Stable Macro-economy – A Key Foundation for Long-term Development

 

At the meeting, the Government and development partners discussed various important economic and social issues facing Vietnam, as it embarks on a new phase of development – which will bring new opportunities and threats to the country. They discussed measures to stabilize the macro-economy, strengthen governance, reduce corruption and make development more sustainable and inclusive, as well as the future of development partnership, as Vietnam enters the middle income country status.

 

Vietnamese Deputy Prime Minister Pham Gia Khiem attended the first session on December 7, and provided an overall assessment of Vietnam’s recent economic performance and social development. He emphasized the Government’s commitment to undertake the three areas of breakthrough indicated in the 10-year Socio-economic Development Strategy and the 5-year Socioeconomic Development Plan, including “developing institutions for a market economy, human resources development and infrastructure development.”

 

The World Bank Country Director for Vietnam, Victoria Kwakwa, noted that Vietnam is at a critical juncture in its development. Development partners stand ready to support the Government to redefine its approaches in all areas discussed at this CG to better address Vietnam’s changing domestic and external environment.

 

“However, Vietnam has ambitious expectations, with the goal of developing an advanced industrialised economy and reducing poverty to a single-digit rate in the next decade. Thus, overcoming recent milestones will be an opportunity to see where Vietnam is in relation with the medium- and long-term objectives, and what Vietnam will do to achieve those goals,” said Kwakwa.

 

According to Ms Kwakwa, to maintain rapid and dynamic growth in the long term, it is essential to have fundamental changes in the development process of Vietnam, at least four respects:

Vietnam needs to build new competitive resources, basing on increased productivity, innovation, differentiation of products and services, and more effective use of investment and trade. Although development roads vary from nation to nation, all developed countries have succeeded in carrying out this process without reliance on the availability of basic advantages.

 

On the other hand, Vietnam needs to redefine the role of government in line with the need of emerging dynamic economy market - a role that help the market work better. To do so, it will provide an environment with more a balanced combination of State-owned and private companies (domestic and foreign) to compete in the economy.

 

At the same time, Vietnam should choose a sustainable development approach in terms of environment and take into account climate change challenges; identify and implement more aggressive poverty reduction measures, etc.

 

Particularly, according to Ms Kwakwa, the stable macroeconomic environment is necessary to create a common framework for these changes. Thus, modern tools and institutions for macroeconomic management suitable with Vietnam's transition into a market economy is critical.

To growing macroeconomic instability in the country, Mr Masato Miyazaki, Division Chief, Asia and Pacific Department of IMF, called for an increased in monetary policy rates combined with fiscal consolidation. Strengthening the financial system and improving communication with the market was also needed. He also suggested the need to shift away from directives and controls toward indirect instruments of economic management.

 

Mr Ayumi Konishi, Asian Development Bank Country Director for Vietnam, pointed out that despite Vietnam’s intention to use WTO accession to leverage acceleration of reforms, the efficiency and competitiveness of SOE (State-owned enterprise) sector has not improved. He stressed the need for separating the ownership from management of SOEs, and encouraged the Government to let SOEs to operate on commercial principles and on a level playing field with the private sector.

 

Development partners reiterated the need for higher transparency and modern governance as key to an effective state owned economic sector, which will bring greater benefits to the country and avoid problems Vinashin has experienced recently in the future.

 

Swedish Ambassador Staffan Herrström on behalf of development partners raised the need to address corruption with urgency. He stressed that much needs to be done, especially in the areas of improving transparency, access to information, developing a vibrant and free media, upholding the rule of law, increasing the autonomy of judiciary and engaging the civil society.

 

Development partners urged the Government to increase the oversight role of the National Assembly, civil society, citizens and media on the fight against corruption. They also emphasized the need for complementary measures to tackle corruption such as regulation to protect whistle-blowers, pay reforms for government officials, and merit based recruitment of civil servants.

 

The Government and development partners agreed on the long term challenges posed by climate change and agreed to work together to address such challenges. Manager for Sustainable Development from the World Bank, Ms Jennifer Sarah, drew the government’s attention to not only the sustainable use of natural resources; but also localized challenges - including, water and air pollution - as well as to global challenges such as greenhouse gases and non-reversible losses in biodiversity and habitat.

 

Mr Guenter W. Riethmacher, Country Director of German Technical Cooperation Agency (GTZ), expressed strong support for climate proofing of the Social Economic Development Strategy to 2020 and the Social Economic Development Plan to 2015, as well as climate proofing of sectoral and provincial social economic development plans. Despite the fact that Vietnam will receive significant climate change finance, the country will need substantial domestic public and private capital. To this end, development partners asked the government to use climate change finance strategically, and sector ministries and localities must access finance for capacity building, technical assistance and investments.

 

Mr Motonori Tsuno, Chief Representative of JICA, co-chair of Aid Effectiveness Forum in Vietnam, indicated that development partners support the new ODA Strategic Framework with priorities. Development partners will also continue to work to move the aid effectiveness agenda forward, and cooperate with Ministry of Planning and Investment to prepare the new framework to address the key issues in aid effectiveness. Development partners are committed to making a concerted effort to enhance aid effectiveness for Vietnam’s sustainable development and achievements of Millennium Development Goals (MDGs) and Vietnam Development Goals by 2015.