WB Country Director's speech at Vietnam Reform and Development Forum 2018

His Excellency Prime Minister Nguyen Xuan Phuc

His Excellency Minister Nguyen Chi Dung

Government Ministers, Leaders of government agencies, committees of the National Assembly, committees of the Party,

Ambassadors, Heads of Development Agencies, Representatives of Private Sectors, Non-Government Organizations,

Ladies and gentlemen,

Good morning! Xin chào!

It is my great privilege and honor to join Minister Dung in welcoming you to the Vietnam Reform and Development Forum 2018.I would like to thank all of you sincerely for arranging your schedule to be here today during a very busy time of the year.I would also like to thank the Ministry of Planning and Investment, all Development Partners and speakers for their strong collaboration leading up to today’s event.

Twenty-five years ago, in November 1993, the first consultative group meeting for Vietnam was held in Paris. Since then, development partners have been accompanying Vietnam not only through financial support but also through knowledge to address development challenges. Prime Minister Phuc, Minister Dung, under the leadership of your government, Vietnam socio-economic achievements have been remarkable.

Over the course of thirty year, the economy has expanded at an average of nearly seven percent annually. As a result, per capita income has increased almost five-fold. Vietnam today has emerged as a thriving lower middle-income economy and an export powerhouse. Growth has also been inclusive, with poverty falling of just below seven percent, compared to more than sixty(60%)percent in the late 1980s.

But Vietnam’s journey to become a modern, industrial economy has only just begun, and past achievements are no guarantee for future success. Domestically, Vietnam will have to tackle rising structural headwinds, including a rapidly aging population, slow productivity growth and weak investment as well as an increasing environmental toll on development.Leaning against these structural headwinds at home, Vietnam will also need to navigate a changing terrain abroad where shifting global trade patterns and the digital economy are both reshaping opportunities and creating new risks.

Prime Minister Phuc, Minister Dung, Ladies and Gentlemen,

As we are moving into the next SEDS – SEDP cycle, it is important that we revisit Vietnam’s unfinished reform agenda and reinvigorate its growth potential, not only in terms of quantity but most importantly in terms of quality and sustainability of growth. This is essential for Vietnam to realize its aspiration of becoming a successful upper middle-income country as envisioned in the Vietnam 2035 Report. With this mind, allow me to suggest four key priorities:

First, reforms to promote domestic private sector development will need to be significantly stepped up, making it a primary driver for improved productivity and economic growth. This entails continued effort to remove obstacles to private business and strengthen regulatory environment. In parallel, SOE reforms should focus on the adoption of international best practice in governance, including through the newly established SOE management committee while accelerating and deepening equitization and divestment especially from commercial assets.

Attraction of FDI should also shift away from quantity to quality with a focus on high-tech and high value-added investments with technology transfer to harness stronger linkages between domestic and foreign firms. This would ultimately help domestic private sector effectively join the global value chains.

Second, notwithstanding current fiscal constraints, continued investment in infrastructure is critical for future growth. Again, not only quantity, but quality matters. While priority will be given to national backbone infrastructure projects such as the north-south expressway, railways, Long Thanh Airport, and key sea ports, individual investments should be driven by an overall multimodal transport connectivity strategy.

Given fiscal constraints, unlocking private investment could hold the key to meeting Vietnam’s significant investment needs. While a robust framework for PPPs can contribute in this regard, deep structural reforms in key infrastructure sectors, such as power generation, can help build competitive markets for infrastructure services and crowd in private financing.

Third, we cannot emphasize more the importance of investment in human capital, especially in the context of fast-changing disruptive technologies and a digital era. As such, investment in human capital will require a life-cycle approach which entails effective coordinated efforts to improve health care and nutrition, especially in early childhood, lifelong education and skill training.

According to the recent launch of the World Bank Group’s Human Capital Index, Vietnam ranks 48 out of 157 countries. This is remarkable, and the countryhas done particularly well in basic education. But a new set of knowledge and 21^st century skills are needed to contribute to stronger productivity growth. This would require focus on the quality and relevance of the tertiary and vocational education. In addition, creating an effective institutional and incentive framework for innovation -with private firms at the center - is critical for future growth.

Fourth, Vietnam’s rapid growth is taking an increasing environmental toll. This is evident in land degradation and soil erosion, rapidly growing green-house gas emissions and air pollution, increasing water degradation, deforestation and pressure on bio diversity. Green-house gas emission are outpacing Vietnam’s rapid economic growth, reflecting in large part a rising dependence on carbon fueled power generation.

According to the Yale Environmental Performance Index, which ranks 180 countries worldwide, Vietnam ranked 132nd. These growing environmental stresses do not only have direct impact on the quality of life, but also potentially affect long term growth. Managing Vietnam’s natural assets and building resilience against climate change are crucial for sustainable growth in key sectors, such as agriculture, food processing, and tourism.

Finally -and perhaps most importantly- delivering on these four priorities -private sector, infrastructure, human capital and green growth- will require capable and effective state institutions. We all know that effective market institutions, and a transparent, clean and accountable state are lynchpins of development. Moreover, as Vietnam has become a middle-income country, development challenges are increasingly sophisticated and cross-sectoral in nature. Hence, effective coordination across ministries and agencies as well between central and local authorities are now more important than ever.

Vietnam will also have to mobilize and use its scarce public resources efficiently to finance this ambitious development agenda. Improving domestic revenue mobilization, complemented by efforts to enhance expenditure efficiency and debt management capacity will be important to ensure development objectives can be achieved without raising debt to unsustainable levels.

Last, but not least, available ODA resources will need to be used more strategically and effectively to complement domestic public resources and aim to leverage non-financial benefits, know-how and private investment.

Excellency Prime Minister Phuc, Ladies and Gentlemen,

A successful series of CGs, VDPFs and VDFs over the past twenty-five years have planted the seed for a new series of VRDFs, starting today. With full government ownership, it focuses on the quest for new vision and new drivers of growth in a new development era.

The forth-coming SEDS 2021-30 and accompanying SEDPs will be the platform for the government to realize this vision and sustain high-quality growth. I am inspired by the Government’s strong commitment to act as a facilitator for Vietnam’s inclusive economic development and growth in the new development era. Development partners stand ready to accompany and support Vietnam, to provide quality support—including knowledge and access to international experience and best practices and the VRDF is really a flagship event in this regard.

I believe we will have an interesting and highly relevant set of issues on our agenda this morning. To get the most out of the Forum, I hope that we will all be focused and succinct in our remarks and give others a chance to speak.