Nakao also met with Governor of the State Bank of Vietnam Le Minh Hung and will participate in the 6th Greater Mekong Subregion (GMS) Summit and the 10th Cambodia–Lao PDR–Vietnam Summit.
Prime Minister Nguyen Xuan Phuc (R) and ADB President Takehiko Nakao (Source: VNA)
Nakao commended the government for steering Vietnam’s economic growth to 6.8% in 2017—the highest since 2007. The country has pursued sound macroeconomic policies and reduced the budget deficit in 2017, pushing down the total public debt to GDP ratio.
ADB projects Vietnam’s economic growth to exceed 7% in 2018, led by robust export growth, rising domestic consumption, and strong investment fueled by continued foreign direct investment. Meanwhile, inflation is projected to remain at around 3.5% this year, as strong domestic demand and bank lending is offset by relatively stable domestic food and transportation costs.
“It is important to continue structural reforms to improve productivity and economic competitiveness,” said Mr. Nakao. “The banking system needs to be strengthened by resolving non-performing loans and tightening supervision. The program to divest state-owned enterprises should be accelerated, and their corporate governance strengthened.”
He reaffirmed ADB’s commitment to helping Vietnam achieve more inclusive and environmentally sustainable growth, the central goal of ADB’s country partnership strategy (CPS) with Vietnam for 2016–2020. Anchored in the government’s 2016–2020 Socio-Economic Development Plan, ADB’s assistance under the CPS focuses on creating quality jobs and improving economic competitiveness, strengthening infrastructure and service delivery, and addressing environmental sustainability and climate change.
Nakao said ADB is working closely with the government to ensure that Vietnam makes full use of the $613 million of ADB’s concessional financing that remains available to it in 2018, before the country’s graduation from concessional assistance on 1 January 2019.
Nakao stated that after Vietnam’s transition to ADB’s more market-based resources (instead of mixed with concessional assistance), ADB can provide at least $1 billion a year in 2019 and 2020 (through our sovereign operations). ADB will support projects in intra-regional and urban transport, wastewater and drainage, and urban climate change resilience. Furthermore, ADB will actively look to mobilize concessional cofinancing from ADB’s trust funds and bilateral and multilateral partners.
In its operations in Vietnam, ADB will seek to have a greater value addition by proactively incorporating innovation and technology. ADB will support the adoption of on-farm water efficient technologies for climate friendly agriculture; the integration of urban metro and bus networks; the expansion of climate resilient urban waste water and flood management; the use of artificial intelligence-based analysis to improve urban public services; and the use of technology-driven credit analysis that promotes financial inclusion for small and medium-sized enterprises.
ADB will strengthen its support for private sector development in Vietnam using both sovereign and nonsovereign financing.
First, ADB will support reforms of state-owned enterprises, such as Electricity of Vietnam, through its sovereign lending. By strengthening the balance sheets and operations of SOEs, they will be better able to attract commercial financing.
Second, ADB will continue to provide transaction advisory services and help prepare projects under the public–private partnership modality, in areas such as ring roads and expressways and waste-to-energy conversion.
Third, ADB will expand its nonsovereign operations to include new sectors such as agriculture, health care, and education. In 2017, ADB lent $100 million to a private bank for the business development of micro, small, and medium-sized enterprises, and $100 million to a company for a municipal waste-to-energy project.
Vietnam was one of the founding members of ADB in 1966. Since ADB resumed operations in 1993, ADB assistance to Vietnam has reached $15.4 billion in loans, $310.6 million in technical assistance, and $329.5 million in grants.
