Western donors cautiously optimistic about Vietnam economy

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The Vietnam News

Western donors cautiously optimistic about Vietnam economy
DALAT - Western donors expressed cautious optimism about the state of Vietnam's economy on Friday after two years of lambasting the nation's communist authorities over the slow pace of market reforms. Gone were the dire warnings of the consequences of failing to adopt an accelerated reform programme as donors congratulated the Vietnamese government on achieving growth of more than six percent in the first six months of the year.

"We agreed that things are better than we expected and we are all very happy about this," said World Bank representative Andrew Steer after two days of largely closed-door talks between Vietnamese officials and representatives of around 50 multilateral and bilateral donors. "I think you are all aware that the economy is growing more rapidly than last year ... We see investment higher than it was last year. We see a boom in exports last year of 23 percent and we see it continuing this year," he said.

Steer welcomed the progress the government had made in recent months both in stimulating the domestic private sector and in relation to state-owned firms. The World Bank representative also hailed the progress the government had made in moving towards greater fiscal openness. Whereas two years ago Vietnam did not publish a budget at all and in 1999 it made only a "very modest presentation," this year it presented donors with a detailed public spending review covering a full 75 percent of total expenditure.

"The overall story is that public money is spent well and that there is an increased openness in explaining that information," Steer said. Planning and Investment Minister Tran Xuan Gia stressed that the other 25 percent was not necessarily secret -- donors had simply asked the government to start by focusing on particular sectors. Steer said the sharp change in the donors' approach since the dire warnings they had issued at last year's review meeting in the northern port cit of Haipong had been brought about by the dramatic improvements of the past 12 months.

"Last year there was a feeling that we were in the middle of a recession in Vietnam and that it was urgent that certain measures be taken," he said. "A year ago we didn't understand what was going on in the poverty picture. The equitisation programme was still preliminary and was more plan than action. "Particularly there was a feeling in the private sector that things were bad." Steer said problems still remained, particularly with foreign investment which was continuing the sharp decline it began in 1996. He said Vietnam would need foreign and private investment as well as public investment if it was to meet its needs over the next few years. Steer denied the new softer line from donors was taking the pressure off the Vietnamese authorities just as they prepare to hold a key congress of the ruling communist party next March which will set the economic framework for the next five years.

"We are not putting pressure on the government because it doesn't work anyway," he said. Many delegates welcomed the more constructive approach adopted by the key multilateral donors this year. "It's far more constructive, it was so confrontational before," one Western diplomat told AFP. "A year ago in Haiphong, people were virtually shouting at each other -- it was left-wing Stalinism against right-wing Stalinism," another diplomat said, referring to the more outspoken champions of free market reform.

Agence France Presse - June 23, 2000.

Vietnam, donors wrap up biannual mtg in positive mood

DALAT - A two-day Consultative Group meeting between international donors and the Vietnamese government ended Friday evening with both sides agreeing it had successfully addressed the issues concerning Vietnam's future growth, participants said. They noted also that the meeting's tone was substantially better than a year ago during a meeting in the port city of Haiphong, when the government came under attack for failing to produced a promised set of economic reforms.

"This week's meeting was successful in substance and in the way issues were discussed," said Minister of Planning & Investment, Tran Xuan Gia. World Bank country director, Andrew Steer, alluded to the ongoing Euro 2000 football competition and said that the donor community and Vietnamese government are no longer on opposing teams.

"We are the same team, playing in a very tough international game," he said. Vietnam's economic growth has slowed in recent years, partly because of the impact of Asia's financial crisis on exports and on foreign investment. But Hanoi's resistance to reform has also hindered growth, analysts say. Foreign donors meet with the government twice a year under the auspices of the World Bank-sponsored Consultative Group conference, or CG. This week's meeting, an "informal midyear review," according to the World Bank, aimed to clarify Vietnam's progress in various economic sectors since the group last met.

The most recent CG was held in Hanoi last December and from it emerged signs that relations were thawing and consensus on Vietnam's future development growing. Donors pledged $2.1 billion in new aid for Vietnam this year, and added a further $700 million in conditional aid, tied to an accelerated reform program.

Reform pace picking up
During this week's meeting, donors agreed that Hanoi has in the first half of this year taken several steps toward a more liberal economic regime and greater fiscal transparency than in 1999. Those issues were two of the main areas of disagreement between donors and the government. A document prepared for the meeting by organizers outlined key improvements to Vietnam's economy in recent months. It highlighted a rapid increase in the pace of state enterprise reform, and the introduction of a new law giving greater rights to the private sector, as evidence Hanoi is becoming increasingly serious about opening protected sectors of its economy to private participation.

According to the report, 220 state-owned firms have become shareholding companies since January, compared with a similar figure during the whole of the past six years. The Enterprise Law, introduced January 1, allows private companies to gain a business license automatically rather than according to discretionary approval and grants them access to loans and other business necessities not previously available, noted World Bank Chief Economist for Vietnam, Kazi Matin. The CG report also mentioned improvements in trade and foreign exchange policies, banking reform and fiscal transparency.

Vietnam last year published its 1997 budget - the first time it has released such information - and this year announced its 2000 budgetary plan. Other figures, such as the value of foreign currency reserves, remain a state secret. "There is an increased openness," said World Bank country head Steer. He added that "last year, there was a feeling we (Vietnam) were in recession and that serious steps needed to be taken. Some of those steps have now been taken."

Dow Jones - June 23, 2000.