Regions and Countries

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p. 25 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia People’s Republic of China Southeast Asia Cambodia Indonesia Lao People’s Democratic Republic Malaysia Myanmar Philippines Thailand Viet Nam East Timor South Asia The Pacific

Viet Nam

Economic performance

Economic growth: According to official data, Viet Nam’s real GDP growth was estimated at 6.8 percent, an increase from 4.8 percent in 1999, the main source of this growth being strong performance in exports and industry. The resurgence of industry sector growth to 9.7 percent was spurred by rising domestic and external demand, with the domestic nonstate sector outperforming the state and foreign private sectors. The agriculture sector performed well (4.0 percent according to official statements) despite the flood in the central region and drought in the north.

Recent data show that the incidence of poverty, based on international poverty benchmarks, has declined over the last five years: from 58 percent in FY1993 (ending 31 March) to 37 percent in FY1998. However, many individuals who were positioned just below the poverty line in 1993 are now clustered just above it.

Employment: In 2000, the urban unemployment rate decreased slightly to 6.4 percent, from 6.7 percent in 1999, mainly because of the economic recovery. Although the overall unemployment rate in major cities declined in 2000, the rates were relatively higher in the urban areas of the Red River Delta and central northern regions.

Inflation: Inflation continued to fall in 2000. As of end-December, the year-on-year percentage change in the consumer price index (CPI) was -0.6 percent. The fall in world prices of agricultural commodities, particularly rice, led to a decline in the food price index that was only partially offset by higher prices of nonfood items in the CPI basket.

Fiscal balance: The fiscal deficit (including onlending) was estimated at 3.0 percent of GDP in 2000, compared with 2.8 percent of GDP in 1999, reflecting easing of the fiscal stance to spur economic recovery. Revenue receipts as a share of GDP were 18.7 percent, helped partly by higher international prices for oil. Expenditure as a share of GDP was estimated to have increased by 2.5 percent over the previous year, as a result of a 25 percent wage increase in public sector salaries and higher capital spending. Although the fiscal deficit was contained within manageable limits, the decline in non-oil revenues as a share of GDP since 1996 is cause for concern.

External sector: Exports grew by 21.3 percent in 2000, compared with 24.1 percent in 1999. The surge in the value of oil exports and fast-growing manufactured exports were the major driving forces. Imports grew by about 29.1 percent in 2000, compared with 3.8 percent in 1999. As a result, the current account surplus narrowed to 2.0 percent of GDP in 2000 from 4.0 percent in 1999. The slowdown in inflows from foreign direct investment (FDI) continued in 2000, with the sectors having attracted FDI in the past (heavy industry, real estate, and construction) reaching their saturation points.

With the signing of the US-Viet Nam Trade Agreement in July 2000, the prospects for the external sector rose but the benefits may not be realized for some time. Viet Nam’s external debt position improved as a result of a major write-down on its debt to Russia.

Domestic policies: The Government’s fiscal and monetary policies were accommodative in 2000. Money supply grew by 40.6 percent. The Government continued with reforms in 2000 in private sector development, state-owned enterprises (SOEs), and banking. The Enterprise Law, which became effective on 1 January 2000, contributed to a surge in the number of registered private firms. By December 2000, 14,400 new firms had registered, more than triple the number registered in 1999. The government has formulated an SOE reform plan that includes equitization/divestiture of 1,857 enterprises, restructuring 423 others, and providing adequate safety nets for redundant workers. In banking, the Government established the National Development Assistance Fund, thus, moving closer to separating policy lending from commercial lending. The first stock exchange was opened in July 2000 in Ho Chi Minh City.

ADB operations

Operational strategy: Work on ADB’s new operational strategy for Viet Nam was begun in 2000, with expected completion in 2001.

ADB loan operations in 2000 were guided by the 1995 operational strategy and focused on policy reform, infrastructure rehabilitation, and human development. Based on ADB’s poverty reduction strategy and the Government’s emerging development priorities, ADB’s future strategy for Viet Nam will likely focus on three priorities: (i) economic growth and private sector development (with particular emphasis on domestic small and medium enterprises) through policy reform in the financial and agriculture sectors, and improved governance; (ii) improved human and social capital by investing in secondary education, health, and urban development in provincial and district towns; and (iii) geographic and socioeconomic targeting by concentrating up to a third of ADB operations on the central region of the country, particularly on the north central coast and the central highlands, which are among the poorest regions in Viet Nam.

Policy dialogue: Policy dialogue evolved around the Government’s preparation of Viet Nam’s Socioeconomic Development Strategy for 2001–2010, to be adopted in April 2001. Policy recommendations and issues for further analysis were synthesized in the Viet Nam Development Report 2001—Entering the 21st Century, a joint report by the World Bank, ADB, and United Nations Development Programme, and discussed at the December 2000 Consultative Group Meeting in Hanoi.

In close collaboration with other funding agencies and nongovernment organizations, ADB also supported the formulation of the Government’s poverty reduction strategy through a small-scale technical assistance and helped with three regional consultation workshops on the draft strategy.

Dialogue with the Government on good governance focused on policy and structural reforms in public administration, the legal sector, private sector development, SOEs, and banking reforms.

Loans and technical assistance: In 2000, ADB approved four loans totaling $223.5 million in the fields of rural health, rural credit, and agricultural diversification, and including a private sector loan for a build-operate-transfer water treatment project; and approved a reallocation of $58.3 million loan to provide emergency assistance for flood rehabilitation in the Mekong Delta and central region of Viet Nam. ADB also approved 12 technical assistance projects totaling more than $9.1 million.

Project implementation: Since joining ADB in 1966, Viet Nam has received 43 loans, of which 29 were active at the end of 2000. Contract awards totaled $176.3 million, bringing the cumulative figure to $1,029.4 million. The contract award ratio was 19.0 percent, lower than the ADB-wide average of 21 percent. Disbursements during the year totaled $237.4 million, bringing cumulative disbursements to $813.8 million. The disbursement ratio was 18.7 percent, lower than the ADB-wide average of 20.5 percent.

Overall portfolio performance in Viet Nam continued to improve in 2000; implementation progress and achievement of development objectives were generally satisfactory. The improvement was attributed to government efforts, supported by ADB technical assistance to familiarize the executing agencies with implementation procedures and requirements, and to monthly project implementation review meetings held by the Viet Nam Resident Mission with the Ministry of Planning and Investment, and the line ministries and executing agencies concerned. A gap still exists between the increasing level of commitment and actual disbursements. Issues to be addressed are centralized and cumbersome approval processes; inadequate project implementation capacity; delays in recruiting consultants and procuring goods and services; lack of counterpart funds; and issues on land acquisition, resettlement, and compensation.

To address these issues, a Project Management Conference, cosponsored by ADB, World Bank, and Japan Bank for International Cooperation, was organized in April 2000. In addition, a country portfolio review was undertaken by ADB in the fourth quarter of 2000, after which the Government and ADB agreed to a time-bound action plan to improve overall portfolio performance.

   

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