MANILA, PHILIPPINES – The Asian Development Bank (ADB) has approved loans totaling $230 million to support Viet Nam’s ongoing reforms to overhaul public finances, boost private investment, and revive the country’s economic competitiveness.
“Viet Nam is falling behind neighbors in terms of competitiveness and ease of doing business, and this is hurting its ability to attract private investment and grow the economy,” said Tomoyuki Kimura, ADB’s Country Director for Viet Nam. “Structural obstacles are holding the country back and this loan assistance from ADB, along with support from other donors, will allow the government to press ahead with measures to resolve these issues.”
After the country’s shift away from a centrally planned economy in 1986, growth averaged over 7% a year from 1990 to 2007 while per capita income almost quintupled. Viet Nam has seen more muted economic activity in recent years with domestic private investment as a ratio of gross domestic product (GDP) declining from around 15% a year in 2007-2010, to 11.5% in 2013. Skills gaps in the workforce, a relatively unsophisticated financial sector, a hefty fiscal deficit, unequal conditions for state enterprises compared with the private sector, and an opaque business regulatory environment have held back competition, investment, and growth.
The ADB-assisted program will help the government push ahead with measures to boost banking sector stability, to improve public administration, to strengthen state-owned enterprise management, and to develop a clearer and more transparent regulatory environment for business. Specific actions supported by the program include implementation of the government’s credit institution restructuring plan, legislation to regulate and guide the rollout of an anti-corruption law, steps for the restructuring of state-owned enterprises, and implementation of an Amended Law on Public Procurement.
The program’s outcomes will include simplified value-added tax procedures, reduced corporate income tax applied to small- and medium-sized enterprises, and reduced transaction costs for small businesses, all of which will help boost productivity and support employment and poverty reduction. Performance targets of the program include boosting private investment as a percentage of GDP to 15% by 2020 from 11.5% in 2013.
ADB’s program assistance is complemented by cofinance of $250 million from the World Bank and $150 million from the Japan International Cooperation Agency. The program’s estimated completion date is June 2015.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members–48 from the region. In 2013, ADB assistance totaled $21.0 billion, including cofinancing of $6.6 billion.