IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA IDA TF-50988) CREDIT IN THE AMOUNT OF SDR49.10 MILLION (US$63.83 MILLION EQUIVALENT)

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank Report No: ICR IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA IDA TF-50988) CREDIT IN THE AMOUNT OF SDR49.10 MILLION (US$63.83 MILLION EQUIVALENT) TO THE SOCIALIST REPUBLIC OF VIETNAM FOR A PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT April 30, 2014 Poverty Reduction and Economic Management Unit East Asia and Pacific Region

2 CURRENCY EQUIVALENTS (Exchange Rate Effective October 2013) Currency Unit = Dong (D) US$1 = 21,100 D FISCAL YEAR January 1 -- December 31 ABBREVIATIONS AND ACRONYMS AF AP BPS CAS CFAA COA CPAR CPS CRPGS DeMPA DMFAS DFID FCWT FM GFMIS GFS GL GOV ICT IDA IFC IFMIS IMF IPSAS IV&V IS ISDA ISR MTR MOF MPI MTFF MTEF Additional Financing Accounts Payable Budget Preparation System Country Assistance Strategy Country Financial Accountability Assessment Charter of Accounts Country Procurement Assessment Report Country Partnership Strategy Comprehensive Poverty Reduction and Growth Strategy Debt Management Performance Assessment Framework Debt Monitoring and Financial Analysis System Department for International Development (UK) Foreign Contractor Withholding Tax Financial Management Government Financial Management Information System Government Finance Statistics General Ledger Government of Vietnam Information and Communications Technology International Development Association International Finance Corporation Integrated Financial Management Information System International Monetary Fund International Public Sector Accounting Standards Independent Validation and Verification Information Systems International Swaps and Derivatives Association Implementation Status & Results Report Midterm Review Ministry of Finance Ministry of Planning and Investment Medium-Term Fiscal Framework Medium-Term Expenditure Framework i

3 NDW PAD PDO PER PFMRP PFMRI PMU PRSC RPM SBV SOCB SOE SU TA TABMIS TCS TSA TTL UNCTAD UNDP VST National Data Warehouse Project Appraisal Document Project Development Objective Public Expenditure Review Public Financial Management Reform Project Public Financial Management Reform Initiative Project Management Unit Poverty Reduction Support Credit Regional Procurement Management State Bank of Vietnam State-owned Commercial Banks State-Owned Enterprise Spending Unit Technical Assistance Treasury and Budget Management Information System Tax Collection System Treasury Single Account Task Team Leader United Nations Conference on Trade and Development United Nations Development Program Vietnam State Treasury Vice President: Axel van Trotsenburg Country Director: Victoria Kwakwa Lead Economist: Sandeep Mahajan Project Team Leader: Quyen Hoang Vu ICR Team Leader: Minh Van Nguyen ii

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5 SOCIALIST REPUBLIC OF VIETNAM PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Project Costs and Financing Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Bank Lending and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents Annex 10. Results Framework Analysis MAP iii

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7 A. Basic Information Country: Vietnam Project Name: Public Financial Management Reform Project Project ID: P L/C/TF Number(s): IDA-37670,IDA ,TF ICR Date: 02/10/2014 ICR Type: Core ICR Lending Instrument: SIL Borrower: SOC. REP. OF VIETNAM Original Total Commitment: XDR 39.90M Disbursed Amount: XDR 45.10M Revised Amount: XDR 49.10M Environmental Category: C Implementing Agencies: Ministry of Finance of Vietnam Cofinanciers and Other External Partners: DFID B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 02/04/2002 Effectiveness: 09/04/ /04/2003 Appraisal: 03/10/2003 Restructuring(s): 02/3/ /26/ /19/2013 Approval: 05/22/2003 Mid-term Review: 12/11/2006 Closing: 02/28/ /31/2013 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Moderately Satisfactory Negligible to Low Moderately Satisfactory Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Satisfactory Quality at Entry: Government: Satisfactory iv

8 Quality of Supervision: Overall Bank Performance: Satisfactory Moderately Satisfactory Implementing Agency/Agencies: Overall Borrower Performance: Satisfactory Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project at any time (Yes/No): No Problem Project at any No time (Yes/No): DO rating before Closing/Inactive status: Satisfactory Quality at Entry (QEA): None Quality of Supervision (QSA): None Rating D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration Sub-national government administration Theme Code (as % of total Bank financing) Debt management and fiscal sustainability Public expenditure, financial management and procurement E. Bank Staff Positions At ICR At Approval Vice President: Axel van Trotsenburg Jemal-ud-din Kassum Country Director: Victoria Kwakwa Klaus Rohland Sector Manager/Lead Economist: Sandeep Mahajan Barbara Nurnberg Project Team Leader: Quyen Hoang Vu Edward Mountfield ICR Team Leader: Minh van Nguyen ICR Primary Author: Sati Achath v

9 F. Results Framework Analysis See Annex 10 for details G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 06/30/2003 Satisfactory Satisfactory /19/2003 Satisfactory Satisfactory /26/2004 Satisfactory Satisfactory /02/2004 Satisfactory Satisfactory /15/2005 Satisfactory Satisfactory /28/2005 Satisfactory Satisfactory /25/2006 Satisfactory Satisfactory /29/2007 Satisfactory Satisfactory /20/2008 Satisfactory Satisfactory /23/2008 Satisfactory Moderately Satisfactory /17/2008 Satisfactory Moderately Satisfactory /30/2010 Satisfactory Moderately Satisfactory /25/2010 Satisfactory Moderately Satisfactory /16/2011 Satisfactory Moderately Satisfactory /01/2012 Satisfactory Moderately Satisfactory /13/2013 Satisfactory Moderately Satisfactory /16/2013 Satisfactory Moderately Satisfactory /30/2013 Satisfactory Moderately Satisfactory H. Restructuring (if any) Restructuring Date(s) Board Approved PDO Change ISR Ratings at Restructuring DO IP Amount Disbursed at Restructuring in USD millions Reason for Restructuring & Key Changes Made 02/3/2011 N S MS For details see Section /26/2013 N S MS For details see Section /19/2013 N S MS For details see Section 1.7 vi

10 I. Disbursement Profile vii

11 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Country and Sector Background. At the time of appraisal in 2003, Vietnam with a population of 78 million people, had a three-tiered structure of local governance. In addition to the national level administration, there were 61 provinces (tier l), 695 districts (tier 2) and 10,500 communes and wards (tier 3). The share of these local administrations in total expenditure increased steadily from 26 percent in 1992 to over 43 percent in 1998, and to close to 50 percent in The existing treasury and budget management systems included some effective mechanisms to prevent over-spending and misappropriation of resources. Targeting of spending on public health and education-especially on education, had improved over time. Public social expenditures were more equally distributed than household expenditures. The 1996 State Budget Law established clear and generally sound rules of the game for resource allocation and resource use. A revised State Budget Law was approved by the National Assembly in December 2002 and came into force in January This revised legislation strengthened the legal platform for budget management in three important regards: (i) Managing decentralization: The new law further clarified the roles and responsibilities of central and sub-national government; (ii) Improving transparency and accountability: The new law consolidated and built on the efforts to promote fiscal transparency and accountability allowing for more detailed publication of final accounts for 2000 and the budget plan for 2002 and providing an enforcement mechanism to make communes post their budgets outside offices; and (iii) Promoting administrative rationalization and streamlining: The division of responsibilities between the Ministry of Finance (MOF), the State Treasury Department (within the MOF), the Ministry of Planning and Investment and the State Bank of Vietnam were further clarified. Project Background. The Public Financial Management Reform Project (PFMRP) was approved by the Board of Executive Directors on May 22, 2003, and became effective on September 4, The project aimed at strengthening the government s capacity to plan, execute and report on its budget and to improve the transparency and accountability of the budgetary systems and processes. The project included major investments to upgrade the core systems of public financial management (funded by International Development Association (IDA) credit), and Technical Assistance to support institutional reforms, policy formulation, and capacity building (partly funded by DFID co-financing). 1

12 Rationale for Bank assistance: The Bank had been working with the Government of Vietnam (GOV) on public financial management reform over a number of years, and had developed a strong partnership with the borrower. There was strong synergy between the Bank support for this project and other components of the Bank Group Country Assistance Strategy 1 (CAS) for Vietnam. In particular, the case for ongoing budget support, through Poverty Reduction Support Credits (PRSCs) and sector-wide assistance programs, would be significantly strengthened if a well-designed project to strengthen public financial management reform was underway in Vietnam. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The objective of the PFMRP was to strengthen budget planning, execution, reporting and accountability. Key performance indicators for the PFMRP were: Accuracy, timeliness, relevance, transparency and compliance with international best practices in budget execution and reporting at each level of government. Better planning of the State Budget and the Public Investment Program to achieve the growth and poverty reduction goals set out in the Comprehensive Poverty Reduction and Growth Strategy (CPRGS). Greater fiscal sustainability through improved and more integrated recording of external and domestic public and publicly guaranteed debt, improved capacity to monitor State-Owned Enterprise (SOE) liabilities, and improved ability to assess associated fiscal risks. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification The objective was not revised. However, at the time of Additional Financing in January 2011, the output indicators were updated to fully reflect the expectations from the key project activities. 1 Document number: VN; Date of latest CAS discussion: September 3,2002 2

13 1.4 Main Beneficiaries Expected beneficiaries were all those who use public services in Vietnam. Through the development of formal links between budget management and the developmental goals of the CPRGS, the poor would benefit significantly. 1.5 Original Components (as approved) The project consisted of four components as follows: Component 1: Strengthening Treasury and Budget Management (61.42 million) The first and largest component of the PFMRP would involve the implementation of an integrated Treasury and Budget Management Information System (TABMIS). The turnkey procurement of the new TABMIS, included hardware, software, technical advice to implement cash management, a Treasury Single Account (TSA) and a government-wide uniform chart of accounts. Component 2: Strengthening State Budget and Investment Planning (4.18 million) This component would involve the strengthening of state budget and investment planning, including the development of a Medium Term Fiscal Framework (MTFF) and of Medium Term Expenditure Frameworks (MTEFs) in four pilot sectors and four pilot provinces. Component 3: Strengthening Management of Public Debt and Monitoring of SOE Fiscal Risks (2.88 million). This component would support the strengthening of the Government's ability to manage Vietnam's public debt and to begin monitoring fiscal risks that emanate from State-Owned Enterprise (SOE) liabilities. This would include technical assistance (TA), training and capacity building, as well as systems implementation to support recording of domestic debt (interfacing or integrated with systems for recording of external debt that are already under development with United Nations Development Program (UNDP) assistance). Component 4: Project Management Support (2.97 million). This component aimed at financing PMU personnel (local consultants and Government staff), training, in-country travel, office space, telecommunication costs, consumables, transport, and audit services. 1.6 Revised Components The components were not revised. However, as mentioned in Section 1.7, the scopes of several sub-components were adjusted. 3

14 1.7 Other Significant Changes The project involved the following changes: (i) Additional Financing Additional Financing (AF) of US$14.0 million was provided in January The objectives of this AF were to: (i) ensure successful completion of original project activities that face cost overrun; and (ii) scale-up the implementation of selected activities and add a limited number of new activities in order to improve the efficiency of the project and sustain its development effectiveness. The details are as follows: Nearly 65 percent of AF went towards completion of the original project activities for which the cost had increased during the first seven years of project implementation. AF was needed to complete TABMIS nationwide implementation, ensure system stability and sustainability for the full scope of users and functions required. The remaining 35 percent of AF was used to finance implementation of additional or expanded activities. For component 1, additional activities included scaling up the implementation of Budget Allocation module to major supervising agencies at central budget level, technical assistance for development of the model, roadmap, technical requirements and bidding documents of a TABMIS Portal, designing a TABMIS Portal enabling e- transaction by all spending units (SUs), and developing a model and a roadmap towards the government s longer term vision of a Government Financial Management Information System (GFMIS), with TABMIS at its core. For component 2, AF was required to prepare timely for the adoption of MTFF and MTEF, which were successfully piloted during the previous four years, and integration of these frameworks to the annual budget process. For component 3, AF was needed to further enhance public debt and risk management instruments and capacity, and to strengthen the monitoring of fiscal risks arising from SOEs. (ii) Project Restructuring The project was restructured three times during implementation: First Restructuring: 3 February The restructuring involved following changes: Adjusting the scope of several sub-components. As the changes are too numerous to be mentioned in the ICR, details are available in project documents. 4

15 Allocation of additional financing and reallocation of funds: (a) The AF of US$ 14 million was mainly allocated to Component 1 (about 80 percent) (b) Unallocated amount of the Original Credit was reallocated to other categories of items financed under the project. (c) A new category of Consultants Services/Training/Workshops was added to reflect the plan to use IDA, instead of DFID co-financing which was expiring, for this type of expenditures. (d) Changes to percentage of financing in each category. Simplification of capital structure was proposed with only two types: 100 percent IDA, 95 percent IDA. Revising the closing date. The closing date of the project was extended from February 28, 2011 to February 28, For details see Project Schedule below. Second Restructuring: 26 February The second Level 2 restructuring included: Revising project activities and their associated output indicators. In response to changing circumstances, it was necessary to: (a) remove selected activities which were no longer appropriate technically or feasible within the project timeframe; and (b) update feasible delivery timeline for a number of pending activities. Accordingly, the output indicators were updated. The removal included: (i) Rollout of Budget Allocation Module to selected major supervising agencies, of which the implementation timeline was no longer feasible in the extension period, and the implementation approach was considered to be technically more optimal through the future TABMIS Portal. (ii) Feasibility study of a Budget Preparation System (BPS), which could be undertaken only after the State Budget Law was revised in Reallocating proceeds across different categories. Allocation of proceeds were adjusted to align them with the changes in project activities: 5

16 For the Original Credit: TABMIS was delivered under a turn-key contract covering both goods and operating costs it was therefore not possible to split category 2 2 and category 3a in each bill. The government wanted to charge the entire contract amount to category 2, thereby requesting to reallocate SDR5.74 million from category 3a (which was supposed to finance operating costs of the turn-key contract) to category 2. For the AF: Reallocation was done from category 2 to category 3a and category 4 in response to additional training needs. The reallocation increase was financed from category 2 due to the savings from the purchase of additional hardware. Third Restructuring: 19 September, The third Level 2 restructuring was to response to changing circumstances and to address the incorrectly reflected information in the existing legal agreement. Changes include (i) remove selected activities which are no longer appropriate technically or feasible within the project timeframe; and (ii) revise a number of sector and output indicators to reflect their recent expectations on content and delivery timeline. (iii) Project Schedule: During implementation the closing date was extended three times as shown below: (a) First Extension: The project closing date was extended from February 28, 2009 to February 28, 2011 to fully achieve the PDO through complete deployment of TABMIS and the Debt Monitoring and Financial Analysis System (DMFAS). (b) Second Extension: The second extension of the project for two more years was required to complete several key original activities. These activities included: (i) Completion of TABMIS rollout to the remaining 28 provinces and any adjustments required after the first years of operation, full operationalization of core TABMIS modules including commitment management and cash management, and introduction of a TSA; (ii) Development of a feasibility study for a BPS; and (iii) Implementation of the domestic DMFAS and integration of domestic and external debt databases. (c) Third Extension: The closing date was extended for eight months from February 28, 2013 to October 31, 2013, to ensure successful hand-over of the TABMIS from the contractor to the MOF and completion of remaining critical activities. 2 Category 1: Goods other than financial management systems Category 2: Goods for financial management systems; Category 3: Incremental Operating Costs (a) For TABMIS; (b) for PMU; Category 4: Consultants Services/Training/Workshops 6

17 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Quality at Entry. The project s quality at entry was moderately satisfactory. The design was realistic in terms of technical perspective and sequencing. For example, initial design of TABMIS was compact in terms of budget preparation and execution/accounting system which focuses only core treasury functions. Likewise, for the component 3 on public debt management, there were strong linkages between the sub-components. The technical tasks involved in completing the project were appraised and assessed to be feasible for Vietnam, given the continued commitment and leadership. In Information and Communications Technology (ICT) terms, this was mainstream work, with wellestablished solutions and internationally-recognized software packages. For TABMIS, the turnkey procurement was chosen, which was a well thought out decision. Measures for mitigating the risks associated with the turnkey approach included increased quality of the bidding documents; bid evaluation and contract; careful scrutiny of CVs and references with controlled resource replacement and right to reject unsuitable resources. An Independent Verification and Validation (IV&V) adviser was used to ensure close contract management. Advanced training of PMU procurement and technical staff on Information Systems (IS) procurement was also included in the project design. Even though in hind sight it appears that the timeline envisioned in the design was ambitious, at the time of project preparation it was realistic to estimate that the implementation of TABMIS could be completed within about six years. It was mainly because of the increase in the number of users from the originally estimated 5000 to more than and the resulting expansion of the scope of TABMIS that the project needed 10 years for completion. Although the project took time like any other IFMIS project, it delivered a highly successful outcome for Vietnam. Many strong and innovative features of the design played a very large part on the success of the project. The Bank took its time to move ahead with this operation, waiting until the new PFM framework was in place. The turn key contract structure, careful oversight of procurement and independent verification and validation of delivery meant that the Government was able to deliver a strong design and had support to manage this complex procurement and contract. 7

18 On the other hand, the design had the following two shortcomings: The PDO was broadly defined The PDO indicators did not have specific measurable targets Soundness of Background Analysis. As part of project preparation, sector background was studied, main sector issues were analyzed in depth, and government strategies to deal with these issues were also considered. There was extensive analysis of sector issues, including the joint IMF-World Bank study of 1999 "Towards Fiscal Transparency"; the joint Government-donor Public Expenditure Review (PER) of 2000; the 2001 Country Financial Accountability Assessment (CFAA) of 2001; and the 2002 Country Procurement Assessment Report (CPAR) of Lessons Learned and Reflected in the Project Design: Lessons were learned from other public financial management reform projects financed by the Bank, including those in Guatemala, Ecuador, Pakistan, Kazakhstan, Ghana, Bolivia, Hungary, Colombia and Turkey, and incorporated into the project. These included the importance of: (i) integrating management and institutional reforms with ICT investments; (ii) sequencing reforms, with a focus on core systems first; (iii) ensuring government commitment and management support for the overall reform through extensive and deep dialogue with the authorities in all aspects of project design and implementation and through workshops in different provinces of the country; (iv) the importance of inter-agency coordination and user involvement in systems design; (v) the importance of developing organizational capacity and technical skills; (vi) the need for formal project planning and systematic processes for management of change; and (vii) the need to develop user requirements, functional and technical specifications and procurement documentation in advance of the main procurement of an ICT solution. Risks and Risk Mitigation Measures. The Project Appraisal Document (PAD) had identified some risks and mitigation measures as deemed appropriate at that time were taken during the preparation stage. Even though there were a few areas where risks were relatively high/substantial, these risks were managed appropriately as indicated in the PAD. Adequacy of Government Commitment: The MOF has been requesting support for a project of this kind from the Bank for at least five years. The continued strength of the Government's commitment and ownership to the project was demonstrated, among other things, by: (i) the Prime Minister's statement on the Public Administration Reform Master Plan, including a clear statement of public financial management reform objectives; (ii) the establishment, through a formal decision of the Minister of Finance of a Steering Committee for the Public Financial Management Reform Initiative; (iii) the passing by 8

19 the National Assembly of a revised Law on State Budget in December 2002, including formal clarification of responsibility for budget planning, budget execution and management of public debt; (iv) the recruitment of the consultant to assist the Government with preparation of the TABMIS; (v) the appointment of one of the MOF s most senior and capable officials to lead the PFMRP team on a full time basis; and (vi) implementation of other reforms to strengthen information, transparency and public financial management. 2.2 Implementation Over the years the project experienced delays due to time consuming ICB procurement of TABMIS system and implementation involving large and complex IT system, business process reengineering, change management, and capacity building process. The Bank conducted a Midterm Review (MTR) in Vietnam from 11 to 22 December, 2006, and assessed progress to date on all project components, the implementation issues and the actions to be taken to ensure the successful completion of the project. The review identified a number of areas where there were issues for the immediate focus of the project to ensure that the project outputs were produced timely and the project objectives were achieved. Factors Affecting Implementation. The following factors affected project implementation: Component 1: (i) The TABMIS contract finalized about 10 months later than originally forecast due to delays caused by the complexities of the procurement package and partly by internal government approval process. (ii) Lack of experience of the government in the early stages of the project for managing a complex TABMIS component and the failure of IV & V consultants to fulfill their role of advising and supporting the government in contract implementation slowed down implementation. (iii) The number of key specialists for the contractor IBM based in Hanoi was not adequate to address issues and improve performance of TABMIS rollout rapidly. There was substantial delay in resolution of technical issues related to application software by the IBM team and Oracles. (iv) The original design of the system capacity (based on survey results obtained about 6-7 years prior to bidding so became backward) was not sufficient for system rollout which necessitated additional time for all parties (the Bank, the government and the contractor) 9

20 in studying and deciding on the system hardware upgrading. These contract revisions were subjected to the World Bank's consideration and approval which took considerable time. (v) Implementation of several core TABMIS modules were delayed fully operational (commitments control, and cash management), due to a need to enact regulations and establish necessary technical infrastructure including automated integration of data across a number of existing and under-development external systems. Component 2: (vi) There were several difficulties in implementing the pilots. Firstly, despite efforts to integrate the MTEFs into the annual budget cycle, given that it was only a pilot, many staff saw this as an added task rather than as part of their ongoing duties. Interest and participation as a result was mixed. This was particularly the case for the Planning and Investment Department, which in 2012 put together a Medium-Term Investment Plan. Secondly, compiling information in a timely manner was a real challenge. (vii) Progress was slow on the preparations for the rollout of the MTEF across the country due to delay in the finalization of key reforms expected to the Constitution and the State Budget Law. (viii) The Budget Preparation System (BPS) was dropped from the project as it was found not feasible due to the complex and highly interlinked budget structure in Vietnam involving four levels of government consisting of the center, provinces, districts and communes. After careful consideration, the Bank and the government decided to drop BPS to concentrate human resources on successfully implementation of TABMIS which is already a huge task. Component 3: (ix) Implementation of Domestic Debt Recording System was delayed primarily due to the additional complications for contracting UNCTAD to implement DMFAS for domestic debt. The contractual deviations from the standard World Bank agreement, required special consideration up to Managing Director level by the World Bank which took considerable amount of time. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E Design. The project s results framework was prepared according to the Bank s guidelines/template which existed at the time of project preparation in As it was extremely difficult to measure the "ultimate impacts" of stronger PFM systems because they are extremely diffuse and there are many intervening variables that make 10

21 attribution hard, Outcome/Impact Indicators were broadly defined and did not have specific targets on these indicators. It was particularly difficult to measure in 2003 when there were no PEFA indicators 3 which are the standard measures used today for PFM systems. In the absence of clear and specific targets, the results framework had 26 intermediate outcome indicators that were more directly under the government's control (and the Bank's ability to directly influence). M&E Implementation. MOF was regularly collecting data according to the output indicators developed during project preparation. These data were closely monitored and the actual figures were compared with the target values by the Bank and MOF. M&E Utilization. Appropriate data collected by MOF were evaluated and used for decision making on certain activities. If any activity was no longer needed, it was either revised or dropped. For example, when the fixed asset module was no longer useful, it was dropped from the scope of the project. Further, decisions such as not implementing TABMIS in SUs (for Component 1) and canceling BPS development (for Component 2) were also based on the M&E data. 2.4 Safeguard and Fiduciary Compliance Safeguards Compliance was not required for this project. Fiduciary Compliance. The project complied with fiduciary covenants during implementation. Internal control arrangements were in place, and financial management aspects were generally in compliance with Bank procedures, although there were a couple of issues during the earlier stage of project implementation. The MOF did procurement in full compliance with the Bank s procurement rules and requirements. Overwhelming majority of contracts was subject to prior review which always showed high quality of procurement documents and observing of all applicable procedures. For details see Section 5.2 (b). 2.5 Post-completion Operation/Next Phase (a) Transition Arrangements. The transition arrangements for maintaining the project s achievements appear to be adequate, as demonstrated by the following measures adopted by the MOF. 3 PEFA indicator set includes 28 evidence-based indicators which assess performance of the country PFM system in three broad categories: PFM system outturns, Cross-Cutting features and key systems, processes and institutions within the budget cycle. 11

22 Policies: A number of specific policy, procedure- and process reforms which have been introduced through TABMIS implementation include: unification of budget procedures and processes; clear definition of budget revenue and spending coverage at all levels of government; reduction of budget adjustment period (from five months to one month); budget allocation cascading from level 0 (NA approval) to level 4 (spending unit) to ensure strict budget control; clear definition g of functions, duties and roles of different agencies in budget allocation and execution (through TABMIS workflows); clearer way of calculating budget deficit in accordance with international practices; introduction of commitment accounting); centralization of real-time and integrated budget revenue and expenditure information enables timely, consistently and accurately reporting for better serving management needs. All regulations and implementation guidelines to affect these policy, procedure and process reforms have been issued and are being followed. Institutional: The MOF has a core team consisting of staff with a mindset for reforms and adopting new technology. The quality of IT staff of MOF and the Treasury has been strengthened with adequate training both in Vietnam and abroad and they are working closely for the implementation of TABMIS. Vietnam State Treasury (VST) has engaged an additional 17 staff, four of whom worked on the TABMIS implementation project as part of IBM s subcontract team. These skills and experiences will enhance the sustainability of the MOF in operating TABMIS. MTFF and MTEF are being institutionalized in the revised State Budget Law to be adopted by end of 2014 and it will then become mandatory for agencies to comply with them. The Debt Management Office (DMO) will continue functioning and will manage debt management. DMO will be gradually taking over domestic debt management, portfolio management and information system in the next 2-3 years, staff have been trained and regulations on duties and responsibilities for each unit in using the system have been made very clear. Technical: TABMIS is well established and operational over a period and the MOF has successfully assumed full responsibility for the system and its environment, with IBM withdrawing completely in September The MOF is administering the system database and security with support from an outsourced contractor for system administration and user 12

23 support. The MOF intends to take on total responsibility for TABMIS in MOF has issued regulations on DMFAS operation and management and is taking total responsibility for DMFAS administration. Financial: GOV has allocated funding in the budget for maintenance cost to cover licensing and other costs to ensure that MOF will be able to administer the system, especially at the database level. Follow-on Project. Currently the MOF is planning a few core information systems for financial management and is thus carrying out a study of the model and roadmap of the GFMIS to enable MOF in developing a comprehensive system based on modern technological platform. The Bank is in the process of discussing with the government on the possibility of supporting the GFMIS project. The Bank is also considering providing further support to help building the MOF capacity for in-depth analysis of the incoming information from the SOEs, early-warning of fiscal risks from SOEs, better reporting to the Government and the National Assembly, and increased transparency of SOEs information to the public. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation The objective, design, and implementation are still relevant, timely and appropriate to the country s current development priorities. The project is also consistent with the Bank's current Country Partnership Strategy 4 (CPS) for Vietnam for the period For example, the Bank will continue to support measures to improve PFM, notably modernization of revenue collection and reform of public expenditure management and oversight, and reforms to various public investment laws. The Bank will also work closely with the International Finance Corporation (IFC) to address priority reforms including on the SOE-related issues of soft budget constraints and weak corporate governance. The Bank and IFC will strengthen dialogue with the Government on SOE reform and respond with financial support for restructuring of the sector if requested. Rating: Considering these factors, the relevance of objectives, design, and implementation is rated High. 4 Report No VN, dated November 7,

24 3.2 Achievement of Project Development Objectives Moderately Satisfactory. The project was successful in achieving its deliverables. As shown in the Results Framework Analysis (details in Annex 10), almost all the intermediate outcome indicators were fully achieved. TABMIS business processes aligned with the World Bank Treasury Reference Model together with a unified Chart of Accounts aligned with GFS and TABMIS itself helped to establish an orderly and transparent budget execution process with strict control throughout four levels of government. TABMIS has realized commendable benefits for the government during challenging budget times due to improved accuracy, timeliness, and transparency in budget execution and reporting at each level of government. Experience from the pilot MTFF and MTEF has resulted in improving budget planning in pilot ministries/ provinces, and more importantly to inform the ongoing amendments of the State Budget Law. The implementation of the DMFAS and a number of other TA activities has steadily helped the government to strengthen the institutional arrangements, systems, and capacity for the management of public debt in a comprehensive manner and the monitoring of fiscal risks from the State-owned enterprises (SOEs). There is no doubt that the project has strengthened the budget planning, execution, reporting and accountability in many aspects. On the other hand, because the PDO and its indicators were too broadly defined, while the project has helped establish critical enabling systems and institutions, it would take more time and further efforts for the PDO as formulated to be fully achieved. Had the PDO been more clearly defined, and the indicators been more closely linked with the project outputs and measurable, the outcome rating could have been assessed to be Satisfactory, given the remarkable achievements recorded by the project. DFID co-financed critical TA inputs in all four components of the project along with IDA funding. DFID-funded inputs constituted integral parts of project activities that contributed to achievement of project development objective are assessed by this ICR. The details of the project s major achievements that contribute to its outcomes are as follows: PDO Indicator 1: Accuracy, timeliness, relevance, transparency and compliance with international best practices in budget execution and reporting at each level of government. A Treasury and Budget Management Information System (TABMIS) has been developed, implemented with a commercial of the self-software solution Oracle Financials and served as a common platform to all treasury offices and financial agencies at all four levels of the Government for budget allocation and control, 14

25 payment and receipt processing, expenditure and revenue accounting and reporting. TABMIS is fully operational in all intended 1,500 treasuries and financial agencies across all 63 provinces, and 37 spending ministerial organizations, and 3 major departments of Hanoi city since October This has enabled the government to allocate, execute and monitor the state budget through a centralized financial management information system, on a transparent and real-time basis. A unified Chart of Accounts (COA) for TABMIS has been developed and applicable throughout all four levels of the government for treasury and budget management. This multi-dimensional COA with 11 segments capturing all relevant information required for budget management such as source of fund, location, administrative, economic and functional budget classifications, targeted programs, projects, spending units etc. provides flexibility to analyze, consolidate and report for each segment and for a combination of segments. Relevant segments of the COA consistent with the international functional and economic classifications of expenditures as provided in GFSM2001/ COFOG allow for GFS reporting. TABMIS is helping a move toward accrual accounting as large state budget expenditure commitments are being controlled and monitored through TABMIS. In addition, some accrual accounting information such debt obligations are accounted and recorded in TABMIS immediately when incur. Improved accuracy and consistency in budget control, payment processing, accounting and reporting is achieved through application of a unified TABMIS COA and a single database of TABMIS, replacing multiple COAs and multiple distributed treasury legacy systems located throughout the country in the past. Furthermore, data on government receipts and expenditures, cash and fund balances available in TABMIS now on a real-time basis mean that all treasury and finance offices can produce instant reports for management purposes. Payment processing thought a centralized financial management information system such as TABMIS has helped enforcing compliance and enhancing transparency in budget execution throughout all levels of government. Full roll out of TABMIS, which provides essential expenditure and revenue accounting foundation for consolidation of treasury accounts, has enabled the MOF to move to implement TSA since the third Quarter of At the ICRR completion time, TSA arrangements have been fully implemented in three out of four state- 15

26 owned commercial banks 5 (SOCBs). As these three banks hold the majority number of treasury idle cash balance accounts, considerable account consolidation has been achieved. When TSA arrangements are fully rolled out to the remaining SOCB by Mid-2014, four SOCBs will provide the direct revenue collection and payment services through four accounts that have replaced all approximately 700 previously existed bank accounts. This would result in considerable rationalization of banking arrangement for government cash management and potentially reduce the cost of borrowing, thus contributing to more efficient budget execution. PDO Indicator 2: Better planning of the State Budget and the Public Investment Program to achieve the growth and poverty reduction goals set out in the SEDP The project successfully piloted the application of MTFF and MTEF in four line ministries (Education and Training, Health, Transport and Agriculture) and three provinces (Binh Duong, Vinh Long, and Hanoi City) for three budget year cycles. The pilot implementation has helped improving the quality of socio-economic forecasting and medium tern fiscal policy and public finance resources projection, thus contributing to improved policy and procedure formulation and fiscal management in pilot ministries and provinces. More importantly, the pilot has demostrated the benefits of the medium-term budget planning approach to government officials and helped build concensus for its acceptance. As a result, MTFF and MTEF nation-wide implementation and result/performance-based budget management will expectedly be institutionalized in the revised State Budget Law (to be enacted by the end of 2014). A number of benefits as reported by the pilot ministries and provinces include: improved analysis of expenditures, strengthened basis for setting expenditure baselines, incorporation of future cost implications of new policies and decisions on both recurrent and capital sides (e.g. minimum wage increase, social security programs, bond issuance out of the budget), and, at least in the initial phase, improved coordination between Finance and Planning Departments. The most important outcome of the pilot is that it helped create a team of officials in MOF, MPI and the pilot ministries and provinces who have a thorough grasp of MTFF and MTEF methodology, model and implementation modalities which will 5 Vietnam Bank for Industry and Trade (Vietinbank), Bank for Investment and Development of Vietnam (BIDV), Vietnam Bank for Agriculture and Rural Development (VBAR), and Bank for Foreign Trade of Vietnam (Vietcombank). 16

27 facilitate future institutionalized. nation-wide rollout once MTFF and MTEF implementation is It is clearly that substantial impacts on impvoved budget planning will not be materialzied until MTFF and MTEF is properly implemented nation-wide but this was not the intended target of the project at the design. PDO Indicator 3: Greater fiscal sustainability through improved and more integrated recording of external and domestic public and publicly guaranteed debt, improved capacity to monitor SOE liabilities, and improved ability to assess associated fiscal risks. The Debt Management and External Finance Department (DMEFD) was established in 2009, leading and coordinating public debt management, information consolidation, public debt reporting - an advanced step in unification of public debt management. Debt management objectives were approved and published in the Strategy for public debt and national external borrowings for the period of and with a vision to Analytical capability in debt management of relevant MOF officials, especially staff of the Middle Office of the DMEFD has been considerably enhanced through incountry and oversea training courses supported by the Project. Steady progress has been achieved on the technical assistance activities to enhance public debt and risk management capacity and reform planning. Notably, these included the development of: a. information sharing mechanism among relevant GOV agencies (MOF, SBV, Ministry of Planning and Investment etc.) to support the establishment of national credit rating. This is an important development given the rating agencies focus on the risks from banking sector and transparency of country information. b. framework International Swaps and Derivatives Association (ISDA) contract for future derivatives transactions to manage risks. DMEFD has been negotiating the appendixes of the ISDA contract with Citibank. Two rounds of negotiations have been conducted under the support of a consultant. In the meantime, DMEFD is also developing a negotiation handbook for ISDA contracts to guide DMEFD staff in future negotiations with other counterparts. c. medium-term debt reform plan on the basis of 2011 DeMPA assessment. Initial consultancy outputs appear to be very helpful for DMEFD to better define interlinkages across debt reform activities, prioritization and sequencing of reform 17

28 actions, performance monitoring framework, and implementation resources needs and arrangements. Domestic Debt Recording System: The installation and training of the DMFAS for recording and management of domestic debt was completed in DMFAS is being used as the debt management and recording system for both domestic and external debt. DMFAS is now accessible by 90 users in all five relevant departments in the MOF. An interface between DMFAS and TABMIS has been developed and is operational. Through this automated interface, receipt from debt issues or borrowings for onlending purposes or for projects is posted directly into the TABMIS General ledger (GL). Payment for interest or repayment of principal for both domestic and external debts is interfaced into TABMIS Accounts Payable (AP). In August 2013, the MOF adopted a regulation on DFMAS operation which requires concerned departments to develop further internal operation and verification processes. The project was instrumental in making the financial information of the SOEs available to the public and making it more transparent. The government is taking strong measures for enforcing the SOEs to comply with this requirement by imposing penalty on those SOEs failing to comply. 3.3 Efficiency The total project final costs are US$87.7 million which is about 22% more than the original cost. Although the final cost exceeded the original estimates, the project could be assessed as quite cost-effective. The increase in total funding for the project compared to the plan was not the consequence of the cost overruns, but due to increase in TABMIS capacity to accommodate the substantially higher number of users and amount of transactions resulting from huge jump in public expenditure. Between design and TABMIS full roll out, the number of system users has increased nearly three times and the total budget expenditure processed by the system has gone up by five times. As indicated at project appraisal, the project would be making important impacts of governance reform, institutional strengthening and capacity building but these impacts are intrinsically hard to quantify. The project would not generate direct income or benefits against which costs could be compared. Nevertheless, as analyzed in previous section, the project is realizing benefits in terms of improved operational efficiency and effectiveness of public expenditure. Such benefits are easier to identify than quantify. However, it could be concluded that the project cost should be more than compensated by 18

29 savings due to better planning, implementation and control of the budget. Vietnam's total public expenditure in 2012 was the equivalent of some US$35 billion. Efficiencies of just a tenth of a percentage point of this amount per year (US$35 million) would be sufficient to payback within less than three years. In addition, there are benefits resulting from project specific activities as follows: 1) The transformation of the 700 existing accounts because of the TSA will result in reduction of idle cash balances from an estimated average of some 35 to 40 trillion Dong to some 10 to 15 trillion dong. The permanent freeing of significant amounts of cash provides options for the Treasury to make available cash to retire state debt, to invest or to increase available cash for purposes of budget execution. A simple gross measurement of the potential returns on these cash balances even at 1% return could be up to $500,000 per annum. 2) TABMIS has facilitated transactions via interfaces, so that the processing of some transactions has been done directly on the computer instead of papers. Rating: Satisfactory 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory Relevance. As explained in Section 3.1, the relevance of objectives, design, and implementation is rated as High. Achievement of PDOs. As explained in Section 3.2, the project has many satisfactory achievements to its credit. However, as the PDO was more broadly defined and the indicators did not have specific measurable targets, the achievement of the PDOs is rated as Moderately Satisfactory. Efficiency. The analysis in Section 3.3 indicates that there were operational and administrative efficiencies which came as a result of the project. The rating on Efficiency is thus Satisfactory Based on the above factors and the discussion in sections , the overall outcome is rated Moderately Satisfactory. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 19

30 Poverty Impacts. The project did not have a direct impact on poverty alleviation. However, the project has enabled the government to have full control on its financial resources and allocate resources appropriately according to government policies. This has enabled better utilization of government resources and indirectly helped alleviate poverty. For example, because TABMIS is a centralized system, transactions like disbursement are quicker and faster, resulting in improved transparency in projects related to poverty reduction and providing assistance to right beneficiaries. Further, there is tight control on budget allocation and better monitoring on expenditure on poverty alleviation program. Gender Aspects. N/A Social Development: N/A (b) Institutional Change/Strengthening The project resulted in a substantial institutional development impact in the following areas: TABMIS MTFF and MTEF DMFAS Capacity Building: Because of the training programs offered under the project on both technical and functional aspects, capacity of the staff of MOF and the Treasury has been strengthened, especially in terms of complying with international good practices and project management, including financial management, procurement, and contract management. For details, see Section 3.2 (c) Other Unintended Outcomes and Impacts (positive or negative) Positive: The project has produced multiple positive outcomes, as follows: The MOF team devoted considerable time and effort to improve their capabilities in relevant areas to better manage the TABMIS contract and overall change management process. These new capabilities will definitely help in the next project, when they start moving towards an integrated FMIS solution. These can perhaps be 20

31 considered as an unintended impact related to the strengthening of the MOF's institutional capacity and problem solving skills. For strengthening the government's capacity for public debt management at MOF, the Law on Public Debt Management was passed in Likewise, the DMEFD was established in This body within MOF would improve the overall management of public debt, both domestic and external borrowing. During the legacy time when the system was decentralized, it was difficult to recruit qualified IT staff to the provinces, as most of them were not willing to go to remote places. However, as TABMIS is a centralized system, it has become easier to recruit them to the State Treasury in the headquarters. The hurdles and challenges during implementation exceeded the preparations of the project team and leaders as well as local agencies but they were steady with their commitment to reforms. Negative: As TABMIS includes the database of the provinces, districts and communes and because the number of users has increased almost three times from 5300 to 15,000, workload of the staff in the MOF and the Treasury for capturing more data has significantly increased. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not applicable 4. Assessment of Risk to Development Outcome Rating: Negligible to Low The ICR team considers that the risk to development outcome would be negligible to low because all the achievements of the project are highly sustainable. In particular, TABMIS is fully operational nationwide, and is the only financial management information system used by all the treasury offices, financial offices and spending units to perform expenditures financed from the public budget across the whole country. After TABMIS has become operational, there is no more manual processing. Sustainability of TABMIS has been enhanced with the additional staff recruited to the VST and the knowledge transfer that has occurred over the last one year of the project. The MOF is administering the system database and security with support from an outsource contractor for system administration and user support. More work 21

32 is, however, needed to amplify the impact of TABMIS by providing more access to line ministries/departments and spending units Along with TABMIS, DMFAS has been operational as expected and stable over a period, and it has resulted in a relatively low level of risk to development outcome. Political developments usually do not impose major changes to the country s development orientations, and the risk of significant backtracking by the government on the reform path is low. There is also no risk that TABMIS will be soon replaced by another system. There is, however, a concern on the sustainability of TABMIS in the financial agencies in the provinces, districts, and communes as they belong to local governments. In light of this factor, the government will need to focus on getting financial resources for the maintenance of operation of the system in these levels of government. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory During preparation and appraisal, the Bank took into account the adequacy of project design and all major relevant aspects, such as technical, financial, economic, and institutional, including procurement and financial management. In addition, major risk factors and lessons learned from other earlier projects in the financial sector were considered and incorporated into the project design. A number of alternatives were considered in arriving at the chosen design. Project preparation was carried out with an adequate number of specialists who provided the technical skill mix necessary to address sector concerns and a good project design. The Bank provided adequate resources in terms of staff weeks and dollar amount to ensure quality preparation and appraisal work. The project was consistent with the CAS and government priorities in the sector at the time. The Bank had a consistently good working relationship with the Borrower during preparation and appraisal. The project was prepared and appraised to the best of technical knowledge, and in full compliance with the Bank procedures and policies at that time. At the same time, in hindsight it appears that the M&E could have been better formulated. In light of this 22

33 factor, the Bank's performance in the identification, preparation, and appraisal of the project is rated as Moderately Satisfactory. (b) Quality of Supervision Rating: Satisfactory The Bank's performance during the implementation of the project was satisfactory. Sufficient budget and staff resources were allocated, and the project was adequately and intensively supervised. The task team prepared Aide-Memoires regularly and alerted the government and the PMU to problems with project execution and facilitated remedies in a timely manner, in conformity with Bank procedures. In addition to periodical supervision mission, country office-based task team oversaw closely day-to-day operations of the project to ensure timely and quality responses to multiple requests from the counterparts for technical inputs and management clearance. During early critical stage of TABMIS contract implementation, the Bank TTL participated in monthly meetings of TABMIS Project Monitoring Committee to closely monitor contract execution and provide necessary facilitations. The Implementation Status and Results Reports (ISRs) realistically rated the performance of the project. In addition to regular supervision, the Bank team paid a strong focus on providing the needed implementation support to the government throughout the project period. In particular, specialized IT expertise within the Bank project team was made available to ensure the quality of design and supervision of the project. When the project faced difficult challenges, e.g. with TABMIS contractual issues, the support was intensified through increased number of support missions (three times a year during ) and timely video conferences, with proactive participation of the head of the Bank s FMIS Community of Practices and the responsible procurement experts. The task team strongly facilitated MOF s active participation in peer learning events, such as (i) FMIS workshops with Asian countries in Jakarta (2009) and in Manila (in 2011), (ii) Joint WBI-PRMPS s Greater Than Leadership (GTL) Program for FMIS Implementation, with Albania, Cambodia, and the Philippines; and (iii) Budget and Treasury Communities of Practices of the Public Expenditure Management Network in Asia (PEMNA) with Korea, China, and other ASEAN countries. These have helped the government teams to learn from practical peer experience to address outstanding issues, keep up with new FMIS developments and good practices elsewhere, meanwhile building more confidence and determination along the process. The Bank s procurement, financial management, and disbursement staff worked closely with the MOF and PMU staff to explain the rules and procedures to be applied during project implementation based on the Credit Agreement. The task team also monitored fiduciary compliances. 23

34 The task team carried out a Mid-Term Review in December The MTR team had identified several issues that were critical at that stage of project implementation. Based on the recommendations of the MTR, measures were taken to ensure improvement in implementation performance. One important aspect of the Bank's performance and contribution was availability of strong technical expertise on the Bank side and continuity of the Task Team, including the Task Team Leader (TTL) and other key specialists during most of the project period. This continuity engendered consistency, depth and follow-up in the dialogue with the government and provided expertise to help the government analyze issues and implement actions as they emerged during supervision. Direct discussions and needed adjustments could be made timely as issues emerged given that the task team leader(s) were based on the field. There was a high level of support and trust between the Bank management and the task team. Regular dialogues between Bank and MOF management had helped to maintain Government s leadership and guidance to overcome difficult junctures and steer the project on-track. The Bank also worked closely with the co-financier DFID. Officials of DFID participated in most of the supervision missions. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory With a Moderately Satisfactory rating for quality at entry and a Satisfactory rating for quality of supervision, overall Bank performance is rated as Moderately Satisfactory in accordance with IEG s harmonized rating criteria. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory As mentioned in Section 2.1, the government had shown its commitment to the objectives of the project at the time of project preparation. The government was fully aware of the benefits of the project and consistently maintained its commitment throughout the implementation. The government prepared an action plan, procurement plan and disbursement estimate, acceptable to the Bank, in order to complete the project. The government officials worked closely with the Bank's project team on a continual basis, and cooperated fully with the task team. 24

35 The institutional set up such as a well-functioning steering committee was very effective in project implementation. Appropriate levels of review and approval were usually in place; financial accountability and follow-up was observed, and expenditures were duly authorized before they were incurred; and documentation was maintained properly for periodic review. The project did not suffer from any counterpart funding problems, as the GOV took timely corrective measures and made appropriate budget provisions. (b) Implementing Agency or Agencies Performance Rating: Satisfactory MOF: The MOF officials demonstrated strong leadership and were fully committed to the project. The MOF s overall institutional and implementation arrangements were effective, including the well-functioning Inter-Ministerial Steering Committee, Component Technical Units, and the Project Management Unit (PMU) organized into specialized component implementation teams. The MOF s serious commitment to the project during preparation was reflected by the Bank s task team which noted the following comment in the Aide Memoire, dated, March 13 20, 2006: The MOF s project team is to be congratulated for having competently handling this difficult procurement process. The bid evaluation report produced by the project team was assessed by the Bank s East Asia Regional Procurement Manager as one of the best-presented bid evaluation reports. This enabled the Bank s OPCS review committee to clear it expeditiously without a single query. During implementation, the MOF continued to maintain its commitments to the project as demonstrated by: (i) assigning a large number seasoned management and technical staff to work with the contractor and consultants to carry out project activities at all levels of the Government, (ii) investing with Government own funding on (a) setting up a country wide dedicated telecommunication network for TABMIS operation, (b) developing interfaces with commercial banks for TSA operation and deploying a Tax Collection System (TCS) to interface with TABMIS for tax collection accounting/reconciliation, and (c) training of staff on business processes and upgrade their IT skills; and (iii) issuing necessary regulations and guidelines for TABMIS and DMFAS operation and MTEF/MTFF piloting. The ISR rating on the Progress towards achievement of PDO was Satisfactory throughout the 10 year project period. Implementation progress was slowed down towards the later part of the project because of the technical and contractual issues related to TABMIS and DMFAS. The MOF had, however, maintained its focus and put great efforts to resolve these issues and moved to complete system implementation. 25

36 The PMU was well functioning and closely collaborative with MOF technical departments. Overall, institutional and implementation arrangements remained effective, and PMU staff supporting relevant functional and technical departments. Financial Management (FM). The project, throughout its life cycle, had adequate financial management system in place that could provide accurate and timely information that Bank loan proceeds were being used for the intended purposes. The budgeting, fund flows, financial management staffing, accounting and financial reporting, internal control systems and external audit, and maintenance of supporting documents at the project s implementing agency were generally adequate. Although financial management aspects were generally in compliance with Bank procedures, there were a couple of issues during the earlier stage of project implementation such as: (i) quality of interim financial reporting; and (ii) the withhold/deduction of Foreign Contractor Withholding Tax (FCWT) on payments to IBM the main contractor of the TABMIS contract. The PMU subsequently took actions to remedy these issues. Procurement Arrangements. The overall project procurement performance is assessed as Satisfactory. The procurement of TABMIS -- the critical backbone contract which accounts for the overwhelming investment costs of the project, was considered a high success story. About a month after the Credit's effectiveness, the MOF was able to submit the draft Bidding Documents for complex TABMIS for the Bank's clearance. The Bank's no-objection was then obtained three months after the Credit's effectiveness, making a good start of procurement process. This impressive timeliness was made possible due to the advance preparation of TABMIS Bidding Documents during the project preparation. With the financing from a PHRD Grant, the MOF had hired an international consultant who helped prepare those bidding documents. The procurement, using two-stage bidding procedures applicable for supply and installation of Information Systems, was completed in about 18 months, a rather reasonable time period for such a highly complex contract, possibly one of the largest IT contracts ever financed by the Bank. The TABMIS contract was subsequently successfully completed despite needing several change orders and time extensions, for an expansion of scopes of supply due to the increased number of users and beneficiaries. The PMU, although initially lacked procurement experience, had very well handled procurement work and fully complied with Bank requirements. Reporting Arrangements. The PMU submitted all required quarterly and annual reports in a timely manner. These reports were informative, and provided valuable feedback on how the project was progressing covering all project activities. The status of 26

37 performance indicators were incorporated in all progress reports and served as valuable input to Bank supervision mission reports. In light of the above factors, performance of the MOF was satisfactory. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory. With a Satisfactory rating for Government performance and a Satisfactory rating for MOF performance, overall borrower performance is rated as Satisfactory in accordance with IEG s harmonized rating criteria. 6. Lessons Learned Project Design and Implementation: Adequate time is needed to prepare a project such as PFMRP. Considering the unique budget structure in Vietnam involving four levels s of the government (centre, provinces, districts, and communes) and the need for harmonizing policies, practices and processes, the government may need to have more time for finalizing the design of an ICT project such as PFMRP. In addition, it will be necessary for the government to understand the needs of the country and get convinced that the new system will meet their requirements. It is normal that the new system would involve changes in the mindset of the officials and users, and also changes in the business processes. The new system may also introduce stricter control on the approval process to make it more transparent, build consensus, and strengthen capacity to understand the new process and new technology. For these reasons, the timeframe for the project needs to be realistic so that unnecessary extensions of the closing date can be avoided. Committed and determined staff with knowledge and skills is important for the implementing agency. Selection of devoted, enthusiastic and determined staff, with knowledge and skills as part of the core team in the MOF is essential for effective implementation. For the PFMRP, the MOF managed to mobilize such a core team in the areas of budgeting, accounting public expenditure, ICT, capital expenditure management and human resources. Likewise, it is essential for a PMU to have qualified staff with good understanding and knowledge on various aspects of the project, including capacity for analysis of data and resource allocation based on priorities. In addition, it will be useful to have a pool of consultants with good experience in the implementation of an FMIS project, to provide advice and guidance to the government whenever needed. The consultants and contractors also need to 27

38 understand the needs and culture of the client and cooperate with the client for making the project successful. For smooth implementation, close coordination and contact between the donors, including the Bank and the Government are important. The Bank together with the co-financier DFID have been engaged closely with the Government throughout the project life to provide critical and timely support to project implementation This support was significant on almost all dimensions of the project, such as project management, technical knowhow, experience from elsewhere in the world, and sometimes even to resolve critical issues between contractors/consultants and the government or even the internal issues within the government. It is necessary for the government to come up with measures to motivate the staff to be committed to pilot projects. There were difficulties in implementing the pilots of MTFF and MTEF. Despite efforts to integrate the MTEFs into the annual budget cycle, given that it was only a pilot, many staff saw this as an added task rather than as part of their ongoing duties. In order to earn the commitment, interest and participation of the staff for the implementation of pilot project, it is necessary for the government to come up with measures to motivate the staff to be equally committed to pilot projects. Procurement: Advanced preparation of bidding documents helps procurement activities: As mentioned earlier, about a month after the Credit's effectiveness, the Borrower had been able to submit the draft Bidding Documents for complex TABMIS for the Bank's clearance. The Bank's no-objection was then obtained three months after the Credit's effectiveness, making a good start of procurement process. This impressive timeliness was made possible due to the advance preparation of TABMIS Bidding Documents during the project preparation. In addition, using the services of procurement consultants for preparing bidding documents is also desirable. Capacity Building, Technical Assistance, Empowerment and Delegation of Accountability to Implementing Agency. Providing assistance and knowledge transfer by international and national consultants to the PMU as well as the MOF leadership giving to the PMU strong and timely guidance, support and directions would empower it to make timely procurement decisions. Bank Support and Collaboration with Borrower: The Bank, (including the Task Team, Regional Procurement Management (RPM) and technical experts), had provided effective hands-on support and guidance throughout the preparation and implementation of the project procurement, especially TABMIS contract. Such 28

39 guidance and support was not only limited to timely review and provision of comments/clearance, but also direct communications/discussions, hands-on advice/guidance, regular and ad-hoc training for the Borrower. The Borrower also maintained excellent cooperation and collaboration with the Bank; it well respected and followed the Bank s advice on procurement. This was an important factor to the project s success. Another important factor was that the Bank Team received important constructive and innovative advice/clearance from RPM for the design of project procurement arrangements and subsequent bidding process for TABMIS contract. Factors for the Success of a Project: Strong and sustained commitment of the government leadership is critical to the success of a project. In a project which is going to take years to implement, it is inevitable that there will be change in leadership and the commitment levels of different leaders will vary. For PFMRP, although the commitment of political leaders as well the leadership within the MOF varied, they ensured support to the project through the entirety of its implementation phase. Even though there were times when the project went through rough times, it was clear that the support from the leaders was available whether it was for retaining a capable team, resolving business processes (BP) issues or in tackling inter-organization issues. The project took almost 10 years to complete, and it must have been a serious challenge to retain a reasonable level of commitment from political leadership for this duration. This can be termed as an outstanding feature of an IFMIS project anywhere in the world. Availability of specialized IT expertise within the Bank project team is critically important to assure the quality of design and supervision of the projects that support development of complex IT systems. For example, as mentioned in Section 5.1 (b), specialized IT expertise within the Bank project team was made available to ensure the quality of design and supervision of the project. Continuity of the core team working on the project, both from the Bank side and the government side, is very important for the success of a project. Frequent changes in the core team would create disruption, lack of continuity and ownership, and different approaches to supervision. On the other hand, the continuity of the core team members will engender consistency, depth and follow-up in the dialogue with the government and provide expertise to help the government analyze issues and implement actions as they emerge during supervision. 29

40 Sector-specific: There are advantages and disadvantages in packaging the contract and asking bids for a single turn-key contract. A country has to weigh all options and then decide. It will be helpful if the country could assess the capabilities of vendors before deciding on this. However, a turn-key contract does not absolve the country of its responsibilities and still requires considerable investment in the management of the project by the country itself and this should not be underestimated, as the experience in Vietnam has shown. The rolling out schedule needs to be realistic and should match the capabilities and capacities of the teams. Vietnam scaled down the number of provinces in each roll-out batch from 10 provinces to 3-5 based on this and it proved workable for them and did not overload the teams. Seasonal pressure of work in treasuries should be avoided for pilot or roll-out phases. For example, in Vietnam, the government did not consider November, December, January or February as good months since they were either end of the financial year or beginning of the new financial year. During this time treasuries have more than normal work and the introduction of a new system will unnecessarily stretch their capacities. For big system implementation with a turnkey contract like TABMIS, it is necessary to clearly mandate the contractor's responsibility in training and knowledge transfer to government staff to ensure good system operation and administration well before the contract ends and help the government to own/master the system right after taking over from the contractor. For big information system implementation with prolonged implementation, it is necessary to have adequate provision for changes which might not be foreseen during the project's preparation and original design. In the case of TABMIS, the number of system users has increased as many as nearly three times and the total budget expenditure processed by the system has gone up by five times between design and full roll out. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing Agencies (b) Co-financiers (c) Other Partners and Stakeholders (e.g. NGOs/private sector/civil society) 30

41 Annex 1. Project Costs and Financing (a) Project Cost by Component (in US$ million equivalent) (Total rows and percentage column will be calculated by the system) Components Component 1 : Strengthening Treasury and Budget Management Component 2: Strengthening State Budget and Investment Planning Component 3: Strengthening Management of Public Debt and Monitoring of SOE Fiscal Risks Component 4: Project Management Support Appraisal Estimate (US$ million) Actual /Latest Estimate (US$ million) Percentage of Appraisal Total Project Costs Project Preparation Facility (PPF) Front-end fee (IBRD only) Total Financing Required (b) Co-financing (The appraisal estimate will be pre-populated from the Financing data in SAP/AUS; Percentage of Appraisal column will be calculated by the system) Source of Funds Type of Financing Appraisal Estimate (US$ million) Actual/Latest Estimate (US$ million) Percentage of Appraisal Borrower

42 UK: British Department for International Development (DFID) International Development Association (IDA)

43 Annex 2. Outputs by Component Component 1: Strengthening Treasury and Budget Management The project activities included in Component 1 contributed to the following main aspects: - A Treasury and Budget Management Information System (TABMIS) has been developed, implemented and used by all treasury offices and financial agencies of all levels in the whole country as well as selected large ministries and government agencies. - A unified Chart of Accounts (COA) has been developed and applicable throughout the government for treasury and budget management; large state budget expenditure commitments are controlled and monitored through TABMIS. - Capacity building in treasury and budget management has been provided to functional and technical staff. - A study on a model and implementation roadmap of TABMIS Portal for linking TABMIS with SUs and a study on a model and roadmap towards a government financial management information system (GFMIS) have been done. TABMIS implementation has been accompanied by a number of TA activities for capacity building, BP modernization, COA reforms. Different stages of BA analysis, system design, testing were undergone from 2006 to April From April 2009 to end 2012, TABMIS was rolled out in all treasury offices and financial agencies of all levels in the whole country as well as selected large ministries and government agencies (the treasury and financial agency at the central level, treasury offices and financial agencies of 63 provinces, over 600 districts, 37 central ministries and 3 departments of Hanoi city. The total number of implementation sites was 1,593). With a unified COA across the government, TABMIS has actively supported treasury and budget management of the central and local governments through process monitoring, data supply, timely and accurate budget execution reports. In addition to TABMIS implementation, there were a number of TA activities towards a government financial management information system. The outputs of these activities included a draft model and roadmap of TABMIS Portal; a model and roadmap towards a government financial management information system (GFMIS) with support from consultants. These products will be further studied and improved by MOF to submit to higher management level for approval. Component 2: Strengthening State Budget and Investment Planning - A methodology for making State budget and investment plans was established via a successful pilot implementation of MTFF and MTEF. It is expected that MTFF and MTEF models will be institutionalized in the highest legal document - the revised State Budget Law for nation-wide rollout in the coming time. 33

44 - Capacity building in budgeting has been provided to staff of both central and local levels via a number of training courses. Templates (manual) in MTFF and MTEF have been developed. From 2005 to 2010, MTFF was successfully piloted at MOF, MPI while MTEF was also successfully piloted at 4 ministries and 4 provinces, with relevant staff trained. The rollout of these frameworks will require institutionalization and will be considered together with the revision process of the State Budget Law. Component 3: Strengthening Management of Public Debt and Monitoring of SOE Fiscal Risks - The Law on Public Debt Management was developed and issued in The Department of Debt Management and External Finance was established within MOF to lead coordination and consolidation of public debt information. - The strategy for public debt and national external borrowings for the period of , with a vision to 2030 was issued and published. - Risk management capacity of public debt has been enhanced. - The Debt Management and Financial Analytical System (DMFAS) has been implemented for domestic debt management and integration of domestic and external debt databases. - The regulations on monitoring SOEs' fiscal risks have been developed and recently issued under a Government's Decree. Prior to 2009, there were TA activities, including consulting services, training and study tours, supporting development and approval of the Law on Public Debt Management and establishment of the Department of Debt Management and External Finance to lead coordination and consolidation of public debt information. From 2009 to 2013, the component supported development and issuance of the long-term debt strategy, capacity building (in both institutional arrangements and human resources) in risk management of public debt. Particularly, focus was made to capacity building of the Middle Office of the Department of Debt Management and External Finance. The Debt Management and Financial Analytical System (DMFAS) was implemented for external debt management in 2003, outside the framework of PFMRP. From 2009 to 2013, the project supported DMFAS implementation for domestic debt management and integration of domestic and external debt databases. An intermediate program has been built for data exchanges between DMFAS and TABMIS. Consultants have actively supported development of the regulations on monitoring SOEs' fiscal risks and other legal documents including a manual providing guideline to the implementation of the regulations as well as training courses for capacity building of relevant staff. Component 4: Project Management Support - Coordination of project activities, development of the project implementation plan, 34

45 project procurement plan and logistics have been well done. - Procurement, contract management, accounting and financial management of funding have fully observed procedures and processes of both the Government of Vietnam and the donors. - Project revisions, extensions and expansions have been undertaken and then timely implemented to facilitate the success of the project implementation. Activities within Component 4 have been undertaken by the PMU. Project revisions, planning, coordination and logistic arrangements have been well done to contribute to the success of the project. For procurement and contract management, in , 85 packages, including TABMIS contract which was worth US$ 53 million and undergone two-stage bidding, were undertaken. In , 107 packages have been undertaken with hundreds of contracts monitored and accepted. For financial management, throughout 10 years of implementation, procedures and processes relating to disbursement, accounting, regular reporting, auditing,... have always been fully met. 35

46 Annex 3. Economic and Financial Analysis See Section 3.3 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Ed Mountfield Manager (TTL until June 2005) OPSPQ Gloria M. Elmore Temporary EASPR Sr. Financial Management Robert J. Gilfoyle Specialist EASFM Sr. Financial Management Hung Viet Le Specialist EASOS Minh Van Nguyen Senior Economist (TTL June August 2009 and between Aug. EASPV 2011-Dec.2011 ) Hoang Xuan Nguyen Procurement Specialist EASR2 Sr. Financial Management Cung Van Pham Specialist EASFM Quynh Xuan Thi Phan Financial Officer GEFOB Tuyet Thi Phung Program Assistant EACVF Ronald Points Consultant EASPC Ramesh Sivapathasundram Lead Information Officer TWICT Nguyen Chien Thang Senior Procurement Specialist EASRP-HIS Jennifer K. Thomson Chief Financial Management Off OPSOR Economist (TTL since August Quyen Hoang Vu 2009 ) EASPV L. S. Christine Wong Shui Wan Operations Officer EASPW Cem Dener Senior Public Sector Specialist PRMPS Anna L. Wielgorska Senior Procurement Specialist EASR1 Bruce Pollock ICT System Consultant EASPV b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY FY FY

47 FY FY FY FY Total: Supervision/ICR FY FY FY FY FY FY FY FY FY FY FY FY FY Total: Annex 5. Beneficiary Survey Results N/A Annex 6. Stakeholder Workshop Report and Results N/A 37

48 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR A. Borrower's comments on the draft ICR: Note: Borrower's comments have been incorporated into the final draft of ICR. 38

49 B. Borrower's ICR: IMPLEMENTATION COMPLETION REPORT OF PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT (PFMRP) A. OVERVIEW OF PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT A. OVERVIEW OF PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT I. Legal Basis and Project Implementation Apparatus 1. Legal Basis: The Public Financial Management Reform Project (PFMRP) was established according to the Prime Minister's Decision No. 432/QD-TTg dated 21/4/2003 which approved the Feasibility Study of the Project; the Prime Minister's Decision No. 974/QD- TTg dated 28/8/2003 on the implementation of the Public Financial Management Reform Project; the International Development Credit Agreement No VN dated 06/6/2003 and the Credit Agreement No dated 07/4/2011; the Non-Refundable Assistance Agreement from DFID Trust Fund No. TF dated 06/6/2003; the Amendment to Financing Agreement dated 19/9/2013; the Decision No. 3286/QD-BTC dated 17/12/2010 of the Minister of Finance to approve the revision, addition and extension of the implementation time of the Public Financial Management Reform Project; the Decision No. 1878/QD-BTC dated 25/7/2012; the Decision No. 573/QD-BTC dated 25/3/2013; the Decision No. 2354/QD-BTC dated 19/9/2013 of the Minister of Finance on revisions of the project plan during its implementation. 2. Project Implementation Appratus: The project implementation apparatus consists of a Project Management Unit (PMU) and component/sub-component implementation units. The PMU and component implementation units are directly set up and run by the Ministry of Finance (MOF) and responsible before the Ministry for the implementation results of the duties delegated to them in their incorporation decisions, i. e.: - The PMU: has the functions and duties of coordinating activities of the PMU and component/sub-component implementation units; making, organizing for undertaking and monitoring the project implementation plan; representing the MOF in relations with individuals and organizations, foreign partners and donors for issues relevant to the project implementation; organizing management over fund sources, payment, procurement and logistics for the project's activities; organizing assessment and 39

50 preparing project completion report; carrying out project final-accounting and handing over the project's assets to relevant agencies. - Component/Sub-component implementation units: have the duties of making plans and organizing for implementation of the activities within the framework of their assigned components/sub-components; collaborating with contractors and consultants in undertaking the activities within the framework of their respective components/subcomponents; monitoring and making assessment on the progress and implementation effects of their components/sub-components. II. Objectives, design and basic activities of the project 1. Overall Objectives: The PFMRP aims to (i) modernize State budget management from planning, execution, reporting to strengthen budget accountability and management responsibility of the MOF; improve transperancy in public finance management; reduce negative actions in budget utilization; ensure financial security in the national development and integration process; (ii) strengthen links between budget management requirements and financial development objectives and macro-economic norms by making medium-term fiscal and expenditure frameworks; (iii) strengthen the Government's capacity in debt management at the MOF. 2. Scope of Implementation: Ministry of Finance (MOF), Ministry of Planning and Investment (MPI), 06 Ministries and 04 provinces piloting the medium-term fiscal and expenditure frameworks, treasury offices and financial agencies of 63 cities and provinces. 3. Timeframe for Implementation: The PFMRP was started in October 2003 with the initial timeframe of 05 years. This has been extended three times and the project closed on 31/10/2013. The total time of the project implementation is 10 years with two phases: Phase 1: from October 2003 to the end of February 2011; Extension Phase (project extension, restructuring and additional financing): from March 2011 to the end of October Overall Design: The Project comprises of four following components: - Component 1 - Investing in a Treasury and Budget Management Information System (TABMIS) - Component 2 - Support the modernization of State budget and investment planning - Component 3 - Technical Assistance to the modernization of debt management and monitoring of SOEs' fiscal risks 40

51 - Component 4 - Project management support 5. Fund Sources: According to the Prime Minister's approval at the Decision No. 974/QD-TTg dated 28/8/2003 on the implementation of the Public Financial Management Reform Project, the initial fund sources of the project consisted of: Unit: million USD No. Fund Source Equivalent to USD 1 The World Bank's IDA DFID's non-refundable financing Counter-part fund 7.14 Total The Minister of Finance issued on 17/12/2010 the Decision No. 3286/QD-BTC to approve the documentation on amendment, addition to and extension of the implementation timeline of the Public Financial Management Reform Project which increased the total investment capital of the project to USD million, i.e.: Unit: million USD No. Fund Source Original investment capital Exchange rate surplus Increased Capital Additional Financing Total Revised Investment Capital 1 IDA Grant Counter-part fund Total

52 B. ASSESSMENT OF IMPLEMENTATION RESULTS AS PER APPROVED OBJECTIVES AND DESIGN: I. Component 1: Investing in the Installation of a Treasury and Budget Management Information System (TABMIS): 1. Objectives and Design of Activities a. Objectives: Component 1 aimed to invest in the installation in the system of treasury from the central to district levels an integrated Treasury and Budget Management Information System (TABMIS) which would be connected to the Ministry of Planning and Investment, spending ministries, financial agencies of different levels, implement and operate effectively in the nation-wide to meet budget management requirements and efficiency in the direction of reform with consideration of special characteristics of Vietnam. In addition, Component 1's target was to identify the orientation and overall roadmap for public financial management modernization and reform with the model of a Government financial management information system. b. Detailed Design and Undertaken Activities: Component 1 consisted of 7 sub-components, from 1(a) to 1(g), including building and implementation of a Treasury and Budget Management Information System - TABMIS, technical assistance activities such as international and local consulting services, training, workshops, study tours,... to support TABMIS implementation (procurement support, independent validation and verification, monitoring of hardware upgrading, implementation result assessment, study of optimization of communication network,...) and technical assistance to reforms of management policies, accounting policies as well as studies of orientation forward for TABMIS Portal and a Government financial management information system (GFMIS). Component 1 completed 127 out of 143 planned activities, including TABMIS contract. In Component 1, the main activities included building and implementation of TABMIS in all treasury offices and financial agencies of the central, provincial and district levels; roll-out of Budget Allocation Module to large ministries/ministerial agencies at the central level, including the Ministry of Planning and Investment. Key activities were: re-engineering business processes, defining requirements for software customization, designing and developing the system software, issuance of management and accounting policies as legal basis for TABMIS implementation; taking-over equipment, software and establishment of system environments; organizing testing of system functionalities at the centre, pilot implementation at the central treasury, Hai Phong and Ha Nam (April-September 2009); roll-out to the remaining treasury offices and financial agencies in the whole country as well as 37 ministries/ministerial agencies 42

53 of the central level and 3 large departments of Hanoi city (including general departments (level-2 spending units) of large ministries). By the end of 2012, TABMIS roll-out was fully completed in 1,593 units/agencies. MOF (TABMIS Implementation Unit-State Treasury) has taken over the system from the contractor since 30/09/2013 and has formally been undertaking system operation and administration. On 30/10/2013, MOF organized system final acceptance. Generally, all parties have completed the establishment, implementation, take-over and administration of TABMIS as per the signed contract and MOF's requirements. Till now, TABMIS is operating stably at all treasury offices and financial agencies nation-wide. Ministries, ministerial agencies, general departments of the central budget as well as 03 departments of Hanoi city are undertaking budget allocation in the system and exploiting information from the system. The system has supported accounting and recording in an accurate, timely and sufficient manner budget execution, control and payment; produced State budget revenue and expenditure reports, management reports serving budget management requirements; provided fast and accurate information of budget execution status at any point of time; assured budget data synchronization between the State Treasury and tax, customs agencies. Financial agencies of different levels can get State budget revenue and expenditure reports directly from the system and carry out budget appropriations management of all levels. 2. Assessment of Results and Impacts a- The implementation of TABMIS required reforms of management mechanism, business processes, accounting policies in State budget management: With business processes and functionalities of the system, MOF has undertaken a number of reforms in State budget management (reducing the time for budget adjustment, establishing budget allocation process at different levels and payment order procedures in the system, accounting policy, commitment control,...), implementation of borrowing plans in the system. b- TABMIS application was developed with functionalities and business processes which could meet MOF's requirements and towards good public financial management practices and standards in the region and the world with adjustments for more suitability to Vietnam. TABMIS is currently operating with 6 modules: General Ledger (GL), Budget Allocation (BA), Accounts Payable (AP), Accounts Receivables (AR), Purchase Order (PO), Cash Management (CM), reports and interfaces with other systems. All treasury offices and financial agencies from the central to provincial and district levels as well as level-1 supervising agencies of the central budget can commonly use the system in their daily transactions, exploitation of data and reports to timely serve 43

54 management work of their leaders. Since this is a centralized system, budget execution processes and the way to record revenue and expenditure is unified across different budget levels with clear roles of different agencies in budget execution. All information of budget revenue and expenditure of all levels is recorded in a real-time, integrated and centralized manner. c- TABMIS implementation has created a step forward in technology modernization in public financial management with the use of an integrated and centralized software, a centralized national database, connections with different agencies, modern and powerful infrastructure, a DR centre for data security, 3,200 sets of PCs for all units joining the system. The financial sector has approached and been professionally operating a big, modern and centralized system of regional and global standards. At the same time, MOF has upgraded and expanded its communication lines to all treasuries offices and financial agencies from the central to the district levels as well as other information technology application infrastructures in the financial sector. d- TABMIS implementation has made great impacts on the organizational structure, supported and pushed forward the improvement of human resource quality, especially staff of MOF and local treasury offices via communication, IT basic and advanced training courses, system use training. It has helped to improve the collaboration among agencies in budget execution, enhance staff knowledge and capacity, adjust the organizational structure for TABMIS operation such as the establishment of the Central Team at the Central State Treasury and a unit carrying out the duties of the Central Team at the provinces for support system operation, the help-desk. e- Based on the results achieved from TABMIS implementation, it is possible to define the next steps forwards through a study of the model and roadmap of a Government Financial Management Information System (GFMIS): the project hired an international consulting firm to support the Department of Financial Informatics and Statistics in developing a model and roadmap of a Government Financial Management Information System (GFMIS) in the specific circumstance of Vietnam to submit to the Minister of Finance for approval. II. Component 2: Support the Modernization of State budget and investment planning 1. Objectives and Design of Activities a. Objectives: Component 2 aimed to support the establishment of the mediumterm fiscal framework and the medium-term expenditure framework for MOF and MPI to contribute to the efficient use of resources, implementation of the strategy on sustainable 44

55 growth and poverty reduction; undertake pilot implementation of the medium-term expenditure framework in some ministries and provinces; move towards institutionalization of the medium-term fiscal framwork and the medium-term expenditure framework; support development of the model and roadmap for development and implementation of a budget preparation system. b. Detailed Design and Undertaken Activities: The Component comprised of 5 sub-components, from 2(a) to 2(e), with the following activities: support preparation of the medium-term fiscal framework and the medium-term expenditure framework at MOF and MPI, with pilot implementation of the medium-term fiscal framework and the medium-term expenditure framework in some ministries and provinces; training to support development of the medium-term fiscal and expenditure frameworks; support development of guidelines on the medium-term fiscal and expenditure frameworks implementation; support preparation of a budget preparation system. Component 2 completed 58 out of 60 planned activities, including international and local consulting services, workshops and training. - To implement the establishment and pilot implementation of the medium-term frameworks, MOF mobilized staff of MPI, pilot ministries (Ministry of Education and Training (MOET), Ministry of Health (MOH), Ministry of Agriculture and Rural Development (MARD) and Ministry of Transport (MOT)) and pilot provinces (Hanoi, Ha Tay, Binh Duong and Vinh Long). During the period of , the medium-term fiscal framework and the medium-term expenditure framework were developed for the medium term of 03 years and on a rolling basis. Publications of the pilot medium-term fiscal framework and the medium-term expenditure framework were made for the period of and had been improved. Their templates, manual and training materials were developed, improved and accepted. MOF organized in Februar 2011 a review workshop on the pilot implementation of the medium-term fiscal framework and the medium-term expenditure framework to make assessment on results gained, advantages and difficulties during the pilot implementation and propose for future steps. - In the project's extension phase of , 03 consultants (01 international and 02 local consultants) were hired to support the institutionalization of the medium-term fiscal framework and the medium-term expenditure framework, make proposals of the model for implementing the medium-term fiscal framework and the medium-term expenditure framework in Vietnam in the new stage, improve forms and templates. 45

56 2. Assessment of Results and Impacts - Results achieved: The pilot implementation of the medium-term fiscal framework and the medium-term expenditure framework has made great impacts on the improvement of forecasting socio-economic indicators, fiscal policies and public financial resources in the medium term as well as budget-financial planning and management. The methodology of the medium-term fiscal framework and the mediumterm expenditure framework has been set up in combination of the experiences of advanced countries and the specific characteristics of Vietnam, contributing to the improvement of legal basis for future implementation. Pilot ministries and provinces have clearly realized the benefits, necessity and rationale of the implementation of these frameworks and their impacts on the annual budgeting cycle. State officials taking part in the pilot implementation have grown up and will be key forces in this area. - Shortcomings: Since the medium-term fiscal framework and the medium-term expenditure framework were only piloted, supporting legal documents were not issued so the pilot implementation met with confusion and there was lack of information at both central and local levels. In addition, the nature of State budget subsidization was still there in the medium-term fiscal framework and the medium-term expenditure framework. The medium-term expenditure framework was still over the budget ceilings. There was still lack of creativeness and self-motivation in studying and suggesting measures for deficiencies. III. Component 3 - Technical Assistance to the Modernization of Debt Management and Monitoring of SOEs' Fiscal Risks 1. Objectives and Design of Activities a. Objectives: Component 3 aimed to strengthen the Government's capacity for debt management at MOF through effective public debt management, improvement of debt analytical skills, including classification, assessment and monitoring of SOEs' risks, development of public debt strategy. b. Detailed Design and Undertaken Activities: Component 3 comprised of 3 subcomponents, from 3(a) to 3(c), including technical assistance activities to strengthening of public debt management (mainly support to development of the legal framework, institutional reforms for public debt management and risk management); implementation of debt management information system; development of a plan for developing debt and risk management information system in the future; strengthening monitoring capacity over SOEs' fiscal risks. This Component completed 59 out of 67 planned activities. 46

57 - Through technical assistance activities such as consulting services, training, workshops, study tours, MOF developed and submited to the Government in order to submit to the National Assembly for approval the Law on Public Debt Management. They also helped to support public debt management reform by developing a plan for public debt reform according to DeMPA, development of debt management tools (public debt strategy and national external borrowings for the period of , public debt review for and the borrowing plan for ), strengthening risk management capacity of public debt (risk management of public debt portfolio, ISDA negotiations and manuals,...), development of a plan to improve the national credit rating,... - In the period of , the implementation of a debt management information system for domestic debt for integration of external and domestic debt databases has been completed with UNCTAD-developed DMFAS at MOF. DMFAS has been deployed in MOF's relevant units. An integrated external and domestic database was set up. There was an intermediate program developed for data exchange between DMFAS and TABMIS. The project also supported development of a plan for developing debt and risk management information system in the future. - In monitoring SOEs' financial risks, the project supported assessment of SOEs' financial risks, improvement of a legal framework for and capacity building for officials in charge of SOEs' financial monitoring (developing the regulations on SOEs' financial monitoring, the manual for SOEs' financial monitoring, training on SOEs' finanical management capacity for 200 officials of management agencies of the central and local levels and big SOEs). 2. Assessment of Results and Impacts - The activities of Component 3 have closely followed the objective "to strengthen the Government's capacity for public debt management at MOF" through contributions to the development of the Law on Public Debt Management issued in 2009, the unification of efficient public debt management (with the establishment of the Debt Management and External Finance Department in 2009), the development of the national public debt and external borrowing strategy for with vision to 2030, enhancement of debt analytical skills (including clasification, assessment of SOEs' financial risks). - The activities of Component 3 during the last 10 years have made big contributions to the strengthening of public debt management, including support to the development of a legal framework, institutional reforms; development of public debt management information system (DMFAS) and development of a plan for developing 47

58 debt and risk management information system in the future; capacity building in debt and risk management. IV. Component 4 - Project Management Support 1. Objectives and Design of Activities a. Objectives: This Component aimed to organize activities for project coordination and management. b. Detailed Design and Undertaken Activities: Component 4 comprised of 3 sub-components, from 4(a) to 4(c), including: a team of consultants supporting project management according to the regulations of the World Bank and the Government of Vietnam, which consisted of coordinators, procurement specialists, financial specialists, interpreters, short-term consultants supporting the PMU in TABMIS contract management, international and local consultants supporting preparations for project closing and evaluation, development of the next project, operation cost management and office management. This Component completed 65 out of 69 planned activities. - Organizing coordination of the activities of the project and each component, collaborating with component implementation units, the donors in developing implementation plans, procurement plans and other relevant activities. - Organizing procurement - contract management: In the period of , the project held 85 bidding packages, including TABMIS which was worth US$ 53 million with two-stage bidding. In the period of , the project organized 107 bidding packages. The PMU collaborated with implementation units to control the implementation of contracts, carry out contract management and acceptance as well as participated in developing MOF's regulations on procurement procedures for WB-funded projects. - Organizing project extension and amendment: There have been three revisions to the Agreement signed with the World Bank (once for time extension, once for additional financing and activity adjustment and once for time extension and activity adjustment). The PMU submited to MOF for approval the adjustments to the project's activities and scope during implementation for feasibility and suitable to actual implementation (revisions of implementation plan, detailed procurement plan,...). - The PMU undertook management of the project's funding sources, payment control, accounting, auditing and final accounting; produced regular reports and assured 48

59 logistics, translation and interpretation for all project activities, including TABMIS rollout in the whole country. 2. Assessment of Results and Impacts The activities of Component 4 have made big contributions to the implementation results of other components. Generally, Component 4 has well fulfiled its duties to assure successful implementation of the project. However, since all project management tasks concentrated at one point, the volume of work for Component 4 was very great, especially in the situation that ODA project running and management must follow the regulations of both the donors and the Government with a lot of complicated procedures to complete, particularly when they were not identical. 3. Disbursement Results as of end of February 2014 Disbursements per components as of end of February 2014 Component Total Capital (1000 USD) Accumulated Disbursement as of 31/12/2013 (1000 USD) Planned Disbursement to February 2014 (1000 USD) Rate (%) Component Component Component Component Total Disbursements per fund sources as of end of February 2014 Fund Source Total Capital (1000 USD) Accumulated Disbursement as of 31/12/2013 (1000 USD) Planned Disbursement to February 2014 (1000 USD) Rate (%) IDA Credit Grant Counter-part

60 Fund Total C. OVERALL ASSESSMENT ON THE RESULTS OF THE PROJECT, ADVANTAGES, DIFFICULTIES AND PROPOSALS 1. Overall Assessment on the Results of the Project after 10 years of Implementation: a. The project was correspondent to and met the objectives and activities of strategies and programs launched by the Government and the financial sector relating to public finance reform: - The master programs on State administration reform for the period of and the period of cover 4 areas: institutional reform, State organizational reform, renovation and enhancement of State cadres, public finance reform and towards a modern administration with effective application of development advances of science and technology, especially information technology. - Development strategy of the financial sector: the financial sector development strategy for the period of and the 11 th program aimed to carry out administration reform and capacity building of national financial management, including study and undertaking duties on organizational improvement, improvement of business processes, informatic application and modernization of budget and financial management technology, training and refreshment. The financial sector development strategy for the period of defines to push up administration reform with modernization of management technology, especially information technology; to form a modern, effective and professional national finance...". - The national program on IT application in the operations of State agencies in the period of : one of the specific objectives is to implement the Treasury and Budget Management Information System (TABMIS) in 100% cities and provinces. The list of projects and nation-level duties assigns MOF to build a Government Financial Management Information System (GFMIS). b. The project has basically completed according to the defined objectives, activities, plan and outputs approved by the Prime Minister at the Decision No QD/TTg, the Credit Agreement and MOF's Decisions: - In comparison to the defined objectives and outputs: 50

61 + Regarding objectives, the PFMRP has basically obtained the project's overall objectives: the implementation of TABMIS has been a great step forward in State budget management modernization, from allocation, organization for budget collecting and spending to reporting. It has helped to increase budget accountability of MOF and other ministries/ministerial agencies, financial agencies and local authorities; clearly assigned the functions and duties of different agencies in budget execution; improved the transparency in public financial management; assured fiscal security in the national development and integration process; reduced errors and negation actions in budget utilization. The development of the medium-term fiscal and expenditure frameworks has improved the quality of forecasting of fiscal policies, public financial resources in the medium term; strengthened the links between budget management requirements and development financial targets and economic-technical norms. Technical assistance to public debt management and implementation of DMFAS has made remarkable contributions to the enhancement of public debt management capacity at MOF, unification of effective debt management, development of public debt strategy, public debt management reform program, formulation of a public debt database, improvement of debt analytical skills, including classification, assessment and monitoring of SOEs' fiscal risks. + Regarding outputs as per the Credit Agreement and the Project Document: in comparison to the 2013 revised output framework, the project has basically obtained the intermediate outcomes committed with the World Bank. Some incomplete outputs such as development of a model and roadmap for the implementation of a cash management system and establishment of a Treasury Single Account (TSA), the guidelines for the nation-wide implementation of the medium-term fiscal and expenditure frameworks are due to the process of revising the State Budget Law and the issuance of the Decree on Cash Management. In addition, the publication of budget execution results from TABMIS as committed will be done after the approval of the revised State Budget Law. - In comparison to the design and action plan: The total number of completed activities is 309 out of 339 planned activities, accounting for 91%, including the implementation of the two information systems, TABMIS and DMFAS, and technical assistance activities such as international and local consulting, training, workshops and study tours. Some activities which were revised or not carried out were mainly technical assistance activities since they were funded by other sources or duplicated or defined by the beneficiary agencies to be unnecessary or unsuitable with the reality or it was impossible to select qualified consultants or there was not sufficient time for undertaking. - Disbursement has been completed (while payments will be done till the end of February 2014 for completed activities). It reached US$ million, equivalent to 51

62 91% of the total capital, of which IDA reached 92%, grant reached 93% and counter-part fund reached 79%. Of the total amount disbursed, the cost of the two information systems accounted for 77% (TABMIS - USD million and DMFAS - USD million). c. The project has made considerable impacts on the reform and modernization of the financial sector and regular operations of agencies/units: Different aspects of administration reform and modernization have been shown right from the project design. Though it has not yet covered all aspects of public financial management that MOF is in charge, the results achieved have had clear impacts on public financial management, i.e.: treasury and budget management reform in Component 1, medium-term planning methodology in Component 2 and institutional, strategical and regulatory reforms in public debt management and monitoring of SOEs' fiscal risks in Component 3. In addition, with support to the establishment of a public debt management office in MOF, the process of budget execution in the system (budget allocation, payment order, recording, borrowing accounting and debt service,...), the project has made considerable impacts on organizational structure reform of different agencies of MOF, local financial agencies and other ministries in the direction of professionalism and clearer assignment of responsibilities. The volume of training carried out within the framework of the project, including training courses for over 15,000 TABMIS users, in house and abroad functional and technical training courses of all components for thousands of staff as well as the working environment with international contractors and consultants have improved the knowledge, mindset, qualifications and work skills of MOF staff, especially at the local level, technicians and project managers at the central level. Regarding technical infrastructure and technology, thanks to the two operating management information systems, TABMIS and DMFAS, budget management and debt management have been considerably modernized in the direction of centralization, integration and towards the current global financial management tendency. Equipment installed and supplied in the nation-wide scale, thorough connection line throughout all agencies and units in the financial sector, upgraded relevant applications, improved technical infrastructure and technology for compatibility to TABMIS,... are great impacts that the project has made on technical infrastructure and technology modernization of the financial sector. These results are not merely of the project but also push up other relevant aspects of MOF and the State Treasury. As mentioned above, the project has made positive effects on the regular operations of relevant agencies; improved the performance efficiency of different units; created high initiativeness in information exploitation, budget monitoring and 52

63 management, especially of financial and level-1 supervising agencies, a new advance ever. Moreover, these results and impacts have created the impetus for next steps of reform and modernization in the financial sector. d. The role and acknowledgement of the international arena of the project's success, results and impacts - The World Bank: During the whole implementation process of the project, in addition to providing the credits, the World Bank has made a lot of support to the project's different aspects, from designing, technical and functional consulting to close monitoring of the project's activities according to the Bank's regulations and the signed Agreement. The World Bank has assessed that the PFMRP has been successful and highly appreciated the implementation of TABMIS - a system which the Bank considers "one of the largest financial management information system implementations in the world" as well as the achievement of the project's expected results and intermediate outputs. In its last supervision mission in October 2013, the Bank has confirmed this and highly appreciated the strong determination of MOF, commitment and devotion of the project team (please kindly see the management letter signed by Ms Keiko Sato Acting Country Director of the World Bank in Vietnam and the Aide Memoire of the Mission). - A study of financial management information systems in several member countries of the Public Expenditure Management Network in Asia (PEMNA) made assessment on FMIS projects in 4 countries: Indonesia, Vietnam, Mongolia and Timor Leste. According to the study results, TABMIS implementation has been evaluated successfully with many findings and lessons learnt from the project implementation in strategic vision, organization for implementation, methods and actual decisions on functional, technical, system administration and long-term development aspects. The lessons from Vietnam are good experiences for countries which are or being implement similar information systems (please see extraction of comments and lessons learnt from Vietnam). e. The project has created the premise, experience and capacity for implementation of future large projects of the sector: Throughout 10 years of implementation, the results achieved, the experience gained during implementation, the improved qualifications and capacity of staff have formed firm basis and confidence for MOF in organizing and implementing coming projects. They also help MOF to properly define next steps in the process of reform and modernization of the financial sector. 53

64 2. Advantages, Difficulties and Lessons Learnt: a. Advantages: - The project has met the requirements for administration reform and modernization and conformed to the sector's development orientations and strategies so it was highly feasible and has received strong support and consent of the donors and the leaders of different levels. - The project has always received the attention and unified instructions of all MOF's leaders. MOF's leaders have always expressed the determination to implement and complete the project. At the local level, the project has also received attention and support of provincial leaders in TABMIS implementation and pilot implementation of the medium-term frameworks. - The project has established a project team with diligent and devoted staff, especially treasury staff in TABMIS implementation. Component/Sub-component implementation units have been responsible and active in undertaking their assigned tasks. Relevant units/agencies within MOF have been very collaborative and supportive in resolving difficulties, active implementation of project activities and facilitating the project implementation. Agencies directly implemented TABMIS, especially provincial treasury officies and financial agencies, actively took part in TABMIS rollout. - TABMIS contractor was capable in system implementation, tenacious, patient and adaptive to the circumstance of Vietnam and very cooperative, particularly in later years of the project. - During the project implementation, the donors, especially the World Bank, have always been supportive and closely monitored all aspects of the project to push up the implementation progress and the achievement of the project's objectives. b. Difficulties/Short-comings: - Issues relating to the project's scope, nature and design: + The scope of the project was very large, covering many aspects of public finance (budget management, public debt management, monitoring of SOEs' fiscal risks). The implementation of TABMIS stretched out in a very large scale (financial sector, planning and investment sector and originally spending units), in the whole country; the original design of the project intended to implement a budget preparation system, a debt management system, together with institutional reform and capacity building. + Complexity: this is an integrated system with unified processes, new technology in the circumstance of special characteristics of the matrioska-doll budget system of 54

65 Vietnam (other projects in the world are mainly for one budget level). Institutional and business process reforms did not happen before but in parallel with the system implementation. + The implementation timeframe of the project was not suitable with its scope and nature. The original design seemed ambitious with rather large objectives and did not account for its complexity, resulting in delays and several revisions/extensions of the project. - Issues relating to the special characteristics of business processes and management mechanism of Vietnam: the matrioska-doll budget system of Vietnam, budget decentralization and revenue sharing, budget regulating mechanisms such as budget advances, budget transfers, accounting policies, reporting policies, orientations for revision of the State Budget Law greatly affected the implementation of such a centralized system as TABMIS as well as the medium-term frameworks. - Issues relating to project team members and users: at the beginning, MOF's staff was inexperienced and lack of knowledge in both international financial management and technology practices, project management, foreign language and work skills with international contractors. Human resources of the project team of all parties experienced frequent changes or could not arrange sufficient time for the project. The number of users was great with inequitable knowledge, experience and skills. Moreover, they were not familiar with the working habbits in a centralized system. All these affected the implementation and operation of TABMIS. - External issues: the close monitoring of the World Bank basically supported and pushed up the project's progress. However, it sometimes created difficulties, due to different points of view and insufficient understanding of the special management characteristics of Vietnam. At the beginning, the international contractor was very different in knowledge, culture, point of view and objectives so it took a long time to improve this relationship and have good cooperation with the contractor. International and local consultants were limited so it took a long time for selecting qualified consultants or the results were not as expected or it was impossible to find consultants for certain complicated assignments. - Issues relating to the project preparation work and organization for implementation: + Project implementation structure: with the scope of the PFMRP, the project implementation apparatus consists of a PMU which acts as the point for project management and component implementation units. They could share work and responsibilities but sometimes had to undergo lengthy procedures which required very 55

66 close and united collaboration. There have been many changes and improvements to the project implementation apparatus. + Legal regulations: There have been complexity and difficulties in observing both the law of Vietnam and regulations of the World Bank as stated in the Credit Agreement. At the beginning, there was no designated financial policy for ODA projects which greatly affected support to implementation. + Organization for implementation: Due to the lack of experience in implementing such a large and complex project, the organization for implementation was still confused, especially in the beginning time. There was not enough attention to planning and monitoring. Collaboration among different units/agencies was not very good, particularly at the beginning of the project implementation. c. Lessons Learnt: - Preparation is fundamental for implementing a reform and modernization project. It should be done carefully with an overall strategy and detailed steps in order to master the objectives, requirements, measures and implementation plan. These are very necessary conditions for the project to be in the right path and feasible as well as to minimize adjustments to and extensions of the project. It is very essential to prepare good legal basis, organization, human and other resources for the project. - Communication and reporting to the leaders of different levels should be attentive in order not only to have their approval for the project but also to have their commitment and determination for the project's implementation. - A key factor for good implementation of the project's activities is the selection of a project team with sufficient capacity, determination and endurance to overcome challanges of the project. - Good lessons are also for training, communication and stakeholder management. - Implementation organization and management: It is necessary to pay attention to implementation planning, clear assignment of the roles and responsibilities of stakeholders, flexible coordination and monitoring of project activities with timely adjustments, building of effective collaboration among relevant agencies to minimize delays and obtain good results. It is essential to undertake effective procurement, contract management, contractor management according to the donors' regulations and the law of Vietnam while being flexible, cooperative to protect the maximum interests of the Government and select qualified contractors for complicated tasks in the implementation of a big system. It is also necessary to organize and manage financial and accounting work, management of fund sources, asset management, logistics, translation and 56

67 interpretation, in a prudent and accurate manner to ensure compliance to the State regulations, financing structure, donors' regulations but help saving the State budget and making no efffects on the implementation of the project's activities. 3. Project Closing Plan and Next Steps a. Project Packaging and Closing: After the closing date of 31/10/2013, work remained include making payments for completed activities and closing the project according to the regulations of the World Bank and the Government, i.e.: - Completing payments for completed activities, completing final accounting of WB's IDA and closing the accounts: February 2014 (PMU). - Preparing report on the project's results to report to MOF's leaders: January 2014 (PMU and component implementation units). - Collaborating with the World Bank for the project implementation completion report: February-April 2014 ((PMU and component implementation units). - Completing hand-over of project assets to other units: February-March 2014 (PMU, component implementation units and relevant units). - Completing final accounting report for the whole project: March-April 2014 (PMU). - Completing selection and implementing independent auditing package for the whole project final accounting report: January-April 2014 (PMU). - Completing document correction and edition to hand-over to MOF's Ministerial Office: February-April 2014 (PMU). - Collaborating with the Department of Personnel and Training and relevant units to make a plan for arranging the PMU's staff after the project closing to submit to MOF's leaders for approval: January-March Since the volume of work in the 10-year implementation is very great, it is difficult for the PMU to complete the project closing timely so it needs the active participation and support of MOF relevant units in such work as asset hand-over, document hand-over, settlement of tax issues, final accounting, project closing, arrangement of PMU's staff after project closing,... b. Continuous Improvement and Promotion of the Project's Results: Besides closing the project, in order to promote the results obtained, MOF (professional units) should continuously improve and sustain the project's results, i.e.: 57

68 - To continuously study for improving the policies and regulations relating to the activities of the project. - To continuously and unceasingly enhance the capacity of the users and administrators of TABMIS and DMFAS. - To quickly study for additional procurement of maintenance services of TABMIS hardware and applications. To improve reporting and data exploitation functionalities of the system. c. Expansion of Reforms and Modernization towards a Government Financial Management Information System (GFMIS): - Relevant agencies (the Department of Financial Informatics and Statisitcs, the Debt Management and External Finance Department) should continue to improve studies of the model of a GFMIS, the public debt and risk management system in order to develop a specific roadmap and plan to submit to MOF's leaders for approval. - The State Treasury should continue to study the model of a cash management system and push up the drafting of a Decree on Cash Management. PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT 58

69 Annex 8. Comments of Co-financiers and Other Partners/Stakeholders DFID is content with the assessment in the report. The project has impressively achieved its expected objectives within a reasonable timeframe. We are satisfied with the Bank s and Government s performance during the duration of the project. The government strong ownership and commitment were definitely key factors to the project s achievement. Close and timely technical support by the Bank s project team and specialists were instrumental to guide the implementation of the project in general and TABMIS development in particular. We shared the lessons learnt, which will be very useful for similar projects of such large scale. We are also satisfied with close collaboration between the Bank s project team and DFID during the implementation and evaluation of the project. Annex 9. List of Supporting Documents Project Implementation Plan Project Appraisal Document for the Socialist Republic of Vietnam: Public Financial Management Reform Project (PFMRP) dated April 24, 2003 (Report No: VN) Aide Memoires, Back-to-Office Reports, and Implementation Status Reports. Project Progress Reports. Borrower's Evaluation Report dated February 2014 *including electronic files 59

70 Annex 10. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of the PFMRP was to strengthen budget planning, execution, reporting and accountability. Revised Project Development Objectives (as approved by original approving authority) The objective was not revised. (a) PDO Indicator(s) Indicator Indicator 1 : Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Accuracy, timeliness, relevance, transparency and compliance with international best practices in budget execution and reporting at each level of government. Value quantitative or Qualitative) - Lack of a unified COA applicable for treasury offices, financial agencies and spending units resulting in budget/finance information which are inconsistent and hard to compare ; - Lack of a centralized information system from central to local levels, among financial agencies, treasury offices and tax agencies makes report on budget revenues and expenditures untimely, inaccurate and inconsistent, creating difficulties for management; - Absence of a TAS coupled with a decentralized information system gives rise to lack of timely and accurate information for cash operation and management. - Utilization throughout government of an unified chart of accounts for treasury and budget management and spending units, consistent appropriate international standards; with - A centralized TABMIS in place and operational in all central, provincial and district treasury and financial offices and large selected spending units; - Progress on the road from cash to accruals accounting; - Progress on the road to a Treasury Single Account (TSA) - Utilization throughout government of a restructured and integrated chart of accounts for treasury and budget management, consistent with appropriate international standards (by end 2012); - A centralized TABMIS in place and operational in all central, provincial and district treasury and financial offices and large central ministries and Government agencies (BA Module); - Progress on the road from cash to accruals accounting; Unified Chart of Accounts for consolidation of state accounting information developed; - Treasury Single - Utilization of a unified COA for treasury and budget management is in place at all treasury offices and financial agencies at each level of government. - A centralized TABMIS in place and operational in treasury offices and financial agencies of all government levels, selected large ministries and some large general departments/ departments of the ministries (BA Module) helped centralizing integrated, timely, accurate revenue and expenditure information and compliance control in better budget execution. -More accurately defining of budget revenue and expenditure coverage. - Treasury Single Account arrangements were introduced in Q3 of 2013 and expected to be fully rolled out by the end of

71 Account introduced. (TSA) Date achieved 31-Jan October Oct-2013 Comments (incl. % achievement) A Treasury and Budget Management Information System (TABMIS) has been developed, implemented with a commercial of the self-software solution Oracle Financials and served as a common platform to all treasury offices and financial agencies at all four levels of the Government for budget allocation and control, payment and receipt processing, expenditure and revenue accounting and reporting. TABMIS is fully operational in all intended 1,500 treasuries and financial agencies across all 63 provinces, and 37 spending ministerial organizations, and 3 major departments of Hanoi city since October This has enabled the government to allocate, execute and monitor the state budget through a centralized financial management information system, on a transparent and real-time basis. A unified Chart of Accounts (COA) for TABMIS has been developed and applicable throughout all four levels of the government for treasury and budget management. This multi-dimensional COA with 11 segments capturing all relevant information required for budget management such as source of fund, location, administrative, economic and functional budget classifications, targeted programs, projects, spending units etc. provides flexibility to analyze, consolidate and report for each segment and for a combination of segments. Relevant segments of the COA consistent with the international functional and economic classifications of expenditures as provided in GFSM2001/ COFOG and IPSAS allow for GFS reporting. TABMIS is helping a move toward accrual accounting as large state budget expenditure commitments are being controlled and monitored through TABMIS. In addition, some accrual accounting information such debt obligations are accounted and recorded in TABMIS immediately when incur. Improved accuracy and consistency in budget control, payment processing, accounting and reporting is achieved through application of a unified TABMIS COA and a single database of TABMIS, replacing multiple COAs and multiple distributed treasury legacy systems located throughout the country in the past. Furthermore, data on government receipts and expenditures, cash and fund balances available in TABMIS now on a real-time basis mean that all treasury and finance offices can produce instant reports for management purposes. Payment processing thought a centralized financial management information system such as TABMIS has helped enforcing compliance and enhancing transparency in budget execution throughout all levels of government. Full roll out of TABMIS, which provides essential expenditure and revenue accounting foundation for consolidation of treasury accounts, has enabled the MOF to move to implement TSA since the third Quarter of At the ICRR completion time, TSA arrangements have been fully implemented in three out of four state-owned commercial banks (SOCBs). As these three banks hold the majority number of treasury idle cash balance accounts, considerable account consolidation has been achieved. When TSA arrangements are fully rolled out to the remaining SOCB by Mid-2014, four SOCBs will provide the direct revenue collection and payment services through four accounts that have replaced all approximately 700 previously existed bank accounts. This would result in considerable rationalization of banking arrangement for government cash management and potentially reduce the cost of borrowing, thus contributing to more efficient budget execution. The targets under this indicator has been largely achieved as compared to Formally Revised Target Values Indicator 2 : Better planning of the State Budget and the Public Investment Program to achieve the growth and poverty reduction goals set out in the SEDP. Value quantitative or Qualitative) - Lack of a medium term fiscal framework, spending plans with due regards to medium term resources constraints, creating uncertainty about budget resource availablities ; lack of links between annual budget and development - 5 year MTFFs and MTEFs piloted as part of 2005 budget cycle; and rolled over, updated and published as part of each subsequent budget cycle. - MTEFs successfully - 3 year MTFFs and MTEFs piloted as part of budget cycle in four sectors and four provinces; and rolled over, updated and published as part of each subsequent budget cycle. - A methodology for budget and investment planning established through succesful pilot implementation of MTEF and MTFF betweem 2005 and

72 priorities set out in the SEDP. - Inconsistencies in management, accounting and reporting of budget revenue and expenditure. - Lack of a comprehensive, unified and complete database for accurate and necessary reports, timely serving decision-making in budgeting process. piloted in four sectors and four provinces. - A budget preparation system implemented. - Guidelines for nationwide implementation of MTFF and MTEF finalized. - Guidelines for MTFF and MTEF pilot implementation developed and finalized. - the implementation of the medium term budgetfiscal framework (including the medium term expenditure framework) and output-based budget management principles incorporated in draft revisions of the State Budget Law - A centralized TABMIS with unified COA for treasury offices, financial agencies and spending units (SUs) (budget classification codes) successfully implemented at all treasury offices and financial agencies of all government levels assured provision of timely and accurate information of budget utilization to effectively support decision-making in budgeting process. Date achieved 31-Jan Feb Oct-2013 Comments (incl. % achievement) Indicator 3 : - The pilot implementation has made great impacts on improvement in the quality of socio-economic forecasting and medium tern fiscal policy and public finance resources projection, thus contributing to improved policy and procedure formulation and fiscal management. As the result, MTFF and MTEF nationwide implementation and result/performance-based budget management will expectedly be institutionalized in the revised State Budget Law (to be enacted by end of 2014). - The pilot implementation has helped create a team of officials in MOF, MPI and the pilot ministries and provinces who have a thorough grasp of MTFF and MTEF methodology, model and implementation modalities which will facilitate future nation-wide rollout once MTFF and MTEF implementation is institutionalized. The target of the first phase for MTFF and MTEF establishment and pilot implementation has been achieved. The guidlelines for the MTFF and MTEF pilot have been developed, adapted to Vietnam context and futher improved though several rounds of pilot. During , an assessment was made on suitablity of MTEF to existing budgetary and planning processes and the type of MTEF model that would best suit Vietnam s needs and capacity. While the work on development of guidelines for nation-wide implementation was initiated but because it is subject to progress in revision of the State Budget Law (which goes beyond the timeframe of the Project), the guidlines have not be finalized. Greater fiscal sustainability through improved and more integrated recording of external and domestic public and publicly guaranteed debt, improved capacity to monitor SOE liabilities, and improved ability to assess associated fiscal risks. Value quantitative or Qualitative) - Lack of an agency leading and coordinating public debt management and consolidation of public debt data while public debt - Effective public debt management unified by identification of a lead department in MOF to direct debt - Effective public debt management unified by identification of a lead department in - The Department of Debt Management and External Finance was established in 2009, leading and coordinating 62

73 management is managed by a number of agencies with and within MOF. - A number of important tasks in debt management such as development of debt strategies, risk analysis and management of publid debt, nation-wide debt accounting not yet clearly defined and assigned to specific agencies. - Nation-wide debt recording and accounting not yet provided a comprehensive and true picture of domestic and external borrowings. A debt management information system only implemented for external debt. No intergrated database of domestic and external debts. - No attention to management of contingent liabilities arisen out of SOEs' liabilities and Government guaranteed debts. No regulations for effective management of these risks. management Government. across - Approval and publication of debt management objectives. - Domestic debt recording system (able to provide consolidated public debt data, including external debt) established. - SOE liabilities monitoring practices established and operational, with key staff trained in the use of this information to make preliminary assessments of associated fiscal risks. MOF to direct debt management across Government. - Approval and publication of longterm debt strategy, including debt management objectives. - Analytical capability in debt management enhanced with critical staff identified and trained, Middle Office capacity enhanced. - Domestic debt recording system (able to provide consolidated public debt data, including external debt) established. - Legal framework and monitoring indicators adopted (in 2013); analytical capability enhanced for monitoring of SOEs fiscal risks. public debt management, information consolidation, public debt reporting - an advanced step in unification of public debt management. - Debt management objectives were approved and published in the Strategy for public debt and national external borrowings for the period of and with a vision to 2030; - Analytical capability in debt management of relevant MOF officials, especially staff of the Middle Office of the Department of Debt Management and External Finance has been considerably enhanced through incountry and oversea training courses. In addition, institutional capacity in risk management of public debt has been enhanced byissuance and implementation of the regulations on risk management of public debt portfolio. - An information system for domestic debt management was established, with integrated domestic and external debt databases. This, together with the leading role of the Department of Debt Management and External Finance in public debt information consolidation and reporting, have helped improve public debt reporting. - Regulations on monitoring of SOEs fiscal risks were established, with relevant staff trained. These helped enhance institutional and human resource capacities in monitoring of SOEs fiscal risks. 63

74 Date achieved 31-Jan Feb Oct-2013 Comments (incl. % achievement) - The activities of Component 3 have closely followed the objective "to strengthen the Government's capacity for public debt management at MOF" through contributions to the development of the Law on Public Debt Management innacted in 2009, the unification of efficient public debt management (with the establishment of the Department of Debt Management and External Finance in 2009), the development of the national public debt and external borrowing strategy for with a vision to 2030, enhancement of debt analytical skills (including clasification and assessment of SOEs debts). - The activities of Component 3 during the last 10 years have made big contributions to strengthening of public debt management, including support to development of a legal framework, institutional reforms; development of public debt management information system (DMFAS) and development of a plan for developing debt and risk management information system in the future; capacity building in public debt and risk management. Some of achievements under this indicator such as the passing of the Law on Public Debt Managment and the creation of the debt management office were not foreseen at the project design. The targets under this indicator have exceeded expectations. (b) Intermediate Outcome Indicator(s) Indicator Indicator 1 : Value (quantitative or Qualitative) Date achieved Comments (incl. % achievement) Indicator 2 : Value (quantitative or Qualitative) Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Utilization throughout government of a restructured and integrated chart of accounts for treasury and budget management, consistent with appropriate international standards (by end 2012). 100% achieved. - Utilization of a unified COA for treasury and budget management in all treasury offices and financial agencies. The accounting system of spending units, sharing the same budget classification codes with COA of treasury and budget accounting system, facilitates budget spending data reconciliation and consolidation. 31-Dec-2012 Implementation of TABMIS in treasury head office, MOF and two pilot provinces (by June 2009), with relevant staff trained. TABMIS was piloted in Hai Phong and Ha Nam in April-September 64

75 2009; in MOF and Treasury Head Office in May- September Relevant functional and technical staff was trained. Date achieved Comments (incl. % achievement) Indicator 3 : Value (quantitative or Qualitative) 30-Sep-2009 After pilot implementation, TABMIS was adjusted and rolled out nation-wide. Lessons learnt from pilot implementation were good experiences in the rollout. 100% achieved. Roll-out of TABMIS to all Treasury and Finance Offices in provinces and districts (by end 2011), with relevant staff trained. Roll-out of TABMIS was fully completed in October Relevant functional and technical staff was trained. Date achieved 31-Dec Dec Dec-2012 Comments (incl. % achievement) Indicator 4 : Value (quantitative or Qualitative) TABMIS roll-out was delayed since MOF and the Contractor had to upgrade the system in to meet the actual volume of transactions which was many times higher than the original estimate at the project design. 100% achieved. Implementation of budget allocation module in 40 large central ministries and government agencies (by end 2011), with relevant staff trained. In , BA module implementation was carried out in 37 ministries and 3 departments of Hanoi City and some large general departments/ departments of the ministries. Relevant functional and technical staff was trained. Date achieved End Dec-2012 Comments (incl. % achievement) Indicator 5 : The reason for delay in the achievement of this indicator was the same as for Indicator 3 above. 100% achieved. All large state budget expenditure commitments and associated contracts (above VND 100 million and 500 million for recurrent and capital expenditures respectively) are controlled and monitored through TABMIS (by end 2013). Value (quantitative Regulations control monitoring on and through 65

76 or Qualitative) TABMIS of commitments (above VND 100 million and 500 million for recurrent and capital expenditures respectively) were issued in November 2008 and in force since June 2013 after TABMIS was fully rolled out and stably operational in the nation-wide. Date achieved End 2013 June 2013 Comments (incl. % achievement) Indicator 6 : Value (quantitative or Qualitative) 100% achieved Budget execution results directly obtained from TABMIS are published on MOF website on a monthly basis within 15 days after the end of the month (after the revised State Budget Law is adopted by the Recipient s National Assembly). TABMIS provides timely and accurate budget revenue and expenditure data, serving budget management. The publication of budget execution results could only be done once the revised State Budget Law (which is now under submission process for adoption) states that. Date achieved Comments (incl. % achievement) Indicator 7 : Value (quantitative or Qualitative) Though it is impossible to assess achievement of this indicator because the revised State Budget Law has not yet been adopted, publication of budget execution reports has seen clear improvement. From publication of annual budget appropriations and final accounts approved by the National Assembly since 2003, MOF has now been publishing quarterly budget execution results within 15 days after the quarter's end. Preservation of at least 30 dedicated and properly trained technical specialists at central, to manage TABMIS databases, system security, user access, and to provide technical support to end users. MOF established the Centre Team to provide technical support to the end users, organized training courses for existing staff as well as newly recruited staff, recruited qualified and 66

77 experienced technical experts to maintain database administration, TABMIS users management and support. At the moment, the number of technical specialist is over 30. Date achieved 15-Oct-2013 Comments (incl. % achievement) Indicator 8 : Value (quantitative or Qualitative) 100% achieved. Progress on the road from cash to accruals accounting; Unified Chart of Accounts for consolidation of state accounting information developed (by March 2013). TABMIS has been applying modified cash accounting towards accruals. Certain transactions which have been done on accrual basis are: Account Payables (AP), Account Receivables (AR), and Purchase Order (PO). A project on State Accounting General Establishment is under development, with expected completion in Date achieved Comments (incl. % achievement) Indicator 9 : Value (quantitative or Qualitative) Basically completed, in which the first activity has been completed with the new COA for TABMIS while the second activity is ongoing. Model, roadmap for development and implementation of cash management system adopted (by end 2013); and Treasury Single Account introduced (by October 2013). - Centralized payment TSA was introduced since Quarter 3 of 2013 and expected to be fully rolled out to all service banks in A model and roadmap for development and implementation of 67

78 cash management system have not yet been completed due to ongoing establishment of legal basis for cash management. Date achieved Comments (incl. % achievement) Indicator 10 : Value (quantitative or Qualitative) Date achieved Comments (incl. % achievement) Indicator 11 : Value (quantitative or Qualitative) Date achieved Comments (incl. % achievement) Indicator 12 : Value (quantitative or Qualitative) Partly achieved. 15-Oct-2013 Model, implementation roadmap, technical requirements and bidding document for TABMIS portal developed. 100% achieved. Model, implementation roadmap, technical requirements and bidding document for TABMIS portal have been developed with support from consultants. 30-Oct-2013 Model and implementation roadmap for a government financial management information system developed. 100% achieved. Model and implementation roadmap for a government financial management information system have been developed, with support from consultants. 30-Oct year MTFFs and MTEFs piloted as part of budget cycle in four sectors and four provinces; and rolled over, updated and published as part of each subsequent budget cycle (starting from fiscal year 2005 until fiscal year 2008). 3 year MTFFs and MTEFs piloted and rolled over starting from fiscal year

79 until 2009, covering four three-year circles: , , and Date achieved 31-Dec-2008 Comments (incl. % achievement) Indicator 13 : Value (quantitative or Qualitative) 100% achieved. Workshops on medium-term budget planning provided to relevant senior National Assembly deputies and government officials (by 2008), with consensus for wider roll-out of medium-term budget planning emerging. Many workshops on medium-term budget planning provided to relevant senior National Assembly deputies and government officials in Roll-out of medium term budget planning is being agreed to be included in the draft revision of the State Budget Law which will formally institutionalize this modern budgeting approach in Vietnam. Date achieved Comments (incl. % achievement) 100% achieved. Indicator 14 : Guidelines for nationwide implementation of MTFF and MTEF finalized (by October 2013). Value (quantitative or Qualitative) A set of templates (manual) and training materials completed. These have been used and further improved during the pilot period. Draft guidelines for nationwide roll-out have not yet been completed because it depends on the revision of the State Budget Law. Date achieved 69

80 Comments (incl. % achievement) Indicator 15 : Value (quantitative or Qualitative) Date achieved Comments (incl. % achievement) Indicator 16 : Value (quantitative or Qualitative) Date achieved Comments (incl. % achievement) Indicator 17 : Value (quantitative or Qualitative) Partly achieved. Identification of a lead department in MOF to direct debt management across Government, with appropriate regulations issued (by mid 2009). 100% achieved. The Department of Debt Management and External Finance was established in 2009, leading and coordinating public debt management, public debt data consolidation and reporting. 30-Jun-2009 Approval and publication of a long-term debt management strategy including debt management objectives (by end 2011). 100% achieved. The strategy on public debt and national external borrowings for the period of , with a vision to 2030 was approved and published on 18/4/ Apr-2012 Analytical capability in debt and risk management enhanced with critical staff identified and trained. Middle Office capacity is sustained by, among other things, preservation of at least five staff of appropriate qualification and experience. - Analytical capability in debt and risk management of critical staff has been enhanced via incountry and oversea training courses and study tours organized within the framework of the PFMRP. - The Middle Office is now having 06 70

81 staff with good qualifications and experience. Date achieved 15-Oct-2013 Comments (incl. % achievement) Indicator 18 : Value (quantitative or Qualitative) 100% achieved. Domestic debt recording system (able to provide consolidated public debt data, including external debt) established and operational (by end 2013), with key staff trained in new systems/practices. DMFAS has been operating at the Department of Debt Management and External Finance since 2003 for external debt (out of the framework of the PFMRP). The PFMRP has supported DMFAS implementation for domestic debt and integration of domestic and external debt databases at MOF. In addition, an intermediate program has been built to interface DMFAS with TABMIS for data exchanges. During this implementation, relevant functional and technical staffs were trained and are now capable to operate and administer the System. Date achieved September 2013 Comments (incl. % achievement) - 100% achieved. Indicator 19 : Strategy for debt and risk management information system developed (by September 2013). Value (quantitative or Qualitative) A strategy for debt and risk management information system has been developed with support from consultants. 71

82 Date achieved 30-Oct-2013 Comments (incl. % achievement) 100% achieved. Indicator 21 : DeMPA self-assessment on public debt management performance conducted (by Mid 2012). Value (quantitative or Qualitative) Date achieved In collaboration with a World Bank mission, DeMPA self-assessment on public debt management performance was conducted in A plan for public debt management reform was developed in June 2012, based on the assessment results and recommendations. 31-Dec-2011 Comments (incl. % achievement) Indicator 22 : Value (quantitative or Qualitative) Exceeding expectations. 100% achieved. Legal framework and monitoring indicators adopted (in 2013); analytical capability enhanced, for monitoring of SOEs fiscal risks. - The regulations on monitoring of SOEs' fiscal risk with a system of monitoring indicators were issued in Analytical capability for monitoring SOEs' fiscal risks of the staff of financial agencies of all levels as well as staff of SOEs and line ministries has been enhanced through training courses in analysis and management of SOEs' fiscal risks. A manual on analysis, monitoring and management of SOEs' fiscal risks has been developed within the framework of the 72

83 PFMRP. Date achieved 30-Aug-2013 Comments (incl. % achievement) Indicator 23 : Value (quantitative or Qualitative) 100% achieved. Key project staff and equipment in place by 2004 and throughout project implementation period. Key project staff and equipment in place by 2004 at the PMU and maintained throughout project implementation period. Date achieved Comments (incl. % achievement) Indicator 24 : Value (quantitative or Qualitative) 100% achieved. Full compliance with procurement, financial management and reporting requirements. The Project has been fully complied with procurement, financial management and reporting requirements throughout project implementation period. All World Bank supervision missions were satisfied with the project's procurement, financial management and reporting. Date achieved Comments (incl. % achievement) 100% achieved. Indicator 25 : International project and contract management consultant(s) in place (by March 2011). Value (quantitative or Qualitative) International project and contract management consultants in place in Date achieved 73

84 Comments (incl. % achievement) Indicator 26 : Value (quantitative or Qualitative) 100% achieved. Study on follow-on public financial management reforms and systems development conducted (by October 2013). A study on follow-on public financial management reforms and systems development has not yet been conducted, subject to the development of a model and roadmap towards a Government financial management information system (GFMIS) as well as the revised State Budget Law. Date achieved Comments (incl. % achievement) Unachievable due to limited timeframe of the project. 74

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