Vietnam has sharply reduced inflation from more than 20% in August 2011 to around 6% by December 2013, stabilised the exchange rate, and built up a strong current account surplus and higher foreign reserves. However, while government policy has succeeded in reducing macroeconomic instability, more progress is needed to address the economy’s structural weaknesses.
“To reach its potential, Vietnam must deal with multiple risks and challenges such as improving competitiveness, managing growing inequities, developing institutional capacity, enhancing transparency, and strengthening governance,” says Asian Development Bank (ADB) President Takehiko Nakao who recently met with Prime Minister Nguyen Tan Dung during a three-day visit to reaffirm ADB’s support for Viet Nam’s continued drive for inclusive growth and development.
Rapid growth cannot be sustained without stronger regulation and supervision of the financial system, market discipline on large state-owned enterprises, and better physical and social infrastructure, Nakao noted in an address at the Foreign Trade University. He touched on the themes of innovation through competition, inclusiveness through improved infrastructure, and integration through regional cooperation.
For Vietnam to more fully reap the benefits of the Greater Mekong Subregion economic program, it is essential to expand the provision of services – such as water, sanitation and reliable power – for the country’s increasingly urban population. For infrastructure financing alone, Viet Nam will need an estimated $167 billion over the next decade to sustain the desired growth trajectory.
In addition to efforts to strengthen revenues, Vietnam could meet the funding gap for infrastructure through public-private partnerships, developing domestic capital markets, and the ASEAN Infrastructure Fund.
Encouraging local currency lending will help tap Vietnam’s potentially large domestic savings. ADB also supports development of a deeper bond market that will enable long-term funding to be channeled to much-needed infrastructure projects.
ADB has been working in close partnership with the Government of Vietnam since the resumption of operations in 1993. As of 30 September 2013, ADB has provided assistance of about $12.7 billion to Vietnam to promote socioeconomic development. The current Country Partnership Strategy for Vietnam 2012-2015 is fully aligned with Vietnam's Socio-Economic Development Plan 2011-2015.