Focusing on Economic Restructuring and Inclusive Growth

Focusing on Economic Restructuring and Inclusive Growth 18/06/2010 10:47:00 425

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The one-day mid-year Consultative Group (CG) meeting for Vietnam was held on June 9, 2010 in Rach Gia City, Kien Giang province. At the meeting, development partners provided inputs to Vietnam’s 2011-2020 Social Economic Development Strategy (SEDS) and the 2011-2015 Social Economic Development Plan (SEDP). Development partners expressed their continued supports for Vietnam and their expectations that Vietnam will deepen its ongoing reforms to ensure that it completes the unfinished low-income agenda, and moves firmly into middle-income status.


10-year SEDS and 5-year SEDP

Prime Minister Nguyen Tan Dung briefed the guiding principles for the Social Economic Development Strategy and the five-year Social Economic Development Plan, including: “Rapid development in close combination with sustainable development, with the latter being a cross-cutting requirement for the entire strategy; synchronous and appropriate economic and political innovation aiming at building a socialist Vietnam with a prosperous people and strong, democratic, equitable and civilised nation; exercise of democracy and maximal promotion of the human factor, regarding it as the subject, main resource, and objective of development; vigorous development of productive forces at increasingly higher scientific and technological levels while improving production relations and the socialist oriented market economy institutions; and shaping of an increasingly independent and autonomous economy in the context of ever far reaching international integration.”


The Prime Minister also highlighted the three main strategy breakthroughs, namely improving the socialist oriented market economy institution to create an environment for equal competition and administrative reforms, developing high quality human resources, and developing a synchronous infrastructure system with modern facilities.


Mr Ben Bingham, the IMF Senior Resident Representative, said: “The IMF welcomes the recent restoration of more stable macroeconomic conditions, but notes that the situation is still fragile and urges the government to focus on consolidating macroeconomic stability to secure the continued recovery of the economy.”

Commenting on recent macroeconomic developments, Mr Ayumi Konishi, ADB Country Director, said: Vietnam should recognise that in a market economy, ‘perception’ is as important as the reality of the economy” and urged the government to provide economic data and explain its policies.


Economic restructuring

Development partners and the government discussed three key issues in relation to the economic restructuring expected as Vietnam moves into the middle-income groups of countries. According to the Chief Representative of JICA to Vietnam, Mr Motonori Tsuno, a first issue is “enhancing the role of the private sector, with more involvement in global value chains, the development of supporting industries, and a level playing field for all businesses.” “Vietnam needs to further reform state-owned enterprises in general, and economic groups in particular. The separation of the ownership and the regulatory functions of the state, and the strengthening of corporate governance in these entities, were mentioned as priorities in this respect,” Mr Tsuno added. The third issue emphasised by development partners was the need for sustainable financing for infrastructure. Proper resource mobilisation mechanisms include a more efficient banking sector, the development of capital markets and the adoption of a framework for Public-Private Partnerships (PPPs).


Development partners welcomed the attention the government is giving to ensuring that growth in Vietnam remains inclusive. Mr John Hendra, UN Resident Representative, said: Vietnam has had a long history of impressive poverty reduction. However, different and innovative approaches are needed to reach the last 15 percent of the population in poverty. What is more, economic and social policy needs to be seen as two sides of the same coin, particularly to ensure that inequality of opportunity does not undermine Vietnam’s progress.”


Risk tackling

Ms Victoria Kwakwa, Country Director of the World Bank in Vietnam, highlighted the importance of tackling key risks to Vietnam’s development success, in particular, State-owned enterprise sector reforms and emerging large economic groups.


“At the same time, Vietnam still encounters enormous challenges. From the unfinished low income country agenda - including ethnic minority poverty, quality of basic education and health services and water and sanitation access, especially in rural areas, and in rapidly expanding urban centres; the emerging middle-income country agenda particularly as regards higher education and enhanced skills base, significantly scaling up infrastructure access and quality significantly including through finding innovative ways to finance major economic infrastructure,” said Ms Victoria.


Besides, according to Ms Victoria, there are cross cutting challenges such as climate change, strengthening governance including the fight against corruption; and building a more open society. The climate change challenge is particularly significant in the Mekong Delta region.


“Overarching all of these is the need to continue Vietnam’s transition to a market economy with socialist orientation and achieve the objective of a modern efficient and competitive economy - and here strengthening modern institutions for upgrading completing the reform of the State-owned enterprise sector are key,” said Ms Victoria.