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Vietnam
The Development Challenge: Vietnam is undergoing a transition from a centrally planned to a market-oriented economy. Since 1986, Vietnam has succeeded in achieving rapid economic growth, doubling the size of its economy and reducing poverty by half. However, with a GDP of $34.1 billion and GDP per capita of $441 in 2002, Vietnam still ranks among the poorest 25 countries in the world. Foreign debts accounted for 42% of GDP by the end of 2002. Although Vietnam's social and political environment is rated as more stable than that of neighboring countries, foreign direct investment has decreased in recent years due to a lack of transparency, uncertainty and inconsistency in the legal and taxation system, and high costs of doing business.
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Vietnam is pursuing its goal of acceding to the World Trade Organization (WTO) by the end of 2005. To achieve this goal, the Government of Vietnam (GVN) must undertake fundamental reforms in the economic, financial, and administrative spheres. Despite criticism of its slow implementation of administrative and regulatory reforms, the GVN continues to manifest uneven political will to undertake rapid reforms due to concerns that these would lead to social unrest, economic instability, and political upheaval. Hundreds of existing laws and regulations will need to be amended, new ones put in place, and law enforcement strengthened as the GVN pursues its roadmap to global integration. Legal and regulatory reform is possibly the greatest challenge and it is precisely the area in which USAID can best assist.
The passage of the Enterprise Law in early 2000 has spurred the establishment of more than 72,000 new businesses. Private small and medium-sized enterprises now account for almost 50% of GDP and create most of the 1.4 million new jobs needed each year by a young and growing workforce. However, private businesses are handicapped by limited access to bank credit and management skills, a restrictive regulatory environment, and an absence of incentives in land rental and taxes. Vagueness, unexpected changes and divergent interpretation of laws and regulations lead to serious problems in consistent implementation and enforcement for businesses. Improving private sector competitiveness is a main challenge if Vietnam and the United States are to benefit from new opportunities that arise as the country reforms. USAID activities focus on these areas.
Vietnam has continued to improve key human development indicators over the last few years. The UNDP's 2003 Human Development Index Report ranks Vietnam 104th in the world, citing Vietnam as a model for many areas of social development. Adult literacy is estimated at 94% and life expectancy is 68 years. The country, however, still faces many social challenges. The disparity of living standards between regions and social groups is on the rise. One-third of children under five are underweight and the child mortality rate is 42 per 1000. Economic growth is associated with deteriorating air and water quality and environmental hazards, threatening health status and economic sustainability. The HIV/AIDS epidemic is now generalized in border provinces, posing one of the greatest human development challenges for Vietnam. HIV incidence is increasing throughout Vietnam. By mid 2003, the number of HIV/AIDS infected people was estimated at 71,500.
U.S national interests in Vietnam include maintaining Vietnamese cooperation on POW/MIA accounting, furthering normalization of ties; fighting terrorism, HIV/AIDS and transnational crimes; encouraging compliance with international standards of human rights and the rule of law; and supporting economic reforms that create opportunities for U.S businesses. For the United States, Vietnam's integration into the world economic and trading system is critical for regional security, prosperity, and peace.
The USAID Program: USAID's program focuses on the following:
- Accelerating Vietnam's transition to an open and market-based economy;
- Improving access to services for selected vulnerable groups; and
- Improving sustainable urban and industrial environmental management.
To meet the first objective, USAID provides advisory assistance to help the GVN implement required reforms consistent with WTO requirements and its commitments under the U.S. Bilateral Trade Agreement, which was ratified on December 11, 2001. New activities launched in FY 2003 have begun to help the private sector compete successfully in global markets. These programs ensure that Vietnam will continue to liberalize and follow a strict roadmap toward global economic integration. Regarding better access to services for vulnerable groups, USAID - through the Displaced Children and Orphans Fund and other regional funds - helps Vietnam provide war victims, displaced and orphaned children, people with disabilities, victims of trafficking, and HIV/AIDS infected people with increased access to services. Economic Support Funds (ESF) support USAID's work in the rehabilitation of trafficked women and children from the Mekong Delta provinces, as well as research and development of effective interventions to prevent trafficking in persons. The third objective, improvement of sustainable environmental management, is being met through the United States-Asia Environmental Partnership Program (US-AEP). This program provides short-term technical assistance, training, exchanges, and small grants to help Vietnam improve environmental policies and governance systems; improve the quality of and access to potable water and sanitation services; improve air quality management; and improve the efficiency of resource use.
Other Program Elements: The Office of Foreign Disaster Assistance supports improving Vietnam's disaster preparedness capacity and disaster mitigation. As part of the Regional Cocoa Alliance, USAID supports a Cocoa Development Project in the Mekong Delta and Central Highlands. Through the Association Liaison Office, USAID has provided a grant to Purdue University to support a Higher Education Partnership with the Vietnamese University of Agriculture and Forestry (UAF) to develop a training curriculum for improved environmental management. UAF also is carrying out research on coffee and cocoa that is supported by a grant under the USAID/Sustainable Agriculture and Natural Resource Management Collaborative Research Program. The Regional Information and Communication Technology (ICT) Initiative, managed by USAID's Economic Growth, Agriculture, and Trade Bureau, implements a number of ICT activities to support e-commerce, internet development, and strengthening the capacity of software cluster in Vietnam.
Other Donors: In the Donor Consultative Meeting in December 2003, donors pledged $2.8 billion of Official Development Assistance to Vietnam in 2004. Japan remains the largest donor in Vietnam, focusing on infrastructure projects in the transport and energy sectors as well as economic growth and poverty reduction programs. Second, the World Bank concentrates on the transport and energy sectors, modernization of the banking system, poverty reduction, and rural development. As the third largest donor, the Asian Development Bank focuses its disbursements on encouraging private sector development, state-owned enterprises (SOE) reform, and social development. The International Monetary Fund provides loans to support policy reforms in banking, SOE reform, public expenditure management, private sector development, and a fiscal and monetary program. Other important bilateral donors include Australia, Canada, France, Denmark, the Republic of Korea, Sweden, and the United Kingdom, which direct their assistance mainly toward social and human resource development, health, rural development, and natural resource management. United Nations agencies, including UNDP, UNICEF, WHO, UNFPA, and UNAIDS, continue to provide assistance in agriculture, health, and social development. Given this donor portfolio and USAID's comparative advantages, USAID expects to collaborate with the World Bank, the UNDP, the IMF, and other bilateral donors in the areas of HIV/AIDS protection and prevention, trade liberalization and legal reform, and private sector development.
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