Vietnam's Mid Year Consultative Group Meeting

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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
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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?
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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
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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.

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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
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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?
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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
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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