
preferences.
PBAs are not the only form of ‘good’ or ‘progressive’ aid in Vietnam. There are various
circumstances in which donors and their counterparts may legitimately prefer not to work
through PBAs. The most obvious example is large infrastructure investments, where both the
GoV and the principal donors are in agreement that stand-alone projects still offer the most
efficient and effective way of organising external assistance. (Given that infrastructure
development represents around half of Vietnam’s external assistance, it may be appropriate
for the GoV and donors to reflect on whether the PBA target has in fact been set too high.)
Likewise, there are still many sectors in Vietnam where national planning and budgeting
processes do not yet lend themselves to PBAs. While working towards PBAs should remain
the goal, donors may legitimately provide stand-alone project support in the meantime
provided that it is strategic.
Moreover, the development of PBAs is most urgent in sector, sub-sector or thematic areas
that are dominated by recurrent expenditure and where achievement of Vietnam’s
development objectives requires a holistic approach to developing policies, systems,
institutional capacities and intergovernmental relations. This is the case in the social sectors
and in areas like rural development and environment. It would also apply to parts of the
transport sector, such as the maintenance of rural roads. The appropriate target for
assistance through PBAs for each sector therefore depends upon the circumstances, and
should be subject to discussion between the responsible GoV agencies and donors.
The 2007 independent monitoring report concluded that developing PBAs could be an
effective strategy for strengthening the alignment of assistance at sectoral level behind
country-led strategies, and overcoming the past fragmentation of assistance. However, it
also noted that, while PBAs could provide a platform for a more intensive, higher-quality
engagement between donors and government, there was nothing automatic about these
benefits. It depended on the level of effort that both sides were willing to put into the
relationship. To result in a significant improvement in aid effectiveness, a PBA has to be
based on a shared vision among donors and counterparts on how exactly the development
partnership should be strengthened.
Policy making, planning and budgeting
At present, planning and budgeting at the sectoral level in Vietnam is not particularly
conducive to the development of PBAs. There are a number of reasons for this.
Most sectors and key thematic areas have now produced policy papers and strategies. In all
three sectors studied, there are strategies outlining broad development goals. In the case of
agriculture and rural development, there is an overarching Rural Development Strategy, as
well as strategies for several sub-sectors such as rural water supply and sanitation, forestry
and disaster management. Similarly in health, there is both a ten-year National Health
Strategy, and a series of thematic or disease-specific strategies and programmes. In the
transport sector, there are also multiple strategies, including the 2004 Transport
Development Strategy to 2020 and the five-year Transport Sector Development Plan 2006–
2010. There are also master plans and strategies in sub-sector areas, for instance, the road
transport plan, aviation transport development strategy, inland waterway development
master plan, river waterway transport development strategy, policy on maritime
transportation development and seaports network development master plan, railway
transport development strategy and the master plan for an express way system in Vietnam.
There is ongoing work under the Vietnam Transport Strategy Study (VITRANSS 2) to
20
December 2008
develop comprehensive long-term development strategies up to 2030, a transport

development master plan up to 2020, and short-term priority programmes 2011–2015.
Nevertheless, not all of these strategies are linked to the Socioeconomic Development Plan
(SEDP), or make use of its results framework. For instance, the transport strategies may
refer to and reflect broad priorities in the SEDP, but it is often difficult to identify the link
between the SEDP and the detailed lists of investments that make up the sub-sectoral
plans.16 Similarly, while sub-sector strategies and action plans have been developed in areas
such as forestry and disaster management, there have reportedly been challenges in
integrating them with the SEDP and its framework. 17
These strategies tend to fall into one of two categories. Some are vision statements,
containing descriptions of development challenges, and giving general indications of the
kinds of solutions and measures that will be used to address them. Others are lists of
possible investment projects that have been compiled in the hope of securing finance from
the national budget or an external financier. Because strategies of this kind are not intended
to be directly implemented, they are often inconsistent or poorly integrated with each other.
Decisions on which activities are implemented are taken in a subsequent resource-allocation
process.
While strategies of this kind provide a broad policy framework to which donors can align their
support, they do not constitute a single, comprehensive programme and budget framework
of the type foreseen in the OECD/DAC definition of PBAs. What appears to be missing in the
sectors examined by the IMT are operational programmes, with cost estimates for proposed
activities and a set of priorities developed by reference to an available resource envelope.
While donors generally describe their assistance as aligned both to the SEDP and to
relevant sectoral strategies, alignment at this level is very general, and not a particularly
onerous commitment. Closer alignment will only be possible when the GoV provides donors
with guidance on programming choices, based on a clear set of priorities and a defined,
overall budget envelope.
The key instrument for achieving this is the MTEF. Vietnam has been piloting MTEFs in a
number of sectors (agriculture and rural development, education, health and transport) and
provinces, in order to establish a stronger link between planning and budgeting. In the health
and transport sector, a number of draft MTEFs have been prepared (although there have
been difficulties with incorporating accurate figures on external financing, particularly grants).
The sectoral MTEFs and development plans are intended to support each other. The
sectoral MTEFs make references to trends and issues related to the sector, where
development goals and objectives presented in the sectoral development plan are
discussed. MTEFs prepared by the MoF and MPI at the central level, and the DoF and DPI
at the provincial level, present social and economic and budget forecasts for the three-year
period based on the national and provincial five-year and annual plan’s goals and targets.
These initiatives are intended to create a more robust link between planning and budgeting.
In the meantime, however, they remain poorly integrated. The capital and recurrent budgets
are also disjointed—a problem that is most visible in the transport sector, where budgetary
allocations for maintenance are generally inadequate to sustain the capital investments
being undertaken.
16
World Bank, ‘Transport Strategy: Transition, Reform, and Sustainable Management’, June 2006.
17
Rydder, Huyen, and Hoglund, ’The Contribution of Partnerships to Sector Coordination and Aid
Effectiveness: The Case of Agriculture and Rural Development Partnership in Vietnam’, January
2008.
21
December 2008
Policy making at the sectoral level tends to be highly fragmented, in that policy decisions
emerge from multiple institutional sites and processes, rather than from a single mechanism.
As a result, line ministries appear to find it difficult to formulate and implement a single
national policy for their sector. Departments within the ministries appear to operate with a
high degree of policy autonomy, with little incentive to harmonise with each other. Vietnam
has a tradition of establishing vertical programmes at the central level to address particular
development challenges. For example, in the health sector, there are vertical programmes
targeting specific diseases. Many of these programmes are highly effective. However,
responsibility for vertical programmes is allocated to different departments in the Ministry of
Health (MoH), which operate largely in isolation from each other. The MoH lacks a central
policy structure to ensure that the individual programmes are consistent with each other and
with an overarching strategy.18
The problem is even more acute in areas like HIV or rural water and sanitation, where
responsibilities are divided across several ministries. Ministries appear to have little incentive
to collaborate with each other on policy initiatives. In HIV, for instance, an effective response
to the epidemic would need to involve the MoH (care and treatment), the Ministry of Labour
and Social Affairs (MoLISA) (in respect of drug users and sex workers) and the Ministry of
Public Security (MoPS) (in respect of law enforcement and management of prisons).
However, the IMT was informed that consultation among the three ministries is limited, and
occurs mainly at the instigation of donors. Over the past year, Vietnam has begun to address
this problem by strengthening the policy oversight function of the National Committee on
AIDS, Drugs and Prostitution Prevention, which is chaired by the Deputy Prime Minister,
Truong Vinh Trong.
Policy dialogue
The fragmented nature of the policy process may also affect the quality of policy dialogue.
Because the policy process is not centrally organised, it often appears opaque to non-
government stakeholders (both donors and civil society). There are relatively few
opportunities for civil society participation at the central level, although Vietnam has made
considerable progress in promoting grass-roots democracy at the local level. This means
that country ownership of sectoral or thematic strategies tends to be fairly narrow.
Donors are also often unsure of how best to engage in policy dialogue. While sector
partnership groups exist in all the major sectors and thematic areas, they are often limited to
information sharing. While both sides are generally open to dialogue, there are some
concerns about the quality of the processes. Donors rarely feel they have an opportunity for
substantive involvement in sectoral policy development. In transport, for instance, there was
limited consultation process around the development of the five-year Transport Sector
Development Plan 2006—2010, and some major donors in the area reported that the plan
had never been officially provided to them. In some cases, GoV representatives are
concerned that donors are represented by generalists and aid administrators, rather than
sector specialists who can contribute to substantive policy dialogue. Sector partnership
groups are not always supported with sufficient follow-up, to put agreements and
commitments into action.
18
Recent capacity assessments indicate that there appear to be no policy task forces responsible for
shaping health strategy and for coordinating and directing the policy-making function (including the
contributions of the various departments within the MoH). While efforts have been made to support a
health policy unit, it carries little weight within the MoH.
22
December 2008
In the area of agriculture and rural development, sector policy dialogue has been undertaken
under various partnership arrangements, including the Ministry–wide International Support
Group, the Forest Sector Support Partnership and the Trust Fund for Forests, the Natural
Disaster Mitigation Partnership, the Rural Water Supply and Sanitation Partnership, and the
Partnership for Avian and Human Influenza. However, a number of policy and institutional
factors at MARD affect the efficiency of the partnerships, including overlap in mandates
between MARD departments; obstacles to integration of the GoV five-year plan and sector
strategies and plans; and challenges in coordination between MARD departments and
between MARD and other line ministries.19
The IMT notes that there are examples of effective policy advocacy. For example, HIV is a
new area of policy development for Vietnam. Donors and United Nations (UN) agencies have
created an Ambassadors/Heads of Agency Informal HIV Coordination Group, which meets
bi-monthly, co-chaired by the UN Resident Coordination and the Ambassador of Ireland to
harmonise their policy advocacy. By speaking with a single voice, they have helped to
introduce their counterparts to international approaches on harm reduction—including a
recent opening towards methadone treatment. Vietnam has on different occasions shown
itself willing to take advice from donors in areas where it recognises a need to draw on
international experience.
What is less clear, however, is whether the current experiments with PBAs have met donors’
expectations of actively participating in policy dialogue and improving mutual accountability.
Donors do not appear to be routinely included in the dialogue on policy making and budget
choices, and often appear to be uncertain as to where the real decisions are being made.
This may be due in part to a Vietnamese concern with protecting the autonomy of its policy
processes, and in part because, with policy making fragmented across multiple sites, a
structured dialogue is difficult to organise.
Decentralisation
Decentralisation presents another major challenge to effective PBAs. Vietnam is

progressively decentralising or deconcentrating responsibilities for implementing
development policy to the provincial level and below. Most services and a substantial share
of development investments are now the responsibility of provincial governments. For
instance, while MARD is responsible for defining the overall strategic orientation and
regulatory framework, it does not have authority for the allocation of resources for the
implementation of strategies and plans. Provincial departments prepare plans that are
consolidated and submitted to the GoV and the National Assembly, and funding is then
channelled directly back to the provincial authorities by the MoF.
This entails a transformation in the role of line ministries, from service delivery agencies to
policy makers and regulators. Line ministries appear to be finding this a difficult transition to
make. As fiscal responsibility is transferred to the provinces, the central ministries have
relatively little practical authority to ensure that national policies and priorities are
implemented (see Box 2.1 below).
The provincial case studies revealed a number of reasons why inter-governmental

coordination is difficult. Within the budget process, Provincial People’s Councils have
considerable discretion to make their own expenditure decisions. While provincial budget
submissions may make reference to national or sectoral development policies, in practice
19
Rydder, Huyen, and Hoglund, ‘The Contribution of Partnerships to Sector Coordination and Aid
Effectiveness: The Case of Agriculture and Rural Development Partnership in Vietnam, January 2008.
23
December 2008
they are free to allocate their budget according to their own priorities. While sectoral
departments within the provinces report to their line ministries in respect of technical matters,
reporting on financial matters is made to the provincial Department of Finance (DoF), and
reporting on the use of external finance is made to the provincial Department of Planning and
Investment (DPI).
Box 2.1 Intergovernmental fiscal relations
The fiscal decentralisation framework as it has been set up in Vietnam is complex, with many
ambiguities in the system and process. The concept of the ‘unified budget’, with the province
budgets (including district and commune budgets) all appearing within the overall state budget, is
somewhat misleading, as considerable delegation and discretion has been given to local
government (Provincial People’s Councils) to make their own expenditure decisions on the basis
of their revenue capability. The fiscal decentralisation framework (or more correctly, de-
concentrated framework) has been established with a range of complex revenue-sharing
arrangements between provinces and central government and, in addition, the provinces are
incentivised for revenue generation, with arrangements for retention of revenues earned over and
above their agreed targets.
There are a number of implications arising from these aspects of the budgetary system:
• The hierarchical budget structure whereby the budget at each level of government has to be
approved by the next level of government up, together with the Provincial People’s Council at that
level, not only leads to an unwieldy budget preparation process with accompanying delays, but
also undermines decentralisation objectives and accountability by sub-national governments.
• The major emphasis in the province budget process in Vietnam is on revenue generation and
projections—getting the revenue projections done in detail and undertaking an extended
negotiation process between central and local government to agree the size of supplementary
appropriation transfers from the State Budget (to fill the gap between expenditure ‘needs’ based
on norms and estimated revenues). This in itself creates incentives in the process for the MoF to
estimate the province revenue projections high at the start of the process, to minimise
expectations of the supplementary transfer, and for provinces conversely to set the revenue
projections low to maximise what they will get from the centre.
• The central allocation is provided to provinces (and in turn to lower levels of local government) as
a lump sum, and even though budget submissions may be prepared on the basis of sector
expenditure strategies, Provincial Peoples’ Councils are free to allocate expenditure as they see
20
fit.
Source: Adapted from ‘Discussion Paper for High Level Task Force on MTEF model’, January
2008
Provinces prepare their own provincial SEDPs. These appear to be more influential on the
priorities of provincial departments than plans prepared at the central level. For example, the
IMT noted that provincial plans in the health and agriculture and rural development sectors
made no reference to national strategies or plans. However, the linkages between provincial
planning and budget allocations are also fairly weak. What is planned for at provincial level is
not necessarily implemented.
Financial reporting at provincial level remains weak and focused on inputs rather than
outcomes and results. There is little tradition of, or capacity for, monitoring and evaluation of
development programmes at the provincial level (see below). As a result, the central
20
It should however be noted that there are certain mandated expenditures on education, science and
research.
24
December 2008
authorities have very little information about programme delivery at provincial level, and the
provinces face little or no formal accountability for their contribution to implementing national
and sectoral development strategies.
Vietnam has traditionally used National Targeted Programmes (NTPs)—special budgetary

allocations earmarked for specific development purposes—to overcome the difficulty of
mobilising provincial administrations behind national policy initiatives. NTPs are used to
direct funding to the poorest provinces to address key development challenges—e.g., to
improve primary school enrolment, or tackle particular diseases. The NTPs are a well-
established Vietnamese tradition, and popular among donors because they are clearly pro-
poor in orientation.
In the absence of effective, sector-wide programmes, NTPs have provided a mechanism for
donors to provide targeted budget support for particular policy initiatives. Examples include
the Education for All programme, tuberculosis, Programme 135 for rural infrastructure for
deprived areas and rural water supply and sanitation. However, the challenges of inter-
governmental collaboration also apply to the NTPs. While NTP funding is provided for
specific purposes, in practice the provinces retain the discretion to reallocate the funds to
other programmes in the same sector. Thus, under the Education for All programme, the
funds are provided to assist rural areas to reach the MDG target of universal primary
education, but can in practice be used by provinces for other educational needs, such as
boosting the quality of schools in the provincial capitals. Because financial reporting and
programme monitoring remain weak, it is very hard for either central ministries or donors to
track expenditure of NTP resources.
Commitment and incentives
These factors help to explain why line ministries appear to be at best ambivalent, and at
worst resistant, to donor initiatives to develop PBAs. The line ministries consulted by the IMT
declared that they were content with, and usually preferred, stand-alone project modalities.
In part, this is from a desire to accommodate donors who prefer to retain stand-alone
projects. It also reflected a reluctance by line ministries to be too directive to donors, in
favour of accommodating their various preferences. For instance, a recent study on the
contribution of partnerships to sector coordination and aid effectiveness in agriculture and
rural development notes:
’Within MARD, various stakeholders have varying degrees of

commitment towards sector coordination, application of SWAp
[sector wide approaches], and new collective aid modalities.
While there is a tentative commitment in this regard at the level
of MARD leadership and ICD [International Cooperation
Department], many functional departments and implementing
centres maintain an entrenched and vested interest in sticking
to the project modality. Furthermore, MARD has deliberately
refrained from recommending new aid modalities in view of the
resistance from several donors, including, mainly, multilateral
financial institutions.’21
However, there are also deeper incentives at play.

21
2008.
25
December 2008
Stand-alone projects provide line ministries with direct access to and control over financial
resources. These resources provide a means of implementing projects directly at the sub-
national level, through hierarchical project management structures. Traditionally, many donor
projects have been established with a central PMU in the line ministries, and provincial
PMUs that report directly to the central authority and donor. This structure provides the line
ministries with a measure of control over project expenditure at provincial level. The central
PMU also provides line ministries with additional staffing and operational budgets that enable
them to oversee project implementation by the provinces. Paradoxically, the management of
aid projects outside country systems may provide a short-term solution to the challenges of
implementing national programmes in a decentralised system.
On principle, providing assistance through the budget should be a more effective way of
financing decentralised development programmes, particularly for recurrent expenditure. It
increases the resources available to the provinces to provide services. In practice, however,
it is perceived by line ministries as making their task more difficult. When donor funding is
channelled through the budget, line ministries have very little control over how it is spent by
the provincial authorities. The weaknesses of financial management and reporting make it
difficult for them to track decentralised expenditure. At the same time, where donors move
away from providing dedicated resources for a central PMU, the line ministry has fewer
administrative resources available to oversee provincial activities. In a PBA, therefore, the
ministry finds itself accountable for the delivery of a programme which is in practice largely
outside its control.
This may help to explain the equivocal results of PBAs in Vietnam to date. In general, donors
hope to achieve a number of benefits through the shift to PBAs. They hope to encourage a
coherent approach to programming both national and external resources, to avoid the
distortions caused by fragmented project aid. By directing assistance through country
systems, they hope to support and accelerate institutional reform and capacity development.
They also hope that basing their support on an agreed sectoral or sub-sectoral strategy will
provide a more effective platform for policy dialogue and mutual accountability.
While these remain key objectives for external aid in Vietnam, they are proving difficult to
achieve in the short term. One MPI study listed the challenges as including:
• the high transaction costs of PBAs, due to the lengthy preparation time;
• a tendency to underestimate capacity constraints within the counterpart institutions,
leading to longer than expected delays in implementation and disbursement;
• the difficulties of implementation in a decentralised environment.22
There is as yet little evidence that institutional reforms have accelerated as a result of PBAs.
In the Education for All programme, for example, donors remain very concerned about the
lack of effective financial reporting. GoV agencies have generally failed to take on effective
leadership of capacity development support (see below). Perhaps most importantly, there is
little evidence that PBAs to date have provided donors with greater policy influence and
mutual accountability. While there have been discrete successes on policy advocacy,
particularly where there is a recognised need for new policies on the Vietnamese side, there
is a continuing reluctance on the part of GoV institutions to open up core planning and
budgeting processes to external participation. One of the core donor assumptions about
PBAs—that, by providing even a small percentage of the resources for a broad, sectoral
22
MPI/CCPB, ’ODA delivery modalities and improved aid effectiveness: lessons learned from
international and national experience’, September 2007, pp. 25–6.
26
December 2008
programme, they obtain some influence over the much larger pool of national resources—
remains unproven. At the least, it appears that the level of effort on the donor side required
to realise the benefits of PBAs is much higher than originally anticipated.
In the face of these challenges, there are real risks associated with the move towards PBAs.
Some donor agencies are under strong pressure from their headquarters to increase their
participation in PBAs on a global basis, in accordance with their Paris Declaration
commitments. Line ministries are trying to accommodate this preference, without necessarily
sharing the vision of the benefits offered by PBAs. The danger is that this will lead to the
introduction of ‘pro forma’ PBAs, in which the aid modality changes but the quality of
engagement does not improve.
This is not to say that moving towards PBAs is not the right goal for Vietnam. However, to
avoid these risks, the GoV and donors need to give careful consideration to exactly what
they are trying to achieve with PBAs, and how best to manage the transition.
Recommendations on this point are included in the final chapter.
2.3 Use of country systems for aid delivery

The GoV and donors have committed themselves to the goal of creating a single legal and
institutional framework for public expenditure on development, whether financed by ODA or
national resources. This goal involves bringing a range of country systems, including public
finance management, procurement, environmental and social safeguards, project
preparation and management up to international standards.
The use of country systems is a much debated issue in Vietnam and at a global level (most
notably the OECD/DAC). Both the GoV and donors (at headquarters) have made high-level
political commitments to strengthening and increasing the use of country systems, in line
with the AAA. While the political commitment is there, the actual implementation on the
ground has proven to be complicated.
There has been a concerted effort to bring Vietnamese systems up to international good
practice standards, with well coordinated support on regulatory and technical issues provided
by the six Banks. Some successes include the development of common Feasibility Study
guidelines and standard procurement, monitoring and reporting formats within the framework
of the AMT. Nevertheless, Vietnam still has some way to go to establish efficient processes
for ODA management, including ensuring a consistent legal framework for public
investments, streamlining approval processes, and introducing a more market-based
approach to cost management.
The IMT 2007 report also noted that there are some differences in the approaches used by
donors with regard to the use of country systems. Development banks are not using country
systems to any great extent, but will use country systems as and when they reach
international good practice standards. One group of bilateral donors with less strict rules are
able to use country systems while accepting a potentially higher fiduciary risk. A second
group of bilateral donors have stricter rules and regulations that do not permit the use of
country systems.
On the other hand, efforts are needed on the Vietnamese side to enable greater use of
country systems. Inconsistencies within Vietnamese laws and procedures, and rules
requiring special treatment of donor funds irrespective of donor requirements, pose practical
obstacles to systems alignment. In addition, line ministries are not actively promoting
27
December 2008
systems alignment, or providing sufficient guidance and encouragement to donors. And in

practice, it has proven difficult to change practices for ongoing projects.
In this respect, a number of actions have been agreed between the GoV and the six Banks in
the recently approved Decision No. 883/2008/QD-BKH (Action Plan for Improving
Performance of ODA Projects and Programs for the 2008 – 2009 period, July 2008), which is
to be jointly implemented by the MPI (with the role of the chairman of the ODA Inter-
Ministerial Task Force (IMTF), the six Banks and relevant line ministries.
Public financial management, auditing and procurement
Vietnam is working towards a set of standardised objective assessment tools for country
systems, used by both the GoV and donors. These include, for instance, Public Expenditure
Reviews (PER), Country Financial Accountability Assessment (CFAA) and Country
Procurement Assessment Reports (CFPAR). The 2008 Paris Declaration survey23 reports on
the methodology for the Assessment of National Procurement Systems, which was
developed by the Joint Venture on Procurement.24 Other significant progress includes
improvements to the GoV’s procurement website and the upgrading of the procurement
bulletin included in the procurement newspaper. The Base Line Indicator (BLI) Assessment
conducted in 2008 gave Vietnam a C rating. However, there remain gaps between donor and
the GoV procedures and a number of donors are using additional safeguards, e.g. ‘no-
objection letter’.25
In recent years there have been efforts to reform public financial management and audit
systems, which also aim to contribute to more efficient use of ODA. These include the
implementation of a modern Treasury Management and Budget Information System
(TABMIS) (which will provide the capability to record ODA projects within the government
accounting and reporting system), and a unified and updated Chart of Accounts. Other
improvements include the publication of the State Budget Law, and the budget process has
been opened up to include a broader range of actors, including National Assembly and
Provincial People’s Councils. The State Audit of Vietnam has also become an independent
organisation, answerable to the National Assembly (IMT 2007 report).
Key remaining challenges, however, include the fact that government public financial
management systems cannot adequately budget, account and report on donor-financed
projects separately from other funds and expenditures. This results in the use of parallel
financial management accounting systems due to donors’ low confidence in government
internal audit controls, reporting and oversight procedures and mechanism.26
23
OECD/DAC, ‘2008 Paris Declaration Monitoring Survey: Vietnam Country Chapter’, 2008
24
The methodology includes two components: (i) the baseline indicators compare the country’s
systems to internationally-accepted good practice; and (ii) a new set of indicators assess overall
performance of the system and compliance with national legislation and standards. The results of the
procurement system self-assessment are expressed as grades on a four-point scale running from A
(the highest) to D (the lowest).
25
PGAE, ‘Mid-Term Review on the Implementation of Paris Declaration and Hanoi Core Statement on
26
World Bank, ‘Capital Matters’, World Bank Report to the Vietnam Consultative Group Meeting in
Hanoi, December 2008.
28
December 2008
The case studies reveal some of the challenges. In the area of HIV there is very little use of
country systems for aid delivery. There is reportedly no significant use of country financial
management and reporting systems, despite one assessment stating that there were no
significant obstacles from a fiduciary or development point of view to donors using GoV
systems for public financial management, with some additional safeguards on procurement
and auditing.27 International agencies all require different formats for financial reporting and
monitoring, and in the are of transport, there is reportedly little use of country financial
management and reporting systems, although attempts were made to pilot provincial budget
support to rural transport in 2005 (Box 2.2).
Box 2.2 Provincial budget support
In 2005, DFID and the World Bank undertook a pilot programme to support rural transport. Rural
transport is an area that requires a high volume of small-scale construction work, which needs to
be matched with recurrent expenditure on maintenance. In Vietnam, provinces have a record of
neglecting maintenance in favour of capital investments. Funds were provided via the MoF as
budget support to two provinces, Lao Cai and Phu Tho. The provincial Department of Transport
(DoT) managed the funds. Payment to contractors was made by bank transfer to the contractor’s
account.
Initially, there was considerable delay in the disbursement of funds due to long planning and
approval process at the provincial level. However, the pilot showed that the government structures
could accommodate for provincial budget support. A positive outcome was that one reporting
system was followed, which cut down on transaction costs (compared to projects which tend to
follow a dual reporting system). This form of budget support also did not require a PMU, which
reduced unnecessary layers of management.
As part of the pilot, a comparison was made between the rural transport provincial budget support
pilot and Programme 135 (a Government national-targeted programme focusing on poverty
reduction in poor communes). The rural transport support and P135 follow the same procedures
except that expenditure on rural transport is controlled at the provincial level and not at local
levels, and P135 funds can only be used for specific expenditures specified by the P135
programme. The expenditure tracking exercise concluded that the rural transport support was
easier to track than P135. This was partly due to the fact that the P135 distributes funds to the
lower levels and has more activities. As a result, the funds are more difficult to track and the
information is less reliable. P135 funds also pass through more levels of administration and are
more widely spread, which opens up opportunities for the potential misuse of funds. Nevertheless,
in both cases, government accounting systems have little breakdown and information on how
funds are allocated, transferred, and how these transfers are authorised.
The pilot concluded that the most significant challenges related to lack of effective reporting to the
centre, lack of clear strategy and guidance, uncompetitive procurement, weak community
participation and planning and budgeting (i.e. matching budgets to plans) at the provincial level.
Some of the recommendations made pointed to the need for provinces to improve targeting of
resources towards specific objectives. The role and accountability mechanisms as well as a
reporting system between the central government agencies and local government needed to be
clearly defined. Support should ideally be integrated within the overall programme of the provincial
department to gain more operational efficiency and avoid biasing investment decisions towards
‘using up’ the given funds in the time available. Procurement practices also need to be improved,
and become more competitive.
Source: Adapted from DFID/Consulting Centre for Transport Development, ‘Provincial Budget
Support Programme: Successes and Lessons’, Final Report, June 2006
27
Biljmakers, “Feasibility of the programme approach in the health sector in Vietnam”, April 2006.
29
December 2008
Procurement is another area where there are gaps between Vietnamese regulations and
international good practice (Box 2.3). There are differences between the Vietnam law on
procurement (and its related decrees and regulations) and donor procurement policies and
procedures. These differences can lead to delays in processing and approving procurement.
The IMT 2007 report also noted that the existence of a dual set of rules raises the capacity
requirements of PMUs, in particular at the provincial level where capacity of staff is lower and
not as familiar with donor and government requirements.
Box 2.3 Debates and issues on the use of country systems
There are differences between the Vietnam law on procurement (and its related decrees and
regulations) and donor procurement policies and procedures. These differences can lead to delays
in processing and approving procurement.
The Vietnam Law on Procurement (Article 3 paragraph 3) stipulates that ‘For projects using
Official Development Assistance (ODA) funds, procurement shall be in accordance with the
international treaties to which the Socialist Republic of Vietnam is a party or other international
agreements which authorized organizations or agencies of the Socialist Republic of Vietnam have
signed’.
The six Banks base their position on that all relevant parties should be guided by this, and in the
case of a conflict between the ODA financing agreement and the national laws and regulations,
the provisions in the financing agreement take precedence. The six Banks maintain their policy
that the Vietnamese government should not attempt to combine the donor procurement
procedures with Vietnam's procurement regulations as this often leads to needless delays and
practices which could be in breach of the international agreements entered into by the Vietnamese
government.
Through the PGAE as well as the six Banks initiatives, the GoV and donors have been working
together to strengthen Vietnam’s public procurement system and harmonise with international
good practice in the fulfilment of the HCS. The six Banks have recently submitted to the MPI the
following for their consideration:
• draft matrix of gaps between Vietnam’s procurement regulations and the procurement
policies of some of the members of the six Banks (e.g. the Asian Development Bank
(ADB) and the World Bank) (see Table 2.2 below);
• possible contents of a directive to be sent to each line agency and project owner of
ongoing ODA-funded projects in order to (a) increase awareness of Article 3 paragraph 3
of the Procurement Law and (b) provide guidance on how to deal with conflicts between
Government procurement regulations and donors’ procurement policies and procedures.
The six Banks consider the matrix part of the basis of strengthening Vietnam’s public procurement
system to mutually agreed standards in line with Indicator 5 of the HCS. Dialogue is ongoing
between the GoV and donors for mutual assessment and to come up with agreement on common
standards.
The draft matrix of gaps between Vietnam’s procurement regulations and the procurement
policies of some of the members of the six Banks is reproduced in Table 2.2 below. This
does not present an exhaustive list of gaps, but the key ones. Other gaps refer to issues
such as time given to bidders to prepare bids, and the role of cost norms and ceiling price.
For instance, the Fifth Joint Portfolio Performance Review notes that ceiling prices are often
based on an unrealistic unit cost that leads to major cost revisions, which require
cumbersome approval processes and causes delays in implementation.
30
December 2008
Table 2.2 Gaps between donor requirements and government regulations
Item Good practice / Donor Vietnam procurement law Reference

requirements Law Decree
58
Eligibility Bidding is open to eligible bidders National bidding restricted Article
from all eligible countries. to domestic bidders only. 4. para.
5
Bidders affiliated with the Equitized SOEs affiliated Article 3

preparation consultants are with the preparation para.
disqualified from downstream consultants may participate 2(b).
bidding. if the parties hold less than
30% of capital of each
other.
Article 3
SOEs may participate only if they An equitized SOE is not
para. 3(a)
operate under commercial law considered as dependent if
and are not dependent of the the procurement entity holds
procuring entity. less than 50% of its capital.
Opening of All bids received before bid Only bids from bidders who Article 28
bids submission deadline shall be bought bidding documents para. 3b
opened. shall be opened.
Deadline for submission of bids If less than three bids are Article 70
can be extended only prior to the submitted, they are not para. 3
original deadline for bid opened and the issue is
submission. referred to a higher authority
for advice.
Evaluation For procurement of goods and Use of merit point system is Articles
criteria works, quantification of factors also allowed without 24 and
must be in monetary terms. limitation. 25
Merit point system allowed for Inadequate distinction Article 25

special cases, such as between evaluation factors para. 2c
procurement of complex IT and qualification criteria and 2g
systems or textbooks and reading such as financial capacity.
materials.
Contract For procurement of goods, works Contract negotiations for Article 31
negotiation and non-consulting services goods and works para. 2a
routine negotiations not allowed procurement are routine. and 2b
with any bidder. Negotiations only Article 41
allowed in exceptional para. 6
circumstances.
Sole source Only under exceptional Can be used for goods and Article Articles
circumstances such as in works contracts costing less 20 40, 41
response to natural disasters, can than 1 billion dong or para. 1 and 42.
equipment of services be consulting services costing dd
obtained only from one source. less than 500 million dong.
Source: ODA IMTF, ‘Fifth Joint Portfolio Performance Review’, May 2007, and World Bank, ‘Capital Matters’,
World Bank Report to the Vietnam Consultative Group Meeting in Hanoi, December 2008.
31
December 2008
Environmental and social safeguards
The 2007 IMT report noted that considerable efforts and progress have been made on
strengthening Vietnamese legislation on environmental and social safeguards, but the
capacity for carrying out impact assessments (both Environmental Impact Assessments
(EIA) and Social Impact Assessments (SIA)) remains very limited.
Under the HCS, the GoV has committed to improve its capacity for carrying out EIAs and
SIAs, and bring its legislation and practices up to international good practice standards. The
donors have committed to use country systems for at least 30% of their impact assessments.
The most recent HCS survey notes that there has been significant improvement, and in
2007, country systems were used for 45% and 57% of EIA and SIA, respectively. Recent
efforts made by the GoV and donors, most notably the six Banks, include for instance,
support to gap analysis and priority areas for further harmonisation including strengthening of
the legal framework guiding the implementation of impact assessments, as well as efforts to
narrow the gap between GoV and donor policies on resettlement. Nevertheless, it is
concluded that more in depth studies are needed in order to have a better understanding of
the actual progress made. 28
The Fifth Joint Portfolio Performance Review also notes that a significant barrier to further
progress is the lack of capacity of local authorities where provincial and district authorities
have limited understanding of resettlement policies, including compensation and monitoring
standards. This is also confirmed with what was reported to the IMT in the provinces visited.
Another issue reported to the IMT by the provinces is the lack of counterpart funding to be
used for the compensation of affected people (also an issue highlighted in the Fifth Joint
Portfolio Performance Review), which also leads to delays in project implementation.29
The IMT concludes, however, that gaps between the GoV and donors are, becoming
smaller, and donors could therefore become more flexible in the use of country systems
where relevant, although this may need changes at the donor headquarters level. The local
situation needs to be taken well into consideration to come up with pragmatic solutions.
External assistance is a small portion of Vietnam’s total public expenditures, and it does not
make sense to create double standard between ODA-funded projects and locally funded
projects. Rather, the use of country systems should contribute in a way to facilitate
institutional and capacity development so as to promote efficient resource utilisation and
donor alignment.
Results-based management
The 2008 HCS survey has attempted to assess progress in developing results-based
management frameworks (including monitoring and evaluation systems). At the sub-national
level results show that results-based practices are still emerging—54% of 48 provinces had
developed a monitoring and evaluation system for the provincial five-year SEDP and 49%
had established monitoring and evaluation practices. It was also reported that 84% of the
28
PGAE, ‘Mid-Term Review on the Implementation of Paris Declaration and Hanoi Core Statement on
29
The Fifth Joint Portfolio Performance Review notes that the time lag between the project
design/feasibility study stage and the implementation period usually requires that the resettlement
compensation budget plan needs to be prepared and approved at least twice.
32
December 2008
provinces have started to use the AMT. The SEDP monitoring and evaluation framework
developed is also expected to be used for reporting to the CG meetings.30
Monitoring and evaluation is an area where there is potential for greater alignment as country
capacity develops. As the case studies indicate, there is little tradition of managing for results
within the sectors and provinces.
Donors have made little progress in harmonising reporting and monitoring requirements for
grant-financed projects. Reporting and monitoring is still done in multiple formats by PMUs,
which diminishes the relevance of project-level monitoring to sectoral policy development. It
is reported that, in most cases, monitoring data is only used by donors. More progress has
been made in standardising reporting for loan-financed projects through the AMT, developed
with the support of the Vietnam Australia Monitoring and Evaluation Support Project
(VAMESP) and the six Banks.31 The AMT has only recently come into operation and has
reportedly experienced some teething problems, with some PMU staff interviewed by the
IMT expressing concerns about the software developed to support it. In due course,
however, the AMT should make a major contribution to systems alignment.
The provincial case studies suggest that monitoring and evaluation frameworks need
strengthening. Provincial plans do not necessarily specify indicators and targets, and are
formulated without being structured so as to be evaluable—objectives, outputs, activities and
inputs are typically mixed up, making it difficult to determine how, or whether plan
implementation is on target or not. In both provinces studied it was reported that provincial
sector departments and authorities have limited experience and capacity in monitoring and
evaluation. Limited evaluation and impact work is carried out, and hence limited lessons
learning. Whatever monitoring and evaluation activity is carried out appears to be done on a
project-by-project basis by provincial PMUs that follow different requirements and criteria
depending on the funding donor.
Key informants that the IMT interviewed in the MoH note that many efforts have been made
to develop monitoring and evaluation frameworks, but on an overall sectoral level they still
need strengthening. The most recent Joint Annual Health Sector Review noted that routine
monitoring of service delivery is limited largely to monitoring inputs. There are few monitoring
and evaluation specialists within the MoH, and the responsible staff work on a shared task
basis. The information that is collected is generally not used to inform management
decisions.32 In a very positive development, however, MoH and donors have recently initiated
a process of joint annual monitoring in the health sector. The annual reviews provide an
opportunity for mutual assessment of progress, supporting both management for results and
mutual accountability, while developing a common understanding of challenges and policy
options.
Significant efforts have also been made to strengthen monitoring and evaluation systems at
project and sub-sectoral levels. For instance, the Forest Sector Support Partnership and the
Trust Fund for Forests and the Rural Water Supply and Sanitation Partnership have
attempted to develop sub-sector performance monitoring systems, but in the absence of a
30
31
The AMT was finalised in 2006, and was reflected into the guiding circular of Decree 131/2006/ND-
CP.
32
Vietnam Ministry of Health and Health Partnership Group, ‘Joint Annual Health Review 2008:
Investment for better health of the people’, August 2008.
33
December 2008
comprehensive monitoring and evaluation framework for MARD. This has resulted in
’fragmentation and confusion as different departments maintain their own databases and
systems’. 33 Recent efforts have however been made to develop a sectoral-level monitoring
framework on the implementation of the MARD five-year SEDP.
In the area of transport, no monitoring and evaluation framework appears to have been
developed for the transport sector as a whole, and monitoring and evaluation tends to be
done on a project-by-project basis. It is unclear to what extent the SEDP monitoring and
evaluation framework issued by the MPI is used by the Ministry of Transport (MoT).34 The
five-year Transport Sector Development Plan 2006–2010 does not contain any monitoring
and evaluation indicators or baseline data for tracking the progress of the sector activities
and initiatives. No joint sector review has been undertaken by donors and the MoT to
improve lesson learning.
The development of a national HIV monitoring and evaluation framework, launched in

January 2007, however, shows the potential of concerned donor efforts on monitoring and
evaluation. The framework, used to track the spread of HIV and the effectiveness of harm
reduction measures, is implemented by a structure of central and regional monitoring and
evaluation units. It is supported by a national HIV monitoring and evaluation working group,
consisting of representatives of both national stakeholders and international partners, who
have worked to develop a programme of capacity-building initiatives to support its
implementation. A number of donors, including the DFID and the World Bank, have now
moved to using the national monitoring and evaluation framework for monitoring their own
projects.
2.4 Country–led and coordinated capacity building

Under the HCS, the GoV agrees to integrate capacity-building objectives into all its
development strategies and provide effective leadership of capacity-building support from
donors. One of the targets for 2010 is to achieve 100% partner-led and coordinated capacity-
building programmes. The Paris Declaration also commits donors to provide technical
cooperation in a manner that is coordinated with partner country strategies and programmes.
The 2008 HCS survey35 reports that 70% of Vietnam’s technical assistance is coordinated
(while it is noted that the responses from the donor survey need to be verified and studied in
more detail to have a comprehensive assessment of coordinated capacity building). Hence,
there is still some way to go to reach the ambitious 2010 HCS target of 100%. It is also noted
that the GoV needs to prioritise and communicate capacity-building objectives, as well as
ensure consistency between national and sub-national strategies to facilitate donor
alignment with these plans. For instance, only 66% out of 48 provinces have developed their
own local capacity development strategies. More recently, the PGAE has set up a new
thematic group on capacity development to conduct an in-depth study on capacity needs for
PBAs, focusing on line ministries and provinces, which will be a basis for a future medium-
term capacity development strategy.
33
2008.
34
According to MPI, the monitoring and evaluation indicators stipulated in the five year SEDP (2006–
2010) were developed by MPI, and MOT was consulted by MPI before its finalisation.
35
34
December 2008
One of the findings of the IMT 2007 report was that it has been difficult to make progress in
the area of country-led capacity building. It was noted that the GoV leadership of capacity
building and donor experience with partner-managed technical assistance programmes are
not particularly encouraging. Line agencies are not always effective in diagnosing their own
capacity constraints, or identifying the kind of assistance they need to address them.
Moreover, there is reportedly scepticism about the value of foreign technical advisers. It is
therefore a widespread perception that the pace of capacity development in Vietnam is not
as good as it could be.
Provinces reported that capacity building and technical assistance is lacking in coordination,
but also ownership. Some donors do not necessarily have the habit of consulting the
province in the formulation and recruitment of technical assistance, which may lead to
inappropriate technical assistance with limited understanding of the context and systems. At
the same time, while some of the provincial plans provide indications on human resources
and capacity needs, the provinces have not undertaken any specific capacity-needs
assessment or developed capacity-building plans that can be communicated to donors.
In HIV there is reportedly little coordination between donors on the provision of capacity-
building assistance. There is no database of capacity-building activities (most projects
include some capacity-building components). With the exception of the area of monitoring
and evaluation, the Vietnamese Administration of AIDS Control (VAAC) has not provided any
guidance to donors on its capacity-building priorities or what forms of assistance it prefers,
and while it has reportedly declined some assistance, it is not clear on what basis it does so.
At present, there is no way of assessing whether the support being offered to VAAC and
other relevant bodies adds up to a coherent whole.
In transport there were no apparent coordination mechanisms or examples of pooled

technical assistance initiatives. The MoT and donors are at a critical crossroad as major
institutional restructuring is being undertaken, which has a significant impact on how aid
projects are being managed and delivered (much of the management of aid projects will be
transferred from the MoT to the Vietnam Road Administration (VRA)). Significant support and
capacity building will be needed as VRA has limited experience in ODA management.
Nevertheless, so far it appears that technical assistance has already been provided by
several donors, but according to VRA not in a systematic manner, and while VRA would like
to undertake a comprehensive capacity-needs assessment, no such assessment has been
undertaken so far.36
36
There is however an ongoing study with capacity-needs assessment components, for instance the
Japan International Cooperation Agency’s (JICA) Special Assistance for Project Implementation
(SAPI2) recently started in September 2008.
35
December 2008
3 Recommendations
The IMT concludes that developing PBAs remains a key strategy for improving aid
effectiveness in Vietnam. PBAs offer the potential to address many of the problems that have
been associated with fragmented project delivery. However, the analysis suggests that
careful thought needs to be given to the transition to PBAs. There are a range of incentives,
capacity issues and regulatory structures that work against the development of PBAs.
Donors and the GoV need to be aware of those constraints, and design PBAs with a view to
overcoming them. They also need realistic expectations about the level of effort that will be
required to achieve an effective PBA. While PBAs offer the potential for a more effective
development partnership, the realisation of these benefits is not automatic.
The IMT concludes that donors should be more willing to make real changes in their
practices, using country systems as and when they reach standards that are appropriate for
the Vietnamese context and administrative realities, provided that the gaps between the
country system and expected donor standards are not considerable. The AAA also makes it
clear that donors must use country systems as their first option. If they do not do so, they
must state the reason, and ensure that any additional safeguards they impose are consistent
with ongoing reforms.
However, more work is also needed on the Vietnamese side to enable this to happen.
Inconsistencies within Vietnamese laws and procedures, and rules requiring special
treatment of donor funds irrespective of donor requirements, pose practical obstacles to
systems alignment. The MPI’s facilitation on this issue needs to be translated into effective
commitment across the administration.
The IMT also concludes that while line ministries and provincial authorities often appear
sceptical of the value of external capacity building and technical assistance, they are not
effectively analysing their own capacity constraints and needs, or providing guidance to
donors on their preferred forms of support. On the other hand, donors also appear weak at
coordinating capacity-building and technical-assistance initiatives with each other.
The IMT offers a number of recommendations for how to move forward. Key priorities for the
coming period include:
Government and donors

• The development of PBAs should become an explicit topic for discussion in
each sector partnership group. How should the PBA target apply in the sector? In
what sub-sector or thematic areas are PBAs most appropriate? What concrete benefits
would they hope to achieve by it?
• Based on this discussion, sector partnership groups should prepare a plan setting
out how to develop PBAs for the sector. They might also consider developing a
sectoral code of conduct or statement of principles to operationalise the HCS and
guide the development of PBAs. Sector partnership groups should then report annually
on the implementation of the plan to the Consultative Group and/or other venue that
the GoV and donors deem most appropriate. The MPI should provide support and
guidance to sector in developing PBAs, as well as ensure that good practices
are identified and shared with ministries and donors.
36
December 2008
• Further analysis of the obstacles and disincentives to implementing PBAs,

looking at particular sectors in more detail (including specific analysis on sectoral
and geographical differences). These obstacles and disincentives should then be
addressed specifically in the design of PBAs. For instance, if line ministries are
concerned that dismantling central PMUs will cause them to lose the administrative
resources they require in order to supervise programme implementation, then donors
might consider using mixed aid modalities, which combine continued resources for a
central (integrated) PMU with budget support for provincial implementation. Donors
might also invest more in monitoring and evaluation capacity within line ministries to
improve their oversight of provincial activities.
• Consider carefully the practical implications of developing PBAs in

decentralised sectors. At present, line ministries lack the capacity and authority to
play an effective policy development, regulation and oversight role over provincial
investments and service delivery. There is insufficient attention given to harmonising
provincial SEDPs with the national SEDP and sectoral strategies. Reporting lines by
sectoral departments through DPI and DoF do not ensure accountability of provinces
for their contribution to achieving national development goals. Developing PBAs should
provide the GoV with the opportunity to increase the efficiency, transparency and
accountability of provincial development activities. Donors may be able to facilitate this
process by developing PBAs and/or capacity-building programmes specifically at the
provincial level, rather than using hierarchical project structures. The design of PBAs
should be done with a view to supporting decentralised programme delivery, by
building intergovernmental policy dialogue and coordination, strengthening provincial
planning and budgeting and providing resources to line ministries to improve their
regulatory and oversight role.
• The GoV and donors should put more effort into the development of sectoral and
provincial monitoring and evaluation frameworks, and develop systematic
approaches to building monitoring and evaluation capacity. As monitoring and
evaluation frameworks are put in place, donors should make a concerted effort first to
ensure that their project-level monitoring and evaluation arrangements support and
contribute to the development of the sectoral and provincial framework, and then
progressively should use sectoral and provincial monitoring and evaluation frameworks
for project-level monitoring. Annual sectoral reviews conducted jointly by the GoV and
donors, as have recently been initiated in the health sector, potentially provide an
excellent basis for policy dialogue.
Government
• The IMT notes that there is continuing uncertainty around the definition of PBAs and
circumstances in which external assistance can legitimately be described as PBA. This
may also lead to an overstatement of the utilisation of PBAs through current donor
surveys on the HCS implementation. Adopting a loose definition of PBAs so as to
encompass existing aid practices does not contribute to improving aid effectiveness.
The monitoring of progress in developing PBAs should therefore be done
through a specific analysis carried out by the MPI, rather than through donor
surveys. The MPI should develop a list of PBAs in each sector in consultation with the
relevant sector partnership group. The MPI should then identify the volume of donor
funding falling within each PBA, and use this figure to calculate an overall proportion of
PBA. The list of PBAs should be updated each year at the time of the HCS monitoring
survey and published in full in the PGAE report. This would both increase the accuracy
of HCS monitoring, and improve the transparency of donor practices.
37
December 2008
• Accelerate the development of sectoral MTEFs in order to introduce a more

strategic approach to planning and budgeting. At present, the GoV agencies are
not generating operational programmes in a form that donors can readily finance. The
planned introduction of MTEFs will create a more robust link between planning and
budgeting, making it possible for donors to shift from targeted budget support through
NTPs towards sectoral budget support.
• Stronger role of the MoF in the management of external assistance. In

cooperation with MPI, MoF should take on a stronger role in developing the systems
and processes for including aid on the budget, and developing guidance for donors on
aligning their assistance with sectoral and provincial budget processes.
• Line ministries and provincial authorities should review capacity needs specified
in strategies and plans; analyse their own capacity constraints, and articulate their
preferences and needs for technical assistance to donors. These preferences and
needs should then be discussed in relevant sector partnership groups, and addressed
in the design of the PBA.
• Resolve barriers and inconsistencies in laws and procedures to enable greater

use of country systems.
Donors
• Focus on discrete sub-sectoral areas that have strategic importance for the
achievement of Vietnam’s development goals and where there appears scope for
positive policy influence. Donors cannot necessarily expect to gain a ‘seat at the
table’ for the entire sectoral budgeting and planning process. Given the small share of
external assistance in the total budgetary envelope for most sectors, and the
compressed time frame for external assistance given pending MIC status, SWAps of
the kind used in more aid-dependent countries (which takes several years to establish
and where external assistance may represent more than half of the total budgetary
envelope) are unlikely to be feasible in Vietnam. There should, however, be discrete
areas where programmatic support is both needed and welcomed.
• In sectors where the development of PBAs is going to take some time, donors should
give careful consideration to consolidating and harmonising assistance, as a
step towards PBA development, including by introducing the use of joint
projects, pooled funding and delegated cooperation arrangements as
appropriate. At present the pattern is for donors to make gradual moves towards
PBAs while maintaining a suite of stand-alone projects in the same sector. There are
potential aid-effectiveness gains from consolidating and rationalising remaining
projects. This means increasing the use of joint projects and pooled funding. This
should also be a specific topic for discussion in relevant sector partnership groups, and
where possible, targets and specific commitments should be identified and agreed
upon. For donors unwilling or unable to pool funding, alternatives include improved
dialogue with GoV partners and other donors on division of labour, and
developing more effective cooperation at the operational level (that is, ensuring
complementary approaches with other projects working in the same area).
38
December 2008
• In principle, any aid modality can form part of a PBA. However, donors that choose to
support PBAs in project form need to give careful consideration to how this is to
be accomplished. What exactly is the difference between a project that forms part of a
PBA, and a stand-alone project? At a minimum, there needs to be a structured process
to (i) develop a common programme and budget framework, encompassing both
national and external resources, to which the project contributes in a strategic way; (ii)
ensure that the project uses, or has a clearly defined process for working towards the
use of, national systems for programme management, procurement and financial
management; and (iii) develop monitoring and evaluation arrangements for the
implementation of the programme as a whole, and not the discrete project component.
This is something that has to be done in collaboration with GoV counterparts and a
group of other donors. It is not something that a donor can achieve in isolation,
however well designed their project.
• Donors should understand their HCS commitment as requiring use of country

systems as and when they reach standards that are appropriate for the
Vietnamese context and administrative realities. Donors should always use country
systems as the preferred option, even where there remain shortcomings, provided that
there is a credible process in place for addressing those shortcomings. In future project
or programme designs, where donors choose to impose additional safeguards, they
should present a written statement of reasons to the relevant sector partnership group.
They should also ensure that any additional safeguards are consistent with ongoing
Vietnamese reform goals and processes.
• Donors should improve the coordination of technical assistance where relevant,

using pooled funding arrangements, and support the establishment of a sector
database or mapping exercise on technical assistance. Coordination of technical
assistance should be an explicit topic for discussion at relevant sector partnership
groups.
39
December 2008
Annex A HIV case study
A.1 Context
The HIV epidemic in Vietnam is at a relatively early stage. National prevalence is estimated
at 0.53%, concentrated among intravenous drug users (IDUs), female sex workers and men
having sex with men. The epidemic is also geographically concentrated, with prevalence
rates in certain provinces (Quang Ninh, Hai Phong and Ho Chi Minh City) well above the
national average, although HIV is present in all provinces and districts. The number of
people living with HIV is estimated to have risen from 96,000 in 1999 to 293,000 in 2007,
with 15,000 deaths due to HIV. However, Vietnam still has a window of opportunity to control
the epidemic before it becomes generalised.37
Over the past five years Vietnam has begun to put in place the legal, policy and institutional
framework to enable an effective response to HIV. A National Strategy on HIV/AIDS
Prevention and Control was adopted in 2004, followed by a law on HIV in 2006. With the
support of international partners, the GoV has established harm reduction programmes
targeted at key groups in high-risk communities. It provides antiretroviral (ARV) treatment to
26–30% of those in need, and has set a target of 70% coverage by 2010. These activities
will need to be scaled up to meet Vietnam’s objective of keeping HIV prevalence across the
general population below 0.3%.
To accomplish this, there are some significant challenges that will need to be addressed on
both the GoV and the international partner sides. Transmission of HIV in Vietnam is
associated with behaviours that are criminalised under Vietnamese law, making it more
difficult for the authorities to engage with high-risk groups. Vietnam runs a system of 80
Compulsory Drug Rehabilitation Centres, with a population of 40–80,000 inmates, in which
no ARV treatment is available (other than through donor-funded pilots). These centres, and
other closed settings like prisons, are key sites for HIV transmission. An effective response
to HIV therefore requires collaboration across multiple sectors, including not just the MoH,
but also the MoPS for prisons and police and the MoLISA for the drug rehabilitation centres.
It also requires collaboration between central ministries and provincial governments, who are
responsible for delivering the bulk of HIV-related services.
At present, the capacity of the GoV to formulate and implement cross-sectoral and
intergovernmental policies and approaches on HIV remains weak. Even within the health
sector, policy making and service delivery tends to be highly fragmented. Recent capacity
assessments suggest that Vietnam has a tradition of strong, vertical health programmes
targeted at specific diseases, but little capacity for overall policy leadership and coordination
at the central level. Although a MTEF has been piloted in the health sector for some years,
resource allocation is not very strategic. Relations between the MoH and provincial
governments are poorly defined, and capacity to monitor the implementation of policy
commitments is limited.
The HIV area is exceptional within Vietnam due to the dominance of external assistance.
Donor support has increased rapidly from US$7–8million per annum in 2002–04 to around
US$51.8 million in 2006. Expenditure funded from the national budget has increased more
37
Data in this paragraph are from the Socialist Republic of Vietnam, ‘The Third Country Report on
following up the implementation to the Declaration of Commitment on HIV and AIDS’, Hanoi, January
2008.
41
December 2008
slowly, to around US$5 million in 2006 and US$9.4 million in 2007. As a result, between 80–
90% of the total expenditure on HIV is thought to be donor financed (although there are no
precise figures for either international or national expenditure). By comparison, only 3% of
total health expenditure (or around 10% of the national health budget) is externally financed.
There are some 25 international partners active on HIV, implementing 121 projects (2005
data). By far the dominant player in the sector in financial terms is the President’s
Emergency Fund for AIDS Relief (PEPFAR), which is providing US$85 million in 2008 out of
a total of around US$110 million in assistance. Other important funding sources are the ADB,
Australia, the DFID, the Global Fund for AIDS, Tuberculosis and Malaria (GFATM), the
Netherlands and the World Bank.
HIV programmes Indicative funding for 2008 (US$ million)

PEPFAR 85.00
DFID 7.67
ADB 6.20
World Bank 6.00
GFATM 3.90
Australia/Netherlands 2.00
Ford Foundation 1.85
Clinton Foundation 1.25
Sweden 0.42
A.2 Country leadership and donor alignment

Vietnam’s National Strategy on HIV/AIDS Prevention and Control, adopted in 2004, sets out
the objective of controlling HIV prevalence among the general population to below 0.3% by
2010, as well as reversing the adverse impact of HIV on socioeconomic development. It
specifies a series of technical solutions to the epidemic, including:
• Surveillance, voluntary counselling and testing

• Ensuring blood transfusion safety
• Prevention of HIV transmission through medical and social services
• Stepping up treatment
• Prevention of mother-to-child transmission
• Prevention and control of sexually transmitted infections (STI)
• Research, monitoring and public education
The Strategy anticipates the development of nine Programmes of Action, covering areas of
activity such as behavioural change, harm reduction, care and support, surveillance and
blood transfusion safety. These were prepared over subsequent years, with some recently
completed. The Strategy contains little detail on implementation arrangements, beyond
giving Provincial People’s Committees in the provinces direct responsibility for
implementation, including allocating budgets and human resources. The MoH is responsible
for guiding the implementation of the Strategy, and for directing the activities of agencies
within its portfolio. The Strategy notes that cross-sectoral coordination is a challenge, and
calls on the MoLISA to cooperate with and coordinate other ministries in studying and
formulating appropriate policies for HIV prevention and control. The Strategy does not
42
December 2008
contain much detail on appropriate responses beyond the health sector, such as responding
to HIV in closed settings like prisons and Drug Rehabilitation Centres.
Together with the 2006 Law on HIV-AIDS Prevention and Control and associated legal
instruments, the Strategy provides a basic outline of Vietnam’s response to the epidemic.
However, neither the Strategy nor the nine Programmes of Action amount to a detailed,
operational plan, linked to a budget framework. With the response to HIV divided across
several ministries, it is not possible to identify precisely the national resource envelope for
HIV.
Donors have made an effort to align their support to the National Strategy and its
Programmes of Action. However, because these lack operational detail and associated
budgets, they do not offer a basis for programmatic support, and all assistance remains in
project form. While many of the projects appear well aligned, the continued operation of a
multiplicity of donor projects means that the Vietnamese response to the epidemic has
inevitably been strongly influenced by donor preferences and funding choices.
One of the main challenges to effective national leadership of the HIV response has been the
multi-sectoral nature of the challenge. While an important share of HIV-related activities are
delivered within the public health service, an effective response to the epidemic also involves
the Ministries of Culture and Information, and Education and Training on raising awareness
and public education, and the MoLISA and MoPS on the treatment of IDUs and sex workers
and harm reduction, care and treatment within closed settings. The responsible ministries
have no tradition of cooperating on the formulation and implementation of cross-sectoral
strategies, and are to some degree in competition with each other for control of external
financing. They also have little experience in working with non-government actors, including
the private sector and NGOs.
The official coordination body is the National Committee on AIDS, Drugs and Prostitution
Prevention and Control, which is chaired by Deputy Prime Minister Truong Vinh Trong,
established in 2001. Until recently, it was relatively inactive, but over the past year it has
become increasingly effective as the lead coordination and policy forum on HIV-related
issues. The lead agency on prevention and treatment is the VAAC which, after a number of
different institutional configurations, is now located within the MoH. However, the VAAC
tends to operate as an independent service-delivery organisation, rather than a national
coordinator, and is poorly integrated with the MoH.
While these coordination structures are improving, there are still major challenges in
conducting an effective, cross-sectoral policy dialogue. Consultations among ministries tend
to occur mainly at the urging of international partners, and support for consultation processes
by individual ministries sometimes appears half-hearted. There were consultations around
recent amendments to the Law on Prevention and Control of Drugs, which partially alleviated
conflicts between the legal frameworks on HIV and drug use, although contradictions remain.
Other ministries also provided comments in writing to the MoH on the National Strategy
during its preparation. However, the tendency is still for the responsible ministries to focus on
their immediate institutional remit, rather than their contribution to national policy goals.
While the situation is improving, Vietnam is still struggling to implement a fully coherent
response to the epidemic across the sectors. At a recent meeting with donors, the Vice
Chairman of the National Committee stated:
43
December 2008
’There are currently two ways to view drug users—as criminals

and as patients. The Vietnamese are not ready to view drug
users as patients only; it is still an illegal activity and has a very
harmful impact on families and society.’38
Lengthy detention of drug users, without access to ARV treatment or effective HIV
prevention measures, is seen by donors both as a serious human rights problem, and as a
major weakness in the national response to HIV. There is still no real agreement with the
MoPS to minimise the impact of law enforcement on harm reduction programmes for IDUs
and sex workers, and peer educators are still subject to arrest and harassment. Nor is there
yet an effective harm reduction or care and treatment programme in prisons. However, in a
positive sign, the MoH will in 2008 host its second National Peer Educator Forum, which
brings together former IDUs and sex workers to train them on outreach programmes.
Against this background, donors appear to be well coordinated in their policy advocacy.
There is an Ambassadors/Heads of Agency Informal HIV Coordination Group, which meets
quarterly under the chair of the United Nations Resident Coordinator and the Irish
Ambassador, with UNAIDS as the Secretariat. Through this group, donors formulate
common positions on policy matters, and coordinate their messages to Vietnamese
counterparts. The group has discussed strategy for policy advocacy, including how to identify
and engage key political constituencies such as the National Assembly and the Communist
Party. Through this forum, donors consulted with one another on recent revisions to the Law
on Drug Control and Prevention, which now includes reference to HIV prevention and
control, although many of their concerns were not addressed. A recent visit to Australia by
the Deputy Prime Minister and a team of officials, organised by AusAID, provided exposure
to international approaches to harm reduction, and is credited with further supporting the shift
of official attitudes towards methadone treatment for IDUs.
Overall, given the novelty of the issues and their tendency to challenge Vietnamese values
and traditions, policy advocacy emerges as one of the strengths of the international
engagement, and has made an important contribution to the development of the national
response. However, Vietnam still has some way to go to ensure overall policy coherence.
A.3 Coordination structures

There are a range of coordination structures established by international partners who
support the HIV response. In addition to the Ambassadors/Heads of Agency group, there is
the HIV Policy and Programme Coordination Group, a sub-group to the Ambassadors/Heads
of Agency Group made up of donors, UN agencies and international NGOs, with UNAIDS as
Chair. This body was established in 2007 to support the Ambassadors/Heads of Agency
Group, to promote an effective, multi-sectoral approach, and to coordinate government and
donor programmes. It formulates joint positions for international advocacy, as well as sharing
information among the donors on their activities.
There is also an international NGO HIV Technical Working Group (TWG), affiliated with the
NGO Resource Centre and associated networks of Vietnamese NGOs, which meets bi-
monthly for information sharing. It has seven subgroups, covering areas such as care and
treatment, harm reduction, men having sex with men, 05/06 Centres, gender and sexuality
and communications. The TWG is open to all interested participants, and brings together
38
Vice Chairman of National Committee on AIDS, Drugs and Prostitution Prevention and Control to
the Ambassadors/Heads of Agency Informal HIV Coordination Group, 29 May 2008.
44
December 2008
participants from both international and Vietnamese NGOs, the Communist Party, the GoV
and mass organisations.
Another structure is the Global Fund Country Coordination Mechanism (CCM), which is
chaired by the President of the Vietnamese Medical Association. It is responsible for
preparing proposals for support from the GFATM and overseas implementation of GFATM
funded projects.
In addition, there are coordination structures established and led by the relevant GoV
agencies, most notably the National Committee, which has the overall policy development
and coordination mandate.
The coordination structures for HIV are not well linked with those for the health sector as a
whole. There is a need to strengthen the linkages between the HIV coordination mechanisms
and those in the health sector, most notably the Health Partnership Group (which is to be
addressed by partners in 2009). There is also an issue of improving multi-sectoral
coordination for HIV, and there have been a call from partners for the implementation of a
partnership mechanism established by the National Committee on HIV, Drugs and
Prostitution to coordinate GoV and donor support and resources.
While these structures indicate a determination on the part of donors to improve

coordination, the process of harmonising the international engagement is still at a relatively
early stage. The first two joint projects are in the process of development—a new Dutch and
Australian initiative, and a merging of ongoing DFID and World Bank projects—which is an
important step in the rationalisation of assistance. However, operational coordination over
issues like cost norms and project delivery arrangements remain a challenge.
In December 2006, in recognition of the need for improved coordination, donors and the GoV
organised a national conference on the coordination and management of foreign aid for HIV
prevention and control. A study commissioned to inform the discussions39 concluded that
there were a range of problems with aid coordination, including:
• a lack of alignment of aid flows with the functions and responsibilities of central and
provincial authorities;
• no clear focal point within the GoV for aid coordination, and no working system for aid
coordination, resulting in scattered and overlapping assistance;
• slow project implementation at provincial level, due to a lack of harmonised management
procedures among donors;
• no reporting system or database on aid flows;
• a general lack of interest in project-level monitoring and evaluation.
The study recognised that inconsistencies in the institutional and legal framework on the
Vietnamese side was a contributing factor to poor aid coordination.
As a result of the conference, a drafting group consisting of the MoH, MPI, MoF with DFID,
PEPFAR and UNAIDS prepared a Coordination Action Plan (CAP). The CAP specifies a
range of ambitious measures for improving aid effectiveness in HIV, including:
39
Centre for Community Health Research and Development, ‘Coordination, management and
utilisation of foreign assistance for HIV/AIDS prevention in Vietnam’, October 2006.
45
December 2008
• the preparation of a set of documents to guide the management and coordination of aid,
specifying collaboration mechanisms among sectors, mechanisms for coordination
between the GoV and donors, and updated project approval procedures and templates;
• measures to improve cross-sectoral collaboration and integration, including annual
collaboration plans in three programming areas, criteria for allocating and integrating
resources across sectors, a long-term human resource development plan, standardised
financial management systems, improvements in communications and information
sharing, a common aid database and information management system, and integrated
project-level monitoring and evaluation processes.
These proposals are perhaps the most ambitious of any sector in Vietnam, but nothing
substantive has yet come of them. The CAP anticipated the establishment of a multi-sectoral
Steering Committee, chaired by the VAAC Chairman. However, to date neither VAAC nor
MPI have wanted to take the initiative for convening the Steering Committee. This lack of
clarity on institutional responsibilities is for the time being preventing national leadership of
the initiative.
A.4 Aid delivery

Aid for HIV in Vietnam is entirely in the form of projects, due to a lack of operational
programmes on the Vietnamese side on which a PBA could be based, and to the challenges
of developing a multi-sectoral response. As the 2006 study concluded, aid in the past has
been highly fragmented, due both to poor coordination among donors and uncertain
institutional structures on the Vietnamese side. For as long as delivery mechanisms on the
Vietnamese side were unclear, donors tended to negotiate separate delivery arrangements
for each project, coming up with a range of different solutions that risked undermining
institutional development on the Vietnamese side.
Some donors (notably PEPFAR) provide a significant proportion of their support through
international and Vietnamese NGOs. VAAC and the provincial authorities have little
experience in collaborating with NGOs, and claim to have little knowledge of or involvement
with activities delivered outside their systems. Other donors (including ADB, DFID and the
World Bank) use PMUs located at central level in the VAAC, and a network of provincial
and/or district PMUs in the areas where they operate. These delivery methods provide more
ownership for the VAAC, but often operate as vertical silos, poorly integrated and
coordinated with the rest of the public health sector and other HIV programmes. The different
geographical coverage of the donor programmes means that delivery mechanisms may vary
in different parts of the country, or even within the same province.
Vietnam is now beginning to standardise its delivery of HIV-related services at provincial

level under the Law on HIV-AIDS Prevention and Control, through the establishment of
provincial Steering Committees and Provincial AIDS Centres (PACs). Donors are trying to
support the PACs to lead on operational coordination. For example, DFID and the World
Bank projects provide assistance to the PACs to formulate local HIV Action Plans, using a
bottom-up planning process, under the guidance and monitoring of the central PMU.
PEPFAR is funding additional staff resources in some PACs to build their capacity to
supervise and coordinate service delivery by non-state actors. However, it is reported that
coordination capacity in the provinces is still very patchy, with Steering Committees and
PACs in some cases still largely paper entities.
46
December 2008
A number of specific operational coordination issues were raised with the IMT by different
stakeholders. One is that the VAAC has assigned different geographical areas to particular
donors. While organising a rational division of labour among donors is a key aid-
management function, there are concerns about the method currently used. The VAAC is
attempting to distribute assistance equitably across all provinces, rather than concentrating it
in areas with the highest HIV prevalence. This suggests a concern with equalising access to
external financing, rather than with finding the most effective method of controlling the
epidemic. Donors would prefer to see saturation coverage of areas with higher prevalence.
VAAC also tends to treat all donor projects as though they offered an equivalent package of
assistance, whereas in reality they offer different kinds and levels of support.
Secondly, there are concerns that external assistance is creating unhealthy competition
among Vietnamese institutions for access to funds. It is reported that some PACs are
beginning to provide HIV testing and treatment services directly, even when these services
would be more appropriately delivered through the public health system. PACs were
originally intended to coordinate services, rather than provide them directly.
Thirdly, there are some important differences in technical approach among the donors, most
notably over the distribution of needles and syringes to IDUs. PEPFAR is subject to US laws
preventing US funds from being used to procure and distribute needles and syringes. Given
that PEPFAR is the dominant funder, this limits the technical responses available to Vietnam.
PEPFAR is trying to minimise the impact on service delivery by collaborating with other
donors who do not have the same restrictions.
Fourthly, donors use different cost norms, particularly regarding remuneration and financial
incentives for national staff. The European Union (EU) and the UN have recently
standardised their cost norms, with the intention of eventually replacing these with
government norms once the latter are raised to a market level. PEPFAR, and to a lesser
extent the World Bank, offer higher cost norms. This creates a strong incentive for GoV
personnel to become involved in PEPFAR projects, and may be distorting the labour market.
Fifthly, there is reportedly little coordination between donors on the provision of capacity-
building assistance. There is no database of capacity-building initiatives (most projects
include a technical assistance component). Programme of Action 9 sets out some general
priorities for donors on capacity building in the area of HIV. However, there is not yet a
comprehensive approach to capacity development in HIV under country leadership, as
anticipated under the HCS. There is a more proactive approach in the monitoring and
evaluation field, where the National HIV Monitoring and Evaluation Technical Working Group
has been coordinating capacity development at central and local levels in support of the
National HIV Monitoring and Evaluation Framework (see below). Overall, however, it is
difficult to assess whether the range of donor technical assistance to the VAAC and
provincial AIDS Centres adds up to a coherent whole.
There is very little use of country systems for aid delivery. The main commodities—ARV
drugs, condoms, needles and syringes—are procured internationally by donors, although
(with the exception of PEPFAR) they are generally distributed through VAAC. There is
reportedly no significant use of country financial management and reporting systems, despite
one assessment stating that there were no significant obstacles from a fiduciary or
development point of view to donors using GoV systems for public financial management,
47
December 2008
with some additional safeguards on procurement and auditing.40 International agencies all
require different formats for financial reporting and monitoring.
Finally, there is no system for tracking financial commitments and disbursements on HIV.
The Development Assistance Database (DAD) managed by the MPI is reportedly not up to
date for HIV. The international agencies have compiled a table of donor activities and
financial commitments. However, precise annual expenditure is impossible to identify, due to
differences in financial years among the donors.
A.5 Managing for results

Vietnam has been investing in the development of a national HIV monitoring and evaluation
framework, launched in January 2007, and stakeholders appear confident that the core of a
robust system is now in place. Vietnam is doing less well at monitoring and evaluation at
activity level, despite a recent government decision mandating the collection of basic input
and output data.
The monitoring and evaluation framework specifies key quantitative and qualitative
indicators, measures of populations at higher risk for coverage calculations, and HIV and
behavioural surveillance data. The MoH carries out sentinel HIV/STI surveillance in order to
map trends. There is a monitoring and evaluation unit in the VAAC at central level, and four
regional monitoring and evaluation units in major regional institutes, including the National
Institute for Hygiene and Epidemiology in Hanoi (which also serves as a national monitoring
and evaluation technical unit), the Pasteur Institute in Ho Chi Minh City, the Pasteur Institute
in Nha Trang and the Hygiene and Epidemiology Institute of the Central Highlands. Local
HIV monitoring and evaluation units are located in each provincial AIDS Centre, reporting to
VAAC, and each District Preventive Medicine Centre has at least two staff working on
monitoring and evaluation.
There is a National HIV Monitoring and Evaluation Technical Working Group, consisting of
representatives from both national stakeholders and international partners, which supports
the implementation of the national monitoring and evaluation framework, including
coordinating capacity building. PEPFAR has been supporting the monitoring system with an
Integrated Biological and Behavioural Survey, conducted in particular sites, done jointly with
the MoH. While there are still some key data gaps, the information base is steadily
improving.
As the most recent Joint Annual Health Review concludes, there is no tradition of results-
based management in the health sector. Administrative monitoring of service delivery is
largely limited to mapping inputs. There are few monitoring and evaluation specialists within
the public health sector in general, with the responsible staff working on a shared task basis
and mostly untrained. The information that is collected is generally not used to inform
management decisions.
Vietnam’s UNGASS report identifies four main challenges to the effective implementation of
the monitoring and evaluation framework:
40
Biljmakers, Leon, ‘Feasibility of the programme approach in the health sector in Vietnam’, April
2006.
48
December 2008
i) lack of trained staff;
ii) lack of quality control over data collection, especially at community level, and a
lack of effective analysis of data collected on at-risk populations;
iii) lack of ‘sufficient and adequate’ use of monitoring and evaluation, which results in
‘poor programme development, resource coordination and allocation’;
iv) lack of financial and material support.41
Other stakeholders interviewed by the IMT noted that the lack of standardised monitoring
and reporting procedures across donor projects overburdens local monitoring and evaluation
capacity, and makes it more likely that monitoring and evaluation data will be produced
purely for donor purposes, rather than to support the national monitoring and evaluation
system. However, some donors (notably the joint DFID and World Bank project) now use the
national monitoring system as far as possible for project-level monitoring.
The UNGASS report usefully sets out a number of priority areas for capacity building around
monitoring and evaluation, developed by the National HIV Monitoring and Evaluation
Technical Working Group:
i) technical assistance for the development of national guidelines and technical

standards for HIV monitoring and evaluation;
ii) technical and financial support for basic equipment and infrastructure;
iii) comprehensive technical training for staff at national and provincial levels;
iv) support for specific HIV studies, including clinical trials, and national surveys.
41
Socialist Republic of Vietnam, ‘The Third Country Report on following up the implementation to the
Declaration of Commitment on HIV and AIDS’, Hanoi, January 2008, p.29.
49
December 2008
Table A.1 HIV funding
Donor 2004 2005 2006 2007 2008 Focus Area After 2008
PEPFAR (Oct 05 – Sept (Oct 06 – Sept (Oct 07 – Sept 08) Prevention- 25%, Care- Will level off at
06) 07) US$ 85 million 32%, approximately US$
US$ 3.4 million US$ 65.8 million Treatment- 31%, 4 % 87.7m per year
Other (Strategic
Information and
Policy/Systems
Strengthening)
GFATM US$ 2.1 million US$ 2.2 million US$ 3.9 million Prevention, Care and Up to $24,036,141m
Treatment to 2012
ADB US$1 million US$0,75 US$0.5 million US$2.5 million US$ 6.2 million Strengthening health - US $16.3m for
(JFPR 9006 million – (HIV Prevention (disbursed under (includes US$ 3.3 systems; Greater Mekong Youth Prevention
Community project Among Youth HIV Prevention million for Youth Sub-region capacity - US$1.3m for HIV in
Action for preparation of Project) Among Youth Prevention building for prevention road construction
Preventing Youth Project Project) Project) - plus other funding
HIV/AIDS in for regional project
Cambodia,
Laos and
Vietnam)
DFID (Apr07 – Mar08) (Apr08 – Mar09) Prevention Joint funding
US$ 3.2 million £5 million DFID/WB – Up to
£18m (TBC) to 2012
World Bank US$ 3 million US$ 5 million US$ 6 million Prevention
AusAID / the US$2 million Prevention, policy, US$ 8m over 3 years
Netherlands (2008- coordination, care (IDUs),
2012 human resources capacity
building
Sweden US$ 965,000 US$ 950,000 US$ 420,000 Policy (leadership training, N/A
jointly with UNDP)
Ford Foundation US$ 633,800 US$ 938,300 US$ 418,800 US$ 693,800 US$ 1,850,200 Prevention, coordination, Funding will reduce
capacity building, rights and and focus on:
vulnerable groups Capacity building for
CSOs; strengthening
rights-based
50
December 2008
Donor 2004 2005 2006 2007 2008 Focus Area After 2008
approaches; related
rights work
Clinton Foundation $500,000 $1,250,000 $1,250,000 Care and treatment $1,200,000 per year
(funding from (funding from (funding from anticipated,
AusAID) AusAID) AusAID) depending on
funding; $450,000 in
commodities per year
$750,000 in care and treatment commodities (funding
until 2010
from UNITAID)
Source: UNAIDS.
51
December 2008
Annex B Transport case study
B.1 Context
The transport sector of Vietnam consists of various transport modes: road, railway, inland
waterway, coastal and sea shipping and aviation. There have been significant achievements
with rapid growth in transport infrastructure and services over the past two decades. High
growth rates and membership in the ASEAN Free Trade Area (AFTA) and the World Trade
Organisation (WTO) are expected to increase demands further for transport infrastructure in
areas such as freight and passenger transportation, most notably air and marine
transportation. Demand for goods transport is forecast to increase by 8.9% per annum in
terms of tonnes, while passenger numbers will grow at 9% per annum and passenger-km at
10.3% for the period 2006–2010. The road system and the inland waterway are still the main
transport modes, with expected capacity as of 2010 to be 230 million and 98.4 million
tonnage of goods transported, respectively. Continued investment in both these main
transport modes is required.42
There are however significant challenges, in particular traffic safety issues and inadequate
maintenance, and considerable improvements are needed in the sector, policy, planning,
budgeting, regulatory and implementation frameworks. A comprehensive review43 of
transport policies and regulations concluded that there is weak policy and policy
implementation in the road sector; the urban transport environment needs significant
improvements; and the implementation of regulations is weak in general and cuts across
many subsectors. Five main challenges were identified: (i) how to increase efficiency in both
resource utilisation and service delivery; (ii) how to achieve fiscally-constrained and
sustainable financing; (iii) how to facilitate growth for future urbanisation; (iv) how to mitigate
the negative impacts of transport; and (v) how to develop institutional and human capacity to
meet the sector's needs.
Substantial amounts of external assistance have been channelled to the transport sector in
the last 10 years. A large share of external assistance is made up of loans with smaller
grants for technical assistance. The most significant donors are the development banks,
including ADB, JICA (formerly the Japan Bank for International Cooperation (JBIC)) and the
World Bank, and some smaller bilateral donors, including Agence Française de
Développement (AFD), DFID, Finland, Kreditanstalt für Wiederaufbau (KfW) and Korea.
While there are forecasts that external assistance will decrease after 2010, in the medium-
term, external assistance is increasing with new commitments and pledges being made by
donors.44
Due to the lack of an updated database or system for tracking external assistance, there are
no up-to-date or reliable data on external assistance to the transport sector. Estimated
figures from 200545 indicated that between 2001 and 2005 external assistance accounted for
around 40% of investment expenditures under the MoT’s control. Funding provided by the
42
GoV, ‘Five Year Transport Sector Development Plan 2006—2010’, 2006.
43
44
GoV, ’2008–2010 MTEF Submission of Transport Sector from the Ministry of Transport’, February
2008.
45
52
December 2008
six Banks46 alone increased by more than US$1 billion in 2005 and 2006, mainly due to
commitments made by JICA (former JBIC). By the end of 2006 there was a reported
US$4.76 billion allocated to the transport sector by the six Banks.47
B.2 Country leadership and donor alignment

There are several transport sector development policies, strategies and plans.48 These
include, for instance, the 2004 Transport Development Strategy to 2020 and the five-year
Transport Sector Development Plan 2006–2010, prepared as an input to the five-year SEDP
2006–2010. In addition, there are ‘master plans’ and strategies in sub-sector areas, for
instance, the road transport plan to 2010, the aviation transport development strategy to
2020, the inland waterway development master plan to 2020, the river waterway transport
development strategy to 2020, the policy on maritime transportation development and
seaports network development master plan to 2010, the railway transport development
strategy to 2020 and the master plan for an express way system in Vietnam by year 2020.
There is ongoing work under VITRANSS2 to develop comprehensive long-term development
strategies up to 2030, a transport development master plan up to 2020, and short-term
priority programmes 2011–2015.
The recent MTEF submission points out that ‘current development plans and strategies are
not likely to be feasible. It is important to look at the mismatch between investment demands
and the availability of resources, which requires frequent review’.49 The total investment
capital requirements for the sector for period 2006–2010 is estimated as of VND315,642
billion in which 45% is from the state budget and 55% from other sources. With respect to
the owner of the funds, 68% is under management of the MoT, and 32% of other ministries.50
However, in official planning documents, there is no justification provided on the availability
of resources to meet those requirements. Another challenge is the lack of optimal resource
allocation in national and provincial plans between operations and maintenance and new
investments and between transport modes, as well as inadequate selection of investment
projects in different sub-sectors (see Box B.1 below).
A mismatch is often apparent between the GoV’s overall strategies and detailed sector
development plans, and as there are often unclear divisions of responsibilities in the planning
function, plans may simply be a long list of investment projects that may not be feasible
and/or consistent. The sector review undertaken in 200651 noted that based on long-term
strategies, such as the SEDP, the MoT prepares plans and strategies for the sector which
include lists of investments in sub-sectors, but there is often a missing link between the high-
level strategy document and the detailed lists of investments in the plan. There are also often
unclear divisions of responsibilities and insufficient coordination among relevant ministries
and agencies in the planning function. For instance, the MoT’s Transport Development and
Strategy Institute prepares long- and medium-term national strategies and plans; the MoT’s
46
ADB, AFD, JICA (formerly JBIC), Korea Eximbank, KfW and the World Bank.
47
ODA Inter Ministerial Task Force (IMTF), ‘Fifth Joint Portfolio Performance Review’, May 2007.
48
For reference, the most comprehensive overview can be found in the World Bank Transport
Strategy: Transition, Reform, and Sustainable Management, June 2006.
49
GoV, ’2008–2010 MTEF Submission of Transport Sector from the Ministry of Transport’, February
2008.
50
GoV, ’Five Year Transport Sector Development Plan 2006–2010, 2006.
51
World Bank, ’Transport Strategy: Transition, Reform, and Sustainable Management’, June 2006.
53
December 2008
sector departments prepare national modal strategies and plans; and the DoTs prepare
provincial transport plans, but these plans may be weakly integrated with one another. There
is also fragmentation in planning at the local level where decentralisation has given provincial
authorities autonomy to prepare plans that are approved by the Provincial People’s
Committees and Councils (and then submitted to the MPI). However, while provincial
authorities receive recommendations on their plans from the MoT, they do not need to follow
these.52
Box B.1 Sub-optimal resource allocation
Suboptimal resource allocation is prevalent throughout the planning process at both national and
local levels. There is misallocation (i) between new investment and maintenance resulting in an
asset preservation problem; (ii) among transport modes; and (iii) in the selection of investments
within each sub sector.
Investment versus maintenance: The principle of dual budgeting, in which planning and budgeting
decisions are split, creates a ‘disconnect’ between planning for new investment and asset
preservation. Approvals of capital and recurrent expenditures are granted by two different
government offices and it is not possible for the MoT to reallocate funds among the two uses. Dual
budgeting practices typically result in inadequate budgets for asset preservation, and reduce the
effectiveness of the planning process. While government transport strategies and plans highlight
maintenance as a priority, the amount of resources allocated to road maintenance indicate
otherwise with at most 50% of the necessary maintenance expenditures on national roads being
made.
Intermodal misallocation: The basis for allocation across sub sectors is not clear. For instance,
expenditures on waterways, in particular, have fallen well below the expenditure levels proposed
in the Public Investment Programme. There are rarely sufficient funds for capital improvement.
The impact of underinvestment in a particular sub sector could also extend beyond reducing the
demand and levels of service associated with that mode to inefficiencies in multi-modal transport.
Prioritisation of expenditures: Aside from the issue of suboptimal intermodal allocation and
inadequate prioritisation between asset preservation, there are also inefficiencies in identifying
new investments and determining maintenance priorities. The medium- and long-term investment
plans contain lists of transport projects that are perceived to provide ideal connectivity and access.
Typically only a fraction of these projects have been implemented due to resource scarcity and
some of the projects that have been implemented were not in the plan. The basis for the selection
of the projects that are ultimately implemented is not clear. Another contributor to the inadequate
prioritisation is the weaknesses in many of the feasibility studies. One of the common
shortcomings in Vietnam is an excessive focus on a proposed project's technical aspects with
little, often inadequate, attention paid to the demand and market side.
Source: Adapted from World Bank, ‘Transport Strategy: Transition, Reform, and Sustainable
Management’, June 2006.
While the GoV’s transport sector policies, plans and strategies may indicate the direction of
sector development, they do not examine budgetary implications, and it may therefore be
difficult for donors to regard the strategies and plans as a credible basis for alignment.
Although a MTEF has been piloted53 in the transport sector for some years, resource
52
See also the provincial case study for a discussion on this issue, also related to other sectors.
53
Recommendations to pilot MTEFs in several sectors and provinces were made in 2000 but
implementation started in 2003. Four pilot sectors were identified (education, health, transport and
agriculture and rural development) as well as four pilot provinces (Binh Duong, Ha Noi, Ha Tay and
Vinh Long). The MTEFs are still being piloted with a view to being rolled out nationally.
54
December 2008
allocations remain non-strategic. Further development of the MTEF would be expected to

improve the links between the planning and budgeting process.
It is also noted that monitoring and evaluation activities and systems are weak. No
monitoring and evaluation framework appears to have been developed for the transport
sector as a whole, and monitoring and evaluation tends to be done on a project-by-project
basis. It is unclear to what extent the SEDP monitoring and evaluation framework issued by
the MPI is used by the MoT.54 The five-year Transport Sector Development Plan 2006–2010
does not contain any monitoring and evaluation indicators or baseline data for tracking the
progress of the sector activities and initiatives. No joint sector review is undertaken by
donors and the MoT, and there does not appear to be any systematic collection of
information to use for decison making.
Sector policy dialogue between the MoT and donors takes place through several
frameworks, including the Transport Partnership Group (TPG) (see below), the six Banks
and the Poverty Reduction Strategy Credit (PRSC). These frameworks are interrelated and
have complementary roles. The six Banks’ initiatives are closely linked with the Vietnamese
government’s high-level ODA IMTF, headed by the Vice Minister. The TPG is co-chaired by
the MoT and JICA (former JBIC), and the PRSC is operated in coordination with the MPI,
MoF, State Bank of Vietnam and the MoT on the government side. Critical issues can be
addressed through different policy dialogue frameworks and at different levels of
government.
For instance, discussions and exchange of information on planned and ongoing projects take
place under the TPG, and policy and regulatory issues to improve ODA performance are
discussed under the six Banks.55 It was, however, reported that while sector policy dialogue
is constructive as a whole, dialogue could be improved between donors and the MoT during
the development of plans and strategies. One example highlighted was the preparation of
the five-year Transport Sector Development Plan 2006–2010. While a participatory approach
for consultations on the SEDP 2006–2010 was taken at a national level (facilitated by the
MPI); this approach was not fully followed by the MoT at the sectoral level.
B.3 Coordination structures

The number of active donors in the sector—mainly the six Banks—is relatively small
compared to other sectors. In the past, during the 1990s, there was a broad division of
labour between the three major donors: Japan—construction of new bridges and grant
assistance to replace rural bridges; ADB—development of provincial roads and rehabilitation
of national roads; and the World Bank—rehabilitation of national roads, construction of rural
roads and inland waterways. In the last couple of years, however, there is reportedly an
increasing overlap in donor activities. The MoT’s view is that progress had been made in
coordination and cooperation, but that this was damaged by the ‘PMU18 scandal’ in 2006,
and since then there has been deterioration in overall coordination, as well as lower
disbursement rates for the sector as a whole.
54
According to the MPI, the monitoring and evaluation indicators stipulated in the five-year SEDP
(2006–2010) were developed by the MPI, and the MoT was consulted by the MPI before its
finalisation.
55
The six Banks have also carried out Joint Performance Portfolio Reviews every two years since
1999, which include analytical work addressing practical barriers to project implementation and use of
country systems. The areas of reform include project preparation, procurement, safeguards and
project monitoring and reporting.
55
December 2008
From the donor side, it was reported that there is a need for more proactive leadership by the
MoT in its dealings with donors as it is not always clear what the priorities are and what the
MoT expects from each donor. One example given was the Expressway Network
development, which is one of the prospective projects under discussion. Donors, but also
private sector Build Operate Transfer (BOT) groups, are showing interest in this
development, but there is reportedly a lack of leadership by the MoT in its coordination and
dialogue with donors and other interested organisations on this matter.
The key forum for coordination is the TPG, established in July 2000. Its main task has so far
been to exchange information and experiences on projects and programmes, but it is
seeking to move towards a forum for more active discussion on sector policy issues. TPG
meetings are currently organised twice a year and co-chaired by the MoT and JICA (former
JBIC). Active and interested donors in the sector and MoT-affiliated organisations are invited
to participate at TPG meetings. In addition to regular meetings, the TPG organises working
groups on specific issues to promote more active discussion and coordination between
donors and the MoT. The most recent TPG meeting held in June 2008 identified a number of
action points for 2008 (see Table B.1 below).56
The TPG appears to have contributed to dialogue, coordination and overall cooperation
between the MoT and donors, and there have been efforts by the MoT to take a lead in
dialogue and coordination with donors through the TPG. Nevertheless, at the moment,
several donors pointed out that the TPG works more as a forum for information sharing,
rather than as a forum for strategic discussions on how to best utilise donors’ funding over
the medium to long term. It was also suggested from the donor side that the TPG may
benefit from having more regular rotation in the donor chair in order to encourage more
donors to take an active role in the TPG and its discussions.
Improvements could also be made in coordination and transparency on data and information
on external assistance. While there is an ongoing effort, at the moment, there are no up-to-
date or reliable data on external assistance in the transport sector, or systems to track
financial commitments and disbursements. The DAD database managed by the MPI appears
to be missing information on transport. No sector ODA database exists, but the MoT
prepares an Excel sheet with a list of projects57 (although it is unclear to what extent this
corresponds with the MPI’s data). The TPG also prepares a project list (see Table B.2)
without indication of funding (although this list differs from the MPI’s project list).
Coordination and accountability could be improved by easily available access to up-to-date
data and information on ongoing and planned projects and programmes undertaken in the
sector, and the TPG, MoT and MPI should seek to consolidate their data and information on
external assistance. Improved information on each donor’s activities and funding would also
ensure that donor activities are focused on priority areas for the sector, while at the same
time avoiding overlap.
Finally, basic regular information-sharing between donors and the MoT could be improved. It
was reported that project and programme documents are not necessarily shared between
donors and the MoT (for instance, a key informant noted that one needed to visit the other
donors’ websites to get hold of programme documents). While there are examples of good
information-sharing practices—for instance, JICA (former JBIC) sometimes invites donors to
its portfolio reviews undertaken with the MoT—similar information-sharing practices could be
done on a regular basis.
56
TPG meeting minutes, June 2008.
57
This list was not shared with the IMT.
56
December 2008
Table B.1 Transport partnership group actions
Issues Actions for 2008

MoT’s MoT keeps effort to carry forward administration reform in sustainable and
restructuring appropriate way so that MoT and the related institutions will improve public
investment and ODA management system, including procurement, quality
control, financial management and asset management in a balanced manner.
The partnership group members will continue to cooperate with each other to
elaborate necessary actions contributing to MoT’s reform.
VRA capacity MoT and VRA will keep efforts to facilitate establishment of sustainable project
building implementation system with careful analysis on the existing project
implementation mechanism including role of the PMUs. In order to secure
appropriate amount of budget for maintenance and new investment, MoT and
VRA will keep effort to keep close coordination with MoF. Donors will support the
effort to be made by MoT and VRA.
VRA will make efforts to accomplish and maintain its database for road and
bridge maintenance management and to strengthen linkage between
maintenance planning and its budgeting system to secure appropriate amount of
budget for maintenance. Donors keep supporting in VRA for necessary capacity
building.
Quality control MoT, especially TCQM will make effort to analyze the existing regulations and
and safety system on quality control and safety management in transport sector, and to
management elaborate a “road map for establishment of comprehensive quality control and
safety management system in transport sector” in close coordination with Ministry
of Construction. In particular, JICA (former JBIC) will work closely with TCQM.
Traffic safety NTSC and TSPMU will keep efforts to enhance its coordinating and leading role
in the field of traffic safety in order to align and mobilize diversified stakeholders’
resources as well as donors’ supports. Donors will support this effort in close
coordination each other.
Expressway MoT and donors will make efforts to keep dialogues each other and to make a
development “comprehensive express highway development plan” in order to maximize
strategy effectiveness of investment and resources from the government, public and
private enterprises and donors. The partnership group members will continue to
share feedbacks from VITRANSS 2
B.4 Aid delivery

External assistance to the transport sector is delivered mainly in the form of projects. While
there have been attempts and experiments with other aid modalities, such as sector and
budget support, this is reportedly not a preferred approach by the MoT due to concerns
about losing control over funds if channelled directly through the state budget under the
control of the MoF.
As early as 2002 there were attempts by the World Bank and DFID to introduce a sector
wide approach as part of the Rural Transport 3 project, and in 2005, provincial budget
support was piloted in two provinces (Lao Cai and Phu Tho). A number of concerns
prevented the adoption of this approach, including the lack of a consistent policy for rural
transport and prioritised MTEF, and a lack of financial reporting and weak procurement
systems (Box B.2).
57
December 2008
Box B.2 Sector wide approach in rural transport
The World Bank’s Rural Transport 3 project design included an option for IDA and DFID funding
through the state budget and implementing a programme using government systems for
procurement, financial management etc. Nevertheless, there were five areas of concern that
prevented the adoption of this approach.
• Lack of a consistent policy for the rural transport sub-sector
• Lack of prioritised medium-term expenditure framework
• A substantial but unqualified debt in the sector that needs to be addressed
• Lack of clarity over provincial reporting on implementation, including financial and physical
progress
• Weaknesses in government systems, especially procurement and social safeguards and

gaps between Vietnamese and international practice.
Source: MPI/CCBP, ‘Recent, Ongoing and Emerging Initiatives in Vietnam with Programme-Based
Approach and Budget Support’, September 2007
External assistance projects in the transport sector are all delivered and managed by PMUs,
which are accountable and report to both the funding donor and the MoT. It is assumed that
building the capacity of PMUs will create spillover effects and enhanced capacity in the MoT.
In 2006 a review of the transport sector noted, however, that:
’PMUs have not been consistently successful in discharging of

their responsibilities in project management and there has
been little, if any, capacity development at the central level, a
finding in no way unique to PMUs in Vietnam.’58
A number of related key challenges were identified, including:
• The criteria for the selection of central and provincial PMUs to manage the
implementation of projects are unclear.
• Performance of PMUs is not assessed against well-defined targets and there is no
incentive system that would encourage efficiency and timely implementation.
• Ability and competence levels vary largely among the different PMUs affecting
implementation and project quality.
• There is no systematic way of sharing good (and bad) practices and experiences
between PMUs, and as a result knowledge accumulation is slow.
The MoT and its agencies are currently undergoing institutional reform following Decree
51/2008/ND-CP on the MoT’s function, task, authority and organisational structure that was
signed by the Prime Minister in April 2008. This includes the establishment of three new
departments: the Department of Infrastructure, the Department of Environment, and the
Department of Traffic Safety. The VRA is transformed into a general department. The MoT
will no longer be the project owner but instead play a state management role. Moreover,
58
World Bank, ‘Transport Strategy: Transition, Reform, and Sustainable Management’, June 2006, p.
47–58.
58
December 2008
central PMUs including PMU18, 6, 9, and Bien Dong will be under the VRA. PMU85 and
PMU Thang Long will remain under the MoT until ongoing projects are delivered. PMU My
Thuan and PMU1 are being piloted to be transformed into the One Member State Limited
Company.59
A significant aspect of the institutional reform is that the VRA will carry out the function as (i)
project owner for categories A and B projects where the MoT is the line agency; (ii) line
agency for category C project; and (iii) agency for projects not financed by the state budget.
The aim is to give a more prominent management role and decision-making power to the
MoT to exercise policy, planning and regulatory functions, while the VRA will play the key
role in project implementation (including control and monitoring of PMUs, feasibility study
preparation and operations and maintenance). These changes are in compliance with
Decree 131 and Circular 03, e.g. having three layers of management: line agency, project
owner, and PMU.
In this respect, donors have requested that the MoT and VRA ensure the continued
effectiveness and efficiency of the implementation of ODA projects and avoid duplication and
unnecessary transactions during the transition period.60 The six bank’s Joint Performance
Portfolio Review also pointed out that in order to ensure gradual transition to new
management structures, it is important to take stock of the capacity of existing PMUs in order
to maintain the transport portfolio performance. The establishment of a GoV–donor working
group under the TPG to look into the issues associated with the restructuring has been
suggested.61 Such a group does not appear to have been established.
While donors reportedly are in favour of the institutional reform, there are debates and
concerns about the capacity of the VRA and its limited experience in external assistance
project management and understanding of regulations and procedures. Capacity building
takes time and while there is need for coherent and coordinated support by donors to
improve the capacity of the VRA, it was reported that donor support to the VRA has not been
provided in a coherent manner. Significant technical assistance has already been provided
by several donors, but according to the VRA not in a systematic manner, and while it would
like to undertake a comprehensive capacity-needs assessment, no such assessment has
been undertaken so far.62
The use of country systems is a widely debated topic, most notably through the six bank
initiatives (Box B.3). Discussions are ongoing both in Vietnam and at a global level as to
what level of standard would be feasible to facilitate the use of country systems. In line with
the AAA, the GoV and the six Banks are undertaking an assessment as to what the
remaining gaps are and what needs to be done to meet international standards by the GoV.
Donors are also making efforts to harmonise their procedures, but there are still differences
even among donors, for instance social safeguard requirements.
59
Apart from central PMUs there are RRMU (VN Railways), MPMU1 and 2 (VINAMARINE), WPMU
(Inland Waterway Administration), Haiphong Port PMU (Vinalines).
60
Transport Partnership Group meeting minutes, June 2008.
61
ODA Inter Ministerial Task Force (IMTF), ‘Fifth Joint Portfolio Performance Review’, May 2007.
62
There is however an ongoing study with capacity-needs assessment components, for instance
JICA’s Special Assistance for Project Implementation (SAPI2) recently started in September 2008.
The objectives of the SAPI2 are: (i) to make a proposal on the most suitable road maintenance system
with respect to database management, and (ii) to make suggestions for necessary capacity
development of the VRA in order to establish a sustainable road and bridge management framework
in a comprehensive manner.
59
December 2008
Box B.3 Debates and issues on the use of country systems
There are differences between the Vietnam law on procurement (and its related decrees and
regulations) and donor procurement policies and procedures. These differences can lead to delays
in processing and approving procurement.
The Vietnam Law on Procurement (Article 3 paragraph 3) stipulates that ‘For projects using
Official Development Assistance (ODA) funds, procurement shall be in accordance with the
international treaties to which the Socialist Republic of Vietnam is a party or other international
agreements which authorised organisations or agencies of the Socialist Republic of Vietnam have
signed’. The six Banks base their position on the fact that all relevant parties should be guided by
this, and in the case of a conflict between the ODA financing agreement and the national laws and
regulations, the provisions in the financing agreement take precedence. The six Banks maintain
their policy that the Vietnamese Government should not attempt to combine the donor
procurement procedures with Vietnam's procurement regulations as this often leads to needless
delays and practices which could be in breach of the international agreements entered into by the
Vietnamese Government.
Through the PGAE as well as the six Banks’ initiatives, the GoV and donors have been working
together to strengthen Vietnam’s public procurement system and harmonise with international
good practice in the fulfilment of the HCS. The six Banks have recently submitted to the MPI the
following for their consideration:
• Draft matrix of gaps between Vietnam’s procurement regulations and the procurement
policies of some of the members of the six Banks (e.g. ADB and World Bank).
• Possible contents of a directive to be sent to each line agency and project owner of
ongoing ODA-funded projects in order to (a) increase awareness of Article 3 paragraph 3
of the Procurement Law and (b) provide guidance on how to deal with conflicts between
Government procurement regulations and donors’ procurement policies and procedures.
The six Banks consider the matrix part of the basis of strengthening Vietnam’s public procurement
system to mutually agreed standards in line with Indicator 5 of the HCS. Dialogue is ongoing
between the GoV and donors for mutual assessment and to come up with agreement on common
standards.
There has been significant progress through the development of common Feasibility Study
guidelines and the AMT (although there are reportedly some issues with implementing this
on the ground due to software problems making it a labour intensive task to work with). It
was, however, reported that the gaps between the Government and donors are becoming
smaller, and donors could become more flexible in the use of government systems where
relevant, although this may need changes at the donor headquarter level. It was also
reported that the local situation needs to be taken well into consideration to come up with
pragmatic solutions. External assistance is a small portion of Vietnam’s total public
expenditures, and it does not make sense to create double standards between ODA-funded
projects and locally funded projects. Rather, the use of country systems should contribute in
a way to facilitate institutional and capacity development so as to promote efficient resource
utilisation and donor alignment.
60
December 2008
Table B.2 Transport partnership group project list63
Project Donor Status Duration

Road Improvement ADB Completed 1993-2001
Sai Gon Port ADB Completed 1994-2001
Second Road Improvement ADB Completed 1997-2003
Third Road Improvement (including Implementation of Sector ADB Completed 1998-2005
Development Policy - ISDP component)
GMS: HCMC-Phnom Penh Highway ADB Completed 1998-2005
GMS: East-West Corridor ADB Completed 2000-2006
Provincial Roads Improvement ADB Ongoing 2001-2008
Central Region Transport Network ADB Ongoing 2005-2010
GMS: Ha Noi - Lao Cai Railway ADB/AFD Ongoing 2006-2010
Kunming-Haiphong Transport Corridor: Noi Bai-Lao Cai Expressway ADB Ongoing Investment Loans 2007-20082008-
(Engineering Loan) 2012
Noi Bai-Lao Cai Expressway (Investment Loan) Ongoing
GMS: Southern Coastal Corridor ADB/EDCF Implementation 2007-2011
(Korea)/AusAid
Ho Chi Minh– Long Thanh – Dau Giay Expressway Engineering Loan ADB/JBIC Engineering Loan Ongoing Firm 2008
Investment Loan under
Preparation Stage
Ho Chi Minh City Metro Rail (Engineering Loan) ADB Preparation Stage Firm 2008
Ho Chi Minh City Metro Rail (Investment Loan) Preparation Stage Firm 2009
Expressway Preparation Facility (Engineering Loan) ADB Preparation Stage Firm 2008
HCMC Second Ring Road ADB Preparation Stage Firm 2009
Central Mekong Delta Transport Connectivity (two bridges over Tien and ADB Preparation Stage Firm 2009
Hau rivers)
63
Project list taken from the TPG meeting minutes June 2008. Note that the list does not appear to be updated as several projects are indicated as
ongoing when they in fact are completed.
61
December 2008

Ben Luc – Long Thanh Expressway ADB/JBIC Preparation Stage Firm 2009
Transport Infrastructure in Northern Mountainous Provinces ADB Preparation Stage Firm 2010
Second Northern GMS Transport Network ADB Preparation Stage Firm 2009
GMS: Ha Noi – Lang Son Expressway ADB Preparation Stage Firm 2010
Ha Long – Mong Cai Expressway ADB Preparation Stage Firm 2011
HCMC Outer Ring Road ADB Conceptual 2011
GMS: Second East-West Corridor ADB Conceptual
Provincial Transport Development ADB Conceptual
Railways Rehabilitation II ADB Conceptual
Ha Noi Urban Transport ADB/ Conceptual
GMS: Southern Coastal Corridor, Phase 2 ADB Conceptual
Ha Noi Metro Rail ADB/AFD Conceptual
Review of Rural Road Strategy DFID On going May 2005 – April
2006
Transport sector co-ordination (SEDP inputs and other co-ord. support) DFID/JBIC On going November 2004 -
March 2006
Bridge Inspection and Repair Project Finland/ FINNVERA Ongoing 2003-2006
F/S on rehabilitation of Long Bien bridge France (MoF) Completed 2004
F/S on tramway line France (MoF) Completed 2004
F/S on pilot rail urban transportation line France (MoF) Completed 2005
Modernization of the signaling and telecommunications system of the France (MoF) Completed
Hanoi - Vinh railway (phase 1)
Modernization of the signaling and telecommunications system of the France (MoF) Ongoing
Hanoi - Vinh railway (phase 2)
Procurement of equipments for the repairing of locomotives France (MoF) Completed
Rehabilitation of 4 railway tunnels at Hai Van Pass France (MoF) Completed
Procurement of equipments for the maintenance of the rail track between France (MoF) Ongoing
Hanoi and Vinh
62
December 2008

Hanoi Pilot Metro Line Nhon - Hanoi Railway Station France Ongoing 2007-2010
(MoF/AFD/FFEM)
Vietnam Railways Project GTZ Ongoing 2001- 2006
Hanoi – Ho Chi Minh City Railways Bridge Rehabilitation Project JBIC Completed 1994 - 2005
National Highway No.1 Bridge Rehabilitation Project JBIC Completed 1994 - 1999
National Highway No. 5 Improvement Project JBIC Completed 1994 - 2004
National Highway No. 1 Bridge Rehabilitation Project JBIC Completed 1996 - 2005
Hai Van Tunnel Construction Project JBIC Completed 1997 - 2007
National Highway No. 10 Improvement Project JBIC Completed 1998 - 2007
Second National Highway No. 1 Bridge Rehabilitation Project JBIC Completed 1999 - 2006
Da Nang Port Improvement Project JBIC Completed 1999 - 2006
Coastal Communication System Project in Southern Vietnam JBIC Completed 2000 - 2007
Binh Bridge Construction Project JBIC Completed 2000 - 2007
Bai Chay Bridge Construction Project JBIC Completed 2001 - 2008
Cai Lan Port Expansion Project JBIC Ongoing 1996 - 2008
Hanoi Urban Infrastructure Development Project JBIC Ongoing 1997 - 2008
National Highway No. 18 Improvement Project JBIC Ongoing 1998 - 2008
Rural Development and Living Standard Improvement Project III (Rural JBIC Ongoing 1999 - 2006
Road)
Transport Infrastructure Development Project in Hanoi JBIC Ongoing 1999 - 2009
Hai Phong Port Rehabilitation Project (Phase II) JBIC Ongoing 2000 – 2008
Sai Gon East-West Highway Construction Project JBIC Ongoing 2000 - 2010
Red River (Thanh Tri) Bridge Construction Project JBIC Ongoing 2000 - 2010
Can Tho Bridge Construction Project JBIC Ongoing 2001 - 2009
National Highway No. 1 Bypass Road Construction Project JBIC Ongoing 2001 - 2009
Tan Son Nhat International Airport Terminal Construction Project JBIC Ongoing 2002 - 2008
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December 2008

Small-Scale Pro Poor Infrastructure Development Project (Rural Road) JBIC Ongoing 2003 - 2009
Third National Highway No. 1 Bridge Rehabilitation Project JBIC Ongoing 2003 - 2009
Transport Sector Loan for National Road Network Improvement JBIC Ongoing 2004 - 2010
Hanoi – Ho Chi Minh City Railway Line Bridges Safety Improvement JBIC Ongoing 2004 - 2009
Project
Cai Mep-Thi Vai International Port Construction Project JBIC Ongoing 2004 - 2012
New National Highway No.3 and Regional Road Network Project JBIC Ongoing 2005 - 2011
Nhat Than Bridge Construction Project JBIC Ongoing 2006 - 2010
Small-Scale Pro Poor Infrastructure Development Project (II) (Rural JBIC Ongoing 2006 - 2010
Road)
Northern Vietnam National Roads Traffic Safety Improvement Project JBIC Ongoing 2007 - 2012
North-South Expressway Construction Project HCM-Long Thanh-Dau JBIC Ongoing 2007 - 2017
Giay
Hanoi Ring Road No. 3 Construction Project JBIC Under preparation 2008 - 2013
The Study on Urban Transport Master Plan and Feasibility Study in Ho JICA Completed 2002-2004
Chi Minh Metropolitan Area (HOUTRANS)
Detailed Design Study of CAI MEP-THI VAI International Terminals JICA Completed 2004-2006
The Project on the Improvement of Port Management System JICA Ongoing 2005-2009
The Project for Traffic Safety Human Resource Development in Hanoi JICA Ongoing 2006-2009
(TRAHUD)
The Study for Traffic Safety Master Plan JICA Ongoing 2007-2008
The Study for Roadside Stations Master Plan JICA Ongoing 2006-2008
The Comprehensive Urban Development Programme in Hanoi Capital JICA Completed 2004-2007
City (HAIDEP)
The Study on the National Transport Development Strategy JICA Under preparation 2007-2008
(VITRANSS2)
The Project for Reconstruction of Bridges in the Central Area – Phase 2 GOJ/JICA Pending 2003-2006
Project for Reconstruction of Bridges in the Northern Mountenious GOJ/JICA Pending 2005-2008
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December 2008

Provinces
Project for strengthening training capabilities for Road Construction JICA Completed 2001-2006
Workers in Transport Technical and Professional School No.1
Building Railway Technical Standard Set JICA Under Preparation 2007-?
Advisor on Railway Planning and Management JICA Under Preparation 2007-2008
Feasibility Study on Urban Railway System of Hanoi KfW completed 1999-2000
Supply of Modern Railway Cranes KfW Ongoing 2000-2003
Workshop Programme Danang KfW Ongoing 1999 - 2005
Main Line Locomotives KfW Ongoing 2001-2007
Hopper Suction Dredger KfW Ongoing 2000-2005
Vietnam Railway Control Center KfW Ongoing 2007-2010
Urban Transport Improvement Project WB Completed 11/1998-6/2005
Inland Waterways and Port Rehabiltation Project WB Completed 03/1998-04/2006
Mekong Transport and Flood Protection Project WB Ongoing 06/2001-06/2006
Road Network Improvement Project WB Ongoing 12/2003-9/2008
Road Safety Project WB Ongoing 2005-2010
Hanoi Urban Transport Development Project WB Ongoing 2006-2011
Mekong Transport Infrastructure Development project WB Ongoing 2006-2011
Northern Delta Transport Development Project WB Ongoing 2008-2012
Multi-Modal Transport Regulatory Review (PPIAF) WB Completed 5/2005-1/2006
Study on Consolidation and Development of bus System in HCMC WB Completed 6/2005-1/2006
(PPIAF)
Second Rural Transport Project WB/DFID Completed 01/05/2000 -
12/2005
Third Rural Transport Project: WB/DFID Ongoing 2006 - 2010
Rural Road Surfacing Research WB/DFID Ongoing 01/05/2003 - 7/2006
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December 2008
Annex C Provincial case study
C.1 Context
This case study looks at the development planning and budgeting process and the aid
management and coordination structures at the provincial level, including the interaction
between central government and provincial authorities, and between provincial authorities,
donors, NGOs and civil society organisations within these processes and structures. The two
provinces visited were Phu Tho (a northern mountainous province with a population of
around 1.4 million) and Nghe An (a north central coastal province with a population of around
3 million).
Nghe An has received significant capacity-building support for ODA management, most
notably through VAMESP, CDOPP and the Comprehensive Capacity-Building Programme to
Strengthen ODA Management (CCBP). In 2008, total donor support amounted to around
US$128 million (21 ongoing projects) of which 80% was donor funding and 20% counterpart
funding. Donor support focuses mainly on agriculture and rural development, transport, water
supply, energy and health and HIV. Main donors include ADB, Denmark, Finland, JICA
(former JBIC), KfW, Korea, Luxembourg and the World Bank. There are 19 PMUs in the
province, of which 3 PMUs are parallel and 13 are ‘umbrella’ PMUs (provincial PMUs under
central PMUs).64 See Table C.1 for the project list and PMUs in Nghe An.
Phu Tho has so far received limited or no capacity-building support for ODA management. In
2008, the total ODA funding (22 ongoing projects) amounted to around US$89 million of
which 77% was donor funding and 23% counterpart funding. Donor support focuses mainly
on rural infrastructure and transport, water supply, health and HIV. Main donors include ADB,
AFD, JICA (former JBIC), DFID, the Netherlands, UNFPA and the World Bank. There are 14
PMUs in the province of which 3 are parallel.65 See Table C.2 for the project list and PMUs in
Phu Tho.
C.2 Development planning and budgeting process

In both provinces, the DPI takes the lead in the planning process and the DoF in the
budgeting process. Provincial sector policies are prepared by provincial sector departments.
For the planning process, the MPI annually provides the SEDP framework with guidelines
and directions to the DPI (see Box C.1 below). The Provincial People’s Committee then
issues the framework for the SEDP at the provincial level. Provincial sector departments
prepare plans, which are then consolidated by the DPI into one provincial development plan
(one and five year) for approval by the Provincial People’s Council.
64
Nghe An preliminary results from HCS survey questionnaire.
65
Phu Tho preliminary results from HCS survey questionnaire. No information was provided on
parallel or umbrella PMUs. There are apparent differences in the number of PMUs reported in the
preliminary results of the HCS survey, and what is reported on in the Phu Tho ODA project list, which
includes a larger number of PMUs.
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December 2008
Box C.1 Annual planning process
Annually, the Prime Minister promulgates instructions for developing and synthesising the SEDP
for the following year by the end of May, in which objectives, requirements, the key content of the
plan, and new mechanisms and policies to be implemented in the period are included. Based on
the instructions, the MPI forms the framework for the next year’s plan. By early June, the MPI
organises an inter-sectoral conference to inform line ministries, sectors and provinces of the
framework, development goals and specific requirements in developing and synthesising plans.
During June to September, line ministries, provinces and central cities develop their development
plans for their sectors and provinces. Based on the Prime Minister’s and Provincial People’s
Council’s instructions and the MPI’s guidelines, the DPI leads the planning process at the
provincial level. The provincial annual plan consists of the following key contents: (i) assessment
of the implementation of previous year plan; (ii) forecasts on the socioeconomic trends and issues
in the national, provincial and regional context for the planning year; (iii) forecasts on the total
resources of the province including budget revenues raised in the province, budget transfer from
central level and external assistance; (iv) development goals and targets for the planning year
based on the provincial five-year plan and sector development planning of the province; (v) overall
solutions and recommendations. In drafting the provincial annual development plan, the DPI works
under instructions of the Provincial People’s Committee and in coordination with line departments.
Line departments are responsible for designing sector plans at the provincial level which will then
be reviewed by the DPI. The DPI holds a meeting with all line departments to get feedback on the
draft development plan. The revised plan will then be submitted to the Provincial People’s
Committee and finally submitted to the Provincial People’s Council for approval.
During the drafting of the development plan and capital planning process, the MPI will take the
lead in working with line ministries and provinces to clarify issues in their submissions. In general,
the MPI holds a meeting with line ministries and sends missions to provinces. During these
working sessions, the MPI and line ministries as well as provinces discuss key contents of the
plans and seek an agreement on key balances.
Ministries’ and provincial planning documents are sent to the MPI for review in September. Based
on the planning documents of line ministries and provinces (and the results of working sessions
with line ministries and provinces), the MPI develops the national SEDP which is then submitted to
the Government. There is a chapter in the national SEDP on regional development with respect to
provinces. The national SEDP is then submitted by the Government to the National Assembly
Standing Committee, and finally the National Assembly for approval at the year-end meeting
session.
By the end of November, the MPI holds a meeting with line ministries and provinces to announce
the approved SEDP and development goals. Provinces will assign tasks to sectors during
December and January of the following year.
In its mandate, the Provincial People’s Council has significant delegated power and
discretion to make its own expenditure decisions based on the revenue capability of the
province. The budgeting process at the provincial level can be summarised as follows:
• Step 1: Based on the Prime Minister’s and Provincial People Committee’s instructions,
and the MoF’s guidance and spending policies of the planning year, the budget division
of the DoF drafts detailed guidelines for preparing state budget estimates for the planning
year.
• Step 2: These are then submitted to provincial sector departments for feedback. The
budget division of the DoF collects feedback, revises guidelines and submits them to the
DoF’s Director for approval and circulation to provincial sector departments.
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December 2008
• Step 3: The DoF consolidates spending requirements for the planning year.
• Step 4: The DoF makes a revenues–expenditures balance, gives indicative figures to
provincial sector departments, and holds budget negotiations with provincial sector
departments.
• Step 5: Provincial sector departments prepare budget estimates based on the DoF’s
detailed guidelines, which are then sent to the DoF for review and consolidation.
• Step 6: The DoF submits revenue–expenditure estimates for the province to the
Provincial People’s Committee, then to the Economic Budget Sub-Committee for
appraisal and finally to the Provincial People’s Council for approval.
• Step 7: Based on the decision of the Provincial People’s Council and on approval of the
provincial budget plan, the DoF prepares a budget allocation plan for the Provincial
People’s Committee to officially assign revenue and expenditure tasks to provincial
sector departments.
The planning and budgeting processes are not necessarily linked, and what is planned for is
not necessarily budgeted for. It was reported in both provinces that there is a need to better
integrate the planning and budgeting process, but that there are significant capacity
constraints in public finance management (including planning, accounting and financial
management) at the provincial level. Limited capacity-building support has been provided to
the DoF in the two provinces, and significant guidance and support is needed from the
centre.
During the planning and budgeting process, provincial sector departments appear to have
limited interaction and information exchange with their corresponding line ministries in terms
of financial issues (except in the case of NTPs where funds are directly transferred from
central budget to provincial sector departments for implementation). Planning is likely to take
place in line with provincial SEDPs approved by the Provincial People’s Council rather than
national sector strategies prepared by relevant line ministries. For instance, in both
provinces, the five-year provincial plan prepared by the provincial department of health
(DoH) did not mention the 10-year national strategic plan on health care. Similarly, in both
provinces, the five-year plan prepared by the provincial Department for Agriculture and Rural
Development (DARD) does not mention the national plan or strategy.
There appears to be limited coordination and exchange of information between the DPI and
DoF in both provinces with regard to external assistance.66 It was reported that external
assistance is not necessarily integrated as part of planning and budgeting. Provincial plans
specify approved external assistance as inputs, they do not provide information on the
estimated funding needed for future projects. For instance, in the case of Phu Tho, the health
sector development plan includes no details on external assistance (only requests for
counterpart funding). It was reported that external assistance is recorded into total
expenditure reports at the end of the year, which are not used for planning or budgeting
purposes.67 Moreover, the Phu Tho five-year plan for agriculture and development does not
mention ODA, but ODA projects are listed as sources for investment together with foreign
direct investment projects. The five-year SEDP for Nghe An mentions ODA in the text, and
lists ODA projects as sources for investment.
66
Coordination between lateral departments is the responsibility of the Chairman and Vice Chairman
of the Provincial People’s Committee.
67
One reason for this is that donors cannot make long-term commitments on external assistance, but
also because the central PMU may change the budget plan every year, without necessarily keeping
the provincial PMU informed of the exact amounts.
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Monitoring and evaluation
Provincial monitoring and evaluation frameworks are weak. Provincial plans do not
necessarily specify indicators and targets, and are formulated without being structured so as
to be evaluable—objectives, outputs, activities and inputs are typically mixed up, making it
difficult to determine how, or whether, plan implementation is on target or not. In both
provinces it was reported that provincial sector departments have limited experience and
capacity in monitoring and evaluation. Whatever monitoring and evaluation activities are
carried out appear to be done on a project-by-project basis by provincial PMUs that follow
different requirements and criteria depending on the funding donor. For instance, in both
provinces the five-year health plan did not develop a monitoring and evaluation framework or
indicators to track progress, and it was reportedly a lack of clear regulations on what was
required in terms of monitoring and evaluation. In the case of Nghe An there has been
tangible progress made on monitoring and evaluation activities through the support provided
by VAMESP. A monitoring and evaluation framework has been developed for the five-year
provincial plan. However, some of the challenges reported on were that provincial PMUs are
weak in integrating these indicators, and in practice, the logical framework is not applied.68
C.3 Aid management and coordination structures

In both provinces, the DPI takes the lead and coordinating role in external assistance
management, through the Foreign Economic Relations Division (FERD). The DPI is
responsible for coordinating ODA activities, collecting data and disseminating ODA
management systems and procedures to relevant provincial sector departments and PMUs.
The DPI is also responsible for taking forward the HCS.
It was, however, noted by the IMT that while a few senior level staff at the DPI are aware of
and have knowledge of the HCS, staff at provincial sector departments and PMUs met with
in both provinces appeared to have limited or no knowledge about the HCS and its content.
The DPI in both provinces wanted to disseminate the HCS, but did not feel they had the
capacity and staff resources to do this. It was also reported that while the centre needs to
improve dissemination activities, support also needs to be provided to the province so that it
can carry out its own dissemination activities.
ODA project proposals are, in both provinces, prepared by the DPI based on the provincial
SEDP and related sector development plans. The DPI has no decision-making authority for
specifying the estimated funding needed for ODA project proposals as this is decided by the
MPI. Recently, it became possible for Provincial People’s Committees and the DPI to
approach donors directly with ODA project proposals though all decisions need to go through
the MPI for approval.
None of the provinces have developed ODA management regulations. However, in Nghe An,
priorities for external assistance have been identified in the document ‘Orientation for
attraction and use of ODA for the period 2006–2010’ (as per the Decision 290/2006/QD-
TTg). This document sets out an assessment on the attraction of ODA and priorities,
including an overview of donor- and NGO-funding and activities. It also provides information
on the impact of ODA and results in key areas, including limitations and challenges in the
implementation of ODA. Challenges identified are how to develop strong enough systems, in
particular public finance management (see above), which can support the application of new
approaches and modalities, such as programme approaches and budget support in line with
68
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December 2008
the Paris Declaration and HCS. The future orientation for ODA during 2006–2010 is divided
into the following sectors: agriculture and rural development (11%), energy and industry
(40%), transport, water supply and urban development (35%), and health, education and
environment (13%). Some donors active in Nghe An have used the provincial SEDP and the
ODA orientation document as a basis for alignment. For instance, ADB, Denmark,
Luxembourg and the World Bank have aligned in areas such as rural infrastructure
development, health care system development, agriculture development and business
environment.69
In the case of Phu Tho, no ODA orientation document or plan has been prepared that
indicates preferences, priorities and specific needs for external assistance. There is a list of
future projects needed to implement the provincial SEDP. However, this list is not prioritised
and it does not provide any indication of funding needed for each project. General
statements are made in the provincial SEDP on how to attract external assistance. External
assistance is, however, an important source of funding for Phu Tho, but it has not yet made
the same progress in articulating its needs and priorities. For instance, in the case of
transport, Phu Tho—being a small province with relatively limited local budget—has received
significant support from ADB, JICA (former JBIC) and World Bank. This support is important
for the sector as the transport demand has been fast increasing. The aim for Phu Tho is to
be selected for projects and attract ODA, but when provided with funding it may not be in line
with the province’s priorities. One example reported on was that Phu Tho received ODA
funding to build rural roads that are of road categories 4 and 5, but the province’s priorities
are to build and improve provincial roads which are of road category 3. ODA funding was
used to build provincial roads with the quality and standards of road category 4, but this
mismatch led to deterioration of the provincial roads. It was reported that there needs to be
consistency in investment priorities at the negotiation stage between donors, the GoV and
provinces, in which the provincial priorities should be taken into account.
Interaction and dialogue
While formal dialogue with donors is conducted through the MPI, both provinces appear to
have limited interaction and dialogue with donors and NGOs. .Direct interaction with donors
usually takes place whenever project reviews are carried out. Responsibility for interaction
and coordination of NGOs lies with the DPI and the FERD. NGOs report to the Foreign
Affairs Office of the Provincial People’s Committee. Interaction between the NGOs and the
Foreign Affairs Office usually relates to administrative matters. In both provinces there
appeared to be no regular meetings between provincial authorities and NGOs to discuss
provincial plans, policies and budgets. There also appears to be limited interaction and
coordination between NGOs active in the provinces. In the case of Nghe An, however, efforts
have been made to coordinate with NGOs (around 50 NGOs have an operating licence), and
the DPI is planning to organise regular meetings with interested NGOs during 2009.
Implementation and monitoring
In both provinces, projects are organised under provincial, district and commune PMUs
depending on the specific project requirements. A Project Steering Committee is usually
established by the People’s Provincial Committee, which allows for direct dialogue between
the donor and responsible provincial sector departments or authority. The majority of PMUs
follow an ‘umbrella’/central management structure where decisions and procedures need
approval from the central PMU (usually located within a line ministry or central authority).
69
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December 2008
The project director of the PMU is in most cases the head or deputy of the relevant provincial
department or authority. The division between government staff and contracted staff in PMUs
differs from project to project, but usually, 20–30% of PMU staff are government staff
working on a part-time basis, and 70–80% are externally contracted staff working on a full-
time basis. Cost norms and salaries differ depending on the funding donor, but government
salaries are significantly lower than contracted staff with donor cost norms (these can be as
little as one-tenth).
For instance, in the area of agriculture and rural development, the DARD in Nghe An assigns
the management (including ODA) of development investment projects to the PMU of the
Agricultural and Rural Development projects. This PMU is under direct monitoring and
guidance of the Director of DARD. For national target programmes, such as Programme 135
phase II, the management is assigned to programme management units that are also
responsible for coordination with the Department of Forestry, Department of Water Supply
etc. For umbrella PMUs or small projects, the DARD assigns one of the Director or Deputy
Director to head the PMU on a part-time basis, with a dedicated coordinator and contracted
staff to run the office. Financial management of projects follows each project's financial
regulation, depending on the funding donor. Decentralisation to lower levels depends on
each project, where each district or commune may create one or two PMUs to manage
projects assigned from the provincial level. Box C.2 below provides two examples of PMUs
in Nghe An.
Box C.2 PMUs in agriculture and rural development in Nghe An
PMU of KfW4—Vietnam-Germany Forest PMU for Agricultural and Rural

Plantation Development projects
The PMU office is located inside the DARD. The PMU office is next to the DARD. The
The provincial PMU office has six staff, of PMU manages two ODA loan projects:
which two are governmental officials (part- ‘disaster risk management project’, supported
time) and four contracted (full-time). In total, by the Netherlands, Japan and the World
the PMU has 47 persons, of which 18 are Bank; and ‘overcoming consequences of
government officials, most of them at district natural disaster’, supported by ADB. The
levels (5 districts). Salary is paid by PMU also prepares work for another ADB
Government, with government levels. project. In total, there are 30 PMU staff, of
Vietnamese side also pays all operation which 10 are governmental officials.
expenditures. The PMU uses national Procurement follows Vietnamese regulations,
procurement regulations, with KfW approval. but with guidelines from donors and final ‘no
objection’ from donors.
In Phu Tho, the DARD has two PMUs. The first PMU manages and implements national
projects with more than 100 staff, of which 20% are government staff, and follows
Vietnamese rules and regulations. A second PMU is then set up, also located in the DARD,
to manage an ODA loan project (‘Overcoming consequences of natural disaster’ funded by
ADB). The Director of DARD is the project director. There is a total of 9 PMU staff of which 3
are government staff (in addition to the project director, one DARD deputy director and one
DARD accountant). All salaries are paid from counterpart funding. The PMU is under the
central management of the Central Project Office in the MARD. Reporting is made to the
Central Project Office in the MARD and DPI. Monitoring is carried out by ADB monthly, and
reviews conducted by ADB and the MARD every six months. It was, however, reported to the
IMT that the level of decentralisation is weak, as the provincial PMU needs approval from the
Central Project Office in the MARD for most matters. Moreover, procurement follows a dual
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December 2008
system—ADB and Vietnamese rules—that needs approval from both donor and Vietnamese
side, but first with a ‘no objection’ from ADB, which is considered to be complicated, time
consuming and creates significant delays. It was also reported to the IMT that there were
little signs of donors changing their procedures, and the most commonly stated reason from
donors not to use the government system is that internationally agreed procedures need to
be followed as the donor operates in many countries and these procedures cannot be
adapted for every country the donor works in. Key challenges reported on and reasons for
delay in project implementation were similar to that of PMUs in Nghe An: delays caused by
increased project costs due to high inflation, which require the agreement with the donor to
be renegotiated; and site clearance procedures.
In the area of transport, Phu Tho has used a centrally managed PMU mechanism where all
investment steps and payments are made by the central PMU6 of the VRA (used to be of the
MoT before July 2008). This means that for every decision that leads to payment, the
provincial PMU in Phu Tho has to wait for approval from PMU6, which has caused delays in
the implementation of projects. It was reported that the PMU had proved experienced in
managing large projects, and should therefore be provided with more managing authority by
the donor. It was nevertheless recognised that there are capacity needs, most notably on
environmental and site-clearance frameworks, but also the differences between international
and local regulations and practices that are relevant to different projects.
In Nghe An, the transport PMU is located in the DoT with six divisions and one project
director and two deputy directors. The PMU is managing 48 projects with a total of 46 staff of
which 12 are government staff and 34 contracted staff. There are two funding sources for
projects (ODA and state budget). The MoT is the central project owner (PMU 6, PMU 85).
ODA projects are funded by ADB and the World Bank, and the PMU currently manages five
ODA ongoing projects. There are ADB and World Bank monitoring and evaluation
frameworks that are followed which differ from the monitoring and evaluation framework for
projects under the state budget. Key challenges for project implementation reported to the
IMT include the high inflation rate and related price changes in materials and project costs.
As all ODA projects have fixed costs in the agreement with the donors there are no
provisions for adjustments, and it is impossible to renegotiate with the donors.70 This may
create delays as a new agreement with the donor needs to be negotiated. Site clearance
procedures need to be followed according to donor regulations, which is a lengthy process. It
was also reported to the IMT that it is difficult to find qualified staff to work at the PMU.
In Phu Tho it was reported that PMUs in the area of health are integrated into existing
systems, but there are occasions when PMUs have not been located appropriately. One
example highlighted was that two HIV projects had been located at separate centres, one in
the HIV-AIDS centre (funded by the Global Fund) and one in the Provincial Population
Centre (funded by ADB), and there had reportedly been little coordination and cooperation
between the two projects. Some were of the view that there is a need for better coordination
structures between projects, and that there should be one sector coordination agency at the
provincial level acting as the focal point under which all HIV projects are located.
In both provinces, ODA monitoring and evaluation activities follow different frameworks
depending on the funding donor. Progress has been made with the use of the AMT.
70
Some donors provide provisions for adjustments, most notably for larger contracts. However, by
nature, most projects in provinces are small scale with a relatively short implementation period, and
the visited provinces indicated that contracts under donor financing are fixed contract without price
adjustment provision, causing provinces difficulties in arranging the additional fund due to the recent
price hike.
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However, both provinces reported on significant constraints in monitoring and evaluation

capacity. Phu Tho reported on the lack of capacity and understanding for developing and
using monitoring and evaluation frameworks. Nghe An reported that assessments and
evaluations of projects are weak, with limited evaluation and impact work being carried out,
and hence limited lessons learnt. It was also suggested that provinces should be facilitated
and supported to carry out evaluation work by themselves.
There have been limited experiences with provincial budget support. Phu Tho has some
experiences in the area of rural transport (see Box C.3 below). It was reported to the IMT
that this form of support worked well once the initial procurement procedures and processes
had been completed.
Box C.3 Provincial budget support to Phu Tho
In 2005, DFID and the World Bank undertook a pilot programme to support rural transport. Rural
transport is an area that requires a high volume of small-scale construction work, which needs to
be matched with recurrent expenditure on maintenance. In Vietnam, provinces have a record of
neglecting maintenance in favour of capital investments. Funds were provided via the MoF as
budget support to two provinces, Lao Cai and Phu Tho. The provincial department of transport
(DoT) managed the funds. Payment to contractors was made by bank transfer to the contractor’s
account.
Initially, there was considerable delay in the disbursement of funds due to long planning and
approval process at the provincial level. However, the pilot showed that the government structures
could accommodate for provincial budget support. A positive outcome was that one reporting
system was followed, which cut down on transaction costs (compared to projects which tend to
follow a dual reporting system). This form of budget support also did not require a PMU, which
reduced unnecessary layers of management.
As part of the pilot, a comparison was made between the rural transport provincial budget support
pilot and Programme 135 (a government national-targeted programme focusing on poverty
reduction in poor communes). The rural transport support and P135 follow the same procedures
except that expenditure on rural transport is controlled at the provincial level and not at local
levels, and P135 funds can only be used for specific expenditures specified by the P135
programme. The expenditure-tracking exercise concluded that the rural transport support was
easier to track than P135. This was partly due to the fact that the P135 distributes funds to the
lower levels and has more activities. As a result, the funds are more difficult to track and the
information is less reliable. P135 also passes through more levels of administration and is more
widely spread, which opens up for potential misuse of funds. Nevertheless, in both cases
government accounting systems have little breakdown and little information on how funds are
allocated, transferred, and how these transfers are authorised.
The pilot concluded that the most significant challenges related to the lack of effective reporting to
the centre, the lack of clear strategy and guidance, uncompetitive procurement, weak community
participation and planning and budgeting (i.e. matching budgets to plans) at the provincial level.
Some of the recommendations made pointed to the need for provinces to improve targeting of
resources towards specific objectives. The role and accountability mechanisms, as well as a
reporting system between the central government agencies and local government, need to be
clearly defined. Support should ideally be integrated within the overall programme of the provincial
department to gain more operational efficiency and avoid biasing investment decisions towards
‘using up’ the given funds in the time available. Procurement practices also need to be improved,
and become more competitive.
Source: Adapted from DFID/Consulting Centre for Transport Development, ‘Provincial Budget
Support Programme: Successes and Lessons’, Final Report, June 2006
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Key challenges and constraints
While the two provinces differ in terms of capacity, they are facing similar challenges and
constraints. Key challenges and issues reported to the IMT included the following:
• There is a need for an improved communication and dialogue with donors, and
coordination with the centre.
• Legal basis for ODA management is developed enough, but there is a need to raise
awareness (especially Decision 131). There is a lack of knowledge and understanding of
ODA decrees, policies, procedures, procurement and financial reporting procedures, and
a lack of adequate English-language skills creates barriers for effective project
implementation.
• There is a need to sort out issues with regard to ODA and human resources. It is difficult
to recruit appropriate and professional staff to employ in the PMUs, which reportedly
creates financial incentives to establish PMUs with higher donor salary and cost norms.
• The PMU structure makes it difficult to manage and coordinate external assistance.
There is no regulation on how PMUs should coordinate with each other, and there is a
need for improved information sharing and coordination mechanisms between PMUs and
executing agencies. In some cases it was noted that projects should be coordinated by
one agency/authority on a sectoral basis.
• The increase in project costs due to the high inflation rate creates a significant barrier
from a budget perspective. Project costs are fixed in the donor contract and agreement.
Donors do not provide provisions for adjustments. A new agreement and contract has to
be negotiated with the donor, which takes time and causes delays. 71
• Capacity building and technical assistance is lacking in coordination and ownership by
the province. Donors do not have the habit of consulting the province in the formulation
and recruitment of technical assistance, which may lead to inappropriate technical
assistance with limited understanding of the context and systems. While some provincial
plans provided include capacity needs, the provinces have not undertaken any specific
capacity-needs assessment or developed capacity-building plans, which then have been
communicated to donors.
71
Some donors provide provisions for adjustments, most notably for larger contracts. However, by
nature, most projects in provinces are small scale with a relatively short implementation period, and
the visited provinces indicated that contracts under donor financing are fixed contract without price
adjustment provision, causing provinces difficulties in arranging the additional funds due to the recent
price hike.
74
December 2008
Table C.1 ODA projects and PMUs, Nghe An

Project Donor Managing Implementing Total ODA Counter
agency agency part
million VND
Vietnam Germany KfW MARD PMU of KfW4 98,613 76,290 22,323

forest plantation
Vinh City drainage KfW PPC Vinh City PC 368,000 258,000 110,000
project
Providing KfW MOLISA Vietnam- 8,100 6,550 1,500
equipment for Germany Higher
vocational training vocational school
Nghi Yen waste KfW PPC Vinh Urenco 72,600 51,246 21,354
treatment complex
Strengthen KfW MOH HIV/AIDS 3,398
preventive prevention center
intervention of
HIV/AIDS/STI
Rural energy 2 WB MOIT PMU REII- DOIT 196,889 115,200 36,972
Natural disaster WB MARD CPO ARD 154,433 142,098 2,700
risk management
Community-based WB PPC DPI 364,900 290,594 74,306
rural infrastructure
HIV-AIDS WB MOH HIV/AIDS 26,350 25,350 1,000
prevention project prevention center
Rural roads WB MOT DOT 64,416 58,560 5,856
Upgrading, ADB MOT DOT 139,200 125,280 13,920
rehabilitation of
rural road network
of central Vietnam
Overcoming ADB MARD CPO ARD 68,056 55,226 12,831
disaster damages
in Nghe An
Science and ADB MARD DARD 24,331 17,664 6,667
technology in
agriculture
Support to ADB MOH Preventive health 12,368 10,250 1,354
development of care center
preventive health
care
Upgrading and Korea PPC Vietnam-Korea 67,677 36,800 30,877
building higher higher vocational
vocational school school
Vietnam-Korea
Specialized credit JICA (former PPC District PCs 132,188 80,385 51,815
program JICA JBIC)
(former JBIC) SPL-
V
Water supply for Finland PPC Nghe An Water 280,984 242,438 38,550
Vinh suburb Supply Co.
Business sector Denmark PPC DPI 7,995
support program-
HP1
75
December 2008

agency agency part
Rural agriculture Luxembourg PPC PMU VIE/014 107,821 104,733 3,088
development of
West Nghe An
Rice seeds suppy UNDP PPC Nghe An Seed 776 776 0
to support typhoon Company
5 damage
Strengthening Sweden MARD DARD 49,703 40,408 10,725
environment and
land administration
Source: DPI of Nghe An. Note: There is a reproductive health project by JICA, but as this is in the post training
phase (‘train the trainers’) Nghe An DPI does not list this project as no foreign funds are involved.
76
December 2008
Table C.2 ODA projects and PMUs, Phu Tho

agency agency part
million VND
Integrated rural WB .. PMU Integrated 334,040 292,660 41,380

poverty reduction Poverty, DPI
Water supply for JICA .. PMU JICA 25,000 20,000 5,000

Thanh Son town (former (former JBIC)
JBIC) Thanh Son
district
Improving quality UNFPA .. PMU improving 30,595 28,595 2,000
and usage of reproductive
reproductive health health care
care services
Improving service ORBIS .. Social diseases 3,787 3,212 575
quality of eyes care prevention
center
Support to ADB .. PMU Preventive 11,889 10,437 1,452
development of health care
preventive health center
care system
Tea plant AFD .. PMU Tea 215,000 158,700 56,300
development development
AFD
Rural energy WB .. PMU Rural 149,578 115,114 34,166
project Energy
Rehabilitation and JICA .. PMU JICA 39,407 23,000 16,407
upgrading of (former (former JBIC)
provincial road 312 JBIC) Ha Hoa district
Rural road JICA .. PMU JICA 24,400 19,430 4,970
supporting craft (former (former JBIC)
village Ngo Xa JBIC) Cam Khe district
Rehabilitation and JICA .. PMU JICA 16,840 13,640 3,160
upgrading of (former (former JBIC)
irrigation system JBIC) Cam Khe district
for 16 communes,
Cam Khe
Construction, ADB .. PMU Agriculture 33,763 31,303 2,460
repair and
upgrading of
embankment at
Viet Tri river
confluence
Electrification of CODEV .. PMU Thanh Son 3,960 3,565 395
remote villages in district
Thanh Son
Rehabilitation, WB; .. PMU Transport 16,300 13,100 3,200
upgrading of Tay DFID
Coc-Ha Luong
77
December 2008

agency agency part
road
Rehabilitation, .. PMU Transport 5,130 3,775 1,355
upgrading of Tien
Du - Yen Kien road
Expanding power JICA .. PMU JICA 16,300 13,100 3,200
network for 8 (former (former JBIC)
communes of Yen JBIC) Yen Lap district
Lap
Rehabilitation, JICA .. PMU JICA 24,900 19,975 4,925
upgrading of Van (former (former JBIC)
Mieu-Thuong Cuu JBIC) Thanh Son
Road
Biogas project Netherlands .. 14,168 12,138 2,030
Community France .. 3,939 2,656 1,283
livelihood clubs for
poverty reduction
and management
Rehabilitation and ADB .. PMU Transport 24,940 11,723 13,217
upgrading of road
324 (Luong Son -
Th. Long)
Rehabilitation & WB .. PMU Transport 15,460 11,702 3,758
upgrading Tay
Coc-Ha Luong
road
Upgrading Road ADB .. PMU Transport 29,618 26,025 3,593
321
Construction of Te JICA .. PMU JICA 15,000 12,000 3,000

Le bridge (former (former JBIC)
JBIC) Tam Nong
district
Rural WB, .. PMU Transport 64,000 43,500 20,480

transportation 3 DFID
Source: DPI of Phu Tho.
78
December 2008

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INDEPENDENT MONITORING OF THE IMPLEMENTATION

OF THE HANOI CORE STATEMENT AT SECTORAL AND

Katarina Kotoglou, Marcus Cox, Masumi Shimamura, Pham Hong Van,

The independent monitoring team (IMT) interviewed key informants, including

Fragmented project delivery has a number of well-documented shortcomings. Project design

Programme based approaches

Fragmented policy-making process and dialogue

Lack of comprehensive sector programme and budget framework

this a difficult transition to make. As fiscal responsibility is transferred to the provinces,

Commitments and incentives

Recommendations for moving forward

Government and donors

• Engage in further analysis of the obstacles and disincentives to implementing

• Consider the practical implications of developing PBAs in decentralised sectors.

• Accelerate the development of sectoral MTEFs in order to introduce a more

• Resolve barriers and inconsistencies in laws and procedures to enable greater

• Careful consideration to consolidating and harmonising assistance, as a step

• Donors should understand their HCS commitment as requiring the use of

• Improve the coordination of technical assistance, where relevant, using pooled

List of tables and figures

Table 2.1 Selected examples of aid fragmentation in well aided countries 17

AAA Accra Agenda for Action

ADB Asian Development Bank

AFD Agence Française de Développement

AFTA ASEAN Free Trade Area

AMT Aligned Monitoring Tool

ARV antiretroviral treatment

BOT Build Operate Transfer

CAP Coordination Action Plan

CCBP Comprehensive Capacity Building Programme to Strengthen ODA

CCM Global Fund Country Coordination Mechanism

CDOPP Capacity Development of ODA Project Planning

CFAA Country Financial Accountability Assessment

CFPAR Country Procurement Assessment Reports

DAC Development Assistance Committee

DAD Development Assistance Database

DARD Department of Agriculture and Rural Development (provincial)

DFID Department for International Development, United Kingdom

DoF Department of Finance (provincial)

DoH Department of Health (provincial)

DoT Department of Transport (provincial)

DPI Department of Planning and Investment (provincial)

EIA Environmental Impact Assessments

FERD Foreign Economic Relations Division (provincial)

GFATM Global Fund for AIDS, Tuberculosis and Malaria

GoV Government of Vietnam

HCS Hanoi Core Statement

IDU intravenous drug users

IMT Independent Monitoring Team

IMTF ODA Inter-Ministerial Task Force

IMTG Independent Monitoring Thematic Group

JBIC Japan Bank for International Cooperation

JICA Japan International Cooperation Agency

KfW Kreditanstalt für Wiederaufbau

MARD Ministry for Agriculture and Rural Development

MIC Middle-Income Country

MoF Ministry of Finance

MoH Ministry of Health

MoLISA Ministry of Labour and Social Affairs

MoPS Ministry of Public Services

MoT Ministry of Transport

MPI Ministry of Planning and Investment