Speech at Autumn Economic Forum Viet Nam’s Economy in 2013 and Prospects for 2014: Implementing Three Strategic Breakthroughs

26 Sep 2013

Speaker: Mr. Bakhodir Burkhanov, UNDP Deputy Country Director
Date:      26 September 2013
Event:    Autumn Economic Forum Viet Nam’s Economy in 2013 and Prospects for 2014: Implementing Three Strategic Breakthroughs
Venue:    Imperial Hotel, Hue City

Dr. Nguyen Van Giau, Member of the CPV Central Committee, Chairman of the Economic Committee of the National Assembly

Dr. Nguyen Xuan Thang, Member of the CPV Central Committee, President of VASS

Mr. Nguyen Ngoc Thien, Member of the CPV Central Committee, Secretary-General of the Thua Thien – Hue Party Committee

Mr. Vu Thien Loc, President of VCCI

Distinguished Deputies of the National Assembly, colleagues and friends:

Let me start by thanking the Economic Committee of the National Assembly for the opportunity to address this important Forum. I would like to convey the apologies of the UN Resident Coordinator, Ms. Pratibha Mehta, who could not join this Forum due to engagements in Ha Noi.

UNDP has been supporting the Committee as well as the Office of the Government, Party’s Central Office, National Financial Supervision Board and VASS since 2010 to strengthen their capacity to examine, advise and oversee macroeconomic policies. More recently, the support under the ECNA project was extended to the Office of the President and Party’s Committee for Economic Affairs. The bi-annual economic forum is an important pillar of our cooperation under this project. These fora provide a great opportunity for an open and frank exchange of ideas on the challenges facing the Vietnamese economy involving members of the National Assembly, other policymakers, technical experts, academia and business representatives.

As recognized by our partners including the ECNA leadership, these debates, together with other discussions and policy research, have helped diagnose problems and identify some solutions, thereby feeding directly into the oversight reports, resolutions and decisions of the National Assembly and of the Government of Viet Nam.

On the other hand, the implementation of identified solutions has not been keeping equal pace. In 2013 Viet Nam has managed to maintain macroeconomic stability. However, the slow progress on structural reforms, particularly in the banking, public investment and SOE sectors, remains an impediment and economic growth continues to decelerate. Investor confidence remains subdued, with growth of labor productivity slowing from 5 percent annually between 2000 and 2007 to 3.5 percent between 2008 and 2011. Viet Nam has dropped 10 places to 75th in the 2012-13 edition of the Global Competitiveness Report by the World Economic Forum, and slipped from 116 in 2010 to 123 in 2012 in Transparency International's Corruption Perception Index. Poverty reduction and human development progress have also slowed down.

In this context, I would like to share the following thoughts and suggestions:

Firstly, there is a growing body of evidence to suggest that the costs of delay in addressing the underlying domestic causes and structural drivers of macroeconomic instability have become more visible. These costs are felt not only in terms of non-performing loans, declining investor confidence or international competitiveness, but most importantly in terms of declining growth, employment creation and living standards of Vietnamese citizens.

Recent studies including ECNA’s 2013 economic report and the report from VASS on mid-term review of SEDP show that about a million workers shifted from formal to informal sectors in 2012 alone, away from industries and services to agriculture, from non-farming to farming occupations. At the same time, the decline in prices of agriculture products has contributed to lowering the profit margin for the farmers. 2013 may be the first year in a long time when Viet Nam’s agriculture sector – the bedrock of growth – will show a slowdown too.

As indicated in the 2013 Report of the Government on the MDG progress, the trend of decline in job quality and income poses a real threat to sustaining Viet Nam’s hard-won MDG achievements. Despite the budget deficit and slowing growth, it is important to build on Viet Nam’s remarkable poverty reduction success during the last two decades and continue to prioritize the poorest communities, especially ethnic minority people, to ensure that MDGs are achieved before the 2015 deadline.

I would therefore like to propose that discussions during the Forum examine the costs of delays in taking decisive actions, and the social impact of different reform options, including on people’s living standards and on Viet Nam’s overall MDG progress across various targets.

Secondly, growth is not only about the right economic policies and incentives. Without an effective institutional framework and implementation capacities, reforms inevitably face challenges. We need to build on the momentum of this Forum to speed up the implementation of the identified policy solutions. This would involve determining what the bottlenecks to reform implementation are, be they legal or institutional frameworks, lack of implementation capacities or resistance to change. I would like to echo Dr. Giau in his call to all participants to identify these bottlenecks and tackle them head-on.

Such an analysis, research and debates could inform the mid-term review of the current SEDP and strengthen the overall approach to action, including the three breakthroughs of institutional development, human resources and infrastructure, identified in the SEDS 2011-2020.

Thirdly, to echo Mme. Nguyen Thi Kim Ngan’s conclusion at the last Spring Forum and respond to a broader sentiment of the Forum participants, there is a need to involve more policymakers from the executive branch of the Government in the dialogue and debates. Effective solutions call for a holistic dialogue on Viet Nam's socio-economic concerns by bringing together diverse expertise from various disciplines. This would not only promote action-oriented discussions at the Forum but also strengthen the important oversight function of the National Assembly to ensure that all Vietnamese benefit from economic development.

As was pointed out in the last Forum, tackling broader issues of distributional impact of economic restructuring particularly on the poor and the vulnerable, and the bottlenecks of reform implementation, may require additional research and analysis. I would like to take this opportunity to reaffirm UNDP support for such further research and studies which could be supported through the ECNA project.

Ladies and gentlemen:
Viet Nam’s ability to move towards a higher, sustained growth trajectory will depend on the pace of reforms, sound policy solutions and ability of institutions to respond to the changing context and to the rising aspirations of people.

I look forward to the discussion on these issues during the Forum leading to actionable recommendations that we can all take forward.

I would like to once again thank the Economic Committee of the National Assembly for convening this important Forum, and wish all participants good health and success.

Xin Cam on.