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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) - PowerPoint PPT Presentation
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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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by GRIPS Development Forum