2011 Annual Vietnam Consultative Group Meeting
December 6 2011
Grand Plaza Hotel, Hanoi
Opening Remarks, World Bank Country Director for Vietnam, Victoria Kwakwa
o Excellency Prime Minister Nguyen Tan Dung;
o Mr. Bui Quang Vinh, Minister of Planning and Investment;
o Governor Nguyen Van Binh;
o Members of the National Assembly;
o Vice Ministers;
o Your Excellency Ambassadors;
o Colleagues Heads of Development Agencies;
o Ladies and Gentlemen
A very good morning to you all.
• I join Minister Vinh in welcoming all of you to the 2011 Annual CG.
• Excellency PM I want to especially welcome and thank you for spending some time with us this morning since the end of the calendar year is typically a busy time for Government. We congratulate you on your appointment to a second term of office as Prime Minister and wish you and your administration great success in this term.
• Minister Vinh, I want to welcome you to your first CG as Minister of Planning and Investment and wish you every success in this role. I look forward very much to working with you as Co-Chair of the CG.
• I also want to extend a special welcome to the Ambassadors and Heads of Agencies who are attending the annual CG for the first time.
• Minister Vinh, I want to thank you and your team at MPI and other agencies in Government for your hard work in preparing this CG, including preparing several documents that will form the basis for our discussions.
• I want to thank Ambassadors and development partners who have also contributed in different ways to the preparations.
• Last but not least I want to thank my colleagues at the World Bank who have worked tirelessly over the past few months to put all the detailed arrangements in place. Thank you for your great team work and for working around the clock to ensure every little detail is in place.
This year’s CG takes place against the backdrop of important events globally and here in Vietnam. The ongoing crisis in the eurozone and continued weakness in the American economy illustrate vividly that no economy is immune to crisis. Even the richest, in the absence of sound macro-financial management and policies to maintain long run competitiveness can and do run into crises. These crises are often characterized by macro imbalances, instability, and severe recession.
The costs to the public budget of addressing such economic reversals can be significant as we saw in the Asian financial crisis in the late 1990s and more recently in Ireland, Iceland, the US, Greece and other countries. These crises also have adverse consequences for the welfare of citizens.
The eurozone crisis and a weak US economy mean less promising prospects for global growth in 2012 and perhaps beyond. Vietnam is therefore faced with a less favourable external environment as we enter 2012. Vietnam’s economy is very open. Trade represents over 150 percent of GDP; exports to the US and the Eurozone has averaged about 37 percent of total exports over the last 5 years. This more difficult external environment can be expected to have both direct and indirect adverse effects through slowdown in trade, investment and through other channels.
In a less favourable global environment, whether economies struggle, survive or thrive, will depend on the strength of their macroeconomic and real sector fundamentals. Vietnam needs to position itself to be amongst those countries that survive or even better, those economies that thrive and are able to take full advantage of any opportunities from the current context.
Vietnam also has its own domestic sources of weakness and risk. Credit growth averaging close to 30% annually over the last decade has created vulnerability to macro instability and we’ve seen this vulnerability materialize over and over during the last 4 years. Related risks in the SOE and financial sectors are also increasingly evident. Both macro instability and inefficiencies in the financial and SOE sectors mean that Vietnam’s macroeconomic and real sector fundamentals are weakening. Addressing these issues is critical for laying the foundations for stronger competitiveness that will help Vietnam succeed in a more challenged global context.
The Government recognizes these important risks to the economy and has since February 2011 been implementing a comprehensive stabilization program—Resolution 11. This has had good results as has already been mentioned. We know that some countries in the region notably China have begun to turn their attention to stimulus and growth but they have stronger macroeconomic fundamentals and much lower rates of inflation than Vietnam. With inflation in Vietnam still high at close to 20 percent annually, it is still important to maintain the current stabilization focus.
In October, the Plenum of the Communist Party identified restructuring of public investment, state owned enterprises and financial sector as key reform priorities for the next five years. This is an important first step.
What is needed next is strong political will that will bring a strong sense of urgency to concretizing the details of this restructuring and driving implementation in a credible way.
A strong sense of urgency is needed because experience demonstrates clearly that inaction or slow action leads to crises which are costly. It would be much easier for Vietnam to pursue its restructuring agenda now than have to restructure after its hit by a crisis. The time for action is NOW.
We recognize that these are difficult areas of reform and stand ready to support the Government in moving forward on this reform. We hope that our discussions today which will focus on public investment and financial sector restructuring will help provide some answers /suggestions on how the Government can best approach this important task.
There is relevant experience from the region as well as from several of the countries represented at this CG that we hope can be shared and discussed. We hope the participation of an expert who will bring Malaysia’s experience in financial sector restructuring will be useful.
The 2011 VDR prepared by the World Bank and other development partners includes a detailed analysis of SOE, financial sector and public investment restructuring and provides some recommendations on action. We hope this can also be a source of useful policy advice for Government.
We see the CG as a discussion between partners—the Government of Vietnam and development partners. We are bound together by our common interest in Vietnam’s development. The intention is not for DPs to assess and pass judgment on Vietnam’s performance but a forum in which we discuss how to make progress on some of the difficult issues/challenges that Vietnam faces. We hope in particular that some concrete ideas and solutions can emerge from this discussion and that the Government will find some useful elements to include in the various restructuring plans that are under preparation.
We will also discuss challenges related to reducing poverty. Vietnam’s poverty dynamics are changing. In addition to persistent poverty within remote ethnic minority populations there are emerging challenges related to urbanization and migration.
Recent global crisis and more severe and frequent natural disasters related to climate change illustrate the growing vulnerability of households—both poor and non-poor. High food inflation in Vietnam’s current inflationary context is one important shock that is adversely impacting the poor and near poor.
This requires development of a robust system of social protection that will consolidate poverty gains and also provide ready mechanisms/instruments to respond to adverse shocks that hit households. We will discuss this important agenda this afternoon.
In all of these areas, I would like to highlight that change at the margin is probably not sufficient. Bold actions are needed to really break with the past and chart a new path that will put Vietnam in a much stronger position to succeed as a MIC.
It will require strong political will and determination to lead and guide implementation of the actions needed to achieve the desired objectives.
Prime Minister, as development partners, we appreciate the opportunity to discuss with your Government Vietnam’s key development issues. On behalf of all of us, I would like to reassure you that we approach this with a strong sense of responsibility and sincerity and hope that it does add value for you and the Government particularly as you begin to implement the ambitious agenda in the 10 year strategy and the five year plan and in particular the restructuring agenda that has recently been announced.
I hope we can discuss openly, honestly and constructively, drawing on the trust and the goodwill that underpins our partnership.
As I have said in remarks at previous CGs, I hope we can all keep our interventions focused and succinct and allow the opportunity for real dialogue by giving each other a chance to be heard and by actively listening to others.
I look forward to very fruitful discussions