House of Commons - International Development

Select Committee on International Development Eighth Report

3 Middle-income status: DFID's role in Vietnam's future development

29. Vietnam is likely to graduate from low-income to middle-income country status by 2010.[30] At this point, many donors intend to reassess their work in Vietnam with a view to scaling back their programmes. The Overseas Development Institute says, however, that middle-income status is far from a panacea:

30. This chapter assesses what we view to be the key challenges for Vietnam as it approaches and attains middle-income status and adjusts to smaller aid flows, and DFID's role in that process.

Social security system

31. We heard during our visit that social insurance programmes are a central plank of the Government of Vietnam's approach to the next phase of Vietnam's development. DFID and other donors told us that there was a clear vision on health insurance, which currently covers 40% of the population and for which there is a target of 100% coverage by 2011. The World Bank, which is leading donor support on social insurance, told us that this plan was affordable. On pensions, the strategy appeared to us less clear. Donal Brown told us that the Government's target was that pensions should cover 30% of the population and that this was achievable.[32] DFID is considering providing support. It seems likely to us that the remaining 70% who will not be covered will include some of the poorest and most vulnerable.

32. Dr Gainsborough said that in designing a social security system for Vietnam the aim should be to develop a "workable system, a system which can be navigated by ordinary people".[33] We were encouraged to hear Donal Brown echo this view.[34] Ramesh Singh welcomed DFID's possible support for the Government's supply-side programme in this area but argued that DFID support should also have a demand-side dimension, for example by supporting civil society to educate people about their entitlements and how to access them.[35] This raised level of awareness would in turn be a means of ensuring a responsive and efficient system. As we have explained in Chapter 2, it is important that civil society organisations receive adequate support to develop their capacity to do such work.

33. We view the priorities for a sustainable and effective social security system in Vietnam to be: broad coverage which includes the poorest and most vulnerable people; simplicity; and demand-side education led by civil society. We recommend that DFID ensure that each of these priorities is reflected in its support in this area.

The Millennium Development Goals

34. Progress towards achievement of most of the Millennium Development Goals (MDGs) is firmly on track in Vietnam. Progress towards two MDG targets is, however, of concern to us: HIV/AIDS and sanitation.

35. HIV/AIDS prevalence is on the increase in Vietnam and in urban areas is close to 1%, the level the lead UN agency on HIV/AIDS, UNAIDS, recognises as a generalised epidemic. We met intravenous drug user (IDU) and sex worker peer educators during our visit. The epidemic is dramatically higher among these vulnerable groups: 34% prevalence amongst IDUs and 16% amongst sex workers. As our last report on HIV/AIDS noted, targeted interventions are crucial in order to avoid nationwide generalised epidemics.[36]

36. In 2004, DFID was the first donor to fund large-scale HIV/AIDS prevention programmes in Vietnam. 115 million condoms and millions of needles have been distributed through these programmes. These are good initiatives which we wholeheartedly support. We were, therefore, particularly concerned to learn from DFID's own evaluation that,

We were glad to hear from Donal Brown's evidence that this programme was now back on track, under the leadership of the Government of Vietnam.[38] We remain concerned, however, that some 60% of a six-year programme is to be spent in the final 18 months of that programme. We recommend that a lessons-learned exercise be carried out in connection with the underspend on the HIV/AIDS programme and shared with us within six months.

37. DFID told us that sanitation "is now the most off-track MDG target in Vietnam."[39] Rural and urban inequalities are particularly acute in this sector: 76% of the urban population has access to hygienic sanitation but this plummets to 16% in rural areas.[40] DFID has relied on the Government of Vietnam to lead work on sanitation and has provided budget support for it. This, however, seems to us a mistake as DFID has told us that "Government programmes have relied on state subsidies for the construction of household latrines, with little success".[41] DFID also told us that it is considering options to increase its support for work on sanitation and that initial DFID analysis indicates that a direct investment of £20 million in the sector could increase rural sanitation coverage by around 8% or roughly four million people.[42]

38. Our inquiry into sanitation and water concluded that lack of access to hygienic sanitation was "a hidden international scandal" and that "DFID should become a global champion for sanitation".[43] This would require of DFID new approaches and new staff configurations.

39. Our report on sanitation and water makes clear that these services sit at the heart of development. We recommend that DFID work urgently to find the £20 million for rural sanitation in Vietnam which DFID analysis suggests could provide four million people with hygienic sanitation, whether as a single donor or in coordination with other donors. DFID should also look at options other than budget support for its work in this sector.

Governance, corruption and human rights

40. During our visit we heard concerns from DFID and other donors about governance, corruption and human rights in Vietnam. In its evidence to us, DFID says:

"Widespread petty corruption poses a serious threat to continued development. Accountability remains weak, National Assembly oversight of the executive is limited, the judiciary is not independent, and media freedom is still carefully controlled as is people's participation in the political process."[

41. The Government of Vietnam has established the Central Steering Committee on Anti-Corruption and appointed a dedicated Deputy Prime Minister in charge of anti-corruption work. But progress on political and civil rights has been limited. We were in Vietnam in May in advance of the elections for the National Assembly. We note that all candidates, including 'independents', had been through a vetting selection process led by the Fatherland Front, an organisation which is closely linked to the Communist Party of Vietnam, and that only one candidate not on the Fatherland Front list was elected to the nearly 500-strong Assembly.[45]

42. Ramesh Singh highlighted the role that third parties can play in addressing these issues:

43. DFID told us during our visit that it intends to increase its focus on governance over coming years and is redirecting resources in order to increase its cadre of governance advisers from one to 2.5 by 2008. In 2005-06, DFID spending on governance in Vietnam was around 3% of the programme, compared to around 67% on economic, trade and infrastructure investment.[47] We heard in Vietnam, from both Foreign and Commonwealth Office and DFID staff, that there was an increasing convergence of embassy and DFID priorities around issues of governance, corruption, institutional capacity and human rights.

44. Given the scale of the challenge, we agree that the DFID programme in Vietnam should increasingly focus on governance and human rights issues. We recommend that resources be redirected at least to double the financial resources available for DFID's governance programme in Vietnam, mirroring the planned increased DFID staff capacity. The refocused and strengthened governance programme is likely to coincide with Foreign and Commonwealth Office priorities. We recommend that DFID and FCO begin planning now for this convergence in order to avoid duplication and to maximise cooperation and shared resources, including staff.

WTO membership and private sector development

45. Vietnam acceded to the World Trade Organisation in January 2007. Our evidence suggests that it is too early to assess the impact of WTO membership.[48] Evidence from DFID points out the significant new economic opportunities which membership offers Vietnam but also notes that it is likely to create rapid migration, urbanisation and land sales which in turn will "generate new vulnerable groups and pockets of poverty".[49] We welcome the priority given in the draft new DFID Country Assistance Plan for Vietnam to ensuring that the poor benefit from WTO accession.[50]

46. A report by the Bristol-Vietnam Project suggests that a key challenge for Vietnamese firms in the next decade is to develop and maintain competitiveness, moving up the supply chain and the technology ladder.[51] Ramesh Singh told us that particular attention should be paid to ensuring that the poor, and small producers and farmers, were not adversely affected by the WTO agreement.[52]

47. DFID already supports programmes whose aim is to ensure that the benefits of World Trade Organisation membership reach beyond the urban industrialised areas and include the poor and vulnerable. We support this work and endorse the priority given to it in the draft new DFID Country Assistance Plan for Vietnam and would expect to see this level of priority maintained in the final agreed Plan.

30 The World Bank defines middle-income countries as those with a per capita gross national income of between $906 and $11,115 Back

31 Overseas Development Institute, Inequality in Middle Income Countries (Briefing Paper), December 2004, p 1 Back

32 Q 71 [Mr Brown] Back

33 Q 31 [Dr Gainsborough] Back

34 Q 71 [Mr Brown] Back

35 Q 31 [Mr Singh] Back

36 International Development Committee, Second Report of Session 2006-07,HIV/AIDS: Marginalised groups and emerging epidemics, HC 46-I, Summary Back

37 Department for International Development, Country Programme Review: Vietnam, May 2007, paragraph 4.60 Back

38 Q 64 [Mr Brown] Back

39 Ev 32 [DFID] Back

40 Vietnamese Academy of Social Sciences, Vietnam Poverty Update Report 2006, June 2007, paragraph 2.1 Back

41 Ev 32 [DFID] Back