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8 Jan 2007

Government seeks US$20b in aid Prime minister Nguyen Tan Dung has signed Decision 290 approving the plan on attracting and using ODA (official development assistance) capital in the 2006-2010 period, under which Vietnam will need US$19-21 billion worth of capital from donors.

In order to carry out the socio-economic goals in 2006-2010 and reach the annual growth rate of 7.5-8% per annum in the period, Vietnam will need to raise US$160 billion. Up to 65% is expected to be raised from domestic sources and 35% externally.

Regarding the demand for ODA in the next five years, Vietnam will need US$11 billion in capital for key development projects, and in order to have this amount, the committed capital must be US$19-21bil.

According to the Ministry of Planning and Investment (MPI), Vietnam has favourable conditions to attract ODA capital. However, the Ministry said that Vietnam would have to compete with other countries in attracting ODA as the demand for ODA in developing countries was increasingly high.

MPI has forecast that the total ODA capital to be committed in 2006-2010 will be US$20.4-23.7 bil. Donors have also forecasted similar figures.

ODA capital is expected to be injected mostly in transport projects, post and telecommunications, water drainage and supply, health care, education, environment and science and technology. Meanwhile, ODA capital to be pumped into industries and energy will see the decrease of 15%.

Vietnam is striving to attract ODA to several fields, including the north-south highway, transport routes in the northern mountainous areas, the Central Highlands and Cuu Long River Delta.

The projects on building T2 International Airport in Hanoi, Long Thanh airport in Bien Hoa City, terminals in Da Nang Airport and Cam Ranh (Khanh Hoa) will also use ODA capital.

For 2001-2005, the donors have pledged to give Vietnam US$14.9 billion in ODA, 80% of which will be in preferential loans. The disbursement rate in the period was US$7.9 billion.

Vietnamnet 06/JAN/2007

Reforms rev up economic growth

Legal and administrative reforms and improved business policies contributed to high economic growth, higher export revenues and a flourishing in foreign investment during 2006, the government concluded in its year-end cabinet meeting last week.

Public administration continued to be reformed during the past year to meet the demands of a developing market economy and international integration.

The building of institutional capacity, laws and regulations proceeded in line with the actual social development of the country. New laws on enterprises, investment, bidding, and real estate transactions helped create a comprehensive legal framework for all business sectors.

GDP grew at 8.17 per cent in 2006 over the previous year, the government reported, with the industrial sector growing at 10.37 per cent, the services sector at 8.29 per cent and agriculture at 3.4 per cent.

Efforts to seek new markets and diversify products helped boost the nation’s exports in 2006, particularly in the later months of the year. Export turnover reached $39.6 billion, a 22.1 per cent increase year-on-year. Leading generators of export turnover included coffee, rubber, crude oil, textiles and apparel, shoes, seafood, wood products, electronic components and rice with major markets including the US, EU and Japan.

Foreign investors recognised Vietnam’s persistent efforts to make the business climate more attractive with the implementation of new laws on enterprises and investment and more favourable and equitable policies for foreign investors.

Inflows of foreign investment from the US, the EU, Japan, Taiwan, Hong Kong (China), South Korea, and Thailand grew in 2006, particularly as the impact of Vietnam’s admission to the WTO was being felt towards the end of the year and permanent normal trade relations were granted by the US, promising a new wave of foreign direct investment (FDI) in Vietnam.

The country attracted a record amount of foreign investment in 2006, at $10.2 billion, representing a 49.1 per cent increase over 2005 and surpassing the year’s targets by 57 per cent. Newly licensed foreign-invested projects worth a total of $7.83 billion focused mostly on the industrial and services sectors. Existing projects increased their registered capital by a combined $2.63 billion during the year.

Sound economic performance, institutional reforms, and the battle against corruption during the past year were also recognised by international donors, who disbursed $2.66 billion in official development assistance (ODA) and promised $4.45 billion in 2007.

To ensure sustainable growth during 2007, Prime Minister Nguyen Tan Dung told the cabinet meeting that government would prioritise the construction of infrastructure, education and training, the battle against corruption, and narrowing the economic gap among urban, rural and remote areas.

Vietnam needed to focus on coping with unsustainable growth, low competitiveness due to the shortage of a knowledgeable and skilled workforce and insufficient infrastructure, all of which hindered growth in 2006, Dung said.

Administrative reform would be advanced from central to local levels in order to create momentum for business development and the fight against corruption, he said. Many governmental administrative functions and responsibilities would be decentralised and transferred to local authorities, helping the government focus efforts on regulating socio-economic development.

Dung instructed the Ministry of Planning and Investment to identify and eliminate all unnecessary licence and sub-licence requirements in order to help build more favourable conditions for enterprises.

Representatives from Ministry of Home Affairs admitted that the existence of many cumbersome administrative procedures and licence requirements as well as the harassing attitude of many State cadres continued to cause problems and dissatisfaction among the people and businesses.

The ministry reported that 181 kinds of licences were eliminated last year, but more than 100 new licences and sub-licences were introduced at the same time, undercutting efforts at administrative reform.

The nation would target GDP growth of 8.5 per cent in 2007, Dung said, for a total value of around $70 billion. The industrial sector would grow at about 10.5-10.7 per cent, services 8-8.5 per cent, and agriculture 3.5-3.8 per cent. Export turnover would also grow by 17.4 percent year-on-year, reaching $45.2 billion

Vietnam Investment Reviews, No. 794/January 1-7, 2007

Vietnam eyes 20 pct increase in export value

Vietnam has targeted a year-on-year rise of 20 percent in export revenue this year, fueled by positive forecasts on national trade volume, said a government body.

The Ministry of Trade estimated that the total value of exports this year would hit US$47.45 billion higher than the Vietnamese National Assembly’s initial goal of $46.5 billion and last year’s $39.61 billion.

The Ministry attributed the ambitious figures to the positive news about the future of both international and national economies.

It said the expected high growth rate of 3.5 – 4.5 percent for the world economy this year and the recovery of giant economies like Japan and the European bloc would give a big boost to export value of countries including Vietnam.

Additionally, the country's WTO membership and permanent normal trade relations (PNTR) with the US would see cuts in tariffs on a variety of goods, widening export markets for Vietnam.

In Vietnam, foreign firms are to continue their top export role with shipments worth $27.7 billion, while domestic firms were expected to export $19.84 billion of goods.

The ministry also set higher targets for key export items.

Agricultural, forestry and aquatic products would make up of $8.88 billion of the total value, while industrial goods expected to reach $19.12 billion, according to the Ministry.

The country's apparel, footwear, and wood products would see a significant rise in export revenues this year on the back of the PNTR status, posting at $7.12 billion; $4.1 billion and $2.6 billion respectively.

The Asia-Pacific market continued to be the top target of the country with the set export revenue of $24.96 billion.

Following targets included the EU with $8.98 billion and $11.17 billion from the Northern America.

Challenges ahead

Trade disputes and technical barriers would be potential obstacles for the country’s export activities.

Poor performance due to insufficient investment capital, advanced technology and professional human resources are to challenge domestic exporters to compete with powerful rivals in the international market.

The ministry has backed reforms to streamline administrative procedures, facilitating domestic exporters and reducing red tape.

Programs targeted at trade promotion and developing markets needed to be expanded, the ministry said adding the role of overseas government offices should be fully tapped.

It also emphasized the need to exercise stricter supervision on issuing certificates of origin and more flexible management in rice and garment shipments.

Domestic exporters have been urged to sharpen their competitive edge to survive and prosper in international markets.

Small-to-medium sized enterprises were encouraged to look into untapped markets in addition to existing ones.

Thanhnien News JAN 08 2007.

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