BSPS Phasing-Out Support Business Sector Programme Support ( )

Transcription

1 Ministry of Foreign Affairs Danida Government of Vietnam Programme Support Document BSPS Phasing-Out Support Business Sector Programme Support ( ) Ref. No. 104.Vietnam November 2010

2 COVER PAGE Country: Vietnam Sector: Business Sector Title: Business Sector Programme Support (BSPS) Phasing-Out Support National Agencies: Central Institute of Economic Management (CIEM) Ministry of Labour, Invalids and Social Affairs (MoLISA) Duration: 3 years Start: 1 January 2011 Overall Budget Frame: Danida grant: 123 million DKK Component Budget Frames: Component 1: DKK 63 million Component 2: DKK 50 million Component 3: DKK 9 million Description: The BSPS Phasing-Out Support represents the final phase of Danida s comprehensive programme support to business sector development in Vietnam. It is supporting the Government of Vietnam in its continuing efforts to strengthen market forces and to increase the international competitiveness of its economy. The objectives are fully consistent with the present Socio-Economic Development Plan (SEDP) and the draft SEDP , Vietnam s main policy framework for development and poverty reduction. The BSPS Phasing-Out Support has been designed with a view to ensure sustainability of previous activities, impacts and approaches. To the extent feasible, programme implementation arrangements have been aligned with national structures. The development objective is strengthening the competitiveness of Vietnamese growth- and export-oriented enterprises and creating decent jobs. The programme comprises three components: 1. Global Competitiveness Facility 2. Improved Labour Conditions in Private Enterprises (budget sector support to the National Programme on Labour Protection and Occupational Safety and Health ) 3. Business Sector Research The BSPS Phasing-Out Support is anchored in the Central Institute of Economic Management (CIEM) in the Ministry of Planning and Investment which is also the focal point of the entire programme. In addition, CIEM is the coordinating agency of Component 1 and the implementing agency of Component 3. On behalf of the Government of Denmark On behalf of the Government of Vietnam

3 Table of Contents Cover Page Map of Vietnam Abbreviations Executive Summary ii iv v vi 1 Introduction 1 2 Development Objective 2 3 Immediate Objectives 2 4 Measures to address cross-cutting issues 9 5 Budget 11 6 Management and Organisation 13 7 Financial Management and Procurement 17 8 Monitoring, Reporting, Reviews and Evaluations 20 9 Key assumptions, Risks and Conditionalities 22 Annexes 27 1 Consolidated Log-Frame Matrix of BSPS Phasing-Out Support 2 Draft Monitoring Matrix 3 Description of Component 1: Global Competitiveness Facility 4 Draft National Programme II on Labour Protection and Occupational Safety and Health 5 - Fiduciary Risk Assessment of the Sector Budget Support to NP-LPOSH 6 Detailed Budget of Draft NP-LPOSH II 7 Matrix of Benchmarks and Triggers for the NP-LPOSH II 8 Description of Component 3: Business Sector Research BSPS Phasing-Out Support Programme Support Document iii

4 MAP OF VIETNAM BSPS Phasing-Out Support Programme Support Document iv

5 ABBREVIATIONS BSPS Business Sector Programme Support CIEM Central Institute of Economic Management CSR Corporate Social Responsibility DERG Development Economics Research Group DFID Department for International Development DKK Danish Kroner DoF Department of Finance DoLISA Department of Labour, Invalids and Social Affairs EDK Embassy of Denmark FM Financial Management FRA Fiduciary Risk Assessment GCF Global Competitiveness Facility GoV Government of Vietnam GSO General Statistics Office ILO International Labour Office ILSSA Institute of Labour Studies and Social Affairs M&E Monitoring and Evaluation M4P Markets for the Poor MDG Millennium Development Goals MoF Ministry of Finance MoLISA Ministry of Labour, Invalids and Social Affairs MoU Memorandum of Understanding MPI Ministry of Planning and Investment NP National Programme NP-LPOSH National Programme on Labour Protection and Occupational Safety and Health OD Occupational Diseases OP Operations Procedures OSH Occupational Safety and Health PMU Programme Management Unit PPC Provincial Peoples Committee RCG Research Coordination Group SAV State Audit of Vietnam SEDP Socio-Economic Development Plan SME Small and Medium Enterprises TA Technical Assistance USD US Dollars VARHS Vietnam Access to Resources Household Survey VCA Vietnam Cooperative Alliance VCCI Vietnam Chamber of Commerce and Industry VFM Value For Money VGCL Vietnam General Confederation of Labour VND Vietnamese Dong BSPS Phasing-Out Support Programme Support Document v

6 EXECUTIVE SUMMARY Introduction The final phase of Danida s support to business sector development in Vietnam is designed as a phasing-out support over a period of three years ( ). It is prepared with a view to consolidate the achievements of the existing support and focusing on sustainability and further alignment with national structures. It will focus on three components to (1) directly support SMEs in selected provinces through matching grants, (2) further strengthening labour protection and (3) further strengthening relevant business sector research. Support to improving labour protection under Component 2 will be implemented through sector budget support to the relevant national targeted programme. In the absence of defined national programmes in the relevant fields, Components 1 and 3 will continue to use the successful implementation arrangements of the first phase of the programme support. The BSPS Phasing-Out Support will be anchored in the Central Institute of Economic Management (CIEM), under the Ministry of Planning and Investment (MPI), which is the focal point of the entire programme. Development Objective The Development Objective of the BSPS Phasing-Out Support is Strengthening the competitiveness of Vietnamese growth- and exportoriented enterprises and creating decent jobs. The support is designed to contribute to the achievement of key objectives of the Vietnam development and poverty reduction framework formulated in the present and new Socio- Economic Development Plan (SEDP). Immediate Objectives The BSPS Phasing-Out Support will be implemented through three components: Component 1: Global Competitiveness Facility The component will assist the GoV strengthening the capacities of domestic enterprises to structurally transform into competitive players in the global market. The component s objective therefore is Increased competitiveness of non-public Vietnamese businesses in export-oriented sectors in target provinces through better access to relevant business services and exposure to innovative business models. BSPS Phasing-Out Support Programme Support Document In continuation of the successful matching grant-fund approach of the first phase Global Competitiveness Facility (GCF), a second facility will be set up, with the aim to provide grant funding for innovative business ideas and new business development services in exportoriented sectors and value chains. The component will continue to be implemented as a stand-alone instrument external of national structures, as no comparable Vietnamese structure or programme has been set up to date. CIEM, as the programme focal point, will be the coordinating agency for this component. A strong focus of the GCF during its final phase will be to analyze and disseminate lessons learnt, and it is hoped that these will be helpful in shaping similar national initiatives in the future. Within the envisaged budget frame it can be expected that a total of 40 to 50 grant projects will be supported with matching grants. The GCF will keep the provincial focus of the first phase. Five new target provinces will be added. Component 2: Improved labour conditions in private enterprises Considering the importance of good labour standards for a company s competitiveness, Danida will continue to assist MoLISA and its partners in the implementation of the National Programme on Labour Protection and Occupational Safety and Health (NP-LPOSH). The second phase of the NP-LPOSH will be implemented from Danida support under this component will be provided through sector budget support over a period of three years. The component s objective is derived from the objective of the National Programme: Improved working conditions, contributing to the sustainable development of the nation, through reducing pollution of the work environment, preventing occupational accidents and diseases and taking care of workers health. The draft NP-LPOSH II represents a comprehensive approach to improving labour conditions throughout the economy with special emphasis on occupational safety and health (OSH) addressing state management structures, the regulatory framework and capacity constraints of public and non-public stakeholders. A major challenge to be addressed is the effective outreach to the ever growing private enterprise sector. The draft NP-LPOSH II therefore assigns considerable emphasis on a better outreach to SMEs and the private sector vi

7 in general, initially with a focus on particularly hazardous production sectors. Under the leadership of MoLISA, the national programme will be implemented as a crosssector effort including relevant ministries, provincial and local governments and a number of non-public organisations such as the VGCL, VCCI and VCA. A fiduciary risk assessment (FRA) conducted by Danida in November 2009 identified a number of risks related to programme management and co-ordination, reporting, procurement and auditing. Overall, the FRA judged the risk level as between moderate and substantial, but closer to the moderate level of risk, and with a chance to be reduced over time to low. Component 3: Business Sector Research Component 3 aims at strengthening and enriching Vietnamese business sector research capacities in order to inform and improve economic policy decision-making in the country through high-quality policy-related research. The objective of the component is: Research and analytical capacity for guiding economic policy-making in Vietnam further improved. The component, implemented by CIEM, is designed as research cooperation between CIEM and an internationally recognised research institute, to be selected through an open tender. The component builds on the previous research cooperation between CIEM, ILSSA and a Danish economic research institution. Focusing on consolidating previous achievements and promoting sustainability the previous SME survey will be replaced by adding a new module on competitiveness and CSR to the regular national enterprise survey conducted annually by the General Statistics Office (GSO). While data collection and processing will be done by GSO as part of its annual regular activities, CIEM in cooperation with the international research partner will analyse the data and prepare indepths studies and policy briefs on development constraints and determinants with respect to competitiveness and CSR. On the other hand, the Vietnam Access to Resources Household Survey will be conducted one more time in This survey, implemented (as before) in cooperation with ILSSA, will be instrumental in improving the pro-poor policy design in the field of unleashing the productive potential of rural households in Vietnam. While ILSSA will be in charge of conducting the survey, CIEM will lead BSPS Phasing-Out Support Programme Support Document the process of in-depth data analysis and formulation of policy recommendation. Measures to address cross-cutting issues GCF will select with priority women business owners and initiatives that impact on female employment and empowerment. NP-LPOSH is expected to specifically aim at implementing the gender-relevant stipulations of the labour law. Component 3 will continue to analyze gender dimensions in the dynamics of enterprise and household production development. Gender mainstreaming in all components will be monitored as part of the BSPS monitoring framework. GCF will not fund any project bearing environmental risks, but focuses on clean technologies. Increasing overall adherence with OSH standards in the private business sector will significantly contribute to a reduction in environmental pollution. In its survey modules on CSR, Component 3 will improve knowledge about issues related to environmental behaviour and technologies at enterprise level. GCF has incorporated the existence of a company-hiv/aids policy into its set of access criteria. HIV/AIDS will become a priority theme in the NP-LPOSH II. The CSR module of the enterprise survey will help to systematically generate in-depths knowledge about HIV/AIDS at the workplace. HIV/AIDS will be monitored within the BSPS monitoring framework. Budget The overall budget of the BSPS Phasing-Out Support is DKK 123 million over the period Of this, DKK 63 m. is allocated for Component 1, DKK 50 m. for Component 2 and DKK 9 m. for Component 3. The overall budget frame of the NP-LPOSH, which is supported by Danida through Sector Budget Support, is expected at VND 1,963 billion. Management and Organisation Each component will be managed and coordinated on its own. There will be no overall programme steering committee, but CIEM will be the programme focal point. Responsibility for the implementation of the GCF rests with the GCF Secretariat, which is headed by an international advisor. To address the anticipated high facilitation need the GCF vii

8 will maintain provincial structures with offices in four provinces. The GCF Secretariat will manage the project proposal preparation and approval process, and will oversee implementation of the grant-funded projects by the grantees. The GCF Secretariat will provide CIEM with regular reports, particularly on grant projects. Modeled upon the present procedure for GCF provincial level grants, EDK will approve proposals for matching grant-funding. A Component Steering Committee will be formed comprising one representative each from CIEM and the EDK. It will provide overall strategic advice, receive period progress and financial reports, approve annual work plans and budgets, and project documents. In addition, stakeholder workshops will be held. The management structure of the NP-LPOSH is governed by relevant decisions and regulations of the GoV. Responsibility for oversight and coordination of the programme rests with the Programme Steering Committee chaired by the Minister of MoLISA. One representative of Danida will be an observer of this Committee during the BSPS Phasing-Out Period. Management at the central level is with the Management Unit assisted by a Programme Management Office within MoLISA s Bureau of Safe Work. At provincial and sub-provincial levels Provincial Management Units/Programme Steering Units will be set up. MoLISA and Danida agreed on the following measures to improve the management set-up of the programme: Assessment of the programme management capacity of the Management Unit Office in MoLISA s Bureau of Safe Work, and necessary capacity strengthening measures. The Provincial Management Units/Programme Steering Units will be equipped with sufficient authority in writing to take the lead and be able to coordinate and have stakeholder departments cooperate. These units will be adequately resourced with clearly defined functions and responsibility. Steering Committee (CSC) comprised of one representative each of CIEM and EDK. In addition a Research Cooperation Group (RCG) will be formed. CIEM, as a member of the CSC in Component 1 and 3, is responsible to fulfill operational and financial reporting requirements on these components by the Government of Vietnam. Financial Management and Procurement Flow of funds will be different in each component depending on the specific organisational arrangements. Overall FM responsibility of Component 1 rests with the Senior (international) Advisor. An effective, efficient and transparent FM system for the GCF is already in place. Disbursements will be made from EDK to the account of the GCF Secretariat based on quarterly fund requests. CIEM will be kept informed of all disbursements made by EDK, including remittance notes. The Senior Advisor will be directly recruited by Danida in accordance with standard procedures and after a no objection note from the Component Steering Committee. National and provincial advisors and GCF support staff will be recruited by the GCF Secretariat. Funds to grant projects will be disbursed by the GCF Secretariat to the implementing grantees based on Grant Agreements. The Secretariat will transfer grants to the project account solely on a reimbursement basis. Grant projects are subject to quarterly external auditing, for which funds are budgeted for in the grant agreements. Assistance under Component 2 is provided as sector budget support and as such fully aligned with the GoV financial management and procurement systems governed by the relevant legal framework. No parallel TA-related funding is envisaged. Funds will be disbursed by Danida once every year directly to the GoV treasury account. MoLISA and Danida have agreed on the following measures to improve financial management: Revision of Interministerial Circular 70/. The revised/ version should include clear guidance on central-provincial coordination arrangements, procurement under the NP, unification of accounting procedures of the same expenditure items across spending Component 3 will be implemented through CIEM. CIEM will establish contractual relations with GSO and ILSSA on the implementation of the surveys. CIEM will appoint a Component Manager in charge of managing the day-to-day activities of the research cooperation. Activities units. under the Danida support should be part of the Capacity of all stakeholders on financial overall CIEM work plan. Oversight of management procedures. component activities rests with the Component Special safeguards for procurement BSPS Phasing-Out Support Programme Support Document viii

9 If necessary, external technical assistance for performance auditing of the NP Funds to be used by CIEM under Component 3 will be transferred from Danida through the Ministry of Finance. Funds to cover the survey costs will be directly transferred by CIEM to GSO and ILSSA. The international research partner will be recruited through an open tender before the commencement of the next BSPS phase. Funds to the international research partner will be directly transferred by the EDK upon financial statements and invoices countersigned by the component manager. Monitoring, Reporting, Reviews and Evaluations A monitoring framework for the BSPS Phasing- Out Support will be developed to measure both component performance (inputs and outputs) as well as impact (outcomes and impact) of components and the programme as a whole. The framework also includes indicators for gender and HIV/AIDS mainstreaming of the components. At the programme level, indicators and targets are aligned with those of the SEDP Component 2 is monitored through the NP monitoring framework, while indicators for Components 1 and 3 are largely drawn from national published data sources. No further baseline studies will be necessary. Responsibility for monitoring at programme level rests with the EDK, while component managers in Components 1 and 3 are in charge of collecting monitoring data for their components. The M&E framework for the NP-LPOSH II will be revised before the programme start using fewer and easily measurable indicators. Component managers of components 1 and 3 will submit first-six-months reports and annual reports to the component steering committees including activity and financial reports. Regarding Component 2, Danida relies on MoLISA Programme Management for reporting arrangement and different involved line ministries. MOLISA will report to the EDK on fund disbursement basing on figures provided by State Treasury and MoF.At the end of the programme period, a programme completion report will be prepared. expenditure tracking and financial management assessment missions will be held. Risks and Conditionalities Among the specific risks identified at component level are: Component 1: Insufficient understanding of the GCF concept and a lack of visionary business ideas of provincial enterprises and organizations lead to the situation that not enough well-designed project proposals are submitted for matching grant funding, particularly in the new provinces. Component 2: Unsystematic and non-strategic programme management and co-ordination and with non-operational M&E framework impedes effective implementation of the NP. Less than full budget execution prevents effective implementation, and implies the risk that Danida funding is not additional to GoV spending. Due to low GoV cost norms, necessary TA to support capacity building cannot be recruited in the local market. Component 3: CIEM staff members who have improved their qualifications and skills will leave the organization. The time for mobilization and induction by the international research partner is too long to ensure a timely preparation of the 2011 survey activities. GSO is not prepared to continue addressing policy-relevant survey module in its annual enterprise survey after the termination of Danida funding in Six triggers for disbursement of sector budget support to the NP-LPOSH are defined relating to successful programme preparation, and development of monitoring framework, capacity increase in MoLISA s Bureau of Safe Work, revision of Circular 70/2007/TTLT-BTC- BLĐTBXH, GoV funding levels and audits were defined. The BSPS Phasing-Out Support will be subject to one mid-term review after approximately oneand-a-half years jointly conducted by Danida and its partners. In addition, for Component 2 joint GoV and Danida annual independent BSPS Phasing-Out Support Programme Support Document ix

10 1 INTRODUCTION After many years of unprecedented success in economic growth and diversification, accompanied by the remarkable achievements in terms of poverty reduction, Vietnam is now about to cross the threshold of middle-income country status. In order to consolidate and strengthen its position in fiercely competitive international markets, the country can no longer limit its strategy to economic expansion alone. As emphasised in the draft new Socio-Economic Development Plan (SEDP) , the critical challenges of the next decade are to improve the quality of production, achieve and sustain global competitiveness and at the same time make sure that the poor are being taken along the growth path. Danida s further involvement in supporting Vietnam s business sector will be aligned with this new emphasis. Danida has been providing systematic business sector programme support (BSPS) to Vietnam since The first phase BSPS has a total budget of DKK 196 million. It will be running until the end of 2010 and comprises five components addressing (1) promotion of provincial business environment, (2) improved labour conditions, (3) business services for global competitiveness, (4) commercial dispute resolution, and (5) business sector research. Considering the development achievements in Vietnam to date and the increased national capacity in those programme areas previous BSPS support was focused on, and in line with Danida s intention to phase out the traditional sector programme support to Vietnam, the next BSPS phase is designed as a phasing-out support over a period of three years ( ). It is prepared with a view to consolidate the achievements of the existing support and focusing on sustainability and further alignment with national structures. It is less extensive in scope compared with the present support and will focus on three components with the objectives to (1) directly support SMEs in selected provinces through matching grants, (2) further strengthening labour protection and (3) further strengthening relevant business sector research. Support to improving the business environment at the provincial level, to HIV/AIDS prevention and to commercial conflict resolution, which were among the focal areas under the first phase BSPS, will not be continued, as these components and sub-components are considered completed in 2010 having achieved their objectives to an extent that partners can now carry on without further BSPS support. In the area of commercial conflict resolution, the EC MUTRAP programme will respond to further need for assistance. Component 2 of the present programme also included support to the Vietnam General Confederation of Labour (VGCL) and the Vietnam Chamber of Commerce and Industry (VCCI) to improve working condition and to promote tripartite cooperation. Parts of the support to VGCL were also earmarked for assisting trade union reform. To enhance effectiveness during the phasing-out period, support to improved labour conditions will be streamlined by assisting the National Programme on Labour Protection and Occupational Safety and Health (NP-LPOSH), in which the social partners are implementing partners. The BSPS Phasing-Out Support is aligned with national implementation structures as far as possible and feasible in the specific contexts. The different components are all designed with a view to ensure sustainability of activities, impacts and approaches. Support to improving labour protection under Component 2 will be implemented through sector budget support to the relevant national targeted programme thus assisting the national labour protection system to BSPS Phasing-Out Support Programme Support Document 1

11 consolidate and deepen its capacities. In the absence of defined national programmes in the relevant fields, Components 1 and 3 will continue to use the successful implementation arrangements of the first phase of the programme support. All three components address the challenge of increasing competitiveness of Vietnamese businesses from different angles and operate in close synergy with each other. The BSPS Phasing-Out Support will be anchored in the Central Institute of Economic Management (CIEM) under the Ministry of Planning and Investment which is responsible to coordinate the programme. CIEM is tasked with advising the Government of Vietnam (GoV) on economic policies, business environment and strengthening competitiveness in the country and has recently assumed responsibility to prepare the Vietnam country report of the Asian Competitiveness Initiative. As such, it is ideally positioned to cooperate with Danida in a programme that is designed to assist the GoV in managing the economy s much needed transition into a globally competitive player. 2 DEVELOPMENT OBJECTIVE The Development Objective of the BSPS Phasing-Out Support is Strengthening the competitiveness of Vietnamese growth- and export-oriented enterprises and creating decent jobs. The support is designed to contribute to the achievement of key objectives of the Vietnam development and poverty reduction framework formulated in the present and new SEDP. The Draft SEDP aims at developing a sustainable economy at high growth rate on the basis of continuing the change in the economic structure, improving quality, effectiveness and competitiveness, and being active in the global integration. In this context, the BSPS is expected to particularly contribute to the defined Tasks 4 and 5, which are related to improving the competitiveness of the economy and enterprises and promoting technological development and technology transfer in industry. It will furthermore directly support the National Plan on Labour Protection and Occupational Safety and Health (NP-LPOSH), the key government programme to improve labour conditions in the process of economic development. The SEDP aims to achieve further annual GDP growth of between 7 and 8% and an average export turnover growth of 12% annually. The plan also foresees a continuation of the impressive success in poverty reduction with an annual further reduction in the poverty rate of 2%. With an estimated rate of below 10% in , Vietnam has already now considerably exceeded its MDG targets with respect to poverty reduction. 3 IMMEDIATE OBJECTIVES The BSPS Phasing-Out Support will be implemented through three components with each one component objective as briefly described in the following. 1 Draft SEDP , Part I: The Implementation of Five Year Socio-Economic Development Plan BSPS Phasing-Out Support Programme Support Document 2

12 Component 1: Global Competitiveness Facility 2 The component will assist the GoV strengthening the capacities of domestic enterprises to structurally transform into competitive players in the global market. The component s objective therefore is: Increased competitiveness of non-public Vietnamese businesses in export-oriented sectors in target provinces through better access to relevant business services and exposure to innovative business models Indicators and targets to measure success of the component include increased export volume and number of export products in the target provinces, as well as increased employment, with particular emphasis on employment opportunities of women. In continuation of the matching grant-fund approach of the Global Competitiveness Facility (GCF) successfully employed during the first phase BSPS, a second phase of the GCF will be set up during the BSPS Phasing-Out Support. The component will continue to be implemented as a stand-alone instrument external of national structures, as no comparable Vietnamese structure or programme has been set up to date that provides direct support to innovative private business initiatives. Other donor-sourced challenge funds do exist in Vietnam 3, however none of them has a provincial focus, which was assessed to be one of the major strength of the Danish support. From the outset, the GCF had been designed as an intervention with a limited life-span, instrumental to test and demonstrate success of a new approach to stimulate private sector development. A stronger focus of the GCF during its final phase will be to analyze and disseminate lessons learnt, and it is hoped that these will be helpful in shaping similar national initiatives in the future. They might inspire, for example, initiatives under the Fund for Development of SMEs to be set up in accordance with the SME law 4. The GCF under this phase will have a slightly modified and streamlined shape as compared to the first phase. It is an open funding facility with the purpose of providing matching grants for the implementation of innovative initiatives of non-public entrepreneurs and organisations. Initiatives eligible for grant-funding must have a strong potential to sustainably provide essential business services to enterprises, or must have, through their initiatives, a long-lasting positive impact on the development of export-oriented value chains in selected provinces. The strategy behind the Facility is to reduce the risk for Vietnamese non-public enterprises and organisations of embarking on forward looking and innovative, i.e. new and previously not available, business strategies and to support them covering the cost involved in identifying and introducing new technologies and developing new markets. The emphasis of the GCF is on innovative projects, 2 The detailed component description is attached. 3 Notably the DFID-funded M4P Challenge Fund. 4 Government promulgated in June 30, 2009 a new law on Assistance to the Development of Small and Mediumsized enterprises (SME Law). In article 7 the law stipulates the establishment of a Fund for development of SMEs. Among the fund activities is also funding of assistance programs and projects on raising the competitiveness, technical and technological capability and business administration capability for SMEs, to be implemented by various organisations in Vietnam. BSPS Phasing-Out Support Programme Support Document 3

13 creating new services and piloting new business models that can be later, at less risk, replicated by others. Within the expected budget frame it can be expected that a total of 40 to 50 projects will be grant-funded. Grants should be in the range of a minimum of 20,000 USD up to a maximum of 400,000 USD, although it is expected that the average grant size would be lower (around 200,000 USD). The direct target group of the component is Vietnamese non-public enterprises which serve or are part of export-oriented value chains, and other non-public organisations that provide relevant services needed in the value chains. The indirect target groups are Vietnamese companies, household enterprises and farmers that will be given a chance to improve and extend their production, hence their income. The component is therefore expected to have a direct impact on poverty alleviation. The GCF will keep the provincial focus of the first phase. It will continue to work in the provinces Nghe An, Khanh Hoa and Lam Dong, but five new provinces will be added: Phu Yen (adjacent to Khanh Hoa), Dak Lak (adjacent to Lam Dong) and Thanh Hoa (adjacent to Nghe An), as well as Can Tho and An Giang both located in the Mekong Delta, a particularly povertystricken area in Vietnam. The approach to target adjacent provinces will support GoV s intention to stimulate cross-provincial industrial clusters along competitive value chains. GCF activities will be concentrated on provincial and cross-provincial priority sectors and value chains with an export potential. Focus sectors will vary from province to province and are likely to include agriculture and agro-processing, fisheries, aquaculture, handicrafts, tourism, and others. It is expected that the GCF Secretariat develops and maintains a network of provincial experts and stakeholders in the selected sectors/value chains, to support the identification of necessary services and project ideas as well as the follow-up of projects. GCF Secretariat can consult with provincial authorities on prioritised sectors and potential candidates. Decision to select enterprises to receive GCF support rests with the Component Steering Committee (CSC). Eligible for grant-funding are principally all non-public enterprises and organisations. The selection of projects for grant funding will be done on the basis of a set of criteria, including (1) strengthening export markets; (2) private sector-strengthening, (3) poverty-orientation; (4) demand-orientation; (5) market-strengthening; (6) financially viable; (7) sustainability of service provision; (8) supportive of women business owners; and (9) consideration of cross-cutting issues. All GCF grants will only be matching own investments of the grant holding entities. Eligible costs for matching grant support and grant ceilings are clearly stipulated. Experience in the first phase GCF has demonstrated that provincial businesses and service providers are often rather weak, and that the development of innovative proposals requires substantial facilitation input from the GCF Secretariat and its provincial offices. Funds will therefore be set aside to commission national or international expert advice to assist with strategic proposal preparation. As mentioned before, a stronger emphasis than previously will also be put on documenting and disseminating successful examples and lessons learnt in order to facilitate replication of successful business models. BSPS Phasing-Out Support Programme Support Document 4

14 The component will have the following four outputs: 1. GCF set-up and appropriately marketed 2. Innovative projects to strengthen the export potential in the target provinces initiated through matching grant agreements 3. GCF projects successfully completed 4. Lessons learnt from the GCF projects analyzed and appropriately disseminated Component 2: Improved labour conditions in private enterprises 5 Assessing the nature and composition of occupational safety and health (OSH) in Vietnam two key observations can be made: 1. The challenges are significant and growing. The first nationwide survey of injury in Vietnam was conducted in 2001, covering 27,000 households and 128,000 residents in eight regions. Using this survey, it was estimated that there were about 200 fatal injuries and over 10,000 non-fatal injuries occurring daily in Vietnam. The results are suffering and loss of life, lower labour productivity, incurring a significant burden to the society. In addition, the growth in economic activities and the shift from agriculture to especially small and medium scale production implies that the prevalence of OSH problems most likely is increasing. 2. Any progress achieved through the ongoing assessment of problems and solutions in the area work related accidents necessitates the presence of a political/institutional mechanism that mediates the translation of new findings into policies and regulations that are enforced by specialized agencies. Despite of increased efforts and recent achievements to improve the public labour protection system in Vietnam, the social and economic costs of workplace accidents and diseases are still unacceptably high and place a considerable burden on the competitiveness of the enterprises and the economic welfare of the country. By implication, support to occupational safety and health in Vietnam has to rely on national Vietnamese structures and institutions. In this context the ongoing formulation of the second National Programme on Labour Protection and Occupational Safety and Health (NP-LPOSH II) represents an important step in the right direction and an obvious entry point for Danish assistance. The second phase of the NP-LPOSH will be implemented from Danida support under this component will be provided through sector budget support over a period of three years. The component s objective is therefore derived from the objective of the National Programme: Improved working conditions, contributing to the sustainable development of the nation, through reducing pollution of the work environment, preventing occupational accidents and diseases and taking care of workers health. 5 The NP-LPOSH II is still under preparation. The current component design is based on the first draft of the programme from November 2009, and updated in line with the fifth draft of the programme document. While the overall intentional and conceptual framework of the new programme is already reflected in the draft, and forms the basis of this programme document, the detailed definition of objectives, implementation structures and budget allocation may still be changed. BSPS Phasing-Out Support Programme Support Document 5

15 Turning to the stated principles for budget support, the ten Danish budget support principles are being assessed annually by the EDK as part of providing general budget support. Overall performance on these principles is assessed to be satisfactory with eight of the ten principles rate A and two B. In addition, the recently formulated Danida guidelines identify the following three principles as the most important in the case of sector budget support: (i) the policy and planning framework for the sector, (ii) the monitoring system, and (iii) the public financial management (PFM) system. The Policy and Planning Framework for the Sector The NP-LPOSH II is still under preparation and expected to be submitted to the Government of Vietnam in August The management structure of the NP-LPOSH underlies GoV Decision 135/2009/QĐ-TTg governing the management of national targeted programmes. Accordingly, the programme is anchored in the Ministry of Labour Invalids and Social Affairs (MoLISA) and represents a comprehensive approach to improving labour conditions in the economy. The current OSH system is in theory well organised: the fundamental laws are in place as is the OSH administrative system from the central to the provincial level. There are, however, differences between theory and practice. In this context the NP-LPOSH II represents an ambitious and multifaceted effort to bridge the gap between de jure and de facto. In particular, focus is on strengthening the capacity and outreach of public and non-public stakeholders in order to reach the substantial proportion (approximately 85% of the labour force predominantly working in agriculture and SMEs) outside the current system. The 5th draft of NP-LPOSH II has a medium-term (five year) perspective and is divided into seven projects, which will be implemented through a cross-sector approach involving relevant ministries, provincial authorities, and non-public stakeholders. NP-LPOSH IIThe 5th draft of the national programme is divided into 7 projects comprising: 1. Building capacity and improving effectiveness of the state management on labour protection 2. Improving working conditions in enterprises with emphasis on minimizing occupational accidents in coal mining and quarrying, metal work, and the production of chemical 3. Enhancing the prevention of occupational accidents and diseases in agricultural production and rural occupations 4. Enhance quality of labour protection in SMEs 5. Promoting occupational disease prevention and control and healthcare for employees 6. Information dissemination, education, training to improve the awareness of different levels, sectors, organizations and individuals on labour protection 7. Enhancing the capacity for research and applying OSH science and technological advances The EDK has been granted an observer status in the Steering Committee (SC) for the NP- LPOSH II during the three year BSPS PS period from 2011 to The SC is responsible for oversight and coordination of the programme and is chaired by the Minister of MoLISA. In 6 The fifth draft National Programme document is annexed. BSPS Phasing-Out Support Programme Support Document 6

16 addition to the EDK the SC comprises high level representatives from involved ministries and non-governmental stakeholders. Presence in the SC will enable the EDK to engage in an ongoing close dialogue with the national counterpart to ensure that issues like the development of provincial management capacity and control arrangements remain in focus. Although impossible to foresee the topics for discussion, the presence of an EDK representative in the SC will greatly facilitate and expand the potential impact of the SBS. Under the leadership of MoLISA, the national programme will be implemented as a cross-sector effort including relevant ministries 7, provincial and local governments and a number of nonpublic organisations such as the Vietnam General Confederation of Labour (VGCL), the Vietnam Chamber of Commerce and Industry (VCCI) and the Vietnam Cooperative Alliance (VCA). Given that the substantial part of the activities will take place at the provincial and subprovincial level programme management will also involve the establishment of Provincial Programme Management/Steering Units. These will, if possible, be integrated with existing Steering Boards for the National Week on OSH and Fire Protection. As lack of provincial level capacity and coordination is expected to represent a considerable challenge, special efforts will be undertaken to map existing capacity just as provincial level management/steering units will be equipped with sufficient authority to autonomously lead and coordinate provincial level activities. The Monitoring System Preliminary targets and indicators refer to the reduction of the occupational accident frequency rates and newly contracted cases of occupational diseases, to the capacities of involved stakeholders, coverage of workers by the labour protection and compensation fund system in specific sectors, and others. Targets and indicators are still subject to change with the finalization of the monitoring framework in the course of the further programme preparation. In close cooperation with MOLISA, the EDK has supported the formulation of a road map for building and implementing an M&E system. The recently developed outline framework for the NP-LPOSH II represents a significant achievement given the rather weak performance during the present period. The proposed M&E system has the benefit of being simple and transparent, relying on already established definitions and existing data in an effort to track progress in terms of reaching the five objectives for the seven projects under the NP-LPOSH II. A total of eight indicators are proposed, measuring both expected programme impact (changes in the incidence of occupational accidents and the prevalence of occupational disease) and the enabling/supportive framework (including coverage of labour protection and compensation fund systems). Danida has supported MoLISA in development and implementation of the M&E framework for NP-LPOSH II. 8. The Public Financial Management System Several sources allow for a detailed and up-to-date assessment of the quality of the PFM system. This includes the annual assessment of the ten Danish budget support principles conducted by 7 Notably the ministries of health, investment and planning, agriculture, finance, science and technology, education and training, industry and trade, construction, information and communication, mining and national defense. 8 See also the recommended M&E System Review Work Plan attached as Annex 9 to the FRA of November The FRA is attached to this programme support document. BSPS Phasing-Out Support Programme Support Document 7

17 the EDK as a proviso for the provision of general budget support. According to the most recent EDK assessment overall Vietnamese performance on the ten principles is rated satisfactory for eight of the ten principles receiving an A, whilst the remaining two principles (Principle 1; Good Governance and Principle 2; Anti-corruption) are rated to be less satisfactory receiving a B. This is in line with the latest Country Fiduciary Accountability Assessment (2007) of the World Bank and the Fiduciary Risk Assessment prepared for the EDK (November 2009) in preparation for the proposed programme. Both assess the fiduciary risks of the public financial management system to be moderate, and notes that considerable efforts have been aimed at continuously improving the system. However, shortcomings are noted in the areas of budget development and the accounting and auditing framework. Accordingly, risk mitigation procedures will be identified and described in the relevant sections of the programme support document. Component 3: Business Sector Research 9 Component 3 aims at strengthening and enriching Vietnamese business sector research capacities in order to inform and improve economic policy decision-making in the country through highquality policy-related research. The objective of the component is: Research and analytical capacity for guiding economic policy-making in Vietnam further improved The component is implemented by the Vietnamese Central Institute of Economic Management (CIEM), a leading economic policy research institutions and public economic think tanks in the country. Component implementation is designed as research cooperation between CIEM and an internationally recognised research institute, to be selected through an open tender. The component builds on the previous research cooperation between the Development Economics Research Group (DERG) within the Department of Economics of the University of Copenhagen and the Vietnamese institutions CIEM and the Institute of Labour Science and Social Affairs (ILLSA) under MoLISA. The cooperation project is considered in Vietnam very successful as it produces unique, previously not available data on the SME sector and development determinants of rural households, and considerably contributed to building Vietnamese capacities in data collection and processing, quantitative economic analysis and in translating knowledge gained from research into policy-oriented analysis and the preparation of policy briefs for decision-makers. The phasing-out period of the research cooperation during the years 2011 to 2013 will focus on consolidating previous achievements and laying the foundations for the continuation of the quantitative business sector research after the termination of the BSPS. To this end, the previous SME survey will be replaced by adding a new module to the regular national enterprise survey conducted annually by the General Statistics Office (GSO). The module to be added addresses two key challenges of the Vietnamese economy: (1) competitiveness with particular emphasis on the question of access to technology and technology diffusion, and (2) corporate social 9 The detailed component description is annexed. BSPS Phasing-Out Support Programme Support Document 8

18 responsibility (CSR). While data collection and processing will be done by GSO as part of its annual regular activities, CIEM in cooperation with the international research partner will utilize the data to generate information on common enterprise patterns and to conduct and publish indepths studies and policy briefs on development constraints and determinants with respect to competitiveness and CSR. The household survey, also known as the Vietnam Access to Resources Household Survey (VARHS), will be conducted one more time in 2012 to produce a unique panel survey data-set with information on household access to land, labour and capital. This survey, implemented (as before) in cooperation with ILSSA, will be instrumental in improving the pro-poor policy design in the field of unleashing the productive potential of rural households in Vietnam. While ILSSA will be in charge of conducting the survey, CIEM will lead the process of in-depth data analysis and formulation of policy recommendation. Experience during recent years has demonstrated that the data-sets and survey results are frequently utilized by external researchers, both private and institutional. Hence the component will be instrumental in increasing the overall quality of economic research in Vietnam beyond the public domain. The research cooperation imparts knowledge, experience and capacity in Vietnamese researchers mainly through joint analytical undertakings. This is complemented by more formalized workshops and seminars on modern research techniques and methodologies. Success of the component will be measured by the quality of arguments and comments related to draft business sector legislation. The component is divided into two sub-components, each with one immediate objective and two outputs: Sub-component 1: Enterprise survey project, with the immediate objective: Enhanced understanding of the dynamics of private sector development and competitiveness with special attention to technology and CSR The sub-component will have the following outputs: 1.1 Comprehensive national data-sets on selected competitiveness aspects and CSR involvement of enterprises available 1.2 Policy-oriented analysis on enterprise competitiveness and CSR disseminated Sub-component 2: Household Survey Project, with the immediate objective: Improved understanding of access to resources of Vietnamese households (in selected provinces) This subcomponent has the following outputs: th Vietnam Access to Resources Household Survey (VARHS) successfully completed and data available 2.2 Policy-oriented analysis on determinants of access to resources of Vietnamese households disseminated 4 MEASURES TO ADDRESS CROSS-CUTTING ISSUES BSPS Phasing-Out Support Programme Support Document 9

19 Despite of a high Gender Development Index of Vietnam compared to many of its neighbours, recent research shows that the ongoing lack of attention to the needs of female business owners in Vietnam is still limiting their growth. In selecting projects for grant funding, GCF II will therefore direct its particular attention to strengthen women business owners 10 and initiatives that impact specifically on female employment and empowerment. Women are also at particular risk of certain hazards in the workplace, and their integration in effective OSH measures is often hampered as they are more often involved in unstable and low status work. In this context the NP-LPOSH is expected to specifically aim, and include relevant indicators in its monitoring framework, at implementing the gender-relevant stipulations of the labour law and appropriately address gender issues in the new OSH Law to be formulated under the NP II. Component 3 will continue to analyze gender dimensions in the dynamics of enterprise and household production development. Further work on different roles and conditions of women and men in production activities is envisaged. At least 30% of all Vietnamese researchers involved in the research cooperation will be women. Gender mainstreaming in all BSPS components will be monitored as part of the BSPS monitoring framework, based on the Action Plan for Gender Mainstreaming into BSPS. The BSPS phasing-out support will continue addressing environmental concerns related to economic development in its components. The GCF will not fund any project that bears environmental risks, but rather focuses on clean technologies in the preparation and selection of project proposals. Increasing overall adherence with OSH standards in the private business sector will significantly contribute to a reduction in environmental pollution in general, especially a reduction in risks in the industrial environment caused by atomic radioactivity, ionized radiation, toxic gas and electromagnetic field. In its survey modules on CSR and competitiveness, Component 3 will improve knowledge about issues related to environmental behaviour and technologies at enterprise level. Good governance issues at enterprise level are addressed in Component 1. Previous experience under the first phase BSPS has already demonstrated that the GCF through its access criteria and grant agreement rules is an effective tool to strengthen corporate social responsibility (CSR) in direct and indirect partner companies and organisations. Furthermore, Component 3 designed to make data and research findings widely accessible will help strengthening good governance through providing knowledge to an interested public audience on pertinent economic developments thus improving the quality and comprehensiveness of public-private economic policy dialogue. The first phase BSPS had a strong specific focus on HIV/AIDS at the workplace. With the Business Coalition on HIV/AIDS currently under the umbrella of the VCCI, an institutional framework for the promotion of HIV/AIDS in the workplace led by employers has recently been established. The GCF has incorporated the existence of a company-hiv/aids policy into its set of access criteria, which turned out to be an effective tool of awareness creation also among indirect partner companies and organisations. HIV/AIDS will become a priority theme in the NP-LPOSH II. The CSR module of the enterprise survey funded under Component 3 will help to systematically generate in-depths knowledge about and HIV/AIDS at the workplace. 10 One-fourth of the grant fund volume is reserved for female applicants. BSPS Phasing-Out Support Programme Support Document 10

20 HIV/AIDS as a priority theme will be specifically monitored within the BSPS monitoring framework guided by the BSPS-HIV/AIDS Mainstreaming Action Plan. 5 BUDGET The overall budget of the BSPS Phasing-Out Support is DKK 123 million over the three-year period The programme budget, shown in the table below, is estimated on the basis of constant prices November For components 1 and 3, the budget presented here provides the framework for detailed annual budgets to be prepared by the component managers and approved by the component steering committees. Contingencies of 10% are included. No reallocation of budgets between components is foreseen. BSPS Phasing-Out Support Programme Support Document 11

21 Indicative Budget BSPS Phasing-out Support Unit: Thousand DKK Total Component 1 Output 1.1 (GCF set-up and marketed) Output 1.2 (Innovative projects initiated) 1, ,100 Output 1.3 (Projects supported and completed) 5,000 21,000 22,000 48,000 (Of which specifically earmarked as a minimum for female grantees) (1,250) (5,250) (5,500) (12,000) Output 1.4 (Lessons learnt disseminated) ,000 Component Management (incl. Audit) 2,674 2,796 2,930 8,400 Contingencies 384 1, ,100 Total Component 10,358 26,246 26,396 63,000 Component 2 Sector budget Support to NP-LPOSH 16,667 16,667 16,667 50,000 Component 3 Sub-component 1: Enterprise survey Output (Competitiveness & CSR data available) ,500 Output (Policy-oriented analysis disseminated) Total sub-component ,021 Sub-component 2: VARHS Output (5 th VARHS completed, data available) Output (Policy-oriented analysis disseminated) Total sub-component Research cooperation 1,689 1,689 1,689 5,067 Management costs Contingencies Total Component 3 2,697 3,384 2,919 9,000 Programme Management (mid-term review, technical missions, progress and completion reporting as agreed, etc.) ,000 GRAND TOTAL 30,055 46,630 46, ,000 The budget includes the following TA: Marketing and management of the GCF (Component 1), facilitation of project proposal as well as impact studies and dissemination cost. Total TA accounts for around 20% of the component s budget, which is at the lower end of comparable challenge funds. BSPS Phasing-Out Support Programme Support Document 12

22 Costs of the international research partner under Component 3, limited funds for national TA to assist CIEM in selected research activities. The overall budget of the NP-LPOSH II is comprised of funds from the state budget, funds mobilised from enterprises 11 as well as earmarked (non budget support) donor contributions. For the NP-LPOSH I, government had pledged a total of 242 billion VND. Budget execution, however, was poor for various reasons, and by the end of 2009 only about 50% of originally budgeted funds was disbursed. Danida budget support of DKK million 50 for NP II would be equivalent to more than the current state budgeted expenditure on an annual basis. In order to avoid the inherent risk of substitution of Danida funding for state budget funding, triggers for Danida fund disbursements have been defined to the effect that the GoV contribution to the NP II should be higher than in Phase 1, and should at least match the Danida contribution. According to the fifth draft National Programme document which is subject to final approval by the Government, the indicative budget of NP-LPOSH II (see Table below) envisages a total budget of VND 1,963 billion, of which GoV state budget is VND 1,054 billion (excluding Danida budget support of VND 173 billion) around 4 times the present NP budget. Indicative Budget of the NP-LPOSH Unit: Billion VND Total National Programme Total ,963 State budget ,227 of which Danida budget support 12 57,67 57,67 57, Mobilisation from enterprises (contribution in-kind) Mobilisation from international donors Once the National Programme document is approved, the component will perform based on the actual approved budget and content provided that the approved budget lives up to the conditionality for Danida funds disbursement as mentioned above. 6 MANAGEMENT AND ORGANISATION CIEM is the focal point of the entire programme. Each component of the BSPS phasing-out support will be managed and coordinated on its own. Since the programme budget does not include unallocated funds, and no re-allocation of resources among components is envisaged during the three-year phasing-out period, there will be no overall programme steering committee. 11 Contribution-in kind from enterprises are accounted as funds mobilized from enterprises within NP-LPOSH II 12 March 2010 exchange rate BSPS Phasing-Out Support Programme Support Document 13

23 Management and organisational arrangements for each component are described in the following. Component 1: Global Competitiveness Facility CIEM, as the programme focal point, will assume the responsibility of a coordinating agency of the component. CIEM will receive regular operational and financial reports from GCF Secretariat, particularly on grant projects. As a coordinating agency, CIEM will submit relevant reports on GCF to government agencies, i.e. Ministry of Planning and Investment and Ministry of Finance. In assisting MoF to record the official development assistance (ODA) provided to GCF grantees, CIEM will verify, duly sign and stamp the ODA grant (aid certification format provided by MoF) prepared by GCF Secretariat for submission to MoF. Responsibility for the implementation of the GCF rests with the GCF Secretariat, which is based in Hanoi and headed by an international advisor. To address the anticipated high need to facilitate good business ideas and proposal preparation by applicants of the funding facility, the GCF will maintain provincial structures with offices in four provinces located in Vinh City, Nha Trang, Da Lat and Can Tho. Eight provincial advisors will be operating from the provincial offices. Only the GCF Secretariat in Hanoi will have administrative support staff. The GCF Secretariat will manage the project proposal preparation and approval process, and will oversee implementation of the grant-funded projects by the grantees, in accordance with procedures stipulated in the component description and the components own management guidelines. The GCF Secretariat submits project proposals to the CSC for approval. The appraisal and approval procedure for grant applications has been modeled upon the present procedure for GCF provincial level grants. It represents a transparent, yet swift and simple, approach that will BSPS Phasing-Out Support Programme Support Document 14