Donors offer $2.7 billion in aid to Vietnam
PARIS - International donors on
Tuesday offered a greater-than-expected $2.7 billion in
aid to Vietnam for 1999, overcoming concerns that the
pace of economic reform there is flagging.
Donors pledged financial support of $2.2 billion and
offered an additional $500 million if the country
accelerated reforms in the public sector, banks and the
trade regime, the World Bank said in a statement after a
meeting of international donors.
Rural development, especially faster growth in off-farm
jobs among small and medium firms, was raising the
standard of living, World Bank Vietnam Country
Director Andrew Steer said.
``Almost all the delegates agreed that poverty reduction
would require much faster growth in non-farm
employment,'' Steer told a news conference.
UN Resident Coordinator in Vietnam Edouard Wattez
said he did not expect all $2.7 billion to be paid out in
1999 as money almost always takes longer to work its
way through the system.
In 1998, $2.4 billion was pledged and $1.4 billion was
disbursed, Wattez said.
Japan was the biggest donor for 1999, offering $853
million, followed by the World Bank, which pleged
between $400 million and $730 million, depending on
the pace of reforms.
Vietnam's Minister for Planning and Investment Tran
Xuan Gia, clearly pleased by the outcome, called the
meeting of the Consultative Group of donors a success.
``The success is not only about the numbers but is also a
recognition of the achievements of the Vietnamese
people,'' Gia told reporters.
Despite concerns that reforms are getting off track, Steer
defended the high level of aid, saying the money was
well used, the need was great and serious reform was
underway in Vietnam.
``Dollars put into Vietnam are very effective,'' Steer said.
Vietnam is widely considered a success story in
development assistance. Its bold 1986 ``doi moi''
economic restructuring plan, later supported by
international aid, led to a decade of strong economic
growth and poverty reduction.
But donors warn the momentum is flagging and that
Vietnam faces a serious economic situation.
``The external shock of the East Asian crisis, together
with weakness in management, and the natural disasters
that have hit Vietnam last year, have all combined to
reduce the growth rate of the economy,'' the World
Bank said.
``This is threatening to undermine, and even reverse, the
remarkable progress in poverty reduction that has been
achieved over the past decade,'' it said.
Economic growth in 1997 was about nine percent but is
projected to slow to 3.5-4.5 percent this year and next
as foreign direct investment declines and export earnings
stagnate.
Analysts have expressed concern that government
actions, such as a decision to force firms to convert 80
percent of foreign currencies into local money
immediately at the time of deposit in current accounts,
may further hurt the economy.
The measure has drawn the ire of international investors
and Steer said on Tuesday the World Bank hoped it
was temporary.
An official in the donor community who attended the
meeting said it had been a watershed in making Hanoi
realise that reforms were needed if the flow of aid money
was to continue.
The government promised to restructure Vietnam's
state-owned enterprises with timetables and targets in
1999 for the merging, privatisation, divestiture and
liquidation of public companies.
Gia told reporters the government hoped to float about
400 of the smaller state-owned companies next year.
The government also promised that in 1999 it would
restructure the entire banking sector, including the four
state-owned commercial banks, and embark on a
three-year trade reform programme.
Reuters - December 08, 1998.
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