CG 2012 Settling “Hot” Economic Issues

Minister of Planning and Investment Bui Quang Vinh said the grant of nearly US$6.5 billion committed by international donors to Vietnam is not small, especially in the context of world economic slowdown. He also appreciated the candid and valuable comments of development partners over the past 20 years. This resource enables Vietnam to overcome challenges and grow from a poor agricultural country to a middle-income country (per capita income near US$1,600 a year).

 

In addition, the minister said despite numerous hardships in 2012, the Vietnamese economy still achieved encouraging results. Specifically, consumer price index growth was controlled at 7.5 per cent in the year. Interest rates declined and credits increased for agriculture, countryside development, export and small and medium enterprises (SMEs). Exchange rates were stabilised, foreign exchange reserves increased and particularly, the restructuring process produced initial results. He forecast that both Vietnam and donors will meet difficulties in 2013. Hence, aid allocated to Vietnam will be limited and difficult. However, the Vietnamese Government indeed hopes donors will continue with supporting programmes, because this is really an important source of capital to reshape the country's development in the coming period.

 

Despite being informed of upbeat indicators of the Vietnamese economy, the biggest concern of donors remains ODA disbursement effectiveness, said Minister Vinh. The punctual deployment and implementation of commitments is still considered a permanent problem of the Vietnamese economy. In this regard, he explained, this is primarily caused by the shortfall of counterpart funds from Vietnamese partners. When Vietnamese ministries, agencies and localities sign counterpart projects, they do not often base these on their budget capabilities but rely on central funding. In the fiscal year 2012, the Vietnamese Government had special concerns about this problem and added VND5 trillion for ODA projects. However, in 2013, this funding source is forecast to be limited. And to thoroughly deal with this problem, the Vietnamese Government put forth an initiative which put ODA counterpart funds on top and called attention from ministries, and agencies. In addition, other forms of disbursement will be expanded to seek counterpart funding in the public-private partnership (PPP) model.

 

Ms Victoria Kwakwa, World Bank (WB) Country Director for Vietnam, said although the Government of Vietnam has made great efforts, the economic reform process still faces numerous difficulties. And it is more important than ever that the Vietnamese Government should take action as soon as possible. She also noted that although there are many positive signs of the domestic economy, these signs are still quite fragile in the long term, and need more time to verify. Accordingly, she recommended that the Government not take any step to loosen the interbank financial market too early. On the other hand, the restructuring process must be carried out with both financial - monetary reform and State-owned enterprise restructuring.

 

She also laid emphasis on Vietnam’s land policy changes. She said Vietnam is at the “crossroad” and entering its first phase as a middle-income country. During this time, land reform plays a very important role if the country wants new success. She noted that many land policies in Vietnam are still very distant from the reality; thus this leads to complex disputes in land clearance or determination of ownership rights to land resources. She also stressed that this is a big problem for the economy in the context of development; therefore it requires time for discussions in the future. And, if this issue is not addressed effectively, its implications will hold back the progress of the entire economy.

 

In the 2013 fiscal year, Japan wants to be Vietnam’s biggest ODA donor. Accordingly, the two priority fields Japan supports in Vietnam are focused cooperation in infrastructure and human resource development. When Vietnam sets the target to become a developed industrialised nation by 2020, it must focus on supporting industrial development and high-level, skilled human resource development. In addition, Japan will continue to support Vietnam to promote the development of small and medium enterprises. According to statistical data, out of 1,836.1 billion yen of Japan’s pledged loan to Vietnam in 2011, 39 per cent went to the transportation sector and 29 per cent was channelled into the electricity sector.

 

However, like other donors, Japan hopes Vietnam will have major banking system and State-owned enterprise reforms. And, the Vietnamese economy will also need accurate information about the business situations of enterprises. This helps donors to see the economic landscape of Vietnam clearly to produce appropriate aid.

With regard to economic restructuring, the interrelation of Vietnamese industries is very important and must be strengthened, especially the coordination of governmental agencies. If the interconnectivity is not smooth, it is difficult to complete the work. In addition, increased transparency in the process of implementing economic - social development plans and learning experience from other countries to apply in Vietnam is very important for the success of the Vietnamese economy. ADB has partnered with the Government of Vietnam in this reform effort, and will continue to do so.