Viet Nam: Second Small and Medium-Sized Enterprises Development Program

Transcription

1 Validation Report December 2017 Viet Nam: Second Small and Medium-Sized Enterprises Development Program Reference Number: PVR-544 Program Numbers: and Loan Numbers: 2680 and 3050

2 ABBREVIATIONS ADB Asian Development Bank DMF design and monitoring framework MPI Ministry of Planning and Investment PCR program completion report RRP report and recommendation of the President SDR special drawing right SEDP Socio-Economic Development Plan SMEDP Small and Medium-Sized Enterprises Development Plan SMEs small and medium-sized enterprises TA technical assistance NOTE In this report, $ refers to US dollars. Director General Deputy Director General Director Team Leader Marvin Taylor-Dormond, Independent Evaluation Department (IED) Veronique Salze-Lozac h, IED Walter Kolkma, Thematic and Country Division (IETC), IED Hyun Son, Principal Evaluation Specialist, IETC, IED The guidelines formally adopted by the Independent Evaluation Department (IED) on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. To the knowledge of IED management, there were no conflicts of interest of the persons preparing, reviewing, or approving this report. The final ratings are the ratings of IED and may or may not coincide with those originally proposed by the consultant engaged for this report. In preparing any evaluation report, or by making any designation of or reference to a particular territory or geographic area in this document, IED does not intend to make any judgments as to the legal or other status of any territory or area.

3 PROGRAM BASIC DATA Program and PCR Circulation Date 1 March 2017 Numbers Loan Numbers 2680 and 3050 PCR Validation Date Dec 2017 Program Name Second Small and Medium-Sized Enterprises Development Program Sector and Subsector Industry and Trade; Public Sector Management Small and Medium Enterprise Development; Economic Affairs Management Strategic Inclusive Economic Growth Agenda Safeguard Environment C Categories Involuntary Resettlement C Indigenous Peoples C Country Viet Nam Approved Actual ADB Financing ($ million) ADF: (2680) (3050) OCR: 0.00 Total Program Costs ($ million) ($ million) Loan 2680 (SDR) 3050 (SDR) (26.54) (33.00) (27.97) (33.66) Borrower Beneficiaries Others Cofinancier none Total Cofinancing Approval Date Signing Date 2680 Program Officers IED Review Director Team Leader Oct Oct Dec Nov 2013 J. Lam J. Gomez Reino Effectiveness Date Closing Date Location ADB headquarters ADB headquarters W. Kolkma, IETC H. Son, Principal Evaluation Specialist, IETC** 24 Mar Feb Mar Mar 2014 From Jan 2017 Jan May Jun Jul Aug 2014 To * Jan 2017 ADB = Asian Development Bank, ADF = Asian Development Fund, IED = Independent Evaluation Department, IETC = Thematic and Country Division, OCR = ordinary capital resources, PCR = program completion report, SDR = special drawing right. * End date is not available in e-ops database. **Team members: M.J. Dimayuga (Senior Evaluation Officer), J. Hawley and R. Brockman (Consultants).

4 2 I. PROGRAM DESCRIPTION A. Rationale 1. The Socioeconomic Development Plan of the Government of Viet Nam supported key reform priorities, 1 emphasizing the importance of increased private investment in generating economic growth and creating employment opportunities. The plan recognized that the sustainable development of small and medium-sized enterprises (SMEs) 2 supports private sector growth The government s Small and Medium-Sized Enterprise Development Plan (SMEDP) emphasized the key role of SMEs in attaining national economic growth and poverty reduction. 4 The Socioeconomic Development Strategy sought to achieve a 7% 8% annual economic growth rate and the creation of eight million new jobs. Growth was expected to be driven by the private sector, especially SMEs (footnote 2). 3. The Second Small and Medium-Sized Enterprises Development Program (the program) comprised two subprograms: Subprogram 1 implemented from December 2010 to July 2011, and Subprogram 2 implemented from November 2013 to June The program was designed to assist the government s implementation of SME development policies in partnership with the Asian Development Bank (ADB) (footnote 4, Appendix 3). Subprogram 1 supported the implementation of strategic policy reforms of improving the business environment and regulatory framework, and enhancing access to finance SME development. Subprogram 2 extended the support for reforms to encourage SME development. This validation covers both subprograms. 4. Subprogram 1 (with $40 million loan) was based on the consideration of factors required to support the implementation of program reforms. These factors included the (i) importance of the sector to the economy, the weight and benefits of the reform program; (ii) direct administrative and/or adjustment costs involved in the design and implementation of specific reforms; and (iii) need to conform to the overall financing requirement under the country partnership strategy (footnote 3, para. 28). 5. Subprogram 2 (with $50 million loan) was for financing the needs of Viet Nam. In 2013, with a budget deficit target of 4.8%, the government needed to borrow D162 trillion ($7.8 billion). In 2012, deficit financing was obtained from domestic sources (44%) and external sources (56%), of which 84% was official development assistance. Assuming a similar distribution for 2013, the government would need to borrow an estimated $3.7 billion through official development assistance to close the budget gap. The loan was also based on the strength of the policy reform package and its development impact (footnote 4, para. 29). 1 The Socialist Republic of Viet Nam Government Portal. The Five Year Socio-Economic Development Plan in ADB Completion Report: Second Small and Medium-Sized Enterprises Development Program in Viet Nam. Manila. Footnote 2 in this document noted that SMEs in Viet Nam comprise all companies with less than D100 billion ($5.0 million) chartered capital and workers; less for the trade and services sector at employees and less than D50 billion in capital. 3 ADB Report and Recommendation of the President to the Board of Directors: Proposed Program Cluster and Loan to Viet Nam for Subprogram 1 on the Second Small and Medium-Sized Enterprises Development Program. Corrigendum. Manila. 4 ADB Report and Recommendation of the President to the Board of Directors: Proposed Program Cluster and Loan to Viet Nam for Subprogram 2 on the Second Small and Medium-Sized Enterprises Development Program. Manila.

5 3 B. Expected Impacts, Outcomes, and Outputs 6. The program s expected impact was the increased contribution of SMEs and the private sector to achieving sustainable high economic growth For each subprogram, the design and monitoring framework (DMF) impact indicators were worded differently in the program completion report (PCR) and in the two report and recommendations of the President (RRP) (Table 1). Table 1. Differences in Subprograms 1 and 2 and PCR Impact Indicators Subprogram 1 Subprogram 2 PCR Number of newly registered enterprises doubled during from 339,000 during By 2015: number of newly registered enterprises increased by 350,000 during (2010 baseline: 550,000) Number of newly registered enterprises doubled to over 600,000 during from 339,000 during Share of employment in SMEs and the private sector increased from 53% in 2008 to 63% in 2015 By 2015: share of employment in domestic private sector increased to 63% (from 53% in 2007) (2010 baseline: 50,000) Share of employment in domestic private sector increased to 63% in 2015 from 53% in 2007 Employment by SMEs and the private sector increased by at least 5% per year (baseline of 57% in 2007) PCR = program completion report, SMEs = small and medium-sized enterprises. Sources: Report and recommendation of the President for Subprograms 1and 2, and the program completion report. 8. The expected program outcome was an improved business environment to support more competitive SMEs and the private sector. 9. Although there were a number of outcome performance indicators in both RRPs, the PCR DMF only showed Subprogram 2 s outcome indicators. 10. There were three outputs in Subprogram 1: (i) improved policy and institutional framework for SME development, (ii) strengthened business competitiveness, and (iii) enhanced SME access to finance. There were four outputs in Subprogram 2: (i) enhanced policy and planning framework for SME development, (ii) improved efficiency of administrative systems in support of SME development and operations, (iii) strengthened regulatory framework for competition policy, and (iv) enhanced SME access to finance. Many output indicators in the two RRPs were different. 11. The PCR DMF only showed three outputs: (i) improved policy and institutional framework for SME development, (ii) strengthened business competitiveness, and (iii) enhanced SME access to finance. 6 5 The DMF for Subprogram 1 shows a different impact in the RRP text (para. 9): increased contribution of SMEs and the private sector to support sustainable high economic growth rather than achieving sustainable high economic growth. 6 The narrative of the program outputs of PCR Section II showed four outputs.

6 4 C. Provision of Inputs 12. The program comprised two single-tranche program loans from ADB s Special Fund Resources. Subprogram 1 loan was for $40 million (SDR26.5 million) and Subprogram 2 loan was for $50 million (SDR33 million). The program was implemented from 26 May 2011 to 18 August 2014 with an original target completion date of March The delays were due to lengthy government processes in meeting the requirements for effectiveness of the program, and the extensions that were required to accomplish the policy matrix actions as a result of the adjustments made to the performance indicators (footnote 2). As a result, the loan effectiveness dates were extended Subprogram 1 by 2 months and Subprogram 2 by 4 months (footnote 2). 13. The costs were higher than initially expected. The difference between appraisal estimates and actual costs was $2.0 million for Subprogram 1 and $1.0 million for Subprogram Consultants were engaged through a project preparatory technical assistance (TA) to support the program. The TA was approved in February 2008 for 15 national and four international consultants to formulate a policy framework covering to improve the business environment and support SME growth In 2013, a TA project 9 supported the program where consultants were engaged for a total of 35 person-months for $500,000 (approved cost is $800,000) (footnote 2) 10 to enhance the regulatory framework for private enterprises in Viet Nam, strengthen the framework for competition policy, and improve SMEs access to finance. The TA project supported the revision of the SME Development Law, and the establishment of the SME development fund in conjunction with the State Bank of Viet Nam. These outputs contributed directly to the policy matrix of Subprogram 2 by focusing on the policy framework for SME promotion and facilitating SME access to finance (footnote 2). 16. Although the scope of this TA project was implemented as proposed, its start-up implementation was delayed by almost 12 months because of deferrals in government implementation approval and internal processing. The TA completion dates had to be extended twice. The first extension was due to a delay in implementing the approval from the Ministry of Planning and Investment (MPI) that was received 7 months after ADB approval. The second extension was until December 2015 to allow for the completion of proposed activities. 11 Each extension was made based on factors relevant to the program implementation. The MPI requested for the second extension to facilitate the drafting of the SME law and to design anew the ADB program of assistance for SME development in Viet Nam. Minor changes in implementation arrangements were necessary to implement a survey for about 1,000 SMEs to be undertaken by a consulting firm to evaluate the needs and priorities for business support services from the government. The Law on SME Development Support in Viet Nam was also drafted to support the processing of Subprogram 2 (footnote 2). 7 For Subprogram 1: the estimate was SDR26.6 million (rounded), while actual was SDR28 million; for Subprogram 2: the estimate was SDR33 million against the actual of SDR33.7 million. 8 ADB Technical Assistance to Viet Nam for Preparing the Second Small and Medium-Sized Enterprise Development Program. Manila. 9 ADB Technical Assistance to Viet Nam for Supporting the Second Small and Medium Enterprises Development Program. Manila. 10 This is equivalent to 14.9 months for international consultants and 20.4 months for national consultants. 11 The total elapsed time from fielding the first consultant (23 September 2013) to TA completion (31 December 2015) was 27 months.

7 5 17. The TA completion report considered the TA project successful as it was highly relevant and provided critical and timely inputs that led to sustained reforms in SME development. The TA project largely delivered its performance targets, achieving relevant policy and regulatory reforms in support of SME development in Viet Nam. 18. The program did not trigger any unintended impact or outcome in the ADB safeguard policies and was categorized C for environment, involuntary settlement, and indigenous peoples. Subprogram 2 supported effective gender mainstreaming in SME development policies and regulatory legislative reform (footnote 2). D. Implementation Arrangements 19. Implementation arrangements were carried out as envisaged at appraisal. The MPI (through the Enterprise Development Agency) was the executing agency and assumed overall responsibility for the program and the coordination of policy actions. The Ministry of Finance; the Ministry of Justice; the State Bank Viet Nam; the Ministry of Industry and Trade; Office of the Government; and the Ministry of Labor, Invalids, and Social Affairs were the agencies responsible for the day-to-day implementation. The Government of Viet Nam established an SME Development Council, chaired by the Deputy Prime Minister, to coordinate all SME-related activities, including the activities of the program (footnote 2). 20. All policy actions for Subprogram 1 were accomplished and the eight triggers 12 for Subprogram 2 were met (footnote 2). Of the 16 loan covenants, 14 were fully complied. One covenant was only partially complied as the government failed to provide semiannual reports as required under Section 6.05 of the Loan Regulations, although progress was assessed by the ADB team through frequent discussions with the government. One covenant (Loan Agreement Schedule 5, para. 5) which required the reform agenda for any subsequent subprogram to be jointly refined by the borrower and ADB to reflect the progress made under the program and the evolving circumstances in the borrower s economic management and in the SME sector was unnecessary as no subsequent subprogram was attached to the program. 21. The risk assessment and management plans for each of the subprograms were as follows: (i) the risk assessment and risk management plan of Subprogram 1 considered that there were two high risks and three medium risks before mitigation measures were in place. The RRP narrative (footnote 3) also considered vested interests resisting some of the reforms as a main risk. After mitigation, these risks were considered medium or low, and the overall risk to the program was considered low; 13 and (ii) subprogram 2 had one high risk, three high-to-medium risks, one medium risk, and one medium-to-low risk. The overall risk was considered medium to high, and although mitigation measures were discussed, there was no assessment of the overall level of risk after mitigation The PCR did not discuss the risks or their impact on the success of the program, except for a statement on risks in the DMF. 12 Footnote 2. These are shown in Appendix 2 (milestones 1.2, 1.4, 2.2, 2.5, 2.9, 2.11, 2.13, and 3.3). Note that it is not clear from the PCR whether there were 10 or 8 triggers; para. 23 states 10 triggers in Appendix 2, but it is not obvious as to which were the triggers. 13 Footnote 3, Appendix 2: List of Linked Documents Risk Assessment and Risk Management Plan. 14 Footnote 4, Appendix 2: List of Linked Documents Risk Assessment and Risk Management Plan.

8 6 II. EVALUATION OF PERFORMANCE AND RATINGS A. Relevance of Design and Formulation 23. The PCR rated the program highly relevant in its design because its components were considered to be consistent with the national SME strategy and policy plans, the ADB Country Partnership Strategy for Viet Nam, and the ADB operational strategy in Viet Nam (footnote 2). 24. The program was aligned with the country s strategy for the development of SMEs to achieve economic growth and to address the difficulties that affected SME competitiveness. The program s design was based on recommendations from the first SME Development Program to improve the effectiveness and sustainability of policy reforms to support SME development. 15 The use of a multi-tranche program loan approach was appropriate with a policy matrix that showed the completed actions of Subprogram 1 and how these would progress in Subprogram 2. The policy actions were also appropriate since they covered policy framework and administrative, regulatory, and financing issues designed to improve the business environment for more competitive SMEs and the private sector. 25. The outputs addressed implementation issues at both the national and subnational levels. At the national level, this was done by simplifying administrative procedures, reducing the number of value-added tax declarations, and redefining the government s support for reforms toward SME development. At the provincial level, capacity building of the provincial registrar offices to implement new national business registration system was undertaken. There was no indication if the improvement in the business environment had delivered better employment or standard of living outcomes. 26. The program s outcomes of improving the enabling policy and regulatory environment, and increasing access to finance were similar to that of the first SME development program. As such, it was a continuation of the first SME development program and had no innovative or transformative features, which are requirements for a highly relevant rating. Given this, the validation assesses the program relevant. B. Effectiveness in Achieving Program Outcomes and Outputs 27. The PCR rated the program outcome effective. There was an improved business environment to encourage more competitive SMEs and the private sector because the program helped reduce the bureaucracy in business registration and regulation, and there has been sustained momentum in government reforms for SME development (footnote 2). 28. This validation assesses the program outcome effective. The cost of starting a business had been reduced, and increased SME and private sector employment have been achieved or were on track to being achieved. By the end of 2013, the target to reduce the cost of doing business had been achieved and Viet Nam s global ranking for ease of doing business improved from 125 in 2015 to 119 in However, the target of increasing private sector investment to 68% was not met as it only reached 60%. This was lower than the 2007 baseline of 62%. 15 Independent Evaluation Department Validation Report: Small and Medium-Sized Enterprise Development Program Cluster (Subprograms 1 and 2) in Viet Nam. Manila: ADB.

9 7 29. The PCR evaluation of performance did not specifically rate the effectiveness of the program outputs. However, there were indications in the narrative on the evaluation of design and implementation (paras ) that all Subprogram 1 and Subprogram 2 outputs had been effective although the PCR DMF only covered the Subprogram 1 outputs. 30. This validation considers the program outputs effective because all output targets had been achieved or partly achieved, as discussed below: (i) The policy and planning framework for SMEs had been enhanced through the delivery of the SME white paper, provision of support to wider stakeholder consultation, the promulgation of decrees to provide support to women-owned enterprises and guidelines on the provision of support policies, and the upgrading of the SME information website (footnote 2). (ii) Business competitiveness was strengthened. For example, measures allowing the simplification of 4,800 administrative processes were introduced, the number of days required to start a business was reduced from 34 in 2014 to 20 in 2015, and the capacity of the provincial registrar s offices to implement the new national business registration system was improved. Although the planned review of the Competition Law was not completed in 2016 (footnote 2), a draft has been posted on the Government Portal for public review and commentary. The draft law is expected to be submitted to the National Assembly in October 2017 and adopted in May (iii) The regulatory framework for competition was strengthened with the issuance of guidelines to undertake regulatory impact assessments, the establishment of a specialized division within the Ministry of Justice to provide legal support services to SMEs, and with the Central Institute for Economic Management preparing the first draft of the amended Enterprise Law 2005 (footnote 2). (iv) Financial access for SMEs was enhanced through increases in (a) the share of longer-term credit to SMEs from 15% in 2009 to 22% in 2015, (b) the number of approved loans that were supported by the government guarantee scheme from 1,164 in 2009 to1,536 in 2015, and (c) the number of enterprises listed in the Hanoi Stock Exchange Unlisted Public Company Market from 10 in 2009, to 142 in 2013, and 256 in However, there was a need to facilitate financial access as a significant segment of the private sector remains apprehensive about SME financing due to the perceived risks involved (footnote 2); and (v) Subprogram 1, with some gender benefits, enabled the Government of Viet Nam to implement legislative reforms to support SME development. Subprogram 2 supported effective gender mainstreaming in SME development policies and regulatory and/or legislative reform. Through the program, there was a specific focus on enhancing access to finance women entrepreneurs, streamlining administrative processes for business registration, inclusive consultation for policy development and reform, and gender-aggregated data on SME development policies and impact (footnote 2). C. Efficiency of Resource Use 31. The PCR rated the program s budget utilization and implementation efficient. 32. Adjustments to the performance indicators following feedback from the government required several extensions to accomplish the policy matrix actions. The extension caused delays 16 B. McKenzie Draft New Competition Law in Viet Nam. Global Compliance News. 28 April.

10 8 in loan effectiveness dates under the two subprograms 2 months in Subprogram 1 and over 3 months in Subprogram 2, and in the closing dates, 4 months for Subprogram 1 and 4.5 months for Subprogram 2 (footnote 2). 33. Nevertheless, this validation views the program s use of resources efficient since delays were not extensive, although program extension was necessary for government to satisfy the modified performance indicators according to government s feedback. D. Preliminary Assessment of Sustainability 34. The PCR rated the program reforms most likely to be sustainable given the government s ownership of the program, commitment to support the development of the SME sector through the SMEDP, and the potential for ADB s continued collaboration with the government to further develop the sector and provide support (footnote 2). 35. There are indications that the program reforms are sustainable given the government s commitment to the development of SMEs. Resolution 35 issued in April 2016 stated that the government will try to create a favorable environment for the development of businesses by supporting and nurturing enterprises over the next 5 years. 17 The resolution sets an ambitious target that by 2020, the country will have at least 1 million enterprises, doubling the current number. The private sector will contribute 48% 49% of gross domestic product and 49% of total social investment by helping people improve their skills and capacities to support them in employment and social life A 2017 report showed continued growth in the number of new SMEs approximately 14,500 new enterprises established during the first 2 months of 2017, 19 with a year-on-year growth of 3.9%. With more than 600,000 registered SMEs increasing at over 100,000 per annum, SMEs are an important sector of the economy. Although several had ceased operations, the number of SMEs resuming operations increased over the last months. The report also noted that CPA Australia s recent survey showed that 89% of small businesses grew in 2016, 20 94% are expected to grow in the next 12 months, confirming the optimism of Vietnamese businesses, and 86% expect the Vietnamese economy to grow in the next 12 months. This is supported by the evidence that 54% of enterprises interviewed had increased the number of their employees in the last 12 months, with 71% of the enterprises expecting similar increases in the next 12 months. The World Bank noted that the Government of Viet Nam continues to show commitment to reforms Nevertheless, other research highlights some concerns. 22 One study showed that despite the government s declared determination to promote SME sustainability, sustainability practices in SMEs appear to be largely informal without any systematic and strategic plans. SMEs focus on the economic element of sustainable development and pay less attention to social and 17 Government of Viet Nam. No. 35/NQ-CP Supporting and Developing Enterprises by Viet Nam Resolution 35. Ha Noi. 18 Official Gazette, Government of Viet Nam Government Vows to Support Businesses. Resolution No. 35/2016. Viet Nam Law and Legal Forum. 27 May. 19 Grant Thornton Chairman's Insights Vietnamese Small and Medium Size Enterprises (SMEs). 5 March CPA Australia is an accounting body with over 150,000 members across 121 countries. 21 World Bank The World Bank in Viet Nam: Overview. Nam/overview. 22 T. Nguyen Small and Medium-Sized Enterprises and Sustainable Development: The Case of Viet Nam. RMIT University Research Repository. Melbourne.

11 9 environmental sustainability. The implementation processes for new government policies are weak and slow. While the number of days to start a business declined to 20 in 2015, it increased to 24 in The validation considers the program reforms likely sustainable. Despite the government s commitment to reform and its current progress in improving the environment for SME development, there are some indications that the business environment may not be improving, that implementation processes are slow, and elements of sustainability are being neglected. III. OTHER PERFORMANCE ASSESSMENTS A. Preliminary Assessment of Development Impact 39. The PCR rated the program impact substantial since it improved the business environment for SMEs as demonstrated by a 26% increase in the number of business registrations from 2014 to 2015, the steady growth in credit access from 2011 to 2014, a doubling in women entrepreneurs access to credit from 2009 to 2015, and an improvement in Viet Nam s ranking in the World Bank 2016 Ease of Doing Business Report from 125 to 119 (footnote 2). 40. The program had positive impact on institutional development with all impact indicators achieved, the policy making process for SME development initiatives improved, and the number of administrative processes simplified. However, the development impact indicators did not point out whether sustainable high economic growth had been achieved or that poverty had been reduced as a result of the contribution of SMEs and the private sector. Also, the program did not discuss the time frame or whether it was over a long enough period to assess the program impact. 41. Nevertheless, this validation considers the development impact satisfactory with indications that the business environment has improved given increases in the numbers of businesses registered and in employment in SMEs and the private sector. B. Performance of the Borrower and Executing Agency 42. The PCR rated the performance of the borrower and the executing agency satisfactory. The borrower met the conditions for the release of the grant proceeds, and the Agency for Enterprise Development the executing agency effectively coordinated with the implementing agencies on reforms and policies, and aligned these with program objectives. There was sustained government commitment to implement the reforms for SMEs over and above the policy triggers incorporated in the DMF. 43. This validation considers the performance of the borrower and the executing agency satisfactory. The government met the loan effectiveness conditions and complied with all covenants and safeguard requirements. 23 World Bank. Doing Business Project: Viet Nam. &locations=vn&start=2003.

12 10 C. Performance of the Asian Development Bank and Cofinanciers 44. The PCR rated the performance of ADB satisfactory. ADB staff at headquarters and in the resident mission provided appropriate assistance to the government in implementing the program with regular missions that kept track of progress (footnote 2). 45. This validation also assesses the performance of ADB satisfactory. ADB undertook a factfinding mission in June July 2009, and a consultation mission from January to February 2010 for Subprogram 1. For Subprogram 2, a consultation mission was conducted in March 2012, a reconnaissance mission from November to December 2012, and a fact-finding mission in April The PCR mission was carried out from March to May Furthermore, the executing agency and implementing agencies found ADB s performance satisfactory (footnote 2). IV. OVERALL ASSESSMENT, LESSONS, AND RECOMMENDATIONS A. Overall Assessment and Ratings 46. The PCR assessed the program successful. 47. This validation considers the overall program successful. The design and formulation were relevant since the program components were consistent with the national SME strategy and policy plans, and with the ADB Country Partnership Strategy and its operational strategy in Viet Nam (footnote 2). The program was consistent with the government s strategy to address the difficulties that affected SME competitiveness and development. It was effective since there were improvements to the policy and institutional framework for SME development and to the business registration process, the regulatory framework for competition had been strengthened, and financial access for SMEs was enhanced. The program was efficient because it was implemented largely as planned although there were several extensions to accomplish the actions in the policy matrix. The program is likely sustainable with the government s commitment to reform and its current progress in improving the environment for SME development. Table 2. Overall Ratings Validation Criteria PCR IED Review Reason for Disagreement and/or Comments Relevance Highly relevant Relevant The program was a continuation of the previous program and did not have any transformative or innovative features. Effectiveness Effective Effective Efficiency Efficient Efficient Sustainability Most likely Likely sustainable sustainable Overall assessment Successful Successful Preliminary assessment Substantial Satisfactory of impact Borrower and executing agency Satisfactory Satisfactory Despite the government's support to promote SME sustainability, implementation processes for government policies are weak and slow. Also, sustainability in SMEs focus on the economic element of sustainable development and pay less attention to social and environmental sustainability.

13 11 Validation Criteria PCR IED Review Reason for Disagreement and/or Comments Performance of ADB Satisfactory Satisfactory Quality of PCR Satisfactory See paras ADB = Asian Development Bank, IED = Independent Evaluation Department, PCR = program completion report. Source: Independent Evaluation Department. B. Lessons 48. Country level lesson: No country-level lesson was identified in the PCR. 49. Sector level lesson: This validation considers the continuing need for a strong coordinating agency that is responsible and accountable for program implementation and to manage the activities of agencies related to the program. This would ensure that while agencies focus on sector issues, they remain committed to the intent of the overall program. 50. This validation also supports the project- and methodology-level lessons identified in the PCR, which are based on feedback from the government agencies involved. 51. Project level lesson: The PCR considered it better to have fewer implementing agencies with sector focus rather than engaging numerous agencies involved in coordination and implementation. 52. Results framework and methodology level lesson: The PCR also stated that future initiatives should draw from the expertise and knowledge of domestic institutions to enforce corporate governance; and improve business management, financial planning, and marketing. C. Recommendations for Follow-Up 53. The PCR provided a series of recommendations divided into general and program-related recommendations. The four general recommendations included (i) the need for future programs to be more focused and to use the expertise of domestic institutions for specific capacity-building activities, (ii) the need for greater focus on gender mainstreaming elements to ensure that women continue to benefit from SME development initiatives, (iii) the usefulness of streamlining government intervention and coordination, and (iv) targeting future ADB assistance to specific priority sectors and/or provinces in Viet Nam. 54. The two program-related recommendations were (i) to encourage the government to continue implementing the regulatory impact assessment process to monitor and ensure the effectiveness of future reforms, and for the Ministry of Justice to facilitate greater involvement of stakeholders in the process; and (ii) for ADB to take note of the Viet Nam SME Development Plan to identify the sustained impact of the program and identify areas requiring future assistance. 55. The PCR also listed some areas in which the implementing agencies and stakeholders had sought additional assistance for SME development. These include the scaling-up of Hanoi Stock Exchange s training opportunities of publicly listed businesses on financial management, corporate governance, and other good business practices, which should include SMEs preparation for public listing or unlisted public company market listing, targeting assistance based on specific sector or province that would enhance the effectiveness of the program, and

14 12 developing innovative solutions for SME development, such as credit guarantees or investment funds for SMEs. 56. This validation considers the content of the recommendations to be sound and largely based on lessons learned from the program. The clarity and presentation of the recommendations are discussed in the section on PCR quality. A. Monitoring and Reporting V. OTHER CONSIDERATIONS AND FOLLOW-UP 57. ADB worked closely with the government in the design of the program and adjusted policy triggers during implementation to better reflect government s implementation capacity. Loan agreement reporting, monitoring, and evaluation requirements were complied, and several missions to Viet Nam were undertaken to confirm the progress of the program and its related TA. Progress results were reported back to ADB. For example, a back-to-office mission report provided information on the progress of implementation of Subprogram 1 in December 2011, 24 and a TA review mission verified that all the policy triggers and milestones for Subprogram 2 had been met in B. Comments on Program Completion Report Quality 58. The PCR was well written and despite some inconsistencies in the text, was relatively easy to understand. It provided a good description of the program and how it was designed to respond to some of the development challenges of the country s SMEs. The appendix on the policy matrix and medium-term directions and results provided a good summary of the actions accomplished under Subprogram 1 and milestones for Subprogram 2. A detailed description of the output achievements in the text, supported by the DMF, was provided. The PCR presented a convincing argument of the performance of the program. 59. Some shortcomings, however, made the description of the achievement of outputs with those documented in the RRPs hard to reconcile, as follows: (i) A better description of the linkages between Subprogram 1 and Subprogram 2 would have helped explain how Subprogram 2 was adjusted because of the experiences of Subprogram 1. (ii) A discussion in the PCR on the risks and how the mitigation strategies had reduced the high-level risks would have been useful to explain how the risk assessment and mitigation strategies may have affected the program design; and (iii) Recommendations should be clear on what has to be done by whom and by when. These should logically follow from the evaluation findings. While some of the recommendations showed what had to be done and by whom, 26 others did not. Some follow-up actions should have also been specified. 24 ADB Technical Assistance Review Mission to Viet Nam: Second Small and Medium Enterprises Development Program. Back-to-office report.13 December (para. 1) (internal). 25 ADB Fact-Finding Mission to Viet Nam: Second Small and Medium Enterprises Development Program (SMEDP), Subprogram 2. Back-to-office report.16 April (para. 2) (internal). 26 These were clear in the recommendations that future programs be more focused in scope and to tap into domestic institutions for specific capacity-building activities; and where the government should continue with the regulatory impact assessment process to monitor and ensure the effectiveness of future reforms.

15 In spite of the shortcomings described above, this validation assesses the PCR quality satisfactory. C. Data Sources for Validation 61. The main data sources for this validation were the PCR; the RRPs and linked documents, including the Risk Assessment and Risk Management plans; the program s Consultation Mission Aide-Memoire (February 2010); the Loans and TA Review Missions back-to-office reports; the Compliance Status of Subprogram Policy Actions; and the Grant Agreements (December 2010 and November 2013). 62. Other key data sources included the World Bank s Ease of Doing Business Report 2016 (footnote 23), the Government s Decree No 56/2009, 27 RMIT University Research Paper 2016 on Viet Nam SME Sustainability (footnote 22), Grant Thornton Chairman s Insights (footnote 19), and the Global Enterprise Monitor Viet Nam Report D. Recommendation for Independent Evaluation Department Follow-Up 63. The Independent Evaluation Department may wish to consider conducting a project performance evaluation report in 2019 to assess whether the program impact was met in the longer term. Alternatively, this could be part of a wider exercise to determine whether the program design, formulation, and its outturn have been successful and sustainable. 27 Government of Viet Nam Resolution on the Implementation of the Government s Decree No.56/2009 of June 30, 2009 on Support for the Development of Small and Medium-Sized Enterprises. Vietnam, May, 2nd para. Resolution on Implementation of Decree 56/ Global Entrepreneurship Monitor Viet Nam Report Ha Noi. p. 20.