[Vnbiz] Aid to Vietnam next year seen matching 2006

[Phan, Tai]

Aid to Vietnam next year seen matching 2006
Thu 14 Dec 2006 1:29 AM ET
By Grant McCool

HANOI, Dec 14 (Reuters) - Vietnam is likely to receive at least as much foreign aid or more next year than the $3.7 billion granted for 2006, officials say, despite economic growth of 8 percent and its quick march to becoming a middle-income country.

Twelve years after its former war enemy the United States lifted a trade embargo, Vietnam is joining the World Trade Organisation backed by one of the fastest-growing economies in the world.

World Bank country director Klaus Rohland said "there are no signs" that donor pledges of official development assistance for 2007 would decrease, but he urged the government to quicken the pace of its transition to a market economy.

"We would encourage you to aim high, but we would encourage you to go fast, but in a sustainable way when it comes to the environment and social cohesion," Rohland said in opening remarks on Thursday at a two-day aid conference.

Donors are making pledges to the Communist-run Southeast Asian country on Thursday and Friday at an annual meeting of government ministers and about 50 ambassadors and foreign aid representatives.

Much of the money is expected to go into helping improve Vietnam's under-developed infrastructure.

Rohland told Prime Minister Nguyen Tan Dung that Vietnam needed "new ways of thinking" to improve the quality of its socio-economic policy, including establishing "a system of social security that is commensurate with a market economy".

While incomes are rising and poverty has been slashed to 19 percent from 60 percent in a decade, there is a growing gap between rich and poor as Vietnamese are increasingly exposed to the risks of the market.

Corruption is cited as an impediment to Vietnam achieving its goal of middle-income status, or an annual per capita income of more than $1,000, by 2010.

Per capita income was $720 in 2006, but some researchers believe it could be as much as three times higher in the main urban areas of Ho Chi Minh City and Hanoi.

"Corruption is a major factor that slows down development efforts," a European Union statement to the conference said. It urged Hanoi to make "systemic changes on various fronts which enhance accountability and increase transparency".

For his part, Planning and Investment Minister Vo Hong Phuc told donors that corruption uncovered in a big-budget road and bridge building agency this year "would not impact the policy of effective uses of aid" and vowed his government would fight graft "without any compromise".

Investors are betting on success for Vietnam's emerging market -- the government estimates that foreign direct investment commitments were a record $9.5 billion this year.