Page 1 PROGRAM INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB3078 Operation Name Vietnam: Developing Advanced Institutions for Higher Order Capacity (DAIHOC) Program Region East Asia and Pacific Sector Tertiary education (100%) Project ID P104694 Recipient Socialist Republic of Vietnam Implementing Agency Ministry of Education and Training (MOET) 49 Dai Co Viet Vietnam Tel: (84-4) 869 4795 Fax: (84-4) 869 4085 Date PID Prepared April 19, 2007 Estimated Date of Appraisal Authorization November 26, 2008 Estimated Date of Board Approval May 15, 2009 1. Key development issues and rationale for Bank involvement Vietnam has been one of the best performing economies in the world over the last decade . Real GDP has grown by 7.3 percent over the last 10 years with per capita income rising by 6.2 percent. The economy has proven resilient to shocks growing by 7.8 percent in the last three years; income per capita rose from $260 in 1995 to $400 in 2000 to a current level of $640. At this pace Vietnam would enter the ranks of middle-income countries by surpassing US $1,000 per capita in 2010. Vietnam has become increasingly integrated with the world economy, and joined the WTO in November 2006 . The share of agriculture in GDP declined from 27 to 21 percent of GDP over 1995-2005 while that of industry rose from 29 to 41 percent over the same period. The services sector picked up in the last two years to record an average growth of 7.2 percent over 2001-05. Tourism-related services have been especially buoyant. The share of the domestic private sector in total investment has risen from 23 percent in 2001 to over 32 percent in 2005, while that of the state-owned sector has declined from about 60 percent to 52 percent. Foreign investment has picked up strongly in the last two years. Reassuringly, public debt stood at a manageable 43 percent of GDP at the end of 2005 . This figure also includes realized contingent liabilities from banking sector reform. However, the problem is manageable especially if the recently adopted banking reform roadmap is implemented as planned. The Government’s current revenue more than covers current expenditure and borrowing is undertaken only for investment Broad- based growth has been accompanied by a continuation of Vietnam’s remarkable record in poverty reduction . Data collected through the Vietnam Household Living Standard Survey (VHLSS) shows that the percentage of the population living in poverty has fallen from 58.1 percent in 1993 to 19.5 percent in 2004. The proportion of poor people now is only about one-third of what it was a decade ago, while measures used to track inequality suggest that there has been only a modest increase in inequality over that time. However, these impressive achievements sit alongside much slower progress for ethnic minorities. The recent trends in poverty in Vietnam demonstrate keenly that growth alone cannot tackle all the problems of poverty and social exclusion. Progress has been more rapid for the majority Kinh and Chinese population groups, even in when they live in remote and mountainous areas. Page 2 There was a noticeable acceleration, starting around 2001, of the Government’s drive towards relying on market mechanisms, building a multi-stakeholder economy and further integrating with the region and the world . The vision underlying this drive was articulated in several strategic plans and documents, including the Ten-Year Socio-Economic Development Strategy 2001-2010, the Five-Year Socio-Economic Development Plan (SEDP) 2001-2006 and the Comprehensive Poverty Reduction and Growth Strategy (CPRGS). These strategic plan represented a sharp improvement from earlier planning documents based on a “command and control” view of the economy spelling out detailed sector-by- sector production targets. In this impressive economic growth, there is increasingly high demand for tertiary graduates in relevant disciplines, the need to improve the match between graduates’ skills and employers’ requirements and the need for change of HE system to be more efficient and responsive to on-going changes of economy and society. GOV sets clear goals for higher education in its “Socio-Economic Development Plan 2006-2010,” (SEDP). 1 The SEDP aims for an overall quantitative goal of “increasing enrollment in universities and colleges by 10 percent annually, to reach a level of 200 students over 10,000 population by 2010” and an overall qualitative goal of “approaching the advanced education standards of the region and the world,” specifically inter alia by: renovating curricula and teaching methods; developing systems that increase study opportunities through transfers; renovating financial mechanisms and policies to make institutions more pro-active and responsible for finance, staff and organization; renovating management with stronger decentralization, and clearer responsibilities and authorities for different entities; implementing quality assurance and accreditation schemes, gradually applying standards and criteria used by developed countries and joining international educational quality accreditation systems; encouraging the establishment of private institutions, including high-quality, accredited and 100 percent foreign-invested institutions in science, technology, and economic management; encouraging foreign scientific and educational experts and Vietnamese expatriates to teach in Vietnam. GOV elaborates on its goals for higher education in its “Higher Education Reform Agenda” (HERA). 2 HERA develops forward-looking strategy for the development of higher education and research. Through HERA, GOV shows its commitment to improving the higher education system in a rapidly changing economic and social environment. It is strategic and comprehensive, with major emphasis on key operational reforms that the World Bank supports, namely: (i) improving the quality of teaching and research, with a view to integration into the increasingly globalized economy; (ii) extending HEI autonomy, especially in academic and administrative matters, with a view to improving responsiveness to the needs of beneficiaries; and (iii) increasing private sector investment, vital in the fiscal sustainability of an expanding sector. GOV’s main challenge is to operationalize these strategic goals by addressing broad governance issues (e.g. legal and financial frameworks) while promoting local, HEI-level modernization. The World Bank’s five-year Country Partnership Strategy (CPS) 3 supports the GOV’s “Five-Year Socio-Economic Development Plan 2006-2010.” Under CPS Pillar I, which aims to assist GOV in its transition to a market economy, the World Bank’s program will help to “develop a higher education system that produces graduates better suited to the new economy’s needs,” measured by changes in the proportion of students finding employment within six months of graduation by field of study. 1 Kê hoa ch Pha t triê n Kinh tê - Xa hô i 5 n m 2006 -2010 (Socio-Economic Development Plan 2006-2010), attachment to Government Resolution No. 25/2006/NQ-CP, dated October 9, 2006. 2 Nghi quyê t vê ô i m i C ba n va Toa n diê n Gia o du c a i ho c Viê t Nam Giai oa n 2006 -2020 (Government Resolution No. 14/2005/NQ-CP, dated November 2, 2005, on substantial and comprehensive renewal of Vietnam’s tertiary education in the 2006-2020 period). See Annex 1. 3 Report No. 38236-VN, dated January 3, 2007. Page 3 Building a higher education system in Vietnam that is innovative, responsive to the demands of the market and of high quality is essential to the economic growth and development of Vietnam. GOV has requested the World Bank to provide c ontinued support for Vietnam’s higher education agenda, recognizing the success of past collaboration in the sector. The World Bank looks at economic development in a comprehensive way and can therefore work with GOV on a higher education strategy that is consistent with, and in support of, Vietnam’s overall development strategy. This is all the more critical at a time when Vietnam, having recently acceded to membership of the World Trade Organization, is looking to develop a skilled population, with a strong knowledge base, that will position the country well for expansion and integration with the global economy. More specifically, the World Bank can bring its international experience in the higher education sector to help Vietnam implement its HERA program. The World Bank has in-depth experience across many higher education projects in the design and implementation of competitive funding, institutional autonomy and performance-based financing to drive improved standards in research and teaching and improvements in the relevance of higher education, all of which are important objectives set out in HERA. 2. Proposed objective The proposed program aims to support the government in the implementation of HERA to improve the higher education responsiveness and overcoming skill bottlenecks for a rapidly changing economic and social environment. In particular, the proposed program, through a Development Policy Lending instrument, will assist the Ministry of Education and Training to develop and implement a series of policies and regulations defined in HERA which will create a more flexible, responsive and diverse higher education system, with more private sector participation, supporting governance and financing frameworks. 3. Preliminary description The program would consist of a series of key policy measures, each financed by a separate credit, linked to an indicative program of reform. Measures implemented by Government on the basis of policy analysis and development carried out with technical assistance under grant-financed component of the Second Higher Education Project (P079665) in the four key areas, including governance, financing, quality assurance and public finance management. The brief description is follow: Governance . The proposed program aims to improve the governance of the higher education and research system at both national, regional and local levels, This implies, in particular, giving greater autonomy to individual institutions, increasing their accountability and introducing measures in order to create a climate of competition between and within institutions that promotes improvement. Financing. The proposed program aims to enhance efficiency and equity of higher education financing through promoting greater autonomy of higher education institutions in managing their own finance and ensuring equitable opportunities to all students based on ability and aspirations and society’s needs. Quality assurance. The proposed program aims to improve the quality of teaching and research of higher education to meet the market demands by establishment of independent quality assurance system using standards –based and credit - based framework for higher education institutions qualifications. Public finance management. The proposed program aims to improve the efficiency and transparency in public resource use by adopt and apply a reliable financial management system, including internal and external audit system in accordance with sound financial management practices. 4. Environment Aspects Page 4 The environment safeguard policy (OP 4.01 and OP 4.012) is not triggered. 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT 0 International Development Association (IDA) 40 Total 40 6. Contact point Contact: Jeffrey Waite Title: Senior Education Spec. Tel: +84-4-934-6600 Fax: +84-4-934-6597 Email: jwaite@worldbank.org Location: Hanoi, Vietnam (IBRD)