Promoting financial cooperation between Vietnam and ADB 14/08/2024 05:35:00 144

On the morning of August 14, Deputy Minister Vo Thanh Hung held a meeting at the Ministry of Finance headquarters with a delegation of Executive Directors from the Asian Development Bank (ADB). The delegation was led by Ms. Charlotte Justine Diokno Sicat, Executive Director in charge of the Philippines Country Office and 6 regional countries. Also present at the meeting were representatives from various units under the Ministry of Finance, including the Department of Debt Management and External Finance, the Department of Investment, the Department of Legal Affairs, the Department of State Budget, and the General Department of Taxation.

Deputy Minister Vo Thanh Hung spoke at the meeting

Deputy Minister Vo Thanh Hung, on behalf of the leaders of the Ministry of Finance, warmly welcomed the ADB Executive Directors and expressed gratitude to ADB for their past support. Vietnam and ADB have signed around 190 loan and aid agreements totaling 13.3 billion USD. ADB is implementing 13 projects with a total loan value of 1.3 billion USD. ADB plans to lend around 3.8 billion USD for projects in Vietnam during 2023-2026. ADB's loans are mainly allocated to programs and projects in transportation, health, education, water and urban infrastructure, agriculture and natural resources, and energy. Ms. Charlotte Justine Diokno Sicat, the Executive Director responsible for the Country Office of the Philippines, Kazakhstan, Maldives, Marshall Islands, Mongolia, Pakistan, and Timor-Leste, as well as the Head of the Delegation, expressed confidence in the significant collaborative relationship between the Ministry of Finance and ADB. Ms. Charlotte Justine Diokno Sicat also congratulated Vietnam on its recent socio-economic development achievements and expressed ADB's readiness to support and collaborate on Vietnam's continued socio-economic progress. Deputy Minister Vo Thanh Hung and the ADB Executive Directors engaged in extensive discussions regarding Vietnam's macroeconomic situation, capital mobilization orientations, opportunities, challenges, and strategies to strengthen cooperation between the two entities in the future.

Ms. Charlotte Justine Diokno Sicat, Executive Director in charge of the Philippines group and 6 countries, Head of the ADB Executive Directors' delegation, spoke at the meeting

Deputy Minister Vo Thanh Hung stated that Vietnam's economy was significantly affected during the Covid-19 pandemic. However, due to active government support policies, including fiscal measures, Vietnam's economy has overcome challenges. There are clear signs of recovery, such as a 6.4% GDP growth in the first half of 2024, and positive foreign direct investment (FDI) attraction, with approximately $18 billion in total registered FDI capital by July 2024, marking an almost 11% increase from the previous year. Additionally, the import-export turnover in the first 7 months reached around $440 billion, reflecting a 17% increase from the same period last year. The average Consumer Price Index (CPI) in the first 7 months of the year rose by 4.12% compared to the same period last year (the targeted increase until the year-end is about 4-4.5%).

Despite the initial recovery, businesses continue to face numerous challenges. This is due to the incomplete recovery of external demand, as well as escalated input and logistics costs, which affect enterprises' competitiveness. Regarding fiscal policy, the Deputy Minister noted that Vietnam has implemented a less stringent fiscal policy over the past 4 years. Various measures have been taken to exempt, reduce, and postpone taxes for businesses and individuals to generate state budget revenue. Furthermore, spending on infrastructure development, social security, and salary expenditures has been raised. In the backdrop of subdued private sector investments, public investment has played a role in expediting the economic recovery process. The Deputy Minister remarked, "In truth, the fiscal policy has been reasonably sound. The application of expansionary fiscal measures has assisted the economy in managing external shocks, overcoming challenges, and gradually recovering without causing excessive fluctuations, thereby maintaining fundamental macroeconomic indicators."

Mr. Sangmin Ryu, Executive Director responsible for the Group's Vietnam, Korea, Papua New Guinea, Sri Lanka, Taipei, China, Uzbekistan, and Vanuatu offices, spoke.

Deputy Minister Vo Thanh Hung emphasized during discussions with the ADB Executive Directors' Delegation that the Vietnamese economy is facing many challenges. These include short-term issues such as slow disbursement of public investment capital and financial difficulties for businesses, as well as medium and long-term challenges such as climate change, an aging population, declining birth rate, and labor productivity. The Ministry of Finance will work with relevant agencies to address short-term difficulties and challenges, while also gradually tackling medium and long-term challenges.

Regarding future development direction, the Deputy Minister revealed that the Vietnamese Government aims to elevate the country to an upper-middle-income country status by 2030 and a high-income country status by 2045. While this is an ambitious goal, Vietnam is committed to achieving it through incremental steps. To attain these objectives, Vietnam requires significant resources, primarily from the private sector, including domestic enterprises, FDI enterprises, and international donors.

At present, the Ministry of Finance is reassessing tax laws, including the Corporate Income Tax Law, for submission to competent authorities to ensure alignment with international commitments on global minimum tax. This effort will support the development of small and medium-sized enterprises, and concurrently review incentives with a focus on green transformation, digital transformation, and innovation.

Regarding the Just Energy Transition (JETP), the Ministry of Finance is seeking information on loan conditions for these projects from donors like ADB. The Deputy Minister emphasized the importance of fair implementation of JETP, stipulating that fairness must be a critical consideration in realizing this commitment. To achieve fairness, the Deputy Minister noted the necessity of additional support mechanisms in terms of finance, technology, and more for countries transitioning to industrialization while simultaneously fulfilling international commitments.

Overview

The Deputy Minister mentioned that in the past, Vietnam and ADB faced challenges in finalizing loan agreements for new projects. These included differences in laws and regulations, especially regarding compensation for site clearance, inspection and examination requirements, bidding regulations, commitment levels, and borrowing costs, which are relatively high compared to domestic loans and those offered by other donors. Vietnam is expected to require significant foreign capital, particularly for large-scale infrastructure projects such as the North-South high-speed train project, metro systems in major cities, climate change response, green transformation, and digital transformation. The Ministry of Finance is hopeful that ADB will continue to provide support and promptly address issues to facilitate the quick implementation of loans. Furthermore, it suggests that ADB should customize appropriate incentives for each project within their group of projects.

Representatives of both sides took a souvenir photo at the end of the meeting

Translator: Thúy Nga