Donors pledge $6.5 billion, urge further reform

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World Bank's Country Director Victoria Kwakwa (1st R) speaks next to Vietnamese Prime Minister Nguyen Tan Dung (2nd R) during the Consultative Group Meeting for Vietnam in Hanoi   

International donors have pledged to provide Vietnam nearly US$6.5 billion worth of official development assistance aid next year, urging strong action to maintain economic stability.

Japan alone is set to provide $2.6 billion, similar to its pledge last year, Minister of Planning and Investment Bui Quang Vinh said in Hanoi Monday after an annual meeting of the Consultative Group, formed by major donors to Vietnam.

He said Vietnam highly appreciates the assistance at a time when many countries have to tighten spending. The government will continue to improve management and ensure efficient use of the funds, he said.

The group, including the World Bank and the Asian Development Bank, meets annually to advance Vietnam's development agenda. The country received $7.4 billion in pledges of grants and low-interest loans from the group last year, down from $7.9 billion in 2010 and $8 billion in 2009.

Vietnam disbursed $3.56 billion worth of official development assistance aid in the first 11 months of this year, official statistics show.

In her opening remarks at the meeting, World Bank Country Director Victoria Kwakwa hailed the Vietnamese government for making "impressive gains" in macroeconomic stability during 2012.

"This has been made possible by the recognition of macroeconomic stability as an important priority, by strong political commitment and resolve, which has allowed the needed bold actions," she said.

However, Kwakwa noted that the economy is losing much of its dynamism, with growth on a downward trend over the last few years.

"Key structural problems the over-extended state enterprise sector, weak banking and financial sector and inefficient public investment are well known and have been identified by the Party and the government as areas that need urgent restructuring"¦ Without determined and resolute action, the costs of addressing these challenges will rise," she said.

She also warned that Vietnam could risk falling into the middle income trap with weak competitiveness.

Speaking at Monday's meeting, Prime Minister Nguyen Tan Dung said Vietnam's economic growth will ease to an estimated 5.2 percent this year, but maintained this is a positive result considering the global economic downturn.

He said inflation has also been under control, with prices rising 7.5 percent this year. There is also an $8 billion surplus in the balance of payments, he added.

Dung said Vietnam is aiming to grow 5.5 percent next year while bringing down inflation further to 6-6.5 percent.

The government will consider cutting corporate income tax and assist businesses in clearing stockpiles and reducing bad debts, he told the meeting.

Surveillance over banks and state-owned enterprises will be strengthened, Dung said, adding violations of the law will be strictly punished.

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