ADB forecasts good future

According to the ADB’s Asian Development Outlook 2006 report, that analyses and forecasts economic trends in the Asia and Pacific region, Vietnam is expected to record GDP growth at 7.8 per cent and 8 per cent for 2006 and 2007, and experience an inflation rate of 6 and 5 per cent respectively.
This year’s publication said that impetus for the country’s higher growth trajectory comes from a steady transition to a market-based system and closer integration with the global economy.
“The near-and-medium-term forecasts for the economy assume that the government will continue to implement market-oriented reforms by, for example, preserving macro-economic disciplines and further improving the investment climate, including enforcing the new investment laws,” said the report.
“It is assumed that Vietnam will join the world trade organisation within a couple of years, possibly in 2006.”
ADB officials organised a press briefing in Hanoi to publicise the report, at which it was revealed that the private sector would prove the most significant driving force in the economy in coming years, given the much improved business environment, coupled with implementation of the Common Investment Law and Unified Enterprise Law.
“Over the next five years, total investment-to-GDP is expected to reach an average of 38.5 per cent, with more than a half of it originating from the domestic and foreign private sectors, compared to 46 per cent of the figure registered over the last five years,” said Aymi Konishi, who was appointed ADB Vietnam’s country director a week ago.
He added that the bank also estimates foreign direct investment (FDI) flow into Vietnam, which constitutes momentum for domestic demand, is this year estimated to consolidate a 38 per cent increase in FDI commitments to $6 billion in 2005, and Intel’s $300m assembly plant, announced early this year.
Bank officials further asserted that the equitisation of increasingly numerous domestic large-scale state-owned companies would spark greater determination among Vietnamese authorities to enhance business efficiency and recognition of the private sector.
“Progress in state-enterprise reform thus far has been mainly among smaller companies, with only modest advances made in divesting larger enterprises. Thus, this year’s planned equitisation of Vietcombank and MobiFone, which are both large firms, will represent a major step,” said Kanokpan “Gem” Lao-Araya, Head of ADB’s resident mission department for finance, trade, governance, and private sector.
The ADB’s officials also warned that beside global risks including a rapid increase in US interest rates, avian flu and rising oil prices, Vietnam will, in the next years, have to cope with the various challenges posed to itself, most particularly those concerning greater competition in the wake of the country’s regional and WTO commitments, which will allow foreign firms to penetrate domestic markets.
“Even though we say that it is possible for Vietnam to realise its dream [of socio-economic development targets], it [will only happen] as long as Vietnam keeps its eyes open to thoroughly prepare for the arising challenges and make subsequent adjustments,” said Omkar Shrestha, head of ADB’s programmes, economics and external relations.
Shrestha recommended that the Vietnamese government further facilitate private sector participation in the economy and coordinate with the sector to increase investment in infrastructure, including the electricity sector to ensure energy security.
The requirements for future efforts to maintain high economic growth, also include improved governance, especially in corruption control.
Answering questions posed at the press briefing regarding ADB’s views towards scandals involving the local Project Management Unit 18, bank country director Aymi Konishi said that on-going developments in the scandal would increase confidence among donors toward Vietnam’s efforts to fight corruption, ultimately leading them to greater assistance to Vietnam in this regard.
“The scandal will not create negativity among the donor community, nor affect promises to support Vietnam. I believe that it is an indication of the government’s efforts to fight against corruption,” said Konishi.




No. 756/April 10-16, 2006