Vietnam can now manage to raise enough capital to serve its economic development needs without depending on official development assistance, which now makes a small contribution to the economy, World Bank Country Director Victoria Kwakwa told reporters on Wednesday.
At the upcoming meeting of the Consultative Group, formed by major international donors to Vietnam, partners are expected to continue supporting Vietnam by helping the country increase "added values" instead of making ODA pledges as in previous years. What is important is the partners' commitment to continue supporting Vietnam's development, not specific figures, she said.
Amidst the global economic recession, partners are not able to pledge specific amounts of ODA, Kwakwa said at a press briefing on Wednesday.
According to a World Bank report, Vietnam's GDP growth is estimated at 5.8 percent this year, lower than the 8-9 percent in the years before the global economic crisis in 2008. However, the anticipated growth this year is still higher than that of many other countries.
Inflation has eased due to the tightened monetary policy, showing that Vietnam is on the right track in dealing with the issue, the report said. Inflation rose only 0.4 percent in November, much lower than the rate a few months earlier.
Another good sign for the economy is that the country is still an attractive destination to foreign investment, said Simon Andrews, regional manager at the International Finance Corporation, the private sector funding arm of the World Bank.
Vietnam should focus on developing capital sources, infrastructure and a skilled labor force to support its growth in the coming years, he said.
However, the country is faced with some challenges this year. Its state budget deficit has narrowed, but it is the result of increases in state budget revenues, mainly from taxes such as value-added tax, special consumption tax, and corporate income tax. It is not the result of spending reduction, Andrews said.
Vietnam's state budget deficit is estimated at 3.9 percent of the GDP in 2011, down from 6.4 percent in 2010, said the report.
Overseas debts are also a concern to Vietnam, the report said. Overseas debts now are estimated at 42 percent of the country's GDP, up 10 percentage points over 2007. Most of the debts are held by firms, and not guaranteed by the government.
The dong devaluation can help Vietnam improve its exports, but it would also increase the value of overseas debts if they are calculated in the dong, it said.
Andrews said Vietnam should focus on restructuring its banking system to facilitate the country's economic growth, as firms' capital mainly comes from banks.
Kwakwa said bad debts at banks have increased in recent months, affecting local production and causing risks to the whole economy. The restructuring process could help banks mobilize enough capital to effectively operate.
In addition, it is important to increase the surveillance over the banking system to discover risks soon and deal with the problems in a timely manner, she said.
At the Consultative Group meeting slated for December 6, delegates will focus their discussion on the economy's reform, poverty reduction and anti-corruption.
Prior to the meeting, the Vietnam Business Forum on December 2 will discuss the issues of investment climate, banking reform, and capital market development.