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The Department for International Development's budget in Vietnam has more than tripled in the last five years. This is a sharp increase but it is also a worthwhile investment—British development assistance to Vietnam is having a positive impact there and British money has helped to lift millions of people in Vietnam out of poverty.
The Government of Vietnam has achieved remarkable economic development in recent years and has a good track record on reducing poverty. Much of DFID's programme in Vietnam is delivered through a grant to the Government's budget. This is an effective way to support Vietnam's ownership of its poverty reduction strategy. It also allows DFID to influence government policy in line with its own strategic objectives on poverty reduction. But we caution DFID against relying too heavily on this mechanism and recommend that it actively and systematically consider other options, such as funding civil society, where these are equally or more effective. A strong civil society needs to be developed so that it can fulfil an essential role in the next phase of Vietnam's development.
Vietnam is likely to graduate from low- to middle-income country status in 2010. This will mean a decline in aid receipts. Challenges will, however, remain and we believe DFID should continue to have a role in addressing these. The development relationship with Vietnam will need to change—moving away from large grants and towards providing more advice. DFID has a good record in Vietnam of doing innovative work which informs research-based policy advice to the Government, and this should be central to its new relationship with Vietnam.
One of the challenges for Vietnam as it approaches and attains middle-income status is in tackling inequality and vulnerability. Ethnic minorities are nearly 10 times as likely to live in hunger as the majority population. 92% of Vietnam's poor live in rural areas. And a quarter of the population hover just above the poverty line. Development programmes therefore need to move away from blanket coverage towards better targeting of these specific groups if Vietnam is to make further progress on poverty reduction.
Governance is rightly a priority for DFID's future programme in Vietnam. The challenges here are significant. DFID should also prioritise work supporting the creation of a responsive and sustainable social security system and on the off-track Millennium Development Goal targets on HIV/AIDS and sanitation. The gender dimensions of DFID's work in Vietnam should be re-examined to ensure that women's empowerment is supported at the local and project level as well as at the policy level.
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