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Vietnam: Stable macro economy a key foundation for long term development, according to CG participants

December 8, 2010

Hanoi, December 8, 2010 - The 2 day Consultative Group Meeting between the Government of Vietnam and Development Partners ended today with a strong sense of commitment to Vietnam’s development as the country moves into middle income status.

At the meeting, the Government and Development Partners discussed various important economic and social issues facing Vietnam, as it embarks on a new phase of development – which will bring new opportunities and threats to the country. They discussed measures to stabilize the macroeconomy, strengthen governance, reduce corruption and make development more sustainable and inclusive, as well as the future of development partnership, as Vietnam enters the Middle Income Country status.

Development Partners pledged US$ 7,905 billion in Official Development Assistance to assist Vietnam in stabilizing the macroeconomy and to focus on the important aspects of sustainable development.

Vietnam’s Deputy Prime Minister H.E. Pham Gia Khiem attended the first session on the morning of December 7th, and provided an overall assessment of Vietnam’s recent economic performance and social development. He emphasized the government’s commitment to undertake the 3 areas of breakthrough indicated in the SEDS and SEDP, “developing institutions for a market economy, human resources development and infrastructure development.”

The Deputy Prime Minister underscored the important role ODA will play in the 2011 – 2015 socio-economic development plan. ODA will constitute significant contribution of the total investment need for Vietnam’s long term plan. The government values the development assistance received and is doing its best to use ODA in the most effective way, the Deputy Prime Minister said.


Development Partners discussed the recent macro economic developments and expressed their concerns about the growing macroeconomic instability in the country and offered a number of suggestions. The Australian Ambassador, Mr Allaster Cox, on behalf of Development Partners, stressed that macroeconomic stability should be recognized as a prerequisite for Vietnam to accelerate its socio-economic development as a middle income country. In combating and restoring stability, ad hoc and trade restrictive measures such as the new price registration and import licensing systems are unlikely to be sustainable.

To address the instability, Mr. Masato Miyazaki, Division Chief, Asia and Pacific Department of IMF, called for an increased in monetary policy rates combined with fiscal consolidation. Strengthening the financial system and improving communication with the market was also needed. He also suggested the need to shift away from directives and controls toward indirect instruments of economic management.

Mr. Ayumi Konishi, Asian Development Bank Country Director for Vietnam pointed out that despite Vietnam’s intention to use WTO accession to leverage acceleration of reforms, the efficiency and competitiveness of SOE sector has not improved. He stressed the need for separating the ownership from management of SOEs, and encouraged the Government to let SOEs to operate on commercial principles and on a level playing field with the private sector.

The Development Partners reiterated the need for higher transparency and modern governance as key to an effective state owned economic sector, which will bring greater benefits to the country and avoid problems Vinashin has experienced recently in the future.

The Swedish Ambassador, Mr. Staffan Herrström on behalf of Development Partners, raised the need to address corruption with urgency. He stressed that much needs to be done, especially in the areas of improving transparency, access to information, developing a vibrant and free media, upholding the rule of law, increasing the autonomy of judiciary and engaging the civil society.

The Development Partners urged the Government to increase the oversight role of the National Assembly, civil society, citizens and media on the fight against corruption. They also emphasized the need for complementary measures to tackle corruption such as regulation to protect whistle-blowers, pay reforms for government officials, and merit based recruitment of civil servants.

Priorities for Sustainable Development

The Government and Development Partners agreed on the long term challenges posed by Climate Change and agreed to work together to address such challenges. On behalf of Development Partners, the Manager for Sustainable Development from the World Bank, Ms. Jennifer Sarah, drew the government’s attention to not only the sustainable use of natural resources; but also localized challenges - including, water and air pollution - as well as to global challenges such as greenhouse gases and non-reversible losses in biodiversity and habitat.

Mr. Henning Plate, Development Counsellor, on behalf of the Embassy of the Federal Republic of Germany, expressed strong support for climate proofing of the Social Economic Development Strategy to 2020 and the Social Economic Development Plan to 2015, as well as climate proofing of sectoral and provincial social economic development plans. Despite the fact that Vietnam will receive significant climate change finance, the country will need substantial domestic public and private capital. To this end, Development Partners asked the government to use climate change finance strategically, and sector ministries and localities must access finance for capacity building, TA and investments.

Various Development Partners agreed that it is vital for Viet Nam to maintain economic growth, for which sustainable energy supply is critical, and low carbon growth. They congratulated Vietnam for putting in place various plans to address climate change and environment sustainable issues, but urged the government on the quicker and more effective, substantive implementation of such plans.

Ensuring Social Inclusion

On behalf of Development Partners, Fiona Lappin, Head of the UK Department for International Development Office in Vietnam, applauded the government for the new draft Strategy for Poverty Reduction 2011-2020 and the National Targeted Programme for Sustainable Poverty Reduction 2011-2015. She affirmed that they are the last of the five building blocks of the Social Protection Strategy and make the Social Protection Strategy complete.

With the changing profile of poverty, Development Partners urged the Government to put more resources into poverty reduction and target more people.

Regarding social protection, UN Resident Coordinator, John Hendra, speaking on behalf of Development Partners, welcomed the Government’s draft Social Protection Strategy and expressed hope for its quick approval. He urged the Government to ensure that the Strategy’s implementation is guided by a coherent cross-sectoral approach. At the same time, its implementation should also address the needs of marginalized groups, such as people with HIV, with disabilities or migrants and women. Development partners emphasized the need for increased financing of HIV/AIDS from Vietnam’s resources.

The Future of Development Partnership as Viet Nam Enters MIC

Development Partners and the Government agreed on a need for a new aid partnership with expectation that ODA will contribute more effectively to the 10 year Socio-Economic Development Strategy and the 5 year Socio-Economic Development Plan.

Mr. Motonori Tsuno, Chief Representative of JICA, co-chair of Aid Effectiveness Forum in Vietnam indicated that development partners support the new ODA Strategic Framework with priorities. Development Partners will also continue to work to move the aid effectiveness agenda forward, and cooperate with Ministry of Planning and Investment to prepare the new framework to address the key issues in aid effectiveness. Development Partners are committed to making a concerted effort to enhance aid effectiveness for Vietnam’s sustainable development and achievements of MDGs and Vietnam Development Goals by 2015.

Minister of Planning and Investment Vo Hong Phuc concluded the meeting by thanking the Development Partners for their sustained support to Vietnam as the country faces new challenges posed by its admission to middle income country status. “The Government of Vietnam expects that the Development Partners continue to support Vietnam as the country move forward,” he said.

The World Bank Country Director for Vietnam, Victoria Kwakwa, noted that Vietnam is at a critical juncture in its development. Development Partners stand ready to support Government to redefine its approaches in all areas discussed at this CG to better address Vietnam’s changing domestic and external environment.

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