Minister Nguyen Chi Dung
Government Ministers, Leaders of government agencies, committees of the National Assembly, committees of the Party,
Excellency Ambassadors, Heads of Development Agencies,
Ladies and gentlemen, Xin chao!
It is for me a great privilege and honor to join Minister Dung in welcoming you to the Vietnam Development Forum 2016. I know this is a very busy time for Government and development partners and thank you for arranging your schedule to be here today. This is important event and I hope over the years the VDF will become forum for knowledge exchange on pertinent development challenges faced by Vietnam.
The 2016 VDF is taking place against the backdrop of rising uncertainty in the global economy—and in the political sphere. Recent trends may have significant impacts on global prospects. For Vietnam, this could translate into opportunities as well as challenges—as the country continues to its global and regional integration through various bilateral and multilateral agreements.
Vietnam is also just embarking on the new 5-year Socio-Economic Development Plan 2016-2020. The 12th Party Congress, concluded earlier this year, set out clear directions and guidance to the Government for the implementation of key reforms and policies to foster sustained growth and prosperity.
Minister Dung, ladies and gentlemen,
As we come close to the year-end, I would like to congratulate the new Government on several important achievements during 2016. Vietnam has witnessed five straight years of macroeconomic stability, underpinned by stability oriented macroeconomic policies, including steps toward more flexible exchange rate management, introduced in early 2016. 2016 was marked by single digit inflation, a relatively stable exchange rate, and a strengthening external position. Importantly, and in spite of global headwinds, the economy continues to show strong resilience, supported by robust domestic demand and export-oriented manufacturing, growth has remained high at about 6.0 percent—one of the fastest growth rates regionally and globally.
While these achievements are encouraging, challenges remain for the Government to achieve the objectives set out by the SEDP 2016-2020. I would like to highlight some of them:
First, is Vietnam’s productivity challenge. In the last years, and following the global recession, Vietnam has achieved a commendable growth recovery. However, a continuing trend of declining productivity growth is of concern. Vietnam’s labor productivity growth rate is below 4 percent and declining. This compares to rates above seven percent for China and five percent for Korea when these countries were at similar levels of development as Vietnam is now. Current productivity growth rates are unlikely to deliver the sustained rapid growth that could see Vietnam follow the development trajectory of countries like Korea or Singapore.
To stem the decline in productivity growth, there is a need for a broad framework to facilitate and promote domestic private sector development, level the playing field between all economic actors, and promote genuine competition as well as linkages among them to establish efficient internal and external production value-chains. Reforms to develop effective market institution will need to be significantly stepped up to achieve this. In addition, it will be critical to adopt more market based approaches to access land and capital. This will ensure resources are allocated to the most efficient and productive uses. The emergence and smooth functioning of land markets would be a great achievement at the end of the SEDP 2016-2020 and would have important economic and social benefits for citizens and private sector actors.
The second broad issue is the environmental footprint of Vietnam’s growth. Over the last five years, Vietnam’s Greenhouse Gas (GHG) emissions have risen at the fastest rate in the region. Energy is the primary source of emissions. While hydro power constitutes 42 percent of Vietnam’s energy supply at present, most large-scale hydropower sites have already been developed. With the demand for electricity growing at about 10 percent annually, new sources will need to be developed.
To avoid further reliance on coal and to promote low-carbon generation, a sound framework to incentivize investments in renewable energy, such as wind, gas, and solar will need to be developed and promoted. Furthermore, efforts to improve energy efficiency will have to be strengthened. This would promote a more sustainable energy path for Vietnam and help the country achieve its NDC target of reducing emissions by 8 percent. We stand side by side with Vietnam to help achieve even better outcomes. But Government action on the policy and institutional framework is fundamental to success.
The third area relates to poverty and social welfare. Despite remarkable progress, poverty still affects a number of Vietnamese. There are indications that progress has been limited with regards to improving social and economic opportunities of ethnic minority groups. The decline in poverty among ethnic minority groups from 2012 to 2015 was limited, including reducing malnutrition. There is an urgent need for new approaches and efforts to tackle ethnic minority poverty and welfare. The two new National Targeted Programs on Rural Development and Sustainable Poverty Reduction, if designed and implemented right, could make a significant difference in this regard.
Finally, the question is how Vietnam will finance its ambitious development agenda over the next five years. At a time when concessional development assistance is phasing out—as a result of the recently obtained middle income status—Vietnam will need to increasingly rely on internal revenue generation. However, over the last five years, the revenue to GDP ratio has declined from 27 to 21 percent. Reinvigorating domestic revenue mobilization, complemented by efforts to enhance expenditure efficiency and debt management capacity, especially domestic debt market, will be important to ensure development objectives can be achieved without raising debt to unsustainable levels. In addition, ODA will need to be used more strategically, efficiently and effectively and aim to leverage private investment.
Ladies and Gentlemen,
Minister Dung provided the Government’s guidance on the VDF process for the next five years. I am strongly encouraged and inspired by the Government’s commitment to continuing to evolve towards a facilitator for Vietnam’s inclusive economic development and growth. I strongly believe that with a concrete action-oriented plan, Vietnam will be able to realize the country’s ambitious objectives over the SEDP period and beyond. Development partners stand ready to support Vietnam, to provide quality support—including knowledge and access to international experience and best practices and the VDF is really a flagship event in this regard.
This year, the VDF focuses on the broad macroeconomic context and outlooks and fiscal/debt management as a strategic policy foundation to address many of the challenges ahead. I believe we have an interesting and highly relevant set of issues on our agenda this morning. To get the most out of this Forum, I hope that we will all be focused and succinct in our remarks and give others a chance to speak.
I look forward to a very productive dialogue. Xin cam on.