The World Bank The First Vietnam Inclusive and Sustainable Recovery Development Policy Operation (P176717) Program Information Document (PID) Appraisal Stage | Date Prepared/Updated: 27-Apr-2021 | Report No: PIDA31983 Page 1 of 6 The World Bank The First Vietnam Inclusive and Sustainable Recovery Development Policy Operation (P176717) BASIC INFORMATION A. Basic Project Data OPS TABLE Country Project ID Project Name Parent Project ID (if any) The First Vietnam Inclusive and Sustainable Recovery Vietnam P176717 Development Policy Operation (P176717) Region Estimated Board Date Practice Area (Lead) Financing Instrument Macroeconomics, Trade Development Policy EAST ASIA AND PACIFIC 29-Jun-2021 and Investment Financing Borrower(s) Implementing Agency The Socialist Republic of Ministry of Finance Vietnam Proposed Development Objective(s) The proposed operation will support the Government of Vietnam’s effort to promote a more inclusive, green and digital-friendly economic recovery in the aftermath of the COVID-19 pandemic. Financing (in US$, Millions) FIN_SUMM_PUB_TBL SUMMARY Total Financing 140.00 DETAILS -NewFin3 Total World Bank Group Financing 140.00 World Bank Lending 140.00 Decision The review did authorize the team to appraise and negotiate Page 2 of 6 The World Bank The First Vietnam Inclusive and Sustainable Recovery Development Policy Operation (P176717) B. Introduction and Context Country Context The macroeconomic policy framework is deemed adequate for this operation. The impact of COVID-19 on Vietnam’s economic activities has been significant but has not affected macroeconomic stability. The strong fundamentals of the Vietnamese economy, with a large current account surplus and relatively ample fiscal space at the end of 2019, helped the Government to withstand the negative effects of the pandemic. In 2020, Vietnam’s GDP growth rate reached 2.9 percent -- the fastest economic expansion in East Asia and Pacific. Moreover, this performance was achieved without creating large fiscal and external imbalances. The level of public debt increased slightly from 55 percent of GDP in 2019 to an estimated 57 percent in 2020, well below the statutory limit. The country accumulated foreign currency reserves worth $30 billion between 2019 and 2020. While Vietnam’s economic recovery has been remarkable, arguably one of the fastest in the world, the country has not yet returned to its pre-pandemic growth trajectory and many households and businesses are still reporting lasting negative effects of the pandemic on their income and well-being. Like most countries in the world, the Vietnamese economy remains, vulnerable to a protracted COVID-19 crisis that would further weaken or delay global recovery. Such uncertainty underscores the need for Vietnam to maintain sound macroeconomic policies and to build back better by accelerating the implementation of reforms that will enable it to move toward a more inclusive, digitally transformative, and greener economic growth. Relationship to CPF The DPO series is closely aligned with the Country Partnership Framework (CPF) 2018-22, as it contributes to each of the three main three focus areas: (i) enable inclusive growth and private sector participation, (ii) invest in people and knowledge, and (iii) ensure environmental sustainability and resilience. Inclusive growth is supported by several reforms included in the first pillar of the series, especially those associated to the improved delivery of social protection assistance to the most vulnerable. Both pillars of the series will enhance private sector development by reducing the tax burden on businesses and by promoting the implementation of a e-payment system as well as trade flows toward new markets. The CFP policy area of environmental sustainability and resilience is covered by the reforms aiming at accelerating the transition toward a low carbon economy. C. Proposed Development Objective(s) The proposed operation will support the Government of Vietnam’s effort to promote a more inclusive, green and digital-friendly economic recovery in the aftermath of the COVID-19 pandemic. The proposed DPO series will be anchored on two pillars. The first one will support an inclusive economic recovery by reducing the tax burden on COVID-19 affected businesses, facilitating access of vulnerable groups to financial assistance, improving gender balance in labor policies, and promoting financial inclusion with the development of a nationwide e- payment system. The second pillar will contribute to geeing trade policies, accelerating adoption of e-government, and greening its infrastructure through new investments in renewable energy. Page 3 of 6 The World Bank The First Vietnam Inclusive and Sustainable Recovery Development Policy Operation (P176717) Key Results At the end of the proposed series, Vietnam is expected to have made progress towards a more inclusive, digitally transformed and climate resilient economy. The country is already making progress on these fronts. For example, both the public and private sectors have accelerated their digital adoption at an unprecedented pace in recent months. Despite the slowdown in global trade and investment flows, the country has managed to improve its trade footprint in the world through the robust expansion of merchandise exports (up 7 percent in 2020) and by attracting massive FDI inflows. While Vietnam has historically lagged in its transition toward a low carbon economy, recent changes in the legal framework have boosted new private investments in solar energy, generating over 10-12 giga watts (GW) of renewable power during the past nine months. The proposed DPO series will play a catalytic role in facilitating this transition. These achievements have been the outcome of the strong and productive partnership between the WBG and Vietnam built over the years, including a robust and diverse technical assistance program and joint analytical studies. D. Project Description As mentioned earlier, the proposed DPO series will be anchored on two pillars. The first pillar will support the authorities in their effort to support an inclusive recovery by easing the burden of the COVID-19 crisis on businesses and people. It will help promote further inclusion by supporting structural reforms in the following policy areas: ( i) ease the tax burden of businesses affected by the COVID-19 pandemic (Prior Action #1); (ii) improve financing assistance to vulnerable groups through better targeting (Prior Action #2); (iii) ) reduce gender discriminations on the work place (Prior Action #3); and (iv) promote financial inclusion through the development of mobile money as a large proportion of the poor remain unbanked in Vietnam (Prior Action #4). The second pillar will help promote a sustainable recovery through digitalization and green growth. The recent adoption of several regional trade agreements, including with European Union in June 2020, offers the opportunity not only to diversify toward new markets but also to modernize the local business environment through the sharing of international best practices (Prior Action #5). The series will promote several reforms supporting the digitalization process of the government (Prior Actions # 6 and 7) and the transition toward a low carbon economy by encouraging investment into renewable energy (Prior Actions # 8 and 9). E. Implementation Institutional and Implementation Arrangements As the program identified in this proposed DPO series is based on the national reform agenda, the national authorities will be monitoring and evaluation of the program as part of their regular M&E of the various strategies and plans that they are implementing. The Ministry of Finance will coordinate this M&E activity. Through the preparation of the series, in consultation with the authorities, an initial set of indicators, baselines and targets were identified to assess the impact of the policy program. The indicators that have been drawn directly from the government’s own strategies, progress reports, and independent sources and surveys. The operation builds on the existing monitoring and evaluation systems of the government, to ensure that program performance is monitored at no additional burden to the institutions. Regular progress reviews will be undertaken as part of the preparation cycle, focusing on both completion and follow up of prior actions as well as progress toward the agreed result indicators. After completion of this operation, the entire series will also be subject to the implementation completion and results review. Grievance Redress: Communities and individuals who believe that they are adversely affected by specific country policies Page 4 of 6 The World Bank The First Vietnam Inclusive and Sustainable Recovery Development Policy Operation (P176717) supported as prior actions or tranche release conditions under a World Bank Development Policy Operation may submit complaints to the responsible country authorities, appropriate local/national grievance redress mechanisms, or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address pertinent concerns. Affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/GRS. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org. � F. Poverty and Social Impacts, and Environmental, Forests, and Other Natural Resource Aspects Poverty and Social Impacts None of the prior actions and their expected outcomes supported by the proposed DPO series are expected to have significant negative impacts on poverty and shared prosperity. On the contrary, several reform measures are expected to directly benefit the poorest and most vulnerable groups through improved targeting and delivery of social programs as well as greater financial inclusion. Other reforms will contribute to faster economic growth among the poor, expanding income opportunities through their indirect effects on productivity and the allocation of resources. Gender equality and women earning opportunities should improve through access to better priced childcare. Environmental, Forests, and Other Natural Resource Aspects This operation is unlikely to cause significant adverse effects on environment, forests, or other natural resources. Overall, the two prior actions related to greening infrastructure and transitioning to low carbon energy production will lead to significant positive environmental outcomes. The policy decision to move to solar energy will help gradually reduce the strong dependance on coal that is estimated to contribute to over half of GHG emissions in the country, principally around the two urban centers of Hanoi and Ho Chi Minh City. Other Prior Actions are not expected to impact the environment significantly. Some may have indirect effects through incentives to be greener and more efficient in energy use. For example, the adherence to the new regional trade agreement with the EU will promote some adjustments in the business environment, including in the most efficient use of energy in industries. The possibility that some of Vietnam’s key trade partners, the US and EU, may raise carbon taxes at their borders would also incentivize exporting companies to accelerate their transition toward the use cleaner energy. G. Risks and Mitigation . The overall risk to PDO achievement is assessed as moderate. Page 5 of 6 The World Bank The First Vietnam Inclusive and Sustainable Recovery Development Policy Operation (P176717) CONTACT POINT World Bank Jacques Morisset, Dorsati H. Madani Program Leader Borrower/Client/Recipient The Socialist Republic of Vietnam Implementing Agencies Ministry of Finance Hai Hoang Deputy Director General hoanghai@mof.gov.vn FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects APPROVAL Task Team Leader(s): Jacques Morisset, Dorsati H. Madani Approved By APPROVALTBL Country Director: Stefanie Stallmeister 27-Apr-2021 Page 6 of 6