ASEM Trust Fund Review Meeting Washington DC, April … · ASEM Trust Fund Review Meeting...

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ASEM Trust Fund Review Meeting Washington DC, April 18, 2005 Country Strategy Notes 34089 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

Transcript of ASEM Trust Fund Review Meeting Washington DC, April … · ASEM Trust Fund Review Meeting...

ASEM Trust Fund Review Meeting Washington DC, April 18, 2005

Country Strategy Notes

34089

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Contents

INTRODUCTION ........................................................................................................................... 6 1. Support for national development priorities ........................................................................ 6 2. Programming....................................................................................................................... 7 3. Implementation................................................................................................................... 8 4. Procurement........................................................................................................................ 9 5. Closing Date......................................................................................................................... 9 6. Closed Grants and Their Impact ......................................................................................... 9 7. Donor and Government Ownership................................................................................... 12

CHINA: COUNTRY STRATEGY NOTE..................................................................................... 13 1. Introduction....................................................................................................................... 13 2. Alignment of ASEM TF2 Country Strategy....................................................................... 13

Recent Economic Developments in China ..................................................................................13 National Development Strategy .................................................................................................13 Alignment of ASEM TF2 with National Strategy and World Bank CAS......................................14

3. ASEM TF2 Portfolio Status ............................................................................................... 14 Completed Programs.................................................................................................................15

Financial and Corporate Sector..............................................................................................15 • Developing the Government Securities Market...........................................................15 • Technical Support to the Chinese Securities Regulatory Commission...........................15

Social Sector/Protecting the Poor ...........................................................................................16 • Social Security Reform.............................................................................................16

Ongoing Programs ....................................................................................................................16 Financial and Corporate Sector..............................................................................................16

• Technical Support to the State Council Office for Restructuring the Economic System .16 • Building Capital Flow Vulnerability Analysis and Early Warning System....................17 • Enterprise Privatization, Restructuring, and Governance .............................................17 • Insolvency Reform ...................................................................................................17 • Promoting Rural Financial Market.............................................................................18 • Establishing a Professional Association of Government Financial Managers ................18 • Building Public Debt Management Capacity ..............................................................19 • Public Service Unit (PSU) Reform Study ...................................................................19

Social Sector/Protecting the Poor ...........................................................................................19 • Strengthening the Public Health Program in Rural Poverty Areas ................................19 • Labor Market Policy Development ............................................................................20 • Capacity for Regional Research and Poverty and Inequality ........................................20

4. Experience of the In-Country Steering Committee (ICSC)................................................ 20 INDONESIA: COUNTRY STRATEGY NOTE............................................................................. 22

1. Introduction....................................................................................................................... 22 2. Alignment of ASEM TF2 Country Strategy....................................................................... 22

Recent Economic Developments in Indonesia .............................................................................22 National Development Strategy .................................................................................................22 Alignment of ASEM TF2 with National Strategy and World Bank CAS......................................23

3. ASEM TF2 Portfolio Status ............................................................................................... 23 Completed programs .................................................................................................................24

Financial and Corporate Sector..............................................................................................24 Improving Fiscal Policy Analysis ......................................................................................24 Building Investor Confidence by Promoting Good Corporate Governance............................24

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Social Sector/Protecting the Poor ...........................................................................................24 Supporting Pro-Poor Policy Development in a Decentralized Indonesia ...............................24

Ongoing programs ....................................................................................................................25 Financial and Corporate Sector..............................................................................................25

• Strengthening Fiscal Policy Analysis Capacity in the Ministry of Finance ....................25 • Building Debt Management Capacity in the Government ............................................25 • Developing the Capacity of the Capital Market and Non-Bank Financial Institutions ....26 • Housing Finance Policy Reform................................................................................26

Social Sector/Protecting the Poor ...........................................................................................27 • Rural Investment Climate Survey ..............................................................................27 • Economic Benefits of Community Investment Projects ...............................................27 • Designing Effective Community Empowerment Programs ..........................................27 • Institutional Strengthening of Department of Community and Village Development .....27

Improving Governance..........................................................................................................28 • Methodology for Regional Civil Service Reform........................................................28 • Environmental Governance and Sustainable Cities Initiative........................................29

Remaining three grants .............................................................................................................29 Governance..........................................................................................................................29 Social Sector/Protecting the Poor ...........................................................................................29

4. Experience of the In-Country Steering Committee ............................................................ 29 PHILIPPINES: COUNTRY STRATEGY NOTE.......................................................................... 31

1. Introduction....................................................................................................................... 31 2. Alignment of ASEM TF2 Country Strategy....................................................................... 31

Recent Economic Developments in the Philippines .....................................................................31 National Development Strategy .................................................................................................32 Alignment of ASEM TF2 with National Strategy and World Bank CAS......................................32

3. ASEM TF2 Portfolio Status ........................................................................................... 32 Financial and Corporate Sector Reforms ................................................................................32

• Closing the Productivity Gap.....................................................................................32 • Pension Reform........................................................................................................33 • Strengthening Capacity for Bank Supervision .............................................................33

Protecting the Poor ...............................................................................................................33 • Poverty Monitoring and Analysis ...............................................................................33 • Strengthening Reforms in the Urban Shelter Programs for the Poor..............................34

Improving Governance..........................................................................................................34 • Knowledge Enhancement of Key Issues in Corporate Governance...............................34 • Strengthening Institutions for Sustainable Poverty Reduction and Good Governance ....34 • Strengthening the Implementation and Enforcement Capacity of Procurement Institutions for Sustainable Good Governance......................................................................................35 • Strengthening the Office of the Ombudsman for Good Governance .............................35

4. Experience of the In-Country Steering Committee (ICSC)................................................ 35 THAILAND: COUNTRY STRATEGY NOTE.............................................................................. 37

1. Introduction....................................................................................................................... 37 2. Alignment of ASEM TF2 Country Strategy....................................................................... 37

Recent Economic Developments in Thailand ..............................................................................37 National Development Agenda ..................................................................................................37 Country-led Partnership Framework ..........................................................................................38

3. ASEM TF2 Portfolio Status ............................................................................................... 39 Completed Programs.................................................................................................................39

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Financial and Corporate Sector..............................................................................................39 • Out-of-Court Mediation Capacity Building Project .....................................................39

Social Sector/Protecting the Poor ...........................................................................................39 • Capacity Building and Strategy for Poverty Reduction ................................................39

Ongoing Programs ....................................................................................................................40 Financial and Corporate Sector..............................................................................................40

• Strategy and Implementation for a Competitive Financial Sector .................................40 • Preparation for Financial Services Liberalization ........................................................41

Socia l Sector/Protecting the Poor ...........................................................................................41 • Strengthening Social Sector Protection for the Working Population, Poor, and Vulnerable 41 • Education Reform.....................................................................................................42 • Stimulating Voluntary Counseling and Testing Services and Early Recruitment into Antiretroviral Treatment ...................................................................................................42 • Capacity Building and Strategy for Poverty Reduction – Phase II ................................42 • Skills and Competitiveness for Poverty Reduction in the Northeast..............................43

Environment ........................................................................................................................43 • Participatory Watershed Management for Ping River Basin .........................................43

Governance..........................................................................................................................44 • Strengthening Governance and Social Service Delivery through Public Sector Reform.44

4. Experience of the In-Country Steering Committee (ICSC)................................................ 44 VIETNAM: COUNTRY STRATEGY NOTE................................................................................ 46

1. Background ....................................................................................................................... 46 2. Alignment of ASEM TF2 Country Strategy....................................................................... 46

Recent Economic Developments in Vietnam..............................................................................46 National Development Strategy .................................................................................................46 Alignment of ASEM TF2 with National Strategy and World Bank CAS......................................47

3. ASEM TF2 Portfolio Status ............................................................................................... 48 Implementation Issues...............................................................................................................48 Completed Programs.................................................................................................................48

Financial and Corporate Sector..............................................................................................48 • Banking Reform – Twinning Arrangement.................................................................48

Social Sector/Protecting the Poor ...........................................................................................49 • Social Safety Nets.....................................................................................................49

Ongoing Programs ....................................................................................................................49 Financial and Corporate Sector..............................................................................................49

• Technical Twinning Arrangement for the Implementation of the BIDV Restructuring Plan 49 • Monitoring Transformations of State-owned Enterprises.............................................50 • Banking Sector Regulation, Supervision, and Development.........................................50 • State-owned Commercial Bank Audit and Basel Core Principles Assessment...............51 • Accelerating Capital Markets Development................................................................52 • Improving Banking Sector Transparency and Reforming Policy Lending .....................52 • Mekong Housing Bank: Diagnostic Review and Preparation for Strategic Partnering/Equitization .....................................................................................................52 • Support for the Resolution of Non-performing Debt and Assets of State-owned Enterprises .......................................................................................................................53 • “Road mapping”/Master Planning to Support the Implementation of the International Economic Integration Strategy for the Banking Sector ........................................................53

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Social Sector/Protecting the Poor ...........................................................................................53 • Strengthening Community-driven Development .........................................................53 • Education Budget processes ......................................................................................54 • Support Development of Social Security Law in Vietnam ...........................................54 • Support for the Operation and Monitoring of the Socia l Safety Net for Redundant Workers (Phase 2) ............................................................................................................54 • Support for Strengthening Evidence-Based Pro-Poor Policymaking in Vietnam............55

4. Experience of the In-Country Steering Committee (ICSC)................................................ 55 Annex 1: ASEM TF2 Donors’ Contributions as of October 4, 2004

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Introduction The ASEM Asian Financial Crisis Response Trust Fund (ASEM) was established by the leaders of the Asia -Europe Meeting in 1998 to provide support to East Asian crisis-hit countries. The Asia -Europe Meeting is an informal platform for dialogue and cooperation between 15 European Union member states, the European Commission, and ten Asian countries. It provides a space for dialogue addressing political, economic, and cultural issues in the spirit of strengthening relations between the two regions. The first ASEM trust fund, ASEM TF1, supported more than 70 activities in financial and corporate restructuring and social welfare and safety nets in seven East Asian countries, and it is now closed. ASEM TF2 became operational in April 2001, with contributions from China, the European Commission, Denmark, Finland, France, Italy, Korea, the Netherlands, Sweden, and the UK (Annex 1). It maintains the focus of its predecessor on financial and corporate restructuring and on social welfare and safety nets. Grants have been made to five countries: China, Indonesia, the Philippines, Thailand, and Vietnam. This review confirms that in each of the five countries the grants are for purposes that support the expressed current national development priorities. In each country, good progress is being made, but in some the progress of disbursements is still slow, generally as the result of a number of country-specific problems. This introduction summarizes the overall trends and statistics before the country sections describe the strategic alignment and progress of the individual country programs. 1. Support for national development priorities In China, the ASEM TF2 portfolio supports the Government’s emphasis on institutional reforms to strengthen the financial and corporate sectors and the Government’s ability to monitor and manage policies in these areas. It also supports improvements in the social sectors, including the integration of labor markets, and the understanding of regional dimensions of poverty and growth. In Indonesia , the grants address challenges that are the focus of the Government’s Poverty Reduction Strategy and the World Bank’s country assistance strategy. They support efforts to improve the investment climate by building capacity for macroeconomic analysis, fiscal policy formulation, debt management, and capital market development, as well as relevant diagnostic studies. They also support efforts to strengthen service delivery to the poor, including through measures to enhance community empowerment, and to improve governance and anticorruption efforts. In the Philippines, the grants support the aims of the Government’s Medium-term Development Plan and the World Bank’s country assistance strategy; they focus on financial and corporate sector reforms designed to bolster the country’s lagging international competitiveness, on better-targeted programs for social protection and human development, and on improving governance. In Thailand, ASEM TF2 supports the Government’s national development agenda, and in particular the Country Development Partnership that Thailand has in place with the World Bank for furthering this agenda. The grants focus on improving financial and corporate competitiveness; extending social

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protection; developing human capital; and strengthening public services, environmental management, and governance. The grants to Vietnam support the Comprehensive Poverty Reduction and Growth Strategy and the Bank’s country assistance strategy, focusing particularly on corporate restructuring and banking reform to help with the transition to a market economy; on improving social policies and social protection, to promote a more equitable pattern of growth and help avoid a slowdown in poverty reduction as Vietnam integrates with the world economy; and on helping the country modernize its public administration, legal, and governance systems. 2. Programming Of the $40.4 million ASEM TF2 funds made available, $39.2 million (97 percent) have been committed, for 73 grants.1 Vietnam has received the largest share (23 percent), followed by China, Indonesia , and Thailand, each receiving 18 percent respectively; the Philippines account for 15 percent and grants for regional activities 9 percent (Figure 1). Activities in the financial/corporate sector have received 51 percent of the funds and the social sectors, 49 percent (Figure 2). Figure 1: ASEM TF2 Grant Amounts by Country (US$)

Philippines 15%

$5,723,000

Thailand 18%

$6,971,900Vietnam

23%$8,944,060

Region9%

$3,552,500China 18%

$7,013,605

Indonesia 18%

$7,029,250

Figure 2: ASEM TF2 Program by Sector (Financial vs. Social) (US$)

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Am

ou

nt

(US

$)

Financial (US$) 4,907,000 3,316,600 2,932,150 1,608,000 6,622,994 683,000

Social (US$) 2,106,605 3,712,650 2,790,850 5,363,900 2,321,066 2,869,500

China Indonesia Philippines Thailand Vietnam Region

1 The unprogrammed funds are a result of the appreciation of the euro and reflows from the first ASEM Trust Fund.

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3. Implementation Significant progress has been made since the last ASEM TF2 update (Table 1). Twelve grants totaling $4.8 million have now been completed and 60 grants totaling $33.9 million are now effective. Only one of the programmed grants is still unsigned; this is designed to help the Government of the Philippines reform its urban shelter programs, and the Bank has asked the Government to confirm its commitment to the original objectives.

Table 1: ASEM TF2 Portfolio Status, as of March 15, 2005 (US$)

Amount % Amount % Disb.

7,013,605 7,013,605 100% 3,511,489 50%

7,029,250 7,029,250 100% 1,817,393 26%

5,723,000 5,223,000 91% 672,744 12%

6,971,900 6,971,900 100% 2,278,807 33%

8,944,060 8,944,060 100% 2,859,625 32%

3,552,500 3,552,500 100% 1,677,845 47%

39,234,315 38,734,315 99% 12,817,903 33%Total

Region

Vietnam

Thailand

China

Indonesia

Philippines

CountryApproved Grant

Amount

Grant Agreement Signed Disbursement

Disbursements to date total $12.8 million, or 33 percent of the amount approved (Table 2). The progress on disbursements varies among countries. In China, the record has been quite satisfactory: disbursements already amount to half the approved grant amount of $7 million. In Thailand, Vietnam, and Indonesia disbursements amount to 33, 32, and 26 percent respectively. But in the Philippines, they are only 12 percent of the approved amount of $5.7 million. Several of the grants to the Philippines have already achieved good outcomes, however.

Table 2: ASEM TF2 Disbursement Data by Country, as of March 15, 2005 (US$)

CountryApproved

Grant AmountDisbursement % Disb. Funds Balance

Contract Balance

Available to Contract

7,013,605 3,511,489 50% 3,502,116 3,279 3,498,837

7,029,250 1,817,393 26% 5,211,857 23,255 5,188,602

5,723,000 672,744 12% 5,050,256 686,468 4,363,788

6,971,900 2,278,807 33% 4,693,093 56,776 4,636,317

8,944,060 2,859,625 32% 6,084,435 0 6,084,435

3,552,500 1,677,845 47% 1,874,655 370,032 1,504,623

39,234,315 12,817,903 33% 26,416,412 1,139,810 25,276,602Total

Region

Vietnam

Thailand

China

Indonesia

Philippines

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The most common reasons cited by the World Bank’s task teams for delays in disbursements are delays in procurement processes (including convening bids and awards committees, and sorting out issues relating to taxes and counterpart funding) , and difficulties in coordinating the work of multiple agencies with varied mandates and operating methods. After the start of implementation, delays have arisen where agencies that are traditionally responsible for oversight (e.g., central planning, finance) rather than for execution functions are unfamiliar with World Bank procedures. In Indonesia, the progress of grants in several areas was interrupted as Government agencies adjusted to changes in the country’s financial management system and a reorganization within the Ministry of Finance, and awaited the publication of approved budgets. In the Philippines, the main reason for slow disbursements seems to be delays in finalizing terms of reference, leading to delays in procurement. 4. Procurement As of March 2005, about $18.6 million have been committed (48 percent of the total approved grant amount) (Table 3).

Table 3: ASEM TF2 Procurement Activities, by Country, as of March 15, 2005 (US$)

CountryApproved Grant

AmountDisbursement as

of 3/15/05Total Amount

(Asia) Total Amount

(Europe) Total Amount (Non-ASEM)

Procurement Grant Total

7,013,605 3,511,489 3,027,922 521,997 551,352 4,101,271

7,029,250 1,817,393 2,533,408 450,244 217,254 3,200,906

5,723,000 672,744 1,772,632 301,502 420,800 2,494,934

6,971,900 2,278,807 2,548,745 232,707 153,584 2,935,036

8,944,060 2,859,625 2,473,359 1,197,542 107,130 3,778,031

3,552,500 1,677,845 1,106,074 290,590 788,586 2,185,250

39,234,315 12,817,903 13,462,140 2,994,582 2,238,706 18,695,428

33% 72% 16% 12% 48%

Total

Region

%

Vietnam

Thailand

China

Indonesia

Philippines

About 88 percent of the committed amount has been contracted to consultants (firms and individuals) from ASEM member countries. More than $13 million has gone to consultants from Asian countries and nearly $3 million to European consultants. Complexities and delays in procurement processes, noted above, are a major reason behind the low procurement rate and the slow progress being made in disbursements. 5. Closing Date Donors have agreed to extend the closing date of the ASEM TF2 program to December 31, 2006. 6. Closed Grants and Their Impact Twelve of the 73 grants under ASEM TF2 have been completed, amounting to $4.8 million (Table 4):

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Table 4: ASEM TF2: Completed Grants as of March 24, 2005

Country Exec. By TF# Project Title Task ManagerGrant

Approval Date

Closing Date

Approved Grant Amount

(US$)

Country TF029759 Developing Government Securities Market Xiaofeng Hua 04/15/01 02/29/04 310,000

Country TF050486 Technical Support to the Chinese Securities Regulatory Commission (CSRC)

Yongbeom Kim 10/25/01 10/07/04 600,000

Country TF050677 China Social Security Reform Xiaoqing Yu 04/15/01 12/31/04 777,000

Sub Total 3 closed grants 1,687,000

Bank TF050483 50,000

Country TF050484 451,000

Country TF050033 Improving Fiscal Policy Analysis (Expansion of activities funded under ASEMI TF022661)

Bert Hofman 04/15/01 03/31/04 200,000

Country TF050793 Supporting Pro-Poor Policy Development in a Decentralized Indonesia

Jehan Arulpragasam

04/15/01 11/30/03 207,500

3 closed grants 908,500

Country TF050491 Out of Court Mediation Capacity Building Project Tanatat Puttasuwan

10/25/01 03/31/04 400,000

Bank TF050488 207,000

Country TF050489 375,000

2 closed grants 982,000

Country TF050454 Banking Reform Program Miguel Navarro-Martin

10/25/01 12/31/03 694,000

Country TF050280 Support for the Operation and Monitoring of the Social Safety Net for Redundant Workers

Nga Nguyet Nguyen

10/25/01 12/31/03 342,000

2 closed grants 1,036,000

Bank TF050293 Regional ASEM Forum on Public Debt Management Sudarshan Gooptu

10/25/01 12/31/03 75,000

Bank TF050674 Corporate Dynamics and Restructuring in East Asia, 2000-10

Kathie Krumm 02/25/02 12/31/03 108,000

2 closed grants 183,000

12 closed grants 4,796,500

10/25/01 06/30/04

Sub Total

Building Investor Confidence by Promoting Good Corporate Governance Bernard Drum

Total

04/15/01 10/31/03

Sub Total

Sub Total

Capacity Building and Strategy for Poverty Reduction Kaspar Richter

China

Indonesia

Thailand

Vietnam

Sub Total

Region

• The three completed in China—for Developing the Government Securities Market, Technical

Support to the Chinese Securities Regulatory Commission (CSRC) Program, and Social Security Reform—have been helping to shape China’s ongoing economic reforms in the related policy areas, according to the recipients. The first of the m (TF029759) broadened and deepened the understanding by government ministries, the Central Bank, and the State Council of government cash management issues and policies; the findings are already helping to shape the government’s medium- and long-term strategies for cash management. The second completed grant (TF050486) was the first phase of a longer-term strategy to help China develop and implement risk management policies and practices in the securities, capital, and futures markets. The client emphasized that the grant has had an impact far in excess of its size; it has provided CSRC with internationally accepted mechanisms for risk management. Applying the experience from one of the activities under the grant, the Ministry of Labor and Social Security is now designing an electronic monitoring system for pension institutions, with World Bank assistance. The third grant (TF050677) supported a component of China’s national pilot of social security reform. The experience has helped to clarify thinking and the pilot program has now been expanded to two other provinces in Northeast China, with some modifications in their implementation plans.

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• Of Indonesia’s three completed grants, one supported the promotion of good corporate governance, one assisted the Government to improve its fiscal policy analysis , and one supported pro-poor policy development. The first grant, with Government- and Bank-executed components (TF050483 and TF050484), strengthened corporate governa nce practices among regulators and corporations in Indonesia; and made an important contribution to corporate governance reform. The second grant (TF050033) extended the activities under an earlier completed grant (TF022661), to strengthen the capacity of the Ministry of Finance for fiscal policy analysis. It supported the dialogue of the World Bank and IMF with the Government on fiscal policies and debt management. Its goals were achieved ahead of schedule and at lower costs than planned. The third grant (TF050793) succeeded in mobilizing a participatory approach to understanding poverty in local settings and stimulating the development of local solutions. It led to the development of poverty action plans in the ten communities immediately involved, but at the time the grant closed they had not been generalized as planned to the development of district and national level poverty reduction strategies and policies.

• Of Thailand’s two completed grants, one (TF050491) has built capacity for out-of-court mediation, helping to speed up the resolution of financial disputes and make the economy more competitive. The other—with components executed by the Government and by the Bank (TF050489 and TF050488)—has strengthened Thailand’s poverty reduction strategy through the completion of empirical studies on poverty; assistance to communities to undertake their own planning for poverty reduction; a pilot study of the capacity of communities to deliver their own social safety nets, and construction of a poverty database.

• In Vietnam, two completed grants have supported the first phase of a project on banking reform and the implementation of a social safety net fund to support workers displaced by the reform of state enterprises. The first (TF050454) has helped to restructure and reorganize the Bank for Investment and Development of Vietnam, strengthening the Bank’s financial and corporate governance structure. The project contributed to the implementation of the World Bank Poverty Reduction Support Credit, which was the key structural adjustment operation in the World Bank’s 2003-06 country assistance strategy for Vietnam. To support further implementation of the recommendations, a twinning arrangement with a reputable international bank is being supported by a new grant (TF053365). The second completed grant to Vietnam (TF050280) was crucial to the design and implementation of the Social Safety Net Fund and to the implementation of the World Bank Poverty Reduction Support Credit. It was highly appreciated by the Government and indeed the Fund has come to be considered as international best practice. A new grant (TF053229) is following up on these successful activities.

• Two regional grants have also been completed. The first of these (TF050293) supported the third annual Regiona l ASEM Forum on Public Debt Management—a successful meeting attended by 32 managers of sovereign debt from 14 countries, focusing on developing markets for domestic government debt. Over the long run the exchange of views, analyses, and experiences should foster better management of public finances and better macroeconomic management. The second grant (TF050674) supported a study of Corporate Dynamics and Restructuring in East Asia. Only half of this grant was used—largely because a six-month delay in obtaining country signatures for release of the funds , compounded by the SARS outbreak and the sudden shift in US immigration policy, meant that some components could not be planned in timely fashion and were therefore cancelled. However, the grant did fulfill its goals of undertaking an in-depth analysis of corporate and economic restructuring in China and building the research capacity of China’s National Bureau of Statistics.

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7. Donor and Government Ownership To ensure a high degree of national ownership and active coordination and involvement by the donor community, the ASEM TF2 governance structure in each grant-recipient country includes an in-country steering committee, comprising representatives from the Government, the donors, and the World Bank country office, which acts as the secretariat for the committee. Through regular meetings, these committees prepare annual ASEM country strategies and endorse and prioritize proposals for new activities, ensuring consistency with existing recipient/donor prior ities. After a slow start, most of the ICSCs have been functioning well. The committees in China and Thailand, in particular, have been playing active roles in monitoring implementation and making recommendations to government. In Vietnam, the Committee has strengthened its involvement in monitoring and implementation issues and its role in information sharing among government agencies, the World Bank, the European Commission, and other ASEM donors. These steps have helped to consolidate cooperation among the ASEM partners and to enhance awareness in Vietnam of the ASEM process. The Committee’s active monitoring of grant progress is not yet reflected in the disbursement figures; this is because most of the grants to Vietnam entail very large contracts that require long and tedious procurement processes. Once work starts on these grants, however, the disbursement rate can be expected to jump. In the Philippines, the Committee has advocated for greater Government involvement in designing and preparing grant proposals, with a view to strengthening country ownership and recipient execution of the grants; with these new arrangements, the Government is now implementing two-thirds of the grants. The Philippines Committee has also taken steps to increase the public visibility of the grants. The disbursement rate remains a challenge, however; it seems likely that with more frequent meetings to monitor and discuss progress, the Committee would have a beneficial impact on the disbursement rate. In Indonesia, the Committee has not met since July 2004, when it reviewed and approved the final batch of proposals.

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China: Country Strategy Note 1. Introduction ASEM TF2 has funded 14 programs in China totaling more than US$7 million. Significant progress has been made since the last ASEM TF2 update on March 2004, and the total funds disbursed to date amount to $3.5 million, or 50 percent of the approved grant amount. Activities under three grants—two in the financial and corporate sector and one in the soc ial sector—have been completed on time and with great success: Developing the Government Securities Market (TF029759) , Technical Support to the Chinese Securities Regulatory Commission (TF050486) , and Social Security Reform (TF050677). According to the recipients, some of the findings and policy recommendations resulting from these grants are being put into effect under China’s ongoing economic reforms in the related policy areas. 2. Alignment of ASEM TF2 Country Strategy Recent Economic Developments in China China’s economy finished the year 2004 on a strong note, with a gain of 9.5 percent in GDP against 9.3 percent in 2003. Monetary policy and administrative measures to slow the economy, taken over the course of 2004, are starting to show results. A pick up in the growth of private consumption, buoyed by solid growth in household incomes, has partly offset a slowdown in investment. Rural household incomes have risen particularly robustly, supported by higher agricultural output, a hefty grain price increase, and a reduction in net agricultural taxes. National Development Strategy The macroeconomic outlook for 2005 is favorable, with a supportive external environment, prospects of robust growth in domestic demand, and waning underlying inflation pressures. In these circumstances, policymakers are putting greater emphasis on institutional and structural reforms :2 • Continuing rural reforms: The Government sees the need to continue the reform of rural taxes

and administrative charges, particularly to lessen the financial burdens on farmers. The Government will also concentrate on reforming governmenta l institutions at the township level, the rural compulsory education system, and the financial management system for counties and townships. It will deepen the reform of the grain distribution system, of rural finance, and the rural land management system.

• Further reform of state-owned enterprises: The focus is on strengthening large enterprises that

are able to become internationally competitive , and on deepening reforms in public utilities, transport, and communications. The Government will also standardize the procedure for transforming SOEs and state equity so as to prevent the erosion of state assets and protect the legitimate rights and interests of employees.

2 The following summary is based on Premier Wen Jiabao’s “Report on the Work of the Government” delivered at the third session of the Tenth National People’s Congress on March 5, 2005.

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• Support of the non-public sector: The Government will create a legal, policy, and market environment to ensure fair competition for all non-public enterprises. More industries and sectors will be opened up to non-public capital and access of non-public enterprises to finance will be widened. Greater protection of private property will be emphasized.

• Reform of financial system: To accelerate the reform of the state-owned commercial banks , the

Government will spearhead a pilot program to turn them into stock companies. Another priority is to strengthen the infrastructure of the capital market, putting in place sound regulations to protect the legitimate rights and interests of private investors. Interest rates will be further deregulated. The system of financial oversight will be improved.

• Reform of fiscal and investment system: The Government aims to strengthen the public finance

system and improve on the system of transfer payments from central government. Reform of the value added tax will be carried out on a trial basis in selected areas before full implementation at the national level.

• Conservation and rational use of energy, water, and other resources: The Government will draw

up standards and targets for reducing energy and resource consumption in every industry; encourage the development of energy efficient, environmentally friendly automobile s, and of housing and public buildings that use less energy and land; and energetically develop the recycling sector of the economy.

• Promotion of balanced development among different regions: Measures designed to promote

social and political stability include strengthening infrastructural development, ecological conservation funding, fiscal incentives, deployment of industries, development of human resources, and the strengthening the social security system.

Alignment of ASEM TF2 with National Strategy and World Bank CAS The ASEM TF2 portfolio has been in line both with the Chinese Government’s priorities and with the emphasis of the World Bank’s country assistance strategy for China. In particular, the focus on poverty (TF054557), public health in rural poverty areas (TF052649), and the rural financial market (TF053170) are in line with the Government’s concerns on rural reform, balanced regional growth, and addressing rural-urban disparities. Grants to support enterprise privatization (TF052842) and insolvency reform (TF053169) focus on SOE reform and the development of the non-public sector. Capital flow vulnerability analysis (TF052832) and technical support to state council (TF050381) emphasize reform in the financial sector. The latest update of the World Bank’s country assistance strategy supports the Government’s priorities in rural reform, corporate and financial sector restructuring, balanced regiona l growth, and sustainable development. 3. ASEM TF2 Portfolio Status Below are the details of the 14 completed and ongoing programs supported by ASEM TF2. China has seven programs under implementation in support of financial and corporate sector reform, and four in progress in the social sectors—to strengthen units providing public services, develop better policy in the labor market, strengthen rural public health programs , and build the capacity for measuring and understanding poverty. Basic information on the grants is in Table 5.

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Completed Programs Financial and Corporate Sector • Developing the Government Securities Market (TF029759, closed February 2004)

Objectives: To assist the Ministry of Finance to develop a conceptual framework and implement strategies for active cash management, and to test the feasibility of a treasury bills program for fostering the development of a government securities market. Outcomes: All project activities have been completed in accordance with the grant agreement. As a result, a much broader audience—including the Ministry of Finance, the Central Bank, and line ministries along with decision makers in the State Council—understands not only the issues in government cash manage ment but also the cash management policies/approaches in place in other countries. A product of the grant, a report on Government Cash Management produced by international consultants, has been well received, and shared with key functional agencies inside the Government. The client is particularly pleased with the technological know-how that the grant provided in the design of a consistent receipts/payments system, cash flow projection, and enhancement of the use of idle balances. The grant’s findings are already helping to shape the Government’s medium- and long-term strategies for cash management.

• Technical Support to the Chinese Securities Regulatory Commission (TF050486, closed October 2004) Objectives: This grant was the first phase of a longer-term strategy to help China develop and implement risk management policies and practices in the securities, capital, and futures markets. Its main goals were to: (1) develop a regulatory framework for the securities and futures markets; (2) build institutional capacity of the regulatory agency; (3) improve risk control mechanisms in clearing and settlement systems; and (4) design a financial reporting mechanism for adequate monitoring of market operations. Outcomes: All activities stated in the grant agreement have been completed. During the recent Bank-administrated Trust Fund Portfolio review in China, the client emphasized that the grant has had an impact far in excess of its size ($600,000). The grant has provided CSRC with internationally accepted mechanisms for risk management, including assessment of the securities market and reporting tools to track and clarify the net capital futures portfolio, and better institutional capacity. The financial reporting system began operation early in 2005. The grant financed workshops and study tours not only for CSRC officials but also for representatives from self-regulatory organizations and futures firms ; this was an effective way to maximize knowledge exchange. The client attributes the success of the grant to four factors: (1) commonly understood goals by all stakeholders—as a result, sufficient counterpart funds and local expertise resources have always been ready whenever needed and thus client ownership of the outputs is strong; (2) the appropriate positioning of grant activities in achieving these goals; (3) timely effectiveness of the grant; and (4) strong team work and communication between the implementation agency and the Bank’s task team. Follow-up activities: Applying the experience from one of the activities under the grant—the design of an electronic financial and monitoring system for supervisors—the Ministry of Labor

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and Social Security is now designing an electronic monitoring system for pension institutions, with World Bank assistance. Key recommendations of the diagnostic report on the securities market will be implemented through a grant of $367,000 from the IMF’s Financial Reform and Strengthening Initiative (FIRST).

Social Sector/Protecting the Poor • Social Security Reform (TF050677, closed December 2004)

Objectives: To support a component of China’s national pilot of social security reform, which has received substantial fiscal support from central and local government. The grant provided (1) expert analysis of social security policies and program administration, using the Government’s chosen pilot province, Liaoning, to test a national policy; and (2) capacity building for key staff in social security policymaking and management. Outcomes: All activities have been completed as planned and on time, and the fund will be fully disbursed within the grace period. Studies covered a wide range of topics in the areas of pensions, labor market, and unemployment benefit and support, as well as urban social safety nets. They contain rich information for understanding many operational details and program-specific information for the Liaoning social security system. Overseas study tours broadened the views of local officers. Training in information technology enhanced the skills of officials at various levels to ensure the smooth implementation of the IT system established in the pilot. While views still differ about the social security policy nationwide, the Liaoning experiment has helped to clarify thinking. Follow-up activities: The pilot program has now been expanded to Heilongjiang and Jilin, two other provinces in Northeast China , with some modifications in their implementation plans.

Ongoing Programs Financial and Corporate Sector • Technical Support to the State Council Office for Restructuring the Economic System

(SCORES) (TF050381, effective February 2002) Objectives: To help the Chinese Government to develop and implement policies and strategies for financial sector reform. The grant provides technical assistance for formulating a comprehensive strategic framework for financial sector reform that takes into account the interrelated nature of problems faced and the interdependency of potential solutions. Progress to date: A seminar on financial stability organized by the State Council’s Development Research Center (DRC) and the World Bank raised the awareness of relevant government leaders of critical vulnerabilities in China’s financial sector , and of the means for building an effective financial stability function. A policy workshop has been delivered on the mitigation of systemic risks. Policy notes summarizing the analyses and recommendations from the two workshops have been delivered to the authorities. On rural financial sector reform, the leadership of the People’s Bank of China has accepted the principle of commercial sustainability and fully endorsed the concept that for rural finance to take hold, rural financial institutions must be free to set lending

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profitable and sustainable rates. This understanding contribute d to the recent adjustment of deposit and lending rates for the Chinese yuan. As a follow-up to the workshops financed by the grant, a senior Chinese delegation will visit Brazil, Chile, and Argentina in the first half of 2005 to study first-hand the policies and practices used by those countries’ authorities to assess and manage systemic risks and to ensure financial stability. When the original beneficiary of the grant, SCORES, was dissolved in the Government’s streamlining endeavor of March 2003, the grant was transferred to the DRC. Government restructuring also affected the implementation of activities under the grant, and the original closing date has been extended by a year to January 2006.

• Building Capital Flow Vulnerability Analysis and Early Warning System (TF052832,

effective October 2003) Objectives: To develop a system for vulnerability analysis and early warning that will help improve the balance of payments management capability of the State Administration of Foreign Exchange (SAFE). This will help the Government to reduce China’s vulnerability to external shocks, better manage short-term capital flows, and improve market perceptions of foreign-exchange-related and sovereign risks in China. Progress to date: SAFE’s capacity for risk management is being enhanced with workshops and study tours. A March 2004 workshop on capital flows vulnerability analysis provide d direction for future implementation of the grant activity. The workshop proceedings have been translated and made available to key government agencies including MOF, NDRC, and the central banks. In July 2004 SAFE staff visited South Korea and Brazil to acquire knowledge on monitoring of high-frequency capital flows and on surveying market expectations. In December 2004 an IMF expert visited Beijing to help SAFE with the monitoring of high-frequency capital flows.

• Enterprise Privatization, Restructuring, and Governance (TF052842, effective September

2003) Objectives: To help the Development Research Center advise other government agencies on the governance, privatization, and restructuring of state-owned enterprises (SOEs). Progress to date: After a somewhat slow start, the project is now making satisfactory progress on studies of SOE privatization and restructuring, corporate governance, performance monitoring, and financial management. Based on inception reports and preliminary deliverables, the output seems likely to enable the counterpart to render sound professional advice to the state shareholder on key issues now affecting SOEs.

• Insolvency Reform (TF053169, effective February 2004)

Objectives: To help the Finance and Economic Committee of the National People’s Congress (NPC) to develop case studies on the effect of a draft insolvency law on SOEs. This law has been in draft form since 1996; it is currently expected to be passed in April 2005. The NPC seeks international and domestic perspectives on eligibility for an insolvency filing, commencement criteria, role of the trustee, and treatment of worker claims.

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Progress to date: Local consultants have produced an excellent report covering insolvency reform issues of key concern to NPC, including insolvency administrators, treatment of SOEs, priority of claims, and commencement criteria. A draft version of the ir report was presented at a national workshop in December 2004 and finalized thereafter.

• Promoting Rural Financial Market (TF053170, effective February 2004)

Objectives: To help China strengthen its reform efforts in rural finance and to build the capacity of the government—including the People’s Bank of China and the Banking Regulation Commission—and selected rural finance institutions for establishing a more robust rural financial system. The grant will assist in analyzing the demand for and supply of rural finance; identifying the optimal corporate governance of rural finance institutions and an appropriate regulatory framework; and sharing knowledge and best practices for the purpose of capacity building. Progress to date: Implementation started in April 2004 with the establishment of a Steering Committee and an Advisory Committee, and to provide comments on terms of reference and work plans for household survey and case studies. However, no substantial activity has been undertaken to date. The subject matter of the research is sensitive and there are differences of opinion between the World Bank task team and the recipient’s executing agency as to the selection of consultants and implementation timetable . It appears that the continuation and final success of the grant activities will depend on strict adherence to the Bank’s procurement rules and procedures as well as the trust fund agreement. Communication is underway with the client on these issues, which have been brought to the attention of the In-Country Steering Committee and the China Country Management Unit for higher level coordination among stakeholders in the near future.

• Establishing a Professional Association of Government Financial Managers (TF053384,

effective April 2004) Objectives: To establish a Professional Association of Government Financial Managers. The Association will serve government accountability professionals by providing quality education, fostering professional development and certification, and supporting standards and research to advance government accountability. This will be the sister association with the China Institute of Certified Public Accountants. Technical assistance financed by the grant provides for: (1) establishing initial bylaws and operating procedures for the Association’s governance structure; (2) establishing an implementation committee providing advisory services; (3) supporting the development of a journal of government financial management; (4) providing leadership training; and (5) institutional support. Progress to date: The grant agreement was signed in April 2004 and implementation has been progressing well since then. An implementation committee has been established to provide advisory services, draft bylaws have been developed, and, after a three-day workshop, the framework for the journal of financial management has been developed.

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• Building Public Debt Management Capacity (TF051293, effective January 2003) Objectives: To help the client develop an integrated system for reporting and managing public debt transactions, with analytical tools to improve the public debt management functions of the Ministry of Finance. Progress to date: After prolonged negotiations for the procurement of software and associated consulting services, the Ministry signed a pre-assessment contract with the software vendor in October 2004. First phase installation will be done in the near future, mainly covering external government debt transactions. Finalizing data import and sharing arrangements between different departments of MOF and the State Agency for Foreign Exchange will be critical to the eventual achievement of the grant activities.

• Public Service Unit (PSU) Reform Study (TF052334, effective August 2003) Objectives: To assist the Government in developing a strategy and guidelines for public service unit reform, building on a wide range of international experience. Progress to date: Implementation has been going well. Consultants are producing a series of 12 diagnosis reports in selected sectors; those on the health, personnel, scientific and research sectors, and state commercial banks are ready for dissemination. A comparative study of international experiences in public service reform has been published for a wide audience. Government officials have undertaken a study tour to Finland, the Netherlands, and the UK to acquire knowledge on public service units. Grant-funded activities have made a major contribution to the policy discussion of a PSU reform strategy among relevant ministries and stakeholders, and have raised public awareness of the urgency and complication of the reform. A draft outline of the reform strategy has been submitted to the State Council for discussion. Given the complexity of some planned activities and grant savings, the task team is processing an extension of the closing date.

Social Sector/Protecting the Poor • Strengthening the Public Health Program in Rural Poverty Areas (TF052649, effective

September 2003) Objectives: To improve health status in China’s poorest areas by improving access to and quality of health services and rationalizing the institutional structure of local health services. Progress to date: Implementation is progressing well. A launch workshop was held in December 2004 in which national, provincial, and international participants reviewed the terms of reference for grant activities and implementation planning. Consultants have been selected to undertake three interrelated studies in two provinces, entailing (1) situation and needs assessment; (2) institutional and resource assessment; and (3) service utilization analysis and health promotion. Research work has started and field work is being carried out. Pilot testing and field investigations have been completed in both Gansu and Guizhou provinces; the data are now being analyzed prior to drafting a report.

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• Labor Market Policy Development (TF052902, effective November 2003) Objectives: To help the Government build its capacity for policymaking and evaluation for sustainable reform in the labor market, including the integration of the national labor market. The labor market analysis and policy development component will establish an overall policy framework based on analysis of labor market trends, and produce detailed recommendations in focused areas. The capacity building component will (1) develop concrete operational models for policy analysis and monitoring and data management, and (2) conduct a series of training courses and seminars to improve policymakers’ knowledge on unemployment, labor misallocation, and other related areas. Progress to date: In 2004, the terms of reference for major studies were finalized, most consultant services were committed, and a technical discussion was held on the outlines and methodology of the studie s. The implementing agencies are now preparing proposals for the improving the labor force survey database and policy tools for projecting unemployment and active labor market programs. A workshop provided labor market training to officials from local development and reform commissions and from labor and soc ial securities bureaus. Most of the research outputs are expected by late spring or early summer of 2005.

• Capacity for Regional Research and Poverty and Inequality (TF054557, effective March

2005) Objectives: To strengthen the economic research capacity of the Development Research Center (DRC) of the State Council to deliver a new generation of empirical tools for policy research, focusing on data and techniques that can advance the understanding of poverty and growth composition in a regional context. The grant was made effective in March 2005, nine months after the proposal was approved by the ASEM In-Country Steering Committee. The delay is partly due to internal processing at the World Bank.

4. Experience of the In-Country Steering Committee (ICSC) China’s ICSC includes representatives of the Government, the European Commission, and the World Bank’s Country Office. After two years of operational and learning experience, the good personal relationships that have developed among the committee members, as well as the effective secretariat support within the Bank, have helped to cut down bureaucratic work and have greatly facilitated the efficient management of the work of the ICSC. Partly because of the tight travel schedules of committee members, the ICSC has handled most of its activities, reports, and discussion virtually, circulating progress reports electronically and commenting on them via email. In the coming year, the Committee will continue to focus on the implementation and monitoring of approved activities.

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Table 5: China: Status of ASEM TF2 Grants (US$)

TF No. Status TF Program NameEffective

DateTask Manager

Grant Amount

Disbursement%

Disb.Closing

Date

TF029759 C Developing Government Securities Market 07/12/01 Xiaofeng Hua 310,000 301,257 97% 02/29/04

TF050486 C Technical Support to the Chinese Securities Regulatory Commission (CSRC)

05/29/02 Yongbeom Kim 600,000 571,868 95% 10/07/04

TF050677 C China Social Security Reform 07/11/2002 Xiaoqing Yu 777,000 684,757 88% 12/31/04

TF050381 A Technical Support for the State Council Office for Reform of the Economic System(SCORES)

02/06/02 Jun Wang 400,000 342,370 86% 12/31/05

TF052832 A Building Capital Flow Vulnerability Analysis and Early Warning System in China

11/11/03 Min Zhao 547,000 146,480 27% 08/31/05

TF052842 A Enterprise Privatization, Restructuring and Governance

11/06/03 William Mako 650,000 383,713 59% 08/31/05

TF053169 A Insolvency Reform 02/13/04 William Mako 300,000 65,490 22% 08/31/05

TF053170 A Promoting Rural Financial (RF) Markets 02/12/04 Jun Wang 700,000 70,000 10% 08/31/05

TF053384 A Establishing a Professional Association of Government Financial Managers

04/20/04 Nancy Chen 300,000 123,750 41% 08/31/05

TF051293 A Building the Public Debt Recording, Monitoring and Analyzing System in China

01/28/03 Sudarshan Gooptu

500,000 105,859 21% 08/31/05

TF052334 A Study on Public Service Unit Reform 09/05/03 Chunlin Zhang 600,000 344,784 57% 10/31/05

TF052649 A Strengthening Public Health Programs in Rural Poverty Areas

09/12/03 L. Richard Meyers

564,000 303,305 54% 08/31/05

TF052902 A Labor Market Policy Development: Addressing Unemployment and Developing Human Resources for the Future

12/04/03 Xiaoqing Yu 450,000 67,856 15% 07/31/05

TF054557 P Capacity for Regional Research on Poverty and Inequality

03/01/05 Dominique van der Mensbrugghe

315,605 0 0% 04/30/06

Total 7,013,605 3,511,489 50%

COMPLETED

Financial and Corporate Sector

Social Sector/Protecting the Poor

UNDER IMPLEMENTATION

Financial and Corporate Sector

Social Sector/Protecting the Poor

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Indonesia: Country Strategy Note 1. Introduction In Indonesia , ASEM TF2 supports a range of activities that address critical constraints on development. The grants are designed to help improve the investment climate, ensure that service delivery is responsive to the needs of the poor , and improve governance. Sixteen grants have been approved to the combined value of US$7 million (Table 6). They provide technical assistance to government agencies for improving fiscal policy analysis and macroeconomic monitoring, strengthening debt management capacity, improving service delivery to the poor by empowering communities, and promoting good governance by developing methods for civil service reform and supporting the Ministry of Environment. Three grants have been completed: two in the financial/corporate sector (TF050033 and TF050483) and one to support pro-poor developme nt (TF050793). 2. Alignment of ASEM TF2 Country Strategy Recent Economic Developments in Indonesia The past year brought both triumph and tragedy for Indonesia. A series of direct elections marked another step in Indonesia’s journey towards genuine democracy. The economic crisis that had set back development for six years was finally closed with a highly successful transition from the IMF program. Economic growth picked up to around 5 percent for the year, and business confidence and investment demand rose sharply. Most important, poverty rates declined to below pre-crisis levels. Sadly, 2004 will also be remembered for the tragic earthquake and tsunami that claimed about 200,000 lives and left more than 400,000 homeless. Problems persist. Overall investment remains at only around 20 percent of GDP, well below pre-crisis levels of around 30 percent. Partly responsible for the slow pick-up have been a number of high-profile investment disputes and governance problems, especially in the banking system, wit h new scandals in 2004. Although exports are climbing, Indonesian export growth is low by regional standards and, Indonesia’s share in the important Chinese market has fallen. Poverty has fallen, as the result of economic growth and lower inflation (the poverty headcount index was 15 percent in 2003), and income poverty continues to decline, but Indonesia continues to under-perform relative to its neighbors in access to quality health, education, and other basic services. Employment growth has been discouraging, adding to pressures on real wages; the open unemployment rate reached 9.5 percent in 2003. Continued advances against poverty are constrained by the still-unfavorable investment climate and weak provision of services, which in turn are caused by problems of governance. National Development Strategy The economy is now entering a cyclical upturn. The improved economic outlook presents new opportunities to deepen reforms and extend the economic recovery. The new Government recognizes that without fundamental reforms in the investment climate, urgent attention to infrastructure, and improvements in governance, current economic performance will not deliver the sustained, quality growth that Indonesia requires. Accordingly, the Government of Indonesia’s priorities include

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reducing the debt burden, improving expenditure allocation including poorly targeted subsidies, creating a more business friendly tax system, establishment of a financial sector safety net, development of strategy to strengthen non-bank financial institutions, development of a medium-term plan for infrastructure development that encourages- public-private partnerships, development of an effective framework to support the development of small to medium enterprises, reform of the attorney general’s office, accelerated prosecution of corruption cases, strengthening the capacity of the Anti-Corruption Commission and Anti-Corruption Court and strengthening law enforcement in relation to illegal logging. Alignment of ASEM TF2 with National Strategy and World Bank CAS The World Bank’s CAS is designed to be consistent with the Government’s poverty reduction strategy paper3 and to support the Government’s associated economic policy package. Thus the Bank’s CAS focuses on three core issues: • Improving the climate for high quality investment; • Making service delivery responsive to the needs of the poor; • Improving governance. The strategy of ASEM TF2 is aligned with the Bank’s CAS. The grants focus on medium-term development challenges. They support efforts to improve the investment climate through capacity building for macroeconomic analysis, fiscal policy formulation, debt management; and capital market development as well as supporting diagnostic measures such as mapping of the rural investment climate. They also support efforts to strengthen service delivery to the poor , for example through measures to enhance community empowerment and to improve governance and anticorruption efforts. 3. ASEM TF2 Portfolio Status Indonesia’s three completed and thirteen ongoing grants are described in what follows. Basic information on the grants is in Table 6. Ten of the ongoing grants are progressing well, despite the fact that progress in several areas has been interrupted by a delay in the publication of approved budgets. The delay arose from revisions to Indonesia’s financial management system in 2004 (which, among other things, will allow the Government to report according to the IMF’s Government Finance Statistics system) and a reorganization within the Ministry of Finance. In addition, line ministries were slow in submitting provisional budgets during budget formulation. The achievements of the ten grants may be greater than the disbursement record shows. Three of the 13 ongoing grants have made no significant progress, however; two of them have had their closing dates extended and the third is likely to require extension.

3 This has now been finalized but is awaiting Cabinet approval.

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Completed programs Financial and Corporate Sector • Improving Fiscal Policy Analysis (TF050033, closed March 2004)

Objectives: This grant funded an expansion of activities funded under ASEM TF022661, to further strengthen the capacity of the Ministry of Finance for fiscal policy analysis. It financed the model built under the first grant and trained a set of core users. Outcomes: Implementation went smoothly and the goals were achieved ahead of schedule and at lower costs than planned. The work supported the dialogue of the World Bank and IMF with the Government on fiscal policies and debt ma nagement. The model and the fiscal policy analysis group became well accepted within the Ministry of Finance.

• Building Investor Confidence by Promoting Good Corporate Governance (TF050483 and TF050484, closed June 2004)

Objectives: To raise awareness of the need for good corporate governance and to strengthen corporate governance practices among regulators and corporations in Indonesia. Technical assistance was provided to five agencies: the Jakarta Stock Exchange (JSX) , the Capital Markets Supervisory Agency (BAPEPAM), the National Committee for Corporate Governance, the Indonesian Institute of Corporate Directorship (IICD), and the Jakarta Initiative Task Force. The technical assistance complemented other activities of the World Bank such as an assessment of corporate governance (Report on Observance on Standards and Codes) and a review of the securities industry. Outcomes: The objectives were successfully achieved in each of the five agencies, on time and at slightly lower costs than planned. The grant has made an important contribution to corporate governance reform, in particular through JSX, BAPEPAM, and IICD. At the time the grant closed, the Jakarta Stock Exchange was preparing to implement its demutualization strategy (which is an output from the grant), the Jakarta Initiative Task Force had begun building a new local capacity for mediation, and the Institute of Corporate Directors had launched classes with almost one 100 participants in total, and trained dozens of new trainers. BAPEPAM’s capacity for surveillance has been enhanced with several internal training sessions. IICD’s training materials have been substantially upgraded as a result of the grant assistance. The National Committee has updated the Code of Good Corporate Governance and benefited from several grant-financed roundtable discussions with experts and a broader audience. In addition, JSX has made several improvements to its listing and reporting regulations as a result of the technical assistance.

Social Sector/Protecting the Poor • Supporting Pro-Poor Policy Development in a Decentralized Indonesia (TF050793, closed

November 2003)

Objectives: To help build the capacity of the Ministry for People’s Welfare for understanding poverty in Indonesia and developing a strategy to reduce it, including the definition of the role of

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national policies in a decentralized government and the establishment of policy and program priorities. Poverty reduction was a primary goal of national development policy, and implementation of the grant began not long after the government had embarked on a “big bang” decentralization, which transferred a large part of decision making and spending authority to the regional district level governments. The view was that poverty solutions must be developed by the poor themselves at the community level. Outcomes: The grant supported quantitative and qualitative analysis of poverty in five provinces and among ten different types of communities (e.g. plantation, coastal, forest, urban). Using the results of the studie s, community-level workshops were organized with a broad range of stakeholders, focused on understanding causes of poverty and ways to reduce it. The grant also supported the participation of NGO representatives and others in a training workshop on poverty alleviation and community development. The grant succeeded in mobilizing a participatory approach to understanding poverty in local settings and stimulating the development of local solutions. It enhanced the skills and capacity of those who took part in the workshops and training. The grant activities led to the development of poverty action plans in the ten communities immediately involved, but at the time the grant closed they had not been applied to the development of district and national poverty reduction strategies and policies. The findings from this work are highly relevant to district and national poverty reduction strategies as well as to decentralization policy.

Ongoing programs Financial and Corporate Sector • Strengthening Fiscal Policy Analysis Capacity in the Ministry of Finance (TF053895,

effective April 2004) Objectives: To (1) expand and refine the macroeconomic model of the Ministry of Finance of Indonesia as developed under previous ASEM grants; (2) disseminate the model with the aim of getting the academic community and others to adopt and expand it; (3) help MOF staff operate, maintain, and further develop the model by formal training and internships with fiscal authorities in ASEM and/or European countries. Progress to date: Some of the grant activities are making good progress. Development of the Ministry’s Macro Model (MODFI) is progressing well; currently, MODFI Version 17 is available, though some improvements are required, and MODFI Version 18 is under development, to include new GDP and budget figures. The implementing agency is considering creating nine sectora l models. No progress has been made yet in the outreach, training, and internship components, partly because of delays in payments to the consultant following the change in Indonesia’s budget procedures mentioned above. However, the internal instructions are planned to be issued soon, after which the consultant’s payments will be made.

• Building Debt Management Capacity in the Government

(TF050268, effective February 2002) Objectives: To strengthen the ability of the Government of Indonesia to manage its public debt according to international sound practices. The grant supports advisory services to improve the

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understanding of debt and risk management principles and practices; the selection, customization, and implementation of a risk management model for public debt management; and the dissemination of sound practices in sovereign debt management from other ASEM member countries. Progress to date: The Government’s debt managers now have better access to comprehensive debt data for the ir day-to-day operations. Debt stock data are available on a loan-by-loan basis covering all government external and domestic debt. However, there is still some overlap in the coverage of the different debt data management systems used by the Ministry of Finance and the Bank of Indonesia. A significant amount of the grant resources remains untapped since the Government has been using its own and other grant resources (e.g. from AUSAID) to support its debt management capacity building program. The subcomponents of the ASEM grant that are related to risk management and software design and acquisition have not yet been initiated, pending full integration of the public debt data and the installation of appropriate legal frameworks. Meanwhile, on December 23, 2004, the Bank was informed that the Minister of Finance, H. E. Yusuf Anwar, has signed a decree confirming the Government’s participation in the World Bank’s Debt Reform and Program Capacity Building Program; since the ASEM grant objectives and activities relate closely with that program, the grant could be used by that program.

• Developing the Capacity of the Capital Market and Non-Bank Financial Institutions

(TF053347, effective March 2004) Objectives: To encourage the diversification of Indonesia’s financial sector by strengthening the regulators of the capital market (Capital Market Supervisory Agency, Jakarta Stock Exchange) and non-bank financial institutions (Directorate of Pension Funds, Directorate of Banking and other Financing Services) through promotion of international standards and best practices. Progress to date: Grant implementation was delayed until December 2004 by changes in the Government’s method for internal project processing, though regular progress monitoring meetings were held between the Bank and each of the five recipient agencies. A procurement specialist has now been hired by the Government to assist the project manager and disbursement is expected to take place starting in April 2005. The recipient agencies have completed terms of reference for international consultants, topics of conferences have been discussed, and training programs are being finalized in some cases.

• Housing Finance Policy Reform (TF052962, effective November 2003)

Objectives: To assist Indonesia in improving its housing policy development and implementation and housing sector institutions through (1) advisory support to the inter-ministry committee on housing policy and finance; (2) development of an operating strategy to institutionalize national housing funds; and (3) in-house training and seminars on housing finance for bankers and market participants. Progress to date: An inception report and a preliminary findings (interim) report have been produced.

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Social Sector/Protecting the Poor • Rural Investment Climate Survey (TF053367, effective March 2004)

Objectives: To help improve the rural investment climate and guide the Government toward sustainable poverty reduction initiatives by (1) undertaking a survey of the rural investment climate in 20-40 districts; (2) undertaking workshops to review and disseminate results and to engage local governments in pro-poor policy formulation. Progress to date: Terms of reference for conducting the study have been developed, as have terms of reference for the individual consultants. The study methodology is being prepared and sampling is in process. The study will consider five types of community investment projects. Procurement and implementation pla ns have been revised based on discussions with each agency. There is a request to extend the grant closing date for one year, to August 2006.

• Economic Benefits of Community Investment Projects (TF054163, effective September 2004)

Objectives: To develop a comparative methodology for carrying out baseline and cost-benefit studies of community development investment in Indonesia ; and to conduct economic and comparative analyses of rural infrastructure completed under community-driven development projects. Progress to date: The national statistical agency, BPS, has completed preparatory work on questionnaire design and translation and in identifying districts for fielding the survey. No disbursements from the fund have yet been made.

• Designing Effective Community Empowerment Programs (TF053282, effective March 2004) Objectives: To (1) install within Bappenas a strategic planning capacity for community and sub-district development programming, to be used to design the next generation of community development projects; (2) to systematize the Government’s approach to monitoring and evaluation; and (3) carry out a variety of impact measurements to assess the effectiveness of alternative community development designs. Progress to date: Grant launch was slower than desired because Ministry of Finance spending authorizations were delayed, but the full study team has now been recruited and trained and a first write-up has brought them nearly back to the expected timeline. The methodology has been completed for a comparative cost-benefit review of all donor-funded community development projects and field staff has been trained and mobilized. Results from the first field review suggest that this will be a very useful study, with strong client ownership and operational relevance.

• Institutional Strengthening of Department of Community and Village Development (TF053785, effective July 2004) Objectives: To strengthen the institutional capacity of the Department of Community and Village Development and thereby promote more efficient and effective community-driven development in Indonesia. The grant supports technical assistance to (1) help the Department align its

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organizational structure, job descriptions, and working procedures with its new functions under decentralization; and (2) organize and manage workshops in Jakarta and the regions that will help the Department to adjust its objectives and define an overarching mission statement and administrative mandate. Progress to date: Terms of reference for the consultant have been prepared fully by the Government. Working groups within the Ministry of Home Affairs have started discussing the nature of the organization but progress has been distracted by the election of a new government, the tsunami disaster, internal reorganizations, and an upcoming senior staff reshuffling. Significant progress towards closer alignment with community-based planning has reportedly been made in some sections of the Department, but it is uneven and still not sufficiently connected to higher-order planning processes. Further delays can be expected following an announcement that there will be a 50 percent reduction in the number of dirjens (directors general), who are the officials authorized to sign off on procurement packages and budgets. The delays are affecting all programs managed by the Ministry and are not tied to this grant in particular.

Improving Governance • Methodology for Regional Civil Service Reform (TF053460, effective May 2004))

Objectives: To help the Government develop a methodology for regional civil service reforms, removing key constraints on better service delivery at the local levels and enhancing the success of decentralization. The grant supports (1) analysis of key civil service issues and constraints arising from central regulation and policies; (2) development of methodologies for civil service reforms; and (3) development of a reform strategy and implementation plan for civil service reform. The intergovernmental advisory team established for the implementation of the ASEM grant sees the work to be accomplished under the ASEM grant as the key input on local-national relations in the overall reform agenda. Progress to date: Implementation commenced in August 2004, after 17 months’ delay. Accomplishments to date include: a policy note for the incoming government on civil service reform, and analytical reports on institutional and financial issues in a decentralized civil service. An intergovernmental advisory group on civil service reform has been established and has selected regions in which reform efforts will be piloted from May 2005. Civil service reform is a priority for the Government, which had set a 100-day target to develop a blueprint for civil service reform and pass a presidential instruction to set up a cross-institutional team led by the Vice-president to drive the reform agenda. The instruction is being redrafted, with the main change being that the reform agenda will probably be led by the President himself. The work program for the ASEM grant is now proceeding on schedule though the question of whether Aceh should be selected as one of the pilot areas caused some delay. (It was concluded that the challenges in Aceh were beyond the scope of the grant.) The State Ministry of Administrative reform has sent a request to the Ministry of Finance to request a grant extension until June 2006.

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• Environmental Governance and Sustainable Cities Initiative (TF053383, effective March 2004). Objectives: To assist Indonesia to improve its environmental governance by (1) strengthening public environmental awareness; (2) enhancing monitoring and evaluation systems to measure environmental performance; (3) building capacity within the Ministry of Environment to develop strategic environmental plans especially on sanitation, waste collection, and water collection; and (4) developing financing mechanisms for urban environmental services. Progress to date: The greatest successes to date concern two programs: the Good Environmental Governance Program, which will be extended to 135 cities nationwide in about a year, from the original 53; and the Program for Pollution Control, Evaluation, and Rating (PROPER). The achievements of PROPER include (1) the approval of a ministerial decree that has made participation in the program mandatory for every industrial facility in Indonesia; (2) revamping of the original program; and (3) scaling up of the program and its adaptation to Indonesia’s decentralized system. The grant-implementing agency, the Ministry of Environment, can now deal more easily with the procedures of the Bank and donors: it has improved the ability of its staff to select international and national individual experts to perform studies, provide timely and satisfactory updates of progress achieved, and share consultants’ progress reports with the Bank. As of February 2005, US$ 416,000 had been contracted, out of which US$135,000 had been disbursed. The original closing date was June 2005, but the Ministry is preparing to request a six-month extension.

Remaining three grants No significant progress was reported in the implementation of the following three grants: Governance • Human Resource Capacity Building of the Anti-Corruption Commission (TF054312) Social Sector/Protecting the Poor • Poverty Reduction through Collective Action (TF053168) • Policy Reform, Capacity Building, and Development of Information System on Trade of Wood

Products in Jakarta Province (TF054194) The closing dates for two of these grants have been extended and that of the third, for Wood Products in Jakarta Province, is likely to require extension. 4. Experience of the In-Country Steering Committee The In-Country Steering Committee met in July 2004 to review and approve the final batch of ASEM TF2 proposals. Although informal consultations have taken place, the Committee has not met in recent months. The Government reviews project progress internally on a regular basis.

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Table 6: Indonesia: Status of ASEM TF2 Grants (US$)

TF No. Status TF Program NameEffective

DateTask Manager Grant Amount Disbursement

% Disb.

Closing Date

TF050033 C Improving Fiscal Policy Analysis (Expansion of activities funded under ASEMI TF022661)

11/16/01 Bert Hofman 200,000 200,000 100% 03/31/04

TF050483 C 04/16/02 50,000 28,327 57%

TF050484 C 04/16/02 451,000 396,646 88%

TF050793 C Supporting Pro-Poor Policy Development in a Decentralized Indonesia

08/29/02 Jehan Arulpragasam

207,500 207,500 100% 11/30/03

TF053895 A Strengthening Fiscal Policy Analysis Capacity In Ministry of Finance

08/12/04 Yoichiro Ishihara 360,000 90,000 25% 08/31/05

TF050268 A Building Debt Management Capacity in Government

02/21/02 Sudarshan Gooptu

250,000 32,536 13% 08/31/05

TF053347 A Developing a Diversified Financial Sector in Indonesia: Strengthening Capacity of the Capital Market and Non-Bank Financial Institutions

04/26/04 P.S Srinivas 1,716,600 340,000 20% 03/31/06

TF052962 A Housing Finance Policy Reform 12/29/03 Risyana Sukarma

289,000 80,944 28% 06/30/05

TF053367 A Rural Investment Climate Survey (RICS) 05/17/04 Shobha Shetty 200,000 0 0% 08/31/05

TF054163 A Economic Benefits of Community Investment Projects

10/08/04 Sri Kuntari 350,000 70,000 20% 12/31/05

TF053282 A Designing Effective Community Empowerment Programs

04/14/04 Scott Guggenheim

450,000 45,000 10% 06/30/05

TF053785 A Institutional Strengthening for Department of Community and Village Development

09/06/04 Scott E. Guggenheim

602,900 0 0% 08/31/05

TF052262 TF053460

A A Methodology for Regional Civil Service Reform

05/12/04 Joel Hellman 547,200 97,904 18% 06/30/06

TF053383 A Environmental Governance and Sustainable Cities Initiative

04/14/04 Giovanna Dore 457,350 70,000 15% 07/15/05

TF054312 A Human Resource Capacity Building of the Anti Corruption Commission

11/22/04 Joel Hellman 350,000 70,000 20% 08/31/05

TF053168 A Poverty Reduction through Collective Action

12/19/03 Aniruddha Dasgupta

297,700 88,536 30% 08/31/05

TF054194 A Policy Reform, Capacity Building & Dev. of Information System on Trade of Wood Products

10/19/04 Josef Lloyd Leitmann

250,000 0 0% 08/31/05

Total 7,029,250 1,817,393 26%

06/30/04

Social Sector/Protecting the Poor

UNDER IMPLEMENTATION

COMPLETED

Financial and Corporate Sector

Building Investor Confidence by Promoting Good Corporate Governance

Financial and Corporate Sector

Bernard Drum

Social Sector/Protecting the Poor

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Philippines: Country Strategy Note 1. Introduction To date, nine projects for the Philippines have been approved for funding under ASEM TF2 for a total of US$5.7 million. They provide follow-up technical assistance to strengthen international competitiveness, banking supervision, poverty monitoring and analysis, pension administration, corporate and public sector governance. In addition, four regional grants include the Philippines as a beneficiary. This update confirms the validity of the ASEM country strategy within the current development scenario, and reports on the progress of the individual grants. 2. Alignment of ASEM TF2 Country Strategy Recent Economic Developments in the Philippines Economic growth of 6.1 percent in 2004, the highest in 15 years, has boosted hopes that the Philippines can achieve sustained economic growth and poverty reduction. Structural reforms dating to the 1980s have integrated significant sectors of the economy into global markets and investment flows, fostering competition in the private economy and transforming the export base from agricultural and mineral-based commodities to semiconductors and electronics components. The stronger growth performance was aided by several factors, including a favorable external environment characterized by a recovery of demand for semiconductor electronics, which make up more than two thirds of Philippine exports, very rapid export growth to China, and ample liquidity in government debt markets in both foreign currency and peso financing, as well as agricultural growth above the histor ical norm. Poverty declined from 33 to 30.4 percent of the population between 2000 and 2003, according to recently-issued official estimates. Viewed from a longer-term perspective, however, development outcomes in the Philippines have fallen well short of their potential—especially given the vast range of natural and human assets that the country can tap for development. Improvements in productivity have lagged well behind those in neighboring countries.4 The unemployment rate reached 11.8 percent in 2004. The banking system remains burdened by high non-performing assets while the export sector is very vulnerable to swings in the world electronics cycle. High inequality, coupled with low growth, has translated into slow progress on poverty reduction. The richest 5 percent of households account for nearly a third of national income, while the poorest quintile accounts for only 6 percent. Despite a per capita GDP more than a third higher than that of Indonesia, poverty incidence is higher in the Philippines.

4 Since 1961, output per worker has risen by about 50 percent in the Philippines but by some 450 percent on average in other East Asian countries. Growth in both physical capital and total factor productivity (TFP) has been much lower than in the rest of East Asia. TFP growth in the Philippines was slightly negative on average over the four decades, compared to increases averaging 1.4 percent a year in other East Asian economies, and the contribution of physical capital accumulation to growth has been only one third as large in the Philippines as in the other economies.

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Persistent problems of inadequate infrastructure and service delivery demonstrate the impact of modest growth and problems with governance and corruption. Macroeconomic stability has been elusive, owing mainly to the declining tax effort (tax revenue as a share of GDP has fallen by 4.7 percent of GDP since 1997), large public sector financing requirements, and contingent liabilities. Addressing investor perceptions of inefficiencies, corruption, and weak governance in the public sector would also help unlock a significant constraint on private investment in public infrastructure. National Development Strategy The Government’s Medium-term Development Plan focuses on fighting poverty and building prosperity for the greatest number of Filipino citizens. Anchored on a ten-point agenda, the Plan lays out strategic interventions to boost economic growth, create employment, and promote responsible stewardship. One of the key objectives of the Plan is to reduce the vulnerability of the poor by designing better targeted programs for social protection and comprehensive human development. Alignment of ASEM TF2 with National Strategy and World Bank CAS The World Bank has recently formulated its country assistance strategy (CAS) for the Philippines in support of the Government’s Medium-term Development Plan. The CAS uses two important levers for pursuing growth and social inclusion: achieving fiscal stability and improving governance. By helping the Government achieve recognized and replicable examples of success in delivering public services and improving public institutions, the Bank aims to help the Philippines enter a virtuous cycle of more effective public institutions, sustained economic growth, and more rapid poverty reduction. The country strategy for ASEM TF2 focuses on supporting new and follow-up initiatives under three key themes: (1) finance and corporate sector reforms; (2) social sector and protecting the poor; and (3) improving governance. These focus areas build on the lessons from ASEM TF1 and remain valid in the context of recent developments in the Philippines and the priorities of the World Bank’s CAS. 3. ASEM TF2 Portfolio Status Of the nine grants to the Philippines, three support the strengthening of the financial and corporate sector, two support poverty reduction, and four are designed to help improve governance. Below are the details of the programs. Disbursements remain low , mainly because of delays in finalizing terms of reference for the work to be done , leading to delays in procurement. Nonetheless, the outcomes of selected grant-funded activities are beginning to come to fruition, particularly those that build on ongoing government reform initiatives, some of which were supported by earlier ASEM grants. Basic information on the grants is in Table 7. Financial and Corporate Sector Reforms • Closing the Productivity Gap (TF051862, effective March 2003)

Objectives: To support key policy actions to strengthen the foundations of productivity growth at the firm level and deepen the links between domestic economic activity and foreign trade and investment. Improved productivity growth will complement corporate restructuring efforts by

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increasing the private sector’s resilience to future crisis. It will also deliver greater poverty reduction benefits by boosting employment and income growth. Progress to date: Studies funded by this grant are nearing completion and a workshop is planned in May 2005 to disseminate findings and gather a consensus around recommended actions.

• Pension Reform (TF052298 and TF052349, effective July 2003) Objectives: The current grant supports the extension of work on pension system reforms begun under earlier grants. It will focus in particular on actions to ensure the sustainability of pension schemes. As well as its role in improving social protection, the reform of the pension system will foster reform and development in financial markets by introducing new products and services and boosting public confidence in the system. Progress to date: Selected officials from the Armed Forces of the Philippines Retirement and Separation Benefit System (AFP-RSBS) and the Department of Finance have taken part in a three-week training program conducted by the International Labor Organization, and representatives of the AFP-RSBS have undertaken a study tour and meetings on military pension systems. The assessment of the actuarial and financial situation of the military pension system and the development of the related databases and demographic profiles are expected to commence shortly. Procurement for consulting services for the actuarial review of the government-run private benefits system is ongoing and expected to be awarded soon.

• Strengthening Capacity for Bank Supervision (TF053181, effective February 2003) Objectives: To help the Bangko Sentral ng Pilipinas (BSP) (1) develop information technology to enhance its supervision capacity; (2) strengthe n its capacity for risk-based consolidated supervision; and (3) implement grants. The training activities supported through this grant build on earlier training provided to the BSP through the IMF’s Financial Reform and Strengthening Initiative (FIRST). Progress to date: Implementation of this grant has experienced some delays because of delays in the procurement process. The contract for the market risk component has been awarded and the consultants have begun work on the assignment. Implementation of the training subcomponent complements the basic level training being supported by the FIRST. The contract for the information technology component was awarded only recently.

Protecting the Poor • Poverty Monitoring and Analysis (TF052722 and TF052723, effective October 2003)

Objectives: To provide technical assistance to help government agencies involved in poverty estimation, analysis, monitoring, policymaking, and implementation, and in particular to harmonize family income and expenditure surveys with the annual poverty survey. Progress to date: Many components have already begun full implementation and the key component of the project is in full swing. However, there is some delay because the procurement

34

of consultants/experts services and the conduct of field surveys have taken longer than anticipated.

• Strengthening Reforms in the Urban Shelter Programs for the Poor (TF054158, approved but not yet effective) Objectives: To help improve decision making and action planning at the national and local levels, on urban shelter programs for the poor, with particular focus on the Community Mortgage Program. The grant aims to identify the needed reform measures to establish sustainable pro-poor shelter programs. Progress to date: The Bank has requested the Government to reconfirm its commitment to the original objectives of the grant, noting that progress has stalled on the Urban Shelter and Community Infrastructure Project.

Improving Governance • Knowledge Enhancement of Key Issues in Corporate Governance (TF050955, effective

December 2002) Objectives: To help improve corporate governance by (1) enhancing development and delivery of educational programs in corporate governance; (2) supporting champions in corporate governance; (3) disseminating information on corporate governance issues to the public. The grant complements ongoing efforts by the Government, private sector, civil society, and the Bank. Progress to date: Commitments have been made for all three components and implementation is in full swing. A training manual on corporate governance has been developed and a series of workshops has been conducted for selected directors of major publicly listed companies, government-owned and controlled corporations, and government financial institutions.

• Strengthening Institutions for Sustainable Poverty Reduction and Good Governance

(TF052163 and TF 052164, effective May 2003) Objectives: To provide institution-building technical assistance to strengthen macroeconomic stability and reduce poverty and vulnerability to future crises, through strengthening the management of fiscal risks; strengthening the effectiveness of local government units in poverty alleviation and service delivery; enhancing the pro-poor impact of public expenditures through more effective oversight arrangements; and improving judicial effectiveness by supporting civil society involvement in judicial appointme nts. Progress to date: Implementation of the recipient-executed portion of this project has been delayed, in part because of the difficulties of coordinating the involvement of several implementing agencies. The Department of Finance Reports has commissioned reports to strengthen the management of fiscal risks by local government units and has contracted the establishment of a centralized risk management system. The component on strengthening linkages between national and regional planning is being managed by the Socio-economic Planning Agency and is proceeding smoothly. The civil society (Bantay Katarungan) entity

35

engaged through the Bank-executed portion to participate in the oversight of judicial appointments has begun work and enjoys strong support from the Supreme Court.

• Strengthening the Implementation and Enforcement Capacity of Procurement Institutions

for Sustainable Good Governance (TF053254, effective March 2004) Objectives: To strengthen the capacity of the Government Procurement Policy Board to carry out its responsibility to protect the national interest in all matters affecting public procurement. This grant for technical assistance builds on the Government’s efforts to implement the newly passed Government Procurement Reform Act and strengthen the procurement service in various public agencies. Progress to date: Problems initially encountered with procurement and disbursement matters have now been resolved and implementation of most components has started. Guidelines for members of the Bid and Awards Committees of public agencies have now been completed and training on their application is now underway.

• Strengthening the Office of the Ombudsman for Good Governance (TF054210, effective

November 2004) Objectives: To improve public sector governance through technical assistance and capacity building initiatives for the Office of the Ombudsman, which has been at the forefront of the Government’s anti-corruption program. The grant supports the following components: (1) training and workshops for field investigators in support of the preparation and prosecution of anti-corruption cases; (2) design and development of a case monitoring and tracking system; (3) establishment of an electronic databank system for all statements of assets, liabilities, and net worth. Progress to date: This project is still in the start-up phase of implementation. A grant coordinator has been identified and terms of reference for the training component are being finalized.

4. Experience of the In-Country Steering Committee (ICSC) To speed up the realization of the benefits of the activities funded under ASEM TF2, the Government and the World Bank’s Country Office have been addressing implementation issues. The In-Country Steering Committee (ICSC) is charged with ensuring the quality of funded projects/programs at entry, through its review of funding proposals. To increase recipient execution of the grants, and thus further strengthen the country ownership of the activities, ICSC has advocated for more substantial involvement of the Government in the design and preparation of grant proposals. During the last call for ASEM TF2 proposals in April 2004, the Committee requested representatives from each of the proponent agencies to make brief presentations on their respective proposals. This new format provided more opportunities for interaction and feedback among the ASEM donor representatives, the Department of Finance, and the proponents. It also helped to establish/validate client ownership and commitment to the proposed grant-funded initiatives. In March 2004 the recipient-Bank execution ratio of ASEM TF2 grants was 60:40; with the three new grants approved since then, the ratio has improved to 65:35.

36

For the most recent ASEM TF2 grants, the Committee has taken three steps to provide greater visibility for the grants: (1) the Government, with assistance from the World Bank Country Office, now issues press releases on the ASEM grant agreements that are signed including a reference to the participating donor partners; (2) implementing agencies invite ASEM partners to their launching activities or similar activities where there could be visibility/press opportunities; and (3) signing ceremonies with the ASEM donors have become the norm. ICSC members have been represented at the signing ceremonies with Government representatives.

Table 7: Philippines: Status of ASEM TF2 Grants (US$)

TF No. Status TF Program NameEffective

DateTask Manager

Grant Amount

Disbursement % Disb.Closing

Date

TF051862 A Closing the Productivity Gap 03/25/03 Milan Brahmbhatt

300,000 126,069 42% 06/30/05

TF052298 A 07/07/03 742,500 12,722 2% 08/31/05

TF052349 A 07/07/03 250,000 27,592 11% 08/31/05

TF053181 A Strengthening Capacity for Bank Supervision

02/17/04 Sameer Goyal 479,650 36,019 8% 08/31/05

TF050955 A Knowledge Enhancement of Key Issues in Corporate Governance

12/19/2002 Sameer Goyal 444,000 138,542 31% 06/30/05

TF053254 A Strengthening the Implementation and Enforcement Capacity of Procurement Institutions for Sustainable Good Governance

03/15/04 Cecillia D. Vales 716,000 102,636 14% 08/31/05

TF052722 A 10/27/03 86,000 24,188 28% 08/31/05

TF052723 A 10/27/03 669,250 69,558 10% 08/30/05

TF054158 P Strengthening Reforms in the Urban Shelter Programs for the Poor

TBD Ming Zhang 500,000 0 0% TBD

TF052163 A 05/26/03 717,600 120,617 17% 06/30/05

TF052164 A 05/26/03 101,400 14,801 15% 06/30/05

TF054210 A Strengthening the Institution of the Office of the Ombudsman for Good Governance

10/01/04 Joven Balbosa 716,600 0 0% 08/31/04

Total 5,723,000 672,744 12%

UNDER IMPLEMENTATION

Financial and Corporate Sector

Pension Reform Sameer Goyal

Poverty Monitoring and Analysis Chorching Goh

Sustainable Poverty Reduction and Good Governance

Joven Balbosa

Social Sector/Protecting the Poor

37

Thailand: Country Strategy Note 1. Introduction ASEM TF2 supports a significant proportion of Thailand’s critical structural reform agenda in the social and financial/corporate sectors. To date, Thailand has received more than US$6.9 million from this source to support 11 country-led technical assistance and capacity building projects. As of March 2005, two of these projects have been completed and eight are still being implemented. In line with the country’s development priorities, the programs financed by ASEM TF2 are laying strong foundations for enhanced national competitiveness, better public services, greater social protection, and decreased incidence of poverty. 2. Alignment of ASEM TF2 Country Strategy Recent Economic Developments in Thailand Thailand has restored macroeconomic stability, stabilized the level of international reserves, reduced its external debt, and brought down the incidence of poverty to below the pre-crisis level. Real GDP growth reached 6.1 percent in 2004. Growth is driven by vibrant domestic consumption, which in turn has been prompted by rising consumer confidence, increased access to financing at low interest rates, an increase in private investments, and ongoing fiscal measures to stimulate government consumption and investments. Poverty has fallen from 15.9 percent of the population in 1999 to less than 9.8 percent in 2003. Despite progress, Thailand’s reform agenda is unfinished. Risks and challenges remain, partly because Thailand remains vulnerable to external shocks such as SARS, Avian Flu, the tsunami disaster, and the higher oil prices of 2004, but also because of the overhang of distressed assets in financial institutions and firms , uncertainties about the sustainability of private investments, rising public investments and debts relative to GDP, and the expected moderation in global growth in 2005. These risks, if not managed well, could prevent Thailand from sustaining its growth over the medium term. The medium-term prospects now depend on the continued ability to implement structural reforms. Thailand will need to complete the ongoing financial and corporate sector reforms , improve its competitiveness, strengthen public sector governance, restore the focus on environmental preservation, and scale up social protection and human resource development programs for the vulnerable. National Development Agenda In the medium term Thailand aims to complete the structural reform agenda, provide more comprehensive social protection, lessen inequality, and accelerate poverty reduction, and enhance the country’s international competitiveness. The Government’s national development agenda is formulated around four pillars: • Human and social capital: to strengthen social protection, with emphasis on labor protection,

education reform, quality of schooling, and enrollment rates in higher education, and access to health care for the poor.

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• Competitiveness: the agenda goes beyond restructuring the financial and corporate sectors and developing infrastructure; it includes strengthening innovations, moving to a knowledge-based economy, and enabling the business and investment environment.

• Poverty and inequality: to engender a more balanced development and better targeted support to

combat persistent urban-rural disparities. • Natural resources and environment have come under stress due to Thailand’s rapid economic

development. Their management was overlooked in the high-growth years, but they have now emerged as key policy priorities.

Across the four pillars, governance is the underlying theme. Progress on governance is necessary for the public and private sectors, as well as for civil society, which encompasses greater transparency, accountability, and effective decentralization and empowerment. Country-led Partnership Framework To implement this policy agenda, Thailand has adopted a country-led partnership framework and engaged developme nt partners in knowledge sharing, specific policy advice, and selected implementation supports. In the case of the World Bank Group, the Government has initiated country development partnerships (CDPs), identifying objectives and activities, inputs, outputs, and expected outcomes, and providing either cash or in-kind contributions to match the contributions of the Bank. Each CDP covers a broad spectrum of reform activities, and supporting resources are drawn from many sources. Six CDPs are being implemented, on social protection, financial and corporate competitiveness, reduction of poverty and inequality, governance/public sector reform, human and social capital development, and natural resources and the environment. Each grant under ASEM TF2 is a major source of financial support to the CDPs (Table 8). The grants may provide support to selected projects within a CDP, or in some cases may support the overall activities of a CDP.

Table 8: Relation between national development pillars and ASEMTF2 grants

Development pillar ASEM grants Total grant amounts (US$)

Competitiveness

Four grants for financial and corporate competitiveness

1,978,300

Human and Social Capital

Two grants for social protection Education reform AIDS therapy

985,000 550,000 260,000

Poverty and Inequality Four grants for poverty analysis and monitoring 1,502,000

Natural Resources and Environment

Watershed management 700,000

Governance Governance and social service delivery 996,600.00

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In particular, ASEM TF2 is a major source of support for human and social capital development; financial and corporate competitiveness; reduction of poverty and inequality, and natural resources and environment. 3. ASEM TF2 Portfolio Status In the financial and corporate sector, ASEM TF2 grants have supported one completed and two ongoing programs totaling US$1.6 million. In the social sector, ASEM TF2 has supported one completed and seven ongoing programs for a total of more than US$5.3 million. Below are the details of the programs. Basic information on the grants is in Table 9. Completed Programs Financial and Corporate Sector • Out-of-Court Mediation Capacity Building Project (TF050491, closed March 2004)

Objectives: To (1) strengthen the institutional capacity of Thailand’s Alternative Dispute Resolution Office (ADRO) to administer out-of-court mediation for financial disputes, including disputes involving non-performing loans; and (2) promote public understanding and awareness of an out-of-court mediation process and its benefits, as an alternative to trial. The grant is executed by ADRO, the Office of the Judiciary. Outcomes: The grant has enhanced the competitiveness of the Thai economy by creating an affordable and speedy conflict resolution system for financial disputes. A training curriculum has been developed for out-of-court mediation of financial disputes and more than 350 registered mediators and ADRO administrators have been trained. Based on international good practices, mediation rules, a code of conduct, and an operational manual (the “RCM Standards”) have been developed and adopted and are being disseminated through the provision of technical assistance and workshops. A public communications campaign has increased public knowledge and awareness of the benefit of out-of-court mediation. After project completion, ADRO is continuing to use the radio announcements and posters in its public education activities.

Social Sector/Protecting the Poor • Capacity Building and Strategy for Poverty Reduction (Government-executed: TF050489;

and Bank-executed: TF050488, closed October 2003 ) Objectives: To support the Government’s efforts to reduce poverty, financing capacity building, policy reform, and participatory activities. Outcomes: The government-executed part of the grant, carried out by the National Economic and Social Development Board (NESDB), strengthened Thailand’s poverty reduction strategy through the completion of: (1) empirical studies on poverty in Thailand; (2) assistance to communities to undertake their own planning for poverty reduction; (3) a pilot study in five communities of a one-stop services program, designed to investigate the capacity of communities to deliver their own social safety nets, followed by workshops on the outcomes of the study; (4) construction of a poverty database, along with poverty measures and indicators. Activities

40

underlying these achievements include : a review of Thailand’s official methodology for poverty measurement to ensure it adequately captures living conditions in the aftermath of economic crisis ; a study on income distribution in Thailand to design a set of policies aiming to reduce inequality; and a study on gender and poverty that will help with the design of more effective policies to reduce poverty. The Poverty Monitoring and Evaluation System used by NESDB and the National Statistic a l Office has been strengthened, and now includes 23 “MDG Plus” indicators tied to current policies and existing indicators. Under the World-Bank executed part of the grant, the Bank worked jointly with the Thailand Development Research Institute and the National Economic and Social Development Board to produce an in -depth empirical analysis that will help to identify constraints and opportunities in alleviating poverty. The study focuses on five areas: (1) old age income security and poverty; (2) the implementation and impact on the poor of the 30 baht health care scheme; (3) risk-sharing, social safety nets, and chronic poverty; (4) government reform and poverty, and (5) social capital and the poor. To disseminate lessons learned on constraints and opportunities in alleviating poverty, a website on poverty has been established and maintained. The grant-financed activity ended with a national conference on “How to eradicate the poverty in Thailand in six years?”, which was attended by almost 300 stakeholders. The grant has created awareness in the key ministries and concerned stakeholders on the need of the ir contributions to fulfill the Government’s effort in reducing poverty.

Ongoing Programs Financial and Corporate Sector • Strategy and Implementation for a Competitive Financial Sector (TF052385, effective

September 2003) Objectives: To strengthen Thailand’s financial sector strategy and structure, and to enhance the capacity to supervise and regulate financial institutions and implement effective risk management. The grant is executed by the Ministry of Finance and the Bank of Thailand (BOT). The activ ities supported by the grant, and the Government’s endorsement of associated policy recommendations, should help improve the competitiveness of the Thai economy by increasing the role of capital markets, enhanc ing competition between domestic and foreign banks, broadening access to financial services, improving the regulatory and supervision mechanisms of financial institutions, enhanc ing market discipline, and improving consumer protection. Progress to date: (1) Work has progressed well on a proposed deposit insurance agency. The policy framework, legislation, institutional design, and implementation plan have been completed for a limited deposit insurance scheme and their implementation awaits the enactment of the Deposit Insurance Act by Parliament. Grant activities are now in progress to develop a management information system for the proposed agency, and a draft report has been submitted. (2) The project is building the capacity of regulators to supervise financial institutions; three out of eight planned workshops and training courses have been developed and delivered. (3) Professionals and market participants are being trained in bond evaluation and portfolio management; seven out of nine workshops have been completed. (4) Work will soon start on assisting the Fiscal Policy Office to develop operating tools and deliver a capacity building program for semi-formal microfinance operators. (5) BOT has finalized its design for a pilot

41

project to provide necessary infrastructure connecting formal financial institutions with semi-formal microfinance operators in rural areas. Given the complexity of the assignment, the implementation schedule could likely exceed the current closing date , and the authorities will likely request an extension of the closing date.

• Preparation for Financial Services Liberalization (TF053461, effective May 2004) Objectives: To assist the Government and financial institutions to prepare for trade negotiations and agreements on liberalization of financial services. The grant is implemented by the Ministry of Finance. It finances studies and the development of recommendations on the liberalization of financial services and the positions Thailand is to take in trade negotiations , as well as workshops to inform and prepare stakeholders for the recommended options and the effect of liberalization in financial services. Progress to date: The procurement of a consultant has been delayed, so the work is not expected to start until May 2005. The Ministry of Finance will likely request an extension of the grant closing date to accommodate the six-month work schedule of the project.

Social Sector/Protecting the Poor • Strengthening Social Sector Protection for the Working Population, Poor, and Vulnerable

(TF050975, effective August 2003) Objectives: To improve the management of social and economic risk through enhanced social protection, providing assistance in six policy areas: (1) social assistance; (2) unemployment insurance; (3) employment services; (4) social protection data development; (5) workmen’s compensation and occupational safety and health; and (6) social protection for the informal sector. The grant is executed by the Ministry of Labor in collaboration with the Ministries of Social Development and Human Security; Information, Communication and Technology; and Finance. Progress to date: (1) A workshop in March 2005 launched a risk and vulnerability assessment that will yield recommendations for improving social protection programs for vulnerable groups. Key performance indicators are being developed to monitor social assistance programs for children, the disabled, and the elderly. (2) Studies are completed and in progress on possible changes in the behavior of the labor market and wages as a result of the introduction of unemployment insurance. (3) Work has started on developing recommendations to improve the fairness and transparency of the legal framework applying to Thai workers abroad and to foreigners in Thailand. (4) The grant has financed the production of a directory of social data and statistics, a master plan for the production of labor and special welfare statistics and data , and a list of firms and establishments which will be used as the sampling frame for an establishment survey. (5) Work has started on developing a plan to establish an autonomous public organization for occupational safety and health, and on introducing more accurate methods for actuarial cost valuation and rate setting for the Workmen’s Compensation Fund (WCF); WCF staff are being trained in these methods. (6) Work has begun on analyzing social and economic risks for informal workers, as the basis for designing a pension or income replacement program for these workers. Training activities thus far completed under the grant include the testing of an improved advanced training curriculum for social workers in research methodology and social policy

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formulation, and training of selected staff from the Ministry of Labor to analyze, report, and disseminate labor market information.

• Education Reform (TF053057, effective February 2004)

Objectives: To support the implementation of the National Education Act in three areas: education finance reform; education decentralization and school based management; and teacher development. The grant is executed by the Office of the National Education Council of the Ministry of Education. Progress to date: Excellent progress is being made. On education finance, recommendations have been prepared to improve the efficiency of public spending in education and a funding formula has been developed for central government allocations to local education areas and schools. The first draft of a study on the relationship between school inputs and student performance is available , and work is in progress on the contributions of private corporations to education. The development of a school funding formula is progressing well and will reflect differences in school types, site-need allocation (based on poverty mapping), and student-need allocations in order to achieve equity goals. A model for decentralized school-based management has been developed; and pilot sites for testing it have been selected in four regions of the country. On teacher development, wide-ranging preparatory work has been accomplished, including production of training materials; identification of training sites and master and leader teachers; orientation of school teachers, administrators, and coordinators; and training of master and leader teachers.

• Stimulating Voluntary Counseling and Testing Services and Early Recruitment into

Antiretroviral Treatment (TF054498, effective January 2005) Objectives: To study how to stimulate demand for voluntary counseling and testing services and facilitate early recruitment into antiretroviral therapy for people living with HIV/AIDS. The grant is executed by the International Health Policy and Planning Thailand International Health Program, Ministry of Public Health. Progress to date: Detailed terms of reference for the first set of activities have been prepared, and the framework, sampling, and methodology for primary data collection have been developed. The contract for project coordinator will be effective from April 1, 2005, and field work is expected to start in May 2005.

• Capacity Building and Strategy for Poverty Reduction – Phase II (Government-executed:

TF052904; and World Bank-executed: TF052905, effective December 2003) Objectives: This grant continues the work of its predecessor, Capacity Building and Strategy for Poverty Reduction, now completed. It supports poverty reduction under the National Ninth Plan by enhancing knowledge and techniques for measuring and analyzing poverty and inequality and by creating and disseminating monitoring and evaluation systems. Progress to date: In the portion of the grant executed by the National Economic and Social Development Board (NESDB), the ongoing activities include (1) inequality studies with policy recommendations in the areas of fiscal and labor market policy; (2) a study on women’s roles in

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poverty reduction; a report on urban poverty; (3) a study on the government’s resource allocation and its link to poverty reduction strategy; and (4) a comparative national level report, with synthesis reports from 40 communities, on moving out of poverty in Thailand. The results of the studies are disseminated through workshops. Capacity building is underway for NESDB staff. To establish effective monitoring and evaluation systems for the government’s poverty reduction programs , ongoing activities include the development of a poverty reduction monitoring system report and training for NESDB staff; completion of a Millennium Development Goals report, and a draft report on progress on meeting the MDGs in two pilot provinces. The World Bank-executed portion of the grant is analyzing the causes of poverty in the Northeast and proposed poverty reduction strategies.

• Skills and Competitiveness for Poverty Reduction in the Northeast (TF053550, effective July

2004) Objectives: To help increase the competitiveness of the labor market in Northeast Thailand by improving workers’ skills. Implemented by the Ministry of Information and Communication Technology (ICT), the grant will (1) increase the productivity of education and training institutions; (2) analyze the factors that influence the productivity of these institutions; (3) facilitate competition and transparency among these institutions; (4) strengthen Thailand’s capacity for technological innovation; and (5) promote efficient use of public and private resources for education in information and communication technology. Progress to date: The project suffered a delay due to high-level personnel changes in the Ministry of ICT. In February 2005, the Bank received a request to continue the grant under the new Permanent Secretary and replied that continuation would depend on more rapid progress in grant execution. A manager for the Project Implementation Unit is now being procured, and is expected to begin work by May 2005, after which the operational subcomponents of the grant will be procured. The Ministry will revisit the procurement plan and is likely to request an extension of the closing date to accommodate the delayed start.

Environment • Participatory Watershed Management for Ping River Basin (TF053040, effective January

2004) Objectives: To improve environmental quality in the Ping River Basin, contributing to the enhancement of livelihoods for communities, and to replicate the experience, particularly the management model, to other Thai river basins. The grant is executed by the Office of Natural Resources and Environment Policy and Planning (ONEP), within the Ministry of Natural Resources and Environment. Progress to date: Criteria for selecting micro-watersheds have been developed; they include indicators of environmenta l quality and natural resources as well as socioeconomic and social capital indicators. After discussion of the criteria at water forums with representatives from all sub-basins of the Ping River, three micro-watersheds have been selected, and in each a representative working group has been formed to coordinate further work with ONEP. Work has started on criteria for selecting 20-25 priority pollution sources in the three selected sub-basins. The grant closing date has been extended to February 28, 2006.

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Governance • Strengthe ning Governance and Social Service Delivery through Public Sector Reform

(TF052331, September 2003) Objectives: To support the second phase of the Government of Thailand-World Bank Country Development Partnership on Governance, this grant finances technical assistance and capacity building activities in expenditure and revenue management, public administration reform, decentralization, and transparency, and accountability. To improve resource management for poverty reduction, the grant covers the preparation of guidelines and provision of training on swaps and derivatives for staff of the Public Debt Management Office, Bank of Thailand, specialized financial institutions, and state-owned enterprises. Progress to date: A base learning program has been formulated on swaps and derivatives. To help enhance governance and service delivery, comprehensive reports are in progress on public expenditure management and on decentralization, both drawing on experiences in pilot provinces, and both focusing on the impact on poverty reduction programs at the local level. In coordination with the National Economic and Social Development Board, a model is being developed for better implementation of provincial poverty reduction programs, including through the development of performance indicators to monitor the progress in implementation. Community radio programs in pilot provinces will also be used to monitor public sector reform and service delivery at the local level. In that connection, a pre-survey has been completed and a database is being compiled. An International Symposium is scheduled for the second half of 2005 to share knowledge and lessons learned on public sector reform and to develop an international network with a view to instituting development and cooperation programs or projects.

4. Experience of the In-Country Steering Committee (ICSC) The ICSC has played a proactive role in monitoring the ASEM TF2 activities. In March 2004 it convened the first ASEM TF2 Monitoring Workshop, at which donors and government officials, as well as responsible agencies, exchange d views on implementation progress for each grant and made recommendations for improvement. The second Monitoring Workshop will be held in early April 2005 to update grant implementation progress. Thailand would like to take this opportunity to express its gratitude to the ASEM donors and the World Bank’s staff for their support of ASEM TF2.

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Table 9: Thailand: Status of ASEM TF2 Grants (US$)

TF No. Status TF Program NameEffective

DateTask Manager

Grant Amount

Disbursement % Disb.Closing

Date

TF050491 C Out of Court Mediation Capacity Building Project

07/17/02 Tanatat Puttasuwan

400,000 367,959 92% 03/31/04

TF050488 C 06/04/02 207,000 207,000 100% 10/31/03

TF050489 C 06/04/02 375,000 355,207 95% 10/31/03

TF052385 A Strategy and Implementation for a Competitive Financial Sector

09/23/03 Renuka Vongviriyatham

990,000 169,784 17% 08/31/05

TF053461 A Thailand’s Preparation for Financial Services Liberalization

05/19/04 Thomas Rose 218,000 21,000 10% 08/31/05

TF050975 A Strengthening Social Protection 08/11/03 John D. Blomquist

985,000 230,855 23% 08/31/05

TF053057 A Education Reform 02/11/04 Omporn Regel 550,000 301,822 55% 08/30/05

TF054498 A Stimulating VCT and Early Recruitment into ART in Thailand

01/25/05 Ana Revenga 260,000 0 0% 03/31/06

TF052904 A 12/15/03 720,000 299,785 42% 08/31/05

TF052905 A 12/15/03 200,000 119,193 60% 08/31/05

TF053550 A Skills and Competitiveness for Poverty Reduction in Northeast Thailand

07/07/04 Magdi M. Amin 370,300 0 0% 08/31/05

TF053040 A Participatory Watershed Management for Ping River Basin

01/30/04 Nat Pinnoi 700,000 88,750 13% 08/31/05 (to be extended to

2/28/06)

TF052331 A Strengthening Governance and Social Service Delivery through Public Sector Reform

09/23/03 Eric Sidgwick 996,600 117,452 12% 02/28/06

Total 6,971,900 2,278,807 33%

Kaspar Richter

UNDER IMPLEMENTATION

Financial and Corporate Sector

Social Sector/Protecting the Poor

Capacity Building and Strategy for Poverty Reduction

Kaspar Richter

Capacity Building and Strategy for Poverty Reduction II

COMPLETED

Financial and Corporate Sector

Social Sector/Protecting the Poor

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Vietnam: Country Strategy Note 1. Background The ASEM Trust Funds have become an important source of technical assistance for Vietnam, addressing the key areas of corporate restructuring (state enterprise reform), banking sector reform, social policies, and social protection. Over the two rounds, Vietnam has benefited from 24 grants totaling more than US$15 million. The grants have helped provide Vietnamese authorities with relevant external expertise and have exposed policymakers to the reform experiences of other countries. The grants have catalyzed analytical work and fuelled important policy changes. By financing studies of issues specific to Vietnam, provided in a timely manner and to key counterparts, they have helped ensure reform measures tailored to Vietnam’s needs. In this way, ASEM TF has supported the Government’s efforts to eradicate poverty and improve socioeconomic conditions. Under ASEM TF2, 17 grants have been approved for Vietnam with a combined grant amount of US$ 8.9 million. 2. Alignment of ASEM TF2 Country Strategy Recent Economic Developments in Vietnam Vietnam’s economic performance has remained remarkably strong despite recurrent adverse shocks. In 2004, GDP growth was above seven percent for the third consecutive year. The resilience of the economy partly reflects prudent economic management, but also reflects the increasing strength and buoyancy of the private sector. Private sector industrial production rose 23 percent in 2004, and commitments of foreign direct investment reached a seven-year high of $4.2 billion in 2004, or nearly 10 percent of GDP. Broadly based growth is raising the living standards of most population groups ; preliminary figures indicate a sharp decline in poverty to around 26 percent of the population in 2004, compared with 29 percent in 2002. National Development Strategy The Government’s Comprehensive Poverty Reduction and Growth Strategy (CPRGS), introduced in 2002 following a broad consultation process, reflects its commitment to further economic and social development. The strategy sustains policy reforms in the structural, social, and institutional areas and is organized around three broad pillars: • Pillar I: High growth through a transition to a market economy. This requires the firm

implementation of the structural reform agenda laid out by the Government, including reform of state-owned enterprises and the financial sector.

• Pillar II: An equitable, socially inclusive, and sustainable pattern of growth. This requires appropriate sectoral and social policies and programs.

• Pillar III: Adoption of a modern public administration, legal and governance system. This is essential for the first two goals to be attainable.

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The three pillars are connected through cross-cutting themes such as employment generation for poverty reduction and the link between public financial management and effective delivery of social services to the poor. Alignment of ASEM TF2 with National Strategy and World Bank CAS The focus of grants under ASEM TF2 derives from the Comprehensive Poverty Reduction and Growth Strategy. The World Bank’s Vietnam Country Assistance Strategy for FY03-06 is also closely aligned with the CPRGS, as is the European Commission’s Country Strategy Paper for Vietnam for 2002-06, endorsed by the European Union member states. The EC strategy has the twin focal points of support for human development and assistance for Vietnam’s integration into the international economy. The ASEM TF2 activities are designed to help Vietnam realize objectives in all three pillars of the Government’s strategy, with a particular focus in two areas: (1) corporate restructuring and banking reform, and (2) social policies and social protection: • Pillar I: Transition to a market economy. Vietnam’s desired accession to the World Trade

Organization, which could happen by the end of 2005, will require determined and comprehensive economic, legal, and institutional reforms. ASEM TF2 grants will help Vietnam accelerate its financial sector reform and prepare to meet its liberalization commitments. Several of the grants follow up and deepen work launched in the areas of state enterprise restructuring and banking reform—in particular, enhancing banking sector transparency, facilitating the restructuring and pilot equitization of the state-owned commercial banks, improving the operations of the policy lending institutions (the Vietnam Bank for Social Policies, the Development Assistance Fund, and the Accounting Department of the State Bank of Vietnam) , and accelerating the diversification of the financial sector through capital market development. Prior ASEM grants were used to engage legal and financial consultants to assist the State Bank of Vietnam, the state-owned commercial banks , and the joint stock banks.5 Current grants support the further restructuring of the state-owned commercial banks and their preparation for privatization; the audit of state-owned commercial banks ; the strengthening of banking supervision; enhancement of the corporate governance and regulatory framework for banking; and the enhancement of assistance planning by the State Bank of Vietnam. Two other grants address strategic aims that are also supported by the World Bank’s Financial Sector Development Strategy for Vietnam: fostering diversity and developing capital markets and improving access to financial services: Accelerating Capital Markets Development (TF053399) , and Improving Banking Sector Transparency and Reforming Policy Lending (TF053398).

• Pillar II: An equitable, socially inclusive, and sustainable pattern of growth. Up to now Vietnam

has managed to maintain quite an equal income distribution thanks to the allocation of agricultural land to rural households, in a context where economic reform provided the incentive for increased productivity. But the next phase of economic growth, with intensified integration with the world economy, could widen the gap between booming regions and the rest of the country. Massive migration to urban areas would likely lead to new forms of poverty. Vietnam’s education and health policies have achieved impressive improvements in the human capital of the

5 TF022399 for Vietnam Banking Sector Restructuring, TF020583 for Banking Reform and Development, and TF050454 for Banking Reform.

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poor, but they are now under strain due to increased decentralization and reliance on out-of-pocket payments. New policy initiatives are designed to make basic social services more affordable to the poor. Several ASEM TF2-activities contribute to this effort by providing support for targeted poverty reduction interventions. Support is also underway to help Vietnamese authorities develop a viable social security system, including a new social safety law and targeted social safety nets.

• Pillar III: Adoption of a modern public administration, legal, and governance system. ASEM

TF2 grants are helping to strengthen the implementation of Vietnam’s Comprehensive Poverty Reduction and Growth Strategy, and the integration of the CPRGS approach with the Government’s planning structure. Grants are also helping the Government move towards a more programmatic approach to public expenditure in the education sector, closely integrated with efforts to move towards sectorwide approaches.

3. ASEM TF2 Portfolio Status Below are the details of the two completed and 15 ongoing programs supported by ASEM TF2. Vietnam has ten programs under implementation in support of financial and corporate sector reform, and five in progress in the social sectors. Basic information on the grants is in Table 10. Implementation Issues The process of activating ASEM TF2 grants and executing procurement has been expedited, though it is still taking too long. For the first two rounds of ASEM TF2 applications, the average lag between donor approval and activation was more than ten months, but in the last 2.5 years the average lag has been reduced to less than seven months. The improvement is partially attributable to the regular discussions in the In-Country Steering Committee of the status of grant implementation. With all the ASEM TF2 grants now activated, the focus of the Committee has shifted towards accelerating the procurement process, particularly in view of the Fund’s expiration date in August 2006. Biannual discussions in the ICSC on monitoring and implementation issues will continue to play a role in identifying and addressing major issues. Efforts will also be made to strengthen the continuous working-level dialogue between World Bank task managers and recipient agencies, in order to quickly address outstanding procurement issues, making full use of the recent addition to the World Bank’s Hanoi office of a full-time trust fund coordinator as well as the decentralization of task managers to the Bank’s Country Office. Completed Programs Financial and Corporate Sector • Banking Reform – Twinning Arrangement6 for Bank for Investment and Development of

Vietnam (TF050454, closed December 2003)

6 A twinning arrangement is an assistance project where an international bank or banking consulting firm works side by side with staff and management from a local bank to implement changes and/or restructuring in all necessary areas through the use of modern banking best practices and procedures, as well as hands-on training.

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Objectives: To assist the recipient to restructure and reorganize the Bank for Investment and Development of Vietnam (BIDV), and strengthen BIDV’s financial and corporate governance structure. Outcomes: The consulting team delivered a customized framework for change management at BIDV, drawing on international best practices and covering organizational structure, credit processes, asset and liability management processes, internal audit functions, risk management policies and procedures; and human resource development and training. The result has been to improve the restructuring of BIDV and to strengthen financial and corporate governance standards. The project contributed to the implementation of the Second World Bank Poverty Reduction Support Credit, which was the key structural adjustment operation in the World Bank’s 2003-06 Country Assistance Strategy for Vietnam. Follow-up activity: A twinning arrangementproject with a reputable international bank is planned to support the full implementation of the recommendations, supported by a new ASEM TF2 grant (TF 053365, described below).

Social Sector/Protecting the Poor • Social Safety Nets (TF050280, closed December 2003)

Objectives: To help the Government implement the social safety net (SSN) for workers being retrenched from state-owned enterprises (SOEs) and establish a monitoring and evaluation system for the social safety net. The grant provided technical assistance to (1) build an efficient monitoring system from the inception of the SSN Fund; (2) train government staff in charge of assisting retrenched SOE workers; and (3) survey retrenched workers to monitor the SSN Fund’s performance. Outcomes: The grant brought tangible benefits to the SOE reform program; it was crucial to the design and implementation of the SSN Fund and was highly appreciated by the Government. The SSN Fund has come to be considered as international best practice. While the Grant was being implemented, the SSN Fund supported more than 400 SOEs and 15,000 workers. A tracer survey of retrenched workers revealed that the impacts of retrenchment on their livelihoods were limited, even among potentially vulnerable groups. The Government has taken some immediate actions in response to findings and suggestions made by the consultant unit during the operation of the SSN Fund. The assistance provided was key for the implementation of the Second World Bank Poverty Reduction Support Credit. Follow-up activities. A new ASEM TF2 grant (TF053229, described below) has been approved to follow up on the successful activities of this grant.

Ongoing Programs Financial and Corporate Sector • Technical Twinning Arrangement for the Implementation of the BIDV Restructuring Plan

(TF053365, effective September 2004)

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Objectives: To implement the recommendations arrived at under a previous ASEM grant, Banking Reform: Twinning Arrangement for BIDV (TF050454, described above), by providing technical assistance to (1) facilitate effective implementation of the change management program, including on credit policie s and procedures, asset liability management, and internal audit; (2) facilitate the development of strategic planning capacity, IT strategy to respond to the impact of technological changes, and management information systems to improve risk management and corporate decision making; (3) build management and staff competency for sustained development. Progress to date: Progress in achieving the grant objectives has been only moderately satisfactory, due to slower than expected procurement. The procurement process began in June 2004 with the issuance of the request for expressions of interest, but the request for proposals and shortlist evaluation of firms was only approved by the World Bank on March 22, 2005. It is expected that once contracted, the project will achieve the grant objectives satisfactorily, but an extension will be needed to allow full implementation.

• Monitoring Transformations of State-owned Enterprises (TF051834, effective March 2003)

Objectives: This grant builds upon previous work, including that financed by a grant under ASEM TF1 (TF 22398). It provides technical assistance to consolidate data from more than a thousand sources to give a clear view of the progress being achieved with state-owned enterprise reform, and will strengthen the capacity of the National Steering Committee for Enterprise Renovation and Development to monitor the progress of SOE reform. Reform of SOEs is a key component of Vietnam’s structural reforms, and this grant will make it easier to address gridlocks in the reform process in a timely manner. It will also make it possible to monitor the implementation of agreements between Government and donors on SOE reform. Progress to date: Good progress is being made. The data base now covers all SOEs transformed since the beginning of 2001and those that are subject to transformation in 2003-05, and is the only single data set providing information on the progress of SOE transformation in Vietnam. It is being used as a tool for follow-up work with former SOEs to appraise their progress post-equitization, and as a part of the preparations of a new World Bank Investment Climate Assessment.

• Banking Sector Regulation, Supervision, and Development (TF052046, effective September

2003) Objectives: Building on activities undertaken with previous ASEM grants and resources from several bilateral donors, this grant supports improvements in the supervisory capacities of and prudential regulations for banks, including formulating policies to improve the prudential regulatory framework for banking; helping implement new regulations on capital adequacy and loan-loss provisioning; assessing and reformulating the entry regulations for banks, including foreign banks; formulating policies to improve the State Bank of Vietnam’s examination of banks; and helping implement a CAMELS-based rating system for banks, through the provision of advisory services and training. The grant also supports improvements in access to credit, through the reform of the governance and operational framework for banks. Here the activities include reviewing and updating the Bank of Vietnam’s systems for prudential regulation, bank

51

asset classification, and loan loss provisioning, and the provision of advisory services and training. Progress to date: Progress has been held back by initial project design flaws and the limited progress made in procurement. The project had to be restructured in July 2004 due to an overly complex original design, but is still expected to achieve all its objectives upon full implementation. On March 22, 2005 the World Bank approved the requests for proposals and shortlists for the CAMELS and corporate governance activities, the two (large) remaining components covered by the grant. The first component to be contracted has helped the State Bank of Vietnam to develop a new prudential regulatory framework for banks, as well as new standards for asset classification and loan loss provisioning, based on international standards. The second component, to help the State Bank of Vietnam roll out new regulations , was contracted in February 2005. The new regulatory framework represents a significant leap forward for the banking sector; it should improve the understanding of the actual position of the banks in the short- and medium term, and ultimately improve the safety and soundness of the system. The grant will require an extension to allow for full implementation.

• State-owned Commercial Bank Audit and Basel Core Principle s Assessment (TF052587,

effective January 2004 ) Objectives: To (1) assist the state-owned Industrial and Commercial Bank with audits conforming to the International Accounting Standards, that will provide the basis for the Bank’s recapitalization and provisioning to suitable levels in accordance with sound international banking practice; and (2) help the State Bank of Vietnam (SBV) to complete and implement the Basel Core Principle s Assessment. The latter will provide a comprehensive assessment of SBV’s banking supervision against international benchmarks, and a roadmap for enhancing the Bank’s supervision function. Progress to date: Progress in achieving the grant objectives has been only moderately satisfactory, due to the slow process of procurement. The bulk of the project was contracted in October 2004 and is under implementation. The Basel Core Principle s Assessment component is still under procurement (RFP/shortlisting). The project is expected to fully achieve its objectives, but an extension of the grant will be required to allow for full implementation.

• Training of Directors and Management of Enterprises on Corporate Governance

(TF052643, effective December 2003) Objectives: To help the Government improve and expand the capacity of the Academy of Finance to train directors and managers of enterprises in corporate governance and to implement current governance requirements more effectively. Progress to date: The training needs assessment for corporate governance has been completed, and terms of reference have been prepared to develop training materials and offer two training programs. A project to benchmark corporate governance practices in Vietnam against OECD principles has commenced; the information will be used both for development of training materials for directors of enterprises in Vietnam and as background for conducting a corporate governance report on the observance of standards and codes (ROSC) in Vietnam in due course.

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• Accelerating Capital Markets Development (TF053399, effective August 2004) Objectives: To assist the Government to provide financial services to a broader range of enterprises through capital markets, by providing technical assistance to: (1) improve the capacity of Vietnam’s State Securities Commission (SSC) in policymaking and securities market regulation; (2) increase the quantity, quality, and diversity of instruments offered in the securities market; (3) strengthen the operations of securities market intermediaries; and (4) enhance research on and awareness of the securities market. The grant also supports international exchanges and partnership activities. Progress to date: The procurement process for this grant has been slow, but since the SSC is a new project management unit and new to the World Bank’s procedures, a delay might have been expected. The requests for proposals were issued in December 2004 and the project is expected to begin in late April 2005. The grant is expected to meet its objectives very satisfactorily, but to require an extension to allow full implementation.

• Improving Banking Sector Transparency and Reforming Policy Lending (TF053398,

effective August 2004) Objectives: To facilitate the reform of Vietnam’s policy lending institutions—the Vietnam Bank for Social Policies (VBSP), Development Assistance Fund (DAF), and the Accounting Department of the State Bank of Vietna m—through: (1) introducing regulatory and operational framework changes; (2) implementing sound accounting and financial management practices; (3) improving human resource capacities, strengthening credit risk management functions, fund mobilization, proje ct appraisal, and overall management practices; and (4) assessing the needs for information technology and management information systems infrastructure. The technical assistance is based on direct requests from the three institutions. The project will als o assist in reforming the Vietnamese Accounting Standard (VAS) chart of accounts and the VAS financial statement reporting format for banks, based on the requirements of International Accounting Standards and other international best practices. Progress to date: Progress has been only moderately satisfactory due to slower than expected procurement. Two of the three components are still in the request for proposals and short-listing stage, and only the smallest—for the State Bank of Vietnam’s Accounting Department—has arrived at the final selection process (it was approved by the World Bank in December 2004). For the VBSP component, World Bank approval was given for the request for proposals and shortlist on March 22 2005. Once all components are contracted, it is expected that the project will meet the objectives, but the grant will require an extension to allow full implementation.

• Mekong Housing Bank: Diagnostic Review and Preparation for Strategic

Partnering/Equitization (TF053193, effective May 2004) Objectives: To prepare the Mekong Housing Finance Bank, a state-owned commercial bank, to actively seek a strategic partner as an equity investor. Prerequisite steps to be financed under this grant include an independent financial and portfolio audit of the Bank for two years, a diagnostic assessment of its operations , and a review of the external policy and legislative environment in which it operates. This grant will also support needed pre-transaction institution building activities, including training staff and strengthening the Bank’s internal control systems. Building

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on the diagnostic work, the options and methodologies for selecting a strategic partner will be evaluated and potential investors’ interest assessed. A time-bound action plan for the transaction phase will be prepared. Progress to date: Progress in achieving the grant objectives is only moderately satisfactory due to delayed procurement. The contract was signed November 2004 and an inception report was expected January 2005.

• Support for the Resolution of Non-performing Debt and Assets of State-owned Enterprises

(TF054113, effective January 2005) Objectives: To strengthen the Government’s capacity to resolve non-performing debts and assets of state-owned enterprises. The grant finances technical assistance and workshops to: (1) evaluate the burden of non-performing debts and assets of SOEs and prepare a non-performing debt map and a comprehensive resolution strategy; (2) enhance the operational capacity of Vietnam’s Debt and Asset Trading Company to resolve non-performing debts and assets; (3) evaluate the impacts on non-performing debt and asset resolution of the operational effectiveness of restructured SOEs and the soundness of the business environment. Progress to date: Since the grant only became effective in January 2005, the implementation is starting, with procurement now underway.

• “Road mapping”/Master Planning to Support the Implementation of the International Economic Integration Strategy for the Banking Sector (TF054268, effective March 2005) Objectives: To help the State Bank of Vietnam define all needs for technical assistance and capacity building activities for the implementation of the international economic integration strategy for the banking sector (decision of the Governor of the State Bank of Vietnam No. 663, June 26, 2003). The grant will facilitate the creation of a roadmap to integrate all technical assistance needs and better utilize the financial assistance of bilateral and multilateral agencies. It will thus improve the State Bank’s ability to implement the international economic integration strategy for the banking sector. Progress to date: The grant agreement was countersigned by the State Bank of Vietnam on March 1, 2005.

Social Sector/Protecting the Poor • Strengthening Community-driven Development (TF050255, effective May 2002)

Objectives: To strengthen the capacity to coordinate community-driven development (CDD) projects by providing technical assistance; establishing a central monitoring and evaluation system; analyzing and assessing the results of CDD experiences; and sharing lessons and disseminating findings to improve policies and projects aimed at poor communit ies. The grant will establish a small professional team to coordinate lessons learned from CDD. Lessons and findings will be discussed and disseminated through the Partnership to Assist the Poorest Communes (PAC), a forum established in 1999 to bring Government, donors, and NGOs together to support CDD.

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Progress to date: PAC was revitalized in March 2003 with support provided by the grant, and is providing a mechanism for regular dialogue and sharing of experience between the Government and donors on CDD. In 2003 and 2004 three workshops were held to draw and disseminate lessons from Vietnam’s experience in integrated rural development. The activities completed in the last six months include: (1) completion of five studies of field experience in aspects of community-driven development (e.g. operation and maintenance of commune infrastructure, training of commune cadres and facilitators, ethnic minority radio); (2) two regional consultation meetings and a national high-profile conference including representatives from grassroots levels, local governments, central agencies, and mass organizations, donors, and NGOs to share the lessons on CDD; (3) production and dissemination of six publications based on the above monitoring studies and the CDD conference; (4) conducting regular planning meetings of PAC stakeholders to update them on new development and coordinate planned activities.

• Education Budget Processes (TF051961, effective June 2003)

Objectives: To assist the Government to align the education sector budget with its poverty reduction policies, by evaluating current budget practices and new initiatives that the Government is piloting. Technical assistance under this grant builds on activities undertaken by the Government with support from UK Department for International Development, the European Union, the UN Development Program, and the World Bank. Progress to date: Preparatory work financed from other sources has started. After a joint review by the Ministries of Finance, Planning and Investment, and Education and Training showed that there were multiple unconnected initiatives touching on the budget process at the macro and the sector levels , a work program is being designed to link the key ongoing programs and to fill any gaps. Two missions have looked at the current budget processes, including central allocations and provincial implementation. A dummy budget submission is being prepared for a medium-term expenditure framework in education.

• Support for the Development of Social Security Law in Vietnam (TF053228, July 2004)

Objectives: To help the Ministry of Labor and Social Affairs prepare a new social security law. The grant will support analysis to assess the financial sustainability of the system under different parameters; to evaluate the incentives to participate based on household survey data; to assess the impact on labor demand, based on enterprise data; and assess the effect of changes in the financing of health care on the operation of the system. Progress to date: International and domestic consultants have started their work, and funds have been disbursed in a timely fashion. However, given a slow start, the project management unit needs to accelerate the implementation, and the project may need an extension of around six months to complete its tasks.

• Support for the Operation and Monitoring of the Social Safety Net for Redundant Workers

(Phase 2) (TF053229, effective June 2004) Objectives: To continue supporting the Government’s implementation and monitoring of a social safety net (SSN) for state-owned enterprise workers made redundant by enterprise reform, and to monitor the SSN Fund’s operation in 2004-05. This grant builds on the work of an earlier grant

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(TF050280), described above. The current grant provides (1) technical assistance to facilitate the smooth operation of the SSN Fund; (2) training on SSN policy, regulations , and procedures; and (3) technical assistance on monitoring and evaluation. Progress to date: The project management unit has carried out all tasks for the three main components of the project, and SOEs have expressed satisfaction with the consultants’ assistance in dealing with redundant workers. However, a two- or three-month extension may be needed for completing a follow-up survey on retrenched workers who have receive d compensation from the SSN Fund.

• Support for Strengthening Evidence-Based Pro-Poor Policymaking in Vietnam (TF053933,

effective December 2004) Objectives: To help establish a policy research unit to support the formulation of evidence-based pro-poor polic ies. The grant will: (1) improve the analytical skills of Vietnamese researchers and policy analysts in areas related to pro-poor growth and inclusive development; (2) facilitate policy dialogue among stakeholders in this process, feeding the findings of analyses into the policymaking process; (3) improve coordination among stakeholders including government agencies, research institutions, and donors for evidence-based pro-poor policymaking. Progress to date: Progress has been moderately satisfactory. Due to the time-consuming government procedures to approve the grant, the grant was only fully activated in December 2004 when the grant agreement was countersigned. The project may need an extension to achieve its planned objectives.

4. Experience of the In-Country Steering Committee (ICSC) Two key factors behind the successful implementation of ASEM TF2 activities are a high degree of national ownership and active coordination and involvement by the donor community in Hanoi. These elements are reflected in the workings of the ASEM Vietnam In-Country Steering Committee, comprising representatives from the Government of Vietnam, the European Commission, the EU presidency, and the World Bank Country Office, acting as secretariat for the committee. Through regular meetings, the committee prepares annual ASEM Country Strategies, endorses and prioritizes proposals for new activities ensuring consistency with existing donor activities, and monitors the implementation of approved grants. Some ASEM donors have complained in the past that they were not well informed about the trust fund process. This is now being addressed by involving the In-Country Steering Committee more closely in monitoring and implementation issues. Strengthening the information exchange mechanism among Government agencies, the World Bank Country Office, the European Commission and other ASEM donors, including through the Government’s dissemination of relevant trust fund outputs, has led to more effective implementation of the grants as well as better coordination among donors. The improved coordination among the ASEM partners has enhanced awareness in Vietnam of the ASEM process as a whole. As the ASEM TF2 implementation comes to an end, the ICSC intends to continue this close cooperation in the course of evaluating the implementation and impact of the ASEM TF program in Vietnam.

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Table 10: Vietnam: Status of ASEM TF2 Grants (US$)

TF No. Status TF Program NameEffective

DateTask Manager

Grant Amount

Disbursement % Disb.Closing

Date

TF050454 C Banking Reform Program 07/18/02 Miguel Navarro-Martin

694,000 688,067 99% 12/31/03

TF050280 C Support for the Operation and Monitoring of the Social Safety Net for Redundant Workers

05/07/02 Nga Nguyet Nguyen

342,000 313,885 92% 12/31/03

TF053365 A Technical Twinning Arrangement for the Implementation of the BIDV Restructuring Plan

09/21/04 James Seward 874,000 87,000 10% 08/30/05

TF051834 A Monitoring of SOE New Establishment and Transformations

03/21/03 Daniel R. Musson 400,000 315,505 79% 08/31/05

TF052046 A Banking Sector Regulation, Supervision and Development

09/08/03 James Seward 944,500 211,166 22% 06/30/05

TF052587 A Banking Sector - SOCB Audit and BASLE Core Principle Assessment

01/14/04 James Seward 640,000 122,312 19% 08/31/05

TF052643 A Training of Directors and Management of Enterprises on Corporate Governance

12/29/03 Behdad Nowroozi 325,000 67,900 21% 08/31/05

TF053399 A Accelerating Capital Markets Development

08/13/04 James Seward 650,000 0 0% 08/30/05

TF053398 A Improving Banking Sector Transparency and Reforming Policy Lending

08/10/04 James Seward 975,500 97,000 10% 08/30/05

TF053193 A Mekong Housing Bank: Diagnostic Review and Preparation for Strategic Partnering/Equitization

05/10/04 Son Thanh Tran 350,400 80,000 23% 06/30/05

TF054113 A Support for the resolution of non-performing debt and asset of state - owned enterprises

01/20/05 Daniel Riley Musson

427,594 0 0% 08/31/05

TF054268 A State Bank of Vietnam’s (SBV) Road Mapping/Master Planning Technical Assistances to Support of the Implementation of the International Economic Integration Strategy for the Banking Sector

03/01/05 Thomas Rose 342,000 0 0% 08/30/05

TF050255 A Strengthening Community Driven Development

05/30/02 Dzung The Nguyen

419,000 351,583 84% 01/31/05

TF051961 A Enhancing Poverty Reduction in the Education Budget Processes

06/09/03 Mai Thi Thanh 450,000 144,125 32% 08/31/05

TF053228 A Support Development of Social Security Law (SSL) in Vietnam

07/19/04 Samuel Lieberman

434,500 97,430 22% 08/30/05

TF053229 A Support for the Operation and Monitoring of the Social Safety Net for Redundant Workers (Phase 2)

06/01/04 Viet Tuan Dinh 369,926 201,067 54% 08/30/05

TF053933 A Support for Strengthening Evidence-Based Pro-Poor Policy Making in Vietnam

12/07/04 Viet Tuan Dinh 305,640 82,585 27% 08/30/05

Total 8,944,060 2,859,625 32%

Financial and Corporate Sector

Social Sector/Protecting the Poor

COMPLETED

Financial and Corporate Sector

Social Sector/Protecting the Poor

UNDER IMPLEMENTATION

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ANNEX 1: ASEM TF2 Donors' Contributions as of November 19, 2004

USD USD Value DateDonor Amount Equivalent Amount Equivalent of Conversion Status

China US$ 500,000 500,000 US$ 500,000 500,000 10-Dec-02 Agreement signed on 29 August 2002.

Denmark US$1,000,000 1,000,000 US$1,000,000 1,000,000 19-Apr-02 Agreement signed on 22 March 2002.

Euro 10,000,000 9,813,000 17-Oct-02

Euro 6,000,000 7,434,600 10-Mar-04

Euro 4,000,000 5,188,400 18-Nov-04

Finland Euro 336,376 304,000 Euro 336,376 304,000 21-Dec-01 Agreement signed on 14 December 2001.

France Euro 1,000,000 1,266,100 Euro 1,000,000 1,266,100 24-Feb-04Agreement signed on 8 January 2004.

Italy Euro 2,000,000 2,466,800 Euro 2,000,000 2,466,800 30-Sep-04Agreement signed on 15 July 2004.

Korea US$ 500,000 500,000 US$ 500,000 500,000 18-Oct-02 Agreement signed on 4 September 2002.

Euro 565,000 570,537 12-Dec-02

Euro 565,000 722,918 29-Oct-04

SEK 5,000,000 536,084 20-Sep-02

SEK 5,000,000 670,781 05-Apr-04

Thailand In-kind contrib. In-kind contrib. - -

GBP 4,000,000 5,768,720 03-Apr-01

GBP 990,675 1,409,136 21-Mar-02

38,151,075 38,151,075

2,682,275

40,833,350

* Reflow on 29-Sep-03 from following Donors:China $114,018Denmark $228,038Finland $248,753Sweden $222,920UK $1,868,546Total: $2,682,275

Agreement signed on 22 August 2002. Euro 20,000,000 22,436,000 EC

TOTAL EST. ASEM TF2 AMOUNT:

Sweden Agreement signed on 27 August 2002. SEK 10,000,000 1,206,865

Netherlands Euro 1,130,000

TOTAL ASEM TF2 PLEDGE:

REFLOW FROM ASEM TF1*:

1,293,455 Agreement signed on 21 November 2002.

Agreement signed on 14 March 2001.

U.K.

PLEDGE CONTRIBUTION RECEIVED

7,177,856 GBP 4,990,675