Official development assistance (ODA) commitment is not the main content of discussions between the Government of Vietnam and donors at the Vietnam Development Partnership Forum 2013 (VDPF 2013) held recently in Hanoi. New definitions

Minister of Planning and Investment Bui Quang Vinh said Vietnam now has another position in the eyes of international donors. After more than 20 years receiving ODA from international partners, Vietnam’s economy has strongly shifted from a least developed country (LDC) to a middle-income economy. Therefore, the Consultative Group (CG) meeting was renamed to the Vietnam Development Partnership Forum (VDPF). At this VDPF, leaders will focus deeper dialogues about medium-term challenges in Vietnam’s socioeconomic development strategy.

Minister Vinh said major donors for Vietnam like the World Bank (WB), Japan, and the European Union (EU) pledged to provide renewed support for Vietnam in the coming time. But the difference of the working agenda of this meeting will be discussed in bilateral form. Another change is that, apart from not discussing aids at VDPF, the allocation of ODA will be more closely and rigorously managed. ODA recipients will not be entitled to receive 100 percent of preferences as before but they must have counterpart funds or have the ability to partially repay the loan. Currently Vietnam is at the threshold of public debt ceiling. If it cannot select projects that have the capability of repaying debts, Vietnam must make an effect on them, not borrowing at any cost.

Before these changes, he added that Vietnam has received aids in the form of ‘subsidy’ for a long period and this is the time to have a more independent use of aids. This is the time to change and adapt to new capital flows bearing relatively high interest rates. Vietnam must adapt to commercial loans from interest-free loans.

Besides, delegates will spend time on policy dialogue, operation orientation and policy implementation, and forum for development partners. Such topics as restructuring, economic stability, growth restoring, poverty reduction in ethnic minority groups, private sector engagement in public services delivery, environmental protection, and strengthening of competitiveness through vocational training and skills.

Government’s commitments

Before new changes as well as new requirements of international donors, at VDPF 2013, the Government of Vietnam made ​​clear its commitments. Speaking to the meeting, Prime Minister Nguyen Tan Dung said although Vietnam’s economy has achieved outstanding accomplishments in recent years, it still exposes limitations and weaknesses. Therefore, in the coming time, Vietnam must have them fixed quickly. Accordingly, in 2014-2015, Vietnam needs to accelerate restructuring process, encourage innovations, and apply advanced science and technology to enhance its economic competitiveness. He also stressed that the country needs to have medium-term public investment plans and effectively decentralise the allocation of resources between central and local levels for regional and local economic development. It will necessarily focus capital for key projects and provide counterpart capital for ODA-funded projects and PPP projects. Regarding private and foreign capital attraction, the country needs to create a equitable playing field for domestic and foreign contractors in order to help them access and use resources to the best.

He also mentioned the restructuring of banking system and financial market. PM Dung affirmed that Vietnam will take drastic measures to perform comprehensive restructuring of credit institutions, especially ailing ones, and allow State-owned banks to go public. In addition, cross ownership in the banking sector and bad debts will be strictly handled while Vietnam Asset Management Company (VAMC) will have to improve its operations to help cope with bad debt in the banking system, with VND100-150 trillion of bad debts to be settled in 2014.

The restructuring of State-owned enterprises (SOEs) is arguably the most complicated aspect of economic restructuring. In this regard, the Government will let around 500 SOEs go public in 2014, including one among eight giant economic groups, five of 10 corporations established under the Prime Minister’s Decision 91 and almost all of 87 corporations established under Decision 90. The Government will sell shares in four of five State-run commercial banks to mark the completion of the equitisation process by 2020.

Ms Victoria Kwakwa, Country Director of the World Bank (WB) in Vietnam

The global economy is in a better shape but the process of recovery will continue to be slow. The Vietnamese economy also has similarities. To enhance the health of the economy, maintaining macroeconomic stability and restoring the financial health of the banking and the SOE sectors and levelling the playing field for the private sector seem important for reviving confidence in the economy of Vietnam.

Mr Sanjav Kalra, Resident Representative of the International Monetary Fund (IMF) in Vietnam

The Government of Vietnam needs to quickly fix the shortcomings which hinder economic growth in the medium term. Particularly, if it lacks macroeconomic structural reform, the economy will continue to be held back by low productivity and misallocation of resources which is evidently reflected in the banking sector, SOEs and economic groups. The international community continues to see Vietnam as a country with huge competitive advantages like young population, qualified and studious workforce. If Vietnam effectively allocates and uses these resources, it will improve living standards for its people and achieve poverty reduction strategies as well as Millennium Development Goals (MDGs).

Mr Tomoyuki Kimura, Country Director of Asian Development Bank (ADB) in Vietnam

When the Government issued a new policy, it must find out answers like whether it creates advantages for businesses, strengthens the private sector and whether State management agencies have enough capability to enforce it or not. Currently, Vietnam’s economy is on a new development level and ODA will be reduced as a result. This requires Vietnam to have measures to control and use this precious capital source most efficiently.

Anh Phuong