Vietnam's Mid Year Consultative Group Meeting

UNCLAS SECTION 01 OF 02 HANOI 000615 SENSITIVE SIPDIS DEPT FOR EAP/MLS FOR MBROWN SINGAPORE FOR TREASURY HHS/OSSI/DSI PASS TO OGHA (WSTEIGER/MVALDEZ/MABDOO) TREASURY FOR SCHUN USTR FOR DBISBEE USAID FOR DAA/ASIA MELLIS, EAA/ASIA DSHARMA AND CJENNINGS E.O. 12958: N/A TAGS: ECON PGOV EAID SENV KGHG VM SUBJECT: Vietnam's Mid Year Consultative Group Meeting REF: A) Hanoi 569 (Red Tape Gripes Dominate Private Sector) ¶1. (SBU) Summary: The 2009 Mid Year Informal Consultative Group (CG) meeting between donors and the GVN in the Central Highlands city of Ban Ma Thuot June 8-9 provided 2009 GDP growth rate estimates ranging from 3.5 to 5 per cent. Donors stressed the need for continued SOE equitization and poverty reduction in the face of the global economic crisis. End Summary. MACROECONOMIC SITUATION STEADY: STAY THE COURSE -------------- -- ¶2. (SBU) The Ministry of Planning and Investment (MPI) delivered a report that highlighted efforts taken by the GVN to implement a stimulus package to respond to the global economic downturn. MPI Minister Vo Hong Phuc emphasized the need to continue to promote economic growth, create a positive environment for business development, improve social security systems and administrative reform. Phuc stated that after an encouraging first quarter growth rate of 3.1 per cent, the economy might be able to achieve a growth rate of 5 per cent for 2009. Deputy Prime Minister and Foreign Minister Pham Gia Khiem committed to further reforms and to meeting WTO requirements and other commitments. A report from the June 1 Vietnam Business Forum (VBF)(Reftel A) urged the GVN to support business growth by improving the development and enforcement of laws, regulations, and implementing guidelines so businesses could plan accordingly. The VBF report highlighted the need for greater GVN investment in "soft" infrastructure, education and human capacity development, and "hard" infrastructure, including roads and ports. ¶3. (SBU) Donors agreed that the Vietnamese economy was faring better than expected earlier in the year and was doing especially well in comparison with other countries in the region. However, they urged the GVN to continue with planned reforms, reminding the ministries that as competition for FDI increases, it is even more important to have good governance, transparency and strong anti-corruption efforts. MPI said that it planned to continue banking law reforms that provide increased autonomy for the State Bank of Vietnam (SBV), including clarification of the roles of the SBV, the MOF, and the National Assembly. The IMF recommended caution in the use of economic stimulus via interest rate subsidy schemes. SOCIAL IMPACTS: WHY IS IT SO HARD TO HELP? -------------- ¶4. (SBU) The CG discussions also focused on GVN poverty reduction efforts on the national level and in the Central Highlands, the part of Vietnam with the greatest number of ethnic minorities and the highest poverty rates. While GVN programs at the national level are effective, programs focused in the Central Highlands are more problematic. The "Group of Four" (Canada, Norway, New Zealand, and Denmark) strongly urged the GVN to implement bilingual education and land allocation programs, provide greater access to legal services, and improve access to religious institutions for ethnic minorities. The donors stressed that among the poor, women remain especially vulnerable, whether as migrant workers affected by the economic downturn, victims of trafficking-in-persons, or victims of domestic violence. The GVN responded that general economic growth and development would most improve the lives of the poor and ethnic minorities. (Comment: The donors chose Dak Lak Province as the CG location to call attention to the needs of the ethnic minorities. The GVN also used the CG's location to showcase its efforts to encourage economic development for ethnic minorities. The two sides clearly had different views on how much assistance and support the Central Highland receives. End comment.) ANTICORRUPTION: INTENTIONS GOOD BUT RESULTS LACKING -------------- -------------- ¶5. (SBU) Representatives from the Government Inspectorate (GI) and MPI reported on the May 29 Anti-Corruption Dialogue (ACD) hosted by the Inspector General and the Embassy of Sweden. The ACD focused on preventing, identifying, and punishing corruption in the high risk construction sector, including large scale projects funded by Official Development Assistance. The GI emphasized the collaborative nature of the Dialogue, highlighting the announcement that the GVN will ratify the UN Convention on Anti-Corruption, as well as providing detailed information about the GVN's 2020 Anti Corruption Strategy. Donors commended the GVN's efforts, but urged the GVN to insure transparency and good governance in overall public administration reform. The donors further said that a free and effective media, an active and strong civil society, and legislation to support them, including protection for whistleblowers, are key. HANOI 00000615 002 OF 002 The donors also identified corruption in the education and health sectors as particularly troubling and harmful to society. While the petty corruption of teachers demanding bribes from students and health care workers asking patients for money involves relatively small sums of money, it nevertheless promotes a culture of corruption and strikes at the heart of the education and health systems. MPI Minister Phuc agreed, and suggested focusing on those sectors for the next ACD and annual CG meeting. CLIMATE CHANGE: VIETNAM VULNERABLE -------------- ¶6. (SBU) The GVN and donors reviewed current activities and plans for climate change adaptation and mitigation. Minister Phuc identified Vietnam as one of the world's most vulnerable countries to climate change but also a country with a low capacity to address the impact. Discussion focused on the GVN's potential to show international leadership on this issue. The Ministry of National Resources (MONRE) is developing various scenarios and multiple donors pledged significant technical and financial support. Donors stressed the importance of involving the private sector, including through public-private partnerships (PPP). The only warning note sounded related to biodiversity, with some donors noting that climate change has removed biodiversity from national and international agendas, and that preserving biodiversity plays a key role in mitigating climate change. AID HARMONIZATION: FORM AND SUBSTANCE? -------------- ¶7. (SBU) Donors urged the GVN to speed up fund disbursement and improve transparency. Donors also highlighted the need for good data collection and clear cost norms as the GVN pursues its goals to become a Middle Income Country by 2010. Although several donors hinted at a changed conversation between the GVN and donors once Vietnam attains this status (and, read the subtext, bilateral aid budgets were reduced),the GVN did not engage on this subject. The GVN and donors agreed on the need to avoid duplication of efforts, to clarify roles and responsibilities and to make the One UN Vietnam concept work effectively. There was less agreement, however, when donors called on the GVN for stronger engagement with the private sector, for greater press and media freedom and a greater role for civil society. The UK repeatedly asserted the need for civil society participation in the upcoming annual CG Meeting but there was little support expressed even from the other donors. FIELD TRIP TO WORLD BANK PROJECT -------------- ¶8. (SBU) In conjunction with the CG, the World Bank organized field trips, including a visit to the Integrated Watershed and Biodiversity Management Program in Chu Yang Sin National Park. This 5-year project, funded by the Global Environment Fund (GEF) and commissioned by the World Bank, is in its third year of implementation and has a budget of 973,000 USD. The project trains and hires local ethnic minorities to protect the park and build partnerships with local and international conservation organizations. The Director of BirdLife, the NGO implementing partner, informed the audience that the Ministry of Defense (MOD) had taken over land which belonged to the National Park and constructed a dam and five kilometers of road for no apparent purpose. The dam was clearly visible to the audience from the briefing site, but when delegation participants expressed interest in visiting the dam itself, local authorities said that the road was not passable by the vehicles arranged for the field trip. The NGO Director speculated to EconOff privately that MOD built the dam and road for its own income generation. MICHALAK