PRESS ROOM

World Bank regional rep views VN with optimism

Date: 04-DEC-2008

On the eve of the annual Consultative Group’s meeting, Viet Nam News spoke with James Adams, World Bank Vice President for the East Asia and Pacific Region, on the impacts of the global economic crisis.

The World Bank has confirmed its continued support for Viet Nam. Is this view shared among donors? And does it mean the financial commitment to Viet Nam this year won’t be less than the US$5.4bn last year?

Part of the reason to have this Consultative Group (CG) meeting is to discuss just that. Viet Nam has benefited strongly from the support of donors and, in the present situation, it’s particularly important that the support is maintained.

The Viet Nam Government has worked very hard with the donor community and has built a strong reputation. There will always be issues and those have to be managed, but the Government can look forward to continuing support.

The expectation is that donors’ support will remain strong and therefore I think funding will be at about the same level as last year.

The World Bank says it has loaned Viet Nam different sources of funding because the Government has used them effectively. Is the WB happy with the pace of development and reform in Viet Nam?

Viet Nam is a very special case. It has achieved 100 per cent success in every project we have undertaken, both in terms of quality and impacts. Every country has a project that doesn’t work very well, but I don’t want to pursue this issue.

It’s impressive that Viet Nam has been borrowing now for 15 years and throughout that period has successfully maintained the pace. No other country has done as well for so long. We remain very impressed. I met with Minister Phuc (Ministry of Planning and Investment) this week and we spoke about how to improve implementation. Some countries work earlier on implementing projects and this is one of the issues we discussed. The Government also wants to move more quickly. I am optimistic that some progress will be made.

How are projects in other countries achieved faster?

The Vietnamese system does not allow people to work on implementation until a board approves projects. In Indonesia, the government allows activities to begin even before they goes to a board, so that makes things faster. In Viet Nam, things start slowly, but once they begin, the work is effective and strong.

In what areas is the money best spent?

We have had success with many programmes. Viet Nam has done a good job in all sectors that are engaged with the bank. In other countries you see difference across sectors. It’s very important to take a step back 15 years to the start of the Consultative Group meeting. When the process began, Viet Nam was a much poorer country, mobilised much less resources, had a much lower growth rate and much lower incomes, so when you look at history, you can’t help but be impressed with the reforms your country has achieved.

In October, you said the World Bank would support East Asian countries in dealing with the global economic crisis. Have you any specific plans for Viet Nam?

There are a couple of things I’d like to emphasise. First, the macro economic crisis earlier this year. Viet Nam is now in a stronger position and some of the problems the Government had to deal with were not easy. The Government has created a lot of confidence. I have spoken to some Government members about what the Bank can do to actually help. One thing is that we have agreed to begin some lending to commercial banks and are prepared to accelerate that to provide substantial resources for Viet Nam.

The second thing that we’d like to be able to do is to ensure that with the combination of bank loans and other resources, we place the Government in a stronger financial position to deal with the financial crisis. We have just done an economic update for China, where we lowered the growth rate from less than 10 per cent to 7.5 per cent. And I think that reflects what is happening in the world.

We are optimistic that Viet Nam can maintain a strong economic growth rate, but I think it will come down a bit from the last two years.

The Prime Minister has said he would curb inflation to a single digit by 2010. What do you think?

I think it is highly likely now, partly because of the Government’s policies, but also because of world trends that Viet Nam does not control. I am quite confident that, in the absence of something dramatic happening in terms of increases in oil prices, by 2010 inflation will be down to a single digit again.

Are falling oil prices and lower food prices making things easier for the Asian region and for Viet Nam in particular?

Well the challenge has changed. The new problem now is dealing with the financial crisis. Yesterday (December 2) was the first time it was announced the United States was in recession in terms of growth. The growth rate in Europe is also down.

This will have an impact on Viet Nam’s prospects because Viet Nam has an important export industry.

The Government has to make sure the export industry remains competitive and continue to grow, and how to deal domestically with the slowing of the overall growth rate. What the Government is looking at is fiscal stimulus whereas nine months ago the recommendation was to reduce expenditures. But it’s not only important to sustain growth, but to also reduce poverty.

In the four pillars of Viet Nam’s development strategy being discussed in the CG meeting tomorrow, what areas need the most catching-up?

Two things need attention: scaling-up the investment infrastructure. The enormous infrastructure needs power to facilitate long-term growth. The second area is poverty. We have to ensure social programmes are there to provide opportunities for those on low-incomes. In Viet Nam and in the region we are working on transfer programmes, where we provide initial support to the poor.

And we also need to strengthen education and health-care programmes, particularly for those on low-incomes. The whole donor community is particularly concerned about ensuring economic difficulties don’t affect the poor.

Could Viet Nam experience the same financial crisis as some Asian countries did 11 years ago?

You have got to recognise the differences. Viet Nam has worked very hard to improve its market economy policy, so it is not going to be vulnerable to these changes. And more specifically, (Asian) governments, including Viet Nam, have worked very hard to strengthen the banking system. It’s quite interesting that the financial sector problem has affected Asia much less than it has done with the US and Europe.

Viet Nam has the advantage that its domestic banking system is not engaged internationally, as in some other countries in the region. The regional banking system is pretty robust and credit is still available. There has been better banking performance in the last 10 years. Viet Nam and other countries are less vulnerable to a crisis, but they are not immune.

How would you advise on coping with the economic crisis?

The macro economic management needs to be sustained. While the Vietnamese Government wants to look at fiscal stimulus, it has to understand it should be done in a framework of stable macro economic management.

The Government should also look at what can be done domestically to sustain higher growth rates. It should also look at the expansion of some social programmes and infrastructure projects. The important thing to closely watch are the impacts on the poor, particularly minority groups, which do not benefit as much from strong economic performance as other groups.

What about macro-economic management in Viet Nam?

The Government can look at some relaxation of monetary policies, look at increasing expenditures, and look at the impacts of low expenditure on tax revenue. It doesn’t have to be so concerned about inflation, and it has to be more concerned about growth rates.

Experts say that Government borrowing will be a burden on the next generation. What do you think?

It’s a matter of how the money is used. The Government borrows to invest in infrastructure and priority services. If the return on that investment is high, the debt is not a problem.

It is important that the money spent is effectively used. This will create a strong Viet Nam that will benefit the next generation. But I do think Viet Nam will have to be prudent in its borrowing. The nation’s debt rate is manageable and comfortable at present. — VNS

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