Diversifying PRSP

The Vietnamese Model for Growth-Oriented Poverty Reduction

September 1, 2002 Izumi Ohno

National Graduate Institute for Policy Studies

Background

• Ongoing global poverty reduction partnership

• Poverty Reduction Strategy Paper (PRSP) – Eligibility for Enhanced HIPC Initiative, ID

A/IMF financial support– Linkage with country assistance strategies– The means to achieve UN Millennium Devel

opment Goals (MDGs)

Japan and PRSP

• Agree on basic principles of PRSP (e.g., ownership, partnership); but

• Suggested areas for its enhancement:

– Incorporating country diversity in the current approach

– Providing strategic alternatives and options for institutional arrangements, etc.

Agenda

1. PRSP Overview2. Country Types and Appropriate

Responses3. Vietnam’s PRSP Experience:

– Strong ownership: built on the existing development vision

– Growth orientation: Asian Dynamism as key factor

1. PRSP Country Status

• 61 countries engaged in PRSP process [as of Aug. 2002] – 18 countries completed Full-PRSPs

o/w: 12 Africa, 4 LACo/w: 15 linked to “Enhanced HIPC Initiative”

• IDA/IMF comprehensive review– Joint Development Committee (April 2002)

PRPS Countries by Progress

4

1

1

1

11

1

7

1

3

17

2

3

2

7

No. of countries

Full- PRSP

Interim- PRSP

before Interim- PRSP

Africa (35)

East Asia (6)

South Asia (4)

Europe &Central Asia (10)

Middle East & North Africa (2)

Latin America &Caribbean (4)

PRSP Countries by HIPC Status

1

5

3

17

1

7 2

1

1

10

4

4

1

4

No. of Countries

HIPC Completion Points reached

HIPC Decision Points reached

HIPC Decision Points not yet reached

HIPC Sustainable Cases

Non-HIPC

Africa (35)

East Asia (6)

South Asia (4)

Europe & Central Asia (10)

Middle East &North Africa (2)

Latin America &Caribbean (4)

PRSP Comprehensive Review:by IDA and IMF

“The PRSP approach requires flexibility so that both the process and the content of poverty reduction strategies can vary across countries in light of national circumstances.”

[IDA/IMF March 15, 2002, p.7]

2. Country Types and Appropriate Responses

• 3 key criteria for localizing PRSP1. Relationship with donors

– Linkage between PRSP and debt relief – Aid dependency– Donor composition, etc.

2. Presence or absence of a national development strategy and its quality

3. Causes of poverty

Burkina Faso

Ghana

Mauritania

Mozambique

Uganda BoliviaHonduras

Mongolia

Nepal

Kenya

Tanzania

Zambia

Nicaragua

Bangladesh

Cambodia

Indonesia

Laos

Pakistan

Sri Lanka

Vietnam

0

5

10

15

20

25

30

0 20 40 60 80 100 120 140 ODA/capita

US$

ODA/GDP%

Aid Dependency(US$ per capita and % of GDP, 1998)

Donor Composition

Vietnam: Major Donors1998-2000 Average

IDA13.5%

ADB12.0%

Germany3.6%

Japan46.3%

Denmark2.8%

France4.6%

Others17.2%

Donor Composition

Uganda: Major Donors1998-2000 Average

UK20.3%

IDA14.1%

Denmark9.2%EU

7.4%USA6.9%

Netherland5.0%

Others38.0%

Tanzania: Major Donors1998-2000 Average

UK13.2%

Japan12.4%

Denmark7.2%

Germany7.0%

Others41.0%

IDA12.2%

Netherland8.0%

ODA Composition: Grants vs. Loans

0% 20% 40% 60% 80% 100%

Tanzania

Uganda

Bolivia

Vietnam

Grants

Loans

National Development Strategy

• How is PRSP—imported from without—treated domestically?

• 2 prototypes:

– PRSP as a supplementary document

– PRSP as a primary document

PRSP as a Supplementary Document

• Existing national development plans guide budget, sector plans and PRSP.

• PRSP supplement, with special attention to poverty reduction – Cross-cutting perspective

– Participatory process, etc.

• Example: Vietnam

PRSP as a Supplementary Document

Existing dev. plan

PRSP Sector plans

Budget

govern

supplement

PRSP as a Primary Document

• PRSP co-exists with the national development plan

• Newly introduced PRSP exerts a stronger influence over budget and sector plans.

• Examples: Tanzania, Uganda

PRSP as a Primary Document

Existing dev. plan

PRSP

Sector plans,budget, MTEF,

aid procedures

symbolic

govern

Institutional Options based on the Existing System

• PRSP-supplementary: donors should respect and support the existing policy framework (rather than replacing it with PRSP).

• PRSP-primary: donors can utilize PRSP & related systems and support local capacity building around PRSP.

Causes of Poverty

• Need for correct matching between diagnosis and prescription in each country – How poverty is created?

– How can growth reduce poverty?

[Ishikawa 2002]

Causes of Poverty (contd.)

• Case 1: a poor country equipped with policies & programs to promote social equity and social service delivery system– A good growth strategy is needed to

improve the purchasing power of the general population.

– Example: Vietnam

Causes of Poverty (contd.)

• Case 2: a poor country constrained with uneven opportunities due to social discrimination (e.g., gender, racial and ethnic discrimination)– Formulation and implementation of

efficient & effective pro-poor targeting measures are needed—in addition to a growth strategy.

Infant Mortality Rate (2000)

0

10

20

30

40

50

60

70

80

90

100

Lao

PD

R

Myan

mar

Cam

bo

dia

Ind

on

esia

Ch

ina

Ph

ilip

pin

es

Th

ail

an

d

Vie

tnam

Ko

rea

Mala

ysia

Taiw

an

Jap

an

Ho

ng

Ko

ng

Sin

gap

ore

Sources: World Bank, World Development Indicators 2002; For Taiwan, ADB, Key Indicators 2001 .

(per 1,000 live births)

Average of lowincome countriesAverage of middle

income countries

Female Adult Illiteracy Rate (2000)

0

10

20

30

40

50

60

70

80

Lao

PD

R

Cam

bo

dia

Ch

ina

Ind

on

esia

Mal

aysi

a

Mya

nm

ar

Tai

wan

Sin

gap

ore

Ho

ng

Ko

ng

Vie

tnam

Th

aila

nd

Ph

ilip

pin

es

Ko

rea

%

Sources: World Bank, World Development Indicators 2002; For Taiw an, ADB, Key Indicators 2001 .

Average of lowincome countries

Average of middleincome countries

Country Diversity and Strategic Alternatives

• Reflect the stages of development (economic, social, institutional etc.), and other country-specific opportunities & constraints.

• Identify an appropriate mix for each country: “pro-poor targeted” vs. “broad-based growth” expenditures[Ishikawa 2002]

3. Vietnam’s PRSP Experience

• Recognized internationally as “good practice”: strong country ownership

• PRSP renamed to “Comprehensive Poverty Reduction & Growth (CPRGS) Strategy”

• CPRGS: as a document subordinate to the core documents which embrace a growth-oriented development vision.

Vietnam’s PRSP Experience

• Different perspective from the early PRSPs– First East Asian country to complete Full

-PRSP (May 2002)

– PRSP not linked to enhanced debt relief program

About Vietnam

• Population: 78.5 million • Located at the heart of East Asia• Years of wars and central planning• Income per capita: $390 per year• Life expectancy at births: 69 years• Female adult illiteracy rate: 9%

[2000 data, WB]

About Vietnam (contd.)

• Transition to a market economy “Doi Moi” policy (1986 ～ ): domestic liberalization

• International integration (early 1990s ～ ): trade, FDI, aid flows

• Achieving high growth rates (7 ～ 8% per year) and halving the ratio of extreme poverty in the 1990s

0.0

2.0

4.0

6.0

8.0

10.0

12.0％

Real GDP Growth Poverty

Progress in the Last Decade

Source: Government Statistics Office (GSO), Government of Vietnam.

58

25

37

15

0

10

20

30

40

50

60

70

Below Total PovertyLine

Below Food PovertyLine

19931998

%

Source: World Bank, “World Bank and Vietnam,” [http://www.worldbank.or.jp/06group/RC_flame.htm].

Vietnam is a Large FDI Receiver

% of GDP, average 1991-99

5.4

0.8

1

1.1

1.2

1.6

3.2

3.5

3.2

0.9

0 1 2 3 4 5 6

Vietnam (1991-00)

Korea, Rep.

Brazil

China

Mexico

Argentina

Malaysia

Chile

High Income countries

Low & middle incomecountries

(%)

Source: Government of Vietnam and World Bank, SIMA database (cited from Vietnam 2010

Entering the 21st Centruy , Joint Report of World Bank, ADB and UNDP, November 2000.

Asian Dynamism: Key Factor

• Development driven by trade & investment

• East Asian growth as collective phenomenon: “Flying Geese Pattern”

• Development as catching up (vs. development as poverty reduction)

• Participation in regional/global production network through int’l division of labor

Share in World Export

0

2

4

6

8

10

12

14

16

18

60s 70s 80s 90s

(%)

Per Capita GNP Growth

0

1

2

3

4

5

6

7

60s 70s 80s 90s

(%)

East Asia

Sub Saharan Africa

Source: Ministry of Economy, Trade and Industry, White Paper on International Trade 2001, p.78.

East Asia

Sub Saharan Africa

East Asia Reduced PovertyDespite Currency Crisis

Population in Extreme Poverty (%)

0102030405060

East Asia LatinAmerica

South Asia Sub-SaharanAfrica

1990

1999

Asian Dynamism: Key Factor

• Vietnam with typical East Asian aspiration• National goal: Industrialization &

Modernization by 2020 (10-Year Strategy & 5-Year Plan)

• Very strong interest in narrowing intra-regional gaps (vs. original ASEAN)

Asian Dynamism: Key Factor

• Also interested in infrastructure, HRD, trade, FDI attraction

• Narrow “poverty reduction” approach, not enough

PRSP Approach

Poverty ReductionGoal:MDGs

CDF/PRSP

Means:

Pro-Poor Policies Growth Policies

East Asian Aspiration

Equitable GrowthGoal:

< Vietnam >Industrialization & Modernization

5-Year Plan & 10-Year Strategy

Means:

Growth Policies Social Policies

Lastly…

• Diversifying PRSP, more flexibility• Specific criteria for localizing PRSP• Options for institutional

arrangements• Strategic alternatives: different

causes, different responses　　　　　　　　　　　　　　　　　　　

Japan’s Cooperation

• Country ownership and partnership• Supporting balanced growth with equity

– Creating the enabling environment for trade & investment, through infrastructure, HRD, policy advice, etc.

– Coping with risks & emerging social problems

• Through an appropriate mix of grants, loans, and technical cooperation

The END

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