IFAD Viet Nam Country Programme Evaluation Draft Issues Paper for the National Round-table Workshop 17 November

2011, Hanoi A. Introduction

1. The present issues paper has been prepared for the National Round-table Workshop on the Viet Nam Country Programme Evaluation (CPE), to be held in Hanoi on 17 November 2011. 2. The purpose of the paper is to highlight some of the main learning issues brought up by the CPE, undertaken by the IFAD Independent Office of Evaluation in 2010-2011, and to present a set of questions for consideration by workshop participants. The paper is organized around three core themes, each of which will be considered in separate working groups during the workshop. These are:

Theme 1: Addressing ethnic minority poverty in Viet Nam; Theme 2: Challenges of the programmes market-oriented approach, which include engaging the private sector; and Theme 3: Strategies for scaling up innovations.

3. As indicated in the IFAD Evaluation Policy (2011), the ACP is a short document that captures the main findings and recommendations of a CPE and confirms the commitment of the Government concerned and IFAD Management to implement the evaluation recommendations within specific time frames. In the case of Viet Nam, the outcome of the workshop will inform, as appropriate, the CPEs agreement at completion point (ACP). The ACP will be signed by the designated representative of the Government of Viet Nam and the Associate Vice-President of IFADs Programme Management Department. Workshop participants will also be invited to discuss the issues contained in the document with the specific aim of generating concrete inputs for the new Viet Nam Country Strategic Opportunities Programme (COSOP), which is to be developed by the Government of Viet Nam and IFADs Asia and the Pacific Division after completion of the CPE process. 4. While the CPE provides a comprehensive background for the evaluation and discussion, it is useful to re-state a number of points common to all three themes. The evaluation has identified four common features of the Viet Nam programme, namely: Support for decentralized development management at the provincial, district and commune levels; Investment in small-scale infrastructure through commune development funds, with projects/programmes selected through a process of local participation; The development of demonstration models for market integration, including for microenterprise development, and their implementation through common interest groups; and Channeling of microfinance to support business plans through savings and credit groups (SCGs) or the banking system.

5. The CPE considers the overall performance of the portfolio to be satisfactory, particularly in terms of support for decentralization, capacity-building, participatory planning, gender mainstreaming, 1

small-scale infrastructure, development of SCGs, and for improving rural livelihoods through production for markets. Viet Nam has faced significant challenges with regard to promoting market integration through developing rural enterprises and value chains, and in generating local employment opportunities by providing market services. The CPE found that IFAD-supported projects/programmes in Viet Nam have not invested enough in business development services, and that partnering with the small and medium-scale private sector, which could impart marketing skills and know-how to smallholders and ethnic minorities, has been limited to date. Another challenge identified by the CPE regards the provision of credit through the banking system. The CPE considers that IFAD has neither a strategy nor a dedicated project that would engage the Government or national financial institutions in tackling this challenge. B. Core Themes

6. Below is a summary of the main issues and guiding questions that would serve as a starting point for deliberations under each theme. The questions contained in this issues paper are not exhaustive. They are intended to stimulate debate and an exchange of views. Group 1: Addressing ethnic minority poverty in Viet Nam 7. According to World Bank, the recent slowdown in poverty reduction in Viet Nam may reflect embedded social inequalities that have been difficult to overcome despite the variety of governmentsponsored programmes targeted at minority populations and poor areas. Although ethnic minorities make up less than 15 per cent of the population, they now comprise over 40 per cent of the remaining poor. Education levels have improved among ethnic minorities. In 2008, however, 45 per cent of household heads of ethnic minority groups had still not completed primary school (compared with 25 per cent of Kinh/Hoa household heads) and less than 10 per cent of ethnic minority household heads had completed upper secondary school or tertiary education. As a consequence, most members of ethnic minority households still mostly work in agriculture and as unskilled labour. This stands in sharp contrast to the continuing move out of agriculture and into (higher paid, higher skill) industry and services among the Kinh/Hoa majority. 8. The provinces where IFAD-supported projects/programmes are implemented are selected on the basis of poverty incidence. IFAD and the Government have mainly selected provinces1 with a high proportion of ethnic minorities, which is generally consistent with poverty targeting because the incidence of poverty among ethnic minorities is well above the national average. Fortunately, with Viet Nams fast rate of growth, poverty incidence is a rapidly moving target. Once a province is selected, however, all the poor in its districts and communes are eligible to participate in the project/programme, whether or not they belong to an ethnic minority. 9. This geographic targeting has remained consistent over the years. However, the CPE raises questions about whether the four common features of the programme described in paragraph 4 are the right ones for addressing the needs of ethnic minorities. It raises the possibility that a lack of explicit focus on ethnic minorities makes it difficult to understand the links between the particular sociocultural practices of different minorities and the potential for poverty reduction. The CPE argues that a more holistic approach may be needed that might also include, for example, support for raising secondary school enrolment of youth from these communities. 10. Questions for discussion: Assuming that the IFAD-supported programme continues to target ethnic minorities to a very large extent, is the programmes content appropriate for reducing the poverty of these communities?

Poverty data have supported the three priority areas (northern uplands, north-central region and central highlands) and the Mekong Delta, where the poverty headcount is lower than in the three other regions owing to its much greater population density.

Should there be an explicit focus on ethnic minorities so as to understand better the links between the particular socio-cultural practices of different minorities and the potential for poverty reduction? If there is to be a more holistic approach to reducing the poverty of ethnic minorities, what could be the strategic synergies/complementarities to develop with Government and other partners?

Group 2: Challenges of the programmes market-oriented approach, which include engaging the private sector. 11. With a view to creating sustainable business links between small farmers and external markets, the more recent IFAD-supported projects/programmes adopt a value chain approach, i.e. selecting a few products with high potential for domestic and external markets, and concentrating investments in infrastructure, rural credit, productivity enhancement and capacity-building. Each project/programme component is designed to contribute to improved market access for the poor and to the development of value chains. In addition, some effort has been put into supporting the provincial business environment. 12. The CPE finds that the value chain approach is still relatively new and unfamiliar, and the corresponding infrastructure, services, and demand and supply links for certain value chains have not always been ready for project/programmes implementation. Along the value chains, thus far, simple local processing has added only marginal value to final products because farmers and small processors lack the formal business connections to supply them on a reliable basis and ensure the necessary quality control. Also, the CPE notes that there is very limited involvement with large or medium-sized private enterprises that could provide sustainable business opportunities for farmers and processors, and promote higher standards of quality control for local produce. Apart from contract farming, which requires farmers to provide raw produce for brewers or exporters, to date, there have been very few concrete examples of a successful value chain bringing substantial benefits to farmers. The CPE recommends that this approach be strengthened in the next COSOP. Ways and means of bringing ethnic minorities into the development process, at different stages of the value chain, will also need to be explored. 13. The CPE notes the uneven progress in implementing the components of the IFAD-supported programme relating to the development and strengthening of rural enterprises and developing links between small and micro enterprises based in the provincial capital, or larger enterprises operating on a regional or national level, and smallholder farmers, particularly those based in provinces with large ethnic minorities. The success stories thus far appear to have been mainly in the Mekong provinces such as Tra Vinh. Many supported enterprises are still at the household level, without proper quality control, basic accounting or formal business connections. A particular challenge has been to develop enterprises in ethnic minority areas, ethnic minorities being obliged to overcome problems of geographic and cultural distances to mainstream markets. 14. The CPE also finds that IFAD has never had a strategy or specific intervention for engaging the Government and national financial institutions in solving the farmers credit problems, although credit schemes have been part of the game. Neither has any project/programme come up with a solution to the unfavourable credit environment for smallholders. IFAD has contributed to a number of initiatives for funding micro-level on-farm productive activities, with the popular approach of SCGs being reasonably successful, but microfinance components have yet to reach the scale needed to support either large-scale business expansion or small enterprises. 15. Questions for discussion: How can the programme support better links between the private sector and the rural poor through activities that give smallholders the confidence to upgrade the quality and range of their products for processing and marketing by the private sector? 3

What kinds of instruments could be more effective in channeling credit to the rural poor? How should these programmes evolve in the context of the upcoming COSOP? How can IFAD and the Government reach out to the private sector through dialogue with a view to engaging them in value chains for rural poverty reduction.

Group 3: Strategies for scaling up innovations 16. While the evaluation finds that IFAD-supported projects/programmes have had a significant impact in the provinces where they are undertaken, it also raises questions about the extent to which the activities piloted through these programmes are being scaled up to other provinces and the national level in a timely and effective manner. IFAD-funded interventions have pioneered participatory processes and the devolution to the commune level of authority for allocating funds and implementation. Largely as a consequence, all loans are for area-specific projects/programmes, covering either one or two provinces, until the most recent loan in 2011 which covers three provinces. Up to now, the Government preferred IFAD to finance projects/programmes covering non-contiguous provinces with very different economic and social conditions. 17. While the focus on poor provinces, particularly the upland areas, was well founded, the failure of the COSOPs to discuss the Governments insistence on putting together, in one project, noncontiguous provinces with very different economic and social conditions is an obvious lacuna. This created problems in terms of design and implementation, including coordination, service delivery, monitoring and supervision. It also limited potential synergies. While possibly appropriate, the recent expansion of the IFAD-supported programme into a number of new provinces does not appear to reflect a clear strategic choice, and was not discussed in the 2008 COSOP. The CPE recommends that the Government and IFAD should move towards a model that combines, for example, three to five contiguous provinces as part of a single IFAD-funded operation. This would facilitate a more thematic model covering wider geographic areas and more poor people, and allow IFAD and the Government to focus the programme on issues such as forestry development in upland areas, environmental protection in coastal zones, and private-sector development in provinces with large ethnic minority populations. 18. Another potential mechanism for scaling up IFAD-supported innovations is through the programmes of the larger agencies such as World Bank and Asian Development Bank. Until now, IFAD has not partnered with either of these agencies and, as the CPE shows, its overall integration into these donors efforts in Viet Nam is limited. 19. Questions for discussion: How could a more thematic approach support a more strategic policy dialogue with the central government, increased economy of scale and potential scaling up schemes? What should be the criteria for selecting provinces for future IFAD-supported operations? How can the programme promote a more thematic approach that is common to several provinces? Is there scope for a more systematic approach to IFADs partnerships with other donors that could contribute to more effective and timely scaling up of successful models?