A new partnership for development

The new platform for policy dialogue will hopefully encourage further growth in Vietnam, as its predecessor did for over 20 years. Former Minister of Planning and Investment Vo Hong Phuc discussed with VIR’s Ngoc Linh.

The Vietnam Development Partnership Forum reflects the new position of Vietnam, from being a recipient of official development assistance (ODA), to become a partner of other countries and international organisations. Do you think it also reflects the development level of Vietnam after two decades of receiving ODA?

Yes, the change of policy dialogue platform reflected the new position of Vietnam. Vietnam is no longer a low-income country. It joined the group of middle income countries two years ago. Therefore, we have to change the dialogue platform. If you look back two decades, you can see how Vietnam has been growing. From the Roundtable Conference in 1993, we successfully changed the platform to Consultative Group Meeting, and now to Vietnam Development Partnership Forum, which allows the country and its partners to further deepen the dialogue and together find concrete actions for the development of Vietnam.

There is no doubt that the ODA provided by international donors has significantly contributed to the growth of Vietnam, helping us reduce poverty and develop infrastructure. Until  now, they have provided us with $78 billion, if which $63 billion was committed through signed agreements. Over $40 billion has been disbursed nationally. Financial support helped us to develop the education system, as well as infrastructure.

From 2011, international donors informed us that they would change their strategy in Vietnam as the country reached middle-income level. Vietnam also recognised that it needed to change its co-operation strategy with international donors. I think we are capable of accepting the change in relationship with our international partners. Grant funds will decrease and commercial funds will increase, but we know how to use it effectively for further growth.

Since becoming a low middle income country Vietnam’s relationship with international donors has shifted towards a partnership

ODA has contributed to the development of Vietnam since the country opened the door to international partners and investors. Can you imagine the state of the economy without ODA?

I believe we could have reached the current socio-economic status without ODA, but the road would have been longer and rougher. ODA helped us enjoy rapid growth, especially in infrastructure, healthcare, education and poverty reduction. With the financial support from international partners, we improved our investment climate in order to attract foreign direct investment. I remember in the early 1990s, the road linking Hanoi and Haiphong was severely downgraded. It took half a day to travel from Hanoi to Haiphong. With Japanese support, we upgraded the road to its present state.

The dialogue platform has changed and international partners have changed their strategy by reducing grants and preferential funds. Do you think it will impact economic growth in the future?

I don’t think it will negatively impact the economic growth, because we knew it before and had time to prepare. The government is drafting public-private partnership legal framework for infrastructure development. This is a good move.

It will encourage private investors to enter sectors the government wants them to enter. And the government has also learned how to combine the preferential fund with the commercial fund for economic growth. With the current economic potential, I believe we can continue developing the economy with reduced funds from international partners.

In your opinion, what was the biggest lesson for Vietnam after two decades of receiving ODA?

I think the biggest lesson was to listen to international partners and create sincere co-operation between the government and international partners. We know how to discuss with them about the development of the economy, but still take initiative to use ODA appropriate to our own development strategy.

At the Vietnam Development Partnership Forum, international partners urged Vietnam to speed up the economic restructuring plan to avoid the middle income trap. But it seems that restructuring is still long overdue. Have we made a mistake by not heeding the advice of the international community?

The restructuring plan was mentioned several years ago and approved by the government. This will help us to further grow. Actually, we talk a lot about restructuring, but the pace remains slow. However, I am aware of the government’s determination to deal with this issue as Prime Minister Nguyen Tan Dung clearly outlined the government’s position in his New Year speech. These issues are now the real survival issue of the nation. I think the government will speed it up this year. The government has to issue more transparent policies. The National Assembly recently discussed the Law on Public Investment, this is a good sign for restructuring.

Many countries like Japan and South Korea were ODA receivers in the past, but they grew and became active ODA providers. Do you think Vietnam will become an active ODA provider in the future?

I think so. Japan and South Korean received ODA for a long time and they used the funds effectively. According to the assessment of international partners, Vietnam is also using ODA effectively. In addition, our position is growing too. I believe one day we will become an active ODA provider. The time it will take, depends on governmental policies. With good policies, the time will be shorter. In turn, if we don’t have good policies, it will take much longer to achieve our goals.