Speech at the 5th Viet Nam Executive Leadership Programme

26 Aug 2013

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Speaker: Ms. Pratibha Mehta, UN Resident Coordinator Viet Nam
Date: 26 August 2013
Event: Viet Nam Executive Leadership Programme (VELP)

Excellency, Deputy Prime Minister Nguyen Xuan Phuc and
Distinguished Members of the Delegation,
Representatives from Harvard Kennedy School of Government,
Ladies and Gentlemen:

It is a real pleasure to be with you at the 5th Viet Nam Executive Leadership Programme. UNDP has been supporting this program through our collaboration with the Ministry of Foreign Affairs for the past 6 years, as  a neutral global development agency of the United Nations, UNDP worldwide  helps in connecting countries and their leaders with the best international development practices through efforts such as VELP.

This year's VELP focuses on institutional renovation and other factors for continued growth, stability and prosperity which, coupled with the structural reform and stabilisation measures, could once again set Viet Nam on a more equitable and sustained development path.

Over the years Viet Nam has built a solid foundation to continue to grow and progress as also indicated in the 2013 Human Development Report which features Viet Nam as one of the 40 high achieving countries which performed better than predicted between 1990 and 2012, both in terms of the income and non-income dimensions of human development.

The people of Viet Nam also remain optimistic about their future prospects as highlighted in the national survey of the Viet Nam Governance and Public Administration Performance, PAPI, of 2012, where 80% of the nearly 14,000 people interviewed considered their economic future prospects to be ‘same’ or ‘better’, demonstrating the great strength and resilience of the Vietnamese people.

However, from several indications recent economic performance and growth is slowing down. Investor confidence remains subdued, with productivity slowing from 5 percent per annum between 2000 and 2007 to 3.5 percent between 2008 and 2011. Viet Nam has dropped 10 places to 75th in the 2012-13 edition of the Global Competitiveness Report by the World Economic Forum, and slipped from 116 in 2010 to 123 in 2012 in Transparency International's Corruption Perception Index. Poverty reduction and human development progress have also slowed down.

Several countries in Southeast Asia, including Thailand, Indonesia, and the Philippines have all suffered economically and socially from being caught in the middle-income trap. Growth is not only about the right macroeconomic policies, and incentives. Without an institutional framework to continuously promote innovation, creativity and new, higher-value added economic activity —including equitable access to quality health services, education and vocational training systems— economies can stagnate.

Viet Nam’s ability to build on its remarkable achievements in reducing poverty and to move towards a higher, sustained growth trajectory will depend on three factors: pace of reforms, sound technical solutions and ability of its institutions to respond to the new global context and to the rising aspirations of people.

Until recently, Viet Nam appeared to grow without a significant rise in inequality. The Gini coefficient has risen from 0.39 to 0.42 – equivalent to a rise of about 5 percent between 2004 and 2010. This compares favourably with Thailand and Indonesia, but lower than in China and the Philippines, and higher than in Cambodia, Laos and India. Yet data shows that income growth has been higher at the top end of the income distribution, than the bottom.

A recent study suggests that perceptions of inequality have risen significantly in Viet Nam over the last five years. Inequalities in voice, power and connections are considered as barriers from accessing jobs or public services or maintaining land rights. Most respondents, however, consider that success in generating income and wealth is acceptable as long as it is generated through fair and legitimate means. It is worthwhile to mention here that in recently conducted national consultations for the post 2015 development agenda in Viet Nam, equality and to be treated equally came out as number one aspiration across all consulted groups.

Inequalities are not just problems of the people whose lives are most directly affected, limiting people’s productive potential is not only a major loss to society, but it also significantly reduces sustainability of national growth.

A rapidly modernising, industrialising and urbanising economy like Viet Nam, requires new ways of governance, but breaking away from the usual practice is often not easy and can pose several dilemmas making it harder to make choices.
For example, despite wide recognition that SOEs, which have been the engine of growth in Viet Nam, are increasingly inefficient but are also blocking unleashing private sector potential, the pace of reforms have remained very slow.
Another dilemma is how to ensure that land is used both effectively and fairly to sustain economic growth and competitiveness as well as poverty reduction, food security, social harmony, and environmental sustainability.

Land grievances have become a pressing issue as indicated by Supreme People’s Court’s official statistics that about 70 per cent of all complaints relate to land compensation and reallocation.

Another dilemma is how to find the right balance between reducing the fiscal burden of the state for public service delivery and at the same time extending universal coverage.  For example, socialisation has helped in expanding the coverage of services, yet evidence shows that access to quality education and health services is becoming increasingly contingent on households' ability to pay. While a greater role for the private sector in service delivery is important, strong governance and accountability mechanisms will need to ensure equitable access for all, particularly the poor and vulnerable.

A key concern is also how to improve the efficiency of public sector institutions. Despite a number of very positive initiatives such as ‘One Stop Shops’, and building a competent cadre of civil servants – red tape remains a challenge. A number of surveys, including PAPI, also show that often citizens pay informal payments to access public services which are substantially higher than the actual cost of the service. Informal payments create an unfair playing field also for businesses as the Provincial Competitiveness Index (PCI) shows and can have far reaching consequences for the country’s overall economic growth and stability.

Global experience shows that as the wealth and the size of the middle class grows, their desire for participation and for a more responsive, accountable public sector also rises.

Over the past 2 years, in Viet Nam civil society has been actively involved in a number of key law-making initiatives, including the draft amended Constitution. In the national consultation on the post 2015 development agenda, civil society showed willingness to be more actively involved in formulating and monitoring policies.

I hope that the next five days provide an opportunity to review international experiences and discuss institutional renovation to successfully deal with the challenges and dilemmas of a middle income country striving for even higher economic growth and human development.

In conclusion, I would like to once again welcome you all to this year’s VELP, and I hope that the discussions here would help you in your reform efforts for a more inclusive, equitable and sustainable social-economic development of Vietnam.

Thank you.