This report concludes that the economic situation is quite serious for Vietnam--threatening to undermine and reverse the progress in poverty reduction that was achieved over the past decade. Vietnam can still avoid a worsening situation, but this will require stepped up reform of both policies and programs, and change in the pattern of support from the international community. The report suggests that such reforms need to be guided by three "imperatives": 1) Recognize that investment resources will be less plentiful, at least temporarily, and focus on making each dong, dollar, or yen work harder. 2) Set policies so as to increase resources available to the economy--from both internal and external sources, and especially from the private sector. 3) In view of the lower growth trajectory for the economy, target resources and policies more effectively in favor of the poor, both to protect them from the slowdown and to harness their full productive potential. The first chapter begins by taking stock of the current state of Vietnam's economy. The next chapter assesses the current policy response, noting good progress in some areas, and urging acceleration in others. The third and fourth chapters then apply the same policy analysis to rural and infrastructure development. Finally, the report explores prospects for the future, identifies financial requirements, and makes recommendations on both the quantity and quality of foreign assistance.