At a press conference following the recent working visit to Vietnam, Takehiko Nakao, President of the Asian Development Bank (ADB), recommended that the Vietnamese economy can make a breakthrough and develop in coming years. Anh Phuong reports.
How do you evaluate Vietnamese economic reform and success in recent years?
In general, Vietnamese economy is getting into stable development orbit in comparison with last year. Inflation is being slowed down, growth rate increased, FDI inflow augmented and exchange rate stabilised. Furthermore, ADB economists forecast that Vietnam will maintain a growth rate of 6.7 per cent this year similar to that of last year. It is quite high in the region compared with the average of developing countries in Asia (5.7 per cent). In 2017, it is estimated at 6.5 per cent; meanwhile inflation rate is forecast at 3 per cent, much higher than 0.6 per cent of last year.
As a world financial institution, what is ADB's ongoing lending policy with the Vietnamese government?
ADB lending policy to Vietnamese government will have no major changes in coming years. ADB will assist Vietnam some US$1 billion/year. Presently, we assist Vietnam under Asian Development Fund (ADF) of low interest rate and long-term. However in the future, perhaps in 2017, Vietnam will no longer have such policy privileges. Instead, it will be OCD (official development fund) with higher interest rate and short term. Therefore, Vietnamese government should make the best use of this time, spending and allocating capital more appropriate with development orientation.
In which sectors of Vietnam ADB will lend its financial support?
We are committed to lending some US$1 billion/year and focusing more on private sector. In addition, we are also interested in the development of infrastructure: land roads, major passengers transport, power distribution, rural electrification, rural water management, general education and job training.
ADB resources are also used to help Vietnamese government in combating extreme climate changes such as land erosion, salinity invasion affecting agricultural production.
In addition, ADB will join with Vietnam in developing energy, renewable energy and green and clean technology.
Although ADB declared to focus resources for private sector, so far this sector could not have access to the resources, why?
In fact, the policy ensuring access to credits for private sector has been implemented in such countries as Myanmar, Thailand and China, and accordingly resources have been granted to businesses engaging in agriculture, renewable energy. Such resources have been expanded to medical equipment in China, education and IT in Thailand and telecommunication in Myanmar.
In Vietnam, such policy has not been materialised because we have not received specific demands from businesses in private sector. Like other countries, private businesses in Vietnam are entitled to access to ADB resources without any problem when investing in agriculture, renewable energy, medical equipment, education, IT and telecommunication.
Evidently, financial-banking sector remains weak in Vietnamese economy, will ADB have any programme to help it develop?
Regarding strategic orientation, ADB believes that Vietnam should continue appropriate economic policies and in-depth structural reform, especially in the reform of State-owned enterprises by reducing percentage of State ownership, upgrading business management and improving financial efficiency. The government should also effectively handle bad debts, increase income from taxes, and improve public spending. More specifically, the government should improve the sustainability of budget, increase income and in particular manage more effectively regular spending when public debts are approaching the ceiling of 65 per cent.
To solve the issue, it is not only the problem with banking sector; the restructuring must be implemented in various sectors and the entire economy. Regarding bad debts, the banking sector can find the solution by assisting businesses of high efficiency to pay debts, buying banking shares to increase State money in banks with bad debts. In the long term, however,
banking management must be upgraded. It is also important to consider case by case whether banks really need State capital. There are two other issues, one, credit expansion may cause heated credit growth; two, ADB is cautious of foreign exchange reserves. Although Vietnamese reserve of foreign exchange has been restored, it is a big risk affecting money resources of the economy.
Therefore, ADB recommended Vietnamese government to direct closely the financing-banking sector, continue the forecasts and settle problems with certainty and long-term, without running after heated growth.
How do you assess the present ceiling of Vietnamese public debt – is it disadvantageous to the growth rate of Vietnamese economy?
Although Vietnamese public debt increases, the foreign debts remainstable in the last 5 years, the increase is mainly the domestic debt. To solve the issue, ADB believes that Vietnamese government should focus on improvement of budget spending, administrative reform and taxation. Besides, the government should find new loans of low interest and diversify resources. Furthermore, ADB forecasts that in 2016-2017, Vietnamese debt arrears with ADB is some US$400, the funding this year is US$0.8-1 billion, therefore the exact loan will be round US$400-600 million, Therefore, the above figures remain acceptable and under control.
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