Vietnam Consultative Group Meeting, Dalat, June 22-23, 2000

Dalat, June 23, 2000 – The third informal Consultative Mid-Year Review between delegates from donor countries and institutions and Government officials took place on June 22 and 23 in the City of Dalat. This followed the meeting of the Private Sector Forum in Ho Chi Minh City on June 21. In an informal setting, the Mid-year Review provides Government and donors an opportunity to discuss a wide range of development issues without the pressure of reaching agreements. Earlier informal mid-year meetings were held in Hue in 1998 and Haiphong in 1999.

Deputy Prime Minister, Mr. Nguyen Manh Cam, headed the Government delegation. “This informal meeting, held mid-way between two Annual Consultative Meetings, provides an excellent opportunity for an open and substantive conversation between Government and donors on progress, challenges and the way ahead. Many of the difficulties faced in 1999 are now behind us, and Government and donors must look ahead to the next 5-year plan and 10-year strategy,” Deputy Prime Minister Cam said.

The meeting agenda contained three main topics: recent economic developments and the medium-term outlook; public expenditures; and the Government’s preparation for its upcoming 10-year strategy and 5-year plan.

The opening session on the economy focused on the year 2000 as a critical year for Vietnam. While economic growth is higher, with both domestic and export demand picking up, investment has to pick up and unemployment brought down. The pace of reforms is still considered slow by donors and competition from neighboring countries in the region is growing quickly.

Minister of Planning and Investment, Mr. Tran Xuan Gia, assured delegates that the Government will make 2000 the year to reverse the decline in economic growth by helping SOEs perform increasingly in accordance with market forces and making Vietnam again attractive to foreign investment. “Failures of foreign invested enterprises are considered as failures of Vietnamese enterprises. FDI is a critical and integral part of the economy,” Minister Gia said. “A way must be found to make the Private Sector Forum more effective and the door is wide open to suggestions on how to do this.”

Deputy State Bank Governor, Mrs. Duong Thu Huong, noted that Government’s proposals for reform of the banking system were moving ahead. “Strong measures are being taken to strengthen joint stock banks, state-owned commercial banks and people’s credit funds,” she said.

“We are all encouraged by progress in the first half of 2000,” said Mr. Andrew Steer, Director of the World Bank in Vietnam and in the chair of the meeting. “The challenge now is to raise investment from around 20% of GDP to 25-30%. The private sector has a specially important role.”

Mr. Edouard Wattez, UN Resident Coordinator and UNDP Representative, stressed the need for continued modernization of institutions for a more market-oriented economy, for a clear vision for a renewed public administration reform strategy and greater participation of all in planning and decision making, in line with Government’s decree on Grassroots Democracy, in order to achieve sustainable poverty reduction.

Mr. Dennis de Tray, Vietnam Country Representative of the IMF, noted Vietnam’s economic growth of 6.2% in the first 6 months of 2000 and the good performance of exports in several sectors, notably in electronics. He emphasized, however, both the need to understand better the sources and quality of current growth and the need for recovery in investment if growth is to be sustained.

In the second session on public expenditures, a joint government-donor review showed that overall Vietnam was allocating public expenditure well despite modest levels of public expenditure in some key areas. The joint Public Expenditure Review represents an important step in the Government’s efforts to improve transparency in public management. The report suggested that capital and recurrent expenditures needed to be brought more closely into line, and overall expenditures should be made more “pro-poor.” The Government indicated its planned actions in these areas. It explained its plans for reviewing investment in rural development, preventive health care, education and training and transport at all levels from central to commune level. Several donors offered their support to Government in these areas.

The third session focused on a Vietnam’s upcoming 10-year strategy and 5-year plan. Building on the partnership approach that has characterized much recent donor support for Vietnam, the Government and donors agreed to improve coordination and cooperation. Donors offered to support the Government’s plan preparations and to seek to place their ODA support within a clearer sectoral framework. Delegates agreed that doing this requires broad agreement on sector strategies and greater transparency in planning and budgeting. Examples of effective partnerships in flood disaster reduction and forestry were highlighted, as was joint preparation - with Government in the lead - of a Comprehensive Poverty Reduction Strategy to support Vietnam’s next 5-year plan. This strategy will be presented to the next CG meeting in December 2000.

In the course of these discussions, a constructive and wide-ranging exchange of views took place on numerous topics, including:

• low agricultural commodity prices and liberalization of the rice market
• the need to open overseas markets further to Vietnam’s exports
• Vietnams’ effective exchange rate and competitiveness in the region
• improvements in the civil service and obstacles to implementation
• public-private partnerships and infrastructure finance
• difficulties faced in the introduction of BOT mechanisms to Vietnam
• HIV/AIDS, and
• keeping the human and natural environment in perspective

The next CG meeting will be held in December 2000.

The Mid-year Review meeting of the Consultative Group for Vietnam was held in Da Lat, Vietnam on June 23, 2000, under the chairmanship of Mr. Andrew Steer, the World Bank’s Director for Vietnam. The Vietnamese delegation was led by His Excellency, Deputy Prime Minister Nguyen Manh Cam and Mr. Tran Xuan Gia, Minister for Planning and Investment. It included among others: Mr. Nguyen Ton, Vice Chairman, Office of the Government; Mr. Nguyen Tam Chien, Vice Minister of Foreign Affairs, Mr. Vu Van Ninh, Vice Minister of Finance; Mr. Dam Huu Dac, Vice Minister of Labor, Invalids and Social Affairs, and Ms. Duong Thu Huong, Deputy Governor of the State Bank of Vietnam.

The meeting was attended by delegations from Australia, Belgium, Canada, Czech Republic, Denmark, European Commission, Finland, France, Germany, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, United Kingdom, United States. Also attending were representatives of the Asian Development Bank, International Monetary Fund, United Nations Development Program, and the World Bank Group. Observers to the meeting included delegations from Austria, Brunei, Poland, Singapore, OECD, FAO, UNICEF, UNFPA, UNIDO, WHO, and representatives of business groups and NGOs (DKT international, CIDSE, VSO, SNV, Vietnam Women’s Union, VINAFPA, and VUSTA ).