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HANOI - December 7, 2007 - The two-day Consultative Group (CG) Meeting 2007 for Vietnam ended today. Development partners welcomed the continued integration of Vietnam into the international system with its successful accession to the World Trade Organization in January 2007 and congratulated the country on its election as a non-permanent member to the United Nations Security Council for a two-year term starting in January 2008. With a buoyant economy and positive prospect for continued growth, the country is on target to achieve the key goals set out in the Socio-Economic Development Plan 2006 – 2010.
The impending graduation of the country from low-income to middle-income status will pose a new set of challenges that will require a different set of solutions. In this process, emphasis should not only be on economic growth, but on the continued strengthening of institutions, accountability, transparency, the rule of law and active participation from civil society. In its transition period Vietnam should learn from the positive as well as negative lessons of those who have already ventured down the path of development.
Moreover, in order to maintain economic growth, great needs in infrastructure development and human resources will have to be met.
The threat posed by climate change was a topic of particular concern. As an especially disaster prone country, partners encouraged Vietnam to act resolutely and with strong political leadership to mitigate against its potentially devastating impact. At the same time, the country should ensure that its further development and economic growth does not threaten the country’s unique environment.
Vietnam’s development partner pledged to stand side by side with Vietnam in its further development process, and financial commitment to Vietnam’s development reached record levels of US$5.4 billion in assistance for the coming year, compared to US$4.4 billion last year.
For the second consecutive year, the meeting had the participation of Vietnam’s Prime Minister H.E. Nguyen Tan Dung. The Prime Minister reaffirmed his commitment to accelerate economic reforms and to reach economic growth of 8.5 – 9 % in 2008, while ensuring that growth and development is sustainable. “The Government of Vietnam will control inflation and reduce poverty rates, create more jobs and take action to mobilize resources from all sources to ensure infrastructure development, especially as it regards transportation and energy. We will also focus our efforts on the development on human resources, especially vocational training. The government also remains committed to preventing and punishing corruption more effectively,” he added, noting also that Vietnam remains a developing country with low income levels, which still needs support from the international community.
The meeting featured fruitful discussion on Vietnam's social and economic performance. Vietnam’s Minister for Planning and Investment H.E. Mr. Vo Hong Phuc noted the positive collaboration between Vietnam and its development partners stating, “We have fulfilled many goals and the completion of others have gone beyond our expectation. International relations have been strengthened and international integration has been deepened and broadened.”
Towards Middle-Income and Beyond
Vietnam’s development partners cautioned the government that moving towards industrialized economy could be even more difficult than the shift from low-income to middle-income. They pledged to continue assisting the country with this transition. “A new decade will offer a set of changing challenges,” said H.E Mr. Norio Hattori, Ambassador of Japan. "I would like to encourage the government to steadily implement Financial Sector and SOE reforms. Investment environment improvement also remains as important as ever.” He also underscored the importance of governance and the drive against corruption.
Cautioning that quality of growth was a necessary focus to avoid the middle-income trap, which has created difficulties for other countries in the world as they graduated from low-income status, Mr. Ayumi Konishi, the Country Director of the Asian Development Bank stated that, “Vietnam should focus on undertaking key reforms and the quality of growth. The country’s attractiveness to investors depends on a favorable legal and administrative environment. The benefits of global integration can only be grasped by economies whose competitiveness is not undermined by high transaction costs caused by red tape, bureaucracy, and an unresponsive administrative system. Strengthening Vietnam’s public administration system is essential to transforming the country into a modern, industrialized and prosperous nation.”
Commenting on the economic fundamentals of Vietnam as well as macro-economic threats, Mr. Shogo Ishii, Assistant Director, Asia and Pacific Department of the International Monetary Fund stated that “Vietnam is one of the fastest growing and most dynamic economies in Asia. Economic growth remains robust and is expected to exceed 8 percent in 2007, driven by buoyant private consumption and investment. However, in the period ahead monetary policy will need to focus more closely on reigning in the increasing inflation and sharply rising asset prices, which have become an increasing concern. Furthermore, a key challenge is to ensure greater exchange rate flexibility and we encourage the authorities to allow the Dong to be more responsive to pressures on the exchange rate.” He said, adding that with the government’s strong commitment to economic reform, the IMF was confident that Vietnam will successfully be able to meet its key policy challenges.
Delivering the statement on behalf of the European Union, H.E. Hervé Bolot, the Ambassador of France pointed to some of the challenges of the future. “Vietnam remains a major success story in poverty reduction, but there are challenges. A high share of the population, particularly in rural and remote areas remains highly vulnerable to environmental and economic shocks and risks falling back into poverty.” He also observed that, “Vietnam needs a knowledge based society with a free flow of information and ideas. Long term stability and sustainable economic success will be enhanced by institution building and participation of educated citizens. Free and independent media and a strong independent civil society are assets in ensuring that nobody is above the law and exempted from scrutiny,” he said.
Natural Disasters and Climate Change
Many delegations noted that 2007 had been a difficult year for Vietnam with natural disasters repeatedly striking the country. The consequences had been grave in terms of loss of human lives, damage to infrastructure and the scarce assets of the poor. Concern was also expressed that climate change would present a new set of hazards for the country, needing resolute and fast response from both global and local actors.
Mr. John Hendra, United Nations Resident Coordinator, noted that Vietnam remains one of the most vulnerable countries to global warming and its consequences. He further stated that, “while we hope the UN Meeting being convened in Bali this week will lay out an agenda and roadmap for a post-Kyoto framework, it is clear that Vietnam, with the strong support of its partners, needs to step up its focus on integration of climate change adaptation into its overall policy framework.”
Drawing attention to the specific significance of climate change to Vietnam, as well as the role the country could play in the international community, Ambassador of Denmark, H.E. Peter Lysholt Hansen encouraged the Government of Vietnam to exercise strong leadership on a global as well on a local level. “This challenge must be viewed as a development issue which requires an intervention at the highest level, across many ministries. Vietnam can also play a significant role at the international level and has special authority to speak out on the issue as it could be severely affected by climate change,” he added.
World Trade Organization Membership
Membership of the World Trade Organizations has been an important catalyst in ensuring a firm increase in Foreign Direct Investment for Vietnam. Living up to its commitments will be imperative for Vietnam to continue attracting investments from the private sector.
The Australian Ambassador, H.E. Bill Tweddell, reflecting consultations with the Like Minded Donor Group , the European Union and the World Bank, remarked that Vietnam’s economy had been flexible to adjust to new opportunities and challenges, but cautioned that there was much work to be done to ensure this growth is sustained and delivers benefits to all its people. “As a starting point”, he said, “Vietnam should press ahead with its long-standing program of economic reform, which importantly should include careful and timely implementation of all its WTO commitments. As Vietnam moves to middle income country status, it must step up efforts on basic reforms that encompass the environment, regional development and impacts on vulnerable groups.”
The Ambassador from the Republic of Korea, H.E. Im Hong-Jae, noted that the Vietnamese development model is one from which other developing nations can learn. He lauded progress made so far, and also noted that “attention needs to be placed on sustained support for the development of human resources in order to guarantee sustainable economic growth.”
Harmonization and Aid Effectiveness
An Independent Monitoring Team commissioned by the Partnership Group on Aid Effectiveness to examine the extent to which development partners were living up to its commitments of the Hanoi Core Statement presented its finding. The findings were broadly positive, with the strong ownership of the national development agenda receiving special commendation. Nevertheless, work still had to be done on ensuring systems of mutual accountability and in the push for more program-based assistance. It was also recommended to continue the independent monitoring process in the future.
The Director General of EuropeAid, Mr. Koos Richelle, remarked that, “Vietnam is often referred to as a model, and it is no co-incidence that at the start of the monitoring of Aid Effectiveness by OECD/DAC in 2006, Vietnam featured as 5th best among the 34 countries for which a baseline for monitoring the 12 Paris Declaration Indicators was established. More work needs to be done, in particular in preparing for sector approaches allowing for more use of country systems. Aid effectiveness and harmonization requires political will, and action must be taken now.”
Governance and Institutional Reform
Delegates welcomed the many initiatives that the Government had taken over the last year to tackle corruption and to create institutions that can accommodate the complexities of a rapidly growing economy and a changing society. These developments include the comprehensive legal framework for anti-corruption and the legal framework for international integration and WTO accession.
Reporting back from a dialogue on anti-corruption earlier in the week, H.E. Rolf Bergman, Ambassador of Sweden, observed that accelerated Public Administration Reform and greater involvement of civil society could deliver important, visible progress. “In the longer run, having an educated younger generation who do not tolerate corruption is vital. This generation needs to be aware of the impact of corruption on national development in general and each own individual’s life in particular. Not tolerating corruption in any form and saying “no” to corruption at an individual level must be encouraged and rewarded”.
In his final remarks, Mr. Ajay Chhibber, World Bank Country Director for Vietnam, thanked all participants for the frank and open spirit in which the dialogue had been conducted. “Vietnam has been widely praised, but there has also been an earnest and open discussion on some key outstanding challenges. The discussions over the past days pay testimony to the commitment of Vietnam to address these outstanding challenges, but also of the willingness of the country’s development partners to stand by its side as it moves to middle-income status and beyond. In this Consultative Group meeting partners have committed to provide the largest amount of ODA to continue support to its goals of further reducing poverty, and maintaining growth in an inclusive and sustainable manner.”
H.E. Minister Vo Hong Phuc closed the meeting thanking participants for their contributions and valuable comments. He noted that “Vietnam is building a legal and institutional system in line with international practices and commitments to WTO, including the training of lawyers to meet these requirements. Continuing the fight against corruption, we have organized an open dialogue with donors to understand each other, and call on donors to continue to support Vietnam in the course of fighting corruption.”