  Vietnam’s Prime Minister Nguyen Tan Dung - Photo: Wikimedia Commons
BY JAYA RAMACHANDRAN
IDN-InDepth NewsAnalysis
PARIS (IDN) – Has Vietnam moved closer to the goal of reaching middle-income status by 2010? Yes, says the World Bank that has agreed to provide 500 million US dollars as development policy loan to support a programme of public investment reforms in the Southeast Asian country.
It is the first such credit to Vietnam from the International Bank for Reconstruction and Development (IBRD) -- but it is not unconditional.
The World Bank declared Vietnam IBRD-eligible in late 2007. The Government has requested a gradual transition to borrowing from the World Bank on IBRD-only terms and will continue to access IDA funds during a multi-year IBRD/IDA “blend” period
IBRD is the low-interest lending arm of the World Bank. It aims at reducing poverty in middle income and creditworthy poorer countries. Until now, World Bank support to Vietnam has come from the IDA (International Development Association) which gives credits and grants to the world’s poorest countries.
Stressing the significance of the loan approval, World Bank Vice President for the East Asia & Pacific region, Jim Adams said: “This is a significant milestone for Vietnam -- a country which has moved from the category of ‘Highly Indebted Poor Country’ to middle income status in less than seven years.”
“Weaknesses in public investment processes have been highlighted during the recent macroeconomic turbulence. This loan is aimed at addressing some of these weaknesses,” Adams added.
According to the World Bank, the credit is the largest ever made by the World Bank to Vietnam. It is the first of two single-tranche operations that will support the country’s stimulus programme in response to the economic crisis
By supporting a series of public investment reforms to improve the quality of public investment, the loan is expected to enhance the impact of Vietnam’s stimulus package as well as its subsequent public investments that are important to sustaining Vietnam’s high economic growth.
The backdrop to the loan is that over the last two years, Vietnam has experienced a succession of shocks -- starting with massive capital inflows in 2007, a surge in commodity prices in 2008 and export declines as a result of the global economic crisis.
Stimulus measures adopted in late 2008 and supplemented in early 2009 contributed to strong growth, now projected to be 5.2 percent for 2009.
REFORMS
“The loan is supported by a strong World Bank program that builds on the Government’s determination to strengthen its public investment processes,” said World Bank Country Director for Vietnam Victoria Kwakwa.
“The quality of Vietnam’s future growth will depend on these reforms," she underlined.
The areas to be strengthened under the reform programme include environmental screening of publicly funded infrastructure projects, environmental management, project preparation and appraisal, procurement, public financial management, the regulatory framework for private participation in infrastructure and monitoring and evaluation.
The loan approval Dec. 22 follows on the recent Country Partnership Strategy Progress Report which takes stock of progress made in implementing the five-year Country Partnership Strategy that will conclude in June 2011 and introduces some adjustments for the remainder of the period.
These adjustments include the introduction of IBRD borrowing, at an indicative level up to 1.7 billion US dollars during the next year and a half; and support for further strengthening natural disaster response, climate change adaptation and mitigation, a framework for public-private partnerships for infrastructure, higher education reform, and facilitation of technology innovation.
ODA PLEDGE
The World Bank loan approval comes within less than three weeks of the donor countries pledging over 8 billion US dollars in official development assistance (ODA) to Vietnam. The pledge was given at the 'Consultative Group Meeting for Vietnam 2009' Dec. 3-4 in Hanoi.
At the meeting, the Government of Vietnam and Development Partners discussed issues relating to securing macroeconomic stability, re-positioning the economy for growth in the post-crisis world, addressing the emerging challenges for poverty reduction, strengthening public administration and fighting corruption, and ensuring sustainable development.
Vietnam’s Prime Minister Nguyen Tan Dung provided an overall assessment of the country's recent economic performance and social development, stressing the government’s flexible approach to macroeconomic management in the face of changing global circumstances.
“The Vietnamese government has timely adjusted the overall target for 2009, shifting the priority from inflation control to prevention of economic slowdown and directed the comprehensive implementation of the solution packages to meet set targets,” Nguyen said.
Development partners recognized and commended the Government for Vietnam’s recent achievements and reaffirmed their support to the country’s continued progress. They urged the Government to put the great potential of the whole of Vietnam society to use as a critical part of Vietnam’s ambition to become an industrialized country by 2020.
On behalf of Development Partners, Asian Development Bank's Country Director for Vietnam, Ayumi Konishi, praised the government for successfully managing adverse impact of the global economic crisis by implementing a stimulus program. “Yet, risks are growing and we appreciate the Government’s recognition that stabilization is the essential prerequisite for rapid and sustainable growth," he said.
International Monetary Fund’s Assistant Director of Asia Pacific Division, Shogo Ishii said: “The IMF welcomed the recent steps taken to address the emerging risks to macro-economic stability, but urge the authorities to remain vigilant to ensure these are overcome.”
Responding to the Development Partners’ remarks, the Prime Minister Nguyen highlighted measures in six areas to ensure rapid and sustainable development. They include:
i) guaranteeing macroeconomic stability and preventing inflation, while addressing shortcomings in infrastructure and strengthening the quality of human resources,
ii) developing social safety nets, with emphasis on health care services and the education system, gender balance, and combating human trafficking,
iii) continuing anti-corruption efforts as an urgent mission for the Government of Vietnam,
iv) fostering democracy and an open society that guarantees fundamental rights of all citizens according to Vietnam’s constitution and laws,
v) implementing the action plan on climate change, and
vi) enhancing the sustainability of Vietnam’s economy to achieve high growth, so that Vietnam will be an industrialized country by 2020.
Speaking on behalf of Development Partners, Fiona Lappin, Head of the UK’s Department for International Development in Vietnam stressed the importance to proactively adapt to a new socioeconomic environment so that no Vietnamese is left out of the process of growth and development.
“We believe that, as the Vietnamese economy continues on a path of economic recovery, there continues to be a need for efficient welfare measures that help Vietnamese families through these difficult times. We need to think differently about how to address the emerging challenges of rising inequality, urban poverty and the working poor, especially ethnic minority that accompany middle income status,” she said.
United Nations Resident Coordinator, Jesper Morch, reminded the meeting that “looking at poverty in terms of deprivation and not only in terms of income, we see that one of three children in Vietnam is poor in terms of being deprived of basis needs such as education, healthy sanitation or social inclusion or protection.”
He added that "in this context, development partners welcomed the current efforts of the Government to reform its social protection system and encourage the Government to embrace dully a universal approach to social protection as a core development strategy." (IDN-InDepthNews/26.12.09)
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