Hanoi, August 22, 2006
– Lars Thunell, Executive Vice President of the International Finance Corporation, has wrapped up a four-day visit to Vietnam with praise for the country’s private sector success, a reminder about challenges to future prosperity, and a promise that IFC will continue to help meet those challenges.
Mr. Thunell said that IFC sees a very promising future for Vietnam as it joins the World Trade Organization: “You have a young and vibrant population, substantial natural resources, and a strong commitment between government and private enterprise to collaborate in improving the business environment.” IFC, the private sector arm of the World Bank Group, has provided nearly $500 million in financing in Vietnam since 1992, as well as extensive technical assistance through its Mekong Private Sector Development Facility, a partnership with donor governments.
For over a decade, Vietnam has maintained average annual growth of 7 percent. From 1993 to 2004, poverty levels were cut by more than half, and the private sector has much to do with this success. The sustained growth is particularly impressive in the face of such economic threats as SARS, avian influenza, devastating floods and droughts, the imposition of tariffs, and anti-dumping lawsuits.
Thunell also noted some major challenges to future prosperity. These include greater global competition, an urgent need to finance large investments in infrastructure, a state-dominated economy, and a capital market that is still in the early stages of development. High levels of poverty persist in some central and highland areas, and there is an uneven playing field for small and medium enterprises. Job creation also poses a challenge as many more young people join the labor market every year.
To help Vietnam overcome these challenges, Thunell said IFC plans to double its annual investments over the next three years and provide even more technical assistance. Priorities include the financial sector, public-private partnerships to develop infrastructure, and collaboration with the government to improve the business environment. Based on IFC’s global experience in bringing private companies and government agencies together to develop infrastructure, the government has appointed IFC as lead advisor in mobilizing private participation in electricity generation projects. This will lay the groundwork for private investments in other sectors, such as ports and telecommunications, where IFC also has worldwide expertise. Manufacturing, agribusiness, tourism, and information and communication technologies are also target sectors, where domestic demand is growing or Vietnam has a competitive advantage.
During his visit to Ho Chi Minh City, Thunell was impressed with the entrepreneurs he met, including at Khai Vy, a leading furniture manufacturer that produces top quality products for export. The company is committed to sourcing wood from sustainable suppliers and continuing to improve working conditions for its employees. IFC’s technical assistance is helping Khai Vy improve sustainability in both areas, while IFC financing will allow it to expand production and add 2,000 employees to its workforce of 5,500.
IFC has been working in Vietnam’s financial sector for a number of years, for example using both investment and technical assistance to help Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) and Asia Commercial Joint Stock Bank (ACB) become two of the country’s largest and best managed private joint stock banks. Thunell emphasized that as the government privatizes state-owned banks and insurers, IFC is prepared to play a role in facilitating this transition through a combination of advisory services, investments, and capacity-building technical assistance.
IFC technical assistance initiative, MPDF, is working with the State Bank of Vietnam to pave the way for private credit bureaus, and with the Ministry of Justice to expand borrowing against moveable assets. The facility is also helping the Bank Training Institute of Vietnam develop certification for credit officers. Thunell pointed out that “All our finance industry investment and technical assistance has the goal of helping the private sector improve access to the financing they need to expand and create more jobs.”
On the business environment, Thunell said IFC will continue to support the Vietnam Business Forum, an important platform for dialogue and advocacy between the government and the private sector, while MPDF will continue to help the government develop and refine business- and investment-related laws and regulations. This facility has advised legislative committees in drafting new enterprise and investment laws and is helping the government develop related implementing decrees, all while ensuring that the private sector has a voice in the process.
Near Hanoi, Thunell visited Bac Ninh Province to see the work that MPDF has been doing to simplify or remove administrative and regulatory barriers that impede business activities at the local level. He said, “Improving the environment for doing business is the key to attracting both foreign and domestic private sector investment. By implementing reforms that promote private sector growth, we hope to help Bac Ninh achieve its goal of becoming a leading industrial province in Vietnam.”
About IFC
The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the other institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.
The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information,
visit www.ifc.org
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