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New Five-Year Plan for Vietnam

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February 5, 2007—The World Bank says it expects to provide more than US$800 million a year over the next five years in interest free grants and loans to Vietnam – a country it describes as having the potential to be one of the great success stories in development.

The assistance was announced today in Hanoi by the Bank’s new Vice President for East Asia and the Pacific, Jim Adams, when releasing the Bank’s new Country Partnership Strategy for Vietnam.

The strategy, laying out the Bank’s future involvement with Vietnam, describes the country’s success in reducing poverty and promoting economic growth as “spectacular”.

Over the past 15 years, poverty levels in Vietnam have dropped from about 60 percent to less than 20. Real income has grown 7.3 percent a year over the past ten years.

“There’s probably no other country in the world that, over the last 15 years, has moved its development so far and so fast,” says the Bank’s outgoing Country Director for Vietnam, Klaus Rohland.

“Vietnam has moved from rice importer to feed its people to the second largest rice exporter of the world.”

However Rohland says Vietnam does face challenges in realizing its goal to achieve middle income country status by 2010. 

“Vietnam wants to complete its transition to a market economy over the next five years and that really requires a focus on institution building,” he says. This includes strengthening the banking sector, improving health care systems and a “legal system built on what people believe is right or wrong and reflects the needs of a modern market economy.”

It’s a move which Rohland describes as “almost a race against time.”

“The market economy and the process towards the market economy moves at its own speed,” Rohland says. “And we need to make sure that the gap between a full-fledged market economy and institutions, that are needed to reign in the excesses of a market economy, is narrowed as much as possible.”

It’s a view reflected in the Bank’s Country Partnership Strategy for Vietnam which stresses Bank support to improve the country’s business environment. Assistance will focus on banking reform and financial sector development, state enterprise reform, as well as support for the emerging domestic private sector and private participation in infrastructure.

The Strategy says while Vietnam’s development is rightly regarded as a success story, “there are certain fault lines that could put Vietnam’s future progress at risk.” It cites reform of state owned enterprises and state owned commercial banks as lagging behind other reforms.

The 2007-2011 Country Partnership Strategy will also focus on improving governance and anti-corruption measures by concentrating efforts to improve public financial management, accountability and transparency. The Bank says partnerships with other donors will be vital to making progress on gove rnance.

The Bank document highlights the fact that poverty in Vietnam is predominantly rural and progress in reducing poverty in the ethnic minorities population has been slow.  Ethnic minorities make up only 13 percent of the total population, but they account for 39 percent of the poor.  

The strategy lays out priorities for future Bank support to help the poor and those with disabilities, increasing access to quality basic infrastructure and health services for the rural poor.

Rohland says while Vietnam has been successful in achieving development with equity, maintaining that in the future is a challenge.

“Inequity is probably part of any development process but too much inequity generates instability, political and social upheaval. Vietnam should be proud of what it has achieved in terms of social cohesion and should continue on that path.”

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