Supporting Policy and Institutional Reforms for Economic Growth and Poverty Reduction in Line

Since the adoption of the Doi Moi (renovation) policy, the Vietnamese economy has continued to register high growth in the transition to a market-oriented economy. As a result, poverty incidence decreased from 58% in 1993 to 29% in 2002. Still, a large number of people are living at the near-poverty level. As the majority of them depend on unstable income from farming, they are vulnerable to natural disasters and unfavorable weather. Thus even those not classified as the poor could easily slip below the poverty line. In addition, there are increasingly serious economic disparities between rural and urban areas. To further reduce poverty, the Vietnamese government drew up the Comprehensive Poverty Reduction and Growth Strategy (CPRGS), an action plan focusing on poverty reduction, in May 2002. JBIC actively participated alongside the Japanese Government in preparations of the CPRGS from the drafting stage. The CPRGS thus reflected the experience of JBIC in its ODA loan operations: economic growth brought about by infrastructure development serves to reduce poverty. Currently, the Vietnamese government is moving forward reforms on a broad front, including state-owned enterprise reform, private sector development, financial sector reform, marketization and integration into the world economy through trade liberalization, policy improvement and institutional strengthening in the education, health and other social sectors, and enhancing governance in administration. JBIC provided an ODA loan totaling ¥2 billion for the Third Poverty Reduction Support Credit in collaboration with the World Bank, Asian Development Bank (ADB) and other donors to support various reforms undertaken under the framework of the CPRGS. Among the reforms supported by this loan were measures to improve the investment climate set out in the Japan-Viet Nam Joint Initiative, which was agreed upon by the two governments in December 2003. Financial assistance for reforms, including improvements in the country’s business environment, is expected to address issues on the policy agenda cited in the CPRGS, thereby contributing to economic growth and poverty reduction in Viet Nam.