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|Amid local obstacles and global uncertainty, Vietnam and its development partners talked approaches at VDF 2016|
Themed “Facilitating an action-oriented government – New driving force for development”, the Vietnam Development Forum (VDF) 2016 took place against the backdrop of rising uncertainty in the global economy. 2016 is also the first year of Vietnam’s new cabinet, which is leading the country on the new five-year socio-economic development plan (SEDP) 2016-2020.
2016 is also the first year that VDF has replaced the Vietnam Development Partnership Forum (VDPF) and the previous Consultative Group (CG) meeting. This year, the Vietnamese government listened to speakers and development partners’ perspectives and suggestions to issues concerning mid-term and long-term SEDP targets, instead of letting reports and future policy discussions lead the day.
The global context in 2017 has become difficult to forecast. The new US regime will have great impact on the global political-economic structure, especially in investment, trade, and monetary systems. In addition, the EU will be facing big changes, with the fallout from Brexit to come. And Asia is expected to face unpredictability caused by the greater influence of the Chinese economy and currency.
“The slow recovery of the global economy and a strong drop in crude oil and necessary commodities have greatly affected Vietnam’s economy. Also, climate change was blamed for the extreme cold in the north, prolonged droughts in the southern-central and Central Highlands regions, salt intrusion in the Mekong Delta, and other challenges,” Minister of Planning and Investment Nguyen Chi Dung told the forum.
“Facing the obstacles ahead, Vietnam wants to consult development partners about our macro-economic outlook perspectives in 2016-2020, global impacts, especially FTAs, and fiscal-debt management. We also seek recommendations to address a series of issues related to market institution, development of driving forces, and investment sources.”
International development partners including the World Bank (WB) and the Asian Development Bank (ADB) lauded Vietnam’s macro-economic stability, while highlighting the challenges for the government to achieve the objectives set out by the SEDP 2016-2020.
“Vietnam has witnessed five straight years of macro-economic stability, underpinned by stability-oriented macro-economic policies, including steps toward more flexible exchange rate management. 2016 was marked by single-digit inflation, a relatively stable exchange rate, and a strengthening external position,” said Ousmane Dione, country director of WB in Vietnam.
“Importantly, and in spite of global headwinds, the economy continues to show strong resilience, supported by robust domestic demand and export-oriented manufacturing. Growth has remained high at about 6 per cent – one of the fastest growth rates regionally and globally.”
Dione also said that declining productivity growth, the environmental footprint of Vietnam’s growth, and poverty and social welfare are among the country’s key future challenges.
At the forum, Prime Minister Nguyen Xuan Phuc committed the country to continue improving the business climate, restructuring the economy, enhancing equitisation of state-owned enterprises, settling bad debts, and ensuring social security.
NGUYEN XUAN PHUC Prime Minister
Handling non-performing loans (NPLs) is a task of the utmost importance, as many of the experts have pointed out: if we don’t manage them properly, it’ll eventually take a toll on macro-economic stability and growth. We therefore ought to focus on completing a legal framework for collateral management and enhancing the capacity and the legal basis for the Vietnam Asset Management Company.
On this occasion, I’d like to propose the World Bank, particularly the International Financial Corporation, support us in resolving the NPL holdup in a most practical way.
I’d like to also reveal a special piece of news: ADB and a Vietnamese private partner have on hand a plan to buy out a weak commercial bank in Vietnam.
ADB can also bring in other partners, in a bid to help the country to handle the NPLs and other weak and fragile banks [those that have been brought over at no cost].
Nguyen Chi Dung Minister of Planning and Investment
With a number of measures and bold actions, Vietnam’s economy has recovered and developed since the first quarter of 2016. Vietnam’s GDP is predicted to grow 6.3-6.5 per cent in 2016, agro-fishery-forestry industries have rebounded, and the construction and service sectors have all seen higher on-year growth. 2016 was also marked by single-digit inflation, a relatively stable exchange rate, and a strengthening external position.
Despite these achievements, Vietnam will face many challenges from global integration, including the middle-income trap, environment pollution, and climate change.
Vietnam needs to solve a series of short- and long-term issues. Thus, we really want to consult development partners about our concerns: macro-economic context, global impacts, feasible solutions to achieve the targets of the SEDP, and international experience in harmonising the relations between growth and public debt.
Norio Saito Deputy country director of Asian Development Bank
Significant reforms have been undertaken over the last two years, including the approvals of the new Public Investment Law and the State Budget Law. However, a number of important areas of reform remain, particularly in regards to public asset management.
Vietnam’s ability to efficiently manage its public assets so that they have a longer lifespan, higher economic returns, and reduced maintenance needs is essential for it to achieve better value for money from its investments. The country has spent an average of 10 per cent of GDP on public infrastructure per annum over the last decade, which is one of the highest levels in the region. Yet while construction has progressed rapidly, approaches to managing these assets once completed have lagged. Three main issues stand out for their importance: complexity, coverage of the national public asset database, and completeness.