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Re-establishing and maintaining macroeconomic stability and protecting the poor

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UN Country Team Statement for the Consultantive Group Meeting of June 2011

Introduction

The past six months have marked a significant period in Viet Nam’s development.  The successful 11th Party Congress adopted the Socio-Economic Development Strategy 2011-2020, and the Socio-Economic Development Plan 2011-2015 which is scheduled to be approved this coming November by the National Assembly. Together, the SEDS and SEDP set the direction for Viet Nam’s development over the next decade, and stress the importance of a more balanced and sustainable approach to ensuring social, human, and economic development of the country and its people.

As the SEDS and SEDP recognise, Viet Nam has entered the ranks of middle-income countries and like other middle-income countries is undergoing rapid socio-economic change and facing challenges. In Viet Nam these include declining ODA, persistent poverty and rising inequalities, accelerating migration and urbanisation, population ageing and climate change, among others. Modern, robust institutions that can facilitate transparency, accountability and participation and ensure a cross-government approach are ever more critical in light of the challenges ahead.

Today, Viet Nam continues to face the challenges of an economy in recovery coupled with rapid social changes.  2011 has already seen a steep rise in inflation and instability in financial markets, with increased food and fuel prices as well as overall living costs impacting on Vietnamese families and businesses. Viet Nam has responded decisively to curb inflation and regain macroeconomic stability, but will need to stay the course over the months ahead, and step up social protection and poverty reduction efforts in order to achieve broad-based and inclusive growth.

An Assessment of the Macroeconomic Situation

In the more than two years since the 2008 financial crisis, Viet Nam has continued to see steady economic growth, consolidating its position as one of the fastest growing economies in the Asia-Pacific region and entering the ranks of middle-income countries with a GDP per capita of around $1200 in 2010.  GDP grew by 5.32 percent in 2009 and 6.78 percent in 2010. In the first three months of 2011, Viet Nam has continued to post high rates of economic growth at 5.43 percent compared to the same period in 2010.

However, Viet Nam’s accession to the World Trade Organisation, the influx of foreign exchange in 2007-2008, the global economic crisis and instability in the foreign exchange market, together with over reliance on investment-lead growth, have posed challenges for macroeconomic management and particularly control of inflation in Viet Nam.

In Viet Nam, the years 2008 through 2010 were characterised by macro-economic instability, with periods of very high inflation in the first half of 2008 and 2010, recurring again in 2011.  The first four months of this year saw a return to the very high inflation rates of 2008, reaching 17.5 percent in April 2011. Over the first four months the inflation rate has been up 13.95 percent over the same period in 2010, well above the target set by the National Assembly of 7 percent for the whole year.  Predictions that 2011 inflation will break the 2008 record of 19.9 percent may well prove to be accurate. Both core and non-core food inflation has increased over the last few months.

Viet Nam, like many other Asian countries, is faced with inflationary pressures that are greater than in many other parts of the world.  Rising food, transportation and housing costs are among the factors driving up inflation in Viet Nam and around the region. However, over the past decade Viet Nam has had one of the highest inflation rates in the region and globally, with inflation currently 10 percent higher than other countries in the region. This is in part due to internal factors such as the priority given by policymakers to generating high rates of economic growth rather than ensuring macroeconomic stability. Use of loose monetary and fiscal policy over a long period of time have had negative effects on macroeconomic stability and led to repeated periods of high inflation, including in 2011.

Firstly, inefficient public investment is paired with a significant budget deficit. Inefficiency in public investment is reflected in Viet Nam’s very high investment/growth ratio (ICOR) of up to 6 or 7, around 1.5 times higher than the average of 3 to 5 in other regional countries.  Similarly, the profit rate on the equity of state enterprises is very low at 6.3 percent compared to 17.6 percent for listed companies and 28 percent for foreign enterprises.  Moreover, state enterprises create fewer jobs than private companies and FDI firms.  Inefficient and excessive public investment has also led to a rise in imports, fuelling a worsening trade deficit. The Vinashin case is only one example of inefficient state enterprises acting as a drag on the economy.

Secondly, loose monetary policy has led to high money supply (M2), and has also fuelled credit growth. ADB data shows that the M2 money supply increased an average of 31.2 percent annually between 2000 and 2009.  Even in 2010, when the Government was pursuing tighter monetary policy, money supply was high at 27 percent.  While high money supply may have helped to maintain low interest rates in the short term, it has inevitably translated into higher prices in the longer term.

Thirdly, in the past when the economy began to overheat and inflation rates rose, the Government reacted by using monetary policy to cool the economy, without also adjusting fiscal policy, including public expenditure. Private enterprises have been most affected due to high interest rates, while state owned enterprises have been cushioned by continued high levels of public expenditure and investment.  Public debt has continued to rise while inefficient public investment has impacted negatively on the quality of growth.

A recent study by the Viet Nam Centre for Economics and Policy Research (VEPR) supported by the United Nations shows that while world prices have an immediate impact on production prices, which is over time reflected in consumer prices and higher inflation rates, recurrent periods of high inflation in Viet Nam are largely due to the internal factors discussed above.  The Government will need to act resolutely to ensure macroeconomic stability.  Resolution 11 is a very welcome development in this regard, as it directly addresses these factors and represents a significant policy shift from prioritising economic growth to ensuring macroeconomic stability in the longer term.

Re-establishing and maintaining macroeconomic stability

Implementation of Resolution 11

Government action since the Tet holidays to ensure macroeconomic stability and contain inflation is to be commended. The introduction of Resolution 11 of the Government on 24 February 2011 marked a turnaround in Viet Nam’s macroeconomic policy orientation. For the first time in many years, economic growth is no longer the top priority in the short term, reflecting a growing consensus about the need to better define targets not only for “quantity” but also for “quality” of growth and development.  Resolution 11 lowers GDP growth targets and provides a package of strong measures aimed at curbing high inflation, restoring macroeconomic stability and strengthening social protection.  These measures are welcome, and the policy changes introduced by Resolution 11 are widely recognised as appropriate and well designed.

Government has been very proactive in using interest rates and currency devaluation to fight inflation.  However, downward pressures on the exchange rate, low foreign reserves and the high trade deficit are concerns. Challenges lie ahead with regard to the implementation of Resolution 11 and its effectiveness. Implementation should clearly target different aspects of inflation by carefully differentiating measures aimed at controlling food and fuel inflation from those aimed at controlling core inflation – in order to ensure they do not act as a brake on economic growth.

The financial sector continues to present a very high risk due to rapid credit growth, which needs to be carefully contained. Resolution 11 sets out the objective of reducing credit growth from 23 percent to below 20 percent and this is expected to reduce total money supply by 50,000 billion VND (USD $2.38 billion). However, it is critical that credit growth is reduced in inefficient State-owned enterprises, and maintained and/or expanded to more efficient private enterprises and the export sector

Monetary policy responses alone are not a sufficient tool for reducing inflation quickly. Monetary policy responses, such as lowering interest rates, are typically introduced after the first signs of rising inflation and therefore tend to lag inflation.  It takes more than five months, on average, for these measures to have an impact.  By this time the public has often been living with high interest rates for seven to eight months, with inevitable affects on consumer attitudes and behaviour, which in turn makes it harder to curb inflation.

Fiscal policy measures introduced by Resolution 11 include lowering the budget deficit to 5 percent of GDP and cutting regular public expenditure by 10 percent in 2011, and are expected to cut total money supply by 60,000 billion VND (USD$2.86 billion). Together with measures to reduce credit growth, these policies will cut aggregate demand by more than 110,000 billion VND (USD$5.24 billion).  However, greater clarity is needed about where the 10 percent cuts to recurrent public investment will fall: beneficiaries and key long-term national programmes should not be adversely affected. The priority should be cutting expenditure in inefficient public investment, not in social programmes or in sectors with potential for growth, job generation and high value-added returns.

The Government’s strong commitment to cut back investment in inefficient State-owned enterprises is a positive sign in this regard.  However, more decisive moves to cut unnecessary large-scale public investment programmes, including in State-owned enterprises, are needed. In addition, Government will need to significantly strengthen the national system for assessing public investment projects based on transparent criteria for economic returns, assessment of social impacts and environmental protection, and climate change proofing.

The recent Government decision to devalue the dong against the USD by 9.3 percent aims to stimulate exports, increase the competitiveness of Viet Nam’s exports and therefore improve the trade balance. However, currency devaluation contributes significantly to inflation. Recent episodes in 2009 and 2010, particularly distortions in the foreign exchange market (especially in the parallel black market due to declining trust in the VND), speculation and dollarization, have all contributed to recurrent high inflation. The trade deficit remains high at USD $12 billion or 12 percent of GDP in 2010, and while exports have improved they have been outpaced by rising imports used for production and consumption.  Most of Viet Nam’s products depend on imported raw materials and other inputs, which account for more than 80 percent of total production costs.

Adjustments to basic prices of some input items, such as to petrol and electricity in February and March, together with currency devaluation, have fuelled high inflation since the end of the first quarter 2011.  These measures also impact on consumer behaviour, especially when further price adjustments to fuel and electricity prices based on market mechanisms are likely in the short term. Only after more than six months of stable inflation rates do people’s memories of high inflation begin to fade.  The Government needs to keep inflation rates low for at least six months in order to rebuild consumer confidence. In addition, market mechanisms only work effectively when healthy competition is encouraged, which is not the case in the fuel sector, for example, where only State-owned enterprises are allowed to operate. State intervention is required, and while adjustments to fuel prices are needed in the long run, the timing should be considered carefully.

Resolution 11 is expected to bring down the inflation rate in the third quarter of 2011. However, Government will need to continue to act resolutely to ensure its effective implementation. Greater efforts to restructure the economy, completely reform State-owned enterprises and reduce ineffective public expenditure, together with promoting growth in areas where it is sustainable and makes the greatest contributing to overall development goals, are key to curbing inflation and ensuring Viet Nam can weather these challenging times, deliver macro-economic stability in the longer term and continue to achieve broad-based socio-economic development.

Protecting the Poor from Macroeconomic Instability

Social impacts on the poor

Inflation has a disproportionate impact on the poor and vulnerable, given that they spend a much higher proportion of their expenditure on food and other essential items than better-off households. According to the 2008 Viet Nam Household Living Standards Survey (VHLSS), the poorest quintile spent 65 percent of their household expenditure on food, compared to 45 percent for the richest quintile. Inflation also impacts the ability of the poor and vulnerable to fund out-of-pocket costs for health care, as limited incomes are stretched even further on other essential items.

The urban poor, in particular poor migrant workers, pensioners, and those with low wages and/or informal sector jobs, are among those most affected. Recent rapid assessments conducted by VASS/CAF show that the urban poor are affected by price increases across a range of goods and services, including food, electricity, fuel (including petrol), transportation and housing costs and social services.  The urban poor and migrants are among those who suffer most as a result of rising electricity prices. Among the rural poor, net food buyers are most affected, and while some net food producers may benefit from higher food prices, these benefits are offset by the rising costs of inputs.  A recent study by MPI shows that rural households’ income from agricultural sources does not increase in parallel with rising input costs during periods of high inflation.  In 2008, income from agricultural sources grew by 10-20 percent while input costs rose by 30-50 percent.

Rising food prices also impact on food security. In Viet Nam this has been notable during 2007-2008 and the first few months of 2011. According to data presented at a recent MPI workshop, an estimated 838,600 agricultural household members experienced hunger in the first two months of 2011, the highest number since 2007and nearly double the number in the same period in 2010.  In 2008 food inflation drove 4 million people into hunger, the highest number on record for the 2006-2010 period. Women and children are often among those most affected, with many households reporting that they cut back on food consumption and pulled their children out of school during the last period of high inflation in 2008.

In the longer term, inflation also has the potential to drive households back into poverty.  For example, projections based on the 2002, 2004, and 2006 rounds of the VHLSS suggest that the poverty rate could have increased by 1.5 percent as a result of inflation in 2008. This was reflected in the slowing rate of poverty reduction during the period 2006-2008 when poverty fell by only 1.5 percent, (down from 16 percent in 2006 to 14.5 percent in 2008), compared to a 3.5 percent decrease between 2004 and 2006, and a 19.5 percent fall between 2002 and 2004.

Long-lasting inflation also has negative impacts on employment. The financial crisis and the period of high inflation during 2008 corresponded with a decrease in secure employment. The proportion of workers on secure contracts declined during the period between the two most recent labour force studies in 2007 and 2009: workers on verbal contracts or with no contract increased from 42 to almost 45 percent.  Women were particularly affected: more women worked as unpaid family workers in 2009 than in 2007, suggesting women lost opportunities to earn an income in both the formal and informal sector over this period.

The current return to high inflation is already impacting on labour relations and working conditions. Since the beginning of the year there has been a significant increase in the number of strikes, with more than 200 reported in the first quarter of 2011. Most of these strikes were prompted by rising prices, including higher food and energy prices and increased rents for workers. Many enterprises are also experiencing high employee turn-over, reaching 50 percent annually in the most industrialised regions. High turnover rates are exacerbated by macroeconomic instability and high inflation. The recent wave of strikes and instability brought about by high inflation points to an even greater need for timely development of effective industrial relations mechanisms and practices in Viet Nam.

Nor are unemployment benefits sufficient to protect affected workers. Unemployment insurance coverage remains limited in Viet Nam, and many unemployed people in formal sector occupations suffered as a result of employers ‘defaulting’ on payment of job termination benefits, including health insurance and unemployment benefits, during the financial crisis of 2008/2009. Informal workers and poor migrant workers also have limited access to social security and basic social services, and high inflation may push them further into poverty.  Women, who are concentrated in informal employment and are more likely to be in insecure employment and earning lower wages, are particularly vulnerable.

Resolution 11 introduces important measures to protect the poor from the impact of high inflation and macroeconomic instability, including measures on poverty reduction and ensuring social protection for vulnerable groups.  However, availability of up-to-date information on the effectiveness and impact of these measures is limited.

While initiatives such as assistance to the poor to cover electricity costs are welcome, they may not reach those who are most in need such as poor migrants who are not registered and therefore not able to access these benefits. The policy is also unlikely to reach poor migrants who pay for electricity through their landlords.

As international experience has shown, having poverty reduction and social protection policies, programmes and mechanisms in place is vital to ensure that immediate social protection and assistance to the poor is available when crises occur. However, periods of macroeconomic instability and high inflation have tended to highlight shortcomings in the social protection response in Viet Nam. Greater flexibility is required to ensure that new and emerging forms of vulnerability can be addressed and emerging groups of poor and/or vulnerable people – such as the urban poor, people living with HIV, people with a disability, migrant workers and informal sector workers, many of whom are currently unregistered and therefore unable to access social protection and social services – are able to access social assistance and support.  Social protection services, including child care support, are also important so that women can access formal employment opportunities.

In the longer term, the development of an inclusive and progressive social system is required that integrates the various existing poverty reduction and social assistance policies and schemes. This will ensure greater coherence, effectiveness and efficiency, and provide comprehensive access to social protection for all Vietnamese citizens who experience economic, health and environmental shocks and crises. In this regard, the United Nations welcomes the recent introduction of the Government Resolution on Directions for Sustainable Poverty Reduction in 2011-2010 which sets out the Government’s commitment to achieving a more coherent and integrated poverty reduction system.

Because information about the impact of high inflation and of Government interventions under Resolution 11 is scarce, it will be critical to closely monitor the impacts of inflation and macroeconomic instability on the livelihoods and living standards of the poor.  In this light, the decision of GSO to conduct the labour force survey more regularly in 2011, so that employment information is available on a quarterly basis, is a positive development. In addition, the United Nations together with other partners will continue to support VASS and MOLISA to conduct Rapid Impact Monitoring studies to provide policymakers and the National Assembly with real-time information on how enterprises and vulnerable households, including families with children, are affected by high inflation, as well as on the effectiveness of Resolution 11.

Measures introduced under Resolution 11 to ensure transparency, so that enterprises, households and the business sector have access to up to date information on finance, prices, social welfare policies, and policies for poor households, are to be commended. Transparency in policy formation and implementation, together with strong and effective public communication, are required to increase people’s confidence in and awareness of Government policies to curb inflation and assist the poor and vulnerable.

The United Nations in Viet Nam continues to urge the Government at both central and local levels to pay attention to addressing imbalances in economic growth between different regions and socio-economic groups. Development is about much more than economic growth, it is about improving people’s living standards and enlarging people’s opportunities and choices.  In this respect, more open participation, greater transparency of public information, improved accountability of public officials and stronger anti-corruption efforts will bring benefits both in terms of economic growth and broader social, human and sustainable development.

The 2010 Governance and Public Administration Performance Index (PAPI) clearly identifies the “governance dividend”. Better governance and public administration leads to improved human development outcomes. Provinces with higher levels of performance in PAPI also have higher levels of human development as measured by the Human Development Index (HDI).  Our host province for this CG meeting, Ha Tinh, is no exception and its strong performance on both PAPI and the HDI demonstrate that good governance and improved human development go hand in hand.

Protecting SMEs

Since 2000, Viet Nam has emphasised private sector development fostered by trade and investment liberalisation and market-oriented reforms that have contributed to the country’s remarkable economic growth.  SMEs make up 98.4 percent of the existing private (“non-State”) sector, which employs 87 percent of all paid workers.  Over this period, SMEs have played an important role in creating jobs, maintaining high labour market mobility and narrowing development gaps between provinces and between urban and rural areas.

Despite these achievements, Viet Nam’s SMEs remain weak in terms of competitiveness, innovation, human capital, networks and readiness to compete in global markets.  The 2008 credit crunch and the global financial crisis that followed highlighted the vulnerability of SMEs to external financial shocks.  With the private sector still in the early stages of development, the Government must ensure SMEs are effectively protected from the impact of inflation, high credit rates and financial instabilities.

Currently, high inflation rates are seriously impacting on SMEs, particularly due to the interest rates that commercial banks offer to enterprises – which create difficulties for these businesses in mobilising inputs.  Although interest rates for SMEs are capped at 14 percent by the State Bank, many banks have broken this ceiling.  Loans at rates of 19-20 percent are common, with very high interest rates of up to 25-26 percent being charged to enterprises. SMEs are under considerable pressure as a result, as they are unable to afford these interest rates but are in need of working capital to keep their businesses running.  Many SMEs use loans to fund their operations because their own resources are limited.  As a result, many SMEs have decreased their production capacity and reduced their staff.  Others lack opportunities to secure capital to expand their markets.

Small and micro-enterprises run by women are particularly affected. Many women business owners face greater difficulties in accessing markets, business development services, and credit to run and expand their businesses.  Typically, women run smaller, home-based businesses that are vulnerable when interest rates and input costs rise.  If this situation continues, SMEs may face collapse, which may in turn lead to economic downturn given the importance of SMEs in the Vietnamese economy. Some smaller enterprises may be pushed back into the informal economy where business owners and workers face challenges due to precarious working conditions and unstable income levels.

The Government must adopt an integrated approach that enables SMEs to access credit at reasonable interest rates to keep their businesses going and growing and improve access to markets and services. This will generate employment and allow SMEs to continue contributing to the economic growth of the country.  A stable macroeconomic environment is key to the viability of micro, small and medium scale businesses as they are more vulnerable than larger firms to unexpected policy changes.  Macroeconomic stability is also important to provide these businesses with incentives to save and mechanisms to channel these savings into improving their services as well as into investments.

A supportive business environment for SMEs is also key to enhancing their competitiveness and minimising the impact of macroeconomic shocks. SMEs tend to be concentrated in lower levels of the supply chain due to limited supporting industries, low levels of technology and human capital, and limited access to production factors.  To effectively support SMEs, strengthened networking with other stakeholders and development of supporting industries is required to encourage linkages with dynamic larger firms and MNCs. Technology innovation and improved management skills and expertise via an effective vocational education and training system is also needed, as well as access to production factors including credit and land, and transparent access to information on public investment plans and procurement opportunities.

Natural Hazards, Unnatural Disasters: The Economics of Effective Prevention

Although parts of Viet Nam are exposed to earthquake and tsunami risks, natural hazards in Viet Nam are largely climate related. A recent climate risk index of most countries of the world shows that over the period 1990-2009 Viet Nam ranked fifth, with 457 human casualties per year and average annual GDP (PPP) losses of USD 1.9 billion, or 1.3 percent of GDP due to climatic extremes such as typhoons, heavy rainfall, and river floods.

Viet Nam experiences severe tropical storms and typhoons each year, which may intensify and could become more erratic as a result of climate change. Their potential to create damage is increasing rapidly as a result of higher population density and high-value economic infrastructure in key exposed areas. For example, extreme weather events during the period 2001-2005 cost the Vietnamese transportation sector VND 2,571 billion in damage from storms and floods. If the mean sea level rises by one metre, 11,000 km of roads could be submerged nationally.

The ADB estimates that climate change will reduce real GDP in Viet Nam by 1-3 percent by 2050, compared to a baseline situation assuming no climate change.  The World Bank has concluded that as a result of climate change impacts on agriculture Viet Nam’s total GDP in 2050 could be reduced by 0.7-2.4 percent, depending on which greenhouse gas emissions scenarios and climate change models are adopted. World Bank modelling also suggests that by 2050 the benefits of adaptation measures in agriculture would amount to 1.3-1.6 percent of total GDP and so could outweigh these costs.

These ADB and World Bank studies consider more than just headline climatic disasters and take into account a wide range of climate change impacts.  However, extreme hazards will undoubtedly account for a large proportion of likely future costs and mitigating their impacts will therefore provide the most significant benefits, in both the short and the longer term.  The highest priority adaptation measures must be those “no regret” actions that are beneficial regardless of the exact future effects of climate change, which cannot be precisely predicted. These include strengthened community based disaster risk management (CBDRM) initiatives and maintenance and upgrading of sea dikes and flood defences.

Critically, action on climatic disasters must focus on the most vulnerable women, men, older people and children. Viet Nam is already providing ad hoc support to those groups in the case of natural disasters, and is, for example, relocating some poor households away from the most vulnerable areas. However, social protection and social security systems must fully address and mainstream responses to the risks and impact of natural disasters. The United Nations strongly recommends that the forthcoming Law on Disaster Risk Management stress this point and articulate the rights of the most vulnerable people, for example, to timely evacuation and health care.

Climate-proofed social infrastructure is also needed. For example, all clinics and hospitals should be made safe for multiple natural hazards and should be accessible to medical staff and patients during and immediately after climatic disasters. Similarly, disruption to education as a result of natural hazards should be minimised by ensuring schools are accessible and are appropriately located and constructed.  These measures will also provide social benefits, support improve human development outcomes, and are expected to also reduce the short as well as longer term economic impacts of the increasingly severe climatic hazards Viet Nam is experiencing.

Anti-corruption in Extractive Industries

Improving transparency and accountability in the extractive industries sector

Extractive industries have played an important role in Viet Nam’s development process over the past two decades. The country is endowed with more than sixty different kinds of minerals, and their contribution to GDP has risen from 4.81 percent in 1995 to more than 10 percent from 2000 to 2008. Of these, crude oil is undoubtedly the most important and contributes to around 25 percent of the Stage budget. The rapid growth of extractive industries has seen a proliferation of licensing and a considerable increase in the number of State-owned and private companies operating in the sector. However, regulation is lagging behind, and as in any other sector, risks and opportunities for corruption are proliferating. The extractive industries sector is recognized as being particularly prone to corruption as it gives rise to opportunities and creates additional monetary incentives for corruption at both local and central levels; a great deal of discretion is embedded in extraction of resources; and the sector is characterised by pervasive lack of transparency and accountability.

The forthcoming revised Law on Minerals is a step in the right direction as it appears to be more compatible with other related legislation (i.e. the Land Law, the Civil Code and the Maritime Convention), and offers greater clarity and less discretionary powers in relation to setting strategy and developing plans on minerals, protection of minerals, survey of minerals, auctioning the right of exploitation and reduction of administrative procedures. However, important gaps and weaknesses still prevail in the extractive industries, together with capacity constraints in the sector’s inspectorate system.

Recent discussions at the policy level and during National Assembly sessions demonstrate the importance of the extractive industries, from bauxite to gold and oil exploration both in Viet Nam and abroad. The key general characteristics of the sector create opportunities for, and risks of, corruption, as in other sectors. To reduce the risks of corruption in the minerals sector, and to improve the living conditions of the poor and vulnerable, the following recommendations should be considered to deal with these tangible risks: (i) improving disclosure and transparency of decision-making in the sector; (ii) clear and transparent management and determination of responsibilities; (iii) greater accountability in relation to minerals exploitation; and (iv) improving inspection, auditing and taxation, among others.

Addressing these deficiencies in the extractive industries sector will also reduce the threat of the “resource curse” in Viet Nam and the destructive connection between the concentration of wealth generated through extractive industries, rising inequality and persist poverty that is evident in affected countries.

Aid Effectiveness

The first six months of 2011 have seen the launch of several key initiatives under the auspices of the Aid Effectiveness Forum, with the intention of ensuring more effective planning and allocation of ODA in Viet Nam in the context of a changing aid environment globally and in-country.  These include the development of the ODA Strategic Framework, the revision of the ODA legal framework (including Decree 131/2006/ND-CP), the initiative to map aid effectiveness activities occurring within Viet Nam, and monitoring of implementation of the Paris Declaration and the Hanoi Core Statement.  Thee initiatives are key to ensuring a more harmonised and effective approach to ODA in Viet Nam, and the United Nations in Viet Nam has been very actively supporting these efforts.

The United Nations is currently developing its next five-year One Plan for 2012-2016 which is consistent with the principles of the Paris Declaration and the Hanoi Core Statement: alignment with national priorities, simplified and harmonised procedures, monitoring of results, and joint responsibility and mutual accountability.  Development of the One Plan 2012-2016 will be guided by the ODA Strategic Framework, which will assist the UN to identify technical areas where the UN should offer support in line with its comparative advantages. The mapping of aid effectiveness initiatives will facilitate more effective coordination with other development partners and the revision of Decree 131 will enable the UN to provide support in a more harmonised and efficient way.  The One Plan 2012-2016 will be finalised by the end of 2011.

The United Nations will continue to provide support to the aid effectiveness dialogue in Viet Nam, and in the second half of 2011 the UN will take up the responsibility of co-chairing the Aid Effectiveness Forum Executive Committee along with MPI, following Finland’s able co-chairing of the Executive Committee since January 2011.  The UN looks forward to working closely with the Government and development partners to promote the aid effectiveness dialogue, and will support the Government of Viet Nam’s contribution to the High Level Forum in Busan in November 2011.

Conclusion

Looking ahead, the Government will need to continue to act decisively to curb inflation, stay the course on implementation of Resolution 11 and ensure social protection and social assistance are available to all who need it.  The Government will need to continue to strengthen the fight against corruption wherever it occurs, whether it is on a large scale in extractive industries or a smaller scale in education and health services.  Consistent and continuous efforts to plan for and adapt to the challenge of climate change will be vital in order to mitigate the likely significant costs of natural hazards and disasters

Strengthening transparency and access to information about Government policy, including measures to combat inflation and provide social protection and assistance, is key to promoting greater public confidence and trust, as is ensuring increased voice and participation of all Vietnamese people in public decision-making processes.  In this light, the United Nations in Viet Nam notes that the representation of women and ethnic minorities has fallen slightly in the new National Assembly and urges the Government to ensure greater representation of women and ethnic minorities in senior decision-making roles in the executive and in the Party.

The United Nations stands ready to continue to support the Government of Viet Nam to address the challenges ahead, act ‘as one’ in response to cross-cutting and multi-sectoral issues, and continue its progress towards broad-based, equitable and inclusive social, economic and sustainable development.

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