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1

This paper is based on the work of a technical assistance mission led by Anja Baum that visited Hanoi July 9–13, 2018, and included Ms. Anh Thi Van Nguyen, economist in the IMF’s Hanoi office. It met with officials from the Mnistry of Planning and Investment, Ministry of Finance, Ministry of Agriculture and Rural Development, Ministries of Education and Training, Mnistry of Transport, and Mnistry of Health. The mission also met with development partners (World Bank, WHO, UNICEF, UNESCO, UNDP and ADB). The author is grateful for the support by Mr. Pham Hoang Mai and Ms. Nga Vo at the MPI on mission coordination, as well as to all counterparts for the valuable input and support. We are further grateful for the generous support by the GIZ in support of the project, and Ms. Nguyet Hoang and Ms. My Anh Nguyen for their support in Vietnam. While the paper draws on existing literature where available, some of the information was gathered during discussion with authorities and development partners and could not be cited. The cost estimation is based on methods developed by the IMF Fiscal Affairs Department under the leadership of Mercedes Garcia-Escribano.

2

Electricity production per capita was 1896 kWh in 2016, and its growth rate about 10.3 percent annually during 2011–2016 (GSO).

3

It should be noted that the paper does not provide an in-depth analysis of causal relationships between the sectors and economic success, nor between policies and outcomes.

4

Previously, crops could only be exported through state-approved companies, which made a profit by paying farmers significantly less than the world price.

5

Vietnam is a unitary state with four tiers of government: central; 63 provinces; around 680 districts; and around 11,000 communes. Each tier of government has both legislative and executive authorities. At central level legislative authority rests with the National Assembly, and executive authority rests with line ministries and agencies. At local level, each tier of government has People’s Councils to exercise legislative authority; and People’s Committees and line departments to exercise executive authority. The SBL 2002 provided a solid framework for public financial management including intergovernmental fiscal relationships (World Bank 2015), which included powers to raise revenue from fees, charges and tolls and autonomy to determine fiscal relationships with districts and communes.

6

Nguyen-Hoang and Schroeder (2010) find that the shared revenue and balancing transfers system is equalizing as it reduces variation in revenue per capita across provinces. World Bank (2015) notes that higher capacity local authorities have higher levels of spending responsibilities on average, and that the share of rural population is positively linked to the level of decentralization within a province.

7

Students facing the greatest disadvantage on an international scale outperformed the most advantaged students in about 20 other PISA-participating countries (OECD 2018). Children’s performances also show relatively little variation in scores by socio-economic status.

9

Electricity production per capita was 1896 kWh in 2016, and its growth rate about 10.3 percent annually during 2011–2016 (GSO).

10

The first user fee exemption policy for the poor was issued in 1994 (Decree 95). Provinces were required to use budget funds to enroll at least 30 percent of the poor in compulsory health insurance as of 1999 (Circular 05). Health Care Funds for the Poor (including ethnic minorities) were introduced in every province in 2002 and as of 2005 all the poor had to enroll in compulsory health insurance with government funds subsidizing their premiums (Health Insurance Decree 63). Some 15 million poor and ethnic-minority people are now covered by subsidized health insurance. This policy reduced the risk of catastrophic spending on health care for the poor (Tien et al. 2011; Wagstaff, 2007).

11

The number of households accessing clean water has been rising annually, from 78.1 percent of households in 2002 to 93.4 percent in 2016 (99 percent urban and 91 percent rural, VNR 2018). Similarly, the percentage of households using hygienic latrines has increased from 55 percent in 2002 to 83 percent in 2016.

12

Based on Decision 2161 of MOET, 2030 targets of student-teacher ratios are less ambitious than the ones used for calculation here, with a student-teacher ratio for pre-primary of 15, primary of 20, and secondary of 22. If the resulting lower average student-teacher ratio was implemented, the additional fiscal space could be used for targeted education initiatives, such as intensified out-of-school training and training on IT.

13

The state budget will also support tuition for students at private schools in poorer and remote areas.

14

See Hutton and Varughese (2016) for a detailed description of the model, which has unit costs calibrated at the country level. A similar WASH model estimated by UNICEF calculated annual needs of 1.2 percent of GDP to reach the additional population, and 0.3 percent for maintenance of already existing water infrastructure. Please see https://data.worldbank.org/indicator/SH.H2O.SMDW.ZS for a description of the WASH model and its indicators.

15

Today’s estimate based on discussions with authorities and the significant increase in road density since 2004. See Rural Access Index, World Bank Group, https://datacatalog.worldbank.org/dataset/rural-access-index-rai

16

Decision 706/2017 of the Ministry of Construction sees the average unit cost of a two-lane paved road in the Delta area at $2.6 million.

17

There are currently 68 PPP projects at the national level. Smaller PPPs at the subnational level are numerous, and their exact number is unknown given gaps in monitoring and reporting.

18

Estimates on private sector participation across sectors have been approximated following conversation with the authorities about likely options going forward. 2016 budget provisions are approximated based on 2016 GSO data, which group electricity with gas, steam and air conditioning supply, and roads with overall transportation and storage.

Vietnam's Development Success Story and the Unfinished SDG Agenda
Author: Ms. Anja Baum